The Shaping of the American Tradition 9780231897341

Table of contents :
Contents
General Introduction
Part One: Leaving Europe and Settling America
Introduction
The English Background
The English Heritage
The Settlement of America
American Values
Part Two: The First American Revolution
Introduction
The American Mind
The American Scene
American Problems
The United States and the World
Part Three: Establishing the New Republic
Introduction
The American Mind
The American Scene
American Problems
The United States and the World
Part Four: Jacksonian Democracy
Introduction
The American Mind
The American Scene
American Problems
The United States and the World
Part Five: The Impending Conflict
Introduction
The American Mind
The American Scene
American Problems
The United States and the World
Part Six: The Second American Revolution
Introduction
Preliminaries
The Republican Program
Slavery and Emancipation
Reconstruction
The United States and the World
Part Seven: Growing Pains in the Post-Civil War Decades
Introduction
The American Mind
The American Scene
American Problems
The United States and the World
Part Eight: Unrest and Expansion in the Nineties
Introduction
The American Mind
The American Scene
American Problems
The United States and the World
Part Nine: The New Freedom
Introduction
The American Mind
The American Scene
American Problems
The United States and the World
Part Ten: The Golden Nineteen Twenties
Introduction
The American Mind
The American Scene
American Problems
The United States and the World
Part Eleven: The Third American Revolution
Introduction
The American Mind
The American Scene
American Problems
The United States and the World
Index of Documents

Citation preview

The Shaping of the AMERICAN TRADITION

The Shaping of the

AMERICAN TRADITION Text by L O U I S M.

HACKER

Documents edited by L O U I S M. and H E L E N E

COLUMBIA

S.

HACKER

ZAHLER

UNIVERSITY

New York & London

PRESS

COPYRIGHT

1947

BY

COLUMBIA

UNIVERSITY

PRESS,

NEW

First printing 1947 Fourth printing 1968 PRINTED

IN

THE

UNITED

STATES

OF

AMERICA

YORK

TO

MY

CHILDREN,

ANDREW

AND

BETSY

CONTENTS

i

Part One: Leaving Europe and Settling America INTRODUCTION ι. The European World from Which the Americans Came, 3; 2. T h e English Background, 8; 3. The Early Settlers of Ame rica, 14; 4. Early Economic Activities, 19; 5. Colonial Agriculture, 24 T H E ENGLISH BACKGROUND English Society, 29; Harrison, The Description of England, 30; The Authoritarian State, 35; Laud, T w o Sermons, 37; Monopolies, 40; James I, Proclamation Touching Grievances, 40; Colepeper, Speeches Relating to Grievances, 42; Enclosures, 43; Winstanley, Declaration . . . , 45; The Moral Rejection of the Poor, 49; Defoe, Giving Alms No Charity, jo

2Ç

T H E ENGLISH HERITAGE Toleration, 56; Locke, A Letter Concerning Locke, Of Civil Government, 66

56 Toleration,

57; Civil Rights, 65;

T H E SETTLEMENT OF AMERICA Virginia, 79; Smith, Description of Virginia, 79; Pennsylvania, 85; Thomas, An Account of Pensilvania, 86; The Scotch-Irish, 94; Letters . . . by Hugh Boulter . . . , 9 5 ; The Plight of Indentured Servants, 97; Personal Narratives, 102

79

AMERICAN VALUES Religious Liberties, 107; Williams, Bloudy Tenant of Persecution, 108; The Land of Opportunity, n o ; Franklin, Observations Concerning the increase of Mankind, n o ; The Duty to Rebel, 113; Mayhew, A Discourse Concerning Unlimited Submission, 114

IO7

Part Two: The First American Revolution INTRODUCTION ι. The Colonial Scene, 123; 2. The Colonial under Mercantilism, 124; 3. Colonial Commerce, 127; 4. Colonial Currency, 130; 5. Colonial Business Depressions, 133; 6. The Tightening of the Mercantilist System, 134; 7. Background of the American Revolution, 136; 8. Winning the Revolution, 138

I23

T H E AMERICAN MIND Jonathan Edwards, 145; Edwards, The Personal Narrative, 147; Benjamin Franklin, 153; Franklin, Autobiography, 154

145

vili

CONTENTS

T H E AMERICAN SCENE J . Hector St. John de Crèvecoeur, i6o; Crèvecoeur, Letters from an American Farmer, 161

16o

AMERICAN PROBLEMS English Colonial Administration, 171; The Appointment and Removal of a Royal Governor, 172; The Disallowance of a Colonial Statute, 174; The Refusal of the Cape Breton Concession, 175; The Navigation Acts, 176; Smith, The Wealth of Nations, 178; Tucker, Tracts, 184; The Stamp Act, 196; Examination of Dr. Franklin, 196; Tlje American Revolution, 202; Paine, Appendix to Common Sense, 203; Paine, The Crisis, 206; Some Results of the American Revolution, 210; The Articles of Confederation, 210; Madison, Views of the Political System . . . , 2 1 2 ; The Charter of the Bank of North America, 215; The Virginia Statute of Religious Liberty, 217; Jefferson, The Virginia Statute . . . , 217; The Land Ordinances of 1785 and 1787, 218

I7 I

T H E UNITED STATES AND T H E WORLD T w o Foreign Views of the American Revolution, 226; Turgot, The American Revolution, 226; Price, Observations on the Importance of the American Revolution, 228

2 26

Part Three: Establishing the New

Republic

INTRODUCTION ι. The Critical Period, 233; 2. Framing the Constitution, 236; 3. The Hamiltonian Program, 238; 4. The Defeat of the Federalists, 245; 5. The American Scene at the Century's Turn, 248

233

T H E AMERICAN MIND Elihu Palmer, 253; Palmer, Principles of Nature, Dwight, Travels in Neva England . . . ,258

253 254; Timothy Dwight, 257;

T H E AMERICAN SCENE Virginia, 264; Jefferson, Notes on Virginia, 264 AMERICAN PROBLEMS The Constitutional Convention, 271; Randolph, The Virginia Plan, 272; Patterson, The New Jersey Plan, 273; Alexander Hamilton's Plan, 275; The Debate over the Constitution, 281; The Federalist, 282; Richard Henry Lee, 288; Lee, Letters of a Federal Farmer, 289; The Bank of the United States, 292; Jefferson, Opinion against . . . a National Bank, 292; Hamilton, On the Constitutionality of a National Bank, 295; Manufactures, 299; Hamilton, Report on . . . Manufactures, 300; Tench Coxe, 305; Coxe, A View of the United States, 305; The End of an Era, 309; Jefferson, The First Inaugural, 310

264

2JI

CONTENTS

ix

THE U N I T E D STATES AND T H E WORLD T h e Louisiana Purchase, 312; Correspondence of Thomas Jefferson, 314; Correspondence of James Madison, 316; Jefferson, Message to Congress, 1803, 320; T h e W a r of 1812 f 322; Randolph, The House Debate . . . on . . . War, 323; Johnson, Rejoinder, 326

3I2

Part Four: ]acksonian Democracy INTRODUCTION ι. The Growth of America, 331; 2. The Mercantile Economy of America, 333; 3. Leveling Tendencies, 337; 4. Problems of the Eighteen Thirties, 340; 5. American Expansion, 345

33I

T H E AMERICAN MIND Ralph Waldo Emerson, 348; Emerson, Nature, 348; Henry C. Carey, 354; Carey, Principles of Political Economy, 356; George Bancroft, 364; Bancroft, The Office of the People, 366

348

T H E AMERICAN SCENE Alexis de Tocqueville, 369; Tocqueville, Democracy

369 in America, 370

AMERICAN PROBLEMS Business Enterprise, 379; Hunt, Lives of American Merchants, 380; Labor and Immigration, 387; Luther, Address to the Working Men of New England, 388; Morse, Imminent Dangers to the Free Institutions . . . , 391; Internal Improvements, 395; Clay, Speech on Internal Improvement, 395; List, Early Railroads in America, 400; Nullification, 403; Webster, The Second Speech on the Foote Resolution, 405; South Carolina Ordinance of Nullification, 410; The Second Bank of the United States, 413; Benton, Speech on the Bank . . . , 416; The Correspondence of Nicholas Biddle, 424; The Depression of 1837-43, 426; Specie Circular of 1836,428; Biddle, Letters to John Quincy Adams, 429; Smith, Letters on American Debts, 431

379

THE

434

UNITED STATES AND T H E WORLD Genesis of the Monroe Doctrine, 434; Correspondence of Canning and Rush, 437; Memoirs of John Quincy Adams, 441; Texas, 445; Wharton, Address . . . , 446

Part Five: The Impending Conflict INTRODUCTION ι. Continued Expansion, 455; 2. Economic Growth, 458; 3. The World of the Workers, 460; 4. The Cotton South, 462; 5. The Struggle over the Territories, 467; 6. Overseas Interests, 470

45 5

χ

CONTENTS

T H E AMERICAN MIND Albert Brisbane, 472; Brisbane, The Social Destiny of Man, 473; Henry D. Thoreau, 478; Thoreau, Civil Disobedience, 479; John C. Calhoun, 482; Calhoun, A Disquisition on Government, 484; Richard Hildreth, 489; Hildreth, Theory of Politics, 490

472

T H E AMERICAN SCENE 493 Charles Dickens, 493; Dickens, American Notes . . . , 493; Bayard Taylor, 498; Taylor, Eldorado, 499 AMERICAN PROBLEMS Building the Railroads, 505; The Illinois Central Railroad, 507; Business Enterprise, 514; New York State Constitutional Convention of 1846, 515; The South, the West, and New York, 524; Articles from De Bow's Review, 526; Condition of the Working Class, 534; The Way to Wealth, 536; The Sociology and Economics of Slavery, 541; Fitzhugh, Cannibals All/, 543; Helper, The Impending Crisis of the South, 546; Abolitionism, 553; The Weld-Grimké Letters, 555; Still, The Underground Railroad, 559

505

T H E UNITED STATES AND T H E WORLD Manifest Destiny, 563; O'Sullivan, Annexation, 563; The Opening of Japan, 568; Perry, Correspondence Relative to the Naval Expedition to Japan, 569

563

Part Six: The Second American Revolution INTRODUCTION ι. The Election of i860, 579; 2. Southern Secession, 580; 3. Lincoln and the Radicals, 583; 4. Fighting the War, 584; 5. The Military Aspects of the War, 586; 6. The Triumph of Industrial Capitalism, 590; 7. The Failure of Reconstruction, 593

579

PRELIMINARIES The Party Platforms of i860, 597; The Constitutional Union Platform, 598; The Democratic Platform, 598; The Democratic (Breckinridge Faction) Platform, 598; The Republican Platform, 599; The South Carolina Convention, 600; Declaration of the . . . Causes . . . [of] Secession, 601

597

T H E REPUBLICAN PROGRAM Charles F. Dunbar, 605; Dunbar, The Establishment System, 606

605 of the National

Banking

SLAVERY AND EMANCIPATION Greeley-Lincoln Correspondence, 614; Greeley, The Prayer of Twenty Millions, 615; Lincoln's Reply . . . , 616; Lincoln, The Preliminary Emancipation Proclamation, 617; Lincoln and the Radicals, 618; Julian, Radicalism and Conservatism, 620

614

CONTENTS

xi

RECONSTRUCTION The South Carolina Freedmen's Code, 628; The South Carolina Constitution of 1868, 637; Joint Select Committee, 644; Minority Report, 645; Travelers in the South, 653; Andrews, The South since the War, 654; King, The Great South, 658

628

T H E UNITED European Napoleon, Napoleon, 673

665

STATES AND T H E WORLD Intervention and the Civil War, 665; Slidell's First Audience with 666; Slidell's Second Audience . . . , 669; Roebuck's Audience with 670; Napoleon and Mexico, 672; Seward, Diplomatic Correspondence,

Part Seven: Growing

Pains in the Post-Civil

War

Decades

INTRODUCTION ι. Party Government, 681; 2. Settling the Country, 684; 3. Industrial Capitalism's Victories, 688; 4. Farmers and Workers, 694; 5. Isolationist America, 698

681

T H E A M E R I C A N MIND Walt Whitman, 703; Whitman, Democratic Vistas, 704; Henry George, 710; George, Progress and Poverty, 7 1 1 ; William Graham Sumner, 717; Sumner, What Social Classes Owe to Each Other, 718

703

T H E AMERICAN SCENE David A. Wells, 725> Wells, Report of the Special Commissioner of the Revenue, 726

725

A M E R I C A N PROBLEMS Settling the Northwest, 735; Minnesota . . . , 735; Agrarian Discontents, 741; Godkin, Editorials from the Nation, 742; Munn v. Illinois, 747; Labor, 753; Powderly, Thirty Years of Labor, 753; Panic and Depression, 758; Cairnes, Some Leading Principles of Political Economy, 759; The Crises of 1837 and 1873, 764; The New York Clearing House Association Report, 768

735

THE

772

UNITED STATES AND T H E WORLD Jdsiah Strong, 772; Strong, Our Country, 772; James G . Blaine, 776; Blaine, Two Addresses . . . , 777

Part Eight: Unrest and Expansion in the Nineties INTRODUCTION ι. The First Steps toward Government Intervention, 781; 2. The Populist Rising, 784; 3. 1896, 788; 4. The Gilded Age, 790; 5. Expansion Overseas, 793

781

xii

CONTENTS

T H E AMERICAN MIND William James, 799; James, Philosophical Conceptions and Practical Results, 800; Andrew Carnegie, 806; Carnegie, Wealth and Its Uses, 807

799

T H E AMERICAN SCENE James Bryce, 8 1 1 ; Bryce, The American Commonwealth,

811

812

AMERICAN PROBLEMS Discontented America, 819; William A. Peffer, 819; Peffer, The Farmer's Side, 820; Charles H. Otken, 824; Otken, The Ills of the South, 825; Henry Demarest Lloyd, 828; Lloyd, Wealth against Commonwealth, 829; Ignatius Donnelly, 834; Donnelly, People's Party Platform of 1892, 835; Benjamin R. Tillman, 838; Journal of the Proceedings of the South Carolina Constitutional Convention, 839; Henry Cabot Lodge, 842; Lodge, Immigration Restriction, 843; Justice Brewer, 847; Brewer, Opinion of the Court in re Debs, 848; Expanding America, 851; Carroll D. Wright, 851; Wright, First Annual Report of the Commissioner of Labor, 852; Wright, industrial Evolution of the United States, 854; The Crisis of 1893, 860; John DeWitt Warner, 860; Warner, The Currency Famine of 1893, 861; The Money Debate, 867; Donnelly, The People's Money, 868; Laughlin, Facts about Money, 872

819

T H E UNITED STATES AND T H E WORLD Expansion, 877; Mahan, The Lessons of the War with Spain, 878; The Open Door, 882; Beresford, The Break-up of China, 884; Basis of the "Open Door" Notes, 88j; The Hippisley Memorandum, 885; The Rockhill Memorandum, 886

877

Part Nine: The New Freedom INTRODUCTION ι. The Political Scene, 893; 2. Big Business and Finance Capital, 896; 3. Other Influences on the Reform Movement, 898; 4. The Workers, 899; 5. The New Freedom, 901; 6. Foreign Affairs under Roosevelt, Taft, and Wilson, 904; 7. World War I, 907; 8. Winning the War and Losing the Peace, 910

893

T H E AMERICAN MIND Thorstein Veblen, 914; Veblen, The Limitations of Marginal Utility, 915; John Dewey, 920; Dewey, The Development of American Pragmatism, 921

914

T H E AMERICAN SCENE The Muckrakers, 927; Steffens, The Shame of the Cities, 927; Wealth and Income, 930; Hunter, Poverty, 931; Streightoff, The Standard of Living, 934; King, Wealth and Income, 936

927

xiii

CONTENTS AMERICAN PROBLEMS Corporate and Finance Capitalism in America, 942; Commissioner of Corporations, 942; Report on the United States Steel Corporation, 943; T h e P u j o C o m m i t t e e , 948, Report on Concentration of Control of Money and Credit, 949; L a b o r in America, 955; Oliver W e n d e l l Holmes, 955; Holmes, Dissenting Opinion in Lochner v. Neiv York, 956; Samuel G o m p e r s , 957; G o m p e r s , T w o Editorials, 958; E u g e n e V . Debs, 9 6 1 ; Debs, T w o Speeches, 9 6 1 ; Vincent St. J o h n , 966; St. J o h n , T e s t i m o n y Concerning the I . W . W . , 967; T h e N e w Freedom, 9 7 2 ; W o o d r o w Wilson, 972; Wilson, The New Freedom, 973; T h e National M o n e t a r y C o m mission, 976; Defects of the National Banking System, 977; C a r t e r G l a s s , 979; Glass, Speech on the Federal Reserve A c t , 979; Robert J . B u l k l e y , 9 8 3 ; B u l k l e y , The Federal Farm-Loan Act, 984

942

THE

988

U N I T E D S T A T E S AND T H E W O R L D Sir G e o r g e Paish, 988, Paish, Trade Balance of the United States, 988; T h e o d o r e Roosevelt, 992; Roosevelt, The Panama Canal, 993, Corollary to the M o n r o e D o c trine, 998; Roosevelt, Corollary to the Monroe Doctrine, 1000; Roosevelt, Message to the Senate on the Dominican T r e a t y , 1003, W o o d r o w Wilson, 1004, W i l s o n , T w o Addresses to Congress, 1004; H e n r y Cabot Lodge, 1 0 1 1 ; L o d g e , The Senate and the League of Nations, 1 0 1 2

Part Ten: The Golden Nineteen Twenties INTRODUCTION IOI 9 ι. W o r k and Wealth, 1 0 1 9 ; 1. Politics in the Twenties, 1023; 3. S o m e Questions of the Hour, 1025; 4. Dark Corners in the United States, 1028; 5. T h e C o u r s e of Business, 1030; 6. Foreign Relations of the Twenties, 1032 THE

THE

AMERICAN MIND Wesley C. Mitchell, 1039; Mitchell, Business Cycles,

IO39 1039

AMERICAN SCENE IO47 E d w i n F. G a y , 1047; G a y , Recent Economic Changes, 1048; Robert S L y n d and Helen M. L v n d , 1054; R . S. and H . M . L y n d , Middletoivn, 1055; A n d r é S i e g f r i e d , 1059; Siegfried, Arnerica Comes of Age, 1060

AMERICAN PROBLEMS I066 T h e W o r k e r s of America, 1066; Robert W . Dunn, 1066; Dunn, The Industrial Welfare Offensive, 1066; Sterling D. Spero and Abram I.. Harris, 1 0 7 1 ; S p e r o and Harris, The Black Worker, 1072; T h e Farmer, 1076; Chase, Prosperity, Fact or Myth, 1077; T h e Boom, 1 0 8 1 ; Seligman, Economics of Installment Selling, 1082; Pecora, Wall Street under Oath, 1086; Allen, Only Yesterday, 1089 THE

U N I T E D S T A T E S AND T H E W O R L D IO94 International Economic Relations, 1094; Klein, Frontiers of Trade, 1095; M a n n , Foreign Reactions to the American Tariff Act, 1099; T w o Failures in F o r e i g n

xiv

CONTENTS Policy, 1104; Ichihashi, The Washington Conference and After, 1106; Kellogg, The Settlement of International Controversies by Pacific Means, m o ; T w o Successes in Foreign Policy, 1 1 1 3 ; Morrow, On Mexico, 1 1 1 4 ; Stimson, The United States and the Other American Republics, 1 1 1 7

Part Eleven: The Third American Revolution INTRODUCTION I I25 ι. T h e Election of Franklin Delano Roosevelt, 1125; 2. Theory and Tactics of the N e w Deal, 1126; 3. The New Deal Agencies, 1130; 4. The Progress of Recovery, 1134; 5. The Cost of the New Deal, 113 j ; 6. Labor under the N e w Deal, 1136, 7. The N e w Deal Continues in Power, 1138; 8. The Third-Term Election, 1140; 9. The New Deal and the Problem of Bureaucracy, 1 1 4 1 ; 10. International Relations under the N e w Deal, 1142 T H E AMERICAN MIND I 147 Franklin D. Roosevelt, 1147; Roosevelt, Commonwealth Club Address, 1149; Alvin H. Hansen, «154; Hansen, Fiscal Policy and Business Cycles, 1154; John Dewey, 1160; Dewey, Democracy, 1161 T H E AMERICAN SCENE I 165 The Bonus Army, 1165; Jackson, Unknovm Soldiers, 1165; Anderson, Tear-Gas, Bayonets, and Votes, 1167; Three Demagogues, 1169; Robinson, Fantastic Interim, 1170; Income, Wages, arid Productivity, 1172; Consumer Ipcomes in the United States, 1174; Bell, Productivity, Wages, and National Income, 1177; Clark, The Conditions of Economic Progress, 1180 AMERICAN PROBLEMS I I85 N R A and A A A , 1185; Means, Industrial Prices and Their Relative Inflexibility, 1185; T V A , 1189; Lilienthal, TVA—Democracy on the March, 1 1 9 1 ; Banking and Public Finance, 1195; Eccles, Two Addresses, 1197; Williams, Deficit Spending, 1205 T H E UNITED STATES AND THE WORLD I2I2 Foreign Trade, 1212; Buell, The Hull Trade Program and the American System, 1213; Continentalism versus Internationalism, 1218; Beard, A Foreign Policy for America, 1220; Roosevelt, The Four Freedoms Address, 1222; Lend-Lease, 1225; Stettinius, Lend-Lease: Weapon for Victory, 1226; World War II, 1231; Roosevelt, T w o Addresses, 1232; One World, 1235; Willkie, One World, 1236

INDEX OF DOCUMENTS Index of Authors, 1241; Index of Titles, 1244

I 241

American Uniqueness. Americans have always been convinced of the unique qualities of their civilization—not in a narrowly chauvinistic sense and rarely because of a missionary zeal. They have not sought to persuade other peoples to abandon their own ways of life; nor have they been too clamorous about the superiority of their own. But they have felt its differences. T o express these differences concretely, however, has not always been easyOne of the explanations for uniqueness which Americans have advanced has been their frontier experiences. This explanation is usually associated with the name of the historian Frederick J . Turner, although as far back as the 1820s we find the German philosopher Hegel speaking largely in the same terms. The frontier theory runs as follows: The United States has been isolated from the main currents of European development by three thousand miles of ocean and, because of this, for the first three centuries of its history, the country has been preoccupied with its own internal problems. These have centered in the conquest of a movable frontier of wild lands where the soil has been arable and also rich in timber and mineral resources. In the fusing fires of this process there has developed an American civilization. The American, as a type, became an individualist, a democrat, an equalitarian, and a utilitarian. He came to look upon government only as an effective device for assuring his happiness and for curbing the oppressive tactics of privilege-hunters. And all because the frontier served as a safety valve. In the wild zones of the West, where land was easily accessible, the American could find both haven and opportunity. Because he conquered the wilderness with his own hands and carved out a freehold for himself and his family, because he erected

governments by free association, because he started with his compeers from the same bottom level—for these reasons the attitudes and institutions of his way of life were profoundly conditioned to individualism, democracy, equality, and utilitarianism. T o a certain extent, all this is true. Nevertheless, important reservations must be noted. All the underprivileged and all the little men did not go West; indeed, could not. For the physical act of transference was a capital operation. Funds were needed for the purchase and improvement of the wild lands, for transportation costs, for maintaining families while they waited to harvest their first crop, for stocking farms and acquiring implements. Also, democratic institutions were as much a part of the settled East as they were of the pioneering West. The traditional American attitude toward government was as familiar to the older New Yorker and Virginian as it was to the newer citizen of Michigan and Wyoming. One notable effect of the frontier, however, should be emphasized. The very fact that there was a West made possible the maintenance of higher wage scales and superior standards of living, and hence made for the traditional American values. For, if driven to it by necessity—as the farmers of New England were, for example—the American could migrate and start life over again in new surroundings. In other words, if industrial workers in America did not migrate westward in great numbers to become free farmers, certainly potential industrial workers did. The small farmers and the rural laborers of New England, New York, the British Isles, Germany, Scandinavia, who began to fill up first the Old Northwest and then the prairie states, would have been converted easily into an industrial proletariat (as were those from the same classes in England,

xvi

GENERAL INTRODUCTION

Germany, and Scandinavia who remained behind), if they had not had the opportunity to continue farming under more satisfactory conditions. Such opportunity was to be found in the American West, and to this extent the West as a safety valve was a reality. Even so, the frontier theory is only a partial explanation of the traditional American way of life. This is of richer stuff, and it is well to examine, at this point, the other contributory factors that have had their effects. Religious Freedom. Freedom of religious worship and freedom from church authority are important cornerstones of the American tradition. In the colonial period, efforts were made—and successfully—to restrict religious toleration and to create established churches. But during the American Revolution many of the new states moved in the direction of religious freedom, and also disestablished churches. The First Amendment of the Constitution for all time fixed the American attitude: it forbade the "establishment of religion" by Congress and guaranteed freedom of worship. By the end of the second decade of the nineteenth century, state established churches were gone. Freedom from an established church not only meant freedom from a single ecclesiastical and educational authority; it also meant a fuller measure of political freedom. For, it is important to observe, established churches have always acted to support the traditional, or conservative, institutions of the societies in which they have functioned. They have a life of their own; they are largely selfperpetuating; they are great property owners; they frequently interpret educational policy in terms of their own needs rather than of those of the whole society. The absence of such a powerful force in the United States made possible the existence of a freer climate for social experimentation, particularly in the educational and political realms. Freedom of Enterprise. Freedom of enterprise is another important cornerstone of the American tradition. Unlike Europeans, Ameri-

cans never found themselves in a climate of precapitalistic influences; that is, feudalism and its relics have been entirely absent from the American scene. T o generalize about feudalism is not easy and qualifications are frequently necessary, but certain observations may be made in order to emphasize the differences between the European and American experiences. While the struggle against feudalism in Europe began quite early—in some regions as far back as the eleventh century—the battle was not easily won. It took western Europe a long time—in many areas almost five hundred years—to shake off feudalism's grip. And even then there continued to survive traces of feudal authoritarianism. Feudalism possessed distinctive qualities as opposed to those associated with free enterprise, or capitalism. Feudalism, for example, supported what was essentially a society of status, where people were irrevocably fixed in their stations, except as they took refuge in the bosom of the medieval Church. Again, in the feudal age economic production was largely on a nonexchange and nonprofit basis; in fact, most production was simply for local use whether it was carried on in the manorial estates or under the supervision of the craft guilds. Also, much of this production was communal. On the land, the customs of the manor governed not only the distribution of the small strips of arable land to the individual peasant but also the planting programs which occupied his whole life. The use of the common lands, which were a part of each village community, was likewise controlled by communal custom, not by individual choice or enterprise. A similar sort of communal regulation controlled the operations of the medieval craft guilds, or associations of craftsmen— tailors, carriage makers, ironmongers—whose authority as regards quality of ware, prices, the training of apprentices, and the accumulation of capital was rarely challenged. Even when the feudal land system began to disintegrate in Europe, starting in the fourteenth century, and when tenants at will began

GENERAL

INTRODUCTION

to replace manorial serfs, the break with communal agriculture was painfully slow. T h e consolidation of strips into family farms went on over a long time; and the same was true of the gradual termination of the rights in the common lands. This is a significant fact. W h e n Europeans, in the seventeenth, eighteenth, even nineteenth centuries were migrating across the seas to take up their homes in the N e w W o r l d and establish themselves as free and independent farmers, they were leaving behind them relatives and friends who were still living under the village agricultural system and within the restrictions of feudal landlordism. Strip cultivation, rights in the common, village organization, the dues and obligations that the landlord still possessed, these continued to exist in Europe. N o t so in the United States; the American farmer started out b y being a free enterpriser from the very beginning. And he became a freeholder. Similar important differences existed in industry and trade. T h e guild controls were monopolistic restraints upon free enterprise. A n d even when the local guilds began to lose their power, monopoly, as an instrument of regulation and control, was not abandoned. T h e emerging national states used monopoly devices tellingly and in every sector of enterprise. And they employed their monopoly powers to control wages and apprenticeship. T h e influence of the guilds as state agencies of regulation did not begin to diminish in significance in England until the eighteenth century. Monopolies in industry and trade, with state charters, were not entirely gone until the nineteenth century. In France and Germany, these institutions lingered on even later. B y contrast, the European immigrant to America found neither guilds nor state-supported monopolies. Like the farmer, the enterpriser in industry or trade in America functioned freely; he was not restrained by the remnants of an ancient feudalism. T h e American suspicion of monopoly is deep-seated. T h e classic struggle against the chartering of the First Bank of the United

xvii

States, led by Thomas Jefferson in 1 7 9 1 , is a case in point. Even industrial corporations w e r e regarded in America with hostility f o r a long time, and it was not until after the 1850s that the states were ready to pass general enabling acts for their creation. T h e American was fearful of the anonymous character of corporate power. Many early industrialists have shown this typical distaste f o r institutionalized business. A n d r e w Carnegie in an earlier generation, Henry Ford in our own, are examples. Both looked on their businesses as personal creations. T h e y were much more concerned with the processes of expansion than with individual profits. T h e result of this attitude was that undistributed earnings plowed back into n e w capital plant made possible the building of the great steel and automobile industries in A m e r ica. Another interesting parallel between C a r negie and Ford is to be noted; both g o t rid of partners—Carnegie buying out Frick, and Ford buying out the Dodges—because their partners resented a business policy based on low productive costs rather than on high profits. The Weak State. T h e weak state is a third cornerstone of the American tradition. T h e early settlers came to America f r o m European countries which were dominated b y the theories of Mercantilism, that is to say, b y a conception of state power which was not unlike the present-day theory of totalitarianism. T h e political and economic well-being of the state was the kev to individual and social activity. Many of the colonists had fled in protest against authority, whether in religious or economic realms, and their allegiance to M e r cantilism was correspondingly weakened because it was associated with the authority of the state. T h e American Revolution cut the connection completely. T h e American Revolution was as much a revolt against the limitations and penalties that hindered free enterprise under colonial relations with England as it was a struggle for political independence. It was only

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natural that Americans, emerging from that conflict with the mother country, should regard the state with suspicion and seek to limit its powers. T h e y struck the first blow f o r freedom in the new state constitutions that were written during the period of the American Revolution. T h e y would not ratify the Constitution until a Bill of Rights had been promised as a part of it. T h e y carried the fight, under J e f f e r s o n and Jackson, into the federal sphere and also into the sutes. T h e theory and practices of the weak, or laissez-faire, state have been as old as American political experiences themselves. If one looks at the histories of England, France, and G e r m a n y , one realizes how far the United States moved from the Old W o r l d view. It was not until the 1840s that the props of English state control—the Acts of Trade and Navigation and the Corn Laws—were finally removed. Also, legal recognition of trade unions did not come until the 1870s. In France, despite the extraordinary achievements of the French Revolution, the French middle class was compelled to struggle against a long line of usurpers seeking to reestablish the principle of absolute monarchy, or state power. It was not until the 1880s that the French state was made responsive to the rights of the individual. And as f o r G e r m a n y , the incubus of state authority was never really shaken off. W h e n it comes to an unbroken history of respect b y the state f o r the individual's natural rights—his rights to life, liberty, and the pursuit of happiness—that of the United States has been the longest, and this despite the lateness with which the United States entered the company of nations. Equality of Opportunity. A fourth cornerstone of the American tradition is the ideal of equality of economic and social opportunity. T h e American people are a middle-class people, and they believe that through the cultivation of the virtues of hard work and thrift they can in time achieve economic independence and social equality. T h e r e can be no question that the belief is solidly founded in reality:

that for a long time and f o r sizable portions of the population such opportunities to achieve measurable independences flourished. Nor can there be question that the hope of their achievement—if not by members of the present generation, at least by their children—still remains an important part of the American credo. This confidence has supported the vast educational structure of America. Education is not so much education for leadership; it is education f o r citizenship and education to equalize opportunities. It is inevitable that a people still "on the make" should place greater store in practical values in education than in the conservative and conserving values of settled and privileged societies. What made possible equality of opportunity in the United States? T h e first and most important influence has already been referred to, that is, accessibility to a vast public domain on which the prior rights of landlords did not have to be respected. There were other factors of which mention should be made briefly. Equality of opportunity also existed in connection with industrial production, f o r there were no privileged and entrenched interests to check the little man in his upward climb. T h e contrast with England is illuminating. T h a n k s to the mercantilist system imposed b y England upon the American colonies, opportunities f o r industrial production, except in limited fields (shipbuilding, iron manufacture), were closed to Americans during the seventeenth and eighteenth centuries. In England, on the other hand, industrial production had had the direct support of the state—with bounties, tax remissions, the establishment of monopolies, c r o w n subscriptions to joint-stock companies. A s a result, large-scale industrial enterprise was flourishing there as early as the sixteenth and seventeenth centuries, in mining and in the manufacture of ironware, chemicals, glass, textiles, and the like. Production was not yet by machinery, of course; but the organization of production was so far advanced that all the characteristics of modern capitalism were already common, that

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INTRODUCTION

is, division of labor, unified workshops, the wage system, and large capitalizations. When the industrial revolution came in England in the third quarter of the eighteenth century, when machine techniques increasingly came to supplant hand processes, there existed therefore an enterpriser class which, while small, was schooled in the methods of largescale industry. This class had already amassed a sizable capital fund. With its managerial skills and its capital, the English middle class was able to move easily into the widening field of industrial capitalism where so many opportunities appeared with the invention of the automatic spindle, the power loom, and the steam engine. Furthermore, transfer from mercantile pursuits to industrial pursuits took place in England. In the United States this was not so; all the industrial capitalists started virtually from scratch. Alexander Hamilton's program to encourage manufactures not only by protection but also by subsidy was never carried out. In the United States, consequently, no established wealth and no especially favored groups checked the young, the daring, and the enterprising. W e do not always realize to what an extent the typical early industrial enterpriser came from the small towns and the countryside of America. His equipment for his extraordinary achievements often consisted entirely of his youthful training in hard labor, a religious education which stressed frugality and application to his calling, and a confidence in his own capacities and the opportunities which his country afforded. Andrew Carnegie, John D. Rockefeller, Cyrus H. McCormick, the Big Four who built the Central Pacific and the Southern Pacific railroads, the great meatpackers of Chicago, Henry Ford—in all cases the story was much the same. In no case did there exist a family inheritance or any kind of special privilege. Equality of opportunity also existed in the United States in the exploitation of its mineral resources. Thanks to the presence of the great public domain and to a generous land policy, it

xìx

was possible for a lucky prospector and a small capitalist to make a lucky strike and to hit and work rich coal, iron, lead, copper, or oil deposits. Many early mining fortunes, in no way connected with special advantage, grew up in pre-Civil W a r America out of modest beginnings. Exactly the reverse was the case in Europe. In England and Germany, for example, the land had already been preempted by landlords, and monopolies in coal production had been flourishing long before industrialism matured. Mining in Europe has always been a favored area of privilege; in the United States it was one of the regions in which free enterprise was able to flourish for a considerable length of time. Equality of opportunity in the United States was also due to the fact that America did not become an economic and financial dependency of Europe. Capital accumulations began to appear in Europe on a large scale in the nineteenth century. Some of these were retained at home to be used for railroad and industrialplant construction. A considerable part, however, flowed overseas for the development of plantations and mines and for the building of railroads and factories. This process was linked with what we have come to call "economic imperialism." Only a small part of such investable funds, however, moved into the United States, and for a simple reason: neither the Federal government nor the state governments would furnish political guarantees that such foreign loans would be serviced or paid back. European capital, it is true, had helped in the original financing of public improvements (including railroads) in the United States as far back as the 1830s. This was due to the fact that many of the securities floated in the London and Amsterdam money markets were state-* government issues. T h e depression of 1837— 1843 threw many of these securities into default; in some cases actual repudiation occurred; and the foreign investor discovered that he was without legal remedy in the federal courts because the state governments were sovereign bodies. Investment, in America, in

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other words, was attended by measurable risks. T h e program of economic imperialism, on the other hand, had real advantages. Either by outright conquest or by the creation of spheres of influence or b y the extraction of governmental guarantees or by extraterritoriality, European governments in the nineteenth century began to expand their areas of political domination. And the businessmen and their bankers, who followed in the wake of missionaries, traders, and soldiers and who sank large sums in mines, plantations, railroads, and factories, knew they were risking little. For economic and military sanctions could always be imposed on the subject peoples. A t the very time, therefore, that the United States offered golden opportunities for capitalist development, notably in the post-Gvil W a r decades, the English, French, Germans, Belgians, and Dutch were turning their attention to Africa, India, China, and Eastern Europe.

The Strength of the American Middle Class, T h i s economic penetration by European capital and enterprise had an interesting and significant consequence: it stunted the growth of a native middle class in the regions where it took place. Industries were dominated by foreign capital, and the profits flowed outward. T h e workers were "proletarianized" and labored, quite literally, under the whips of overseers; while the thin middle layer of managers and functionaries was made up either of foreigners themselves or of educated natives whose loyalties were overseas. T h e classic example of such foreign exploitation was Ireland under English landlordism; Russia became another example toward the end of the nineteenth century. Not so in the United States; here the role of foreign capital was slight (except in the case of railroading and even there the foreign investors were usually bondholders and not shareholders). T h e upshot was that after the close of the American Civil W a r it took a full generation before large-scale capitalist activities appeared in industrial production. And this was the period in which the small enterpriser

emerged. If he were diligent, abstemious, and shrewd, he could increase a small stake into a respectable and frequently an immense fortune. T h e annals of American enterprise, particularly the annals of industrial and smelting fortunes, are filled with the histories of hundreds of young fellows who, starting obscurely, made money, plowed profits back into capital plant or bought out competitors, and ended by becoming rich. Contrast this situation in the United States with that in Ireland or Russia or India or China during the same period, and the greater stability of the American middle class is startlingly revealed. In the United States, a homegrown, home-rooted middle class nursed its profits carefully, expanded its capital plant out of its own surpluses, maintained owner-management, rewarded the top layer of salaried employees by admitting them into its own ranks, and at the same time was able to pay out high wages. In short, it presented tangible proofs on every side of the reality of the American dream that equality of economic opportunity existed. For the middle class in the United States, life was rich with promise. In all those countries under the sway of foreign or imperialist capitalism, by contrast, society was sharply polarized, with a small upper class having a foreign and not a native allegiance. When economic and political shocks c a m e — as they did in Russia, for example—there were no middle layers to cushion the blows. One is to note, finally, the recurrent strain of equalitarianism in our political thinking and party history. Leveling ideas here have always been linked to property rights; the property rights of land and kine and small workshops, however, and not rights of privilege and monopoly. T h e political ideas and leadership of Jefferson, Jackson, the Radical Republicans, the Populists, La Follette, the N e w Dealers— these have had as profound influences in shaping the middle-class ideas and ideals of America as have any other set of beliefs. Americans have fought, again and again, for liberty and equality. T h e First American R e v o -

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INTRODUCTION

lution (the W a r of Independence) sought to free the American people from the domination of an oversea authority and to establish equality of opportunity f o r all men in the economic sphere. T h e Second American Revolution (the Civil W a r ) , in the hands of the Radical Republicans, was an instrument with which to achieve the freedom of the Negroes and to create equality of opportunity for blacks and whites in the South and for enterprisers everywhere. T h e T h i r d American Revolution (die N e w Deal)—happily carried out peacefully— had a powerful equalitarian strain in its composition; through the intervention of the state, the little men of America were to be made secure in their possessions and opportunities to rise were to be reestablished. It is false to assume that the concept of equality of opportunity is only a wistful and nostalgic hankering after an earlier and simpler world. T r u e , our w a y s of living have become institutionalized; w e move among Big Corporations, Big T r a d e Unions, and the Big State. But w e are not powerless: as long as the rights of f r e e discussion and free association are preserved.

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characterize the American system began to make themselves felt. It is one of the most significant characteristics of the American political scheme that it is based upon limited powers. T h e limitations upon government are imposed in a variety of ways: ι. Ours is a government of laws and not of men. Highest of all is the natural law w h i c h Jefferson, obtaining the notion f r o m J o h n Locke, embodied in the Declaration of Independence. " W e hold these truths to be selfevident, that all men . . . are endowed b y their Creator with certain unalienable rights . . . life, liberty, and the pursuit of happiness." T o defend these natural rights of the individual against usurpation at the hands of government the Bill of Rights was added to the Constitution. T h e individual is specifically protected against an established church; he is assured freedom of worship, speech, assembly, and the press; he is safeguarded against a too zealous police authority and tyrannical courts. His property rights are defended b y the famous "due process" clause of the Fifth and F o u r teenth Amendments. Interestingly enough, this appeal to natural law (or a "higher l a w " ) was also used bv the Abolitionists in their attacks on Negro slavery.

The Democratic Institutions of the United States. American political institutions reflect the attitudes here outlined, in both the establishment and protection of personal rights and the limitations imposed upon government. W e like to call our government a democracy, although in the literal meaning of the term—direct government b y all the people—it is not really that. It is a republic and, in fact, the Founding Fathers referred to themselves as republicans and not democrats. Charles A . Beard calls attention to the fact that in the eighteenth cent u r y the word "republic" was employed broadly, that is to say, not in an institutional sense but in a moral one. In short, the representatives of the people, acting through government, sought to create welfare and assure the happiness of the greatest number.

In addition to the Lockian natural law, w e have the protection of the common law, constitutional law, and statute law. In each case, the law is interpreted b y the judiciary, but it is a mistake to assume—as is sometimes too easily done—that this procedure results in judgemade law. It is true that at times, particularly in the processes of judicial review at the hands of the Supreme Court, the courts have violated the intention of the legislative branch, whether in the states or in Congress. But not f o r too long; sooner or later the judges come to understand that the popular will is supreme in the American scheme of things. T h e y did so in the 1870s; they have come to do so again in the 1930s.

As the instruments of government came increasingly under popular control, more and more the limitations upon government which

Henry Steele Commager has expressed this thought in the following words: " T h e state is an organic, not a static, thing, and constitutions

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are designed to permit growth, adaptation, and experimentation . . . T h e police power is not narrowly restricted to emergency legislation but covers all great public needs. T h e great value of the federal system is that it permits experiments in forty-eight political laboratories and such experiments are to be encouraged. T h e r e must be play f o r the joints of political machinery if it is to w o r k , and restrictions should be limited to jurisdiction, not to political p o w e r or administrative activities. Majorities have a right to make mistakes, and there is nothing in the Constitution which prevents them f r o m committing errors or follies." 2. T h e separation of powers—the division of functions into the executive, the legislative, and the judicial—is another means b y which governmental p o w e r is limited. Congress, notably, has always been jealous of its authority, and it has used its rights again and again to cut down Executive pretensions. It has been able to do this especially through its control over the purse strings (as a result of which it can eliminate executive agencies at will) and through the Senate's participation in foreign affairs. T h e executive, on its part, has the important right of veto and in this w a y can impose limitations on legislative conduct. T h e judiciary operates in its o w n sphere. In general, the separation-of-powers theory has worked out well, and there is no question of the f a c t that the American people are devoted to their system. Substitution f o r the three independent branches of government of a single authority—as has been true of totalitarian states —is not likely to meet with much support in America. 3. T h e division of functions between the central government and the states—between Nationalism and Federalism—is a third means b y which the p o w e r of government is limited. B y the Constitution the Federal government is granted specific functions: the rights to make w a r and peace, to maintain a uniform currency, to raise money, to regulate commerce among the states, and the like. A l l unspecified rights are reserved to the states, and in their sphere

they have sovereign powers. T h e struggle between central authority and state rights has been recurrent in American political annals, and the pendulum has swung persistently f r o m one position to the other. T h e original Federalists believed in a powerful central union, particularly f o r the purposes of creating a sound credit system in the new republic and of holding in check the leveling tendencies in the states themselves. T h e Jeffersonians (later Democrats) moved to the opposite extreme: they sought to narrow down as f a r as possible the functions of the Federal government and to make the states completely expressive of the popular will. T h e Republican party, f r o m i860 to 1932, again looked to the national government, first to abolish slavery and then to defend property rights. Under the N e w Deal, curiously enough, the two positions were reversed. T h e Democrats came to regard the central g o v ernment as the only possible agency f o r the protection of human rights and the promotion of the public welfare. T h e Republicans, more and more, began to speak of decentralization and of the necessity for buttressing the sovereignty of the separate states. T r u e , in recent years, because of governmental intcrventionism, operating in the interests of welfare, liberty has appeared to be in danger at the hands of an overzealous and excessive state authority. Frequently, it has been. T h e pendulum, in a free society, does swing over a wide arc. From the 1860s through the 1920s, the state was too passive; during the 1930s and 1940s, it has been too active. Just as-—once and f o r all—we have rejected laissez faire, so we must always be suspicious of statism. American institutions and attitudes furnish us with the weapons: the balancing of the legislative power against the executive power, decentralization of authority, responsibility in office, grass-roots democracy—these are w a y s and means. Again, an alert people has the p o w e r to defend its rights. Parties and Pressure Groups. Against this general background of personal rights and g o v -

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INTRODUCTION

e m m e n t a l limitations, the American political institutions operate. T h e y are made up, as has been said, of the executive and its agencies, the legislature, and the courts. T h e popular will is exerted chiefly in two ways: through the party system and through pressure groups. A m e r icans g o to the polls to vote not f o r individuals but f o r partv candidates. T h e party itself is controlled b y the membership through the dist r i c t clubs and the direct primaries. T h e party, in its turn, is significant f o r the crystallization o f public issues, for its ability to discipline o f fice holders, and f o r its willingness to scrutinize constantly, as an opposition, the acts of the p a r t y in power. A t times in our history, it is evident, the A m e r i c a n two-party system has caused the confusion rather than the clarification of important questions. But at critical periods in our history, the parties have become rallying c e n ters and have not hesitated to act boldly. T h i s was true in the struggles over slavery, free silver, and the League o f Nations, to take a few examples. Also, at critical periods, the parties have represented clear-cut class alignments. In the free-silver debate, f o r instance, the D e m ocratic party was the spokesman for labor and the lower-middle classes; it has been, too, under the N e w Deal. And this significant functioning o f the parties takes place despite the fact that t h e y often appear to be mere local groups and leaders who band together every four years only to participate in national elections. Pressure groups also make possible a greater responsiveness on the part of the executive and the legislature to the popular will. At first blush this is difficult to believe, since pressure groups have usually been assumed to be sinister agencies operating secretly. In the beginning this was unquestionably so, and there can be no doubt that the earliest pressure groups used their power to f o r c e concessions from government to powerful property interests. E a r l y tariff-making is justly associated with the lobb y i n g activities of so-called wool institutes, iron and steel associations, and the like. In recent years, however, pressure groups have f u n c -

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tioned more and more in the open, so that the agencies of government have the means o f judging their strength and o f balancing the articulate forces in the nation. T o d a y it is no longer possible to say that the secret government of Big Business runs public affairs. F o r side by side with the representatives o f business at Washington are to be found the equally capable representatives of the organized farmers and the organized trade unionists. All these groups are very strong, and the result is that government in the United States is government b y compromise. T h i s , in t h e long run, is the most stable kind of g o v e r n m e n t . Equipped, then, w i t h certain traditional beliefs regarding the foundations o f their c o m mon life and having remarkable opportunities to work out these beliefs in practice, Americans have developed the resources o f their land, growing from a small c o m m u n i t y to one o f the great Powers in the world. T h e y have also demonstrated that d e m o c r a c y is a w o r k i n g system. It is the intention o f this b o o k — b y the use of examples—to show h o w A m e r i c a n ideas and institutions have been developed. Its materials fall into t w o parts: text and c o n t e m p o r a r y documents. T h e text, in e f f e c t a book in American history, serves as a series of introductions to the documents. T h e s e are fitted into a pattern which has been followed faithfully in nine o f the eleven parts into w h i c h the book is divided. In each of the parts, in o t h e r words, four divisions have been set up: the A m e r i c a n Mind, the American Scene, A m e r i c a n Problems, and the United States and the W o r l d . It is hoped that, by these devices, the reader will be able to catch the body and the spirit, the enduring values and the transitory—albeit pressing— problems of the w o r l d in w h i c h Americans lived as they marched ahead t o create a civilization. I have sought to do o t h e r things as well. I have tried to make the documents representative—not only o f the strains in the American tradition that are still alive but o f the best

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thinking in and about America. Thus, in the field of philosophy, there has been included selections from the writings of Williams, Edwards, Franklin, Palmer, Emerson, Thoreau, Whitman, James, and Dewey. In the field of economic thought, there are selections from Franklin, Hamilton, Carey, George, Wells, Godkin, Sumner, Wright, Veblen, Mitchell, and Hansen. In the field of political thought, there are selections from Mayhew, Jefferson, Madison, Hamilton, Lee, Bancroft, Webster, Calhoun, Hildreth, Wilson, and Franklin D. Roosevelt. There have been included pieces from the works of distinguished foreigners who have written about America—Adam Smith, Josiah Tucker, Hector St. John Crevècoeur, Robert Turgot, Richard Price, Alexis de Tocqueville, Charles Dickens, J . E. Cairnes, James Bryce, André Siegfried, Colin Clark. Also, through documents, an effort has been made to point up the staples of American foreign policy—the Monroe Doctrine, the Open Door, the Defense of the Panama Canal, the Good Neighbor, International Collaboration. The greater part of the text has been written as an original work, although, of course, it leans heavily on other writings by myself. In a few places it repeats word for word things 1 have said elsewhere. I wish to acknowledge my \hanks to my other publishers for permission to reprint passages or condensations from other writings of mine: to F. S. Crofts and Company for materials from The United States Since 186f ( N e w York, 1932); to Simon and Schuster for materials from The Triumph of American Capitalism ( N e w York, 1940); and to D. C. Heath and Company for materials from The United

States and Its Place in World Affairs, 1918-1943, edited by Allan Nevins and Louis M. Hacker (Boston, 1943). This book has grown out of the requirements of the Contemporary Civilization course at Columbia College, and more particularly its work in the second year. I am deeply grateful to my colleagues for the aid and encouragement I have received. I have discussed my outlines with them fully and at many points have been saved from errors of omission and commission. Notably, I wish to acknowledge my debt here to Dean Harry J . Carman and to Professors Dwight C. Miner and Horace T a y lor. In another sense, this book is peculiarly a Columbia product. It was prepared at the Nicholas Murray Butler Library, and I am under great obligations to the staff of the library for the facilities that were placed at my disposal. And it is being published by the Columbia University Press, which handled with skill and imagination the mechanical problems involved in getting out a book of these great proportions. I acknowledge my thanks here to Charles G. Proffitt, Henry H. Wiggins, Matilda L. Berg, and Eugenia Porter. Helene S. Zahler worked with me on this from the beginning—sifting the documents, writing many of the forewords, and reading the proof. I am grateful to her for her very capable assistance. My wife, Lillian L. Hacker, helped me with her encouragement and understanding: to her my deep thanks. Louis

Columbia University New York, August 1, 1946

M.

HACKER

Part One LEAVING EUROPE AND SETTLING AMERICA

INTRODUCTION /. THE EUROPEAN WORLD FROM WHICH THE AMERICANS CAME ALL MANNER OF FOLK left Europe to come to America in the seventeenth and eighteenth centuries. They came from many lands and various stations of life; they came willingly and unwillingly. Some left Europe behind forever —not only physically but emotionally and intellectually as well—and America was both an asylum and a new beginning. Others brought Europe along with them. In one sense, of course, they were the products of a Western civilization that had been centuries in process of developing; in another, they were the children of the Western World. All of which is to say, they became Americans. The original settlers were in the main English men and women. But by the eighteenth century there were to be found among them ScotchIrish and Germans in large numbers as well as a sprinkling of Dutch, Welsh, Swedes, and Frenchmen. For the most part, they came from the small villages and towns of the country, although urban dwellers (from London, Bristol, Plymouth, Nantes, Amsterdam) were in their company. Nearly always, they were humble men and women, of little means and simple education, who had been farm workers and tenants—and only occasionally small freeholders. Some had been skilled artisans and mechanics; some had been sailors and fishermen. There were, it is true, among them, a small proportion of the well-born: younger sons of country squires, here and there a merchant or a professional soldier, occasionally—but quite rarely— a man of sizable possessions. But none of Europe's great came to America. At the other pole, there were the completely underprivileged: dispossessed small agricultural tenants, the recipients of parish poor relief, the wid-

owed and orphaned, those who were unwanted for religious reasons. And—in the eighteenth century—there were the Negro slaves.

The Transforming European World. The European economic and social world from which the original Americans came had been in process of transformation for at least half a millennium. By the seventeenth century—at least as far as England, France, and Holland were concerned—the feudal society of Thomas Aquinas and Dante and the Knights Templar was finished. It had been a society based upon a caste system and it had revolved about agricultural production with the individual's position in it firmly fixed through a complicated program of rights and obligations. It had also been, thanks to the ethical system created by the medieval Catholic Church, a society in which the market relation had been clearly subordinated. But that feudal polity and economy had not been wiped out with a single bold and clean stroke; the processes of change had left behind many vestigial traces. The world out of which the American settlers came was no longer the tight, local, selfcontained feudal world. It was a world into which the free air of enterprise had already entered. The caste system of feudalism was being dissolved. The individual was beginning to claim and establish certain rights to the liberty of his person. Above all, he was extending the sphere of operations of his property rights. He could buy and sell in a market; he could hire himself out and hire the labor of others; he could save money capital and transform it into wealth, in the economic sense. It must not be assumed that he possessed that full liberty with which we associate private and property rights

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today; but, certainly, he had moved far down that road which mankind in the West had blazed since the thirteenth centuiy—and which had resulted in the loosening of the bonds that tied the individual to authority. For the authorities of the Catholic Church, the manor, and the guilds—all of which had rejected the profit motive and man's ability to improve his station in life as the bases for personal action and social organization-—the men of the fifteenth and sixteenth centuries, therefore, were substituting free enterprise. Their loyalties, notably in western and northern Europe, were shifting from a lower to a higher plane in another area as well. And that was the political. T h e feudal world had been a particularistic one. A man was associated with a village, if a rural dweller, or with a commune, if an urban one. T h e great outside beat upon his gates only occasionally, in the person of a begging friar or in the awful passage of an armed troop. T h e villagers lived and married and died within the narrow sphere of their own stripped fields and commons; the townsmen clung to the shelter of the great walls they helped erect around their communes. But in the fourteenth and fifteenth centuries, these confining horizons were being pushed out. Wayfarers—itinerant merchants, wandering students, soldiers, sailors, runaway serfs— had appeared increasingly on natural highways. Merchants had taken to pitching their tents and bazaars outside walled cities, thus extending the areas of urban settlement. Feudal lords, in the great valleys of western Europe, had accorded these itinerants protection as they moved from fair town to fair town. Powerful overlords, by conquest and agreement, were expanding the spheres of their own influence. These last, in time, were destined to become the national and absolute monarchs of early modern Europe. B y the fourteenth and fifteenth centuries—in Portugal, Spain, France, England, Denmark, Sweden—such monarchies had emerged. T h e y were mighty centralizing and pacifying influences; and, as a result, the loyalty of the individual was shifting from his

locality and his local lord to those of the national monarch and the state. The National Monarchies. How had these monarchies emerged? Largely because of successful wars against the feudal lords, the independent communes, and the Church, wars which the new merchant princes were aiding by making loans to the kings so that mercenary soldiers could be hired, supplied and provisioned, and siege equipment acquired. T h e muskets and the cannon of the national monarchs blew the armored knights and the walled towns out of the history of Europe. Churches were nationalized, and Church properties, either by seizure or through royal appointment to ecclesiastical office, came under the control of the kings. National monarchs, merchants, even the little men of Europe profited in a hundred and one different ways. The national monarchs expanded the territorial areas of the state; established their absolute sway; created great courts in which they reduced the turbulent barons to docile and even humanist courtiers; fostered new and superior tastes in manners, clothes, and house furnishings; and completely controlled the public revenues. Private enterprise also grew in stature. For the monarchs pacified the land and reduced the corporate privileges of the communes. Here was a widening national market, protected by the king's soldiers and the king's judges, into which business could move. Roads and bridges were built; weights and measures were regularized; for varying periods, the coinage was stabilized; provincial and local barriers to the free movement of goods were leveled—partially in some countries, entirely in England. In the nations that broke with the Catholic Church, in the sixteenth century, properties were taken over by the national monarchs to enrich their personal estates and to build up a new court nobility. The Rising Middle Class. Businessmen gained directly and indirectly. Indirectly, because the market was expanded. Directly, because they received from the kings certain concessions and monopolies—to work mines, to manufacture

INTRODUCTION capital goods, to form regulated and jointstock companies for oversea trade and the planting of colonies. The little men of Europe profited as well. The more enterprising and ambitious now had wider fields in which to range. They could move out of the villages and incorporated towns—where opportunity was restrained and thwarted by local custom and guild privileges—into a freer climate. They could enter the king's service or take to the sea or engage in manufactures. Nothing is more interesting than the emergence of the little man •—the petit bourgeois, the interloper, the parvenu—in times of great social change. Many of the later great merchant families of the sixteenth and seventeenth centuries stemmed from obscure forebears who boldly followed the main chance. T h e same was true of the great railroading and industrial families of the nineteenth and twentieth centuries. When human affairs take a sudden leap forward, the innovators are not the scions of ancient privilege, but unknowns, whose strength is to be found in their courage and their ability to endure privations—and, frequently, in their lack of scruples. Out of such a world, the American settlers emerged; a world of royal and dynastic absolutism but, at the same time, a larger and freer world in the economic sense. There was still a third profoundly conditioning force which released the energies and the minds of men from their loyalties to an old authority; this was Protestantism. The Protestant Reformation. Protestantism cut the individual loose from the penitential system of the Catholic Church. The achievement of grace was to be no longer an unending preoccupation with good works through the constant ministrations of the clergy. Now, salvation was to be won by faith: bv the individual's own and direct approach to God, upon whose mercies he threw himself, through his free conscience. The Catholic Church had taught that man was born and lived in sin; and that it was his pride (the greatest of human failings) that prompted him to improve his

worldly station. A too close devotion to the creation of wealth, out of which individual profit might be derived—so had held the Church's great fathers f r o m Augustine to Aquinas—was equally unchristian. T h e ideal medieval man was the ascetic of the monastery who eschewed all this world's goods and who prayed for his fellow Christians. Protestantism, on the other hand, was individualistic, classless, anti-authoritarian and productive in the economic sense. It created a climate where the guides to conduct and action were many and varied: working and saving; the hustle and bustle of the market place; individual striving and personal choices rather than group sanctions were parts of the new social morality. Notably from John Calvin did Protestantism derive its ethical justification of work and thrift. The English, Scottish, ScotchIrish, French, Dutch, and German followers of the Calvinist and reformed Lutheran creeds —the Puritans, Quakers, Presbyterians, Huguenots, Dutch Reformed, and Pietists who played such a large part in the settlement of America and the creation of its individualistic psychology—were impatient with the notions of humility and poverty just as they rejected the whole program of medieval other-worldly asceticism. The Calvinist doctrine of predestination— that there was a small company of God's elect alone chosen for salvation—instead of turning Protestants from the world threw them fully into it. Regardless of their birth, they were picked to rule. Faith, therefore, came first; and it produced works. Faith, too, was linked with application to an everyday "calling." T h e asceticism of work—of the daily application to one's job—was more significant for the Christian life than the asceticism of contemplation. Thus by labor, diligence, sobriety, and thrift, by production and by saving, the good Christian was destined to achieve grace in both this world and the next. The English historian, R. G. Tawney, in these words has described the world-view of the seventeenth century English Puritan and Scottish Presbyterian:

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Convinced that character is all and circumstance nothing, he sees in the poverty of those who fall by the way not a misfortune to be pitied and relieved, but a moral failing to be condemned, and in riches not an object of suspicion . . . but the blessing which rewards the triumph of energy and will. Tempered by self-examination, self-discipline, self-control, he is the practical ascetic whose victories are won not in the cloister, but on the battlefield, in the counting house, and in the market.1 The American publicist, William Allen White, has shown how these values have been carried over into America: Men sought heaven for their immortal souls through the acceptance of salvation. . . . Moreover, they have set up reason as the final arbiter in the relations of men. Out of this establishment of government and the social order upon reason rather than force, men have come into democracy. . . . Men in the pioneer West have had to be hardworking to clear off the wilderness. They have had to be thrifty if they survived the economic rigors of pioneering. They have had to be punctual if they got on with their busy neighbors. They have had to be debt-payers or fail. They have had to cultivate a rather strict sense of social duty. In other words, the western Protestantism carried over the Puritan virtues into the continental West. All those hard virtues, all those social ideals, all those yearnings for the establishment of justice after debate and under reason, erected a social order wherein each individual came to rely with easy confidence upon the guidance of his conscience.2 Geographical Expansion. There was a fourth influence operating on the old world, that of the discoveries and geographical expansion. T h e heart of medieval Europe had been the Mediterranean lands. Here Rome had been established, here were the Holy Places associated with the nativity and passion of Christ; here had worked Paul, Augustine, and other great Church Fathers. The Crusades had reopened a portion of these lands to direct physical contact on the part of western Christendom. The Italian merchants and traders occasionally had 1

R . G . Tawney, Religion and the Rise of Capitalism ( N e w York, 1926), p. 230. 2 W . A. White, The Changing West (New York, •939). PP· 29~30·

penetrated personally into the farther regions of Asia. They had brought back tales of the fabulous lands of Cathay (China) and Zingu (Japan): of rich and populous cities, of great navigable rivers, and of incalculable wealth in precious stones, metals, and fine fabrics. Europe knew of these distant places of Asia as it knew of a dark continent to the south. But Europeans did not go there, for they were compelled, in their little boats, to keep constantly in sight of land lest the vast uncharted seas engulf them. But by the fifteenth century Europeans had become bold seafarers. The revival of learning —and the greater knowledge of geography and astronomy—that had come about in the Moorish universities in the twelfth century, had been a significant influence. Men had learned to know once more that the earth was a sphere; they had come to believe that the continent of Africa could be rounded and the Far East reached by southern—and perhaps, too, by northern and western—all-water routes. The science of navigation had matured. The compass and the astrolabe made it possible for navigators to strike out into the great seas; larger and safer ships were built; portolan charts were now drawn up. The invention of printing helped to advance the easy and cheap circulation of geographical knowledge. Theoretical and technical aids thus existed to make adventuring possible. The adventurers, by the fifteenth century, were in existence. They operated under the new monarchies of western Europe. Not the Italian or North German city-states fitted out navigators and explorers but the kings and princes of Portugal, Spain, France, England, and Holland. In a sense, these journeys of discovery and exploration were linked with the ambitions of dynastic monarchy; for the expansion of territories and rulership over distant places added to the glory of the royal crown. Missionary zeal played its part. A desire to find precious metals for decoration and coinage— for European supplies of gold and silver were limited—contributed to the impulses to dis-

INTRODUCTION c o v e r y j n d exploration. Of equal importance was thedesire to be freed of the dominance of the Italan and German traders who monopolized th trade with the Near East in spices and textiles. T h e r was still a further consideration: and this hacto do with the dislocations in the Near East as result of the appearance of the Turks. T h e Tirks, when they took Constantinople in 1453 aid E g y p t in 1517, did not shut off the trade wth these lands and close the avenues into MiddleAsia; but they burdened business with heavy mpositions. That is to say, the Italians were prmitted to operate as before; except now tfcy were required to pay registration fees, tols, tariffs, and similar charges. All these exactiois—as well as the monopoly prices of the Italans and the fact that land-borne traffic is dearc than water-borne—kept the prices of Eastern wares high. Portigal was the first nation to seek escape from tie iron ring of the Mediterranean. Under the leacership of Prince Henry, son of the first Portugiese national monarch, navigators moved out ino the Atlantic and began the circuit around Africa. They reached the Canary Islands, /ladeira, and the Azores. T h e y moved south, eeling their way around the African coast a Prince Henry carried on a war against the Mors. T h e Moorish power collapsed; and the Poruguese found on the African coast gold and slaves and ivory tusks. All this whetted their apetites. T h e y discovered the Congo in 1482; rached the Cape of Good Hope in 1487; and in 1497 they sailed out into the Indian Ocean ind in the following year put foot on Indian soil. In another fifty years, from their own cmcessions and factories in India, Portuguese nerchants and sailors were penetrating into allthe archipelagos of the Spice Islands and reachiig even into China and Japan. T h e allwater ink between East and West had been establined. Spaii followed the example of Portugal. Christy the Act of 1663, all the commodities g r o w n , produced, or fabricated in Europe which the colonies might require or wished to handle had to come by way of England as the entrepôt. Transshipment in this fashion meant, of course, export duties and additional freight and handling charges, so that the cost of European goods for the colonists was increased. T h i s meant, again, an effort to force the American colonies to deal with England alone f o r their manufactured-ware necessaries. Later acts were designed to strengthen the administrative regulations of enforcement. This was only one part of the Navigation System. T h e second had to do with production. Written into the Acts of T r a d e and Navigation were so-called "enumerated lists," or lists of raw-material products g r o w n or created in the colonies which were to be exported to E n g land alone. Naturally, these products were f o r English use or English transshipment into the European markets, In this w a y England (in true mercantilist fashion), hoped to f r e e herself of her dependence upon the naval stores, minerals, spices, and the like, of foreign lands; also, the carriage of such wares in the European trade

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meant earnings f o r English ships and profits for English merchants and processors. There was, in addition, the factor of revenues from import and export duties levied on such articles. So, the A c t s of 1660 and 1663 placed the following colonial commodities on these "enumerated lists": sugar, cotton, tobacco, ginger, indigo, and various dyewoods. T h e Acts of 1704 and 1705 included rice, molasses, naval stores, hemp, and masts and yards. T h e A c t of 1721 listed copper ore, beaver furs, and other furs. T h e A c t of 1764 enumerated whale fins, hides, iron, lumber, raw silk, and potash and pearl ashes. It will be observed that virtually all the surplus products of the new country, except cereals, meat stuffs, and fish, in time fell under the controls of the Navigation System, Restrictions Oil Manufacturing. As far as international trade was concerned, the orbit of colonial enterprise was a limited 011e indeed. T h e same restricted opportunities existed in industrial production. T h e explanation for the insignificance of colonial manufacturing is a simple one; and, again, it is linked with mercantilist restraint. T h e English administrative apparatus of control over the economic life of the colonies was elaborate. T h e kev açencv was the Board of T r a d e established as such in 1696, although its predecessors ran back into the Cromwellian period. T h e devices used bv the Board of T r a d e f o r directing and supervising economic matters included the following: It was given the task of preparation of the civil list, so that it had its hands on the personnel sent over to or in charge of the colonics. It supervised the activities of the colonial judiciary. It passed on the petitions of English companies seeking investment opportunities in the colonies and reported back to the Privv Council. (In this particular it is important to note that very f e w such requests for charters were granted; and in no cases were the petitions acceded to when a business right of Englishmen was threatened.) Even more important were the Board's two functions of reviewing colonial legislation and recommending approval or disapproval ("dis-

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allowance" was the term employed) to the Privv Council, and of preparing instructions f o r the deportment of the royal governors. These two rights the Board of Trade employed; so that a good deal of the conflict that emerged between colonial legislatures and royal governors in the eighteenth century stemmed f r o m the constant limitations imposed upon the popular will from overseas. Notably at t w o points, colonial enterprise was being circumscribed. T h e first had to do with prohibitions against the encouragement of manufacturing by the colonial legislatures. T h e second was concerned with the checking of attempts on the part of the colonies to increase their money supply in an effort to escape from the trap of inadequate credit facilities. It is not generally recognized to what degree colonial legislatures were preoccupied with the problem of manufactures. Taking a leaf f r o m the experiences of the mother country and using characteristically mercantilist devices, the legislatures sought to encourage the development of textile and ironware industries. T h e y passed statutes offering bounties, public credit, and tax exemptions; they tried to create monopolies, to assure fair ware, and to incorporate new towns where industries mi^ht be estabO lished. T h e Board of Trade examined these statutes and used a number of means to hold the tendency in check. It recommended disallowance to the Privy Council. It instructed the royal governors to veto. It advised Parliament in the preparation of general legislation. In the last connection, three laws were passed. T h e Woolen A c t of 1699 struck at the colonial (as well as the Irish) woolen textile industry. Under it, colonial wool, woolen varn, and woolen cloth could not enter into intercolonial or international trade. T h e Hat Act of 1732 not onlv prevented colonial-made hats from moving into intercolonial and international trade but it also reduced the industry to retail and custom-made proportions. Negroes were barred from participation in it; the seven-year apprenticeship law was imposed; and all hat-

INTRODUCTION makers were limited to two apprentices. T h e Iron Act of 1750 denied to the colonial enterprisers the right to expand their iron operations by the erection of new mills, forges, and furnaces. They could, in other words, continue to produce heavy bar iron; but not wrought ironware or finished steel products. In addition, the right of disallowance was regularly used bv the Privv Council at the recommendation of the Board of Trade. Colonial laws to encourage shoemaking (Pennsylvania, 1705), sailcloth manufacture (New York, 1706), the establishment of new towns (1706, 1707, 1708 in Virginia and Maryland), linen fabrication (Massachusetts, 1756) were vetoed. And it made no effort to conceal its intention. Thus, in 1756, the Board declared that "the passing of laws in the plantations for encouraging manufactures, which anv ways interfere with the manufacture of this kingdom, has always been thought improper, and has ever been discouraged." The Bounty System. Side bv side with mercantilist restraint went encouragement, but all to achieve the grand design of making colonial enterprise an adjunct of English economic requirement. Again and again, special privileges were offered bv the mother country in an effort to direct colonial activity into specific spheres. England \vas dependent upon the so-called East Country (lands around the Baltic Sea) for her naval stores, ropes, and rigging. In 1705, to stimulate the colonial production of these staples, upon which shipbuilding was based, bounties were offered for the raising and making of hemp, tar, pitch, and resin. But New Eng-

3. COLONIAL T h e colonial businessman was primarily a merchant. In the Northern colonies, he subordinated his other economic interests to trade; but he was an independent trader. In the Southern colonies, usually, he was an agent or factor for English or Scottish merchants. There is another regional difference that must be had in

landers, whom London had particularly in mind, did not yield to these blandishments. In South Carolina an impetus was given to naval store production; in North Carolina, to hemp. The bounties were permitted to lapse for a time, were renewed again in 1729 at a lower level, and then raised once more in 1764. This assistedproduction neither solved England's problem— for her own shipbuilding industry continued to depend upon East Country exports—nor did it divert New England enterprise out of those activities that were competitive with the mother country's. Similar programs were launched in connection with the production of subtropical requirements. Attempts were made to foster the development of wine (imported from France) and silk (imported from Italy) first in Virginia in the seventeenth century and again in Georgia in the eighteenth century. Bounties, assisted emigration, and high prices for wine and wound silk produced no results. In the case of tobacco, mercantilist policy was more successful. T o give the planting colonies an opportunity to cultivate the weed without competition, its growth was banned in Great Britain and Ireland in 1620. On the other hand, tobacco was put on the enumerated list under the Navigation System, so that the crop was moved through the hands of English and Scottish dealers and processers before it was transshipped to the European continent. This was less than a blessing. T h e fact is, on balance, the mercantilist restrictions and prohibitions hampered colonial enterprise. A closer examination of foreign O trade will demonstrate this.

COMMERCE mind. The English mercantile economy welcomed Southern plantation wares; while it was in no position to absorb all the goods produced in surplus in the Northern colonies. T h e problems of both sections were different, although the overall limitations on their business activities were the same.

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The Balance of Payments. Because England took, in such large quantities, the South's tobacco, indigo, naval stores, furs and hides, it might be supposed that the balance of trade was favorable to the colonials of this region. Such was not the case. T h e y had to buy their invisible items from the English—shipping, brokerage, commissions, interest. The terms of trade were against them, for there was a constant complaint in the South of the lack and the dearness of manufactured ware. English investments (by the 1770s, they came to something like ¿4,000,000 in the planting South) continued to increase. This meant that English creditors were converting the short-term debts of Southern planters into long-term obligations, largely mortgages on land and slaves. All in all, the planting colonies were in a debtor relationship to the mother country—a state of affairs that was not unduly restrictive as long as credits were available in England. The North was also in a debtor relationship because its businessmen had to buy from England while they could not sell to her. They were able to carry on, and even to expand, as long as they could find other areas of trade in which to acquire favorable balances. Here developed one of the paradoxes of the mercantilist program. In an effort to avoid the competition of colonial businessmen, the English limited industrial enterprise; but to make possible the purchase in America of English goods in growing quantities, they were compelled to tolerate colonial competition in the foreign trade. In short, Northern businessmen tried to earn freights, commissions, profits, and brokerage fees on their own account, bv extending their trading activities into foreign spheres where English merchants were already functioning. Northern businessmen, to pav their English balances and sustain their domestic trade, had to find markets in Newfoundland, the Wine Islands, southern Europe, Africa, and the West Indies. In virtually all these regions, they built up favorable balances; from all these regions they obtained specie and bills of exchange with which to satisfy their English creditors. In this

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way, the import trade was financed—and colonial mercantile accumulation could take place. When the competition became too keen, when New York, Boston, Newport, and Philadelphia merchants began to press their English rivals too closely, then the English Mercantile System was on the horns of a dilemma. T o curb the aggressive Northern businessmen threatened the ruin of the Northern business centers. But to permit colonial enterprisers to go their own way and engage in industry meant the end of the economic usefulness of the colonies. This was England's problem after the end of the Seven Years' War in 1763. There was no solution for it. The Northern Trades. T h e foreign trades opened up bv Northern merchants, therefore, were not extra ventures but fundamental to their continuance in business. These trades were the following: ( 1 ) THF. NEWFOUNDLAND TRADE. T o this region, New England merchants sent provisions, lumber, rum, fishing tackle, and salt for the maintenance of the English colonies planted there. Originally, in the seventeenth century, N e w Englanders fished the banks themselves; but increasingly, into the eighteenth century, they contented themselves with trade alone. They received in return fish and coin and bills of exchange. The balance of payments was in their favor. (2) T H E w i N F . ISLANDS TRADE. T o the Azores, the Canaries, and Madeira, lying in the eastern Atlantic off the coasts of the Iberian peninsula and north Africa, N e w England, N e w York, and Philadelphia merchants exported fish, provisions, live animals, and barrel staves. T h e y obtained in return light and fortified wines, part of which were carried to England to pay off balances. Some of the wines were brought into colonial America. In this region, too, the balance of payments was in favor of the colonies. ( 3 ) THE SOUTH EUROPEAN TRADE. T o Portugal, Spain, France, and Italy, N e w England merchants (out of Boston in the seventeenth century, out of Salem in the eighteenth), sold fish,

INTRODUCTION timber, and Southern rice. Direct trade was almost completely forbidden with these countries, the imports, in small quantities, being lemons, limes, raisins, salt and olive oil. "I he returns therefore were in coin and bills of exchange. Again, the balance of payments was in fayor of the colonies. (4) T H E W E S T I N D I A - A F R I C A N TRADE. T h e most important trade of all was the triangular trade which included the Guinea coast of Africa as one leg, the famous Middle Passage across the Atlantic as the second, and the northern return journey from the Caribbean settlements as the third. Here, too, the balance of payments was in favor of the colonies. T o Africa, increasingly in the eighteenth century to rival the slavers out of Bristol, Liverpool, and Nantes, went colonial slave ships out of Newport, Boston, Salem, and N e w Y o r k , with cargoes of domestic rum and iron and trade goods picked up in English ports. B y the 1770s there were perhaps as many as seventy colonial ships in this traffic, each able to carry 65 Negroes. As an indication of its size and economic significance, one may note that the colonial slaving fleet was fully one third that of England's. Despite the hazards of the business and the necessity for quickly amortizing the value of the vessels (as a rule, in three years), the profits on each voyage were very large, perhaps in the neighborhood of 30 percent. These Guineamen, as they were called, also purchased ivory, gums and bees wax. But the N e g r o trade was the most important of all; and the Negroes were moved, to a lesser extent, into the mainland colonies and, to a greater extent, across the Middle Passage to the sugar plantations of the Caribbean. The profits of the slave trade were taken frequently in coin and bills of exchange; therefore the full value of this triangular trade is not reflected in comm o d i f y movements. N o r was this all. From the West Indies came large quantities of goods; to them were shipped most of the surplus Northern products which were banned in England. Northern merchants loaded their small swift ships (70 tons was a

large vessel) with all those necessaries the sugar plantations were incapable of p r o d u c i n g — w o r k animals, lumber, staves, heads, barrel hoops, flour, salted provisions, refuse fish—and sold them originally to the English planters of Jamaica, Barbados, Antigua, Montserrat, and Nevis. But as the eighteenth century lengthened, more and more these Northern ships w e r e to be found in the ports of the foreign islands and settlements. From about 1 7 3 0 on, although the French and Spanish W e s t Indies w e r e legally closed to them, Yankee and N e w Y o r k captains had brought the whole Caribbean region from Dutch Guiana on the southeast to the Bahamas on the northwest into their sphere of influence. T h e y were at home in Jamaica, of course (doubly so, not only because it was British but also because it was the center out of which the illegal traffic with the other islands was carried on); and equally at home in Spanish Havana, Vera Cruz and Porto Bello, in French Martinique, in Danish St. Thomas and St. Croix, and in Dutch Curaçao. In all these ports, the Northern ships purchased indigo, cotton, ginger, allspice, and d y e woods, which were largely transshiped to E n g land; and salt and a little coffee f o r the colonies; and—most important of all—sugar and molasses which were moved northward to the distilleries of Rhode Island and Massachusetts to be distilled into rum. It was this wondrous and heady beverage that flowed through the veins of the domestic Indian trade, the N e w f o u n d l a n d trade, and the African trade. In this wise, the c y c l e was completed and thus Northern business was able to prosper and g r o w , within the confines of mercantilist restraint, until 1763. The First Molasses Act. Mention has been made of the fact that Northern merchants traded freely over the whole Caribbean region. This was important, of course, in the light of the existing mercantilist prohibitions. W h a t was of even greater significance, as f a r as the E n g lish Mercantile System was concerned, was the fact that gradually the Northern merchants began to favor the non-English settlements as the

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sources f o r their sugar and molasses. N o w the mother country was touched at a vital spot, for the darling of the English imperial scheme was not the mainland colonies but the sugar plantations. T h e Board of T r a d e and Parliament, listening to the protestations of the sugar lords sympathetically, moved with energy and dispatch. In 1733, Parliament passed the Molasses A c t , which placed virtually prohibitive duties on foreign-islands sugar, molasses and rum imported into the English colonies. But there was a fly in the ointment; the British were incapable of enforcing the law. T h e customs machinery in the colonies was weak and venal (notably at Jamaica, through which the foreign sugar cleared) and the naval patrols that could be allocated f o r enforcement and to run down the illegal traders w e r e inadequate. W h y ? Because, frorrr 1740 through the Seven Years' W a r , England was engaged in foreign wars almost continuously and the navy was required for military purposes.

4. COLONIAL Mercantilist control affected the colonial economic life at another important point. This was the close regulation of the colonial money supply. In the second half of the seventeenth century and most of the eighteenth, the whole European w o r l d was affected by a dearth of minted money. T h e original Spanish silver mines in A m e r i c a were no longer in production. Bullion was being drained off into the East to be buried and removed from circulation. A n expanding industry and commerce were clamoring f o r more elastic credit facilities. Commercial banking was still at a low point in development—bank money, created by the writing up of deposits, was virtually unknown —so that business transactions were largely carried on in coin, or foreign bills of exchange. T h e importance of coin to the mercantilist era was understandable. W i t h this fact was joined the mercantilist insistence upon a favorable balance of payments, to be settled only by the movement of bullion.

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Within this framework, therefore, what was in effect an illegal colonial trade could operate with impunity. All the merchants f r o m all the Northern ports engaged in it; with their profits they built distilleries and made rum; rum moved into the African trade and the slavers flourished. In a sense, the foreign-islands commerce was the foundation stone of Northern mercantile prosperity and sustained the adverse direct trade with England. B y the late 1750s at least 11,500 hogshead of molasses reached Rhode Island annually from the foreign islands, as against 2,500 from the British; 14,500 hogshead came to Massachusetts from the same foreign sources as against 500 from Jamaica, Barbados, and the other British islands. By 1750, it was estimated, Massachusetts had some sixty distilleries making rum, and Rhode Island some thirty. T h e manufacture of rum was undoubtedly the most important single industrial enterprise in N e w England in the second quarter of the eighteenth century.

CURRENCY The Program of Restriction. T h e colonial money supply was compelled to operate in terms of these limitations. T h e British program may be summarized in this fashion. It did not permit the exportation of English coin to the colonies. It compelled colonials to p a y public obligations in coin whenever possible. It did not permit the colonials to prevent the exportation of coin, or indeed bullion, f r o m America to the mother country. It refused to allow the erection of colonial mints and it regarded with a suspicious eye the efforts to augment the money supply by the emission and circulation of bills of credit. T h e colonial currency, despite the great need of credit f o r expansion at home and the settlement of obligations overseas, was tied to the English pound and kept tightly contracted. There were special considerations that played a part in the determination of this policy. A n independent coinage—if it were f r e e d from the pound—might affect adversely the credits E n g

INTRODUCTION lish merchants had advanced to colonials. Similarly, an independent, and an expanding, money supply might furnish those additional financial resources with which colonial businessmen would be tempted to expand their enterprise into avenues closed to them by the mercantilist system. T h u s , the heavy burden of debt, the paucity of coin, and the absence of commercial banking facilities created an inflationary attitude in colonial America; the English, on the other hand, were deflationary. In 1764, after a long and unsuccessful contest against the colonial legislatures, England took a fatal step. In the midst of colonial depression, already aggravated b y the sharp decline in the foreign-islands sugar trade, Parliament passed the Currency A c t , which denied to all the colonies the right to issue and circulate paper money, the so=called bills of credit. T h e steps leading to this impasse must n o w be recounted. Because of the scarcity of coin, in the seventeenth century all the colonies legalized the use of commodity money f o r public transactions. Exchange values were regularly fixed by law. Of course, it was impossible to compel the use of commodity money to settle private accounts, so that t w o price levels were actually in existence. All sorts of commodities were employed in this w a y — f o r the payment of taxes, the salaries of public officials, and the like. In N e w England and the Middle colonies, at one time or another, wheat, barley, rye, beef, pork, cattle, and peas were used as commodity money. In Virginia and Maryland, tobacco served this function. Necessarily, this was a poor makeshift. Commodity money had to be inspected, transported, and stored; it deteriorated; the market value of commodities often was lower than the official exchange ratios. It was inevitable, therefore, that colonial governments should turn their thoughts to the establishment of provincial mints. Massachusetts, indeed, erected such an agency; f o r in 1652, during the interregnum at home, it began to strike off the famous pinetree shilling. Characteristic of the colonial attitude, this coin had a smaller silver content than the English

'3'

shilling. But in 1684, the English c r o w n , claiming that the issuance of the coinage was an exclusive privilege of sovereignty, outlawed the Massachusetts mint. N o similar attempt was made elsewhere. Another expedient was then tried. Foreign coins circulated freely in colonial A m e r i c a because of the favorable balances in the Caribbean trade and because, interestingly enough, piracy brought much of its ill-gotten gains into the ports of N e w Y o r k and Philadelphia right up to the end of the seventeenth century. Colonials were familiar with the f o l l o w i n g gold coins: the Portuguese Johannes and half J o hannes, the Spanish Pistoles, and the F r e n c h Guineas. T h e most familiar foreign coin, h o w ever, was the Spanish milled silver dollar, o r piece-of*eight, which was officially valued at 4s. 6d. In an effort to attract more of these coins into the colonies, legislatures took to overvaluing them. T h e piece-of-eight was revalued at 5s. originally and then pushed up to as high as 8i. in some of the colonies. Again mercantilist policy issued a warning. T h e laws of Maryland and Virginia (as well as those of Barbados and Jamaica) w e r e disallowed by the Privy Council. W h e n this measure proved unavailing and South Carolina, Pennsylvania, N e w Y o r k , and the N e w E n g land colonies followed the example of the planting colonies, the crown intervened. A royal proclamation was published in 1704 w h i c h established a uniform table of values f o r all foreign coins; the piece-of-eight was fixed at 6s. In 1708, Parliament put teeth into the proclamation b y threatening all violators with prison sentences. Bills of Credit. T h e device of overvaluation having failed, the colonies turned to the emission of paper money. As early as 1690, the Massachusetts legislature had led the w a y when it had circulatcd short-term bills of credit, in effect promissory notes, in order to meet extraordinary expenditures arising out of military operations. These w e r e really taxanticipation warrants. T h e y w e r e to be retired after the lapse of a stipulated period, and w e r e

»3*

T H E FIRST AMERICAN

to be used only f o r public purposes. In other words, they were not to be regarded as legal tender and could therefore be refused in the settlement of private debts. From time to time between 1700 and 1715 the Massachusetts example was followed by other colonies: Connecticut, Rhode Island, New Hampshire, New York, N e w Jersey, North Carolina, and South Carolina. Pennsylvania joined the others in 1723, Maryland in 1733, Virginia in 1755, and Georgia in 1760. It is important to note that up to about 1710, this device was used with restraint so that inflation did not set in. But not for long. A number of steps were taken to lead the colonies inevitably down the road of a depreciated currency. In the first place, the bills of credit were declared legal tender, and penalties were imposed on those persons refusing to accept them in private transactions. In the second place, the dates of the collection of taxes on which the bills were based were pushed ahead, so that the issues virtually became a permanent paper currency. In the third place, taxes were not provided in adequate quantities with which to redeem the bills. In the fourth place, in some colonies, old issues were simply canceled and new ones struck off to replace them. Finally, to supplement the bills, every colony but Georgia authorized the creation of land banks with the right of note issue. Land Banks. These banks welcomed the deposit of land mortgages and against them emitted notes, charging an interest rate of about 5 percent. South Carolina created the first in 1715. In Rhode Island the institution was particularly favored, and at one time or another nine such land banks made their appearance. In all, in this one colony, the issue of such notes came to £ 465,000. Massachusetts sought to pioneer in still another direction. In 1740 its general court granted a group of private individuals a charter to form a "Land and Manufactures Bank." Capitalized at £ 150,000, the society was empowered to accept land as security for its stock and issue notes based on the real estate. Stock-

REVOLUTION

holders were to be charged 3 percent interest if they put up land as security for their subscriptions, and this could be paid either in bills of the society or in nonperishable raw materials or rough manufactures. Furthermore, every year 5 percent of the principal was to be amortized in the same way. Loans were to be paid off in bills or in commodities. The intention of the society was plain: it was seeking to create a device for the expansion of credit based on nonperishable commodities, largely agricultural produce. (It might be said, parenthetically, that the subtreasury scheme of the Populists of the 1890s was based on a similar thought; and so were the commodity loans made by the N e w Deal's A A A to the growers of agricultural staples.) The idea was welcomed, and in the first- and only year of its operations the Land and Manufactures Bank issued notes totaling some ¿40,000. But Parliament quickly intervened. The precedent was too dangerous a one and might lead the way to the establishment of commercial banks. As a result, the moribund English Bubble Act of 1720 was invoked, the Massachusetts Bank was outlawed, and the subscribers were compelled to make good on the notes issued. Depreciation and Intervention. It has been said that depreciation of the colonial currency followed because of these practices. In Massachusetts, it has been estimated, the value of sterling to paper money readied a maximum ratio of h to ι. In Connecticut, it was 8 to 1. In New Hampshire, it got to 24 to 1. In Rhode Island it was 26 to 1. In North Carolina it was 10 to ι. In South Carolina, it was 7 to 1. In New York and Pennsylvania, succcssful curbs were imposed and depreciation was held within narrow limits. The English government sought to intervene through characteristic mercantilist means. It disallowed legislation and issued instructions to its governors to veto, whenever refunding for bills was not provided and whenever the colonies tried to make the bills legal tender. But by 1750, these measures had proved unavailing

INTRODUCTION and a headlong inflation was threatening; as a result, in 1751 Parliament stepped in and passed the Currency A c t of that vear. This law, directed at the N e w England colonies, forbade the creation of new land banks and once and f o r all declared that bills of credit could not be accepted as legal tender. Also, outstanding bills were to be retired at their maturities; new bills might be issued only when a tax base actually existed; and their terms might run for but t w o years for ordinary civil purposes and five years f o r military purposes. T h e lightning struck in 1764. Parliament in

f. COLONIAL

BUSINESS

It is sometimes assumed that business fluctuations—cyclical waves of expansion and contraction—were brought into the modern world by industrial capitalism. This is not so: under commercial economies recurrent periods of good times and hard times have taken place. But this distinction must be had in mind: in preindustrial economies, panics and depressions largely have affected the commercial centers only; in modern times, their effects are universal. T h e r e were such business fluctuations in colonial America, certainly as far back as the beginning of the eighteenth century. Anne Bezanson and her associates have found that at Philadelphia a number of fairly well-defined short cycles can be charted against the background of two secular, or long-term, cycles.T h e first of these long-term cycles ran from about 1720 to about 1744, and was marked by level or moderately rising priccs. The second ran from 1744 to about 1784, and was marked by rising prices. T h e second long-term cycle is of particular interest because of the nature of the shorter fluctuations that took place within it. From the summer of 1744 to the spring of 1749, there was a period of recovery; from 1749 to 1757, 2 A n n e B c z a n s o n , and others. Prices sylvania (Philadelphia, 1935).

in Colonial

Penn-

13J

th is vear extended the C u r r e n c y A c t to include all the colonies and tightened up the law. Provision was to be made f o r the retirement of all outstanding bills; even exceptions in the case of military expenditures were withdrawn. Contraction began to take place—notably in a period of business depression. Credit, already narrowly circumscribed, became even tighter, and bankruptcies followed. B y 1774, when a slight business revival was already in operation, there was not much more than ¿2,400,000 in currency in all the colonies available f o r exchange requirements and f o r credit.

DEPRESSIONS

recession followed. W i t h the outbreak of the Seven Years' W a r and the increasing engagement of colonial businessmen in it—in supplying the British armies and in illegal trading with the enemy—the price curve once more moved upward. Another period of recovery and prosperity occurred, lasting until 1763. T h e n , with the termination of the war, the tightening up of the mercantilist controls, the stringency of money and credit, and the enacting of new fiscal measures by Parliament (the Stamp A c t of 1765, the Townshend Acts of 1767), confidence waned. A recession set in, which reached depression levels during the greater part of the years 1764-69. T h e r e was a brief recovery in 1770-72, and once more recession in 1772-75. These experiences of Philadelphia were duplicated in the other commercial centers. T h a t is to say, there were good times as a result of the war with France, and hard times with the end of the war and England's rigorous enforcement of the Acts of Trade and her deflationary policy. The periods of recession of 1764-69 and 1772-75 arc to be noted: unemployment, falling prices, tight credit, bankruptcies, and additional fiscal burdens w e n t hand in hand with political unrest and the challenging of the Alercantilist System.

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T H E FIRST A M E R I C A N

REVOLUTION

6. THE TIGHTENING OF THE MERCANTILIST SYSTEM T h e successful termination of the war against France left England in undisputed possession of Canada, the American West (up to the Mississippi River), and the East Indian trade. She emerged with a large national debt. And she was confronted by a Mercantilist System, which, as far as the colonies were concerned, was in sad disrepair. With all these problems, English imperial policies in the next decade were concerned and were carried out, in terms of the characteristic mercantilist outlook. T h e English program did not mark a break with mercantilist policy; rather, the intention was to strengthen it. The tightening up and the rigorous enforcement of the Acts of Trade and Navigation—which virtually put an end to the profitable and necessary colonial import-export trade with the foreign sugar islands—was part of mercantilist policy. So was the Currency A c t of 1764. So was the expansion of the enumerated commodity list in the same year. So was the closing off of the West, under the Proclamation Order of 1763. So was the monopolization by England of the wine trade. So was the order that excise taxes be paid in silver. Smuggling. T h e attack on the illegal West India trade was pushed with energy. As early as 1761 the colonial courts were directed to issue and enforce writs of assistance, or general search warrants, for the purpose of hunting down smugglers. In 1763, the royal navy was converted into a coast patrol. In the same year absentee sinecure holders in the customs service were ordered to their colonial posts. In 1764, a vice-admiralty court \vas set up for all the colonies to try offenders against the Acts of Trade. In 1768, a new board of five customs commissioners, resident in America, was installed. Everything that could conceivably be thought of was tried out in an effort to smash the trade with the foreign sugar islands. Informers were encouraged; judicial salaries were freed from dependence upon the pleasure of provincial

assemblies; customs officials were guaranteed against personal liability if their zeal took illegal forms. N e w revenue acts were passed in 1764 and 1765, the second including the hated stamp duties. What is frequently overlooked, however, is that these acts contained characteristic mercantilist devices calculated to contract the spheres of colonial business enterprise. Thus, provision was made for the payment of the new taxes in specie, thereby further draining the colonies of their available currency supply. In proper mercantilist fashion and to tempt colonial capital out of trade and into rawmaterial production, bounties again were offered to growers of hemp and flax and the English import duties on colonial whale fins were rescinded. The enumerated list was expanded to include lumber, hides and skins, pig and bar iron, and pot- and pearl ashes. In 1766, all remaining nonenumerated articles—flour, provisions, and fish—destined f o r European ports north of Cape Finisterre were ordered landed in England first. The Second Molasses Act. The Sugar Act of 1764, by reenacting duties on molasses and refined sugar and forbidding entirely the importation of foreign rum, was a further blow at the hated foreign-island trade. In the same act, high duties were put on wines from the Wine Islands, and on wines, fruits, and oil from Spain and Portugal brought directly to America. On the other hand, the duties were to be nominal only, if these commodities were imported from England. Also in 1764, import duties were levied upon popular French luxury articles at colonial ports for the first time; and, in the next year, the importation of French silk stockings, gloves, and mirts was entirely banned. T o complete the tale, the passage of the Currency Act of 1764, curtailing sharply the issue of colonial bills of credit, must once more be mentioned.

INTRODUCTION There can be no question that such conduct, in the midst of a bad depression, only succeeded in further limiting business activity. Colonial merchants and their legal spokesmen knew this. Thus, a memorial drawn up by N e w York businessmen in 1764 directly linked hard times with the contraction of the foreign-islands trade and warned Parliament that the enforcement of the old Molasses Act of 1733 "must necessarily end not only in the utter impoverishment of His Majesty's northern colonies and the destruction of their navigation but in the grievous detriment of British manufactures and artificers and the great diminution of trade, power, wealth, and naval strength of Great Britain." The colonial clamor against the Stamp Act brought about its repeal in a year. The unpopular Townshend duties, imposed on paper, paint, and glass in 1767, were also withdrawn in 1770. A small tax on tea was allowed to remain but even this was reduced further in 1773, when a new Tea Act provided for a full drawback on the English import duties if the tea purchased was of British origin. The Tea Act. The Tea Act came in 1773, once more in the midst of colonial depression. On the face of it, it seemed a conciliatory gesture. But this was the silken glove that concealed the iron fist. For the act also stipulated that the East India Company, long the pet of British officialdom, and now as before in financial difficulties, was to have the power of moving through its own agencies the tea of its overstocked warehouses into the colonial market. It was estimated that the company held something like 70,000,000 pounds of the leaves. What did this mean? With the drawback on the duty, Holland tea, which had been handled by colonial merchants themselves, was to be driven out of America. In the second place, by using its own ships and agents, the East India Company was going to cut down the already dwindling profits of colonial carriers, handlers, and retailers. Arthur M. Schlesinger, in his notable mono-

135

3

graph, has indicated why the merchants of N e w York, Philadelphia, Boston, and Charleston were quick to take alarm. It was more than a matter of tea alone. Their spokesmen pointed out that the present project of the East India C o m pany was the entering w e d g e f o r larger and more ambitious undertakings calculated to undermine the colonial mercantile world. T h e i r opinion was based on the fact that, in addition to the article of tea, the East India C o m p a n y imported into England vast quantities of silks, calicos and other fabrics, spices, drugs, and chinaware, all commodities of staple demand; and on their fear that the success of the present venture would result in an extension of the same principle to the sale of the other articles.

T h e Boston Tea Party and similar manifestations elsewhere were not larks but unmistakable signs of a determination to be freed once and for all of oversea domination over the economic life of the American mainland colonies. The Land Proclamation. There was another area in which resentments flared up. Attention has been called to the fact that Philadelphia and Albany merchants and Southern landlords had become deeply involved in the fur trade and the wild-land jobbing of the West. Southerners, especially, whose tobacco operations had not been too successful in the late 1760s, had been turning to these activities to recoup their fallen fortunes. T h e revitalized imperial policy dealt them a staggering blow. Presumably in the interests of working out a plan for the governing of the new region acquired from France in the American West and for putting Indian relations on a permanent footing, the Proclamation Line Order of 1763 virtually closed the whole region to colonial enterprise. Political controls were taken out of the hands of colonial governors and placed under imperial agents. Settlements were ordered abandoned. Meanwhile, agents of American companies, organized to exploit the fur trade and land promotion, cooled their heels in the antes Arthur M . Schlesinger, The Colonial Merchants and the American Revolution, i"¡6}-¡t¡6. (New York,

1917).

ι3 6

T H E FIRST A M E R I C A N

rooms of British politicians in London while long delays prevented the granting of charters. T h e Western program, as it was finally devised in 1 7 7 4 under the Quebec Act, choked off another avenue f o r colonial enterprise. In the whole great domain north of the Ohio and south of Virginia, colonial speculators and settlers w e r e shut out. T h e land companies were denied charters. T h e claims of the colonies to Western lands w e r e brushed aside. T h e English c r o w n could argue that the intention here was the quieting of the suspicions of the Indians. B u t colonials w e r e skeptical, particularly when it became k n o w n that English subjects were receiving special favors. T h e same was true of

REVOLUTION

the f u r trade. T h e Quebec A c t had as one of its intentions the diverting of the f u r trade from N e w Y o r k and Philadelphia to Montreal. T h a t is to say, using a licensing system, the crown provided that traders were to operate under the eye of the governor of Queher. It was apparent that British, as opposed to colonial, companies were to be favored. T o all these disabilities, the representatives of all the colonies, meeting in the First Continental Congress in 1774, replied with the Continental Association. This was an embargo on English goods and so thoroughly was it enforced that imports f r o m England almost entirely disappeared in 1775. But b y that time the American Revolution had already broken out.

7. BACKGROUND OF THE REVOLUTION Bases of Separatism. It would be idle to imply that the necessity f o r breaking out of the closed circle of mercantilist restraint was the only impelling f o r c e that precipitated the American Revolution. T h e r e were other forces at work. T h e physical f a c t of separation by an ocean that was 3,000 miles wide and long weeks in the crossing was bound to have its effects. American institutions and the American character were f o r g e d in a climate that had many independent and novel features about it. Attention has already been called to the fact that the very act of migration across the seas constituted a kind of psychological release. And, in this sense, the loyalties of Americans to European institutions never could have the firmness and the matter-of-factness displayed bv Europeans themselves. Adjustments to frontier living inevitably strengthened this awareness of independence. In this sense, the able exponent of the frontier theory of American history, Frederick Jackson T u r n e r , has been right, of course. T h e American Revolution represented a conflict between a settled society and one whose social and economic relations were in a fluid

AMERICAN

form: old and new, ancient and young, turned on each other. T h e y do not, always, of course. N o v a Scotia and the British sugar islands, also y o u n g and also frontier settlements, and which also had to pay the Stamp and T o w n s h e n d duties, did not join the Revolution. T h e point is, simply, that the will to independence is a complex of forces in which are combined economic, psychological, political, and philosophical influences. Political Reasons for Separatisrn. Politically, the pull to independence was powerful. Englishmen, during the second half of the seventeenth century, had carried on a struggle f o r the curbing of the crown's absolutism, and they had been successful. T h e royal prerogative was so hedged about, so narrowed down, that, in time, it became nothing more than a symbol of state sovereignty. N o t a b l y b y the Bill of Rights and the Mutiny A c t of 1689, the capstone on the w o r k of the English Revolution had been erected; Parliament was now supreme. It was inevitable that Englishmen overseas should seek to achieve comparable liberties. Under their charters, colonials were ruled

INTRODUCTION b y a governor, a legislature (of two houses), and a judiciary. The governor, except in the cases of Rhode Island and Connecticut, was appointed either by the crown or the proprietaries. The judiciary was selected by the governor, with final appeal from judicial decisions in England. The upper house of the legislature, the council, was also usually appointed b y the governor. The lower house, the assembly, was popularly elected, although, throughout most of the eighteenth century the franchise was based on property and only propertyowners might hold office. By the opening of the eighteenth century, those victories that Parliament had gained at home were being pressed for in colonial legislatures. Because England made no effort to support the royal governors—indeed, it insisted as a general rule that the colonies be selfcontained financially, so that even colonial wars had to be financed in considerable measure by the colonials—these administrators were being compelled more and more to accept the primacy of the colonial assemblies. These bodies insisted upon the right to initiate legislation; more important, they demanded the right to control the colonial finances—to tax and to pass money bills. T h e y obtained both—and moved on to virtual independence. Freedom of speech on the floor, the establishment of their own rules, the right to pass on legality of elections—these became recognized powers. It should not be inferred that the English government yielded at every point. The assemblies were not permitted to control their speakers, to fix regular elections, or to establish new districts. T h e y were not allowed to override the governor's veto. And, of course, as we have already seen, where the rights and privileges of English economic interests were threatened, the crown and Parliament stood firm. Yet, on balance, it may be said, popular sovereignty triumphed. Fiscal power was the agency. T h e royal governors came to accept annual salaries from the hands of the assemblies. T h e y were forced to give their assent to appropriation bills—particularly f o r military purposes. T h e y were com-

'37

pelled to sufFer the appointment of provincial treasurers. With the control over the purse, the assemblies were in a position to clip the wings of the governors and subordinate increasingly the executive branch to the legislative. T h e home government recognized this as it did also its inability to cope with the situation. A similar development was occurring in the judicial sphere. Under the English law, the governors were permitted to appoint the judges; and they held this right despite efforts on the part of colonial assemblies to limit judicial office to good behavior. But the assemblies were not powerless, for, again through the right of appropriation, they could force judges to accept legislative surveillance and control. Thus, a kind of colonial self-rule was emerging; but always there stood in the background the specter of the royal prerogative. Ironically, at home in England, it had been shorn of power; overseas, in the colonies, it was employed to maintain the inferior position of the colonies. The colonies had control over their own fiscal policies but Parliament had not granted this as a right. They had subordinated the governors to the assemblies; but again, this had not been formally conceded. A f t e r 1763, Parliament tried—through the royal prerogative—once more to subordinate the colonies particularly in the financial sphere. As the preliminaries of the Revolution developed, colonials might justly contend that they were only seeking to extend those rights to America which Englishmen had acquired f o r themselves as a result of the Puritan and Glorious Revolutions. T h e Declaration of Independence taxed the crown with many derelictions; this was natural, f o r Parliament was employing the symbol of the royal prerogative to attack liberty. Religious Reasons for Separatism. T h e colonials had drunk deeply from the fount of independency as well. T h e Separatism of the English Levellers of the 1640s—of Lilburne, W i n stanley, Bellers, and others, in that first English company of equalitarians—after all had taken firm root in America; more so, indeed, than in

i38

T H E FIRST AMERICAN

England. R o g e r Williams and the Rhode Island experiment sprang from the loins of English Separatism. Descendants of Separatists were to be found elsewhere in the American colonies. Also, in the eighteenth century, notably in the back-countrv regions, the .Methodism of Wesley and Whitefield set the emotions of men on fire—and stimulated them to critical examinations of prevailing institutions. T h e line f r o m independency in religion to natural rights in politics is a straight one. From Winstanley and Beliers to John Locke and Thomas Jefferson the arrow's flight is true. Americans were the children and the inheritors of the Puritan Revolution. T h a t Thomas J e f f e r son (and Benjamin Franklin and John Adams, and many other colonials) should have read and venerated John Locke, the great spokesman f o r Englishmen's liberties, was perfectly natural. The Declaration of Independence. T h e influence of Locke on Jefferson is there in the Declaration of Independence for all to read. Civil authority is established to maintain order and to guarantee the natural rights of the citizens to life, liberty, and the pursuit of happiness. A social compact is entered upon between the people and their sovereign for the maintenance of these natural rights and to assure the continuance of the ruler's powers. But this compact

8. WINNING

THE

Winning the war with England was no easy task. T h e Americans possessed no trained army. T h e y were compelled to improvise a manufacturing industry in order to supply the men in the field. There was no centralizing authority with fiscal powers and control over commerce; nor was there a machinery to marshal opinion and hunt down dissent. Nevertheless, the Revolution was successful, thanks to the devotion of the commander-in-chief George Washington and the timely assistance rendered by the French, the Dutch, and the Spanish. W e may see the tasks of the American Revo-

REVOLUTION

is not inalienable: its life is to continue as long as both parties are ready to act in good faith. And who speaks f o r the people? Their duly chosen representatives. Libertv is safeguarded because natural rights are inalienable; the social compact is terminable when tvranny raises its head, and because in the final analysis sovereignty is in the people itself. So John L o c k e in 1689 and Thomas Jefferson after him in 1776. Just as Englishmen had laid down their lives in 1640 and in 1688 in defense of these imperishable principles against the tyrannical conduct of Charles I and James II, so Americans were ready to do similarly in 1776 against the tyrant George III. This is w h y the Declaration of Independence clearly speaks out against the "abuses and usurpations" of the English crown. This is w h y it declares simply that Americans had the right, nay the "duty to throw off such government, and to provide new guards for their future security." This is w h y there is catalogued a long series of "injuries and usurpations" suffered at the hands of a crown which sought to impose "an absolute tyranny over these states." This defense of liberty was no made-toorder ideology drawn up by logic-chopping lawyers, but an idealistic credo as truly a part of the American people as was their confidence in divine justice.

REVOLUTION lution as four. T h e first was the achievement of victory on land and sea. T h e second was the financing of the war. T h e third was the crushing of disloyalty at home. T h e fourth was the creation of stable political, social, and economic institutions. The Military Task. T o overcome the inadequacies of the domestic economy, cribbed, cabined, and confined by mercantilist restraint, was not easy. T h e troops under Washington required cannon, arms, and ammunition; they needed clothing; they demanded great supplies of blankets, cloth, flint, tin, copper, and salt.

INTRODUCTION T h e state governments did what thev could to encourage domestic production. T h c v made m o n c v grants and olfered tax remissions and m o n o p o l y privileges to industrialists. Before Ioni;, clot Ii. powder, gun, and cannon factories w e r e operarmi;. I l o w extensive this activity was is revealed in Alexander Hamilton's long catalogue in his Report on Manufactures. But it was not enough. Resort to Europe must be made. F r o m 1777 on, unofficially, from 1778 on, officially, first France, then Spain, then Holland t h r e w in their lot with the struggling thirteen states. France be^an to send supplies f r o m the Continent as early as 1777; goods from the W e s t Indies seeped through the British blockade as well. In 1778, France recognized the United States of America and entered into a commercial and military alliance. In 1779, Spain declared w a r on Fngland; in 1780, because the Dutch had c o m e to the assistance of the Americans, F n g l a n d declared war on Holland. French and D u t c h crédits, the French fleet, even a French a r m y : all aided in making the outcome a f a v o r able one. The Financial Task. Because of the limitations imposed on the Continental Congress—it was not given independent taxing powers—the financing of the W a r of Independence presented almost insuperable difficulties. Thanks to Furopcnn good will, credit could be obtained on the Continent. T h e French c r o w n made outright grants, these subsidies coming to perhaps 12,000,000. Another $6,000,000 or so w a s lent by the French government. Private D u t c h bankers, as the w a r was drawing to a close, raised something like $1,300,000. T h e Spanish government lent $200.000. T h e s e helped in the flow of badly needed materials across the seas. O b v i o u s l y , such foreign loans were inadequate; additional funds must be had by domestic borrowings. T h e Continental Congress floated, at home, long-term bonds and shortterm certificates of indebtedness. T h e total of the f o r m e r was $67,000,000; of the latter, $ 1 7 , 000,000. In addition, the states themselves bor-

1

39

rowed, in all, something like $25,000,000 to aid the war effort. On its f a c e , this looked impressive. It is important to observe, h o w e v e r , that Congress's inability to tax, the reluctance of the states to do so, and the cloud of uncertainty that hung o v e r the revolutionary cause to the very end, vitiated these financing efforts seriously. T h e loans could not be floated on a specie basis. T h e y were subscribed to in paper notes of constantly falling value; and as governmental credit weakened, the resort to the printing presses became more c o m m o n . Indeed, it may be said that 011 the somewhat more than f 100,000,000 of revolutionary loans floated, not more than $16,000,000 to 5-o,ooo,ooo was realized in specie. Thus, the spiral of inflation was begun, it ended, as 011c might expect, with the existence of a universally valueless paper c u r rency. It has been said that the Continental Congress could not tax; it was given o n l y the p o w e r to request fiscal support f r o m the states. H e r e it was generally' unsuccessful. In the t w o years f r o m November, 1777, to October, 1779, C o n gress called on the states f o r $95,000,000. It received less than half this sum, of which the specie value was about $2,000,000. W i t h the collapse of the first Continental paper issues, Congress in 1780 sought to obtain requisitions in kind. Having failed here, in 1 7 8 1 , it tried to raise among the states $10,000,000 in specie. It received something like $1,600,000. T h e resort to paper bills was inevitable in such a situation. T h e matter w a s worsened w h e n the states made the same move. Beginning in June, 1775, the Continental Congress took to financing the war expenditure with bills of credit. In the first y e a r $6,000,000 was issued; in 1776, the total came to $19,000,000; in 1777, to Si 3,000,000. By that time, depreciation was marked. Therefore, in 1 7 7 8 , the issues totaled $63,000,000 and in 1779, $140,000,000. A t the end of 1779, inflation had reached the point where a continental paper dollar was w o r t h 1 Y2 cents in silver. A desperate effort was made to begin all over

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again, and in 1780 the "old tenor" issues were called in at a ratio of exchange of 40 to 1. In this w a y , some $119,000,000 out of the $240,000,000 continental paper was redeemed and destroyed. A more cautious policy was inaugurated in this same year, when only $4,000,000 in " n e w tenor" bills of exchange were issued. T h e ratification, finally, in 1 7 8 1 , of the Articles of Confederation made possible the establishment of a somewhat more stable system of public financing; while the end of the war, with the resumption of the W e s t India trade, once more brought foreign coins into the country. It is also to be noted that the appointment in 1781 of Robert Morris, a man hostile to fiat money and devoted to the principles of free enterprise, to the post of Congressional Financier, helped to ease the strain. State issues of bills of credit were as large as the Continental issues, coming to a total of $250,000,000. Virginia was responsible f o r fully half of the state paper; N o r t h and South Carolina between them issued another one third. Depreciation and repudiation were the inevitable concomitants. Virginia finally set an exchange value in specie f o r the redemption of its notes at 100 to 1 ; the N o r t h Carolina rate was 800 to i ; while the other states paid off their notes at ratios ranging from 40 to 1 to 100 to 1. B y 1782, the state "old tenor" bills were pretty generally outlawed. A price inflation naturally followed, as much from the collapse of public credit as from the scarcity of commodities. T h e inadequacy of production, the effectiveness of the British blockade, hoarding prompted by the general uncertainty—these helped to push prices upward. N o devices could curb the rise. Extraordinary committees in the several states took measures in their o w n hands and treated speculators harshly. T h e states tried to prevent monopoly activities and forestalling; they passed price-fixing laws. Such statutes were written in Pennsylvania, Connecticut, Massachusetts, N e w Y o r k , and N e w Jersey. Interstate compacts were attempted. In December, 1776, the N e w England states held a price convention

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and drew up schedules of prices and wages based on the paper bills. In January, 1778, they tried once more, this time seeking to freeze prices at an advance of only 75 percent over those prevailing in 1774. Both attempts met with failure. These were terrific odds to contend with. T h e collapse of C o r n w a l l ' s army at Y o r k town in 1781 and the writing of a peace treaty in 1783 came just about in time to permit the American people to reorder their domestic house. T h e T r e a t y of Paris was half a loaf; but it was better than none. T h e independence of the United States of America was recognized; but it was not until 1795, under the J a y T r e a t y , that England was prepared to grant Americans nondiscriminatory commercial rights in the English market and limited rights in the W e s t India market. T h e Mississippi River was fixed as the western boundary, with free navigation until the port of entry—that is to say, N e w Orleans-—was reached. In view of the fact that both Floridas were turned back to Spain, it was necessary f o r the new republic to deal with that European power as far as port regulations were concerned. T h e American government recognized the validity of the prewar private debts owed to English houses; and it promised to recommend to the states that they restore confiscated loyalist properties. This last, obviously, embodied only a pious hope. The Task of Putting Down Disloyalty. Thus, the first t w o tasks of the Revolution, the winning of the war and its financing, were achieved. T h e third, as has been said, was the putting down of disloyalty at home. This was accomplished with fire and the sword; indeed, it represents one of the dark chapters in the annals of the period. T h e patriots of the Revolution did not have it all their own w a y . In fact, as John Adams recalled it, but one third of the population supported the revolutionary cause, one third was indifferent, while another third was actively hostile and aided the crown openly or surreptitiously. Upon these—an older literature called them Tories, more recently they

INTRODUCTION have been referred to as "loyalists"—the patriots wreaked their vengeance. W h o were these loyalists? B v and large, they were to he found in the upper rank of colonial society: the royal officeholders, the Anglican clcrsjv, most of the large landowners of the Middle colonics, most of the Southern merchants. T h e Revolution did not cut like a knife horizontally through the layers of the colonial people, converting the well-born and rich into loyalists and the small propertied men and artisans and mechanics into patriots. Men took sides regardless of class differences. But certain special interests, those referred to, were more closely allied with crown privileges than others; and these challenged the patriotic pretentions. W i t h the outbreak of the Revolution, customary governmental agencies broke clown. T h e new states set about the task of creating new governmental forms; but until these were installed, power was in the hands of extraordinary committees. These so-called Committees of Safety—and there were local as well as statewide units to be found in all the thirteen commonwealths—set about the task of maintaining order and stimulating support f o r the war. T h e v gathered arms and supplied the men in the field with all their necessaries; they sought to curb speculation and profiteering; they sat as courts; they issued letters of marque and reprisal to privateers; they authorized and helped finance domestic manufacturing; they emitted bills of credit; they watched the loyalists, rounded them up, sequestered their property. Sometimes, supreme state committees continued to operate even after constitutions had been written and regular governmental authorities created. So, in N e w Hampshire, such a committee was in regular session from 1778 to 1784. In Pennsylvania, a committee sat until 1777; in N e w York and N e w Jersey until 1778; in Connecticut until 1783. T h e loyalists were harshly treated physically. Some were undoubtedly informers and saboteurs; but the innocent suffered with the guilty as homes w e r e burned, belongings were seized,

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men were shot down or imprisoned, and scores of thousands—perhaps as many as 100,000— were driven into flight. T h e process of confiscating or sequestering loyalist property went on systematically. First, of course, the ungranted crown lands and the estates and claims of the proprietors of Maryland and Pennsylvania were seized. T h e n the real property of those who had fled or w h o were known to support the crown was taken over and sold to discharge claims against the English government. In all the states, it has been estimated, loyalist property losses ran to about $50,000,000.

The Task of Creating Political Institutions. Meanwhile, as the fourth task of the Revolution, permanent political institutions were being created. During preparation, a contest between right and left factions among the patriots reached fever pitch. In some states, the radicals quickly seized control and wrote leveling state constitutions. In others, they were defeated, with the result that the frames of government were more conservative. In still others, they were held at arm's length until the revolutionary fires had burned themselves out; and then the more moderate influences took over. In these debates and controversies over the forms of state government w e find the origins of Jeffersonian democracy. A s has been said, the connection with Leveller theory and L o c k ian doctrine is clear. T h e radicals were democrats: they were fearful of a powerful executive; they sought a larger measure of popular control over executive and judiciary; they wanted the recognition of local rights. These radicals, too, were populists in the American sense: because they were agrarians and debtors they pushed for the passage of the easy-money legislation to which reference has already been made. T h e leveling constitution written b y the radicals in Pennsylvania in 1776 was typical of the sentiments of this group. This document granted the franchise to all tax-paying freemen, whether they were freeholders or not. It contained a bill of rights. It provided f o r a singlechambered house which was to choose the

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state's civil and judicial officers. T o prevent usurpation, it crcatcd a multiple executive and a council of censors; the latter v a s to meet every seven years to decide whether government Mas acting in conformity with liberty and justice. The constitutional conventions of N o r t h Carolina, Delaware, N e w Hampshire, and Georgia drew up somewhat similar fundamental laws. Generally, it may be said, the following w e r e their characteristics: Qualifications f o r voting were made more generous, although universal manhood suffrage did not come in the eastern states f o r another two generations. T h e rights of the back country to legislative representation were recognized. Local governments for new regions were provided. T h e powers of the legislature, at the expense of the executive, were expanded. Only the popularly chosen house might originate money bills. T h e veto p o w e r of the governor was either abolished or drastically curbed, and the governor himself was to be either elected or named by the legislature. His term in office, as well, was to be short. Similarly, efforts were made to control the judiciary, which was to be elected b y the voters or the legislature and which might be removed easily. T h e radical forces did not have their way everywhere. In Rhode Island and Connecticut they were not permitted to write constitutions, despite the fact that in the former at least they were completely in control. A N e w York constitution and a Massachusetts constitution, written later, were more conservative documents. In fact, the conservatives recaptured power in N e w Hampshire in 1784 and in Pennsylvania in 1790. F o r an interval, at any rate, the democratic forces w e r e being checked. The Articles of Confederation. T h e conservative tendency appeared also in the central government. T h e writing and final ratification of the Articles of Confederation marked another victory f o r moderating influences. T h e Articles of Confederation had been drawn up in the Continental Congress late in 1777 anc ^ submitted to the states f o r unanimous ratification. T h e last, Maryland, did not do so until

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March, 1 7 8 1 ; so that it was not until the R e v o lutionary W a r was virtually over that "a perpetual union" and a "league of friendship" was created. T h e Articles did not mean a strong central government; but they were a decided advance over the faltering rule of the old Congress. In any event, the conservatives w e r e pleased, so much so that one of their opponents wrote: " T o r y i s m is triumphant here. T h e v have displaced every W h i g but the President." Under the Articles, whereby each state was to have a single vote, the central government received only limited powers. There was to be no independent executive department or a permanent judiciary. T h e pow ers granted to the Congress were direct and explicit; all those ungranted were reserved to the states. T h e Congress could not levy taxes; nor could it regulate domestic commerce. Its financing was founded largely upon the requisition system; and in this case, levies upon the states w e r e to be apportioned 011 the basis of the value of real property. It was, however, given the right to write commercial treaties with foreign powers and to regulate Indian affairs. Its greatest triumph was the establishment of a public domain. Because of conflicting state claims to Western lands, the decision was taken to turn over all these territories to the central government. T h e Ordinance of 1785, f o r the governance of the Western regions, flowed f r o m this cession. B y 17S6, in fact, all the states but North Carolina, South Carolina, and Georgia had turned over their rights; the result was, the sale of public lands to freeholders constituted an important element in central financing. Beside the reservation of ungranted powers, the states limited the Congress's scope in other ways. T h e consent of at least nine states was necessary f o r the enactment of legislation affecting the coinage, the issuance of bills of credit, the borrowing or appropriations of funds, and the declaration of w ar. In this connection, it is interesting to observe that the states refused to allow the Congress to pass tariff legislation, although only light import duties were proposed. Finally, the states reserved to themselves ex-

INTRODUCTION plicitlv the sole right to enact legislation affecting contracts; thcv also had the rights to coin money and issue bills of exchange. Here was the point, apparently, where the populists would not yield. Results of the Revolution. Despite these uncertainties, the Revolution was won, the connection with mercantilism was ended. Business enterprise had a freer world in which to range. Many inequities were wiped out. And real advances in the direction of the achievement of democratic rights were made. As f a r as foreign trade was concerned, the end of mercantilist restraint permitted the development of direct channels of intercourse with the European continent, the colonial possessions of the continental powers, and with the Middle and Far East. T h e glorious days of the India and China trades were to revitalize American mercantile fortunes. As far as the domestic trade was concerned, the push across the mountains into Kentucky, Tennessee, and the Western Reserve was to open new markets f o r Eastern businessmen. As far as manufacturing was concerned, freedom made possible new avenues for enterprise. Stimulated bv wartime necessity and state aid —bounties and prizes, tariff walls—manufacturing sprang up in a vast variety of fields. In addition to cannons, guns, and powder, Americans took to making ironware, pottery, textiles, paper, glass, leather goods, notions. T h e capitals involved were not great and organizational forms were still at preindustrial levels in many fields—that is to say, the iron plantation and the putting-out system existed. There were a number of reasons w h y a real industrial renaissance was deferred in America for at least three generations more. T h e early American tariffs, both state under the Confederation and federal under the Union, were not prohibitory; English goods therefore flowed into America in an unabated flood. In the second place, capital found more remunerative returns in other areas of enterprise: in banking, the building of public works, the opening up of the wild lands of the West, the improvement of urban real

'4?

estate, notably in the domestic and foreign trade. As far as the land was concerned, the gains were notable. T h e ungranted c r o w n lands were taken over by the states of N e w Hampshire, N e w Y o r k , Virginia, N o r t h Carolina, South Carolina, and Georgia. W i t h these were swept away feudal carry-overs: the quitrents and the rigtfts of the King's W o o d s , b y w h i c h royal agents had claimed the tallest and best stands of timber f o r the king's navy. Likewise, the prohibitions against settlement in the region beyond the crest of the Appalachians, under the Proclamation Order of 1763 and the Quebec Act of 1774, were flouted. E a g e r colonists and land agents—by 1790 some 221,000 persons— pressed into Kentucky, Tennessee, the W e s t ern Reserve, and Wabash countries, and into the Southwest. Proprietary and absentee estates w e r e seized —the ungranted lands of the Penns and the Calvcrts, the great Granville holdings in N o r t h Carolina, the five million acres belonging to Lord Halifax in Virginia. R e f e r e n c e has already been made to the treatment of the real property of loyalists. B y Congressional enactment and by action of state Committees of Safety and legislatures, property was taken over, sold, and the proceeds converted into central and state loan certificates. T h e democratization of land tenure made giant strides. T h e attack was directed chiefly against those feudal props of land concentration—entail and primogeniture. T h e elimination of the right to entail estates began early. South Carolina passed such a law in 1775, V i r ginia in 1776, Georgia in 1776 and 1777, N o r t h Carolina, Maryland, and N e w Y o r k in 1784 and 1786. B y 1790, the reform had been completed everywhere. As regards primogeniture, the task of ending it and establishing equal inheritance for all children was begun during the R e v o l u tion and completed by 1800. Another great democratic achievement was the disestablishment of churches. T h e Anglican Church had been established b y law in many of the colonies; that is to say, it had special

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property rights, its clergy were paid out of taxes, and all inhabitants were required to attend services. T h e new state constitutions struck at ecclesiastical privilege and disestablishment was provided for by Maryland, North Carolina, and Virginia, all in 1776. Similarly, the fundamental laws of N e w York, Georgia, and South Carolina guaranteed freedom of worship to Christians of all sects. The very first clause of the first Amendment to the Constitution closed the door for all time to the creation of any church establishment in the United States. In the same democratic spirit, the South-

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ern states moved to stop the wretched African slave trade; while a number of the Northern states provided for gradual abolition. Attacks were directed against the cruel penal codes the colonists had brought over from England. And, under the influence of the Enlightenment, some of the state constitutions provided for popular education. Despite the swing of the pendulum in the opposite direction during 1783-1800, great and lasting gains in the achievement of democratic rights in the economic and political fields had been won by the Revolution.

! • ;

T H E AMERICAN MIND JONATHAN

THINKING MAN concerns himself with the world he sees, the relations of men in that world, and the reasons why man and that world exist. Prerevolutionary America had raised no wall of specialization between those disciplines; it was still possible for the same person to have a fruitful interest in all three. The old hierarchy of learning had not yet been altered, to be sure: physical science was still an avocation, the social studies had only begun to emerge as a separate branch of inquiry, the proper interest of the American scholar was his God. Cotton Mather and Jonathan Edwards both were concerned with their fellow men and the natural world: Mather was chosen a fellow of the Royal Society; Edwards's youthful observations on spiders won admiration from a professional entomologist more than a century later—but neither would have considered science as more than a secondary interest. Nothing less than the effort to comprehend the purpose of the universe was worthy the full attention of a Christian scholar. But while Edwards was setting forth the worthlessness of the natural man, Benjamin Franklin was trying to improve that same complex creature. Whatever the proper task of the professional man of learning might be, the business of man in society was the better understanding of his physical and social world. As Edwards stimulated and tried to guide the emotional forces that produced the religious revival of the 1730s and early 1740s, so Franklin expressed the active, secular, bustling spirit which found so much to do that it could dismiss the claims of eternity with a benevolent deism. As Cotton Mather looks forward to Franklin in scientific interest and practical benevo-

l· :

EDWARDS lence, though not in religious philosophy, so Jonathan Edwards ( 1 7 0 3 - 1 7 5 8 ) looks forward to Emerson in his emphasis on intuition and emotion, though the Transcendental reliance on an unchecked inner witness would have seemed mere "enthusiasm" to him. For Edwards's appreciation of the emotional aspects of the spiritual life did not make him indifferent to logic. He refused to forego either rapture or reason. Each had its place in religion and the Christian life, but neither could bring a valid message unless that agreed with Scripture. Such concern with authority came naturally to a man whose mother was descended from a ministerial family and whose father had returned to the ministry after t w o American generations had worked and prospered at the cooper's bench. Jonathan Edwards began training for his lifework when he entered Yale at thirteen. His student record of thought and reading as a youth newly exposed to John Locke and Ralph Cudworth shows him a keen reasoner and an apt builder of systems. T h e Platonic idealism which he found so congenial in Cudworth was the base of much of Edwards's later thinking, though he never worked in a metaphysics separated from his religious interests. After two years of graduate study followed by a period of tutoring at the college, he turned from scholarship to practical work in the ministry and, in 1729, succeeded to his maternal grandfather's pulpit at Northampton. Here Edwards married, reared a large family, studied and labored to waken his congregation from religious lethargy. B y 1735, first the young people and then their elders were roused to concern for their sinful state. Northamp-

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ton experienced a season of spiritual renewal eloquently set forth in Edwards's Faithful Narrative of a Surprizing Work of God ( 1 7 3 7 ) . T h i s pamphlet was widely read, both in the colonies and abroad, and probably had considerable influence in setting the pattern f o r the G r e a t A w a k e n i n g of the 1740s and f o r subsequent religious revivals. T h o u g h George Whitefield's preaching had a wider and more direct immediate influence in 1740, it was E d wards w h o defended the whole revival movement when reaction f r o m its extravagances had brought it into discredit. Edwards's concern with the experience of conversion, w h i c h lay at the root of the faith encouraged bv revivals, led him to views which his congregation could not share. Since only a change of heart could make a Christian of an inherently corrupt "natural man," none but those w h o could profess belief that such a change had occurred in them might properly be admitted to the Lord's Supper. Though Edwards's was the more ancicnt opinion, all the practice of the last generation contradicted it and his congregation refused to deny the sacrament to people instructed in doctrine and seemlv in life because they could not sincerely state that they had been converted. T h i s theological dispute, embittered bv long-standing quarrels and dissensions within the town of Northampton, finally led to Edwards's dismissal in 1750. T h e following summer, he went to Stockbridge as a missionary to the Indians settled there. In this .Massachusetts frontier community he lived and worked for the seven years that produced his best-known book, The Enquiry into the Freedom of the Will ( 1 7 5 4 ) , together with his defense of the doctrine of original sin and the posthumously published treatises on the nature of true virtue and the end f o r which G o d created the world. From Stockbridge, E d w a r d s was called to the presidency of Princeton, as successor to his son-in-law, the elder Aaron Burr, but he died of the effects of smallpox inoculation within a month of assuming that office.

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In comparison with the span of Mather's or Franklin's life, Edwards had been cut off at fifty-five. Productively viewed, he can hardly be considered to have died young. His first widely circulated sermon, God Glorified in Man's Dependence ( 1 7 3 1 ) , had heartened Calvinist orthodoxy against the Arminian v i e w , which claimed man's own efforts could help him to salvation. Edwards's later w o r k gave the contran,' view even more solid foundation in argument. But it is not in the contrivance of "museum pieces of Christian thought" that Edwards illuminates the American mind of this period. T o future religious thinking he gave impetus both b y his followers and through his opponents, w h o contrived to turn him f r o m a quiet-voiced, reasoning mystic into a hellroaring expounder of damnation. T o the tepid religious life of his own time, E d w a r d s helped bring the Great Awakening. He was one of the influences fostering that revival and he continued to defend it against friend and enemy alike. That defense is most completely presented in the Treatise Concerning Religious Affections ( 1 7 4 6 ) , which William James regarded as an "admirably rich and delicate description" of the religious experience. T h o u g h E d w a r d s admitted the justice of the criticism directed at the hysterical manifestations of the G r e a t Awakening, he insisted that emotion alone could serve as a spur to action. Consequently, emotion should have an important place in the religious life: the problem was to distinguish the genuine from the false, and, for this, E d wards's criteria are as dynamic as his idea of the religious emotions themselves. A holy life and a whole-hearted acceptance of the sovereignty of G o d would mark the person w h o actually had been given that supernatural sense which alone could direct fallen "natural man" toward disinterested love of God. T h e selection here reprinted, known as the "Personal Narrative" is taken from The Works of President Edwards, edited by Samuel A u s tin ( 1 0 vols., Worcester, Mass., 1 8 0 8 - 1 8 1 0 ) .

T H E AMERICAN MIND

The

Personal

BY J O N A T H A N . . . I HAD a variety of concerns and exercises about m y soul from my childhood; but had t w o m o r e remarkable seasons o f awakening, before I m e t with that change by which I was brought to those new dispositions, and that new sense of things, that I have since had. T h e first time was w h e n I was a boy, some years before I went to college, at a time of remarkable awakening in my father's congregation. I was then very much affected f o r many months, and concerned about the things o f religion, and my soul's salvation; and was abundant in duties. I used to pray five times a day in secret, and to spend much time in religious talk with other boys; and used to meet with them to pray togéther. I experienced I know not what kind of delight in religion. M y mind was much engaged in it, and had much sclfrighteous pleasure; and it was my delight to abound in religious duties. I with some o f my schoolmates joined together, and built a booth in a swamp, in a very retired spot, for a place of prayer. And besides, 1 had particular secret places of my own in the woods, where I used to retire by myself; and was f r o m time t o time much affected. M y affections seemed to be lively and easily moved, and I seemed to be in m y element when engaged in religious duties. And I am readv to think, many are deceived with such affections, and such a kind of delight as I then had in religion, and mistake it for grace. B u t in process of time, my convictions and affections wore off; and I entirely lost all those affections and delights and left off secret prayer, at least as t o any constant performance of it; and returned like a dog to his vomit, and went on in the ways o f sin. Indeed I was at times very uneasy, especially towards the latter part of my time at college; when it pleased G o d , to seize me with a pleurisy; in which he brought me nigh to the grave, and shook me over the pit of hell. And yet, it was not long after my recovery, before I fell again into m y old ways of sin. But G o d would not suffer me to go on with any quietness; I had great and violent inward struggles, till, after many conflicts with wicked inclinations, repeated resolutions, and bonds that I laid myself under by a kind o f vows to G o d , I was brought wholly to break off all f o r m e r wicked ways, and all ways of known outward sin; and to apply myself to seek salvation, and practise many religious duties; but without that kind o f affection and delight which I had for-

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merly experienced. M y c o n c e r n n o w w r o u g h t more by inward struggles and conflicts, and selfreflections. I made seeking m y salvation the main business of my life. But y e t , it seems t o me, I sought after a miserable manner; w h i c h has made me sometimes since to question, w h e t h e r ever it issued in that which was saving; being r e a d y t o doubt, whether such miserable seeking ever succeeded. I was indeed brought t o seek salvation in a manner that I never was b e f o r e ; I felt a spirit to part with all things in the world, f o r an interest in Christ. M y concern continued and p r e vailed, with many exercising thoughts and inward struggles; but vet it never seemed t o be p r o p e r to express that concern b y t h e name o f t e r r o r . F r o m my childhood up, m y mind had been full of objections against the doctrine o f G o d ' s sovereignty, in choosing w h o m he would t o eternal life, and rejecting w h o m he pleased; leaving t h e m eternally to perish, and be everlastingly t o r m e n t e d in hell. It used to appear like a horrible doctrine to me. But I remember the t i m e v e r y well, w h e n I seemed to be convinced, and fully satisfied, as to this sovereignty o f G o d , and his justice in thus eternally disposing o f men, a c c o r d i n g t o his sovereign pleasure. But never c o u l d give an a c c o u n t , how, or by what means, I was thus c o n v i n c e d , not in the least imagining at the time, n o r a long time after, that there was any extraordinary influence of God's Spirit in it; but only that n o w I saw f u r ther, and my reason apprehended the justice and reasonableness of it. H o w e v e r , m y mind rested in it; and it put an end to all those cavils and o b j e c tions. And there has been a w o n d e r f u l alteration in my mind, with respect to the doctrine o f G o d ' s sovereignty, from that day t o this; so that I scarce ever have found so much as the rising o f an o b jection against it, in the most absolute sense, in. God's shewing m e r c y to w h o m he will shew m e r c y , and hardening w h o m he will. G o d ' s absolute sovereignty and justice, w i t h respect t o salvation and damnation, is what m y mind seems t o rest assured of, as much as o f any thing that I see with m y eves; at least it is so at times. But I have often, since that first conviction, had quite another kind of sense of G o d ' s sovereignty than I had then. I have often since had not only a c o n viction, but a delightful c o n v i c t i o n . T h e doctrine has very often appeared exceeding pleasant, bright, and sweet. Absolute sovereignty is what I love t o ascribe to God. But m y first c o n v i c t i o n was n o t so.

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T h e first instance that I remember of that sort of inward, sweet delight in G o d and divine things that I have lived much in since, was on reading those words, 1 T i m . i. 17. Now unto the King eternal, immortal, invisible, the only wise God, be honor and glory for ever and ever, Avien. A s I read the words, there came into m y soul, and was as it were diffused through it, a sense of the glory of the Divine Being; a new sense, quite different from any thing I ever experienced before. Never any words of scripture seemed to me as these words did. I thought with myself, how excellent a Being that was, and how happy I should be, if I might enjoy that G o d , and be rapt up to him in heaven, and be as it were swallowed up in him for ever! I kept saying, and as it were singing over these words of scripture to myself; and went to pray to G o d that I might enjoy him, and prayed in a manner quite different from what I used to do; with a new sort of affection. But it never came into my thought, that there was any thing spiritual, or of a saving nature in this. From about that time, I began to have a new kind of apprehensions and ideas of Christ, and the w o r k of redemption, and the glorious w a y of salvation by him. A n inward, sweet sense of these things, at times, came into my heart; and my soul was led away in pleasant views and contemplations of them. A n d m y mind was greatly engaged to spend m y time in reading and meditating on Christ, on the beauty and excellency of his person, and the lovely w a y of salvation by free grace in him. I found no books so delightful to me, as those that treated of these subjects. Those words Cant. ii. ι, used to be abundantly with me, I am the Rose of Sharon, and the Lilly of the valleys. T h e words seemed to me, sweetly to represent the loveliness and beauty of Jesus Christ. T h e whole book of Canticles used to be pleasant to me, and I used to be much in reading it, about that time; and found, from time to time, an inward sweetness, that would carry me away, in my contemplations. This 1 know not how to express otherwise, than by a calm, sweet abstraction of soul from all the concerns of this world; and sometimes a kind of vision, or fixed ideas and imaginations, of being alone in the mountains, or some solitary wilderness, far from all mankind, sweetly conversing with Christ, and wrapt and swallowed up in God. T h e sense I had of divine things, would often of a sudden kindle up, as it were, a sweet burning in m y heart; an ardor of soul, that I know not how to express. N o t long after I first began to experience these things, I gave an account to mv father of some things that had passed in m y mind. I was pretty

much affected b y the discourse w e had together, and when the discourse was ended, I walked abroad alone, in a solitary place in m y father's pasture, for contemplation. A n d as I was walking there, and looking up on the sky and clouds, there came into my mind so sweet a sense of the glorious majesty and grace of G o d , that I know not how to express. I seemed to see them both in a sweet conjunction; majesty and meekness joined together; it was a sweet, and gentle, and holy majesty; and also a majestic meekness; an awful sweetness; a high, and great, and holy gentleness. A f t e r this my sense of divine things gradually increased, and became more and more lively, and had more of that inward sweetness. T h e appearance of every thing was altered; there seemed to be, as it were, a calm, sweet cast, or appearance of divine glory, in almost every thing. G o d ' s excellency, his wisdom, his purity and love, seemed to appear in every thing; in the sun, moon, and stars; in the clouds, and blue sky; in the grass, flowers, trees; in the water, and all nature; which used greatly to fix my mind. I often used to sit and view the moon for continuance; and in the day, spent much time in viewing the clouds and sky, to behold the sweet glory of G o d in these things; in the mean time, singing forth, with a low voice, m y contemplations of the Creator and Redeemer. A n d scarce any thing, among all the works of nature, was so sweet to me as thunder and lightning; formerly, nothing had been so terrible to me. Before, I used to be uncommonly terrified with thunder, and to be struck with terror when I saw a thunder storm rising; but now, on the contrary, it rejoiced me. I felt God, so to speak, at the first appearance of a thunder storm; and used to take the opportunity, at such times, to fix myself in order to view the clouds, and see the lightnings play, and hear the majestic and awful voice of G o d ' s thunder, which oftentimes was exceedingly entertaining, leading me to sweet contemplations of my great and glorious G o d . W h i l e thus engaged, it always seemed natural to me to sing, or chant for mv meditations; or, to speak my thoughts in soliloquies with a singing voice. I felt then great satisfaction, as to m y g o o d state; but that did not content me. I had vehement longings of soul after G o d and Christ, and after m o r e holiness, w h e r e w i t h m v heart seemed to be f u l l , and readv to break; w h i c h often brought to m y mind the w o r d s of the Psalmist, Psal. cxix. 28. My soul breaketh for the longing it hath. I o f t e n felt a mourning and lamenting in m v heart, that I had not turned to G o d sooner, that I might have had more time to g r o w in grace. M y mind was greatly fixed on divine things; almost perpetually in the

T H E AMERICAN contemplation of them. I spent most of my time in thinking of divine things, year after year; often walking alone in the woods, and solitary places, for meditation, soliloquy, and prayer, and converse with God; and it was always my manner, at such times, to sing forth mv contemplations. I was almost constantly in ejaculatory prayer, wherever I was. Prayer seemed to be natural to me, as the breath by which the inward burnings of my heart had vent. T h e delights which I now felt in the things of religion, were of an exceeding different kind from those before mentioned, that I had when a boy; and what I then had no more notion of, than one born blind has of pleasant and beautiful colors. T h e y were of a more inward, pure, soul animating and refreshing nature. Those former delights never reached the heart; and did not arise from any sight of the divine excellency of the things of God; or any taste of the soul satisfying and life-giving good there is in them. My sense of divine things seemed gradually to increase, until I went to preach at Newyork, which was about a year and a half after they began; and while I was there, I felt them, very sensibly, in a much higher degree than I had done before. My longings after God and holiness, were much increased. Pure and humble, holy and heavenly Christianity, appeared exceeding amiable to me. I felt a burning desire to be in every thing a complete Christian; and conformed to the blessed image of Christ; and that I might live, in all things, according to the pure, sweet and blessed rules of the gospel. I had an eager thirsting after progress in these things; which put me upon pursuing and pressing after them. It was my continual strife day and night, and constant inquiry, how I should be more holy, and live more holily, and more becoming a child of God, and a disciple of Christ. I now sought an increase of grace and holiness, and a holy life, with much more earnestness, than ever I sought grace before 1 had it. 1 used to be continually examining myself, and studying and contriving for likely ways and means, how I should live holily, with far greater diligence and earnestness, than ever I pursued any thing in my life; but yet with too great a dependence on my own strength; which afterwards proved a great damage to me. M y experience had not then taught me, as it has done since, my extreme feebleness and impotence, every manner of way; and the bottomless depths of secret corruption and deceit there was in my heart. However, I went on with my eager pursuit after more holiness, and conformity to Christ. T h e heaven I desired was a heaven of holiness; to be with God, and to spend my eternity in

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divine love, and holy communion with Christ. My mind was very much taken up with contemplations on heaven, and the enjoyments there; and living there in perfect holiness, humility and love: And it used at that time to appear a great part of the happiness of heaven, that there the saints could express their love to Christ. It appeared to me a great clog and burden, that what I felt within, I could not express as I desired. T h e inward ardor of my soul, seemed to be hindered and pent up, and could not freely flame out as it would. I used often to think, how in heaven this principle should freely and fully vent and express itself. Heaven appeared exceedingly delightful, as a world of love; and that all happiness consisted in living in pure, humble, heavenly, divine love. I remember the thoughts I used then to have of holiness; and said sometimes to myself, "I do certainly know that I love holiness, such as the gospel prescribes." It appeared to me, that there was nothing in it but what was ravishingly lovely; the highest beauty and amiableness . . . . a divine beauty; far purer than any thing here upon earth; and that every thing else was like mire and defilement, in comparison of it. Holiness, as I then wrote down some of my contemplations on it, appeared to me to be of a sweet, pleasant, charming, serene, calm nature; which brought an inexpressible purity, brightness, peacefulness and ravishment to the soul. In other words, that it made the soul like a field or garden of God, with all manner of pleasant flowers; all pleasant, delightful, and undisturbed; enjoying a sweet calm, and the gently vivifying beams of the sun. T h e soul of a true Christian, as I then wrote my meditations, appeared like such a little white flower as we see in the spring of the year; low and humble on the ground, opening its bosom to receive the pleasant beams of the sun's glory; rejoicing as it were in a calm rapture; diffusing around a sweet fragrancy; standing peacefully and lovingly, in the midst of other flowers round about; all in like manner opening their bosoms, to drink in the light of the sun. There was no part of creature holiness, that I had so great a sense of its loveliness, as humility, brokenness of heart and poverty of spirit; and there was nothing that I so earnestly longed for. My heart panted after this, to lie low before God, as in the dust; that I might be nothing, and that God might be ALL, that I might become as a little child. While at Newyork, I was sometimes much affected with reflections on my past life, considering how late it was before I began to be truly religious; and how wickedly I had lived till then;

THE FIRST AMERICAN REVOLUTION and once so as to weep abundantly, and for a considerable time together. O n January 12, 1723. I made a solemn dedication of myself to G o d , and wrote it down; giving up myself, and all that I had to G o d ; to be f o r the future in no respect m y own; to act as one that had no right to himself, in any respect. And solemnly vowed to take G o d f o r my whole portion and felicity; looking on nothing else as any part of m y happiness, nor acting as if it were; and his law f o r the constant rule of m y obedience; engaging to fight with all m y might, against the w o r l d , the flesh and the devil, to the end of m y life. But I have reason to be infinitely humbled, w h e n I consider how much I have failed of answering my obligation. I had then abundance of sweet religious conversation in the family where I lived, with Mr. J o h n Smith and his pious mother. My heart was knit in affection to those in whom were appearances of true piety; and I could bear the thoughts of no other companions, but such as were holy, and the disciples of the blessed Jesus. I had great longings f o r the advancement of Christ's kingdom in the world; and m y secret prayer used to be, in great part, taken up in praying f o r it. If I heard the least hint of any thing that happened, in anv part of the world, that appeared, in some respect or other, to have a favorable aspect on the interest of Christ's kingdom, my soul eagerly catchcd at it; and it would much animate and refresh me. I used to be eager to read public news letters, mainly f o r that end; to see if I could not find some news favorable to the interest of religion in the world. I very frequently used to retire into a solitary place, on the banks of Hudson's river, at some distance from the city, f o r contemplation on divine things, and secret converse with God; and had many sweet hours there. Sometimes Mr. Smith and I walked there together, to converse on the things of G o d ; and our conversation used to turn much on the advancement of Christ's kingdom in the world, and the glorious things that G o d would accomplish for his church in the latter days. I had then, and at other times the greatest delight in the holy scriptures, of any book whatsoever. Oftentimes in reading it, every word seemed to touch m y heart. I felt a harmony between something in m y heart, and those sweet and powerful words. I seemed often to sec so much light exhibited bv e v e r y sentence, and such a refreshing food communicated, that I could not get along in reading; often dwelling long on one sentence, to see the wonders contained in it; and yet almost every sentence seemed to be full of wonders.

I came away from N e w y o r k in the month of April, 1723. and had a most bitter parting with Madam Smith and her son. Mv heart seemed to sink within me at leaving the family and citv, where I had enjoyed so manv sweet and pleasant days. 1 went from N e w v o r k to Weathersfield, by water, and as I sailed awav, I kept sight of the city as long as I could. However, that night, after this sorrowful parting, I was greatly comforted in G o d at Westchester, where we went ashore to lodge; and had a pleasant time of it all the voyage to Saybrook. It was sweet to me to think of meeting dear Christians in heaven, where we should never part more. A t Savbrook we went ashore to lodge, on Saturday, and there kept the Sabbath; where I had a sweet and refreshing season, walking alone in the fields. A f t e r I came home to Windsor, I remained much in a like frame of mind, as when at N e w york; onlv sometimes I felt mv heart ready to sink with the thoughts of my friends at N e w y o r k . M y support was in contemplations on the heavenly state; as I find in my Diarv of May 1, 1723. It was a comfort to think of that state, where there is fullness of joy; where reigns heavenly, calm, and delightful love, without alloy; where there are continually the dearest expressions of this love; where is the enjoyment of the persons loved, without ever parting; where those persons w h o appear so lovely in this world, will really be inexpressibly more lovely and full of love to us. And how sweetly will the mutual lovers join together to sing the praises of G o d and the Lamb! H o w will it fill us with joy to think, that this enjoyment, these sweet exercises will never cease, but will last to all eternity! . . . . I continued much in the same frame, in the general, as when at N e w y o r k , till I went to Newhaven as tutor to the college; particularly once at Bolton, on a journey from Boston, while walking out alone in the fields. A f t e r I went to Newhaven I sunk in religion; mv mind being diverted from mv eager pursuits after holiness, bv some affairs that greatly perplexed and distracted mv thoughts. In September, 1 7 : 5 , I was taken ill at N e w haven, and while endeavoring to ço home to Windsor, was so ill at the North Village, that I could go no further; where 1 lay sick for about a quarter of a year. In this sickness G o d was pleased to visit me again with the sweet influences of his Spirit. M v mind was greatly engaged there in divine, pleasant contemplations, and longings of soul. I observed that those who watched with me, would often be looking out wishfully f o r the morning; which brought to mv mind those words of the psalmist, and which my soul with delight

THE AMERICAN made its own language, My soul iraiteth for the Lord, more than they that n-atch for the morning,, I say, more than they th.it iratch for the morning; and when the light of day came in at the windows, it refreshed mv soul from one morning to another. It seemed to be some image of the light of God's glory. I remember, about that time, 1 used greatly to long f o r the conversion of some that 1 was concerned with; I could gladly honor them, and with delight be a servant to them, and lie at their feet, if they were but truly holy. But, some time after this, I was again greatly diverted in my mind with some temporal concerns that exceedingly took up m y thoughts, greatly to the wounding of my soul; and went on through various exercises, that it would be tedious to relate, which gave me much more experience of my own heart, than ever I had before. Since 1 came to this town [Northampton], I have often had sweet complacency in God, in views of his glorious perfections and the excellency of Jesus Christ. God has appeared to me a glorious and lovely Being, chicflv on the account of his holiness. T h e holiness of God has always appeared to me the most lovely of all his attributes. T h e doctrines of God's absolute sovereignty, and free grace, in shewing mercy to whom he would shew mercv, and man's absolute dependence on the operations of God's Holy Spirit, have verv often appeared to me as sweet and glorious doctrines. These doctrines have been much my delight. God's sovereignty has ever appeared to me, great part of his glory. It has often been my delight to approach God, and adore him as a sovereign G o d , and ask sovereign mercy of him. I have loved the doctrines of the gospel; thev have been to mv soul like green pastures. T h e gospel has seemed to me the richest treasure; the treasure that 1 have most desired, and longed that it might dwell richlv in me. T h e way of salvation by Christ has appeared, in a general way, glorious and excellent, most pleasant and most beautiful. It has often seemed to me, that it would in a great measure spoil heaven, to receive it in any other w a y . T h a t text has often been affecting and delightful to me, Isa. xxxii. 2. A man shall be an hiding place from the u-ind, and a covert from the te?npest, &c. It has often appeared to me delightful, to be united to Christ; to have him for my head, and to be a member of his body; also to have Christ for m y teacher and prophet. I very often think with sweetness, and longings, and pantings of soul, of being a little child, taking hold of Christ, to be led bv him through the wilderness of this world. That

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text, Matth, xviii. 3, has often been sweet to me, exccpt yc be converted and become as little children, óc. I love to think of coming to Christ, to reccivc salvation of him, poor in spirit, and quite empty of self, humbly exalting him alone; cut off entirely from my own root, in order to grow into, and out of Christ; to have G o d in Christ to be all in all; and to live by faith on the son of G o d , a life of humble, unfeigned confidence in him. T h a t scripture has often been sweet to me, Psal. cxv. 1. Not unto us, O Lord, not unto us, but unto thy name give glory, for thy mercy, md for thy truth's sake. And those words of Christ, Luke x. 21. In that hour Jesus rejoiced in spirit, and said, 1 thank thee, O Father, Lord of heaven and earth, that thou hast hid these things from the niise and prudent, and hast revealed them unto babes: Even so, Father, for so it seemed good in thy sight. That sovereignty of G o d which Christ rejoiced in, seemed to me worthy of such joy; and that rejoicing seemed to shew the excellency of Christ, and of what spirit he was. Sometimes, only mentioning a single w o r d caused my heart to burn within me; or only seeing the name of Christ, or the name of some attribute of God. And G o d has appeared glorious to me, on account of the Trinity. It has made me have exalting thoughts of G o d , that he subsists in three persons; Father, Son and H o l y Ghost. T h e sweetest joys and delights I have experienced, have not been those that have arisen from a hope of my own good estate; but in a direct view of the glorious things of the gospel. W h e n I enjoy this sweetness, it seems to carry me above the thoughts of my own estate; it seems at such times a loss that I cannot bear, to take off my eye from the glorious, pleasant object I behold without me, to turn my eye in upon myself, and mv own good estate. M y heart has been much on the advancement of Christ's kingdom in the world. T h e histories of the past advancement of Christ's kingdom have been sweet to me. W h e n I have read histories of past ages, the pleasantest thing in all m y reading has been, to read of the kingdom of Christ being promoted. And when I have expected, in my reading, to come to any such thing, I have rejoiced in the prospect, all the w a y as 1 read. And my mind has been much entertained and delighted with the scripture promises and prophecies, which relate to the future glorious advancement of Christ's kingdom upon earth. I have sometimes had a sense of the excellent fulness of Christ, and his meetness and suitableness as a Saviour; whereby he has appeared to me, far above all, the chief of ten thousands. His

THE FIRST AMERICAN REVOLUTION blood and atonement have appeared sweet, and his righteousness sweet; which was always accompanied with ardency of spirit; and inward smugglings and breathings, and groanings that cannot be uttered, to be emptied of myself, and swallowed up in Christ. Once, as I rode out into the woods f o r m y health, in 1737, having alighted from my horse in a retired place, as m y manner commonly has been, to walk f o r divine contemplation and prayer, I had a view that f o r me was extraordinary, of the glory of the Son of G o d , as Mediator between G o d and man, and his wonderful, great, full, pure and sweet grace and love, and meek and gentle condescension. T h i s grace that appeared so calm and sweet, appeared also great above the heavens. T h e person of Christ appeared ineffably excellent with an excellency great enough to swallow up all thought and conception . . . which continued as near as I can judge, about an hour; which kept me the greater part of the time in a flood of tears, and weeping aloud. I felt an ardency of soul to be, what I know not otherwise how to express, emptied and annihilated; to lie in the dust, and to be full of Christ alone; to love him with a holy and pure love; to trust in him; to live upon him; to serve and follow him; and to be perfectly sanctified and made pure, with a divine and heavenly purity. I have, several other times, had views v e r y much of the same nature, and which have had the same effects. I have many times had a sense of the glory of the third person in the Trinity, in his office of Sanctifier; in his holy operations, communicating divine light and life to the soul. G o d , in the communications of his H o l y Spirit, has appeared as an infinite fountain of divine glory and sweetness; being full, and sufficient to fill and satisfy the soul; pouring forth itself in sweet communications; like the sun in its glory, sweetly and pleasantly diffusing light and life. A n d I have sometimes had an affecting sense of the excellency of the word of G o d , as a w o r d of life; as the light of life; a sweet, excellent lifegiving word; accompanicd with a thirsting after that word, that it might dwell richly in my heart. Often, since I lived in this town, I have had v e r y affecting views of m y own sinfulness and vileness; very frequently to such a degree as to hold me in a kind of loud weeping, sometimes f o r a considerable time together; so that I have often been forced to shut myself up. I have had a vastly greater sense of m y own wickedness, and the badness of m y heart, than ever I had before my conversion. It has often appeared to me, that if G o d should mark iniquity against me, I should appear

the very worst of all mankind; of all that have been, since the beginning of the world to this time; and that I should have by far the lowest place in hell. W h e n others, that have come to talk with me about their soul concerns, have expressed the sense they have had of their own wickedness, by saying that it seemed to them, that they were as bad as the devil himself; I thought their expressions seemed exceeding faint and feeble, to represent my wickedness. M y wickedness, as I am in myself, has long appeared to me perfectly ineffable, and swallowing up all thought and imagination; like an infinite deluge, or mountains over mv head. I know not how to express better what m y sins appear to me to be, than by heaping infinite upon infinite, and multiplying infinite by infinite. V e r y often, f o r these many years, these expressions are in m y mind, and in m y mouth, "Infinite upon infinite. . . . Infinite upon infinite!" W h e n I look into m y heart, and take a view of m y wickedness, it looks like an abyss infinitely deeper than hell. A n d it appears to me, that were it not f o r free grace, exalted and raised up to the infinite height of all the fulness and glory of the great Jehovah, and the arm of his power and grace stretched forth in all the majesty of his power, and in all the glory of his sovereignty, I should appear sunk down in my sins below hell itself; far beyond the sight of every thing, but the eye of sovereign grace, that can pierce even down to such a depth. A n d yet it seems to me, that my conviction of sin is exceeding small, and faint; it is enough to amaze me, that I have no more sense of m y sin. I know certainly, that I have very little sense of m y sinfulness. W h e n I have had turns of weeping and crying for m y sins I thought I knew at the time, that my repentance was nothing to m y sin. I have greatly longed of late, f o r a broken heart, and to lie low before G o d ; and, when I ask for humility, I cannot bear the thoughts of being no more humble than other Christians. It seems to me, that though their degrees of humility may be suitable for them, vet it would be a vile selfexaltation in me, not to be the lowest in humility of all mankind. Others speak of their longing to be "humbled to the dust;" that may be a proper expression for them, but I always think of myself, that I ought, and it is an expression that has long been natural f o r me to use in prayer, "to lie infinitely low before G o d . " And it is affecting to think, how ignorant I was, when a young Christian, of the bottomless, infinite depths of wickedness, pride, hypocrisy and deccit, left in my heart. I have a much greater sense of my universal, exceeding dependence on God's grace and strength,

T H E AMERICAN and mere good pleasure, of late, than I used formerly to have; and have experienced more of an abhorrence of mv own righteousness. The very thought of any joy arising in me, on any consideration of my own amiableness, performances, or experiences, or anv goodness of heart or life, is nauseous and detestable to me. And yet 1 am greatly afflicted with a proud and selfrighteous spirit, much more sensibly than I used to be formerly. I see that serpent rising and putting forth its head continually, every where, all around me. Though it seems to me, that, in some respects, I was a far better Christian, for two or three years after my first conversion, than I am now; and lived in a more constant delight and pleasure; yet, of late years, I have had a more full and constant sense of the absolute sovereignty of God, and a delight in that sovereignty; and have had more of a sense of the glory of Christ, as a Mediator revealed in the gospel. On one Saturday night, in particular, I had such a discovery of the excellency of the gospel above all other doctrines,

BENJAMIN BENJAMIN

FRANKLIN

was

a

moralist,

not

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that I could not but say to myself, "This is my choscn light, my chosen doctrine;" and of Christ, "This is my choscn Prophet." It appeared sweet, beyond all expression, to follow Christ, and to be taught, and enlightened, and instructed by him; to learn of him, and live to him. Another Saturday night, (January 1739) I had such a sense, how sweet and blessed a thing it was to walk in the way of duty; to do that which was right and meet to be done, and agreeable to the holy mind of God; that it caused me to break forth into a kind of loud weeping, which held me some time, so that I was forced to shut myself up, and fasten the doors. I could not but, as it were, cry out, "How happy are they which do that which is right in the sight of God! T h e y are blessed indeed, they are the happy ones!" I had, at the same time, a very affecting sense, how meet and suitable it was that God should govern the world, and order all things according to his own pleasure; and I rejoiced in it, that God reigned, and that his will was done.

FRANKLIN a

philosopher; none of his mature work denied the inspiration of Scripture or attempted to destroy its authority. For the vast " T o what e n d ? " which Edwards put to the universe, Franklin substituted a modest, operational " H o w ? " H e was equally modest in his consideration of virtue. Where Edwards defined true virtue as the disinterested love of God, Franklin named it a decent consideration f o r the w e l f a r e of one's fellow men. If he regarded virtue as an art, it was a mechanical art, one which could be reduced to rule and acquired b y faithful practice. Beyond such persistent striving to improve his conduct, no man could be asked to go. Franklin's mind ranged too widely in this world, then, to be much concerned with the next. If that limitation made him active in every scheme f o r promoting the comfort of Philadelphia, if it drew him to study the effects of lightning and the use of glass as a musical instrument, if it made him a skillful propagandist and the first and most persuasive of our de-

visers of gadgets, it also tended to give a rather smug tone to his moralizing. T h e mingled c o m placency and irony implicit in his outlook is neatly illustrated in his letters of the summer of 1764. Both William Strahan, his former business associate, and G e o r g e Whitefield, the evangelist, were among his correspondents that J u l y , and Franklin repeated to Strahan the substance of what he had written to Whitefield: " Y o u r frequently repeated wishes f o r m y eternal as well as my temporal happiness are v e r y obliging, and I can only thank y o u f o r them and offer mine in return. I have myself no proper doubt that I shall enjoy as much of both as is proper f o r me. T h a t Being, w h o gave mc existence, and through almost three-score years has been continually showering his favors upon me, whose v e r y chastisements have been blessings to me; can I doubt that he loves me? And if he loves me, can I doubt that he will g o on to take care of me, not only here but hereafter? This to some may seem presumption; to me it appears the best grounded hope; hope of the future built on experience of the past."

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T h e selection f r o m Franklin's writings used here is from the Autobiography

of Benjamin

REVOLUTION

Franklin.

Edited

from

his Manuscript.

l>v J o h n B i g e l o w (Philadelphia,

. . .

1868).

Autobiography BY

BENJAMIN

W E HAVE an English proverb that says, "He that •would thrive must ask his wife." It w a s lucky f o r me that I had one as much dispos'd to industry and frugality as myself. She assisted me cheerfully in m y business, folding and stitching pamphlets, tending shop, purchasing old linen rags f o r the paper-makers, etc., etc. W e kept no idle servants, our table was plain and simple, our furniture of the cheapest. F o r instance, my breakfast was a long time bread and milk (no tea), and I ate it out of a r w o p e n n v earthen porringer, with a p e w t e r spoon. But mark how luxury will enter families, and make a progress, in spite of principle: being call'd one morning to breakfast, I f o u n d it in a China bowl, with a spoon of silver! T h e y had been bought f o r me without niv knowledge b y m y w i f e , and had cost her the enormous sum of thrce-and-twenty shillings, f o r which she had no other excuse or apology to make, but that she thought her husband descrv'd a silver spoon and China b o w l as well as any of his neighbors. T h i s was the first appearance of plate and China in our house, which a f t e r w a r d , in a course of years, as our wealth increas'd, augmented gradually to several hundred pounds in value. I had been religiously educated as a Presbyterian; and tho' some of the dogmas of that persuasion, such as the eternal decrees of God, election, reprobation, etc., appeared to me unintelligible, others doubtful, and I early absented myself f r o m the public assemblies of the sect, Sunday being m y studying day, I never was without some religious principles. I never doubted, f o r instance, the existence of the D e i t y ; that he made the w o r l d , and govern'd it by his Providence; that the most acceptable service of G o d was the doing good to man; that our souls are immortal; and that all crime will be punished, and virtue rew a r d e d , either here or hereafter. T h e s e I estcem'd the essentials of e v e r y religion; and, being to be f o u n d in all the religions w e had in our country, I respected them all, tho' with different degrees of respect, as I found them more or less mix'd with other articles, which, without any tendency to inspire, promote, or confirm morality, serv'd principally to divide us, and make us unfriendly to one another. T h i s respect to all, with an opinion that the worst had some good effects, indue'd me

FRANKLIN to avoid all discourse that might tend to lessen the good opinion another might have of his o w n religion; and as our province increas'd in people, and new places of worship were continually wanted, and generally erected by voluntary c o n tribution, m v mite f o r such purpose, whatever might be the sect, was never refused. T h o ' I seldom attended any public worship, I had still an opinion of its propriety, and of its utility when rightly conducted, and I regularly paid m y annual subscription f o r the support of the only Presbyterian minister or meeting w e had in Philadelphia. H e us'd to visit me sometimes as a friend, and admonish me to attend his administrations, and 1 was now and then prevail'd to do so, once f o r five Sundays successively. H a d he been in my opinion a good preacher, perhaps I might have continued, notwithstanding the o c casion I had f o r the Sunday's leisure in my course of study; but his discourses were chiefly either polemic arguments, or explications of the peculiar doctrines of our sect, and were all to me v e r y dry, uninteresting, and unedifying, since not a single moral principle was inculcated or e n f o r e ' d , their aim seeming to be rather to make us Presbyterians than good citizens. A t length he took f o r his text that verse of the brethren, fourth chapter of Philippians, " F i n a l l y , whatsoever things are true, honest, just, pure, lovely, or of good report, if there be any virtue, or any praise, think on these things." A n d I imagin'd in a sermon on such a text, we could not miss of having some morality. But he confin'd himself to five points only, as meant by the apostle, viz.: ι Keeping holy the Sabbath day. 2. Being diligent in reading the holy Scriptures. 3. Attending duly the publick worship. 4. Partaking of the Sacramcnt. 5. Paving a due respect to G o d ' s ministers. T h e s e might be all good things; but, as thev w e r e not the kind of good things that I expected f r o m the text, I despaired of ever meeting with them f r o m any other, was disgusted, and attended his preaching no more. I had some years b e f o r e compos'd a little L i t u r g y , or f o r m of praver, f o r m y own private use (viz., in 1 7 2 8 ) , entitled Articles of Belief and Acts of Religion. I return'd to the use of this, and went n o more to the public assemblies. M y conduct might be

THE AMERICAN MIND blameable, but I leave it, without attempting further to excuse it; mv present purpose being to relate fac:s, and not to make apologies for them. It was about this time I conceiv'd the bold and arduous project of arriving at moral perfection. I wish'd to live without committing any fault at any time; 1 would conquer all that either natural inclination, custom, or company might lead me into. A s I knew, or thought I knew, what was right and wrong, I did not see why I might not always do the one and avoid the other. But I soon found I had undertaken a task of more difficulty than I had imagined. While my care was employ'd in guarding against one fault, I was often surprised by another; habit took the advantage of inattention; inclination was sometimes too strong for reason. I concluded, at length, that the mere speculative conviction that it was our interest to be completely virtuous, was not sufficient to prevent our slipping; and that the contrary habits must be broken, and good ones acquired and established, before we can have any dcpendcnce on a steady, uniform rectitude of conduct. For this purpose I therefore contrived the following method. In the various enumerations of the moral virtues I had met within my reading, I found the catalogue more or less numerous, as different writers included more or fewer ideas under the same name. Temperance, for example, was by some confined to eating and drinking, while bv others it was extended to mean the moderating every other pleasure, appetite, inclination, or passion, bodily or mental, even to our avarice and ambition. I propos'd to myself, for the sake of clearness, to use rather more names, with fewer ideas annex'd to each, than a few names with more ideas; and I included under thirteen names of virtues all that at that time occurr'd to me as necessarv or desirable, and annexed to each a short precept, which fully express'd the extent I gave to its meaning. These names of virtues, with their precepts, were: ι. Temperance. Eat not to dulness; drink not to elevation. 2. Silence. Speak not but what may benefit others or yourself; avoid trifling conversation. 3. Order. Let aL your things have their places; let each part of your business have its time. 4. Resolution. Resolve to perform what you ought; perform without fail what you resolve.

155

5. Frugality. Make no expense but to do good to others or yourself; i.e., waste nothing. 6. Industry. Lose no time; be always employ'd in something useful; cut off all unnecessary actions. 7. Sincerity. Use no hurtful deceit; think innocently and justly, and, if you speak, speak accordingly. 8. Justice. Wrong none by doing injuries, or omitting the benefits that are your duty. 9. Moderation. Avoid extreams; forbear resenting injuries so much as you think they deserve. 10. Cleanliness. Tolerate no uncleanliness in body, cloaths, or habitation. 1 1 . Tranquillity. Be not disturbed at trifles, or at accidents common or unavoidable. 12. Chastity. Rarely use venery but f o r health or offspring, never to dulness, weakness, or the injury of your own or another's peace or reputation. 13. Humility. Imitate Jesus and Socrates. M y intention being to acquire the habitude of all these virtues, I judg'd it would be well not to distract mv attention by attempting the whole at once, but to fix it on one of them at a time; and, when I should be master of that, then to proceed to another, and so on, till I should have gone thro' the thirteen, and, as the previous acquisition of some might facilitate the acquisition of certain others, I arrang'd them with that view as thev stand above. Temperance first, as it tends to procure that coolness and clearness of head, which is so necessary where constant vigilance was to be kept up, and guard maintained against the unremitting attraction of ancient habits, and the force of perpetual temptations. This being acquir'd and establish'd, Silence would be more easy; and my desire being to gain knowledge at the same time that I improv'd in virtue, and considering that in conversation it was obtain'd rather by the use of the ears than of the tongue, and therefore wishing to break a habit I was getting into of prattling, punning, and joking, which only made me acceptable to trifling company, I gave Silence the second place. This and the next. Order, I expected would allow me more time f o r attending to my project and my studies. Resolution, once become habitual, would keep me firm in my endeavors to obtain all the subsequent

T H E FIRST AMERICAN

156

virtues; Frugality and Industry freeing me from my remaining debt, and producing affluence and independence, would make more easy the practice of Sincerity and Justice, etc., etc. Conceiving then, that, agreeably to the advice of Pythagoras in his Golden Verses, daily examination would be necessary, I contrived the following method for conducting that examination. I made a little book, in which I allotted a page for each of the virtues. I rul'd each page with red ink, so as to have seven columns, one for each day of the week, marking each column with a letter for the day. I cross'd these columns with thirteen red lines, marking the beginning of each line with the first letter of one of the virtues, on which line, and in its proper column, I might mark, by a little black spot, every fault I found upon examination to have been committed respecting that virtue upon that day. Form

of the

pages.

TEMPERANCE. Eat not to dulness; Drink not to elevation. T.

S.

M.

S.

•

O.

•

R. F. I.

T.

W.

T.

• •

•

•

weaken'd, that I might venture extending my attention to include the next, and for the following week keep both lines clear of spots. Proceeding thus to the last, I could go thro' a course compleat in thirteen weeks, and four courses in a year. And like him, who, having a garden to weed, does not attempt to eradicate all the bad herbs at once, which would exceed his reach and his strength, but works on one of the beds at a time, and, having accomplish'd the first, proceeds to a second, so I should have, I hoped, the encouraging pleasure of seeing on my pages the progress I made in virtue, bv clearing successively my lines of their spots, till in the end, by a number of courses, I should be happy in viewing a clean book, after a thirteen weeks daily examination. This my little book had for its motto these lines from Addison's Cato: "Here will I hold. If there's a power above us (And that there is, all nature cries aloud T h r o ' all her works), He must delight in virtue, And that which he delights in must be happy." Another from Cicero,

F.

S.

•

•

REVOLUTION

«

•

• •

•

S. J· M. C. T. c. H. I determined to give a week's strict attention to each of the virtues successively. Thus, in the first week, mv great guard was to avoid every the least offence against Temperance, leaving the other virtues to their ordinary chance, only marking every evening the faults of the day. Thus, if in the first week 1 could keep my first line, marked T , clear of spots, I suppos'd the habit of that virtue so much strengthen'd, and its opposite

" O vitae Philosophie dux! O virtutem indagatrix expultrixque vitiorum! Unus dies, bene et ex praeceptis tuis actus, peccanti immortalitati est anteponendus." Another from the Proverbs of Solomon, speaking of wisdom or virtue: "Length of days is in her right hand, and in her left hand riches and honour. Her ways are ways of pleasantness, and all her paths are peace." iii. .6, .7.

And conceiving God to be the fountain of wisdom, I thought it right and necessary to solicit his assistance for obtaining it; to this end I formed the following little prayer, which was prefix'd to my tables of examination for daily use. "O powerful Goodness! bountiful Father! merciful Guide! Increase in me that wisdom -which discovers my truest interest. Strengthen my resolutions to perform what that wisdom dictates. Accept my kind offices to thy other children as the only return in my power for thy continual favours to me." I used also sometimes a little prayer which I took from Thomson's Poems, viz.: "Father of light and life, thou Good Supreme! O teach me what is good; teach me Thyself! Save me from folly, vanity, and vice, From every low pursuit; and fill my soul

T H E AMERICAN With knowledge, conscious peace, and virtue pure; Sacred, substantial, never-fading bliss!" T h e precept of Order requiring that every part of my business should have its allotted time, one page in my little book contain'd the following scheme of employment for the twenty-four hours of a natural day. T h e Morning. Question. What good shall I do this day?

j 6

7 8 9 io Noon.

Evening. Question. What good have 1 done to-day.

Night.

Rise, wash, and address Powerful Goodness! Contrive day's business, and take the resolution of the day; prosecute the present study, and breakfast. Work

12 ι 2 3 4 J

Read, or overlook my accounts, and dine

6

Put things in their places. Supper. Music or diversion or conversation. Examination of the day.

7 8

Work-

9

Sleep.

I entcr'd upon the execution of this plan for self-examination, and continu'd it with occasional intermissions for some time. I was surpris'd to find myself so much fuller of faults than I had imagined; but I had the satisfaction of seeing them diminish. T o avoid the trouble of renewing now and then my little book, which, by scraping out the marks on the paper of old faults to make room for new ones in a new course, became full of holes, I transferr'd my tables and precepts to the ivory leaves of a memorandum book, on which the lines were drawn with red ink, that made a durable stain, and on those lines 1 mark'd my

MIND

'57

faults with a black-lead pencil, which marks I could easily wipe out with a wet sponge. After a while I went thro' one course only in a year, and afterward only one in several years, till at length I omitted them entirely, being employ'd in voyages and business abroad, with a multiplicity of affairs that interfered; but I always carried my little book with me. My scheme of ORDER gave me the most trouble; and I found that, tho' it might be practicable where a man's business was such as to leave him the disposition of his time, that of a journeyman printer, for instance, it was not possible to be exactly observed by a master, who must mix with the world, and often receive people of business at their own hours. Order, too, with regard to places for things, papers, etc., I found extreamly difficult to acquire. I had not been early accustomed to it, and, having an exceedingly good memory, I was not so sensible of the inconvenience attending want of method. This article, therefore, cost me so much painful attention, and my faults in it vexed me so much, and I made so little progress in amendment, and had such frequent relapses, that I was almost ready to give up the attempt, and content myself with a faulty character in that respect, like the man who, in buying an ax of a smith, my neighbor, desired to have the whole of its surface as bright as the edge. The smith consented to grind it bright for him if he would turn the wheel; he turn'd, while the smith press'd the broad face of the ax hard and heavy on the stone, which made the turning of it very fatiguing. The man came every now and then from the wheel to see how the work went on, and at length would take his ax as it was, without farther grinding. " N o , " said the smith, "turn on, turn on; we shall have it bright bv-and-by; as yet, it is only speckled." "Yes," says the man, "but I think 1 like a speckled ax best." And I believe this may have been the case with many, who, having, for want of some such means as I employ'd, found the difficulty of obtaining good and breaking bad habits in other points of vice and virtue, have given up the struggle, and concluded that "a speckled ax was best'''; for something, that pretended to be reason, was every now and then suggesting to me that such extream nicety as I exacted of myself might be a kind of foppery in morals, which, if it were known, would make me ridiculous; that a perfect character might be attended with the inconvenience of being envied and hated; and that a benevolent man should allow a few faults in himself, to keep his friends in countenance. In truth, I found myself incorrigible with re-

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T H E FIRST AMERICAN REVOLUTION

spect to Order; and now I am grown old, and my memory bad, I feel v e r y sensibly the want of it. But, on the whole, tho' I never arrived at the erfection I had been so ambitious of obtaining, ut fell far short of it, yet I was, by the endeavour, a better and a happier man than I otherwise should have been if I had not attempted it; as those who aim at perfect writing b y imitating the engraved copies, tho' they never reach the wish'd for excellence of those copies, their hand is mended by the endeavor, and is tolerable while it continues fair and legible. It may be well mv posterity should be informed that to this little artifice, with the blessing of G o d , their ancestor ow'd the constant felicity of his life, down to his 79th year, in which this is written. W h a t reverses may attend the remainder is in the hand of Providence; but, if they arrive, the reflection on past happiness enjoy'd ought to help his bearing them with more resignation. T o Temperance he ascribes his long-continued health, and what is still left to him of a good constitution; to Industry and Frugality, the early easiness of his circumstances and acquisition of his fortune, with all that knowledge that enabled him to be a useful citizen, and obtained for him some degree of reputation among the learned; to Sincerity and Justice, the confidence of his country, and the honorable employs it conferred upon him; and to the joint influence of the whole mass of the virtues, even in the imperfect state he was able to acquire them, all that evenness of temper, and that cheerfulness in conversation, which makes his company still sought for and agreeable, even to his younger acquaintance. I hope, therefore, that some of m y descendants may follow the example and reap the benefit. It will be remark'd that, tho' my scheme was not wholly without religion, there was in it no mark of any of the distinquishing tenets of any particular sect. I had purposely avoided them; for, being fully persuaded of the utility and excellency of my method, and that it might be serviceable to people in all religions, and intending some time or other to publish it, I would not have any thing in it that should prejudice any one, of any sect, against it. I purposed writing a little comment on each virtue, in which I would have shown the advantages of possessing it, and the mischiefs attending its opposite vice; and I should have called my book T H E A R T O F V I R T U E , because it would have shown the means and manner of obtaining virtue, which would have distinguished it from the mere exhortation to be good, that does not instruct and indicate the means, but is like the apostle's man of verbal charity, who only

E

without showing to the naked and hungry how or where they might get clothes or victuals, exhorted them to be fed and clothed. James ii, 15, 16. But it so happened that my intention of writing and publishing this comment was never fulfilled. I did, indeed, from time to time, put down short hints of the sentiments, reasonings, etc., to be made use of in it, some of which I have still by me; but the necessary close attention to private business in the earlier part of m y life, and public business since, have occasioned m y postponing it; for, it being connected in m y mind with a great and extensive project, that required the whole man to execute, and which an unforeseen succession of employs prevented m y attending to, it has hitherto remain'd unfinish'd. In this piece it was my design to explain and enforce this doctrine, that vicious actions are not hurtful because they are forbidden, but forbidden because they are hurtful, the nature of man alone considered; that it was, therefore, every one's interest to be virtuous w h o wish'd to be happy even in this world; and I should, f r o m this circumstance (there being always in the world a number of rich merchants, nobility, states, and princes, who have need of honest instruments for the management of their affairs, and such being so rare), have endeavored to convince young persons that no qualities were so likely to make a poor man's fortune as those of probity and integrity. M y list of virtues contain'd at first but twelve; but a Quaker friend having kindly informed me that I was generally thought proud; that my pride show'd itself frequently in conversation; that I was not content with being in the right when discussing any point, but was overbearing, and rather insolent, of which he convinc'd me b y mentioning several instances; I determined endeavouring to cure myself, if I could, of this vice or folly among the rest, and I added Humility to mv list, giving an extensive meaning to the word. I cannot boast of much success in acquiring the reality of this virtue, but I had a good deal with regard to the appearance of it. I made it a rule to forbear all direct contradiction to the sentiments of others, and all positive assertion of mv own. I even forbid myself, agreeably to the old laws of our Junto, the use of every word or expression in the language that imported a fix'd opinion, such as certainly, undoubtedly, etc., and I adopted instead of them, / conceive, I apprehend, or I imagine a thing to be so or so; or it so appears to vie at present. W h e n another asserted something that I thought an error, I deny'd m y -

T H E AMERICAN MIND self the pleasure of contradicting him abruptly, and of showing immediately some absurdity in his proposition; and in answering I began by observing that in certain cases or circumstances his opinion would be right, but in the present case there appear'd or s ceni i to me some difference, etc. I soon found the advantage of this change in my manner; the conversations I engag'd in went on more pleasantly. The modest way in which I propos'd my opinions procur'd them a readier reception and less contradiction; I had less mortification when I was found to be in the wrong, and I more easily prevail'd with others to give up their mistakes and join with me when I happened to be in the right. And this mode, which I at first put on with some violence to natural inclination, became at length so easy, and so habitual to mc, that perhaps for these fifty years past no one has ever heard

'59

a dogmatical expression escape me. And to this habit (after my character of integrity) I think it principally owing that I had early so much weight with my fellow-citizens when I proposed new institutions, or alterations in the old, and so much influence in public councils when I became a member; for I was but a bad speaker, never eloquent, subject to much hesitation in my choice of words, hardly correct in language, and yet I generally carried my points. In reality, there is, perhaps, no one of our natural passions so hard to subdue as pride. Disguise it, struggle with it, beat it down, stifle it, mortify it as much as one pleases, it is still alive, and will every now and then peep out and show itself; you will see it, perhaps, often in this history; for, even if I could conceive that I had compleatly overcome it, I should probably be proud of my humility.

]. HECTOR ST. JOHN DE T H E AMERICAN LEGEND in its simplest, y e t m o s t

idyllic, terms is presented in Crèvecoeur's Letters from an American Farmer. America is a place where a man who is willing to work can earn enough to feed his family decently. Bald as the fact may be, Crèvecoeur is writer enough to make his development of it charming as well as significant. He shows us the American who made the Revolution: the hard-working, sober farmer; the pioneer, who is still depicted as social castoff, the man too restless, too indolent or too rebellious for settled society; the immigrant straightening his back as he becomes man and citizen instead of half-servile laborer. Crèvecoeur sees Europeans of all nations transformed into Americans under the influence of a government that does not oppress them with taxes or burden them with tithes. T h e American chooses his own religion, practices it as he will, and, provided he violates 110 law, lives as he pleases. Under this discipline, he has become a laborious, thrifty, litigious man, self-seeking yet willing to help a neighbor, hopeful, energetic and free fr.om the refinements of luxury and the corruptions of vice. T h e picture is conventional enough to serve the most unimaginative of modern orators. But Crèvecoeur helped create the convention. And there is a measure of appropriateness in the fact that this apt description of the American was made by one of the foreigners who thought to become what he depicted. J. Hector St. John de Crèvecoeur ( 1 7 3 5 1 8 1 3 ) came to America to serve with the

CRÈVECOEUR

French under Montcalm. Early in the 1760s, he changed allegiance and proceeded to travel through the Pennsylvania back country until he came to N e w York where he settled, was naturalized and married during the years when antirent rioting and the Stamp A c t disorders made N e w York a place one would not think likely to give birth to idyls. A f t e r the colonists broke with England, Crèvecoeur strove to remain neutral and finally found it either wise, or necessary, to leave his family and return to France in 1780. In Paris, he was introduced into literary society b y Mme. d'Houdetot, who had been Rousseau's mistress. Through her influence, Crèvecoeur was named Consul at N e w York, a post he contrived to hold until Revolutionary politics forced him out. He returned to Europe and spent the rest of his life in Paris, London and Munich, where he found a king who had read the Farmer's letters with great pleasure. Crèvecoeur had delighted other readers than King Maximilian of Bavaria, for his book was published in four English and two French editions, to say nothing of pirated German and Dutch reprints and the American edition of 1793. T h e famous essayist, William Hazlitt, found it charming; Charles Lamb read it with interest; and the Coleridge-Southey project f o r a literary settlement in the Susquehanna country is said to have taken inspiration from the Letters of an American Farmer. T h e selection reprinted here is taken from the American edition of 1793.

T H E AMERICAN SCENE

Letters BY

J.

from

HECTOR

an American

ST. J O H N

I WISH I could b e acquainted with the feelings and thoughts w h i c h must agitate the heart and present themselves to the mind of an enlightened Englishman, when he first lands on this continent. H e must greatly rejoice that he lived at a time to see this fair c o u n t r y discovered and settled; he must necessarily feel a share of national pride, w h e n he views t h e chain of settlements which embellishes these extended shores. W h e n he says t o himself, this is the w o r k of m y countrymen, w h o , w h e n convulsed by factions, afflicted by a variety o f miseries and wants, restless and impatient, took refuge here. T h e y brought along w i t h them their national genius, to which they principally owe what liberty they e n j o y , and what substance they possess. H e r e he sees the industry o f his native c o u n t r y displayed in a new manner, and traces in their works the embryos o f all the arts, sciences, and ingenuity which flourish in E u r o p e . H e r e he beholds fair cities, substantial villages, extensive fields, an immense country filled with d e c e n t houses, good roads, orchards, meadows, and bridges, where an hundred years ago all was wild, w o o d y , and uncultivated! W h a t a train o f pleasing ideas this fair spectacle must suggest; it is a prospect which must inspire a good citizen with the most heartfelt pleasure. T h e difficulty consists in the manner of viewing so extensive a scene. H e is arrived on a new continent; a modern society offers itself to his contemplation, different from what he had hitherto seen. It is n o t composed, as in Europe, of great lords w h o possess everything, and o f a herd of people w h o have nothing. Here are no aristocratical families, no courts, no kings, no bishops, n o ecclesiastical dominion, no invisible power giving t o a few a very visible one; no great manufacturers employing thousands, no great refinem e n t s o f luxury. T h e rich and the poor are not so f a r removed f r o m each other as they are in E u r o p e . S o m e f e w towns excepted, we are all tillers o f the earth, from Nova Scotia to W e s t Florida. W e are a people o f cultivators, scattered o v e r an immense territory, communicating with each o t h e r b y means of good roads and navigable rivers, united b y the silken bands o f mild governm e n t , all respecting the laws, without dreading their p o w e r , because they are equitable. W e are all animated with the spirit of an industry which is unfettered and unrestrained, because each person w o r k s f o r himself. If he travels through our

DE

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Farmer CREVECOEUR

rural districts he views n o t the hostile castle, and the haughty mansion, contrasted with t h e c l a y built hut and miserable cabin, where cattle and men help to keep each o t h e r warm, and dwell in meanness, smoke, and indigence. A pleasing unif o r m i t y o f decent c o m p e t e n c e appears t h r o u g h out our habitations. T h e meanest of o u r l o g houses is a dry and c o m f o r t a b l e habitation. L a w y e r or merchant are the fairest titles o u r t o w n s afford; that of a f a r m e r is the o n l y appellation of the rural inhabitants o f our c o u n t r y . It must take some time ere he can reconcile himself t o our dictionary, which is but short in w o r d s o f dignity, and names o f honour. T h e r e , o n a S u n day, he sees a congregation o f respectable farmers and their wives, all clad in neat homespun, well mounted, or riding in their own humble waggons. T h e r e is not among them an esquire, saving t h e unlettered magistrate. T h e r e he sees a parson as simple as his flock, a f a r m e r w h o does not riot on the labour o f others. W e have no princes, f o r whom we toil, starve, and bleed: we are the most perfect society now existing in the world. H e r e man is free as he ought to be; nor is this pleasing equality so transitory as m a n y others are. M a n y ages will not see the shores o f our great lakes replenished with inland nations, nor the u n k n o w n bounds of North America entirely peopled. W h o can tell how far it extends? W h o can tell the millions o f men whom it will feed and contain? f o r no European foot has as yet travelled half the extent of this mighty continent! T h e next wish of this traveller will be t o k n o w whence came all these people? they are a mixture of English, S c o t c h , Irish, F r e n c h , D u t c h , G e r mans, and Swedes. F r o m this promiscuous breed, that race now called A m e r i c a n s have arisen. T h e eastern provinces must indeed be excepted, as being the unmixed descendants o f Englishmen. I have heard many wish that they had been m o r e intermixed also: for m y part, I am no wisher, and think it much better as it has happened. T h e y exhibit a most conspicuous figure in this great and variegated picture; they too enter f o r a great share in the pleasing perspective displayed in these thirteen provinces. I k n o w it is fashionable t o reflcct on them, but I respect them f o r what t h e y have done; f o r the a c c u r a c y and wisdom w i t h which they have settled their t e r r i t o r y ; f o r t h e d e c e n c y o f their manners; f o r their early love o f letters; their ancient college, the first in this hemi-

IÓ2

THE FIRST AMERICAN REVOLUTION

sphere; f o r their industry; which to me who am but a farmer, is the criterion of everything. T h e r e never was a people, situated as thev are, who with so ungrateful a soil have done more in so short a time. D o you think that the monarchical ingredients which are more prevalent in other governments, have purged them from all foul stains? T h e i r histories assert the contrary. In this great American asylum, the poor of Europe have by some means met together, and in consequence of various causes; to what purpose should they ask one another what countrymen they are? Alas, two thirds of them had no country. Can a w r e t c h who wanders about, who works and strives, whose life is a continual scene of sore affliction or pinching penury; can that man call England or any other kingdom his country? A country that had no bread for him, whose fields procured him no harvest, who met with nothing but the frowns of the rich, the severity of the laws, with jails and punishments; who owned not a single foot of the extensive surface of this planet? N o ! urged bv a variety of motives, here they came. E v e r y thing has tended to regenerate them; new laws, a new mode of living, a new social system; here they are become men: in Europe they were as so many useless plants, wanting vegetative mould, and refreshing showers; they withered, and were mowed down by want, hunger, and war; but now by the power of transplantation, like all other pïants thev have taken root and flourish! F o r m e r l y thev were not numbered in any civil lists of their country, except in those of the p o o r ; here thev rank as citizcns. Bv what invisible power has this surprising metamorphosis been performed? B v that of the laws and that of their industry. T h e laws, the indulgent laws, protect them as they arrive, stamping on them the symbol o f adoption; thev receive ample rewards f o r their labours; these accumulated rewards procure them lands; those lands confer on them the title of freemen, and to that title every benefit is affixed which men can pos:;iblv require. This is the great operation daily performed bv our laws. From whence proceed these laws? From our government. W h e n c e the government? It is derived from the original genius and strong desire of the people ratified and confirmed bv the crown. T h i s is the great chain which links us all, this is the picture which everv province exhibits, Nova Scotia excepted. There the crown has done all; either there were no people who had eenius, or it was not much attended to: the consequence is, that the province i:s very thinly inhabited indeed; the power of the crown in conjunction with the musketos has prevented men from settling

there. Y e t some parts of it flourished once, and it contained a mild harmless set of people. But for the fault of a few leaders, the whole were banished. T h e greatest political error the crown ever committed in America, was to cut off men from a country which wanted nothing but men! W h a t attachment can a poor European emigrant have for a country where he had nothing? T h e knowledge of the language, the love of a few kindred as poor as himself, were the only cords that tied him: his country is now that which gives him land, bread, protection, and consequence: Ubi pajiis ibi patria, is the motto of all emigrants. W h a t then is the American, this new man? H e is either an European, or the descendant of an European, hence that strange mixture of blood, which you will find in no other country. I could point out to you a family whose grandfather was an Englishman, whose wife was Dutch, whose son married a French weman, and whose present four sons have now four wives of different nations. He is an American, who, leaving behind him all his ancient prejudices and manners, receives new ones from the new mode of life he has embraced, the new government he obeys, and the new rank he holds. H e becomes an American by being received in the broad lap of our great Alma Mater. Here individuals of all nations arc melted into a new race of men, whose labours and posterity will one day cause great changes in the world. A m e r icans are the western pilgrims, who are carrying along with them that great mass of arts, sciences, vigour, and industry which began long since in the east; thev w'ill finish the great circle. T h e Americans were once scattered all over Europe; here they arc incorporated into one of the finest systems of population which has ever appeared, and which will hereafter become distinct by the power of the different climates they inhabit. T h e A m e r ican ouiïht therefore to love this country much better than that wherein either he or his forefathers were born. Here the rewards of his industry follow with equal steps the progress of his labour; his labour is founded on the basis of nature, self-interest; can it want a stronger allurement? Wives and children, who before in vain demanded of him a morsel of bread, now, fat and frolicsome, gladly help their father to clear those fields whence exuberant crops are to arise to feed and to clothe them all; without any part being claimed, either by a despotic prince, a rich abbot, or a mighty lord. Here religion demands but little of him; a small voluntary salary to the minister, and gratitude to G o d ; can he refuse these? T h e American is a new man, who acts upon new principles; he must therefore entertain new ideas, and form new

T H E AMERICAN SCENE o p i n i o n s . F r o m i n v o l u n t a r v idleness, servile d e p e n d e n c e , p e n u r v , and useless l a b o u r , he has passed r o toils of a v c r v d i f f e r e n t n a t u r e , r e w a r d e d l>v a m p l e s u b s i s t e n c e . — T h i s is an A m e r ican. B r i t i s h A m e r i c a is d i v i d e d into m a n v p r o v i n c e s , f o r m i n g a l a r ç e a s s o c i a t i o n , scattered a l o n g a c o a s t 1 5 0 0 m i l e s e x t e n t and a b o u t :o w i d e . T h i s s o c i c t v I w o u l d f a i n e x a m i n e , at least such as it a p p e a r s in the m i d d l e p r o v i n c e s ; if it d o c s not a f f o r d t h a t v a r i e t y of riñeres a n d g r a d a t i o n s w h i c h m a y be o b s e r v e d in E u r o p e , w e h a v e c o l o u r s p e c u l i a r t o o u r s e l v e s . F o r i n s t a n c e , it is natural t o c o n c e i v e t h a t t h o s e w h o l i v e n e a r the sea, must be v e r y d i f f e r e n t f r o m t h o s e w h o live in the w o o d s ; the int e r m e d i a t e s p a c e w i l l a f f o r d a separate and dist i n c t class. M e n are like p l a n t s ; the g o o d n e s s and f l a v o u r of t h e f r u i t p r o c e e d s f r o m tl'.c p e c u l i a r soil and e x p o s i t i o n in w h i c h t h e y g r o w . W e are n o t h i n g b u t w h a t w e d e r i v e f r o m the air w e b r e a t h e , the clim a t e w e inhabit, the g o v e r n m e n t w c o b e y , the s y s t e m of r e l i g i o n w e p r o f e s s , and the n a t u r e of o u r e m p l o y m e n t . H e r e y o u w i l l find but f e w c r i m e s ; t h e s e h a v e a c q u i r e d as y e t 110 r o o t a m o n g us. I w i s h I w a s able t o t r a c e all m y ideas; if m y ignorance prevents me f r o m describing them p r o p e r l y , I h o p e I shall b e able to delineate a f e w o f the o u t l i n e s , w h i c h are all I p r o p o s e . T h o s e w h o live n e a r the sea, f e e d m o r e on fish t h a n o n flesh, and o f t e n e n c o u n t e r that b o i s t e r o u s e l e m e n t . T h i s r e n d e r s t h e m m o r e bold and e n t e r p r i s i n g ; this l e a d s t h e m t o n e g l e c t the c o n f i n e d o c c u p a t i o n s of the land. T h e y see and c o n v e r s e w i t h a v a r i e t y of p e o p l e ; t h e i r i n t e r c o u r s e w i t h m a n k i n d b e c o m e s e x t e n s i v e . T h e sea inspires t h e m w i t h a l o v e o f t r a f f i c , a desire of t r a n s p o r t i n g p r o d u c e f r o m o n e p l a c e t o a n o t h e r ; and leads t h e m t o a v a r i e t y of r e s o u r c e s w h i c h s u p p l y the p l a c e of l a b o u r . T h o s e w h o inhabit the m i d d l e settlem e n t s , b y f a r the m o s t n u m e r o u s , must b e v e r y d i f f e r e n t ; t h e s i m p l e c u l t i v a t i o n of the e a r t h p u r i fies t h e m , b u t the i n d u l g e n c e s of the g o v e r n m e n t , t h e s o f t r e m o n s t r a n c e s of r e l i g i o n , the r a n k of ind e p e n d e n t f r e e h o l d e r s , m u s t n e c e s s a r i l y inspire t h e m w i t h s e n t i m e n t s , v e r y little k n o w n in E u r o p e a m o n g p e o p l e o f t h e s a m e class. W h a t d o I s a y ? E u r o p e has n o s u c h class of m e n ; the e a r l y k n o w l e d g e t h e y a c q u i r e , the earl}' b a r g a i n s t h e y m a k e , g i v e t h e m a g r e a t d e g r e e of s a g a c i t y . A s f r e e m e n t h e y w i l l be litigious; pride a n d obstin a c y a r e o f t e n the c a u s e of l a w suits; the n a t u r e o f o u r l a w s a n d g o v e r n m e n t s m a y be a n o t h e r . A s c i t i z e n s it is e a s y t o i m a g i n e , that t h e y w i l l c a r e f u l l y r e a d t h e n e w s p a p e r s , e n t e r into e v e r y p o l i t ical d i s q u i s i t i o n , f r e e l y b l a m e o r c e n s u r e g o v e r -

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n o r s and others. A s f a r m e r s t h e y w i l l b e c a r e f u l and anxious to g e t as m u c h as t h e y c a n , b e c a u s e w hat t h e y

ADMINISTRATION that field, the Board of T r a d e acted as adviser to Cabinet and Privy Council and as the coordinating agency which received colonial communications and brought them to the attention of the department immediately a f fected. Among the Board's o w n manifold activities, drawing up the instructions of royal governors and scrutinizing colonial laws presented for royal approval w e r e important methods of imperial control, f o r they afforded a check on the colonial executive and at least a negative influence on colonial legislation. Colonial laws were subject to both legal and economic challenge before the Board of T r a d e . If opposition made good its arguments after hearing, the Board recommended that the P r i v y Council disallow the law. A disallowed law ceased to be valid but, in certain instances, acts done under its authority might be permitted to stand. Though the Board of T r a d e varied in activity and influence and finally became a wholly advisory body in 1766, when a Secretary of State for the Colonies was added to the Cabinet, its recommendations on disallowance were accepted by the Privy Council. Colonial laws were disallowed for three principal reasons: interference with the royal prerogative, hindrance of English economic interest, or conflict with English law. T h e Board's procedure was fair and judicial, but its frequent interference in such local matters as Virginia's quarantine of ships importing convicts or servants contributed to creating the temper which made the Revolution possible. Of the three examples of British administrative activity cited here, the first, the removal of Governor Hardy, illustrates thè control the Board attempted to exercise over the colonial

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T H E FIRST AMERICAN

executive. T h e second, the disallowance of the Virginia insolvency act, shows how it tried to keep colonial legislation in accord with fixed principles of protecting British interests. T h e third, the refusal of a concession in Cape Breton to a group of British capitalists, indicates that the policy of restricting colonial economic life was applied also to the investment of British capital in the plantations overseas. T h e policy of control was thus not limited to colonial enterprise; the Sir Samuel Fludyer ( 1 7 0 5 - 1 7 6 8 ) whose associates were first

REVOLUTION

granted and then denied the privilege of digging coal on Cape Breton was a wealthy London merchant, active in City affairs and a deputy governor of the Bank of England. T h e documents relating to Governor Hardy come from The New Jersey Archives, Vol. I X (Newark, 1885). T h e disallowance of the V i r ginia statute is from Acts of the Privy Council: Colonial Series, Vol. I V (London, 1 9 1 2 ) . T h e refusal of the Cape Breton concession is from the same source, Vols. I V and V .

The Appointment and Re?noval of a Royal for the Governors of Nova Scotia, New Hampshire, New York, New Jersey, Virginia, North Carolina, South Carolina, Georgia. Barbadoes, Leeward Islands, Bermuda, Bahama and Jamaica relative to the Tenure of the Commissions to be by them granted to the Judges and other Officers and Ministers of Justice in the said Colonies. Whereas Laws have been lately passed or attempted to be passed in several of our Colonies in America, enacting that the Judges of the several Courts of Judicature or other Chief Officers of Justice in the said Colonies shall hold their Offices during good behaviour; and whereas the Governors or other Chief Officers of several others of our said Colonies have granted Commissions to the Judges or other Chief Officers of Justice by which they have been impowered to hold their said Offices during good Behaviour contrary to the express directions of the Instructions given to the said Governors or other Chief Officers by us or by our Royal Predecessors; And whereas it does not appear to us that in the present situation and Circumstances of our said Colonies it would be either for the interest and advantage of the said Colonies or of this Our Kingdom of Great Britain that the Judges or other Chief Officers of Justice should hold their Offices during good Behaviour. It is therefore our express will and pleasure that you do not upon any pretence whatever, upon pain of being removed from your Government give your Assent to any Act by which the Tenure of the Commissions to be granted to the Chief Judges or other Justices of the several Courts of Judicature shall be regulated or ascertained in any manner whatsoever. And you are to take particular care in all Commissions to be by you granted to the said Chief

D R A U G H T OF A N INSTRUCTION

Governor

Judges or other Justices of the Courts of Judicature that the said Commissions are granted during Pleasure only, agreeable to what has been the Ancient Practice and Usage in our said Colonies and Plantations. LDecember, 1761] referred to the Attorney and Solicitor General as to whether Governor Hardy's appointment of Judges during good behavior are valid. By His Majesty's Letters Patent bearing date at Westminster the day of 1761, Josiah Hardy Esqr was appointed to be Captain General & Governor in Chief of Nova Caesarea or New Jersey, and was thereby required to do and execute all things in due manner that belong unto his said Command and the trust reposed in him, according to the several Powers and directions granted or appointed by his said Commission, & the Instructions & Authorities therewith given him, or by such further Powers, Instructions and Authorities as should at any time be granted or appointed him under His Majesty's Signet & sign manual, or by order of His Majesty in his Privy Council, and according to such reasonable Laws & Statutes as were then in force, or should be made and agreed upon by him with the Advice and Consent of the Council and the Assembly of the said Province under his Government, in such manner and form as was therein expressed. M E M O R A N D U M OF C A S E

The said Josiah Hardy was further impowered by the said Letters Patent to erect, constitute and establish such and so many Courts of Judicature and publick Justice within the said Province under his Government as he should think fit and necessary for the hearing and determining of all Causes as well Criminal as Civil according to Law and

AMERICAN PROBLEMS equity and for awarding of Execution thereupon, with all reasonable and necessary Powers, Authorities, Fees & Privileges belonging thereto; and also to constitute and appoint Judges and in Cases requisite Commissioners of Over and Terminer, Justices of the Peace, and other necessary Officers and Ministers in the said Province for the bener Administration of Justice, and putting the Laws in Execution. By His Majesty's general Instructions to the said Josiah Hardy Esqr under His Majesty's Signet arid Sign Manual, bearing date the 30th day of June 1761, which said Instructions are referred to in, and were delivered with the above recited Letters Patent, it is directed, that all Commissions to be granted by him the said Josiah Hardy to any Person or Persons to be Judges, Justices of the Peace or other necessary Officers should be granted during Pleasure only. Some time after Mr Hardy's Arrival in his Government, he thought fit to appoint Robert Hunter Morris Esqr to be Chief Justice, and two other Gentlemen to be second & third Judges of the supreme Court during their good Behaviour. Q. Are such Appointments of these Judges to be Judges of the Supreme Court during good Behaviour, contrary to the express Directions of His Majesty's Instructions to the Governor, legal and valid Appointments? Q. If such Appointments are not legal & Valid, by what Authority and in what manner may they be set aside? [March 1762] from the B : of Trade to the King in Council, for removing Mr Hardy from the Government of N e w Jersey, dated March 27th 1762 for his having appointed three Judges of that Province during their good behaviour, in Disobedience to his Majesty's Instructions.

C O P Y OF R E P R E S E N T A T I O N

T o the Kings most Excellent Majesty, May it please your Majesty, Having lately ree·1 a letter from Josiah Hardy Esqr Governor of your Majesty's Province of New Jersey, dated the 20th of Janry last, acquainting Us amongst other things that he had granted a Commission to Robert Hunter Morris Esqr to be Chief Justice and also Commissions to two other Gentlemen to be second and third Judges of the supreme Court of Justice in that Province, during their good behaviour, it is our duty humbly to lay before your Majesty the annex'd extract of so much of Mr Hardy's letter as relates to this matter.

i73

W e have already in Our humble Representation to your Majesty of the 1 ith of November last so fully set forth Our Opinion of the impropriety of the Judges in the Plantations holding their Offices during good behaviour and the operation, w ch in the present state of those Plantations such a Constitution would have to lessen their just and proper dépendance upon your Majesty's Government that it is unnecessary for Us to add any thing further upon that head, and your Majesty's General Instructions to all your Governors and those Instructions in particular which were grounded upon that Representation are so full and so positive that W e cannot offer any thing that may in the least degree extenuate so premeditated and unprecedented an Act of disobedience of your Majesty's Governor of New Jersey, in a matter so essential to your Majesty's interest and Service, not only in that Province but in all other your Majesty's American Dominions. The appointing Mr Morris to be Chief Justice after the Contempt he had shown of your Majesty's authority, by procuring a person who had been appointed to that Office in consequence of His late Majesty's Warrant, to be superseded by a Judgment of that Court, in which he claimed to preside by a bare authority of the Governor, is alone such an example of misconduct, as does, in our opinion, render the Governor unworthy of the Trust your Majesty has conferred upon him. But aggravated as his Guilt is by the mode of the appointment and by the influence which it will necessary have in the neighbouring Provinces of Pennsylvania and N e w York, and particularly in the latter, where the utmost zeal and efforts of the Lieutt Governor has been hardly sufficient to restrain the intemperate zeal and indecent opposition of the Assembly to your Majesty's authority, and Royal Determination upon this point: It becomes, under these Circumstances, our indispensible duty to propose that this Gentleman may be forthwith Recalled from his Government, as a necessary example to deter others in the same situation from like Acts of Disobedience to your Majesty's Orders, and as a measure essentially necessary to support your Majesty's just Rights and authority in the Colonies and to enable Us to do Our duty in the station your Majesty has been graciously pleased to place Us in, and effectually to execute the Trust committed to Us. Which is most humbly submitted. Sandys E d Eliot Soame Jenyns Geo: Rice E d Bacon John Roberts John Yorke Whitehall March 27th 1762

THE

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FIRST A M E R I C A N

strong Representation of the Board of T r a d e to the King in Council, judged it expedient to put an End to y o u r Commission of G o v e r n o r of N e w Jersey; I am to acquaint vou that His Majesty has been pleased to appoint William Franklin E s q r to succeed vou in that office; and that M r Franklin will repair to N e w Jersey, as soon as His Coinmission and Instructions can be expedited. I am &c Egremont

LETTER f r o m the Earl of Egremont to G o v e r n o r H a r d y — i n f o r m i n g him of his removal from the G o v e r n o r s h i p of N e w J e r s e y . Whitehall Sept r 1 1 t h 1761 G o v r Hardy. Sir, His

Majesty

having

in conséquence

The

of

the

Disallowance

REVOLUTION

of a Colonial Statute

[ A VIRGINIA ACT of Dec., 1762—for relief of insolvent debtors, f o r the effectual discovery and more equal distribution of their estates—is disall o w e d , in accordance with the Committee report of 9 J u l y , agreeing with the Board of Trade representation of 6 J u l y referred to them on 7 J u l y , w h i c h set f o r t h ] that as this A c t appeared to the said L o r d s Commissioners to affect the Property of British Creditors, they Communicated a C o p y of it to the Principal Merchants of London trading to Virginia, to the end, that if the Act should in their judgment be prejudicial to their Interests, they might have an opportunity of being heard against it. A n d that the said Lords Commissioners having accordingly been attended bv several of the said Merchants in behalf of themselves and the Merchants of Bristol, and also by the Agent of the C o l o n y , and having heard what each party had to o f f e r in Objection to, and in support of the said A c t , it appeared, that the Operation of this A c t being not confined to Insolvents in Prison, but extended to Debtors in general, it was principally in the N a t u r e and Spirit of a Bankrupt L a w , which although just and equitable in its abstract principle, had always been found in its execution to a f f o r d such opportunities for fraudulent practices that even in this Country, where in most cases the whole number of Creditors are resident on the spot, it might well be doubted whether the f a i r T r a d e r did not receive more detriment than benefit f r o m such a Law; But in a C o l o n y where it is computed that not above a tenth part of its Creditors reside, a Bankrupt L a w had hitherto been deemed inadmissable on account of the Injustice of its Operation with respect to the other Nine tenths of the Creditors residing in G r e a t Britain. A n d that upon this Consideration, His late Majesty was pleased, in consequence of a Representation of the said Lords Commissioners dated the 29th of June 1758, to repeal an A c t passed in the Province of the Massachusets Bay in 1757, f o r providing R e m e d y f o r

Bankrupts and their Creditors. T h a t exclusive of this general Objection to the Principle of the A c t , as a Bankrupt L a w , there were several of its Provisions which the said Merchants complained of as unequal to the Creditors in general, or injurious to themselves in particular, the most material of which were— First. T h a t by this Act the Insolvent Debtor had it in his power to clear himself by a V o l u n t a r y Surrender of all his Effects, which the Creditors were obliged to accept; But that they had no means of compelling him to such Surrender, and therefore that the advantage was not reciprocal. Secondly. T h a t within Ninety days after Surrender, the Creditors resident in Virginia w e r e , by Majority of Number (without regard to value as the English L a w requires) to chuse t w o A s signees from amongst themselves, in which choice, the Creditors residing here could have no share. T h i r d l y . That these Assignees were within three months to sell the Debtors effects by A u c tion, upon twelve months Credit; w h e r e b y the R e c o v e r y of the whole produce of such Sale was rendered precarious: A n d the Security of such part of it as might happen to be received was also endangered, by the want of any obligation on the Assignees to appoint a Treasurer (as is the practice here) or to place it in other safe custody. Fourthly. T h a t the Assignees were to be allowed five per Cent, for their trouble, which was contrary to the practice of this Country and an unreasonable diminution of the Insolvents effects, to the prejudice of his Creditors. Fifthly. T h a t it was indeed Enacted that Creditors in Great Britain might transmit their Claims, duly proved, to their Agents, which being produced at anv time before the Dividend was made should be allowed; But as the A c t also declared that the Debtor might disprove anv Demand and the Assignees might set one debt against another, and allow no more than should appear to be due on the Ballance of such an Account, the M e r -

AMERICAN chants apprehended that thev were thereby exposed to the possibility of great injustice by making them Debtors for consignments, which though made, might never have been received, or at Prices, which the Commodities, though received, might never fctch. Sixthly. That the Assignees might make a Dividend at the end of the twelve months after Sale of the Debtors Estate, but they were obliged (except in the Case of extraordinary circumstances in the recovery and Sale of the Insolvents effects) to make a final Dividend within Eighteen months after their appointment, and from thenceforth the Insolvent was made free and clear, whereby the British Creditor, if at this distance he should not have timely Notice of his Debtors Insolvency, or if his power of Attorney should

PROBLEMS

miscarry, might frequently lose his whole debt. And lastly, that this Act gave to Insolvents an allowance of Poundage on their Dividends without Limitation of any certain sum, which was conccivcd to be highly unreasonable and in improper encouragement to run in Debt, and that though the British Statute of Bankruptcy allowed the Bankrupt a Poundage and at the same Rates yet it restrained the amount of that allowance to the sum of three hundred pounds. That for these Reasons the Principal Merchants of London and Bristol trading to Virginia, and the Merchants of Glasgow and Liverpoole (by Memorials presented to the said Lords Commissioners) had requested that this A c t which took effect the ist of June last, might not be suffered to continue in force.

The Refusal of the Cape Breton July 20, 1763 [REFERENCE to the Committee, and on 19 March by them to the Board of Trade, of the memorial of the H o n . William Howe on behalf of himself and other officers who served in America in the late war and are entitled under the proclamation to grants of land there: ] being desirous to become Adventurers in Opening Coal Mines and Endeavouring to Establish a Colliery on the Island of Cape Breton for the better Supplying the several Colonies and Garrisons, on the Continent with Fuel, T h e y humbly pray, that they may have granted to them (as their Allotment) a Tract of Land on the East shore of the aforesaid Island extending from the Point on the North side of Mire Bay to the South East side of the Entrance into the Labrador and Seven Miles Inland to be computed from the point and entrance abovementioned and supposed to contain about fifty five thousand Acres, which Tract the Memorialists will settle with Inhabitants in the manner directed by his Majestys Royal Proclamation. [ A memorial of Charles, Duke of Richmond, Lennox and Aubigny, f o r a grant in fee of Cape Breton Island to himself and others of the nobility and gentry, is referred to the Board of Trade. On 18 May their report is referred to the Committee.] [Order is given in accordance with the Committee report of 21 May, agreeing with the Board of Trade, who represented] That was there no other Consideration in this matter than whether your Majesty should be graciously pleased to Grant the Island of Cape Breton to the Noble Memorialist as a Mark of your Royal favour and regard, we should not Hesitate to recommend to

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Concession

your Majesty to comply with his Graces request; but it is our Duty in the Station W e are in, to consider the Publick Interest only, and to lay before your Majesty such Plans as will in our j u d g ment most effectively conduce to the promoting and extending the Commerce of your Majestys Kingdoms by encouraging the speedy Settlement of those Valuable Territories and Islands Ceded and Confirmed to your Majesty by the late Treaty of Peace; Your Majesty has been pleased to approve the Opinion, which we humbly offered in our Representations upon the Earl of Egmont's Memorials, praying a Grant of the Island of St. John, to which W e beg leave to refer, and as the great extent of the Grant then desired was one Principal Argument which induced us humbly to advise your Majesty not to Comply with his Lordships Proposal, the same Argument Operates more strongly upon our Judgment in the present Instance, as the Island of Cape Breton is very Considerably larger than that of St. John. W e cannot therefore avoid giving our humble Advice to your Majesty, that the same Principles your Majesty has been pleased to direct to be pursued in the Granting y o u r Majestys Lands in the Island of St. John, should be adopted in Grants to be made of Lands in the Island of Cape Breton. [Reference to the Committee of a Board of Trade representation of 10 July on several proposals for working collieries in Cape Breton Island.] [Order in accordance with the Committee report of 17 July, that the proposal of Sir Samuel Fludyer and his associates should be accepted as the most advantageous f o r his Majesty's service,

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THE

FIRST A M E R I C A N

and that the proposals, the Board of Trade representation, and the schemc of Joseph Guerish f o r the improvement of the coal mines in Nova Scotia, be referred to the T r e a s u r y f o r their opinion as to the manner and terms of the grant. ] [Reference to the Committee of a Treasury report, a Board of T r a d e representation and other papers relating to several proposals for working coalmines in Cape Breton Island.] [Order in accordance with the Committee report of 29 N o v . , agreeing with the Treasury, who represented] that in the late Grants of Lands in America Y o u r Majesty had been advised to make an Express reservation of Mines of Coal which, although of less immediate and intrinsic Value than G o l d , Silver and Copper, may yet, from other incidental Circumstances, and as a Material leading to Extensive manufactures, be consequentially and finally of as great, if not greater N a tional M o m e n t — T h a t it has been the policy of this Century, to give large Bounties, upon the produce of pig and Bar Iron in Order to Divert the Colonies f r o m the manufacture, that from the same Contemplation the Legislature has forbid the Erection of Slitting Mills in America, and that in Consequence of these W i s e provisions, Iron is at present imported f r o m the Colonies in the Material and returned to them in the Manufacture; T h a t it appeared to them that it night seem a Sudden and Direct Contravention of this Excellent Policy, were they to advise Y o u r Majesty to furnish America with the only possible means of Establishing a Manufacture, which Parliament has Exerted so much Authority and taken so many measures to prevent, that it has been alledc;ed to the said L o r d s Commissioners, that the Quality of the Cape Breton Coal is the same as the Coal of Scotland, and therefore unfit f o r the manufacture of Iron b v the Hammer but that thev had no Satisfactory Evidence of this Fact laid before them, and that one of the petitioners, in particular.

being Examined to this essential point, answered with great Candour and Disinterestedness "that he thought more than probable, that Coal fit f o r anv Manufacture, might be found in a V e i n of such Extent as that of Cape Breton is represented to be." That the Argument in the Representation of the Lords Commissioners of T r a d e and plantations, drawn from the high price of Coals in E n g land seems to be a good Reason f o r preventing the Exportation of them to America, but does not touch the other, and, as they think, the higher Considerations which spring from the Nature of Commerce, and the Relation of the Colonies.— T h a t as the prudence of the measure is equivocal, the object of Advantage proposed, but it is v e r y Confined, in as much as the utmost Expectation of Revenue for five years, amounts to no more than twenty five thousand pounds and after that time it is supposed the profits may be doubled.—That having opened the Mines of Coal in Cape Breton, it might be very Difficult afterwards to refuse the same privilege upon equal necessity or Convenience alledged to other provinces, where Coal proper for the Hammer might meet the Bar and everything necessary f o r the Manufacture of Iron be found within the provinces themselves; that f o r these Reasons the said Lords Commissioners of Y o u r Majestys Treasury are humbly of opinion that the opening Coal Mines in America to be worked at Large is in itself at least a Disputeable measure, in point of Expediency, an Innovation in the system hitherto pursued in the Regulation of the Colonics, too Doubtful in the principle, and too Delicate in the Consequences to be adopted and recommended by an office. ¡"The Committee accordingly reported] that it will not be adviseable f o r Your Majesty at present to authorize or Encourage the opening Coal Mines to be W o r k e d in the Island of Cape Breton and that all Petitions f o r that purpose ought to be dismissed.

THE NAVIGATION PROTECTION o f its c a r r y i n g trade was the c o r nerstone of British colonial p o l i c y . In the f o u r decades b e t w e e n the F i r s t and the Fourth N a v igation A c t s , that p o l i c y w a s developed and made definite. T h e first act, 1660, primarily c o n c e r n e d w i t h s h i p p i n g , reflects England's e f f o r t to d r i v e the D u t c h f r o m the c a r r y i n g trade. A l l colonial p r o d u c e w a s to be b r o u g h t

REVOLUTION

ACTS

to E n g l a n d in British ships m a n n e d b v c r e w s at least three quarters of w h i c h w e r e British. Certain enumerated colonial p r o d u c t s — n o t a b l y sugar, t o b a c c o , indigo, g i n g e r , and d y e s t u f f s — w e r e to be carried o n l y to British ports. F o r e i g n goods in f o r e i g n b o t t o m s must enter E n g l a n d directly f r o m their c o u n t r y of origin. T h r e e years later, a similar l a w a n n o u n c e d

A M E R I C A N PROBLEMS its purpose to keep the colonies in dependence and render them "more beneficiai" to England in the employment of seamen, as a market for woolens, and as an entrepôt for British commerce. Careful provision was made for enforcement by the exaction of bonds and the requirement that colonial governors take a "solemn oath" to abide by the law. In 1672, these provisions were further strengthened by the requirement of an export duty to be paid on enumerated commodities unless bonds were given that they would be brought to England. Though the Stuarts lost their throne, their colonial policy was continued under William and Mary. Restrictions were even tightened, f o r Ireland was excluded from free trade with the colonies. While the Navigation Acts and their enforcement did hamper colonial trade, they were generally considered a proper use of Parliament's authority. Even Adam Smith considered navigation laws a necessary exercise of national power, and deemed the British colonial policy justifiable. An English contemporary, Josiah Tucker, disagreed with him. The positions of both these great advocates are presented here. Adam Smith (1723-1790) was born in Scotland and educated at Glasgow and Oxford. He prepared for the Anglican ministry, but relinquished this intention to spend the rest of his life as professor of moral philosophy at Edinburgh and as an independent student and writer. His great book, Inquiry into the Nature and Causes of the Wealth of Nations (Glasgow, 1776) was written over a ten-year period during which he held no teaching position. Smith broke with Mercantilism as a theory and as a public policy. T o this extent, he and Locke are among the very first of our modern men in their understanding of the true role of liberty in society. But in the matter of colonial management, Smith hedged and ended by placing defense above opulence. Polemics aside, his description of the English colonial system is a very fair one.

177

The selection used here is from Book I V , chapters 7 and 8 of the Wealth of Nations. That the Dean of Gloucester Cathedral should have written the Four Tracts . . . on Political and Commercial Subjects (1774) indicates the practical turn which certain Christians' thinking had taken in the age of common sense. In his sermons, Josiah Tucker ( 1712— 1799) proved that commerce and true religion promote the same virtues and so supplement each other to the good of the community. In the tracts, he presents economic doctrines much resembling those of Adam Smith. Tucker denies the bullion theory of wealth, insists that only industry can make a country rich and asserts that no political exertion, not all the fleets and armies of the world, can hold a nation's markets if another nation can supply goods more cheaply. Wars for trade's sake are useless, therefore, and the mercantilist economics fallacious. Only saving, frugality, and moral conduct can make a nation economically flourishing. The first two tracts, which are more general in scope, were meant to be part of a text in political economy designed for the instruction of the Prince of Wales who was to be George III. Tucker gave up the plan when he found that any work presenting a "free, generous and impartial System of national Commerce" would have embarrassing political repercussions. The third and fourth tracts, based on the laissez-faire reasoning of the others, present Tucker's idea of a proper colonial policy. Since freedom to trade where they wish is what the Northern colonies actually want, the metropolis should allow that freedom, grant political independence if that is desired, and then conclude a treaty of commerce with the new nation. The colonists will tire of their bargain, no doubt, but even if they do not, Tucker argues, better free trade with an independent America than an attempt to keep her in subjection by force. An unsuccessful punitive expedition will not help English business; a successful war ending in an attempt to govern the

THE

•7» continental

colonics

FIRST

despotically

AMERICAN

will

serve

o n l y to s u b v e r t E n g l i s h liberties. Peaceful sepa-

lish

REVOLUTION protection

against

oppression

from

the

stronger.

ration, on the o t h e r hand, w i l l save E n g l a n d

T u c k e r ' s third t r a c t w a s w r i t t e n in the same

the cost of colonial g o v e r n m e n t and of b o u n -

y e a r ( 1 7 6 6 ) that F r a n k l i n w a s p r o c l a i m i n g the

ties on colonial

colonies' c o m p l e t e l o y a l t y ; the f o u r t h in 1 7 7 4 ,

produce;

it will not

injure

E n g l i s h trade, f o r e v e n f a c t i o u s A m e r i c a n s are not fools enough to refuse to b u v in the best

b e f o r e the fight at C o n c o r d . T h e selections used here are f r o m the

Third

market; and it m a v ultimately lead to a v o l u n -

Tract and the Fourth Tract and are from the

t a r y reunion as the w e a k e r colonies seek E n g -

original E n g l i s h editions.

The

Wealth BY

ADAM

BOOK I V EVERY EUROPEAN nation has e n d e a v o u r e d m o r e o r less to m o n o p o l i z e to itself the c o m m e r c e of its colonies, and, u p o n that a c c o u n t , h,l5 prohibited the ships of f o r e i g n nations f r o m trading to them, and has p r o h i b i t e d them f r o m importing E u r o pean g o o d s f r o m a n y f o r e i g n nation. But the m a n n e r in w h i c h this m o n o p o l y has been exercised in d i f f e r e n t nations has been v e r y d i f f e r e n t . S o m e nations h a v e g i v e n u p the w h o l e c o m m e r c e of their colonies t o an exclusive c o m p a n y , to w h o m the colonies w e r e obliged to sell the w h o l e of their o w n surplus p r o d u c e . It w a s the interest of the c o m p a n y , t h e r e f o r e , not o n l y to sell the f o r m e r as dear, and to b u y the latter as cheap as possible, but to b u y no more of the latter, even at this l o w p r i c e , than what they could dispose of f o r a v e r y high price in E u r o p e . It w a s their interest, not o n l y to degrade in all cases the value of the surplus produce of the c o l o n y , b u t in m a n y cases to discourage and k e e p d o w n the natural increase of its quantity. O f all the expedients that can w e l l be contrived to stunt the natural g r o w t h of a n e w c o l o n y , that of an exclusive c o m p a n y is u n d o u b t e d l y the most e f fectual. "This, h o w e v e r , has b e e n the p o l i c y of H o l l a n d , t h o u g h their c o m p a n y , in the course of the present c e n t u r y , has g i v e n up in m a n y respects the e x e r t i o n of their exclusive privilege. T h i s too w a s the p o l i c v of D e n m a r k till the reign of the late king. It has o c c a s i o n a l l y been the p o l i c v of F r a n c e , and of late, since 1 7 5 5 , after it had been abandoned b v all o t h e r nations, on account of its a b s u r d i t y , it has b e c o m e the p o l i c v of Portugal w i t h r e g a r d at least to t w o of the principal p r o v inces of Brazil, P e r n a m b u c o and Marannon. O t h e r nations, w i t h o u t establishing an exclusive c o m p a n y , have c o n f i n e d the w h o l e c o m m e r c e of

of

Nations

SMITH their colonies to a particular p o r t of the m o t h e r c o u n t r y , f r o m w h e n c e n o ship w a s a l l o w e d to sail, but either in a fleet and at a p a r t i c u l a r season, o r , if single, in c o n s e q u e n c e of a p a r t i c u l a r l i c e n c e , w h i c h in most cases w a s v e r y w e l l paid f o r . T h i s p o l i c y o p e n e d , i n d e e d , the trade of the c o l o n i e s to all the natives of the m o t h e r c o u n t r y , p r o v i d e d t h e y t r a d e d f r o m the p r o p e r p o r t , at the p r o p e r season, and in the p r o p e r vessels. B u t as all the d i f f e r e n t m e r c h a n t s , w h o joined their s t o c k s in o r d e r to fit out those licensed vessels, w o u l d find it f o r their interest t o act in c o n c e r t , the t r a d e w h i c h w a s carried o n in this m a n n e r w o u l d necessarily be c o n d u c t e d v e r y n e a r l y u p o n the same principles as that of an e x c l u s i v e c o m p a n y . T h e p r o f i t of those m e r c h a n t s w o u l d b e almost e q u a l l v e x o r b i t a n t and o p p r e s s i v e . T h e colonies w o u l d be ill supplied, and w o u l d be o b l i g e d both t o b u y v e r y dear, and to sell v e r y cheap. T h i s , h o w e v e r , till w i t h i n these f e w y e a r s , had a l w a y s b e e n the p o l i c y of Spain, and the price of all E u r o p e a n g o o d s , a c c o r d i n g l y , is said to h a v e been e n o r m o u s in the Spanish W e s t Indies. . . . B u t it is c h i e f l y in o r d e r to p u r c h a s e E u r o p e a n g o o d s , that the colonies p a r t w i t h their o w n p r o d u c e . T h e m o r e , t h e r e f o r e , t h e y p a y f o r the one, the less t h e y really get f o r the other, and the d e a m e s s of the one is the same thing w i t h the cheapness of the other. T h e p o l i c v of P o r t u g a l is in this r e s p e c t the same as the ancient p o l i c v of Spain, w i t h r e g a r d to all its colonies, e x c e p t P e r n a m b u c o and M a r a n n o n , and w i t h r e g a r d to these it has lately a d o p t e d a still w o r s e . O t h e r nations leave the trade of their c o l o n i e s f r e e to all their subjects, w h o m a y c a r r y it o n f r o m all the d i f f e r e n t p o r t s of the m o t h e r c o u n t r y , a n d w h o have occasion f o r no other l i c e n c e t h a n the c o m m o n dispatches of the c u s t o m h o u s e . I n this case the n u m b e r and dispersed situation of the

AMERICAN PROBLEMS different traders renders it impossible for them to enter into any general combination, and their competition is sufficient to hinder them from making very exorbitant profits. Under so liberal a policy the colonies are enabled both to sell their own produce and to buy the goods of Europe at a reasonable price. But since the dissolution of the Plymouth company, when our colonies were but in their infancy, this has always been the policy of England. It has generally too been that of France, and has been uniformly so since the dissolution of what, in England, is commonly called their Mississippi company. The profits of the trade, therefore, which France and England carry on with their colonies, though no doubt somewhat higher than if the competition was free to all other nations, are, however, by no means exorbitant; and the price of European goods accordingly is not extravagantly high in the greater part of the colonies of either of those nations. In the exportation of their own surplus produce too, it is only with regard to certain commodities that the colonies of Great Britain are confined to the market of the mother country. These commodities having been enumerated in the act of navigation and in some other subsequent acts have upon that account been called enumerated commodities,1 The rest are called non-enumerated; and may be exported directly to other countries, provided it is in British or Plantation ships, of which the owners and three-fourths of the mariners are British subjects. Among the non-enumerated commodities are some of the most important productions of America and the West Indies; grain of all sorts, lumber, salt provisions, fish, sugar and rum. Grain is naturally the first and principal object of the culture of all new colonies. By allowing them a very extensive market for it, the law encourages them to extend this culture much beyond the consumption of a thinly inhabited count r y , ind thus to provide beforehand an ample subsistence for a continually increasing population. In a country quite covered with wood, where timber consequently is of little or no value, the experse of clearing the ground is the principal obstacle to improvement. By allowing the colonies a verv extensive market for their lumber, the law endeavours to facilitate improvement by raising the price of a commodity which would otherwise be of little value, and thereby enabling them to 1 The commodities originally enumerated in 12 Car. II. c. 18, »ec. 18, were sugar, tobacco, cotton-wool, indigo, ginigei, fustic, and other dyeing woods.

'79

make some profit of what would otherwise be mere expencc. In a country neither half-peopled nor halfcultivatcd, cattle naturally multiply beyond the consumption of the inhabitants, and are often upon that account of little or no value. But it is necessary, it has already been shewn, that the price of cattle should bear a certain proportion to that of corn before the greater part of the lands of any country can be improved. By allowing to American cattle, in all shapes, dead and alive, a very extensive market, the law endeavours to raise the value of a commodity of which the high price is so very essential to improvement. T h e good effects of this liberty, however, must be somewhat diminished by the 4th of George III. c. 15 which puts hides and skins among the enumerated commodities, and thereby tends to reduce the value of American cattle. T o increase the shipping and naval power of Great Britain, by the extension of the fisheries of our colonies, is an object which the legislature seems to have had almost constantly in view. Those fisheries, upon this account, have had all the encouragement which freedom can give them, and they have flourished accordingly. The N e w England fishery in particular was, before the late disturbances, one of the most important, perhaps, in the world. The whale-fishery which, notwithstanding an extravagant bounty, is in Great Britain carried on to so little purpose, that in the opinion of many people (which I do not, however, pretend to warrant) the whole produce does not much exceed the value of the bounties which are annually paid for it, is in New England carried on without any bounty to a very great extent. Fish is one of the principal articles with which the North Americans trade to Spain, Portugal and the Mediterranean. Sugar was originally an enumerated commodity which could be exported only to Great Britain. But in 1731, upon a representation of the sugarplanters, its exportation was permitted to all parts of the world. The restrictions, however, with which this liberty was granted, joined to the high price of sugar in Great Britain, have rendered it, in a great measure, ineffectual. Great Britain and her colonics still continue to be almost the sole market for all the sugar produced in the British plantations. Their consumption increases so fast, that, though in consequence of the increasing improvement of Jamaica, as well as of the Ceded Islands, the importation of sugar has increased very greatly within these twenty years, the exportation to foreign countries is said to be not much greater than before.

ι8ο

THE FIRST AMERICAN REVOLUTION

Rum is a very important article in the trade which the Americans carry on to the coast of Africa, from which they bring back negroe slaves in return. If the whole surplus produce of America in grain of all sorts, in salt provisions, and in fish, had been put into the enumeration, and thereby forced into the market of Great Britain, it would have interfered too much with the produce of the industry of our own people. It was probably not so much from any regard to the interest of America, as from a jealousy of this interference, that those important commodities have not only been kept out of the enumeration, but that the importation into Great Britain of all grain except rice, and of salt provisions, has, in the ordinary state of the law, been prohibited. T h e non-enumerated commodities could originally be exported to all parts of the world. Lumber and rice, having been once put into the enumeration, when they were afterwards taken out of it, were confined, as to the European market, to the countries that lie south of Cape Finisterre. B y the 6th of George III. c. j2. all non-enumerated commodities were subjected to the like restriction. T h e parts of Europe which lie south of Cape Finisterre, are not manufacturing countries, and we were less jealous of the colony ships carrying home from them any manufactures which could interfere with our own. T h e enumerated commodities are of two sorts: first, such as are either the peculiar produce of America, or as cannot be produced, or at least are not produced, in the mother country. Of this kind are, molasses, coffee, cacao-nuts, tobacco, pimento, ginger, whale fins, raw silk, cotton-wool, beaver, and other peltry of America, indigo, fustic, and other dyeing woods: secondly, such as are not the peculiar produce of America, but which are and may be produced in the mother country, though not in such quantities as to supply the greater part of her demand, which is principally supplied from foreign countries. Of this kind are all naval stores, masts, yards, and bowsprits, tar, pitch, and turpentine, pig and bar iron, copper ore, hides and skins, pot and pearl ashes. The largest importation of commodities of the first kind could not discourage the growth or interfere with the sale of any part of the produce of the mother country. By confining them to the home market, our merchants, it was expected, would not only be enabled to buy them cheaper in the Plantations, and consequently to sell them with a better profit at home, but to establish between the Plantations and foreign countries an advantageous carrying trade, of

which Great Britain was necessarily to be the center or emporium, as the European country into which those commodities were first to be imported. The importation of commodities of the second kind might be so managed, too, it was supposed, as to interfere, not with the sale of those of the same kind which were produced at home, but with that of those which were imported from foreign countries; because, by means of proper duties, they might be rendered always somewhat dearer than the former, and yet a good deal cheaper than the latter. By confining such commodities to the home market, therefore, it was proposed to discourage the produce, not of Great Britain, but of some foreign countries with which the balance of trade was believed to be unfavourable to Great Britain. The prohibition of exporting from the colonies, to any other country but Great Britain, masts, yards, and bowsprits, tar, pitch, and turpentine, naturally tended to lower the price of timber in the colonies, and consequently to increase the expence of clearing their lands, the principal obstacle to their improvement. But about the beginning of the present century, in 1703, the pitch and tar company of Sweden endeavoured to raise the price of their commodities to Great Britain, by prohibiting their exportation, except in their own ships, at their own price, and in such quantities as they thought proper. 2 In order to counteract this notable piece of merchantile policy, and to render herself as much as possible independent, not only of Sweden, but of all the other northern powers, Great Britain gave a bounty upon the importation of naval stores from America and the effect of this bounty was to raise the price of timber in America, much more than the confinement to the home market could lower it; and as both regulations were enacted at the same time, their joint effect was rather to encourage than to discourage the clearing of land in America. Though pig and bar iron too have been put among the enumerated commodities, yet as, when imported from America, they are exempted from considerable duties to which thev are subject when imported from any other country, 3 the one part of the regulation contributes more to encourage the erection of furnaces in America, than the other to discourage it. There is no manufacture which occasions so great a consumption of wood as a furnace, or which can contribute so much to the clearing of a country over-grown with it. The tendency of some of these regulations to 2 Anderson, Commerce, a.d. 1703. s 23 Geo. II., c. 19.

AMERICAN PROBLEMS raise the value of timber in America, and thereby to facilitate the clearing of the land, was neither, perhaps, intended nor understood by the legislature. Though their beneficiai effects, however, have been in this respect accidental, they have not upon that account been less real. T h e most perfect freedom of trade is permitted between the British colonies of America and the W e s t Indies, both in the enumerated and in the non-enumerated commodities. Those colonies are now become so populous and thriving, that each of them finds in some of the others a great and extensive market f o r every part of its produce. A l l of them taken together, they make a great internal market f o r the produce of one another. T h e liberality of England, however, towards the trade of her colonies has been confined chiefly to what concerns the market for their produce, either in its rude state, or in what may be called the very first stage of manufacture. T h e more advanced, or more refined manufactures even of the colony produce, the merchants and manufacturers of Great Britain chuse to reserve to themselves, and have prevailed upon the legislature to prevent their establishment in the colonies, sometimes by high duties, and sometimes b y absolute prohibitions. . . . W h i l e Great Britain encourages in America the manufactures of pig and bar iron, by exempting them f r o m duties to which the like commodities are subject when imported from any other country, she imposes an absolute prohibition upon the erection of steel furnaces and slit-mills in any of her American plantations. 4 She will not suffer her colonists to work on those more refined manufactures even for their own consumption; but insists upon their purchasing of her merchants and manufacturers all goods of this kind which they have occasion for. She prohibits the exportation from one province to another b y water, and even the carriage by land upon horseback or in a cart, of hats, of wools and woollen goods, 5 of the produce of America; a regulation which effectually prevents the establishment of any manufacture of such commodities f o r distant sale, and confines the industry of her colonists in this way to such coarse and household manufactures, as a private family commonly makes f o r its own use, or f o r that of some of its neighbors in the same province. T o prohibit a great people, however, from making all that they can of every part of their own produce, or f r o m employing their stock and in* 2j Geo. II., c. 29. 8 Hats under 5 Geo. II., c. 22; wools under 10 and 11 William III., c. 10.

ι8ι

dustry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of mankind. Unjust, however, as such prohibitions may be, they have not hitherto been very hurtful to the colonies. Land is still so cheap, and, consequently, labour so dear among them, that they can import from the mother country, almost all the more refined or more advanced manufactures cheaper than they could make them f o r themselves. T h o u g h they had not, therefore, been prohibited f r o m establishing such manufactures, yet in their present state of improvement, a regard to their own interest would, probably, have prevented them from doing so. In their present state of improvement, those prohibitions, perhaps, without cramping their industry, or restraining it f r o m any employment to which it would have gone of its o w n accord, are only impertinent badges of slavery imposed upon them, without any sufficient reason, by the groundless jealousy of the merchants and manufacturers of the mother country. In a more advanced state they might be really oppressive and insupportable. Great Britain, too, as she confines to her o w n market some of the most important productions of the colonies, so in compensation she gives to some of them an advantage in that market; sometimes by imposing higher duties upon the like productions when imported f r o m other countries, and sometimes by giving bounties upon their importation from the colonies. In the first w a y she gives an advantage in the home-market to the sugar, tobacco, and iron of her o w n colonies, and in the second to their raw silk, to their hemp and flax, to their indigo, to their naval-stores, and to their building-timber. This second w a y of encouraging the colony produce b y bounties upon importation, is, so far as I have been able to learn, peculiar to Great Britain. T h e first is not. Portugal does not content herself with imposing higher duties upon the importation of tobacco from any other country, but prohibits it under the severest penalties. With regard to the importation of goods f r o m Europe, England has likewise dealt more liberally with her colonies than any other nation. Great Britain allows a part, almost always the half, generally a larger portion, and sometimes the whole of the duty which is paid upon the importation of foreign goods, to be drawn back upon their exportation to any foreign country. N o independent foreign country, it was easy to foresee, would receive them if they came to it loaded with the heavy duties to which almost all foreign goods are subjected on their importation

I 82

THE FIRST AMERICAN REVOLUTION

into Great Britain. Unless, therefore, some part of those duties was drawn back upon exportation, there was an end of the carrying trade; a trade so much favoured by the mercantile system. Our colonies, however, are by no means independent foreign countries; and Great Britain having assumed to herself the exclusive right of supplying them with all goods from Europe, might have forced them (in the same manner as other countries have done their colonies) to receive such goods, loaded with all the same duties which they paid in the mother country. But, on the contrary, till 1763, the same drawbacks were paid upon the exportation of the greater part of foreign goods to our colonies as to any independent foreign country. In 1763, by the 4th of Geo. III. c. 15. this indulgence was a good deal abated, and it was enacted, " T h a t no part of the duty called the old subsidy should be drawn back f o r any goods of the growth, production, or manufacture of Europe or the East Indies, which should be exported f r o m this kingdom to any British colony or plantation in America; wines, white callicoes and muslins excepted." Before this law, many different sorts of foreign goods might have been bought cheaper in the plantations than in the mother country; and some may still. Of the greater part of the regulations concerning the colony trade, the merchants w h o carry it on, it must be observed, have been the principal advisers. W e must not wonder, therefore, if, in the greater part of them, their interest has been more considered than either that of the colonies or that of the mother country. In their exclusive privilege of supplying the colonies with all the goods which thcv wanted from Europe, and of purchasing all such parts of their surplus produce as could not interfere with any of the trades which they themselves carried on at home, the interest of the colonies was sacrificed to the interest of those merchants. In allowing the same drawbacks upon the re-exportation of the greater part of European and East India goods to the colonies, as upon their re-exportation to any independent country, the interest of the mother country was sacrificed to it, even according to the mercantile ideas of that interest. It was for the interest of the merchants to pay as little as possible f o r the foreign goods which they sent to the colonies, and consequently, to get back as much as possible of the duties which they advanced upon their importation into Great Britain. T h e y might thereby be enabled to sell in the colonies, either the same quantity of goods with a greater profit, or a greater quantity with the same profit, and, consequently, to gain something

either in the one w a y or the other. It was, likewise, f o r the interest of the colonies to get all such goods as cheap and in as great abundance as possible. But this might not always be f o r the interest of the mother country. She might frequently suffer both in her revenue, by giving back a great part of the duties which had been paid upon the importation of such goods; and in her manufactures, by being undersold in the colony market, in consequence of the easy terms upon which foreign manufactures could be carried thither by means of those drawbacks. T h e progress of the linen manufacture of Great Britain, it is commonly said, has been a good deal retarded by the drawbacks upon the re-exportation of German linen to the American colonies. . . . T h e exclusive trade of the mother countries tends to diminish, or, at least, to keep down below what they would otherwise rise to, both the enjoyments and industry of all those nations in general, and of the American colonies in particular. It is a dead weight upon the action of one of the great springs which puts into motion a great part of the business of mankind. By rendering the colony produce dearer in all other countries, it lessens its consumption, and thereby cramps the industry of the colonies, and both the enjoyments and the industry of all other countries, which both enjoy less when they pay more f o r what they enjoy, and produce less when they get less for what they produce. B y rendering the produce of all other countries dearer in the colonies, it cramps, in the same manner, the industry of all other countries, and both the enjoyments and the industry of the colonies. It is a clog which, for the supposed benefit of some particular countries, embarrasses the pleasures, and encumbers the industry of all other countries; but of the colonies more than of any other. It not only excludes, as much as possible, all other countries from one particular market; but it confines, as much as possible, the colonies to one particular market: and the difference is very great between being excluded from one particular market, when all others are open, and being confined to one particular market, when all others are shut up. The surplus produce of the colonies, however, is the original source of all that increase of enjoyments and industry which Europe derives from the discovery and colonization of America; and the exclusive trade of the mother countries tends to render this source much less abundant than it otherwise would be. . . . T o found a great empire f o r the sole purpose of raising up a people of customers, may at first appear a project fit only f o r a nation of shop-

AMERICAN PROBLEMS keepers. It is, however, a project altogether unfit for a nation of shopkeepers; but extremely fit for a nation whose government is influenced b y shopkeepers. Such statesmen, and such statesmen only, are capable of f a n c y i n g that they will find some advantage in employing the blood and treasure of their fellow-citizens to f o u n d and maintain such an empire. Say to a shopkeeper, B u y me a good estate, and I shall always b u y m y clothes at y o u r shop, even though I should pay somewhat dearer than w h a t I can have them for at other shops; and y o u will not find him v e r y f o r w a r d to embrace y o u r proposal. But should any other person b u y y o u such an estate, the shopkeeper would be much obliged to y o u r benefactor if he would enjoin y o u to b u y all y o u r clothes at his shop. England purchased f o r some of her subjects, w h o found themselves uneasy at home, a great estate in a distant country. T h e price, indeed, was v e r y small, and instead of thirty years purchase, the ordinary price of land in the present times, it amounted to little more than the expence of the different equipments w h i c h made the first discovery, reconnoitred the coast, and took a fictitious possession of the country. T h e land was good and of great extent, and the cultivators having plenty of g o o d ground to w o r k upon, and being f o r some time at liberty to sell their produce where they pleased, became in the course of little more than thirty or f o r t y years (between 1620 and 1660) so numerous and thriving a people, that the shopkeepers and other traders of England wished to secure to themselves the monopoly of their custom. W i t h o u t pretending, therefore, that they had paid any part, either of the original purchase-money, or of the subsequent expence of improvement, they petitioned the parliament that the cultivators of A m e r i c a might f o r the future be confined to their shop; first, f o r b u y i n g all the goods w h i c h they wanted f r o m Europe; and, secondly, for selling all such parts of their o w n produce as those traders might find it convenient to b u y . F o r they did not find it convenient to buy every part of it. Some parts of it imported into England might have interfered w i t h some of the trades w h i c h they themselves carried on at home. T h o s e particular parts of it, therefore, they were willing that the colonists should sell w h e r e they could; the farther off the better; and upon that account proposed that their market should be confined to the countries south of Cape Finisterre. A clause in the famous act of navigation established this truly shopkeeper proposal into a law. T h e maintainance of this monopoly has hitherto been the principal, or more properly perhaps the

183

sole end and purpose of the dominion w h i c h G r e a t Britain assumes over her colonies. In the exclusive trade, it is supposed, consists the great advantage of provinces, w h i c h have never y e t afforded either revenue or military f o r c e for the support of the civil government, or the defence of the mother country. T h e m o n o p o l y is the principal badge of their dependency, and it is the sole fruit w h i c h has hitherto been gathered f r o m that dependency. W h a t e v e r expence G r e a t Britain has hitherto laid out in maintaining this dependency, has really been laid out in order to support this m o n o p o l y . T h e expence of the ordinary peace establishment of the colonies amounted, before the commencement of the present disturbances, to the pay of t w e n t y regiments of f o o t ; to the expence of the artillery, stores, and extraordinary provisions w i t h w h i c h it was necessary to supply them; and to the expence of a v e r y considerable naval f o r c e w h i c h was constantly kept up, in order to guard, f r o m the smuggling vessels of other nations, the immense coast of N o r t h A m e r ica, and that of our W e s t Indian islands. T h e w h o l e expence of this peace establishment was a charge upon the revenue of G r e a t Britain, and was, at the same time, the smallest part of w h a t the dominion of the colonies has cost the mother country. If w e w o u l d k n o w the amount of the whole, w e must add to the annual expence of this peace establishment the interest of the sums w h i c h , in consequence of her considering her colonies as provinces subject to her dominion. G r e a t Britain has upon different occasions laid out upon their defence. W e must add to it, in particular, the w h o l e expence of the late war, and a great part of that of the w a r w h i c h preceded it. T h e late w a r was altogether a colony quarrel, and the w h o l e expence of it, in w h a t e v e r part of the w o r l d it m a y have been laid out, w h e t h e r in G e r m a n y or the East Indies, ought justly to be stated to the account of the colonies. It amounted to more than ninety millions sterling, including not o n l y the n e w debt w h i c h w a s contracted, but the t w o shillings in the pound additional land tax, and the sums w h i c h w e r e e v e r y year b o r r o w e d f r o m the sinking fund. T h e Spanish w a r w h i c h began in 1739, was principally a c o l o n y quarrel. Its principal o b j e c t was to prevent the search of the c o l o n y ships w h i c h carried on a contraband trade with the Spanish main. T h i s w h o l e expence is, in reality, a bounty w h i c h was given in order t o support a m o n o p o l y . T h e pretended purpose of it was to encourage the manufactures, and t o increase the c o m m e r c e of G r e a t Britain. But its real effect has been to raise the rate of mercantile profit, and t o enable our merchants to turn into a

184

T H E FIRST AMERICAN REVOLUTION

branch of trade, of which the returns are more slow and distant than those of the greater part of other trades, a greater proportion of their capital than they otherwise would have done; two events which if a bounty could have prevented, it might perhaps have been very well worth while to give such a bounty. Under the present system of management, therefore. Great Britain derives nothing but loss from the dominion which she assumes over her colonies. T o propose that Great Britain should voluntarily give up all authority over her colonies, and leave them to elect their own magistrates, to enact their own laws, and to make peace and war as they might think proper, would be to propose such a measure as never was and never will be adopted, by any nation in the world. No nation ever voluntarily gave up the dominion of any province, how troublesome soever it might be to govern it, and how small soever the revenue which it afforded might be in proportion to the expence which it occasioned. Such sacrifices, though they might frequently be agreeable to the interest, arc always mortifying to the pride of every nation, and what is perhaps of still greater consequence, they are always contrary to the private interest of the governing part of it, who would thereby be deprived of the disposal of many places of trust and profit, of many opportunities of acquiring wealth

and distinction, which the possession of the most turbulent, and, to the great body of the people, the jnost unprofitable province seldom fails to afford. The most visionary enthusiast would scarce be capable of proposing such a measure, with any serious hopes at least of its ever being adopted. If it was adopted, however, Great Britain would not only be immediately freed from the whole annual expence of the peace establishment of the colonies, but might settle with them such a treaty of commerce as would effectually secure to her a free trade, more advantageous to the great body of the people, though less so to the merchants, than the monopoly which she at present enjoys. By thus parting good friends, the natural affection of the colonies to the mother country, which, perhaps, our late dissensions have well nigh extinguished, would quickly revive. It might dispose them not only to respect, for whole centuries together, that treaty of commerce which they had concluded with us at parting, but to favour us in war as well as in trade, and, instead of turbulent and factious subjects, to become our most faithful, affectionate, and generous allies; and the same sort of parental affection on the one side, and filial respect on the other, might revive between Great Britain and her colonies, which used to subsist between those of ancient Greece and the mother city from which they descended.

Tract Ill BY

JOSIAH TUCKER

. . . UPON the whole therefore, what is the Cause of such an amazing Outcry as you raise at present? —Not the Stamp Duty itself; all the World are agreed on that Head; and none can be so ignorant, or so stupid, as not to see, that this is a mere Sham and Pretence. W h a t then are the real Grievances, seeing that the Things which you alledge are only the pretended ones? W h y , some of you are exasperated against the Mother Country, on account of the Revival of certain Restrictions laid upon their Trade:—I say, a 1 Revival; for the same

Restrictions have been the standing Rules of Government from the Beginning; though not enforced at all Times with equal Strictness. During the late War, you Americans could not import the Manufactures of other Nations (which it is your constant Aim to do, and the Mother Country always to prevent) so conveniently as you can in Times of Peace; and therefore, there was no Need of watching you so narrowly, as far as that Branch of Trade was concerned. But immediately upon the Peace, the various Manufactures of Europe,

1 Ever since the Discovery of America, it has been the System of every European Power, which had Colonies in that Part of the World, to confine (as far as Laws can confine) the Trade of the Colonies to the Mother Country, and to exclude all others, under the Penalty of Confiscation, ¿re. from partaking in it. Thus, the Trade of the Spanish Colonies is confined by Law to Old Spain,—the Trade of the Brazils to Portugal,— the Trade of Martinico and the other French Colonies to Old France,—and the Trade of Curacoa and Suri-

nam to Holland. But in one Instance the Hollanders make an Exception (perhaps a wise one) viz. in the Cafe of Eustatia, which is open to all the World. Now, that the English thought themselves entitled to the same Right over their Colonies, which other Nations claim over theirs, and that they exercised the same Right bv making what Regulations they pleased, may be seen by the following Acts of Parliament, viz. 12 of Car. II. Chap. 18.—15 of Car. II. Ch. 7. —22 and 23 of C. II. Ch. 26.—25 of C. II. Ch. 7.—7

AMERICAN PROBLEMS particularly those of France, which could not find Vent before, were spread, as it were, over all voLir Colonies, to the prodigious Detriment of your Mother Country; and therefore our late Set of Ministers acted certainly right, in putting in Force the Laws of their Country, in order to check this growing Evil. If in so doing, they committed any Error; or, if the Persons to whom the Execution of these Laws were intrusted, exceeded their Instructions; there is no Doubt to be made, but that all this will be rectified by the present Administration. And having done that, they will have done all that in Reason you can expect from them. But alas! the Expectations of an American carry him much further: For he will ever complain and smuggle, and smuggle and complain, 'till all Restraints arc removed, and 'till he can both buy and sell, whenever, and wheresoever he pleases. Any thing short of this, is still a Grievance, a Badge of Slavery, an Usurpation on the natural Rights and Liberties of a free People, and I know not how many bad Things besides. But, my good Friend, be assured, that these are Restraints, which neither the present, nor any future Ministry can exempt you from. They are the standing Laws of the Kingdom; and God forbid, that we should allow that dispensing Power to our Ministers, which we so justly deny to our Kings. In short, while you are a Colony, you must be subordinate to the Mother Country. These are the Terms and Conditions, on which you were permitted to make your first Settlements: They are the Terms and Conditions on which you alone can be entitled to the Assistance and Protection of Great-Britain;—they are also the fundamental Laws of the Realm;—and I will add further, that if we are obliged to pay many Bounties for the Importation of your Goods, and are excluded from purchasing such Goods, in other Countries (where we might purchase them on much cheaper Terms) in order to promote your Interest;—bv Parity of Reason you ought to be subject to the like Exclusions, in order to proand 8 of Will. III. Ch. 22.—10 and 11 of W . III. Ch. 21. — j and 4 of Ann. Ch. 5 and 10.—8 of Ann. Ch. 13.— i l of Ann. Ch. 9.—1 of G . I. Ch. 26.—3 of G. I. Ch. 21. —8 of G . I. Ch. 15 and 18.—11 of G. I. Ch. 29.—12 of G . I. Ch. 5 . - 2 of G . II. Ch. 28 and 3 5 . - 3 of G. II. Ch. 28.—4 of G . II. Ch. 15.—5 of G. II. Ch. 7 and 9. —6 of G . II. Ch. 13.—8 of G . II. Ch. 18.—11 of G . II. Ch. 29.—12 of G . II. Ch. 30.—13 of G. II. Ch. 4 and 7.— i j and 16 of G . II. Ch. 23.—with many others of a later Date. I might also mention the Laws made in the Reign of his present Majesty; but as these Laws are now the Point Controversy, I forbear.

185

mote ours. This then being the Case, do not expect, from the present Ministry, that which is impossible for any Set of Ministers to grant. All that they can do, is to connive a while at your unlawful Proceedings. But this can be but of short Duration: For as soon as ever fresh Remonstrances are made by the British Manufacturers, and British Merchants, the Ministry must renew the Orders of their Predecessors; they must enforce the Laws; they must require Searches, and Confiscations to be made; and then the present Ministers will draw upon themselves, for doing their Duty, just the same Execrations, which you now bestow upon the last. So much as to your first Grievance; and as to your second, it is, beyond Doubt, of a Nature still worse. For many among you are sorely concerned, That they cannot pay their British Debts with an American Sponge. This is an intolerable Grievance; and they long for the Day when they shall be freed from this galling Chain. Our Merchants in London, Bristol, Liverpool, Glasgow,

Cost f o r Cash

17 79V4

For Credit lb. of Flour at 4 cts Gallon of Vinegar lb. Brown Sugar lb. of Coffee

$7 84 25 1 02 jo

ι 6 3 12 10 jo 6 ι 20 12 2

lb. Black T e a lb. Candles Bushels of Potatoes lb. of Ham lb. of Pork lb. of Indian Meal Boxes of Matches Broom lb. of Butter lb. of Soap Gallons of Molasses

62% 75 2 6iY¿ 1 jo 73 1 00 12% 2j 417 87% 75

Cost on Credit Cost for Cash In favor of Cash

2301 17 79% j 21%

The above is a moderate estimate of the difference between a running account, and having the range of the market with ready money. If the practice of having things charged is also adopted with regard to fresh meats, fruits and vegetables, in city markets, the difference will be found to be much greater. Three cents a day, amount to eleven dollars and forty cents a year. This sum would supply a small family with fuel through the winter. Six and a quarter cents a day, amount to twenty-two dollars eighty-one cents in a year. This sum would furnish for winter, two tons of coal, one barrel of flour, one hundred pounds of Indian meal, and one hundred pounds of pork. Is there a mechanic or laborer, who finds it difficult to provide the necessaries of life f o r his family, and who spends twelve and a half cents a day for strong drink? let him remember that this small sum will in one year amount to forty-five dollars sixty-two cents, and will purchase, when the markets are cheapest, the following indispensable articles, viz., 3 tons of coal, ι load of wood, 2 barrels of 200 lbs. of Indian meal, 200 lbs. of pork 8 bushels of potatoes,

flour,

Jij.oo 1.62 11.00 3.00 11.00 4.00 $45.62

Into a house thus supplied, hunger and cold could not enter. And if to these articles is added what before he has felt able to purchase, abundance and comfort would be the inmates of his dwelling. Should a mechanic or laborer read this, w h o is forty years of age, and who has expended twelve and a half cents a day, for strong drink, and is now feeling the bitterness of poverty,—by saving this sum, he might, since he was twenty-one years

AMERICAN of age, have accumulated about one thousand dollars,—if he is fifty years of age, one thousand five hundred dollars,—sixty years of age, two thousand dollars;—and twenty-five cents a day, would produce twice the above amounts. And permit me, reader, in conclusion to say, that if to economy, frugality, and temperance, you add humble faith in Christ, and obedience to the Gospel, then, indeed, you may not only be comfortable, but useful and happy. RELIGION, after all,

PROBLEMS

THE SOCIOLOGY AND ECONOMICS OF A s CALHOUN presented the political argument f o r the South's "peculiar institution," so G e o r g e Fitzhugh argued its case on the level of social theory. B o r n and reared a Virginia planter, G e o r g e Fitzhugh ( i 806-1881) found life good in his o w n community. While the w o r l d outside was shaken b y social discontent and disturbed b y innovations in literature and religion, Virginians continued in the ways of peace and piety. T h e y appointed no commissions to r e f o r m poor laws, investigate the condition of labor, or consider erecting better prisons; there w e r e no murders in Fitzhugh's c o u n t r y and no thieves or beggars. Such a happy condition was the product of Virginia's social organization—characterized by the existence of slavery. T h u s Fitzhugh in his Sociology for the South (Richmond, 1854). Slave r y was good then, a positive good, since it freed the South f r o m the problems that were vexing the rest of the world. F o r all the keenness of its argument, Sociology for the South attracted comparatively little interest at home. T h r e e years later, Fitzhugh proceeded to an even more vigorous defense of slavery, in his Cannibals All! (Richmond, 1 8 5 7 ) , which carried the argument into the home of its enemies. He confronted liberals with the criticisms of the Utopians, Northern and British manufacturers with the reports of British poor law commissions, and Abolitionists with the sufferings of wage laborers. W h a t the world needs, Fitzhugh argues, is to abandon false philosophy and return to the true science of politics as expounded by Aristotle.

54'

is the principal thing. It has the promise of the life that now is, and of that which is to come. Without it, whatever else you possess in this life, you will go portionless into eternity. But with it, whatever else is denied you here, you will have the favor of God, an approving conscience, and a sure hope of heaven. Seek then, with the deepest earnestness and seriousness, the things which belong to your everlasting peace. So s lull it be well with you here and hereafter.

SLAVERY

Give up the compact theory and the notion of natural rights; admit that government is based on force; accept the facts of nature. Some are strong, others are weak; it is right that those who need protection—women, idiots, laborers, and Negroes—should obey their protectors. Man was born a social creature, he never existed in the "state of nature" postulated b y the natural rights theorists. Free society is as great a failure as the philosophy on which it is built, Fitzhugh continues. T h e Abolitionists themselves recognize that fact, for they all support women's rights, heretical interpretations of the Bible, and the abandonment of government; their chief advocate, Horace Greeley's Tribune, is the organ of "all the isms." While Northern newspapers expound such doctrine, the Southern press prints sense. " T h e South is governed b y the need to keep its negroes in order, which preserves a healthy, conservative public opinion." N o r t h e r n conservatives should recognize that, he declares; they should combine with like-minded Southerners before the Abolitionists let loose a torrent of Jacobinism. Southerners, on the other hand, should strengthen their o w n states, improve the education of their poorer whites, develop a more varied economic life, reestablish small entails to prevent the development of a Southern pauperism, and then stand firm with the Democratic party against the treason of the North. Thus a frank defense of slavery. Other voices were also being raised in the debate.

54»

T H E IMPENDING CONFLICT

T h e North Carolinian, Hinton R. Helper, criticized slavery from the point of view of the non-slaveowning yeoman white farmers. These two selections present aspects of the social and economic analysis of the South's "peculiar institution" being made just before the Civil War. T h e selection from Fitzhugh here reprinted is from Cannibals All; or, Slaves without Masters (Richmond, 1857). For reading Helper's The Impending Crisis of the South men were lynched and at least one Southern state made possession or distribution of the book a felony. An examination of the work helps one understand this oblique tribute to the power of the printed word. For Hinton Rowan Helper (1829-1909) did his best to destroy the idea of a South solidly united behind its slave-holding interest. H e l p e r himself was born in the upcountry of North Carolina and came from a family of farmers. A f t e r a brief period at a country academy, and a few years spent unsuccessfully as a clerk ata crossroads store, he went to California, where he was no luckier. He returned to North Carolina, then, and wrote the Impending Crisis, which Northern publishers refused to print because they considered it too "incendiary." Helper brought the book out at his own cost in 1854, but though it had an enormous circulation it brought him less money than reputation. Northerners sprang to refute its statistics; Southerners answered Helper's argument by proving him a thief; and the non-slaveholding whites for whom he wrote were often without the ability to read its violent pages. And that was another of the ills they owed to slavery. T h e North and the South began on an equal footing, Helper asserts; if either had an advantage, that lay with the South in 1789. Yet the South now lives and dies in economic bondage to the North. The slave system had produced that decline, Helper declares. Slavery had made the South waste its timber and destroy its soil; it was profiting England and the North, not the South itself, where capital earned scarcely one per cent. Though an insignificant fraction of the population, the slave-

holders have constituted themselves "the sole arbiters and legislators for the entire South." T h e y have driven the non-slaveholders from the best land and denied them the benefit of industry and common schools, since it is "the oligarchy's" policy to "keep the masses, the non-slaveholding whites and negroes forever . . . in loathsome dungeons of illiteracy." That is almost the only word of sympathy for the slave which is to be found in the Impending Crisis. Helper is concerned with the white man now crushed by the slave system. "Smallpox is a nuisance," Helper shouts, "strychnine is a nuisance; mad dogs are a nuisance; slavery is a nuisance; slave-holders are a nuisance and so are slave-breeders; it is our business, nay, it is our imperative duty to abate nuisances; we propose therefore . . . to exterminate this catalogue from beginning to end." Slave-holders are worse than thieves and more criminal than murderers. Their white victims should rise, unite and exclude them from political power. Then, slaves should be taxed progressively, so that the slaveowners who have reduced the value of Southern land by $21 an acre may bear the cost of shipping the freed Negroes back to Liberia. For the present, though, Helper declares himself willing to accept the program of the Wheeling, Va., Gazette: repeal the Fugitive Slave L a w and the Kansas-Nebraska Act, abolish slavery in the Dictrict of Columbia, and acquire no more slave territory. The audience Helper most wanted to reach never did hear him. The Republican party he had helped (for his book was used as a campaign document in i860) rewarded him with a South American consulate that led Helper to the promotion of an unsuccessful scheme for a railroad to unite the Three Americas. He returned to the United States and to obscurity and died a suicide. The Impending Crisis is particularly significant for revealing the plight of the poor white farmers of the South who were also the victims of the slave institution. The selection here reprinted is from the New York edition of i860.

AMERICAN PROBLEMS

543

Cannibals All! B Y CHAPTER

I:

THE

UNIVERSAL

GEORGE

TRADE

WE ARE, all, North and South, engaged in the White Slave Trade, and he who succeeds best, is esteemed most respectable. It is far more cruel than the Black Slave Trade, because it exacts more of its slaves, and neither protects nor governs them. W e boast, that it exacts more, when we say, "that the profits made from employing free labor are greater than those from slave labor." Thé profits, made from free labor, are the amount of the products of such labor, which the employer, by means of the command which capital or skill gives him, takes away, exacts or "exploitâtes" from the free laborer. The profits of slave labor are that portion of the products of such labor which the power of the master enables him to appropriate. These profits are less, because the master allows the slave to retain a larger share of the results of his own labor, than do the employers of free labor. But we not only boast that the White Slave Trade is more exacting and fraudulent (in fact, though not in intention,) than Black Slavery; but we also boast, that it is more cruel, in leaving the laborer to take care of himself and family out of the pittance which skill or capital have allowed him to retain. When the day's labor is ended, he is free, but is overburdened with the cares of family and household, which make his freedom an empty and delusive mockery. But his employer is really free, and may enjoy the profits made by others' labor, without a care, or a trouble, as to their well-being. The negro slave is free, too, when the labors of the day are over, and free in mind as well as body; for the master provides food, raiment, house, fuel, and everything else necessary to the physical well-being of himself and family. The master's labors commence just when the slave's end. No wonder men should prefer white slavery to capital, to negro slavery, since it is more profitable, and is free from all the cares and labors of black slave-holding. Now, reader, if you wish to know yourself—to "descant on your own deformity"—read on. But if you would cherish self-conceit, self-esteem, or self-appreciation, throw down our book; for we will dispel illusions which have promoted your happiness, and shew you that what you have considered and practiced as virtue, is little better than moral Cannibalism. But you will find yourself in numerous and respectable company; for all good and respectable people are "Cannibals all," who

FITZHUGH

do not labor, or who are successfully trying to live without labor, on the unrequited labor of other people:—Whilst low, bad, and disreputable people, are those who labor to support themselves, and to support said respectable people besides. Throwing the negro slaves out of the account, and society is divided in Christendom into four classes: The rich, or independent respectable people, who live well and labor not at afi; the professional and skillful respectable people, who do a little light work, for enormous wages; the poor hard-working people, who support every body, and starve themselves; and the poor thieves, swindlers and sturdy beggars, who live like gentlemen, without labor, on the labor of other people. The gentlemen exploitate, which being done on a large scale, and requiring a great many victims, is highly respectable—whilst the rogues and beggars take so little from others, that they fare lime better than those who labor. But, reader, we do not wish to fire into the flock. "Thou art the man!" You are a Cannibal! and if a successful one, pride yourself on the number of your victims, quite as much as any Feejee chieftain, who breakfasts, dines and sups on numan flesh.—And your conscience smites you, if you have failed to succeed, quite as much as his, when he returns from an unsuccessful foray. Probably, you are a lawyer, or a merchant, or a doctor, who have made by your business fifty thousand dollars, and retired to live on your capital. But, mark! not to spend your capital. Tnat would be vulgar, disreputable, criminal. That would be, to live by your own labor; for your capital is your amassed labor. That would be, to do as common working men do; for they take the pittance which their employers leave them, to live on. They live by labor; for they exchange the results of their own labor for the products of other people's labor. It is, no doubt, an honest, vulgar way of living; but not at all a respectable way. The respectable way of living is, to make other people work for you, and to pay them nothing for so doing—and to have no concern about them after their work is done. Hence, white slaveholding is much more respectable than negro slavery—for the master works nearly as hard for the negro, as he for the master. But you, my virtuous, respectable reader, exact three thousand dollars per annum from white labor, (for your income is the product of white labor,) and make not one cent of return in any form. You retain

544

THE IMPENDING CONFLICT

your capital, and never labor, and yet live in luxury on the labor of others. Capital commands labor, as the master does the slave. Neither pays for labor; but the master permits the slave to retain a larger allowance from the proceeds of his own labor, and hence "free labor is cheaper than slave labor." You, with the command over labor which your capital gives you, are a slave owner —a master, without the obligations of a master. T h e y who work for you, who create your income, are slaves, without the rights of slaves. Slaves without a master! Whilst you were engaged in amassing your capital, in seeking to become independent, you were in the White Slave Trade. T o become independent, is to be able to make other people support you, without being obliged to labor for them. N o w , what man in society is not seeking to attain this Situation? H e who attains it, is a slave owner, in the worst sense. H e who is in pursuit of it, is engaged in the slave trade. You, reader, belong to the one or other class. The men without property, in free society, are theoretically in a worse condition than slaves. Practically, their condition corresponds with this theory, as history and statistics every where demonstrate. The capitalists, in free society, live in ten times the luxury and show that Southern masters do, because the slaves to capital work harder and cost less, than negro slaves. T h e negro slaves of the South are the happiest, and, in some sense, the freest people in the world. T h e children and the aged and infirm work not at all, and yet have all the comforts and necessaries of life provided for them. T h e y enjoy liberty, because they are oppressed neither by care nor labor. T h e women do little hard work, and are protected from the despotism of their husbands by their masters. T h e negro men and stout boys work, on the average, in good weather, not more than nine hours a day. T h e balance of their time is spent in perfect abandon. Besides, they have their Sabbaths and holidays. White men, with so much of license and liberty, would die of ennui; but negroes luxuriate in corporeal and mental repose. With their faces upturned to the sun, they can sleep at any hour; and quiet sleep is the greatest of human enjoyments. "Blessed be the man who invented sleep." T i s happiness in itself—and results from contentment with the present, and confident assurance of the future. W e do not know whether free laborers ever sleep. They are fools to do so; for, whilst they sleep, the wily and watchful capitalist is devising means to ensnare and exploitate them. The free laborer must work or starve. He is more of a slave than the negro, because he works longer and harder for less allowance than the slave, and

has no holiday, because the cares of life with him begin when its labors end. H e has no liberty, and not a single right. W e know, 'tis often said, air and water, are common property, which all have equal right to participate and enjoy; but this is utterly false. T n e appropriation of the lands carries with it the appropriation of all on or above the lands, usque ad caelum, out ad inferos. A man cannot breathe the air, without a place to breathe it from, and all places are appropriated. All water is private property "to the middle of the stream," except the ocean, and that is not fit to drink. Free laborers have not a thousandth part of the rights and liberties of negro slaves. Indeed, they have not a single right or a single liberty, unless it be the right or liberty to die. But the reader may think that he and other capitalists and employers are freer than negro slaves. Your capital would soon vanish, if you dared indulge in the liberty and abandon of negroes. You hold your wealth and position by the tenure of constant watchfulness, care and circumspection. You never labor; but you are never free. Where a few own the soil, they have unlimited power over the balance of society, until domestic slavery comes in, to compel them to permit this balance of society to draw a sufficient and comfortable living from "terra mater." Free society, asserts the right of a few to the earth—slavery, maintains that it belongs, in different degrees, to all. But, reader, well may you follow the slave trade. It is the only trade worth following, and slaves the only property worth owning. All other is worthless, a mere caput mortwum, except in so far as it vests the owner with the power to command the labors of others—to enslave them. Give you a palace, ten thousand acres of land, sumptuous clothes, equipage and every other luxury; and with your artificial wants, you are poorer than Robinson Crusoe, or the lowest working man, if you have no slaves to capital, or domestic slaves. Your capital will not bring you an income of a cent, nor supply one of your wants, without labor. Labor is indispensable to give value to property, and if you owned every thing else, and did not own labor, you would be poor. But fifty thousand dollars means, and is, fifty thousand dollars worth of slaves. You can command, without touching on that capital, three thousand dollars' worth of labor per annum. You could do no more were you to buy slaves with it, and then you would be cumbered with the cares of governing and providing for them. You are a slaveholder now, to the amount of fifty thousand dollars, with all the ad-

AMERICAN vantages, and none of the cares and responsibilities of a master. "Property in man" is what all are struggling to obtain. W h y should they not be obliged to take care of man, their property, as they do of their horses and their hounds, their cattle and their sheep. N o w , under the delusive name of liberty, you work him, "from morn to dewy eve"—from infancy to old age—then turn him out to starve. You treat your horses and hounds better. Capital is a cruel master. T h e free slave trade, the commonest, yet the cruellest of trades. C H A P T E R I I : L A B O R , S K I L L AND CAPITAL

Nothing written on the subject of slavery from the time of Aristotle, is worth reading, until the days of the modern Socialists. Nobody, treating of it, thought it worth while to enquire from history and statistics, whether the physical and moral condition of emancipated serfs or slaves had been improved or rendered worse by emancipation. None would condescend to compare the evils of domestic slavery with the evils of liberty without property. It entered no one's head to conceive a doubt as to the actual freedom of the emancipated. T h e relations of capital and labor, of the propertyholders to the non-property-holders, were things about which no one had thought or written. It never occurred to either the enemies or the apologists for slavery, that if no one would employ the free laborer, his condition was infinitely worse than that of actual slavery—nor did it occur to them, that if his wages were less than the allowance of the slave, he was less free after emancipation than before. St. Simon, Fourier, Owen, Fanny Wright, and a few others, who discovered and proclaimed that property was not only a bad master, but an intolerable one, were treated as wicked visionaries. After the French and other revolutions in Western Europe in 1830, all men suddenly discovered that the social relations of men were false, and that social, not political, revolutions were needed. Since that period, almost the whole literature of free society is but a voice proclaiming its absolute and total failure. Hence the works of the socialists contain the true defence of slavery. Most of the active intellect of Christendom has for the last twenty years been engaged in analyzing, detecting and exposing the existing relations of labor, skill and capital, and in vain efforts to rectify those relations. The philosophers of Europe, who have been thus engaged, have excelled all the normal philosophers that preceded them, in the former part of their pursuit, but suggested

PROBLEMS

545

nothing but puerile absurdities, in the latter. Their destructive philosophy is profound, demonstrative, and unanswerable—their constructive theories, wild, visionary and chimerical on paper, and failures in practice. Each one of them proves clearly enough, that the present edifice of European society is out of all rule and proportion, and must soon tumble to pieces—but no two agree as to how it is to be re-built. " W e must (say they all) have a new world, if we are to have any world at all!" and each has a little model Utopia or Phalanstery, for this new and better worla, which, having already failed on a small experimental scale, the inventor assures us, is, therefore, the very thing to succeed on a large one. W e allude to the socialists and communists, who have more or less tinged all modern literature with their doctrines. In analyzing society; in detecting, exposing, and generalizing its operations and its various phenomena, they are but grammarians or anatomists, confining philosophy to its proper sphere, and employing It for useful purposes. When they attempt to go further—and having found the present social system to be fatally diseased, propose to originate and build up another in its stead—they are as presumptuous as the anatomist, who should attempt to create a man. Social bodies, like human bodies, are the works of God, which man may dissect, and sometimes heal, but which he cannot create. . . .

CHAPTER

XXXII:

M A N HAS PROPERTY IN

MAN!

In the Liberator of the 19th December, we observe that the editor narrows down the slavery contest to the mere question, whether "Man may rightfully hold property in man?" We think we can dispose of this objection to domestic slavery in a very few words. Man is a social and gregarious animal, and all such animals hold property in each other. Nature imposes upon them slavery as a law and necessity of their existence. They live together to aid each other, and are slaves under Mr. Garrison's higher law. Slavery arises under the higher law, and is, and ever must be, coeval and coextensive with human nature. We will enumerate a few of its ten thousand modifications. The husband has a legally recognized property in his wife's services, and may legally control, in some measure, her personal liberty. She is his property and his slave. The wife has also a legally recognized property in the husband's services. He is her property, but not her slave.

THE IMPENDING CONFLICT

54*5

The father has property in the services and persons of his children till they are twenty-one years of age. They are his property and his slaves. Children have property, during infancy, in the services of each parent. Infant negroes, sick, infirm and superannuated negroes, hold most valuable property in the services and capital of their masters. The masters hold no property in such slaves, because, for the time, they are of no value. Owners and captains of vessels own property in the services of sailors, and may control their personal liberty. They (the sailors) are property, and slaves also. The services and persons, lives and liberty of soldiers and of officers, belong to the Government; they are, whilst in service, both property and slaves. Every white working man, be he clerk, carpenter, mechanic, printer, common laborer, or what else, who contracts to serve for a term of days, months, or years, is, for such term, the property of his employer. He is not a slave, like the wife, child, apprentice, sailor or soldier, because, although the employer's right to his services be equally perfect, his remedy to enforce such right is very different. In the one case, he may resort

The

Impending

to force to compel compliance; in the other, he is driven to a suit for damages. Again: Every capitalist holds property in his fellow men to the extent of the profits of his capital, or income. The only income possibly resulting from capital, is the result of the property which capital bestows on its owners, in the labor of other people. In our first three chapters we attempt to explain this. All civilized society recognizes, and, in some measure, performs the obligation to support and provide for all human beings, whether natives or foreigners, who are unable to provide for themselves. Hence poor-houses, &c. Hence all men hold valuable property, actual or contingent, in the services of each other. If, Mr. Garrison, this be the only difficulty to be adjusted between North and South, we are sure that your little pet. Disunion, "living will linger, and lingering will die." When Mr. Andrews and you have quite "expelled human nature," dissolved and disintegrated society, and reduced mankind to separate, independent, but conflicting monads, or human atoms —then, and not till then, will you establish the "sovereignty of the individual," and destroy the property of man in man.

Crisis of the South

BY HINTON R. CHAPTER I: COMPARISON BETWEEN THE FREE AND THE SLAVE STATES

. . . AND NOW that we have come to the very heart and soul of our subject, we feel no disposition to mince matters, but mean to speak plainly, and to the point, without any equivocation, mental reservation, or secret evasion whatever. The son of a venerated parent, who, while he lived, was a considerate and merciful slaveholder, a native of the South, born and bred in North Carolina, of a family whose home has been in the valley of the Yadkin for nearly a century and a half, a Southerner by instinct and by all the influences of thought, habits, and kindred, and with the desire and fixed purpose to reside permanently within the limits of the South, and with the expectation of dying there also—we feel that we have the right to express our opinion, however humble or unimportant it may be, on any and every question that affects the public good; and, so help us God, "sink or swim, live or die, survive or perish," we are determined to exercise that right with manly firmness, and without fear, favor or affection.

HELPER

And now to the point. In our opinion, an opinion which has been formed from data obtained by assiduous researches, and comparisons, from laborious investigation, logical reasoning, and earnest reflection, the causes which have impeded the progress and prosperity of the South, which have dwindled our commerce, and other similar pursuits, into the most contemptible insignificance; sunk a large majority of our people in galling poverty and ignorance, rendered a small minority conceited and tyrannical, and driven the rest away from their homes; entailed upon us a humiliating dependence on the Free States; disgraced us in the recesses of our own souls, and brought us under reproach in the eyes of all civilized and enlightened nations—may all be traced to one common source, and there find solution in the most hateful and horrible word, that was ever incorporated into the vocabulary of human economy—Slavery.' Reared amidst the institution of slavery, believing it to be wrong both in principle and in practice, and having seen and felt its evil influences upon individuals, communities and states, we

A M E R I C A N PROBLEMS deem it a duty, no less than a privilege, to enter our protest against it, and to use our most strenuous efforts to overturn and abolish it! Then we are an abolitionist? Yes! not merely a freesoiler, but an abolitionist, in the fullest sense of the term. W e are not only in favor of keeping slavery out of the territories, but, carrying our opposition to the institution a step further, we here unhesitatingly declare ourselves in favor of its immediate and unconditional abolition, in every state in this confederacy, where it now exists! Patriotism makes us a freesoiler; state pride makes us an emancipationist; a profound sense of duty to the South makes us an abolitionist; a reasonable degree of fellow feeling for the negro, makes us a colonizationist. With the free state men in Kansas and Nebraska, we sympathize with all our heart. W e love the whole country, the great family of states and territories, one and inseparable, and would have the word Liberty engraved as an appropriate and truthful motto, on the escutcheon of every member of the confederacy. W e love freedom, we hate slaveiy, and rather than give up the one or submit to the other, we will forfeit the pound of flesh nearest our heart. Is this sufficiently explicit and categorical? If not, we hold ourself in readiness at all times, to return a prompt reply to any proper question that may be propounded. Our repugnance to the institution of slavery, springs from no one-sided idea, or sickly sentimentality. W e have not been hasty in making up our mind on the subject; we have jumped at no conclusions; we have acted with perfect calmness and deliberation; we have carefully considered, and examined the reasons for and against the institution, and have also taken into account the propable consequences of our decision. The more we investigate the matter, the deeper becomes the conviction that we are right; and with this to impel and sustain us, we pursue our labor with love, with hope, and with constantly renewing vigor. That we shall encounter opposition we consider as certain; perhaps we may even be subjected to insult and violence. From the conceited and cruel oligarchy of the South, we could look for nothing less. But we shall shrink from no responsibility, and do nothing .unbecoming a man; we know how to repel indignity, and if assaulted, shall not fail to make the blow recoil upon the aggressor's head. The road we have to travel may be a rough one, but no impediment shall cause us to falter in our course. The line of our duty is clearly defined, and it is our intention to follow it faithfully, or die in the attempt. But, thanks to heaven, we have no ominous forebodings of the result of the contest now

547

pending between Liberty and Slavery in this confederacy. Though neither a prophet nor the son of a prophet, our vision is sufficiently penetrative to divine the future so far as to be able to see that the "peculiar institution" has but a short, and, as heretofore, inglorious existence before it. Time, the lighter of every wrong, is ripening events for the desired consummation of our labors and the fulfillment of our cherished hopes. Each revolving year brings nearer the inevitable crisis. The sooner it comes the better; may heaven, through our humble efforts, hasten its advent. The first and most sacred duty of every South· erner, who has the honor and the interest of his country at heart, is to declare himself an unqualified and uncompromising abolitionist. No conditional or half-way declaration will avail; no mere threatening demonstration will succeed. With those who desire to be instrumental in bringing about the triumph of liberty over slavery·, there should be neither evasion, vacillation, nor equivocation. W e should listen to no modifying terms or compromises that may be proposed by the proprietors of the unprofitable and ungodly institution. Nothing short of the complete «bob· tion of slavery can save the South from falling into the vortex of utter ruin. Too long have we yielded a submissive obedience to the tyrannical domination of an inflated oligarchy; too long have we tolerated their arrogance and self-conceit, too long have we submitted to their unjust and savage exactions. Let us now wrest from them the sceptre of power, establish liberty and equal rights throughout the land, and henceforth and forever guard our legislative halls from the pollutions and usurpations of proslavery demagogues. . . . Notwithstanding the fact that the white nonslaveholders of the South, are in the majority, as five to one, they have never yet had any part or lot in framing the laws under which they live. There is no legislation except for the benefit of slavery, and slaveholders. As a general rule, poor white persons are regarded with less esteem and attention than negroes, and though the condition of the latter is wretched beyond description, vast numbers of the former are infinitely worse off. A cunningly devised mockery of freedom is guarantied to them, and that is all. T o all intents and purposes they are disfranchised, and outlawed, and the only privilege extended to them, is a shallow and circumscribed participation in the political movements that usher slaveholders into office. W e have not breathed away seven and twenty years in the South, without becoming acquainted with the demagogical manoeuvrings of the oligarchy. Their intrigues and tricks of legerdemain

54«

THE IMPENDING CONFLICT

are as familiar to us as household words; in vain might the world be ransacked for a more precious junto of flatterers and cajolers. It is amusing to ignorance, amazing to credulity, and insulting to intelligence, to hear them in their blattering efforts to mystify and pervert the sacred principles of liberty, and turn the curse of slavery into a blessing. T o the illiterate poor whites—made poor and ignorant by the system of slavery—they hold out the idea that slavery is the very bulwark of our liberties, and the foundation of American independence! For hours at a time, day after day, will they expatiate upon the inexpressible beauties and excellencies of this great, free and independent nation; and finally, with the most extravagant gesticulations and rhetorical flourishes, conclude their nonsensical ravings, by attributing all the glory and prosperity of the country, from Maine to Texas, and from Georgia to California, to the "invaluable institutions of the South!" With what iatience we could command, we have frequently to the incoherent and truth-murdering declamations of these champions of slavery, and, in the absence of a more politic method of giving vent to our disgust and indignation, have involuntarily bit our lips into blisters. The lords or the lash are not only absolute masters of the blacks, who are bought and sold, and driven about like so many cattle, but they are also the oracles and arbiters of all non-slaveholding whites, whose freedom is merely nominal, and whose unparalleled illiteracy and degradation is purposely and fiendishly perpetuated. How little the "poor white trash," the great majority of the Southern people, know of the real condition of the country is, indeed, sadly astonishing. The truth is, they know nothing of public measures, and little of private affairs, except what their imperious masters, the slave-drivers, condescend to tell, and that is but precious little, and even that little, always garbled and one-sided, is never told except in public harangues; for the haughty cavaliers of shackles and handcuffs will not degrade themselves by holding private converse with those who have neither dimes nor hereditary rights in human flesh.

Íistened

Whenever it pleases, and to the extent it pleases, a slaveholder to become communicative, poor whites may hear with fear and trembling, but not speak. They must be as mum as dumb brutes, and stand in awe of their august superiors, or be crushed with stern rebukes, cruel oppressions, or downright violence. If they dare to think for themselves, their thoughts must be forever concealed. The expression of any sentiment at all conflicting with the gospel of slavery, dooms

them at once in the community in which they live, and then, whether willing or unwilling, they are obliged to become heroes, martyrs, or exiles. T h e y may thirst for knowledge, but there is no Moses among them to smite it out of the rocks of Horeb. The black veil, through whose almost impenetrable meshes light seldom gleams, has long been pendent over their eyes, and there, with fiendish jealousy, the slave-driving ruffians sedulously guard it. Non-slaveholders are not only kept in ignorance of what is transpiring at the North but they are continually misinformed of what is going on even in the South. Never were the poorer classes of a people, and those classes so largely in the majority, and all inhabiting the same country, so basely duped, so adroitly swindled, or so damnably outraged. It is expected that the stupid and sequacious masses, the white victims of slavery, will believe, and, as a general thing, they do believe, whatever the slaveholders tell them; and thus it is that they are cajoled into the notion that they are the freest, happiest and most intelligent people in the world, and are taught to look with prejudice and disapprobation upon every new principle or progressive movement. Thus it is that the South, woefully inert and inventionless, has lagged behind the North, and is now weltering in the cesspool of ignorance and degradation. . . . Non-slaveholders of the South! farmers, mechanics and workingmen, we take this occasion to assure you that the slaveholders, the arrogant demagogues whom you have elected to offices of honor and profit, have hoodwinked you, trifled with you, and used you as mere tools for the consummation of their wicked designs. They have purposely kept you in ignorance, and have, by moulding your passions and prejudices to suit themselves, induced you to act in direct opposition to your dearest rights and interests. By a system of the grossest subterfuge and misrepresentation, and in order to avert, for a season, the vengeance that will most assuredly overtake them ere long, they have taught you to hate the abolitionists, who are your best and only true friends. Now, as one of your own number, we appeal to you to join us in our patriotic endeavors to rescue the generous soil of the South from the usurped and desolating control of these political vampires. Once and forever, at least so far as this country is concerned, the infernal question of slavery must be disposed of; a speedy and perfect abolishment of the whole institution is the true policy of the South—and this is the policy which we propose to pursue. Will ypu aid us, will you assist us, will you be freemen, or will you be slaves? These are ques-

AMERICAN PROBLEMS tions of vital importance; weigh them well in your minds; come to a prudent and firm decision, and hold yourselves in readiness to act in accordance therewith. You must either be for us or against us —anti-slavery or pro-slavery; it is impossible for you to occupy a neutral ground; it is as certain as fate itself, that if you do not voluntarily oppose the usurpations and outrages of the slavocrats, they will force you into involuntary compliance with their infamous measures. Consider well the aggressive, fraudulent and despotic power which they have exercised in the affairs of Kansas; and remember that, if, by adhering to erroneous principles of neutrality or non-resistance, you allow them to force the curse of slavery on that vast and fertile field, the broad area of all the surrounding States and Territories—the whole nation, in fact —will soon fall a prey to their diabolical intrigues and machinations. Thus, if you are not vigilant, will they take advantage of your neutrality, and make you and others the victims of their inhuman despotism. D o not reserve the strength of your arms until you shall have been rendered powerless to strike; the present is the proper time for action; under all the circumstances, apathy or indifference is a crime. First ascertain, as nearly as you can, the precise nature and extent of your duty, and then, without a moment's delay, perform it in good faith. T o facilitate you in determining what considerations of right, justice and humanity require at your hands, is one of the primary objects of this work; and we shall certainly fail in our desire if we do not accomplish our task in a manner acceptable to God and advantageous to man.

CHAPTER I I :

How

SLAVERY CAN B E

ABOLISHED

N U M B E R OF SLAVEHOLDERS IN THE UNITED S T A T E S — 1 8 JO.

Alabama Arkansas Columbia, District of Delaware Florida Georgia Kentucky Louisiana Maryland Mississippi Missouri North Carolina South Carolina Tennessee Texas

*9¿95 5*999 M77 809 3,520 38,456 38,385 20,670 16,040 23,116 19,185 28,303 2 5,596 33.865 7,747

549

Virginia

55,063

Total Number of Slaveholders United States

in the

347,515

CLASSIFICATION OF T H E SLAVEHOLDERS—185Ο.

Holders Holders Holders Holders Holders Holders Holders Holders Holders Holders Holders

of of of of of of of of of of of

ι slave 1 and under 5 5 and under 10 10 and under 20 20 and under 50 50 and under 100 100 and under 200 100 and under 300 300 and under 500 500 and under 1,000 1,000 and over

68,820 105,683 80,765 54.595 *9>733 6,196 M79 187 jó 9 2

Aggregate Number of Slaveholders in the United States 347.$*$ It thus appears that there are in the United States, three hundred and forty-seven thousand five hundred and twenty-five slaveholders. But this appearance is deceptive. T h e actual number is certainly less than two hundred thousand. Professor De Bow, the Superintendent of the Census, informs us that "the number includes slave-hirers," and furthermore, that "where the party owns slaves in different counties, or in different States, he will be entered more than once." Now every Southerner, who has any practical knowledge of affairs, must know, and does know, that every New Year's day, like almost every other day, is desecrated in the South, by publicly hiring out slaves to large numbers of non-slaveholders. T h e slave-owners, who are the exclusive manufacturers of public sentiment, have popularized the dictum that white servants, decency, virtue, and justice, are unfashionable; and there are, we are sorry to say, nearly one hundred and sixty thousand nonslaveholding sycophants, who have subscribed to this false philosophy, and who are giving constant encouragement to the infamous practices of slaveholding and slave-breeding, by hiring at least one slave every year. In the Southern States, as in all other slave countries, there are three odious classes of mankind; the slaves themselves, who are cowards; the slaveholders, who are tyrants; and the non-slaveholding slave-hirers, who are lickspittles. Whether either class is really entitled to the regards of a gentleman is a matter of grave doubt. T h e slaves are pitiable; the slaveholders are detestable; the slave-hirers are contemptible. With the statistics at our command, it is impossible for us to ascertain the exact number of slave-

55°

THE IMPENDING CONFLICT

holders and non-slaveholding slave-hirers in the slave States; but we have data which will enable us to approach very near to the facts. The town from which we hail, Salisbury, the capital of Rowan county, North Carolina, contains about twentythree hundred inhabitants, including three hundred and seventy-two slaves, fifty-one slaveholders, and forty-three non-slaveholding slave-hirers. Taking it for granted that this town furnishes a fair relative proportion of all the slaveholders, and non-slaveholding slave-hirers in the slave States, the whole number of the former, including those who have been "entered more than once," is one hundred and eighty-eight thousand five hundred and fifty-one; of the latter, one hundred and fiftyeight thousand nine hundred and seventy-four; and, now, estimating that there are in Maryland, Virginia, and other grain-growing States, an aggregate of two thousand slave-owners, who have cotton plantations stocked with negroes in the far South, and who have been "entered more than once," we find, as the result of our calculations, that the total number of actual slaveholders in the Union, is precisely one hundred and eighty-six thousand five hundred and fifty-one—as follows: Number of actual slaveholders in the United States 186,551 Number "entered more than once" 1,000 Number of non-slaveholding slave-hirers 158,974 Aggregate number, acording to De Bow 347,525 The greater number of non-slaveholding slavehirers, are a kind of third-rate aristocrats—persons who formerly owned slaves, but whom slavery, as is its custom, has dragged down to poverty, leaving them, in their false and shiftless pride, to eke out a miserable existence over the hapless chattels personal of other men. So it seems that the total number of actual slaveowners, including their entire crew of cringing lickspittles, against whom we have to contend, is but three hundred and forty-seven thousand five hundred and twenty-five. Against this army for the defense and propagation of slavery, we think it will be an easy matter—independent of the negroes, who, in nine cases out of ten, would be delighted with an opportunity to cut their masters' throats, and without accepting of a single recruit from either of the free States, England, France or Germany—to muster one at least three times as large, and far more respectable for its utter extinction. W e hope, however, and believe, that the matter in dispute may be adjusted without arraying these armies against each other in hostile at-

titude. We desire peace, not war—justice, not blood. Give us fair-play, secure to us the right of discussion, the freedom of speech, and we will settle the difficulty at the ballot-box, not on the battle-ground—by force of reason, not by force of arms. But we are wedded to one purpose from which no earthly power can ever divorce us. W e are determined to abolish slavery at all hazards— in defiance of all the opposition, of whatever nature, which it is possible for the slavocrats to bring against us. Of this they may take due notice, and govern themselves accordingly. Thus far, in giving expression to our sincere and settled opinions, we have endeavored to show, in the first place, that slavery is a great moral, social, civil, and political evil—a dire enemy to true wealth and national greatness, and an atrocious crime against both God and man; and, in the second place, that it is a paramount duty which we owe to heaven, to the earth, to America, to humanity, to our posterity, to our consciences, and to our pockets, to adopt effectual and judicious measures for its immediate abolition. The questions now arise, How can the evil be averted? What are the most prudent and practical means that can be devised for the abolition of slavery? In the solution of these problems it becomes necessary to deal with a multiplicity of stubborn realities. And yet, we can see no reason why North Carolina, in her sovereign capacity, may not, with equal ease and success, do what forty-five other States of the world have done within the last forty-five years. Nor do we believe any good reason exists why Virginia should not perform as great a deed in 1859 as did New-York in 1799. Massachusetts abolished slavery in 1780; would it not be a masterly stroke of policy in Tennessee, and every other slave State, to abolish it in or before i860? Not long since, a slavocrat, writing on this subject, said, apologetically, "we frankly admit that slavery is a monstrous evil; but what are we to do with an institution which has baffled the wisdom of our greatest statesmen?" Unfortunately for the South, since the days of Washington, Jefferson, Madison, and their ilustrious compatriots, she has never had more than half a dozen statesmen, all told; of mere politicians, wirepullers, and slave-driving demagogues, she has had enough, and to spare; but of statesmen, in the true sense of the term, she has had, and now has, but precious few—fewer just at this time, perhaps, than ever before. It is far from a matter of surprise to us that slavery has, for such a long period, baffled the "wisdom" of the oligarchy; but our surprise is destined to culminate in amazement, if

A M E R I C A N PROBLEMS the wisdom of the non-slaveholders does not soon baffle slavery. From the eleventh year previous to the close of the eighteenth century down to the present moment, slaveholders and slave-breeders, who, to speak naked truth, are, as a general thing, unfit to occupy any honorable station in life, have, by chicanery and usurpation, wielded all the official power of the South; and, excepting the patriotic services of the noble abolitionists above-mentioned, the sole aim and drift of their legislation has been to aggrandize themselves, to strengthen slavery, and to keep the poor whites, the constitutional majority, bowed down in the deepest depths of degradation. W e propose to subvert this entire system of oligarchal despotism. W e think there should be some legislation for decent white men, not alone for negroes and slaveholders. Slavery lies at the root of all the shame, poverty, ignorance, tyranny and imbecility of the South; slavery must be thoroughly eradicated; let this be done, and a glorious future will await us. The statesmen who are to abolish slavery in Kentucky, must be mainly and independently constituted by the non-slaveholders of Kentucky; so in every other slave State. Past experience has taught us the sheer folly of ever expecting voluntary justice from the slaveholders. Their illicit intercourse with "the mother of harlots" has been kept up so long, and their whole natures have, in consequence, become so depraved, that there is scarcely a spark of honor or magnanimity to be found amongst them. As well might one expect to hear highwaymen clamoring for a universal interdict against traveling, as to expect slaveholders to pass laws for the abolition of slavery. Under all the circumstances, it is the duty of the non-slaveholders to mark out an independent course for themselves, to steer entirely clear of the oligarchy, and to utterly contemn and ignore the many vile instruments of power, animate and inanimate, which have been so freely and so effectually used for their enslavement. N o w is the time for them to assert their rights and liberties; never before was there such an appropriate period to strike for Freedom in the South. Had it not been for the better sense, the purer patriotism, and the more practical justice of the non-slaveholders, the Middle States and New England would still be groaning and groveling under the ponderous burden of slavery; New-York would never have risen above the dishonorable level of Virginia; Pennsylvania, trampled beneath the iron-heel of the black code, would have remained the unprogressive parallel of Georgia; Massachusetts would have continued till the pres-

j51

ent time, and Heaven only knows how much longer, the contemptible coequal of South Carolina. Succeeded by the happiest moral effects and the grandest physical results, we have seen slavery crushed beneath the wisdom of the non-slaveholding statesmen of the North; followed by corresponding influences and achievements, many of us who have not yet passed the meridian of life, are destined to see it equally crushed beneath the wisdom of the non-slaveholding Statesmen of the South. With righteous indignation, we enter our disclaimer against the base yet baseless admission that Louisiana and Texas are incapable of producing as great statesmen as Rhode Island and Connecticut. What has been done for N e w Jersey by the statesmen of New Jersey, can be done for North Carolina by the statesmen of North Carolina; the wisdom of the former State has abolished slavery; as sure as the earth revolves on its axis, the wisdom of the latter will not do less. That our plan for the abolition of slavery, is the best that can be devised, we have not che vanity to contend; but that it is a good one, and will do to act upon until a better shall have been suggested, we do firmly and conscientiously believe. Though but little skilled in the delicate art of surgery, we have pretty thoroughly probed slavery, the frightful tumor on the body politic, and have, we think, ascertained the precise remedies requisite for a speedy and perfect cure. Possibly the less ardent friends of freedom may object to our prescription, on the ground that some of its ingredients are too griping, and that it will cost the patient a deal of most excruciating pain. But let them remember that the patient is exceedingly refractory, that the case is a desperate one, and that drastic remedies are indispensably necessary. When they shall have invented milder yet equally efficacious ones, it will be time enough to discontinue the use of ours—then no one will be readier than we to discard the infallible strong recipe for the infallible mild. N o t at the persecution of a few thousand slaveholders, but at the restitution of natural rights and prerogatives to several millions of non-slaveholders, do we aim. Inscribed on the banner, which we herewith unfurl to the world, with the full and fixed determination to stand by it or die by it, unless one of more virtuous efficacy shall be presented, are the mottoes which, in substance, embody the principles, as we conceive, that should govern us in our patriotic warfare against the most subtle and insidious foe that ever menaced the inalienable rights and liberties and dearest interests of America:

55 2

THE IMPENDING CONFLICT

ist. Thorough Organization and Independent Political Action on the part of the Non-Slaveholding whites of the South, and. Ineligibility of Slaveholders—Never another vote to the Trafficker in Human Flesh. 3rd. N o Co-operation with Slaveholders in Politics—No Fellowship with them in Religion— N o Affiliation with them in Society. 4th. N o Patronage to Slaveholding Merchants— N o Guestship in Slave-waiting Hotels—No Fees to Slaveholding Lawyers—No Employment of Slaveholding Physicians—No Audience to Slaveholding Parsons, jth. N o Recognition of Pro-slavery Men, except as Ruffians, Outlaws, and Criminals. 6th. Abrupt Discontinuance of Subscription to Pro-slavery Newspapers. 7th. The Greatest Possible Encouragement to Free White Labor. 8. N o more Hiring of Slaves by Non-slaveholders. 9th. Immediate Death to Slavery, or if not immediate, unqualified Proscription of its Advocates during the Period of its Existence. 10th. A T a x of Sixty Dollars on every Slaveholder for each and every Negro in his Possession at the present time, or at any intermediate time between now and the 4th of July, 1863—said Money to be Applied to the transportation of the Blacks to Liberia, to their Colonization in Central or South America, or to their Comfortable Settlement within the Boundaries of the United States, n t h . A n additional Tax of Forty Dollars per annum to be levied annually, on every Slaveholder for each and every Negro found in his possession after the 4th of July, 1863—said Money to be paid into the hands of the Negroes so held in Slavery, or, in cases of death, to their next of kin, and to be used by them at their own option. . . . In our own humble way of thinking, we are frank to confess, we do not believe in the unity of the races. This is a matter, however, which has little or nothing to do with the great question at issue. Aside from any theory concerning the original parentage of the different races of men, facts, material and immaterial, palpable and impalpable —facts of the eyes and facts of the conscience— crowd around us on every hand, heaping proof upon proof, that slavery is a shame, a crime, and a curse—a great moral, social, civil, and political evil—an oppressive burden to the blacks, and an incalculable injury to the whites—a stumblingblock to the nation, an impediment to progress, a damper on all the nobler instincts, principles,

aspirations and enterprises of man, and a dire enemy to every true interest. Waiving all other counts, we have, we think, shown to the satisfaction of every impartial reader, that, as elsewhere stated, on the single score of damages to lands, the slaveholders are, at this moment, indebted to us, the non-slaveholding whites, in the enormous sum of nearly seventy-six hundred millions of dollars. What shall be done with this amount? It is just; shall payment be demanded? N o ; all the slaveholders in the country could not pay it; nor shall we ever ask them for even a moiety of the amount—no, not even f o r a dime, nor yet for a cent; we are willing to forfeit every farthing for the sake of freedom; for ourselves we ask no indemnification for the past: we only demand justice for the future. But, Sirs, knights of bludgeons, chevaliers of bowie-knives and pistols, and lords of the lash, we are unwilling to allow you to swindle the slaves out of all the rights and claims to which, as human beings, they are most sacredly entitled. Not alone for ourself as an individual, but for others also— particularly for five or six millions of Southern non-slaveholding whites, whom your iniquitous statism has debarred from almost all the mental and material comforts of life—do we speak, when we say, you must emancipate your slaves, and pay each and every one of them at least sixty dollars cash in hand. By doing this, you will be restoring to them their natural rights, and remunerating them at the rate of less than twenty-six cents per annum for the long and cheerless period of their servitude, from the 20th of August, 1620, when, on James River, in Virginia, they became the unhappy slaves of heartless masters. Moreover, by doing this you will be performing but a simple act of justice to the non-slaveholding whites, upon whom the institution of slavery has weighed scarcely less heavily than upon the negroes themselves. You will also be applying a saving balm to your own outraged hearts and consciences, and your children—yourselves in fact—freed from the accursed stain of slavery, will become respectable, useful, and honorable members of society. And now. Sirs, we have thus laid down our ultimatum. What are you going to do about it? Something dreadful, as a matter of course! Perhaps you will dissolve the Union again. Do it, if you dare! Our motto, and we would have you to understand it, is the abolition of slavery, and the perpetuation of the American Union. If, by any means, you do succeed in your treasonable attempts to take the South out of the Union to-day, we will bring her back to-morrow—if she goes away with you, she will return without you.

AMERICAN

Do not mistake the meaning of the last clause of the last sentence; we could elucidate it so thoroughly that no intelligent person could fail to comprehend it; but, for reasons which may hereafter appear, we forego the task. Henceforth there are other interests to be consulted in the South, aside from the interests of negroes and slaveholders. A profound sense of duty incites us to make the greatest possible efforts for the abolition of slavery; an equally profound sense of duty calls for a continuation of those efforts until the very last foe to freedom shall have been utterly vanquished. T o the summons of the righteous monitor within, we shall endeavor to prove faithful; no opportunity for inflicting a mortal wound in the side of slavery shall be per-

PROBLEMS

553

mitted to pass us unimproved. Thus, terrorengenderers of the South, hatfe we fully and frankly defined our position; we have no modifications to propose, no compromises to offer, nothing to retract. Frown, Sirs, fret, foam, prepare your weapons, threat, strike, shoot, stab, bring on civil war, dissolve the Union, nay annihilate thé solar system if you will—do all this, more, less, better, worse, anything—do what you will. Sirs, you can neither foil nor intimidate us; our purpose is as firmly fixed as the eternal pillars of Heaven; we have determined to abolish slavery, and, so help us God, abolish it we will! Take this to bed with you to-night, Sirs, and think about it, dream over it, and let us know how you feel to-morrow morning.

ABOLITIONISM THE

AMERICAN

ANTISLAVERY m o v e m e n t

was

less the product of a specific social indignation than an outgrowth of the "evangelical revival" of the period 1810-30. Though deeply rooted in religious emotion, that revival stressed good works as a necessary concomitant of faith. In its wake spread interest in temperance, Sunday schools, foreign missions, and the work of home missionary societies which brought the Gospel to the frontier and the neglected areas of the expanding cities. Revivalists like Charles Finney roused people to concern f o r their souls and their conduct; Congregational and Presbyterian ministers created churches to keep the souls thus found; and wealthy laymen like Arthur and Lewis Tappan provided much of the money needed to print tracts and maintain agents in the field. Into ground prepared by two decades of evangelical preaching of the individual's moral responsibility f o r the conduct of others as well as himself, fell the germ of British agitation against the slave trade and slavery in the West Indies. If holding men in bondage was wrong in a British possession, it was equally wrong in the United States. Organizing to put an end to wrong was natural enough to people w h o had already joined together to promote temperance, Christian education and true piety. In

this spirit, the American Anti-slavery Society was founded in 1833. T h e following year brought the society its first great accession of strength. A lecture against slavery set the students of Lane T h e ological Seminary debating the issue, and that debate won the student body to the cause of abolition. When the Seminary's trustees ordered the debate ended, the students abandoned the school and quit Cincinnati. T h e y were earnest young men, western N e w Y o r k ers in large part, and strongly influenced b y Finney's preaching. Their enthusiasm carried Abolitionism through rural Ohio in a fashion far more effective than any tracts that anti-slavery men could send out f r o m the East. T h e lecturer who had given impetus to the cause was Theodore Dwight W e l d ( 1 8 0 3 1895), himself from western N e w Y o r k although his family was of Connecticut origin and related to the Dwights and Edwardses. Like other youths of the period, W e l d injured his eyes by overdose attention to study and was forced to substitute lecturing f o r a regular education. After two years spent earning his living by teaching a system of mnemonics, Weld was converted by Finney's preaching and became one of the evangelist's co-workers. It was then that W e l d returned to books. H e

554

T H E IMPENDING

studied theology at the Oneida Institute, a manual-labor school where the students supported themselves while they learned. Lewis Tappan's two sons were at Oneida with Weld and through them Weld was drawn into the work of the Anti-slavery Society. A t a meeting of the society's agents in 1836, Weld met the G r i m k é sisters and saw how much they could aid the cause. You "are southern women," he wrote, "once in law slaveholders, y o u r friends all slaveholders, etc., hence your testimony, testimony, TESTIMONY is the great desideratum," for the North will believe nothing so much as "the deliberate calm decided testimony of a southern man or woman in y o u r circumstances; and the weight of the testimony would be very much increased if it be JOINT testimony." Weld coached Angelina Grimké as a lecturer, accordingly, and urged her and her sister Sarah to carry Abolitionism not only to groups of women but also to legislative committees and even mixed audiences. In the forties, factionalism split the antislavery movement. W e l d remained aloof from these dissensions, for he had found another means of bringing the question before the public. Though Congress had refused to receive petitions f o r the abolition of slavery in the District of Columbia, year after year such petitions were circulated and offered. Gathering signatures to these memorials had brought the slavery issue to the very doorsteps of Ohio and western N e w Y o r k and, through that intensive work, the antislavery movement acquired a flexible organization as well as the prestige inherent in the defense of so important a principle as the right of petition. In 1841, the leaders of the petition campaign sent Weld to Washington where he served as ghost writer and maintainer of morale to the little group of antislavery men who formed a "knot of agitators" in the House of Representatives. T h e House effort to censure John Quincy Adams f o r offering a petition praying f o r the dissolution of the Union boomeranged under the counterattack of his relentless ora-

CONFLICT

tory; the members who feared discussion of the slavery issue were glad to silence him b y tabling the resolution of censure. But the attempt to smother Abolitionism b y silence had failed. B y 1843, the W h i g party was too badly in need of Ohio votes to continue cooperation with the Democrats' policy. T h e House of Representatives had been made a sounding board for Abolitionists and the slavery debate had left the lecture room and pulpit f o r the halls of Congress. T h e selections here reprinted are f r o m G . H . Barnes and D. C. Dumond, editors, Letters

of Theodore Divight Weld, Angelina

Grimké

Weld and Sarah Grimké ( 1 vols., N e w Y o r k , 1934) and are published by permission of the American Historical Association. T h e flames of Abolitionism were further fed by the Fugitive Slave Law controversy. T h e Constitution provided for the return of f u g i tive laborers and, in 1793, a law was passed to implement that provision. That law had not been effective even in the early nineteenth century. As sentiment against slavery matured people in Ohio, Pennsylvania, N e w Jersey, and N e w York enlisted themselves to aid fugitives attempting to pass northward from the slave states into freedom. They worked obscurely, in danger of betrayal sometimes, and, at the beginning, against the sentiments of their own communities. So long as slavery was an institution recognized by the law and the Constitution, the slaveholder was entitled to recover his property. If existing legislation did not afford protection against the opinion of the communities to which slaves fled, then it stood in need of revision. That was Webster's opinion as he rose to answer Calhoun on March 7, 1850. T h a t was the opinion of many conservative men w h o set their legal obligations above sentiment and abstract justice. Accordingly, they agreed with Webster when he supported the new Fugitive Slave Law of 1850. This provided f o r the return of slaves in summary fashion on the affidavit of the claimant. The fugitive's testimony was not to be accepted in his own defense and

AMERICAN o n c e his ownership had been determined b y affidavit, no other legal process might interf e r e w i t h his r e c o v e r y . T h e United States marshal w a s made liable f o r the slave's value if he should escape and any obstruction o r arrest made the o f f e n d e r subject to a $1,000 fine. T h e federal commissioner himself was enlisted on the claimant's side, f o r his fee was $ 1 0 if the f u g i t i v e w e r e returned to slavery and only $5 should he be declared f r e e . But the moving of fugitives north on what had come to be called the Underground Railroad did not cease. Slaves were brought north on foot and b y steamboat; sometimes they were nailed into boxes; sometimes they were even driven in coaches b y white coachmen hired with their own earnings. T h e y were passed along from one "station" to the next. If the fugitive happened to halt at Philadelphia, he might come to William Still ( 1 8 2 1 - 1 9 0 2 ) ,

PROBLEMS

The passages here reprinted are from Still's book, Underground Rail-Road Records (Philadelphia, 1886).

The Weld-Gri?nkê W E L D TO A N C E L I N A AND SARAH G R I M K É

N e w Y o r k , N . Y . July 22. 37 Saturday evening M y dear Sister Angelina I have been in receipt of your letter five or six days. Should have answered it by return mail, but the most important members of the Executive Committee were out of town, and I have not been able to get a sight at the individual whom I wished most to see on the subject of your letter until nine o'clock tonight. Seeing them however has been with me a mere matter of course, in compliance with your request, and to relieve you of anxiety, and not bccause I had the least doubt as to their feelings on the subject referred. Your relation to the Executive Committee seems rather a relation of Christian kindness— a sort of cooperative relation recognizing harmony of views and feelings, with common labors, joys and trials in a common cause, rather than authority on the one hand and a representative agency on the other. In short the relation which you sustain to the Ex. Com. no more attaches their sanction to your public holdings-forth to promiscuous assemblies than it does to y o u r "theeing and thouing" or to your tight crimped caps, seven by nine bonnets, or that impenetrable drab that defieth utterly all amalgamation of colors! If any gainsay your speaking in

555

N e g r o clerk in the office of the Philadelphia Anti-slavery Society. T h e city Abolitionists had united to form a Vigilance Committee, when the Fugitive Slave L a w was passed, and Still was an important part of its work. T h e son of a slave w h o had bought his own freedom, he came to Philadelphia from a farm in the "piney woods" of N e w J e r s e y . H e won the confidence of the Anti-slavery Society and his home became a station on the Underground. In 1850, he began to record the narratives of the arriving fugitives. Such a record was a dangerous possession, since it might bring the runaway's friends into the hands of the law; but Still continued the record because it might help reunite families separated by flight and sale.

Letters

public and to men, they gainsay the Quakers and not the abolitionists. T h e y fly in the face of a denominational tenet, not an anti slavery doctrine or measure. I mean distinctively: I would to G o d that every anti slavery woman in this land had heart and head and womanhood enough and leisure withal to preach as did the captive woman in the second century to the warriors of a vandal army and to a barbarian monarch and his court till savage royalty laid off its robes at the foot of the cross and a fierce soldiery relaxed and wept under the preaching of a woman. God give thee a mouth and wisdom to prophesy like the daughters of Philip, like Huldah and Deborah. If the men wish to come, it is downright slaveholding to shut them out. Slaveholders undertake to say that one class of human beings shall not be profited by public ministrations. I pray you leave slaveholders "alone in their glory." If I should ever be in the vicinity of your meetings I shall act on the principle that he that hath ears to hear hath a right to use them; and if you undertake to stuff them with cotton or to barricade them with brick and mortar, we'll have just as much of a breeze about it as can be made at all consistent with "peace principles." Why! folks talk about women's preaching as tho' it was next to highway robbery—eyes astare and mouth agape. Pity women were not born with

55*

THE IMPENDING CONFLICT

a split stick on their tongues! Ghostly dictums have fairly beaten it into the heads of the whole world save a fraction, that mind is sexed, and Human rights are sex"d, moral obligation sex'd; and to carry out the farce they'll probably beat up for a general match making and all turn in to pairing off in couples matrimonial, consciences, accountabilities, arguments, duties, philosophy, facts, and theories in the abstract. So much for the "March of mind," i.e. proxy-thinking, India rubber consciences, expediency, torn fooleries, with "whatsoever defileth and worketh abomination and maketh a lie." But enough of this. N o w f o r the scolding. Quarter! quarter! quarter! ist. You say " O n account of thy neglect in not having the extracts on slavery published for me at the right time," etc. Not guilty, say I. Avast there with your railing accusations. Ah, you haven't lived at the South for nothing. "Practice makes perfect." Wonder how long it would take me to get my hand in; quité certain I should be a dull scholar, tho' if I had you for teacher, rather think I should come up fast—perhaps make a prodigy. 2. That infinite distinction between the "rights" and the "wrongs" of woman, just exactly the difference between "pencil marks" and pen strokes. So then nothing but jet black will do for you. Well its a noble labor. I have strong predilections that way myself; think I should carry an ink bottle in my pocket if it would [not] put my temperance good name in jeopardy. 3. "Hypocritical pretence." Pretty good at "hard language" f o r a new beginner. True it might be a world harder but dont be discouraged. Children you know when learning to write are apt to keep their first strait marks to measure future progress by. N o w suppose you keep up your spirits with the same recipe. I can assure you from experience you will find it very exhilirating. Enough for a quarrel: now to business. The day that I received your letter I sent Wheelers Law of Slavery and divers other books and papers to you and Sarah, Care of Fuller, to be left at 25 Cornhill. Also a package of Convention documents from Julia. She will make you her own apology for not sending them before. She received your message from me the day of my arrival in the city. In the package you will find the Emancipator of the date you mention, also several others before and after. While passing from place to place you must expect that many things sent by mail will miss you. I suppose I never received more than half of my Emancipators when lectur-

ing. Your letters to Catharine Beecher I like greatly, and yet I wish they were better. In the first letter the words liberty, freedom, and if I remember right some other terms are used vaguely. Liberty! What does it mean? Anything, everything. In common parlance you say "Every man has an inalienable right to liberty." That conveys no definite idea. It may mean any one of fifty things. In discussion, especially such a discussion demanding accurate analysis and exact definition presenting the naked point, every thing like a loose popular phraseology confuses. In the next letter you say "this principle of freedom is embedded in our very natures," or something like it. "Principle of freedom" if it had been F R E E D O M of principle it would have been just about as definite. You speak of "slave-holding" as being "the permanent exercise of the manstealing P O W E R . " The power of wamstealing is the power of stealing anything else, the power of putting out the hand and of willing to do it, or anything equivalent. I presume you meant "slaveholding is the constant or habitual perpetration of the A C T of manstealing." T o make a slave is man stealing—the act itself; to hold him such, is man stealing—the habit, the permanent state, made up of individual acts. In other words to B E G I N to hold a slave is manstealing; to keep on holding him is merely a repetition of the first act, doing the same identical thing all the time. A series of the same acts continued for a length of time is a habit or permanent state, and the first of this series of the same acts that make up this habit or state is just like all the rest. But I see I have no room to say a few other things about the letters that [I] want to. Your allusion to the long time taken by C. E. B. to answer your appeal with a remark or two in conexion looks a little like vanity, as well as a sort of stoop to undignified twitting. You talk about "throwing them from your pen." Well keep throwing, but take true aim, and so hit that they wont bound back. So you see I am at my old tricks of fault finding with you. Be patient. In this hollow world where even most of those who call themselves friends show it only by flattery, you will escape criticism pretty much; and even if mine should be unjust you can quickly neutralize them. A thousand things crowd upon me, but I have no room. Do take care of your health and may God give you his own sweet and ceaseless communion, better, better than life. Surely there is not need for me to say again to you and dear Sarah, call on me at all times for whatever I have or can do for you. Most affectionately your brother in Jesus T . D. Weld

A M E R I C A N PROBLEMS A N G E L I N E G R I M K É TO W E L D

Groton [Mass.] 8th Month n . [1837] M y Dear Brother No doubt thou hast heard by this time of all the fuss that is now making in this region about our stepping so far out of the bounds of female propriety as to lecture to promiscuous assemblies. M y auditors literally sit some times with "mouths agape and eyes astare," so that I cannot help smiling in the midst of "rhetorical flourishes" to witness their perfect amazement at hearing a woman speak in the churches. I wish thou couldst see Brother Phelp's letter to us on this subject and sisters admirable reply. I suppose he will soon come out with a conscientious protest against us. I am waiting in some anxiety to see what the Executive Committee mean to do in these troublous times, whether to renounce us or not. But seriously speaking, we are placed very unexpectedly in a very trying situation, in the forefront of an entirely new contest—a contest for the rights of woman as a moral, intelligent and responsible being. Harriet Martineau says "God and man know that the time has not come for women to make their injuries even heard o f " : but it seems as tho' it had come now and that the exigency must be met with the firmness and faith of woman in by gone ages. I cannot help feeling some regret that this sh'ld have come up before the Anti Slavery question was settled, so fearful am I that it may injure that blessed cause, and then again I think this must be the Lord's time and therefore the best time, for it seems to have been brought about by a concatenation of circumstances over which we had no control. The fact is it involves the interests of every minister in our land and therefore they will stand almost in a solid phalanx against woman's rights and I am afraid the discussion of this question will divide in Jacob and scatter in Israel; it will also touch every man's interests at home, in the tenderest relation of life; it will go down into the very depths of his soul and cause great searchings of heart. I am glad H. Winslow of Boston has come out so boldly and told us just what I believe is in the hearts of thousands of men in our land. I must confess my womanhood is insulted, my moral feelings outraged when I reflect on these things, and I am sure I know just how the free colored people feel towards the whites when they pay them more than common attention; it is not paid as a R I G H T , but given as a B O U N T Y on a little more than ordinary sense. There is not one man in 500 who really understands what kind of attention is alone acceptable to a woman of pure and exalted moral and intel-

557

lectual worth. Hast thou read Sisters letters in the Spectator? I want thee to read them and let us know what thou thinkest of them. That a wife is not to be subject to her husband in any other sense than I am to her or she to me, seems to be strange and alarming doctrine indeed, but how can it be otherwise unless she surrenders her moral responsibility, which no woman has a right to do? I want to review Hfubbard] YV[inslow]'s sermon and I think I would, if brother Wright or thyself could see it before it was published but you are so far off. W H O will stand by woman in the great struggle? As to our being Quakers being an excuse for our speaking in public, we do not stand on this ground at all; we ask no favors for ourselves, but claim rights for our sex. If it is wrong for woman to lecture or preach then let the Quakers give up their false views, and let other sects refuse to hear their women, but if it is right then let all women who have gifts, "mind their calling" and enjoy "the liberty wherewith Christ hath made them free," in that declaration of Paul, "in Christ Jesus there is neither male nor female." O! if in our intercourse with each other we realized this great truth, how delightful, ennobling and dignified it would be, but as I told the Moral Reform Society of Boston in my address, this reformation must begin with ourselves. I thank thee for thy strictures on my letters to C. E. B[eecher], but should have thanked thee still more if before they were republished in the Emancipator thou hadst been so kind a brother as to have corrected them for me. Didst thou do as thou wouldst have been done by? I find thou wilt find out my pride in whatever form it appear, will keep a watch, for I have a great deal of it—so much that I should not like at all to see such "a distinguished man" as thyself at one of my lectures; and if moral suasion could keep thee out, I assure thee I would N O T let thee come in, unless I was in so humble a mood as to be ready for a close criticism on the matter and manner of my talk and gesture, etc. I did not like brother Stantons coming to two of our meetings, but did not know him well enough to beg him to keep away; as for thee, I should feel quite free to ask thee to do so. How dost thou think I felt at those great meetings in Lowell? ijoo city people in the blaze of a chandelier. Sister says that before I rose I looked as if I was saying to myself "the time has come and the sacrifice must be offered." Indeed 1 often feel in our meetings as if I was "as a lamb led to the slaughter," sometimes so sick before I rise that it seems impossible for me to speak 10 minutes; but the Lord is at my right hand, I lean on the arm of my beloved and he sustains me and

55»

THE IMPENDING CONFLICT

fills my mourh as soon as I open it in faith for the dumb. A t times when I feel so miserable and little and incompetent I remember what thou told us about thy feelings before speaking and am really strengthened by thy experience. I am afraid thou art not the only Northern man who thinks I have not lived at the South for nothing, for I do scold most terribly when I undertake to tell the brethren bow the North is implicated in the guilt of slavery; they look at me m utter amazement. I am not at all surprized they are afraid lest such a woman should usurp authority over the men. T h e fact is, I was once a great scold and I am indebted to a slave for curing me of it. It was when I was quite a little girl and she shamed me and coaxed me out of the horrible practice by telling me very affectionately how ugly it was and promising to make me a doll and dress it like a soldier if I would give it up. She made the doll, I made the promise and believe [I have] kept it unbroken to this day so far as slaves were concerned. I think this woman did a great deal towards opening my childish heart to sympathize with these poor suffering bleeding ones. 1 thank the Lord for it; and to this time I remember that doll and her kind advice with feelings which bring tears into my eyes. W e have been spending 10 days in this lovely little village at Dr. Farnsworth's and lecturing in the vicinity every other day for Sister has a troublesome little cough that just keeps her good for nothing brother Weld in the way of lecturing: she gets cold continually and I dont know what to do with her, sometimes wish she was safe in Phil'a for I think this climate must be injurious to her lungs; then again she says her mind has never got over one week of hard work when we first set off to hold meetings, so we are going to Brookline for her to rest. I am quite well, for I take good care of myself, for instance when I hold forth for 2 hours and ride 14 miles as I did yesterday, I retire at 8 Oclock and take a good rest, and then I am as strong as ever and ready to run over the hills in the morning. I tho't thou promisedst to go to thy Fathers farm and hoe corn and potatoes. If Cornelia is not a very good Abolitionist I think she will certainly quarrel and scold about thy breach of promise, for I hear thou art poring over great musty volumes in the libraries of tha: miserable place N.Y. How does it agree with thy health? Last but not least we thank thee very much for the books, papers, scraps, etc. which came safely to hand. I hope to study the Law book at brother Philbricks where we go on the 14th. Thanks too foi that scratchification; some words N O T de-

cyphered yet but as practice makes perfect, perhaps we shall learn in progress of time how to read all thy hieroglyphics. I enclose $10; pay thyself what we owe thee and keep the rest. W e shall probably want other things from N . Y . Pay R . Williams (2 for the Emancipator I asked him to send to Elizabeth Pease of Eng. E. Wright I owe for some pamphlets G . Thom[p]son sent me to his care, and thyself for the binding of those books, and the law book. 14—Yesterday the sabbath, rode 12 miles to lecture at Roxboro, brother Cross having written us a pressing invitation to come and plead the cause of God's perishing poor in his pulpit. It so happened that yesterday was the only day we could do so before we left for Boston. Found his meeting crammed to overflowing. O! what a feeling, to see such a congregation waiting for the words that shall fall from M Y unworthy lips. Thou knowest it dear brother, and can understand all about it except that 1 am a woman. I spoke an hour and a half and then stopped and took some refreshment with his family. He says J. Woodbury is against our womanhood and that as all the Congregational ministers except himself (about here 1 mean) are opposed, he expects to have to fight a battle at their next meeting; and that he means to throw down the gauntlet about women's preaching. W e pointed out some texts he had not tho't of and tried to throw our views before his mind. May the Lord open his heart more and more on this subject and sustain him in the sore conflict he will have to wage, if he is faithful in pleading for womans essential rights. I have no doubt that posterity will read withal women were not permitted to preach the gospel, with as much amazement and indignation as we do that no colored man in No. Ca. is allowed this holy right. Now we want thee to sustain us on the high ground of M O R A L R I G H T , not of Quaker peculiarity. This question must be met now; let us do it as moral beings, and not try to turn a S E C T A R I A N peculiarity to the best account for the benefit of Abolitionism. W E do not stand on Quaker ground, but on Bible ground and moral right. What we claim for ourselves, we claim for every woman whom God has called and qualified with gifts and graces. Can't thou stand just here side bv side with us? W e have seen the last Emancipator and are satisfied. It may do to take such ground now but like the little city of Agar it must soon be abandoned for the munition of rocks high above the plain of Sectarianism. Mary Parker sent us word that the Boston women would stand by us if every

AMERICAN PROBLEMS body else forsook us. A. Weston has been here with us and is very strong. She is a charming little woman. Farewell may the Lord speedily restore thee to health and prepare thee for the field again

559

with a double portion of His holy spirit is the prayer of Thy sister in the bonds of woman and the slave A. E. Gé.

The Underground Railroad BY WILLIAM A B R A M G A L L O W A Y AND RICHARD E D E N , T w o SENGERS SECRETED IN A V E S S E L

LOADED

PASWITH

SPIRITS OF T U R P E N T I N E . SHROUDS PREPARED TO P R E V E N T B E I N G S M O K E D TO D E A T H PHILADELPHIA branch of the Underground Rail Road was not fortunate in having very frequent arrivals from North Carolina. Of course such of her slave population as managed to become initiated in the mysteries of traveling North by the Underground Rail Road were sensible enough to find out nearer and safer routes than through Pennsylvania. Nevertheless the Vigilance Committee of Philadelphia occasionally had the pleasure of receiving some heroes who were worthy to be classed among the bravest of the brave, no matter who they may be who have claims to this distinction. In proof of this bold assertion the two individuals whose names stand at the beginning of this chapter are presented. Abram was only twenty-one years of age, mulatto, five feet six inches high, intelligent and the picture of good health. "What was your master's name?" inquired a member of the Committee. "Milton Hawkins," answered Abram. "What business did Milton Hawkins follow?" again queried said member. "He was chief engineer on the Wilmington and Manchester Rail Road" (not a branch of the Underground Rail Road), responded Richard. "Describe him," said the member. "He was a slim built, tall man with whiskers. He was a man of very good disposition. I always belonged to him; he owned three. He always said he would sell before he would use a whip. His wife was a very mean woman; she would whip contrary to his orders." " W h o was your father?" was further inquired. "John Wesley Galloway," was the prompt response. "Describe your father?" "He was captain of a government vessel; he recognized me as his son, and protected me as far as he was allowed so to do; he lived at Smithfield, North Carolina. Abram's master, Milton Hawkins, lived at Wilmington, N . C." "What prompted you to escape?" was next asked. "Because times were hard and I THE

STILL

could not come up with my wages as I was required to do, so I thought I would try and do better." At this juncture Abram explained substantially in what sense times were hard, &c. In the first place he was not allowed to own himself; he, however, preferred hiring his time to serving in the usual way. This favor was granted Abram; but he was compelled to pay $1$ per month for his time, besides finding himself in clothing, food, paying doctor bills, anda head tax of $15 a year. Even under this master, who was a man of very good disposition, Abram was not contented. In the second place, he "always thought Slavery was wrong," although he had "never suffered any personal abuse." Toiling month after month the year round to support his master and not himself, was the one intolerable thought. Abram and Richard were intimate friends, and lived near each other. Being similarly situated, they could venture to communicate the secret feelings of their hearts to each other. Richard was four years older than Abrain, with not quite so much Anglo-Saxon blood in his veins, but was equally as intelligent, and was by trade, a "fashionable barber," wellknown to the ladies and gentlemen of Wilmington. Richard owed service to Mrs. Mary Loren, a widow. "She was very kind and tender to all her slaves." "If I was sick," said Richard, "she would treat me the same as a mother would." She was the owner of twenty, men, women and children, who were all hired out, except the children too young for hire. Besides having his food, clothing and doctor's expenses to meet, he had to pay the "very kind and tender-hearted widow" $11.50 per month, and head tax to the State, amounting to twenty-five cents per month. It so happened, that Richard at this time, was involved in a matrimonial difficulty. Contrary to the laws of North Carolina, he had lately married a free girl, which was an indictable offence, and for which the penalty was then in soak for him—said penalty to consist of thirty-nine lashes, and imprisonment at the discretion of the judge. So Abram and Richard put their heads together, and resolved to try the Underground Rail Road.

560

THE IMPENDING

T h e y concluded that liberty was worth dying for, and that it was their duty to strike for Freed o m even if it should cost them their lives. T h e next thing needed, was information about the Underground Rail Road. Before a great while the captain of a schooner turned up, from Wilmington, Delaware. Learning that his voyage extended to Philadelphia, they sought to find out whether this captain was true to Freedom. T o ascertain this fact required no little address. It had to be done in such a w a y , that even the captain would not really understand w h a t they were up to, should he be found untrue. In this instance, h o w ever, he was the right man in the right place, and v e r y well understood his business. A b r a m and Richard made arrangements with him to bring them a w a y ; they learned when the vessel w o u l d start, and that she was loaded with tar, rosin, and spirits of turpentine, amongst w h i c h the captain was to secrete them. But here came the difficulty. In order that slaves might not be secreted in vessels, the slave-holders of Narth Carolina had procured the enactment of a law requiring all vessels coming N o r t h to be smoked. T o escape this dilemma, the inventive genius of A b r a m and Richard soon devised a safe-guard against the smoke. T h i s safe-guard consisted in silk oil cloth shrouds, made large, with drawing strings, which, w h e n pulled over their heads, might be drawn v e r y tightly around their waists, whilst the process of smoking might be in operation. A bladder of water and towels were provided, the latter to be w e t and held to their nostrils, should there be need. In this manner they had determined to struggle against death for liberty. T h e hour approached for being at the wharf. A t the appointed time they were on hand ready to go on the boat; the captain secreted them, according to agreement. T h e y were ready to run the risk of being smoked to death; but as good luck would have it, the law was not carried into effect in this instance, so that the "smell of smoke was not upon them." T h e effect of the turpentine, however, of the nature of which they were totally ignorant, was worse, if possible, than the smoke would have been. T h e blood was literally drawn from them at every pore in frightful quantities. But as heroes of the bravest type they resolved to continue steadfast as long as a pulse continued to beat, and thus they finally conquered. T h e invigorating northern air and the kind treatment of the Vigilance Committee acted like a charm upon them, and they improved very rapidly from their exhaustive and heavy loss of blood. Desiring to retain some memorial of them, a member of the Committee begged one of their

CONFLICT

silk shrouds, and likewise procured an artist t o take the photograph of one of them; which keepsakes have been valued very highly. In the regular order of arrangements the wants of A b r a m and Richard were duly met by the Committee, financially and otherwise, and they were f o r w a r d e d to Canada. A f t e r their safe arrival in Canada, Richard addressed a member of the Committee thus: KINGSTON, J u l y ÎO, 1857

Friend:—I take the opertunity of wrighting a f e w lines to let y o u no that w e air all in good health hoping thos f e w lines may find y o u and your family engoying the same blessing. W e arived in King all saft Canada W e s t A b r a m Galway gos to work this morning at $1 75 per day and John pediford is at w o r k f o r mr george mink and i will opne a shop f o r m y self in a f e w days M y wif will send a daugretipe t o y o u r cair whitch you will pleas to send on to me Richard Edons to the cair of George Mink KingsB ton C W MR. WILLIAM STILL—Dear

Yours with Respect,

RICHARD E D O N S

Abram, his comrade, allied himself faithfully to John Bull until Uncle Sam became involved in the contest with the rebels. In this hour of need A b r a m hastened back to North Carolina to help fight the battles of Freedom. H o w well he acted his part, we are not informed. W e o n l y k n o w that, after the war was over, in the reconstruction of N o r t h Carolina, A b r a m was promoted to a seat in its Senate. H e died in office only a f e w months since. T h e portrait is almost a "fac-simile." ESCAPE

OF JOHN

HENRY

HILL

FROM THE

SLAVE

A U C T I O N IN R I C H M O N D , ON THE FIRST D A Y

OF

J A N U A R Y , 1853 JOHN H E N R Y at that time, was a little turned of twenty-five years of age, full six feet high, and remarkably well proportioned in every respect. He was rather of a brown color, with marked intellectual features. John was b y trade, a carpenter, and was considered a competent w o r k man. T h e year previous to his escape, he hired his time, for which he paid his owner $ i j o . T h i s amount John had fully settled up the last day of the year. A s he was a young man of steady habits, a husband and father, and withal an ardent lover of Liberty; his owner, John Mitchell, evidently observed these traits in his character, and concluded that he was a dangerous piece of property to keep; that his worth in money could be more easily managed than the man. Consequently, his master unceremoniously, without intimating in any w a y to John, that he was to be sold, took him

A M E R I C A N

to Richmond, on the first day of January (the great annual sale d a y ) , and directly to the slaveauction. Just as John was being taken into the building, he was invited to submit to hand-cuffs. As the thought flashed upon his mind that he was about to be sold on the auction-block, he grew terribly desperate. "Liberty or death" was the watchword of that awful moment. In the twinkling of an eye, he turned on his enemies, with his fist, knife, and feet, so tiger-like, that he actually put four or five men to flight, his master among the number. His enemies thus suddenly baffled, John wheeled, and, as if assisted by an angel, strange as it may appear, was soon out of sight of his pursuers, and securely hid away. This was the last hour of John Henry's slave life, but not, however, of his struggles and sufferings for freedom, for before a final chance to escape presented itself, nine months elapsed. The mystery as to where, and how he fared, the following account, in his own words, must explain— Nine months I was trying to get away. I was secreted f o r a long time in a kitchen of a merchant near the corner of Franklyn and 7th streets, at Richmond, where I was well taken care of, by a lady friend of my mother. When I got T i r e d of staying in that place, I wrote myself a pass to pass myself to Petersburg, here I stopped with a v e r y prominent Colored person, who was a friend to Freedom stayed here until two white friends told other friends if I was in the city to tell me to go at once, and stand not upon the order of going, because they had hard a plot. I wrot a pass, started f o r Richmond, Reached Manchester, got off the Cars walked into Richmond, once more got back into the same old Den, Stayed here from the 16th of Aug. to 12th Sept. On the n t h of Sept. 8 o'clock P. M. a message came to me that there had been a State Room taken on the steamer City of Richmond f o r my benefit, and I assured the party that it would be occupied if God be willing. Before 10 o'clock the next morning, on the 12th, a beautiful Sept. day, I arose early, wrote my pass f o r N o r f o l k left my old Den with a many a good bye, turned out the back way to 7th St., thence to Main, down Main behind 4 night waich to old Rockett's and after about 20 minutes of delay I succeed in Reaching the State Room. M y Conductor was very much Excited, but I felt as Composed as I do at this moment, for I had started from my Den that morning for Liberty or f o r Death providing myself with a Brace of Pistéis. Yours truly J. H . H I L L . A private berth was procured for him on the steamship City of Richmond, f o r the amount of

PROBLEMS

561

$12 j , and thus he was brought on safely to Philadelphia. While in the city, he enjoyed the hospitalities of the Vigilance Committee, and the greetings of a number of friends, during the several days of his sojourn. T h e thought of his wife, and two children, left in Petersburg, however, naturally caused him much anxiety. Fortunately, they were free, therefore, he was not without hope of getting them; moreover, his wife's father (Jack McCracy), was a free man, well known, and very well to do in the world, and would not be likely to see his daughter and grandchildren suffer. In this particular, Hill's lot was of a favorable character, compared with that of most slaves leaving their wives and children. FIRST LETTER ON ARRIVING IN CANADA TORONTO, October 4th, 1853 take this method of informing you that I a m well, and that I got to this city all safe and sound, though I did not get here as soon as I expect. I left your city on Saterday and I was on the way untel the Friday following. I got to N e w York the same day that I left Philadelphia, but I had to stay there untel Monday evening. I left that place at six o'clock. I got to Albany next morning in time to take the half past six o'clock train for Rochester, here I stay untel Wensday night. T h e reason I stay there so long Mr. Gibbs given me a letter to M r Morris at Rochester. I left that place Wensday, but I only got five miles from that city that night. I got to Lewiston on Thurday afternoon, but too late for the boat to this city. I left Lewiston on Friday at one o'clock, got to this city at five. Sir I found this to be a very handsome city. I like it better than any city I ever saw. It are not as large as the city that you live in, but it is very large place much more so than I expect to find it. I seen the gentleman that you given me letter to. I think him much of a gentleman. I got into work on Monday. T h e man whom I am working for is name Myers; but I expect to go to work for another man by name of Tinsly, who is a master workman in this city. He says that he will give me work next week and everybody advises me to work f o r Mr. Tinsly as there more surity in him. DEAR S I R : — I

Mr. Still, I have been looking and looking for my friends for several days, but have not seen nor heard of them. I hope and trust in the Lord A l mighty that all things are well with them. M y dear sir I could feel so much better sattisfied if I could hear from my wife. Since I reached this city I have talagraphed to friend Brown to send

562

T H E

I M P E N D I N G

my thing to me, but I cannot hear a word from no one at all. I have written to Mr. Brown two or three times since I left the city. I trust that he has gotten my wife's letters, that is if she has written. Please direct your letters to me, near the corner Sarah and Edward street, until I give y o u further notice. Y o u will tell friend B. how to direct his letters, as I forgotten it when I writt to him, and ask him if he has heard anything from Virginia. Please to let me hear from him without delay for my very soul is trubled about my friends w h o m I expected to of seen here before this hour. Whatever y o u do please to write. I shall look for y o u paper shortly. Belive me sir to be y o u r well wisher. JOHN H .

HILL.

SECOND LETTER EXPRESSIONS OF GRATITUDE—THE CUSTOM HOUSE REFUSES TO CHARGE H I M DUTY

HE IS GREATLY CON-

CERNED FOR HIS W I F E

TORONTO, October 30th, i 8 j j . M Y DEAR FRIEND:—I n o w w r i t e to i n f o r m y o u

that I have received my things all safe and sound, and also have shuck hand with the friend that you send on to this place one of them is stopping with me. His name is Chas. Stuert, he seemes to be a tolerable smart fellow. I Rec'd my letters. 1 have taken this friend to see Mr. Smith. However will give him a place to board unteli he can get to work. I shall do every thing I can for them all that

C O N F L I C T

I see the gentleman wish you to see his wife and let her know that he arrived safe, and present his love to her and to all the friend. Mr. Still, I am under ten thousand obligation to you for your kindness when shall I ever repay? S. speek very highly of you. I will state to you what Custom house master said to me. He ask me when he Presented my efects are these your efects. I answered yes. He then ask me was I going to settle in Canada. I told him I was. He then ask me of my case. I told all about it. H e said I am happy to see you and all that will come. He ask me how much I had to pay for my Paper. I told him half dollar. H e then told me that I should have m y money again. He a Rose from his seat and got m y money. So my friend you can see the people and tell them all this is a land of liberty and believe they will find friends here. M y best love to all. M y friend I must call upon you once more to do more kindness for me that is to write to m y wife as soon as you get this, and tell her when she gets ready to eome she will pack and consign her things to you. You will give her some instruction, but not to your expenses but to her own. W h e n you write direct your letters to Phillip Ubank, Petersburg, V a . M y Box arrived here the 27th. M y dear sir I am in a hurry to take this friend to church, so I must close by saying I am your humble servant in the cause of liberty and humanity. JOHN H .

HILL.

MANIFEST which Canning had found characteristic of the United States in the twenties did not break through her boundaries again until the annexation of Texas. From that date until the Civil War, the country's urge to expand found vent in war, conquest, filibustering, and orations on "manifest destiny." That phrase became a catchword in 1846 during the debate on the Oregon boundary, when Robert Winthrop of Massachusetts told the House of Representatives that he would join the advocates of our "manifest destiny" to rule the Western Hemisphere on the day they showed him the clause in Father Adam's will which had made them that bequest. Winthrop's words soon became a slogan, but the phrase was not coined by him. It is to John L. O'Sullivan (1813-1895), editor of the Democratic Review, that Julius Pratt attributes the first use of the words, not in connection with T H E AGGRESSIVE EXPANSIONISM

DESTINY the dispute over the Oregon boundary but in an article on Texas. In that article, which appeared in the JulyAugust, 1845, issue, O'Sullivan called for a halt to criticism of our annexation policy. Had we not done as we did, other nations might have interfered with our "manifest destiny" to overspread the continent. Contrary to present policy, we had not acted unjustly toward Mexico; unwisely perhaps, but never unrighteously. Nor was annexation a proslavery measure. On the contrary, annexation would operate to draw slaves from the northern slave states to southern regions less opposed to a mingling of races. As for the opinion of other powers—the United States will soon outweigh them all in strength. O'Sullivan called his article "Annexation." The selection here reprinted is from The Democratic Review.

Annexation BY

JOHN

L.

IT IS TIME now for opposition to the Annexation of T e x a s to cease, all further agitation of the waters of bitterness and strife, at least in connexion with this question,—even though it may perhaps be required of us as a necessary condition of the freedom of our institutions, that w e must live on f o r ever in a state of unpausing struggle and excitement upon some subject of party division or other. But, in regard to Texas, enough has now been given to Party. It is time for the common duty of Patriotism to the Country to succeed;—or if this claim will not be recognized, it is at least time for common sense to acquiesce

O'SULLIVAN with decent grace in the inevitable and the irrevocable. T e x a s is n o w ours. A l r e a d y , before these words are written, her Convention has undoubtedly ratified the acceptance, by her Congress, of our proffered invitation into the Union; and made the requisite changes in her already republican form of constitution to adopt it to its future federal relations. H e r star and her stripe may already be said to have taken their place in the glorious blazon of our common nationality; and the sweep of our eagle's w i n g already includes within its circuit the wide extent of her fair and fertile land. She is no

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longer to us a mere geographical space—a certain combination of coast, plain, mountain, valley, forest and stream. She is no longer to us a mere country on the map. She comes within the dear and sacred designation of Our Country; no longer a "paysshe is a part of "la patrie;" and that which is at once a sentiment and a virtue, Patriotism, already begins to thrill for her too within the national heart. It is time then that all should cease to treat her as alien, and even adverse—cease to denounce and villify all and everything connected with her accession—cease to thwart and oppose the remaining steps for its consummation; or where such efforts are felt to be unavailing, at least to embitter the hour of reception by all the most ungracious frowns of aversion and words of unwelcome. There has been enough of all this. It has had its fitting day during the period when, in common with every other possible question of practical policy that can arise, it unfortunately became one of the leading topics of party division, of presidential electioneering. But tnat period has passed, and with it let its prejudices and its passions, its discords and its denunciations, pass away too. T h e next session of Congress will see the representatives of the new young State in their places in both our halls of national legislation, side by side with those of the old Thirteen. Let their reception into "the family" be frank, kindly, and cheerful, as befits such an occasion, as comports not less with our own self-respect than patriotic duty towards them. Ill betide those foul birds that delight to 'file their own nest, and disgust the ear with perpetual discord of ill-omened croak. W h y , were other reasoning wanting, in favor of now elevating this question of the reception of Texas into the Union, out of the lower region of our past party dissensions, up to its proper level of a high and broad nationality, it surely is to be found, found abundantly, in the manner in which other nations have undertaken to intrude themselves into it, between us and the proper parties to the case, in a spirit of hostile interference against us, for the avowed object of thwarting our policy and hampering our power, limiting our greatness and chocking the fulfilment of our manifest destiny to overspread the continent allotted by Providence for the free development of our yearly multiplying millions. This we have seen done by England, our old rival and enemy; and by France, strangely coupled with her against us, under the influence of the Anglicism strongly tinging the policy of her present prime minister, Guizot. T h e zealous activity with which this effort to defeat us was pushed by the representatives of those governments, together with the

character of intrigue accompanying it, fully constituted that case of foreign interference, which Mr. Clay himself declared should, and would unite us all in maintaining the common cause of our country against the foreigner and the foe. W e are only astonished that this effect has not been more fully and strongly produced, and that the burst of indignation against this unauthorized, insolent and hostile interference against us, has not been more general even among the party before opposed to Annexation, and has not rallied the national spiric and national pride unanimously upon that policy. W e are very sure that if Mr. Clay himself were now to add another letter to his former Texas correspondence, he would express this sentiment, and carry out the idea already strongly stated in one of them, in a manner which would tax all the powers of blushing belonging to some of his party adherents. It is wholly untrue, and unjust to ourselves, the pretence that the Annexation has been a measure of spoliation, unrightful and unrighteous—of military conquest under forms of peace and law—of territorial aggrandizement at the expense of justice, and justice due by a double sanctity to the weak. This view of the question is wholly unfounded, and has been before so amply refuted in these pages, as well as in a thousand other modes, that we shall not again dwell upon it. T h e independence of Texas was complete and absolute. It was an independence, not only in fact but of right. No obligation of duty towards Mexico tended in the least degree to restrain our right to effcct the desired recovery of the fair province once our own—whatever motives of policy might have prompted a more deferential consideration of her feelings and her pride, as involved in the question. If Texas became peopled with an American population, it was by no contrivance of our government, but on the express invitation of that of Mexico herself; accompanied with such guaranties of State independence, and the maintenance of a federal system analogous to our own, as constituted a compact fully justifying the strongest measures of redress on the part of those afterwards deceived in this guaranty, and sought to be enslaved under the yoke imposed by its violation. She was released, rightfully and absolutely released, from all Mexican allegiance, or duty of cohesion to the Mexican political body, by the acts and fault of Mexico herself, and Mexico alone. There never was a clearer case. It was not revolution; it was resistance to revolution; and resistance under such circumstances as left independence the necessary resulting state, caused by the abandonment of those with whom her former

T H E UNITED S T A T E S AND T H E W O R L D federal association had existed. What then can be more preposterous than all this clamor by Mexico and the Mexican interest, against Annexation, as a violation of any rights of hers, any duties of ours? W e would not be understood as approving in all its features the expediency or propriety of the mode in which the measure, rightful and wise as it is in itself, has been carried into effect. Its history has been a sad tissue of diplomatic blundering. How much better it might have been managed—how much more smoothly, satisfactorily and successfully! Instead of our present relations with Mexico—instead of the serious risks which have been run, and those plausibilities of opprobrium which we have had to combat, not without great difficulty, nor with entire success—instead of the difficulties which now throng the path to a satisfactory settlement of all our unse ttled questions with Mexico—Texas might, by a more judicious and conciliatory diplomacy, have been as securely in the Union as sne is now—her boundaries defined—California probably ours—and Mexico and ourselves united by closer ties than ever; of mutual friendship, and mutual support in resistance to the intrusion of European interference in the affairs of the American republics. All this might have been, we little doubt, already secured, had counsels less violent, less rude, less one-sided, less eager in precipitation from motives widely foreign to the national question, presided over the earlier stages of its history. W e cannot too deeply regret the mismanagement which has disfigured the history of this question; and especially the neglect of the means which would have been so easy, of satisfying even the unreasonable pretensions, and the excited pride and passion of Mexico. The singular result has been produced, that while our neighbor has, in truth, no real right to blame or complain—when all the wrong is on her side, and there has been on ours a degree of delay and forbearance, in deference to her pretensions, which is to be paralleled by few precedents in the history of other nations—we have yet laid ourselves open to a great deal of denunciation hard to repel, and impossible to silence; and all history will carry it down as a certain fact, that Mexico would have declared war against us, and would have waged it seriously, if she had not been prevented by that very weakness which should have constituted her best defence. W e plead guilty to a degree of sensitive annoyance—for the sake of the honor of our country, and its estimation in the public opinion of the world—which does not find even in satisfied conscience full consolation for the very necessity of

seeking consolation there. And it is for this state of things that we hold responsible that gratuitous mismanagement—wholly apart from the main substantial rights and merits of the question, to which alone it is to be ascribed; and which had its origin in its earlier stages, before the accession of Mr. Calhoun to the department of State. Nor is there any just foundation for the charge that Annexation is a great pro-slavery measure— calculated to increase and perpetuate that institution. Slavery had nothing to do with it. Opinions were and are greatly divided, both at the North and South, as to the influence to be exerted by it on Slavery and the Slave States. That it will tend to facilitate and hasten the disappearance of Slavery from all the northern tier of the present Slave States, cannot surely admit of serious question. The greater value in Texas of the slave labor now employed in those States, must soon produce the effect of draining off that labor southwardly, by the same unvarying law that bids water descend the slope that invites it. Every new Slave State in Texas will make at least one Free State from among those in which that institution now exists —to say nothing of those portions of Texas on which slavery cannot spring and grow—to say nothing of the far more rapid growth of new States in the free West and Northwest, as these fine regions are overspread by the emigration fast flowing over them from Europe, as well as from the Northern and Eastern States of the Union as it exists. On the other hand, it is undeniably much gained for the cause of the eventual voluntary abolition of slavery, that it should have been thus drained off towards the only outlet which appeared to furnish much probability of the ultimate disappearance of the negro race from our borders. The Spanish-Indian-American populations of Mexico, Central America and South America, afford the only receptacle capable of absorbing that race whenever we shall be prepared to slough it off—to emancipate it from slavery, and (simultaneously necessary) to remove it from the midst of our own. Themselves already of mixed and confused blood, and free from the "prejudices" which among us so insuperably forbid the social amalgamation which can alone elevate the Negro race out of a virtually servile degradation even though legally free, the regions occupied by those populations must strongly attract the black race in that direction; and as soon as the destined hour of emancipation shall arrive, will relieve the question of one of its worst difficulties, if not absolutely the greatest. No—Mr. Clay was right when he declared that Annexation was a question with which slavery

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had nothing to do. The country which was the subject of Annexation in this case, from its geographical position and relations, happens to be— or rather the portion of it now actually settled, happens to be—a slave country. But a similar process might have taken place in proximity to a different section of our Union; and indeed there is a great deal of Annexation yet to take place, within the life of the present generation, along the whole line of our northern border. Texas has been absorbed into the Union in the inevitable fulfilment of the general law which is rolling our population westward; the connexion of which with that ratio of growth in population which is destined within a hundred years to swell our numbers to the enormous population of two hundred and fifty millions (if not more), is too evident to leave us in doubt of the manifest design of Providence in regard to the occupation of this continent. It was disintegrated from Mexico in the natural course of events, by a process perfectly legitimate on its own part, blameless on ours; and in which all the censures due to wrong, perfidy and folly, rest on Mexico alone. And possessed as it was by a population which was in truth but a colonial detachmcnt from our own, and which was still bound by myriad ties of the very heartstrings to its old relations, domestic and political, their incorporation into the Union was not only inevitable, but the most natural, right and proper thing in the world—and it is only astonishing that there should be any among ourselves to say it nay. In respect to the institution of slavery itself, we have not designed, in what has been said above, to express any judgment of its merits or demerits, pro or con. National in its character and aims, this Review abstains from the discussion of a topic pregnant with embarrassment and danger—intricate and double-sided—exciting and embittering —and necessarily excluded from a work circulating equally in the South as in the North. It is unquestionably one of the most difficult of the various social problems which at the present day so deeply agitate the thoughts of the civilized world. Is the negro race, or is it not, of equal attributes and capacities with our own? Can they, on a large scale, coexist side bv side in the same country on a footing of civil and social equality with the white race? In a free competition of labor with the latter, will they or will they not be ground down to a degradation and misery worse than slavery? When we view the condition of the operative masses of the population in England and other European countries, and feel all the difficulties of the great problem, of the distribution of the fruits of production between capital,

skill and labor, can our confidence be undoubting that in the present condition of society, the conferring of sudden freedom upon our negro race would be a boon to be grateful for? Is it certain that competitive wages are very much better, for a race so situated, than guarantied support and protection? Until a still deeper problem shall have been solved than that of slavery, the slavery of an inferior to a superior race—a relation reciprocal in certain important duties and obligations—is it certain that the cause of true wisdom and philanthropy is not rather, for the present, to aim to meliorate that institution as it exists, to guard against its abuses, to mitigate its evils, to modify it when it may contravene sacred principles and rights of humanity, by prohibiting the separation of families, excessive severities, subjection to the licentiousness of mastership, &c.? Great as may be its present evils, is it certain that we would not plunge the unhappy Helot race which has been entailed upon us, into still greater ones, by surrendering their fate into the rash hands of those fanatic zealots of a single idea, who claim to be their special friends and champions? Many of the most ardent social reformers of the present day are looking towards the idea of Associated Industry as containing the germ of such a regeneration of society as will relieve its masses from the hideous weight of evil which now depresses and degrades them to a condition which these reformers often describe as no improvement upon any form of legal slavery—is it certain, then, that the institution in question—as a mode of society, as a relation between the two races, and between capital and labor,—does not contain some dim undeveloped germ of that very principle of reform thus aimed at, out of which proceeds some compensation at least for its other evils, making it the duty of true reform to cultivate and develope the good, and remove the evils? T o all these, and the similar questions which spring out of any intelligent reflection on the subject, we attempt no answer. Strong as are our sympathies in behalf of liberty, universal liberty, in all applications of the principle not forbidden by great and manifest evils, we confess ourselves not prepared with any satisfactory solution to the great problem of which these questions present various aspects. Far from us to say that either of the antagonist fanaticisms to be found on either side of the Potomac is right. Profoundly embarrassed amidst the conflicting elements entering into the question, much and anxious reflection upon it brings us as yet to no other conclusion than to the duty of a liberal tolerance of the honest differences of both sides; together with the

THE UNITED STATES AND THE WORLD certainty that whatever good is to be done in the case is t o be done only by the adoption of very different modes of action, prompted by a very different spirit, from those which have thus far, a m o n g us, characterized the labors of most of those who claim the peculiar title of "friends of the slave" and "champions of the rights of man." W i t h no friendship for slavery, though unprepared to excommunicate to eternal damnation, with bell, book, and candle, those who are, we see nothing in the bearing of the Annexation of T e x a s on that institution to awaken a doubt of the wisd o m of that measure, or a compunction for the humble part contributed by us towards its consummation. California will, probably, next fall away f r o m the loose adhesion which, in such a country as Mexico, holds a remote province in a slight equivocal kind of dependence on the metropolis. Imbecile and distracted, Mexico never can exert any real governmental authority over such a country. T h e impotence of the one and the distance of the other, must make the relation one of virtual independence; unless, by stunting the province of all natural growth, and forbidding that immigration which can alone develope its capabilities and fulfil the purposes of its creation, tyranny may retain a military dominion which is no government in the legitimate sense of the term. In the case of California this is now impossible. T h e AngloSaxon f o o t is already on its borders. Already the advance guard of the irresistible army of AngloSaxon emigration has begun to pour down upon it, armed with the plough and the rifle, and marking its trail with schools and colleges, courts and representative halls, mills and meeting-houses. A population will soon be in actual occupation of California, over which it will be idle for Mexico t o dream of dominion. T h e y will necessarily become independent. All this without agency of our government, without responsibility of our people —in the natural flow of events, the spontaneous working of principles, and the adaptation of the tendencies and wants of the human race to the elemental circumstances in the midst of which they find themselves placed. And they will have a right to independence—to self-government—to the possession of the homes conquered from the wilderness by their own labors and dangers, sufferings and sacrifices—a better and a truer right than the artificial title of sovereignty in Mexico a thousand miles distant, inheriting from Spain a title g o o d only against those who have none better. T h e i r right to independence will be the natural right of self-government belonging to any community strong enough to maintain it—distinct

5&7

in position, origin and character, and free f r o m any mutual obligations of membership of a common political body, binding it to others by the duty of loyalty and compact of public faith. T h i s will be their title to independence; and by this title, there can be no doubt that the population now fast streaming down upon California will both assert and maintain that independence. Whether they will then attach themselves to our Union or not, is not to be predicted with any certainty. Unless the projected rail-road across the continent to the Pacific be carried into effect, perhaps they may not; though even in that case, the day is not distant when the Empires of the Atlantic and Pacific would again flow together into one, as soon as their inland border should approach each other. But that great work, colossal as appears the plan on its first suggestion, cannot remain long unbuilt. Its necessity f o r this very purpose of binding and holding together in its iron clasp our fast settling Pacific region with that of the Mississippi valley—the natural facility of the route—the ease with which any amount of labor for the construction can be drawn in from the overcrowded populations of Europe, to be paid in the lands made valuable by the progress of the work itself—and its immense utility to the commerce of the world with the whole eastern coast of Asia, alone almost sufficient for the support of such a road—these considerations give assurance that the day cannot be distant which shall witness the conveyance of the representatives from Oregon and California to Washington within less time than a few years ago was devoted to a similar journey by those from Ohio; while the magnetic telegraph will enable the editors of the "San Francisco Union," the "Astoria Evening Post," or the "Nootka Morning N e w s " to set up in type the first half of the President's Inaugurai, before the echoes of the latter half shall have died away beneath the lofty porch of the Capitol, as spoken from his lips. Away, then, with all idle French talk of balances of power on the American Continent. T h e r e is no growth in Spanish America! Whatever progress of population there may be in the British Canadas, is only for their own early severance of their present colonial relation to the little island three thousand miles across the Atlantic; soon to be followed by Annexation, and destined to swell the still accumulating momentum of our progress. And whatsoever may hold the balance, though they should cast into the opposite scale all the bayonets and cannon, not only of France and England, but of Europe entire, how would it kick the beam against the simple solid weight of

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the two hundred and fifty or tthree hundred millions—and American millions—destined to gather

THE OPENING AMERICA'S PRESSURE on her borders was not limited to the W e s t e r n Hemisphere. T h o u g h the United States did not seek to extend its physical conquest b e y o n d the continental domain, it w a s anxious to expand its commercial activities in the Pacific- American trade with China, w h i c h had begun almost as soon as her independence w a s recognized, increased after 1 8 1 5 and again w h e n the Opium W a r of 1 8 3 9 42 opened more of China to foreign enterprise. Commercial interest and the hardships of A m e r i c a n whalers w r e c k e d off the Japanese islands w a k e n e d America's; desire to penetrate the kingdom. N a v a l officers had attempted to touch at Y e d o and Nagasaki in 1846, but their ships w e r e driven o f f . T h e discovery of gold in California, the increase in steamship traffic, which made coaling stations a necessity, and the g r o w t h of trade between San Francisco and Shanghai all turned American attention to the "hermit nation" of Japan which lay on the main route between the west and China. T h e failure of 1846 was repeated in 1851 when another American naval officer was denied entrance to Japanese ports. B y 1 8 5 2 - 5 3 , when Perrv's expedition sailed, a more militant A m e r i c a n policy had developed. T h e D u t c h in their Nagasaki compound — t h e one spot to w h i c h the Japanese had permitted E u r o p e a n access since 1641 when all foreigners had been driven f r o m the kingdom — w a r n e d the Japanese that the United States was an aggressive nation and that Perry might not be completely peaceable in his purpose. M a t t h e w Calbraith Perry ( 1 7 9 4 - 1 8 5 8 ) entered the n a v y as a midshipman fifteen years a f t e r his birth at N e w p o r t , Rhode Island. H e f o u g h t in the early years of the W a r of 1 8 1 2 , helped establish Liberia in 1820, visited revolutionary G r e e c e and Turkish Asia Minor in 1826, and then returned to shore duty. From 1833 to 1843, P e r r y was in command of the

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beneath the flutter of the stripes and stars, in the fast hastening year of the Lord 1945?

OF

JAPAN

N e w Y o r k n a v y yard, a post that permitted him to pioneer in the new naval techniques necessitated b y the introduction of steam. W h e n an expedition against Japan was decided on, P e r r y , with his experience in w a r , in naval technology and in dealing w i t h foreign p e o ples, was a logical choice as commander. Perry's instructions (the first t w o documents printed here) were largely drafted b y himself. H e was to make the Japanese understand the difference between the United States and E n g land and to stress our disinterested tolerance in religious matters as a means of securing his desires without the use of force. B u t his main effort was to obtain protection f o r shipwrecked American seamen, to get a coaling station, and to win permission f o r Americans to trade in Japan. Perry took a squadron of six ships—they were steam vessels and carried heavy armament of guns—and set out f o r the Far East. H e sailed into Japanese waters with f o u r of these ships; refused to go to Nagasaki to treat w i t h the Dutch; and insisted on delivering the President's letters directly to the Shogun's court. Perry retired then with the announcement that he would return f o r a reply in the spring. W h i l e P e r r y was negotiating, Russian and French squadrons sailed into the W e s t e r n Pacific and the Russian admiral even proposed joint action to the American commodore. Perry, whose views are made clear b y his instructions and his later letter suggesting A m e r ican occupation of a Japanese island as a f r e e port, refused that offer. T h e presence of f o r eign navies hastened Perry's return. In F e b r u ary, 1854, he dropped anchor in Y e d o B a y and demanded audience with the Mikado, o r the Shogun in his stead. P e r r y accepted the village of Yokohama instead of the c i t y of Y e d o as the locale f o r treaty parleys, h o w e v e r ,

THE UNITED STATES AND THE and in March, after an exchange of gifts and banquets, he secured a treaty. This opened two Japanese ports to foreigners and assured decent treatment of shipwrecked American sailors. If necessary, trade agreements and a consular convention might be concluded later,

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but in any case the United States was to have commercial privileges equal to those granted the most favored nation in the future. These selections are reprinted from Senate Executive Document Noi· 34, 33d Congress, 2d Session (Washington, 1 8 5 5 ) .

Correspondence Relative to the Naval Expedition to Japan BY

MATTHEW

S E C R E T A R Y OF THE N A V Y TO C O M M O D O R E P E R R Y

United States N a v y Department Washington, November 13, i8j2 SIR: SO soon as the steam frigate Mississippi shall be in all respects ready f o r sea, you will proceed in her, accompanied by the steamer Princeton, to Macao, or Hong Kong, in China, where the vessels of your command will rendezvous. Y o u will touch at such ports on your passage out as you may deem necessary for supplies, &c. It has been deemed necessary to increase the naval force of the United States in the East India and China seas, f o r reasons which will be found in the enclosed copy of a communication from the Secretary of State addressed to this department under date of November, 1852. T h e force at present there consists of the steam frigate Susquehanna, Commander Buchanan, sloop Plymouth, Commander Kelly, and sloop Saratoga, Commander Walker. T h e store ship Supply, Lieutenant Commanding Sinclair, is on her passage to that station. There will be added to this force, at the earliest day practicable, the ship-of-the-line Vermont, Captain Paulding; the steam frigate Mississippi, Captain McCluney; the corvette Macedonian, Captain Abbot; the steamer Princeton, Commander Lee; the steamer Alleghany, Commander Sands; the sloop Vandalia, Commander Pope; and the store-ship Southhampton, Lieutenant Commanding Boyle. With this you will receive a copy of the general instructions given to Commodore John H . Aulick, recently in command of the East India squadron, which you will consider as in full force and applicable to your command. Y o u will also receive herewith copies of other orders addressed to Commodore Aulick, which may require your attention after you reach your station. T h e special mission to Japan with which you have been charged by the government will require all your firmness and prudence, in respect to which the department entertains the fullest

C.

PERRY

confidence that they will be adequate f o r any emergency. In prosecuting the object of your mission to Japan you are invested with large discretionary powers, and you are authorized to employ dispatch vessels, interpreters, Kroomen or natives, and all other means which you may deem necessary to enable you to bring about the desired results. T h e suggestions contained in the accompanying letter "from the Secretary of State to this department you will consider as your guide, and follow as the instructions of the government. 1 Y o u will confer with the commissioner of the United States to China as to the course most advisable f o r you to pursue to give weight to his demands upon the Chinese government f o r the settlement of claims of citizens of the United States against that government. Y o u r attention is particularly invited to the exploration of the coasts of Japan and of the adjacent continent and islands. You will cause linear or perspective views to be made of remarkable places, soundings to be taken at the entrances of harbors, rivers, &c., in and near shoals, and collect all the hydrographical information necessary f o r the construction of charts. Y o u will be careful to collect from every reliable source, and particularly from our consular or commercial agents, all the information you can of the social, political, and commercial condition of the countries and places you may visit, especially of new objects of commercial pursuits. T o these ends you will call into activity all the various talents and acquisitions of the officers under your command. T h e results of such labors and of all such researches you will communicate to the department as often and as complete as practicable. W h a t events will transpire during your absence time alone can develope. T h e utmost caution and vigilance are enjoined upon all under your command. T h e act of March 2, 1837, " T o provide for the enlistment of boys for the naval service, and to 1 The letter immediately follows the selection.

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extend the term of enlistment of seamen," section χ provides, " T h a t when the time of service of any person enlisted for the navy shall expire while he is on board any of the public vessels of the United States employed on foreign service, it shall be the duty of the commanding officer of the fleet, squadron, or vessel, in which such person may be, to send him to the United States in some public or other vessel, unless his detention shall be essential to the public interests, in which case the said officer may detain him until the vessel in which he shall be serving shall return to the United States," &c.; and section 3 of the same act provides, "That such persons as may be detained after the expiration of their enlistment, under the next preceding section of this act, shall be subject in all respects to the laws and regulations for the government of the navy, untü their return to the United States; and all such persons as shall be so detained, and all such as shall voluntarily re-enlist, to serve until the return of the vessel in which they shall be serving, and their regular discharge therefrom in the United States, shall, while so detained, and while so serving under their reenlistment, receive an addition of one-fourth to their former pay." You will, therefore, should it be essential to the public interests, exercise the power conferred by the act above cited; or should it be found practicable, by new enlistments on the coasts you may visit, to keep up the complements of your vessels, you will send to the United States all persons whose times of service may expire during your cruise. You will, however, in all such cases, be governed by the exigencies of the service. A subject of great importance to the success of the expedition will present itself to your mind, in relation to communications to the prints and newspapers, touching the movements of your squadron, as well as in relation to all matters connected with the discipline and internal regulations of the vessels composing it. You will, therefore, enjoin upon all under your command to abstain from writing to friends or others upon those subjects. The journals and private notes of the officers and other persons in the expedition must be considered as belonging to the government, until permission shall be received from the Navy Department to publish them. For any supplies that you may need you will address yourself seasonably to the chief of the appropriate bureau, or take such measures to procure them as will best subserve the objects of your cruise. Before sailing, you will cause to be sent to the department correct muster-rolls of both vessels, conformably to the 29th article of the act for the

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better government of the navy of the United States, approved April 13, 1800. Tendering my best wishes for a successful cruise, and a safe return to your country and friends, for yourself, officers, and the companies of your ships, I am, very respectfully, your obedient servant. John P. Kennedy. Commodore M. C. PERRY, Appointed to command of the U. S. squadron in the Elast India and China seas, Norfolk, Va. MR. CONRAD TO MR. KENNEDY

Department of State Washington, November 5, 1852 SIR: AS the squadron destined for Japan will shortly be prepared to sail, I am directed by the President to explain the objects of the expedition, and to give some general directions as to the mode by which those objects are to be accomplished. Since the islands of Japan were first visited by European nations, efforts have constantly been made by the various maritime powers to establish commercial intercourse with a country whose large population and reputed wealth held out great temptations to mercantile enterprise. Portugal was the first to make the attempt, and her example was followed by Holland, England, Spain, and Russia; and finally by the United States. All these attempts, however, have thus far been unsuccessful; the permission enjoyed for a short period by the Portuguese to trade with the islands, and that granted to Holland to send annually a single vessel to the port of Nagasaki, hardly deserving to be considered exceptions to this remark. China is the only country which carries on any considerable trade with these islands. So rigorously is this system of exclusion carried out, that foreign vessels are not permitted to enter their ports in distress, or even to do an act of kindness to their own people. In 1831, a Japanese junk was blown out to sea, and, after drifting about for several months, was cast ashore near the mouth of the Columbia river, in Oregon. An American ship, the Morrison, undertook to carry the survivors of the crew back to their country, but, on reaching the bay of Yedo, she was fired into from the neighboring shore. She repaired to another part of the island and attempted to land, but meeting with the same reception there, she returned to America with the Japanese on board. When vessels are wrecked or driven ashore on the islands their crews are subjected to the most cruel treatment. T w o instances of this have recently occurred. In the year 1846, two American whaling ships, the Lagoda and the Lawrence, hav-

T H E UNITED S T A T E S A N D T H E W O R L D ing been wrecked on the island of Niphon, their crews were captured and treated with great barbarity, and it is believed that their lives were spared only through the intercession of the Dutch governor of Nagasaki. Every nation has undoubtedly the right to determine for itself the extent to which it will hold intercourse with other nations. The same law of nations, however, which protects a nation in the exercise of this right imposes upon her certain duties which she cannot justly disregard. Among these duties none is more imperative than that which requires her to succor and relieve those persons who are cast by the perils of the ocean upon her shores. This duty is, it is true, among those that are denominated by writers on public law imperfect, and which confer no right on other nations to exact their performance; nevertheless, if a nation not only habitually and systematically disregards it, but treats such unfortunate persons as if they were the most atrocious criminals, such nations may justly be considered as the common enemy of mankind. That the civilized nations of the world should for ages have submitted to such treatment by a weak and semi-barbarous people, can only be accounted for on the supposition that, from the remoteness of the country, instances of such treatment were of rare occurrence, and the difficulty of chastising it very great. It can hardly be doubted that if Japan were situated as near the continent of Europe or of America as it is to that of Asia, its government would long since have been either treated as barbarians, or been compelled to respect those usages of civilized states of which it receives the protection. This government has made two attempts to establish commercial intercourse with Japan. In the year 1832, a Mr. Roberts was appointed a special agent of the government, with authority to negotiate treaties with sundry nations in the east, and among others with Japan, but he died before he arrived at the island. In 1845, Commodore Biddle was sent with two vessels of war to visit Japan and ascertain whether its ports were accessible. He was cautioned, however, "not to excite a hostile feeling, or a distrust of the government of the United States." He proceeded to Yedo, but was told that the Japanese could trade with no foreign nations except the Dutch and Chinese, and was peremptorily ordered to leave the island and never to return to it. A personal indignity was even offered to Commodore Biddle, and it is not improbable that the barbarity which a short time afterwards was practised by these people towards the crew of the

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Lagoda, may have been in part occasioned by the forbearance which that excellent officer felt himself bound under his instructions to exercise towards them. Recent events—the navigation of the ocean by steam, the acquisition and rapid settlement by this country of a vast territory on the Pacific, the discovery of gold in that region, the rapid communication established across the isthmus which separates the two oceans—have practically brought the countries of the east in closer proximity to our own; although the consequences of these events have scarcely begun to be felt, the intercourse between them has already greatly increased, and no limits can be assigned to its future extension. The duty of protecting those American citizens who navigate those seas is one that can no longer be deferred. In the year i 8 j i , instructions were accordingly given to Commodore Aulick, then commanding our naval forces in the East Indies, to open a negotiation with the government of Japan. It is believed that nothing has been done under these instructions, and the powers conferred on Commodore Aulick are considered as superseded by those now given to Commodore Perry. The objects sought by this government are— ι. To effect some permanent arrangement for the protection of American seamen and property wrecked on these islands, or driven into their pons by stress of weather. 2. The permission to American vessels to enter one or more of their ports in order to obtain supplies of provisions, water, fuel, &c., or, in case of disasters, to refit so as to enable them to prosecute their voyage. It is very desirable to have permission to establish a depot for coal, if not on one of the principal islands, at least on some small uninhabited one, of which, it is said, there are several in their vicinity. 3. The permission to our vessels to enter one or more of their ports for the purpose of disposing of their cargoes by sale or barter. As this government has no right to make treaties for, or to redress the grievances of, other nations, whatever concessions may be obtained on either of the above points, need not, of course, apply in terms to the inhabitants or vessels of any other nation. This government, however, does not seek by this expedition to obtain any exclusive commercial advantage for itself, but, on the contrary, desires and expects that whatever benefits may result from it will ultimately be shared by the civilized world. As there can be no doubt that if the ports of the country are once opened to one

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nation they would soon be opened to all. It is believed, that for reasons hereinafter mentioned, any reference in your negotiations to the wrongs or claims of other nations, so far from promoting this object, would tend to defeat it. T h e next question is, how are the above mentioned objects to be attained? It is manifest, from past experience, that arguments or persuasion addressed to this people, unless they be seconded by some imposing manifestation of power, will be utterly unavailing. Y o u will, therefore, be pleased to direct the commander of the squadron to proceed, with his whole force, to such point on the coast of Japan as he may deem most advisable, and there endeavor to open a communication with the government, and, if possible, to see the emperor in person, and deliver to him the letter of introduction from the President with which he is charged. H e will state that he has been sent across the ocean by the President to deliver that letter to the emperor, and to communicate with his government on matters of importance to the two countries. T h a t the President entertains the most friendly feeling towards Japan, but has been surprised and grieved to learn, that when any of the people of the United States go, of their own accord, or are thrown by the perils of the sea within the dominions of the emperor, they are treated as if they were his worst enemies. He will refer particularly to the cases of the ships Morrison, Lagoda, and Lawrence, above mentioned. H e will inform him of the usages of this country, and of all Christian countries, in regard to shipwrecked persons and vessels, and will refer to the case of the Japanese subjects who were recently picked up at sea in distress and carried to California, from whence they have been sent to their own country; and will state that this government desires to obtain from that of Japan some positive assurance, that persons who may hereafter be shipwrecked on the coast of Japan, or driven by stress of weather into her ports, shall be treated with humanity; and to make arrangements for a more extended commercial intercourse between the two countries. T h e establishment of this intercourse will be found a difficult, but, perhaps, not an impossible task. T h e deep-seated aversion of this people to hold intercourse with Christian nations is said to be owing chiefly to the indiscreet zeal with which the early missionaries, particularly those of Portugal, endeavored to propagate their religion. T h e commodore will therefore say, that the government of this country, unlike those of every other Christian country, does not interfere with the

religion of its own people, much less with that of other nations. It seems that the fears or the prejudices of the Japanese are very much excited against the English, of whose conquests in the east, and recent invasion of China, they have probably heard. As the Americans speak the same language as the English, it is natural that they should confound citizens of the United States with British subjects. Indeed, their barbarous treatment of the crews of the vessels above referred to was partly occasioned by the suspicion that they were really English.—(See the statement of the crew of the Lagoda.) Comodore Perry will, therefore, explain to them that the United States are connected with no government in Europe. T h a t they inhabit a great country which lies directly between them and Europe, and which was discovered by the nations of Europe about the same time that Japan herself was first visited by them; 'hat the portion of this continent lying nearest to Europe was first settled by emigrants from that country, but that its population has rapidly spread through the country until it has reached the Pacific ocean. T h a t we have now large cities from which, with the aid of steam, Japan can be reached in twenty days. That our commerce with all that portion of the globe is, therefore, rapidly increasing, and that part of the ocean will soon be covered with our vessels. That, therefore, as the United States and Japan are becoming every day nearer and nearer to each other, the President desires to live in peace and friendship with the emperor; but that no friendship can long exist between them unless Japan should change her policy and cease to act towards the people of this country as if they were her enemies. That, however wise this policy may originally have been, it is unwise and impracticable now that intercourse between the two countries is so much more easy and rapid than it formerly was. If, after having exhausted every argument and every means of persuasion, the commodore should fail to obtain from the government any relaxation of their system of exclusion, or even any assurance of humane treatment of our shipwrecked seamen, he will then change his tone, and inform them in the most unequivocal terms that it is the determination of this government to insist, that hereafter all citizens or vessels of the United States that may be wrecked on their coasts, or driven by stress of weather into their harbors shall, so long as they are compelled to remain there, be treated with humanity; and that if any acts of cruelty should hereafter be practised upon citizens of this country, whether by the government or by the in-

THE UNITED STATES AND THE habitants of Japan, they will be severely chastised. In case.he should succeed in obtaining concessions on any of the points above mentioned, it is desirable that they should be reduced into the form of a treaty, f o r negotiating which he will be furnished with the requisite powers. H e will also be furnished with copies of the treaties made b y this government with China, Siam, and Muscat, which may serve him as precedents in drawing up any treaty he may be able to make. It would be well to have one or more of these translated into the Japanese tongue, which, it is presumed, can be done in China. He will bear in mind that, as the President has no power to declare war, his mission is necessarily of a pacific character, and will not resort to force unless in self defence in the protection of the vessels and crews under his command, or to resent an act of personal violence offered to himself, or to one of his officers. In his intercourse with this people, who are said to be proud and vindictive in their character, he should be courteous and conciliatory, but at the same time, firm and decided. H e will, therefore, submit with patience and forbearance to acts of discourtesy to which he may be subjected, by a people to whose usage it will not do to test by our standard of propriety, but, at the same time, will be careful to do nothing that may compromit, in their eyes, his own dignity, or that of the country. H e will, on the contrary, do everything to impress them with a just sense of the power and greatness of this country, and to satisfy them that its past forbearance has been the result, not of timidity, but of a desire to be on friendly terms with them. It is impossible by any instructions, however minute, to provide for every contingency that may arise in the prosecution of a mission of so peculiar and novel a character. For this reason, as well as on account of the remoteness of the scene of his operation, it is proper that the commodore should be invested with large discretionary powers, and should feel assured that any departure f r o m usage, or any error of judgment he may commit will be viewed with indulgence. T h e government of Holland has communicated to this government that instructions had been given to the superintendent of their factory at Dezima to promote, by every means in his power, the success of the expedition; and the kindness that has heretofore been shown by that officer towards our countrymen in captivity leaves no room f o r doubt that he will cheerfully fulfil these instructions. T h e commissioner of the United States to China

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has been directed to prefer certain claims of citizens of the United States against that government. As the presence of the squadron might give some additional weight to the demand, you will please direct its commander (if he finds he can do so without serious delay or inconvenience) to touch at Hong-Kong or Macao and remain there as long as he may deem it advisable. If the squadron should be able, without interfering with the main object for which it is sent, to explore the coasts of Japan and of the adjacent continent and islands, such an exploration would not only add to our stock of geographical knowledge, but might be the means of extending our commercial relations and of securing ports of refuge and supply for our whaling vessels in those remote seas. With this view he will be provided with powers authorizing him to negotiate treaties of amity and navigation with any and all established and independent sovereignties in those regions. In the event of such a voyage, he will inform himself, as far as practicable, of the population, resources, and natural productions of tne country, and procure and preserve specimens of the latter, and the seeds of such plants as may be peculiar to the country. He will be authorized by this department to draw on the Messrs. Baring Brothers & Co., of London, to a limited amount f o r the payment of guides, interpreters, messengers, &c., and of other expenses incident to his mission; as also f o r the purchase of such presents as it may be deemed advisable to make to promote the objects of his mission. I have the honor to be, very respectfully, your obedient servant, C. M. Conrad, Acting Secretary. H o n . J . P.

KENNEDY,

Secretary of the N a v y . C O M M O D O R E P E R R Y TO S E C R E T A R Y OF T H E

NAVY

U. S. Steam Frigate Mississippi, Madeira, December 14, 1852 SIR: Since leaving the United States I have had leisure to reflect more fully upon the probable result of my visit to Japan, and though there is still some doubt in my mind as to the chances of immediate success in bringing that strange government to any practicable negotiation, yet I feel confident that in the end the great object in view will be effected. As a preliminary step, and one of easy accomplishment, one or more ports of refuge and supply to our whaling and other ships must at once

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be securcd, and should the Japanese government object to the granting of such ports upon the main land, and they cannot be occupied without resort to force and bloodshed, then it will be desirable in the beginning, and indeed, necessary, that the squadron should establish places of rendezvous at one or t w o of the islands south of J a p a n , having a g o o d harbor, and possessing facilities for obtaining water and supplies, and by kindness and gentle treatment conciliate the inhabitants so as to bring about their friendly intercourse. T h e islands called the L e w Chew group are said to be dependencies of Japan, as conquered by that power centuries ago, but their actual sovereignty is disputed by the government of China. T h e s e islands come within the jurisdiction of the prince of Satsuma, the most powerful of the princes of the empire, and the same who caused the unarmed American ship Morrison, on a visit of m e r c y , to be decoyed into one of his ports and then fired upon f r o m the batteries hastily erected. H e exercises his rights more from the influence of the fear of the simple islanders than from any p o w e r to coerce their obedicnce; disarmed, as they long have been, f r o m motives of policy, they have no means, even if they had the inclination, to rebel against the grinding oppression of their rulers. N o w , it strikes me, that the occupation of the principle ports of those islands for the accommodation of our ships of war, and for the safe resort of merchant vessels of whatever nr.tion, would be a measure not only justified by the strictest rules of moral law, but what is also to be considered b y the laws of stern necessity; and the argument may be further strengthened by the certain consequences of the amelioration of the condition of the natives, although the vices attendant upon civilization may be entailed upon them. In my former commands upon the coast of A f r i c a and in the Gulf of Mexico, when it fell to m v lot to subjugate many towns and communities, I found no difficulty in conciliating the good will and confidence of the conquered people, by administering the unrestricted power I held rather to their comfort and protection than to their annoyance; and when the naval forces left, they carried with them the gratitude and good wishes of their former enemies; and so I believe that the people of the islands spoken of, if treated with strict justice and gentle kindness, will render confidence for confidence, and after a while the Japanese will learn to consider us their friends. In establishing those ports of refuge it will be desirable to provide the means of supply to the

vessels that may resort to them, and hence the necessity of encouraging the natives in the cultivation of fruits, vegetables, etc.; and to carry out in part this object, garden-seeds have been p r o vided; but to pursue the purpose still further, I have thought that if a few of the more simple agricultural implements of our own country were sent to me f o r use, and for presents, they would contribute most essentially to the end in view; such, for instance, as the common cultivator, the plough and harrow, spades, hoes of various kinds, the threshing and winnowing machines, and especially those inventions for separating the cotton and rice f r o m their husks. A n d with reference, also, to the subject of m y letter to Mr. Fulsom, chargé at the Hague, a c o p y of which has been enclosed to the Department of State, it would be good policy to counteract the discreditable machinations of the Dutch, b y circulating printed publications representing the true condition of the various governments of the world, and especially to set forth the extraordinary prosperity of the United States under its genial laws. T o effect this object, I am already provided with works for presentation, descriptive of the civil and political condition of the United States, such as the census tables, post office, and railroad reports, reports of the Indian and land offices, military and naval registers, also with the magnificent publications of the State of N e w Y o r k , etc. A n d I h i v e thought that a small printing press, with type and materials, would go far to facilitate our plans, by giving us the means of putting forth information calculated to disabuse the Japanese of the misrepresentations of the Dutch. T h e government of Japan keep in employment linguists in all modern languages; and such is their curiosity, that these publications, if admitted at all, would soon be translated. Having thus, according to my anticipations, established harbors of resort, and organized certain rules of equity to govern our intercourse with the natives in the payment for labor, supplies, &c., and having depots of provisions and coal near at hand, we shall be able to act with more effect in bringing about some friendly understanding with the imperial government. At all events, steamers, or whatever vessels that may be passing to and f r o m California and China, will find safe harbors in their way, and it may reasonably be expected that in the course of time the intercourse thus brought about will lead to a better understanding of our pacific intentions. It may be said that my anticipations are t o o sanguine. Perhaps they may be, but I feel a strong confidence of success. Indeed, success may be

T H E UNITED STATES AND THE commanded by our government, and it should be, under whatever circumstances, accomplished. The honor of the nation calls for it, and the interest of commerce demands it. When we look at the possessions in the east of our great maritime rival, England, and of the constant and rapid increase of their fortified ports, we should be admonished of the necessity of prompt measures on our part. By reference to the map of the world, it will be seen that Great Britain is already in possession of the most important points in the Elast India and China seas, and especially with reference to the China seas. Singapore commanding the southwestern, while Hong Kong covers the northeastern entrance, with the island of Labuan on the eastern coast of Borneo, an intermediate point, she will have the power of shutting up at will and controlling the enormous trade of those seas, amounting, it is said, in value to 300,000 tons of shipping, carrying cargoes certainly not under ¿ij,000,000 sterling.

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Fortunately the Japanese and many other islands of the Pacific are still left untouched by this unconscionable government; and, as some of them lay in a route of a commerce which is destined to become of great importance to the United States, no time should be lost in adopting active measures to secure a sufficient number of ports of refuge. And hence I shall look with much anxiety for the arrival of the Powhatan and the other vessels to be sent to me. I have thus exhibited, in this crude and informal communication, my views upon a subject which is exciting extraordinary attention throughout the world, and I trust that the department will approve the course I propose to pursue. With great respect, I am, sir, your most obedient servant, M. C Perry, Commanding East India Squadron— Hon. JOHN P. KENNEDY, Secretary of the Navy, Washington.

Part Six THE SECOND AMERICAN REVOLUTION

/. THE ELECTION THE ELECTION of i860 was one of the great turning points in American history. Tempers were exacerbated by the events of the previous years—the civil war in Kansas, John Brown's raid, the Dred Scott decision, the hard times following the panic of 1857; and political differences were intensified by all these. Politicians were reluctant to phrase the issue sharply: they still tried to discover formulas and compromises to avoid the impending conflict. But "squatter sovereignty" and "free soil" no longer held charms; while even the nativism of the Know-Nothings—the typical effort of demagogues to distract attention from the current pressing concerns—had lost its magic. The South knew its peculiar institution was in danger; the North was becoming increasingly critical of it. Harriet Beecher Stowe's Uncle Tom's Cabin (first published in 1852) continued to be read and wept over; Helper's Impending Crisis was published in the North and became the textbook of the enemies of slavery. Meanwhile, more and more, Northern and Western businessmen were beginning to understand that the Democratic party could not offer even half a loaf as far as economic progress was concerned. The Democrats. As i860 approached, the Democratic party was confronted by the horns of a dilemma. T o continue supporting Douglas's "squatter sovereignty" meant the repudiation of the Dred Scott decision and ultimately the surrender of political power. T o follow Taney meant that Democracy's appeal would be wholly sectional and that it must lose. These dreadful choices were posed at their convention at Charleston, South Carolina, in April, i860, and when neither the Northern Democrats—adhering to Douglas's position—nor the

OF i860

Southern Democrats—accepting the Taney formulation—would yield, the convention broke up in disorder. The Northern wing met in Baltimore on June 18 and nominated Douglas and H. V . Johnson of Georgia. The Southern wing also met in Baltimore ten days later and named John C. Breckinridge and Joseph Lane of Oregon. T o make confusion worse confounded, the remnants of the Whigs (largely Southern) and some Know-Nothings met on May 9 and nominated John Bell of Tennessee and Edward Everett of Massachusetts. They called their ticket the Constitutional Union party and helplessly they phrased pious platitudes: they were for "the Constitution of the country, the Union of the states, and the enforcement of the laws." The Republicans. This was going to be a Republican year and it was necessary to write a platform with consummate skill. On the slavery issue, the trimmers carried the day; on the economic questions, a bold and open appeal was made to the rising industrial capitalist class of North and West. The Republicans met on May 16 at Chicago and their platform threw a wide net to catch every disgruntled vote. The Republicans endorsed the Declaration of Independence and the Union; they attacked the Democratic party; they agreed that each state had the right to control its own domestic institutions. As far as the territories were concerned, the Wilmot Proviso was the correct formulation; therefore (without naming the Supreme Court), the Republicans declared that neither Congress nor a territorial legislature could legalize slavery in the territories. Also, they opposed the reopening of the African slave trade. This was, in short, a free-soil platform.

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A s far as economic questions went, however, there was no beating about the bush. T o the North, the Republicans promised protectionism, internal improvements, and a liberal immigration policy. T o the West, they held out homesteadism and a Pacific Railway. They were silent on money and finance—but it was plain that Republicans favored a national banking system and a sound currency. T h e Republicans were not wanting for candidates. Heading the list was William H. Seward, N e w York's Senator, erstwhile Whig but available because he was antislavery, antiKnow-Nothing, and for protection. Other aspirants were Simon Cameron of Pennsylvania, a staunch protectionist; Salmon P. Chase of Ohio, at various times a Whig, a Liberty party man, a Democrat, and Ohio's first Republican governor; Edward Bates of Missouri, brought up on the conservative W h i g tradition; and Abraham Lincoln of Illinois, once a Clay W h i g and now a free-soil Republican who had no emotional feelings about slavery. Seward led on the first and second ballots but did not have enough votes for a majority and the nomination. T o the surprise of the country—although his political managers were very astute and succeeded in taking advantage of the dislike in which Seward was held, as well as in promising Cabinet posts to the other candidates—Lincoln

SOUTHERN And yet, the South accepted it as such and despite all of Lincoln's soft words—he was not an Abolitionist; he favored gradual emancipation with compensation; the freed Negroes ought to be deported—the cotton South seceded. South Carolina took the first fatal step. On December 20, 1860, a convention especially called for that purpose declared the dissolution of "the union now subsisting between South Carolina and the other states, under the name of the 'United States of America.' " By February 4, 1861, South Carolina had been followed

REVOLUTION

was nominated on the third ballot. With him was named Hannibal Hamlin of Maine. The Campaign. The Republican campaign was skillfully managed. Lincoln made no speeches; but Republican orators plucked every string. In the West, they talked up homesteadism; in the German strongholds, they attacked the nativists; in New Jersey and Pennsylvania, they ran exclusively on the high-tariff plank. Only a tariff could raise wages, labor was told in Philadelphia; only a homestead law could make the worker a freeholder, labor was told in St. Louis. On slavery—to the chagrin of the Abolitionists—the Republicans were silent. Indeed, they took pains to assure the voters that the election of their candidate in no wise jeopardized the Union.

Lincoln was elected because of the four-way split. Lincoln's popular vote was 1,858,000 against 1,292,000 for Douglas, 850,000 for Breckinridge, and 646,000 for Bell; in short, he received almost 1,000,000 votes less than those of his opponents combined. But he won in the electoral college with 180 votes out of 303. Lincoln triumphed because he carried the old Northwest and New York—previously Democratic strongholds. He did not get a single popular vote in the cotton South. The Republicans did not have majorities in both Houses of Congress. Clearly, this was not a vote against the South and slavery

SECESSION out of the Union by Georgia, Alabama, Mississippi, Louisiana, and Florida; and on that day a convention at Montgomery, Alabama, drew up a provisional constitution for "The Confederate States of America." Jefferson Davis of Mississippi and Alexander H. Stephens were chosen President and Vice President respectively. And on February 23, Texas joined the Confederacy. The Opening Gun. Buchanan, still in office, would do nothing; Northern Abolitionists were relieved that the separation had occurred

INTRODUCTION so painlessly and declared that the erring seven should be permitted to "depart in peace"; efforts at compromise were started in Congress but without success; and Lincoln kept his own counsel. When he rose to deliver his First Inaugural Address in Washington on March 4, his remarks were conciliatory. He had no intention to interfere with slavery in the South; the Union had to be preserved; government property in the South—forts, custom houses— would be protected. He hoped the seceded states would soon learn the error of their ways. But events inexorably were moving toward a decision. There were two federal forts in the South—Pickens at Pensacola, Florida, and Sumter at Charleston, South Carolina—which were not taken by the Confederates and their commanders refused to surrender them. They were running short of supplies, however, and efforts had to be made to feed the beleaguered troops. One relief ship, The Star of the West, bound for Ft. Sumter, was fired on as she entered Charleston harbor and was compelled to turn back. Lincoln sent out a whole expedition; and when the Confederate government learned this, orders were given to reduce the fort. On April 12, the Southern guns opened fire and for thirty-four hours Ft. Sumter was under attack; then its commander, Major Anderson, surrendered—and the war was on. Meanwhile, Ft. Pickens was relieved, and it continued in federal hands throughout the war. In May and June, the Confederacy was joined by Arkansas, Virginia, North Carolina, and Tennessee. The Border states—Delaware, Maryland, Kentucky and Missouri—stayed out, in part because Lincoln in the beginning did not molest slavery, in part because there were powerful Unionist forces in these states. The western portion of Virginia was hostile to secession, with the result that in July, 1861, it separated from the Old Dominion and joined the Union as West Virginia. The Call to Arms. Lincoln did not summon Congress in special session until July. Assuming full responsibility—many of his acts had to be legalized later, for they were clearly unconsti-

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tutional—he proceeded to put the Union into a state of defense. On April 15, he issued a proclamation of "insurrection" and he called upon the states to furnish 75,000 militiamen for three months. He ordered the expansion of the army. He proclaimed blockades of Southern ports. He directed the Secretary of the Treasury to issue $2,000,000 in notes to meet defense expenditures. He suspended the writ of habeas corpus. When Congress met, in July, the Radical Republicans were in control with Stevens of Pennsylvania, Julian of Indiana, and Davis of Maryland as leaders in the House, and Sumner of Massachusetts, Wade of Ohio, and Chandler of Michigan the spokesmen for the group in the Senate. They proceeded to ratify the President's acts; and after die rout at Bull Run (July Ì1 ) they authorized the enlistment of 500,000 volunteers for periods running from 6 months to 3 years. Later, as the war was prolonged, volunteers were to be mustered in to serve for the duration. The Two Sides. On the face of it—in terms of the human and material resources of the two sections—the war promised to be brief, for the North's strength was immeasurably the greater. The North's white population was 20,750,000; the South's 9,150,000. In terms of military effectives (white males between 15 and 40 years), the North had 4,000,000 men against the South's 1,000,000. While the South had more acreage in farms, the North's improved acreage was larger. The North could produce more foodstuffs—so important in war—in i860 having turned out $167,000,000 worth of flour and meal as compared to the South's $56,000,000 worth. In i860, the North had 19,770 miles of rail; the South, 10,513. When it came to manufactures, the North was far in the lead. The capital value of its manufacturing plant was $842,000,000 to the South's $168,000,000; its wage earners in industry numbered 1,132,000 to the South's 189,000; the worth of its manufactured products was $1,594,000,000 to the South's $291,000,000. Woolen goods—to be made into uniforms and blankets—were part of the immediate necessities of armies in the

58i

T H E SECOND AMERICAN R E V O L U T I O N

field. In i860, the North produced 964,270,000 worth of woolen products, the South $4,596,000. In the case of finances, again the North's superiority was clear. Total bank deposits in the North were $187,678,000; in the South, $66,124,000. In the North, money in circulation totaled $119,826,000; in the South, $87,276,000. Despite all this, the war dragged on for four bitter years. W h y was this? For one thing, the Union's military organization was poor: it had too many political generals; whereas the best men in the officer caste joined the South. The South's fighting spirit was also better: many of its men had been brought up in an aristocratic tradition which accepted combat as a normal way of life. Again, there were ineptness and gross mismanagement in the furnishing and handling of supplies and materials of war. In the third place, the war was largely fought in the South, on a terrain familiar to the Southern leaders, whose lines of communication could be better controlled. Fourth, conscription was not resorted to in the North until 1863; and even when it was, the use of substitutes was freely countenanced. The result was that desertions from the Union ranks came to more than 200,000 men. Finally, Lincoln's whole theory of the war was one of limited objectives. He wanted to keep the Border states in the Union; he wanted to take Richmond (which succeeded Montgomery as the Confederacy's capital). However, he was reluctant to adopt those measures that would strike the dagger at the heart of the rebellion: the confiscation of Southern property; the arming of the Negroes; most important of all, the emancipation of the slaves and the proclamation of the war as a great moral crusade. The Union won in the long run—for its superior resources were bound to tell, and Lin-

coln's hand was forced. European powers did not intervene on the side of the South, although the ruling classes of England and France were sympathetic to the Confederate cause. The English found themselves ultimately bound to the Union because of the thriving business they were doing in the supply of munitions and implements of war. In exchange for these, the English took Northern wheat; in fact, by 1862, the English were getting 39 percent of their wheat imports from the North as compared with 25.5 percent in i860. England was not wholly dependent upon American wheat stocks; but American importations kept the price down—and low costs made it possible to maintain the English free trade system. Equally significant was the moral support given the Union cause by the organized workers of Europe. They saw the war as a struggle for human rights and, notably after the Emancipation Proclamation was issued, they brought powerful pressures to bear upon their governments to compel the maintenance of neutrality. The successful blockade of the Confederate ports by the Union navy was another important factor. The South could not ship out its cotton—which it had hoped would win the war ior it—and the result was that it was incapable of obtaining foreign credits. In 1862, England was getting only 2.6 percent of her cotton imports from the South as compared with 80.2 percent in i860. Finally, after 1863, with the promise of emancipation and the arming of the Negroes, the Civil War became what the Abolitionists had urged from the start: a conflict to reassert the great doctrine of equality co which the Declaration of Independence had committed the United States. T o this extent, the war was won by the Radical Republicans (as the Abolitionists now called themselves).

INTRODUCTION

3. LINCOLN

AND THE

The Position of the Radicals. The Radical Republicans were equalitarians. Many of them, like Horace Greeley and Thaddeus Stevens, were spokesmen for the rising industrial capitalism of the North. Many of them, like George W. Julian and Carl Schurz, were sincere advocates of homesteadism and Western expansion. But at the same time they were loyal and dogged fighters in the cause of human rights, and the greatest of these was equality of opportunity in a regime of liberty and justice. They understood—as had the early Seekers, the Transcendentalists, the Jacksonians—that the common man's claim to equality of opportunity was the only basis for a decent society. To them, therefore, slavery was a great wrong. It was a vicious and reprehensible system that demoralized the South and debased the American people. Because it was iniquitous and immoral, there could be no compromise with it. Slavery had to be destroyed and America's pledge to the common man—the realization of equality—had to be reaffirmed. In other words, the war, to be won, had to be fought ideologically. The policy of the Radical Republicans, in the Congress, in the Cabinet, in the press and the pulpit, had economic and idealistic facets. The Radicals sought the conversion of the American economy from a mercantile to an industrial one, in a climate of liberty. Also, they wanted to preserve the fruits of their victory; and this could be done only by winning the war the right way. The Radical conception of this war, therefore, ran as follows: The South was antagonistic to free institutions and a free way of life; and because the South's politics, ethics, and psychology were dominated by the slaveowners, this class had to be destroyed. To defeat the South, total war was necessary, because this, in the long run, was the more humane. Only military leaders who were aware of this could be trusted; hence, the suspicion of General McClellan and others like

583

RADICALS

him. The economic and political power of the great plantation owners had to be rooted up; hence, the demand for the confiscation and breakup of their estates. Specifically, the program of the Radicals called for the use of these three devices: ( 1 ) free the Negroes at once; (2) arm them and put them into Union uniforms; (3) divide the confiscated estates of the rebel slaveowners among landless blacks and whites so that a large number of freeholders would be established in the new South to defend and preserve the institutions of freedom. On the first point, the Radicals were partially successful; on the second, entirely so; on the third, they failed. The failure of Reconstruction may be linked with this last. The Position of Lincoln. Lincoln did not read the purposes or the outcome of the war in these terms. Originally, he believed he had been elected only to preserve the Union; and, while he regarded himself as an antislavery man, as late as 1862 in his famous reply to Greeley he could say: " M y paramount object in this struggle is to save the Union, and is not either to save or to destroy slavery." This is why Lincoln persisted for a long time in pursuing his policy of limited objectives. He coddled the Border states (they gave him 50,000 rifles, he said); he did not carry war into the deep South; he reprimanded General Fremont for freeing Negroes in Missouri and General Hunter for doing the same thing in South Carolina. Lincoln, in his efforts to come to grips with the slavery question, as he groped his way toward a proper policy, was amazingly unrealistic. His program included the following: ( 1 ) gradual emancipation, to be extended over a period of 37 years, that is, up to 1900; (2) emancipation by the states and compensation by them; (3) reimbursement of the states by the Federal government; (4) the colonization of freedmen, at federal expense, outside of the United States. This idea of colonization had a

J®4

T H E SECOND AMERICAN REVOLUTION

The Question of Confiscation. Even on the strange fascination for Lincoln. He helped in the organization of one such project—which most extreme demand of all, that of confiscaended disastrously. As late as August, 1862, in tion, Lincoln was not obdurate. The Radicals addressing a delegation of Negro leaders, he had pushed through Congress two Confiscacould say that the whites and blacks would be tion Acts but neither had been of any signifibetter off if they were separated—with water cance because neither had concerned itself with real property. Southern homesteadism, as the between them. Lincoln Moves toward the Radicals. And yet Radicals called it, was the only honest solution Lincoln—because he was a great man and a to the Negro problem in the South. Bills had great leader—knew that he had to keep moving been introduced in both Houses of Congress toward the position of the Radicals. The war and one, in fact, had passed the lower House; was not being won; defeatism already was rais- the National Union League had approved; in ing its head at home; there always threatened 1864, the subcommittee on resolutions of the European intervention; he was alienating the National Republican Convention had brought the project before the party's General Comgreat mass of Europe's workers. The Emancipation Proclamation was his first mittee. There was no achievement yet. But by step in the direction of the Radicals. It freed no July, 1864, even on this point, Lincoln had Negroes—but it outlined a policy; the per- come around to the position of the Radicals. sistence of the rebellion would lead, as a re- For an outstanding Radical, George W. Julian prisal, to the emancipation of the Negroes in of Indiana, in his Political Recollections, rethe Southern states. As far as the induction of ported a conversation in which Lincoln said Negroes into the Union armies was concerned, he would sign a bill confiscating the real propLincoln was cautious. The Proclamation care- erty of rebels, "if we would send it to him." Nothing came of it, and the division between fully declared that "such persons of suitable condition will be received into the armed serv- Lincoln and the Radicals was never closed. One ice of the United States to garrison forts, posi- may well raise the question whether Lincoln— tions, stations, and other places, and to man in view of his great political skill—would not vessels of all sorts in said services." The Ne- have been more successful in the handling of groes were not to be active combatants; yet, Reconstruction than was Johnson. Lincoln by late 1863, Lincoln had again yielded and knew when to change his mind; Johnson, on given his consent to the raising of both slave- the other hand, because of his origins and loyalNegro and free-Negro regiments. Altogether, ties, from a certain point on was inflexible. Rebefore the war was over, 186,000 Negroes had construction failed—and its heritage still survives to plague us. seen service in Union armies.

4. FIGHTING Financing. The Union government—whose Treasury Department was headed by Salmon P. Chase—used many devices for raising the great revenue needed for the war's prosecution. (1) It increased tariff rates—although the intention here was largely protectionist; but it did not get very much from this source. In 1861, duties brought in only $36,000,000 and in 1864 only $102,000,000. (2) It expanded the

THE

WAR

excises, taxing according to no plan, with the result that the list was miscellaneous to an extraordinary degree. There were taxes on beer, liquor, and tobacco; on manufactures, railroads, and steamboats; on bank notes, advertisements and legacies; on legal documents; and on occupations. Here, too, the yield was unimportant —from all taxes, about $300,000,000. (3) It imposed taxes on personal incomes. The first

INTRODUCTION such levy, in August, 1861, placed a rate of 3 percent on incomes in excess of $800. During 1862-65, incomes between $600 and $5,000 were taxed at 5 percent and those above at 10 percent. With the war's end, the exemption was raised to $2,000, and in 1872 the income tax was abolished. Altogether, this tax brought in only $55,000,000 during the war years. (4) More important was the issuance of paper money, Treasury notes, and bonds. In all, the Treasury was authorized by Congress to print $450,000,000 in greenbacks; and these were to be regarded as full legal tender for all private purposes and for all public purposes except the payment of customs duties and interest on the public debt. Until 1864, greenbacks—despite their depreciation—could be used to buy bonds, which were to be redeemed in gold or "coin." (5) The Treasury floated issue after issue of Treasury notes and long-term bonds and employed every conceivable method to dispose of them. Interest rates were high—5 to 7.3 percent. After 1863, bonds were sold at the market rather than at par. The new national banks were forced to buy by linking the right of bank-note issue with federal bonds. In only one way did the Treasury protect itself: as a rule, redemption was fixed at indeterminate periods (5 to 20 years, 10 to 40 years), thus permitting refunding at more favorable rates at some future time. In all, something like $2,600,000,000 in bonds were issued. Boom times followed, as was to be expected; and with the dearth of commodities an extraordinary inflation occurred. The United States went off the gold standard at the end of 1861; the greenbacks were now legal tender and their presence and those of the bonds acted as volatile agencies. Prices began to soar so that the greenback dollar was worth 87 cents in July, 1862; 77 cents in July, 1863; and it was worth on an average only 64 cents in 1864. It reached as low as 39 cents in July, 1864. After the war was over, in July, 1865, the greenback was worth 70 cents. It was not until January 1, 1879, that the United States was back on the gold standard.

5»S

The following index numbers reveal what happened to prices, money wages, and real wages during the war years ( 1926 = 100). Year i860 1861 1861 1863 18Ó4 1865 1866

Wholesale Prices 60.9 61.3 7«-7 90.J 116.0 132.0 116.3

Money Wages 18.8 18.8 19.3 22.0 2J.2 28.Ο 19.8

Real Wages 30.9 30.7 16.9 ai.7 21.2 jjjS

That is to say, from i860 to 1865, prices increased almost 120 percent, while money wages increased only about 50 percent; so that die real wages of workers declined more than 30 percent. Labor therefore suffered bitterly and engaged again and again in strikes, very few of which were successful. Trade unionism made only slight gains during the war. It was not until 1868 that real wages were back where they had been in i860; and not until 1878 that wholesale prices were at die levels also reached in the year J86O. Mobilizing Man Power. The country was badly prepared for war; in fact, at the start, the regular army had only 16,400 men and officers. Resort, therefore, had to be made to calling up of state militias and volunteers, and to conscription in order to prosecute the war. The second group, the volunteers, furnished the largest body of men. It was not until March, 1863, that a national conscription act was passed. Under it, all able-bodied males between 20 and 45 years were declared liable to military service. The draft machinery was put in charge of federal marshals and the unit of enrollment was made the congressional district. Opportunities for enlistment were still granted so that, in effect, only deficiencies in quotas were to be made up by conscription. The system had many inequities, in view of the fact that drafted men (up to 1864) could buy exemptions for $300, or by furnishing a substitute. The payment of bounties—which ran as high as $1,000—to volunteers also complicated the situation.

586

T H E SECOND AMERICAN REVOLUTION

The conscription law was unpopular and efforts to enforce it led to widespread disturbances. The draft riots in New York City (July 13 to 16, 1863) took a terrible toll of lives and property. The rioters were in control of the city for a good part of the time. Negroes and their friends were hunted down, assaulted, and killed; many parts of the city were fired. The number of dead on both sides has been put between 300 and 500. The draft was scarcely worth the effort, for it obtained only 46,000 conscripts and 118,000 substitutes— and many of the latter "jumped" their bounties. Despite these difficulties an army was obtained and before the war was over had been whipped into a trained fighting force. Supply and communications improved, as did medical facilities. When hostilities ceased, more than 1,580,000 different men had seen service in the Union armies. On the Confederate side, perhaps as many as 700,000 men had fought in its armies. How the armies grew may be ascertained from these figures of the number of men confronting each other at various times. In July, 1861: 186,700 Unionists against 112,000 Confederates; in January, 1863,918,000 Unionists against 446,000 Confederates; in January, 1864, 860,000 Unionists against 460,000 Confederates. Mobilizing Opinion. There was much more opposition to the prosecution of the war than has been commonly believed. For the most part.

5. THE MILITARY

the opponents of the war were "peace" Democrats—particularly strong in Indiana, Illinois, and Ohio—who favored peace by negotiation on the basis of the recognition of the Confederacy. Some engaged in treasonable activity: they recruited for the enemy; sought to release Confederate prisoners; and also acted as spies and agents. These antiwar groups captured the Illinois and Indiana legislatures and virtually took these states out of the war. They also formed secret and terrorist societies called variously "Sons of Liberty" and "Knights of the Golden Circle" and known popularly as "Copperheads." Against these dissidents, Lincoln moved with severity and dispatch. In districts where they were active he suspended the habeas corpus, imposed martial law, shut down newspapers, and ordered summary arrests. In all, more than 13,000 such cases were reported. After the war was over, in 1866, the Supreme Court in Ex parte Mtlligan, found that trials by military commission had been illegal. It should be said, however, that Lincoln was no dictator in the modern sense. Trials by military commissions were few; suppressed newspapers were permitted to resume after short periods of suspension; there was no general interference with freedom of speech; and party activities were never under the ban. In fact, in the election of 1864, the Democrats openly denounced the war as a failure and called for a cessation of hostilities.

ASPECTS OF THE

The Anaconda Plan. The general strategy of the war, devised by the aged Winfield Scott, commander-in-chief of the army, was in its larger outlines followed as planned. Using economic as well as military measures, it called for the isolation and then strangulation of the South as an effective fighting machine; for this reason, it was known as the Anaconda Plan. The full utilization of the Anaconda Plan encompassed the following: ( 1 ) The South was

WAR

to be cut off from all contacts with the outside world by blockade; this was to prevent cotton from getting out and railroad iron from getting in. (2) Southern ports were to be seized; hence expeditions were sent against Port Royal, New Orleans, and Mobile, all of which were taken. Only Charleston was able to hold out. (3) The Southern fleet was to be driven from the high seas and its commerce destroyers tracked down. (4) Mexico was to be kept

INTRODUCTION neutral—and was. (5) The western part of the Confederacy was to be cut off from the eastern part; and the eastern armies were to be overwhelmed by superior forces and destroyed. The general scheme was followed and the Southern defenses were broken down as the South was gradually isolated. But Lincoln's Border state policy permitted supplies to flow into the South, thus prolonging the war; while he was reluctant to use devices—such as the arming of the Negroes—which would have succeeded in smothering the South from the military point of view. It was not until 1863 that the western Confederacy was separated from die eastern part; and not until 1864 that the lower South was detached from the center. The War m 1861. With the outbreak of hostilities a horde of enthusiastic but untrained men descended on Washington: the rebellion was to be crushed in ninety days. At Bull River on July 21, two motley armies faced each other and after a day's fighting—which all Washington streamed out to see—the Union forces were sent flying in retreat. The Confederates were too spent to follow up their victory and Washington was saved. Lincoln now summoned George B. McClellan to take command of the army on the Potomac and in nine months he created a remarkable fighting machine. McClellan was only 34 years of age, had had a successful business career, and was a Democrat in politics. He was no friend of the Negro, was contemptuous of the democratic processes, and detested Radical Republicanism and all it stood for. In disregard of Congress and the press, he spent months whipping his men into shape; because he believed he could crush the Confederacy in a single campaign, he was prepared to bide his time until he was ready. In the beginning, Lincoln protected McClellan and, in fact, showed his confidence by naming him commander-inchief to replace Scott. The year ended with McClellan still training his men. The War in 1862. It was not McClellan who struck first but U. S. Grant—and the opening campaign occurred in the West. Grant, a West

587

Pointer, had left the army and had struggled with poverty and drink as he grew into middle age. When the war broke out he raised an Illinois volunteer regiment and was made its colonel. In a few months he was promoted to the command of a brigade and sent to Cairo, Illinois. Familiar with the Mississippi country, he was aware of the fact that fifty miles up the Ohio River the Tennessee and Cumberland rivers entered it; and that the control of these tributaries opened the door into Tennessee, Alabama, and Mississippi. The Confederates had placed forts on the two rivers and against these Grant moved swiftly. He took Ft. Henry on the Tennessee and proceeded to beseige Ft. Donelson on the Cumberland. With the fall of the latter (it was here he gained the soubriquet "Unconditional Surrender" because of the terms he imposed), Tennessee was completely exposed to the Union armies. Grant then moved against Shiloh, up the Cumberland River and into the southern end of Tennessee; he sought to sever Mississippi and Alabama from the Confederacy in this campaign. He won a victory—but at such a heavy loss in men that his command was taken from him. He had demonstrated his great capacity, however, and Lincoln was to fall back on him when all his other generals failed him. The Peninsular campaign was still languishing as McClellan waited. Finally in March he was ordered to advance and he proceeded up the York Peninsula. But he had been stripped of his command and three other armies had been set up in Virginia. The Confederates, although outnumbered, were led by Lee and Jackson, and their superior strategy and particularly Jackson's move against Washington compelled McClellan to dig in. Lee now attacked. The Seven Days' Battles (June 26-July ι ) for Richmond took place; and McClellan retired to the Peninsula. Halleck, who had been placed over Grant in the West, was at this point called to Washington and made commander-in-chief. His effort to cover Washington led to Pope's defeat at the second battle of Bull Run at the hands of

5 88

T H E SECOND AMEI C A N R E V O L U T I O N

Lee; Lee now pushed into Maryland. McQellan was summoned north to meet him and the decisive battle of Anrietam took place in western Maryland (September 17) and Lee was forced to retire. It is true Lee escaped from a trap; but Antietam was important because it was the North's first great victory. It prevented European recognition of the South and it gave Lincoln a chance to issue the preliminary Emancipation Proclamation. But McQellan's inability to take either Lee or Richmond led to his being relieved of his command once more; in fact, it was the last time, and his military career was over. Whether this was a mistake or not it is hard to say. True, the Army of the Potomac was now a superior fighting force; it is equally true that McQellan's strategy in the Peninsula Campaign was the same one that Grant followed to victory two years later. But McClellan was untrustworthy politically and he refused to see eye to eye with Congress as far as the war's purpose was concerned. If one accepts the Radicals' theory of the war, McClellan was a dangerous man. The War in 1863. This year saw the final success of Grant's initial strategy: the separation of the western Confederacy from the eastern half. It also saw the failure of Lee's effort to bring the war into the North; the ultimate decision, it was evident, could not rest with the Confederacy. Beginning in the early spring, Grant moved south from Memphis and was accompanicd by Porter's gunboats on the Mississippi. Then Grant struck across country and in 18 days marched 200 miles. He won five battles; he took 8,000 prisoners; and he lay siege to Vicksburg. The city capitulated July 3, and now the Mississippi was open from New Orleans to St. Louis. The Union armies of the East—this time commanded by Hooker—once more sought to enter Virginia. Lee and Jackson attacked, and at Chancellorsville (May 5) Hooker was routed. But in this battle Jackson was fatally wounded by his own men—an irreparable loss for the Confederacy. A second time Lee tried

to invade the North and with a great army swung into southern Pennsylvania. He was met by Meade and for three days (July 1 - 3 ) the batde of Gettysburg was fought. The Union soldiers held and Lee was permitted to retire. Meade might have cut him to pieces; but it was only a matter of time now. For Lee's best men were gone and the hope of European support had permanendy vanished. The War in 1864. In this year, the second pan of Grant's strategic plan was realized: the lower South was cut off from Virginia. The Army of the Cumberland had been put under Grant in 1863 and as a result of the Confederate defeat at Chattanooga (November 14) the way was open into Georgia. Grant was called to Washington and Sherman was left in charge of the Union armies numbering 100,000 men. Beginning in May, 1864, and extending his lines of communication, Sherman pushed into Georgia and marched on Atlanta, which he took on September 2. Then he cut himself loose from his supplies and proceeded to live off the country as he marched to the sea. A campaign of deliberate destruction was launched: across a stretch sixty miles in width, the Union soldiers burned and seized everything that could be of any possible use to the Confederacy. Sherman appeared before Savannah on December 10—after a two months' march—and took it. The way up the Carolina coast was clear. At the same time Grant was fighting in Virginia. He had been made commander-inchief in March and Lincoln expressed the fullest confidence in him. Beginning in May, Grant began that series of bloody engagements known as the Battle of the Wilderness; in a single month Grant's casualties were $5,000 to Lee's 30,000. The war of attrition was in full swing and it was apparent that Lee could not suffer such extraordinary losses. Lee retired to Petersburg and Grant locked up the Confederate army here for nine months. Then the country really lost heart and defeatism swept it. It was at this time that the greenback dropped to 39 cents.

INTRODUCTION

j8Ç

The Election of 1864. It was in such an so, a constitutional convention was to be sumatmosphere that the presidential contest of moned; and the constitution it drew up was to 1864 was waged. The Radicals had never lost be ratified by a majority of the voters. Only their suspicion of Lincoln, and it was only then might the President of the United States, heightened when his plans for the Reconstruc- with the consent of Congress, proclaim tion of the seceded states were made public. the establishment of the new state governLincoln announced that his key to Recon- ment. struction was the reestablishment of the "norLincoln vetoed this bill on July 4, 1864. And mal relations with the Union" as quickly as the Radicals struck back in a bitter manifesto. possible. At this the Radicals took alarm; now This was an attack on their own party candithey were certain that Lincoln not only mis- date, for Lincoln had been renominated by the understood the purposes of the war but was Republicans on June 7. Andrew Johnson of prepared to betray them. To them the war and Tennessee, War Democrat, was named his runthe peace—the revolution, in fact—could be ning mate. Lincoln had no confidence in his defended only by the protection of the civil own reelection; nor did the Radicals, for that rights of the freshly emancipated Negroes and matter, for they proceeded to look about for the economic gains industrial capitalism had another candidate from among their own numwon. Against Lincoln's "normal relations" ber. Davis of Maryland, who was party to diese therefore the Radicals juxtaposed the "con- conversations, expressed himself as follows: quered province" theory. The seceded states, "There are hundreds of thousands who think in other words, were to be readmitted only that Mr. Lincoln cannot suppress die rebellion, after they had been purged of rebels and re- and they are anxiously casting around their bellious attitudes. eyes, in this hour of deep agony, for a man of Lincoln acted first. In December, 1863— mind and -will who is able to direct the naafter Tennessee, North Carolina, Arkansas, tional power to the tuppression of the rebelLouisiana, and Virginia had been presumably lion." conquered and military governors appointed— The Democrats, aware of this division, did Lincoln announced that when 10 percent of not meet until August 29; they adopted a peace the i860 qualified voters of these states had plank and nominated McQellan. But in Septaken an oath of allegiance and set up legal tember, Sherman had taken Atlanta and the governments he would then recognize the South was dismembered. The Radicals stopped states as having resumed their proper relations plotting; Fremont, who had been named to with the Union. This infuriated the Radicals: head an independent ticket by his German Congress had not been consulted; Lincoln's admirers in the Middle West, withdrew his terms were not only mild but they imposed no candidacy; and the way was clear for Lincoln's guarantees. The result was, Congress took Re- reelection. With only the Union states voting, construction into its own hands and passed the Lincoln carried all but Kentucky, Delaware, Wade-Davis bill in June, 1864. This was based and New Jersey. But there were large McClelon Charles Sumner's conception that the se- lan minorities in New York, Pennsylvania, ceded states had committed suicide; they were, Ohio, Indiana, and Illinois; too, Lincoln's therefore, only territories and were to be ad- popular majority did not exceed 400,000 votes. ministered by the Federal government. The The End of the War. This was the beginning bill abolished slavery in the rebel states. Then, of the end as far as the South was concerned. after the insurrection had been crushed, all A negotiated peace was sought; but when the white males were to be enrolled by federal discussions failed, Lee abandoned Petersburg marshals and asked to swear allegiance to the and, on April 4, Grant entered Richmond. Five Union. When a majority in any state had done days later Lee surrendered the pitiable rem-

T H E SECOND A M E R I C A N R E V O L U T I O N

59°

nants of his army to Grant at Appomattox Court House. On Good Friday, April 14, Abraham Lincoln held his last Cabinet meeting and in the evening went to the play. He was shot down by the actor John Wilkes Booth

6. THE

TRIUMPH

and died the next morning without having recovered consciousness. Andrew Johnson— whom the Radicals were disposed to regard with greater friendliness—was President of the United States.

OF INDUSTRIAL

The war was being won on the field and on the floor of Congress; and not only was slavery abolished but the progress of industrial capitalism was now at last assured. To this extent, the Republican party was responsible for the Second American Revolution. For the control of the Federal government during the war years gave the Republicans the opportunity to carry out the economic program—and more—that it had promised in its platform of i860. The industrial capitalist of America recovered the opportunities of expansion that had been choked off as a result of the domination of public affairs by the slave owners and their allies for more than a generation. To this end, several important economic matters were enacted by Congress during the Civil War years. Protective Tariffs. Morrill of Vermont had introduced a tariff bill during the Congressional session of 1859-60 and the House had passed it; but the Senate had refused to follow suit. With the Southerners gone from Washington, the lame duck session of Congress early in 1861 passed the bill and President Buchanan signed it on March 2. This measure merely restored the rates of 1846. The Republicans were not ready to stop here. From 1861 to 1864, a stream of new bills appeared and with only casual debate went through the legislative mill. Said their defenders: new revenues were needed to finance the war, also, domestic manufacturers required compensation for the excise taxes they were being called upon to pay. At the end of the Civil War, the average rate on dutiable goods stood at about 47 percent as compared with the 18.8 percent at its beginning. Tariff revision—usually upward—continued

CAPITALISM

during the whole Reconstruction period. In 1867, the wool and woolen industries got new rates; in 1867, the duty on copper was raised sixfold; in 1870, steel rails were put on the protected list. In 1870, rates were cut somewhat; in 1875, the reductions were restored. Even the Eastern Democrats, by this time, were reluctant to tamper with the protective system and it remained essentially untouched until the Wilsonian Democrats sat down to revise its rates radically downward in 1913. There was an ironic turn to protectionism that led to curious consequences. High schedules, presumably, were supposed to make imports prohibitive; and yet foreign goods continued to pour in. So much so that during the decades 1870-90 every year saw almost an annual surplus of $100,000,000 in the Treasury —produced by the tariff duties. The government used these funds to redeem the Civil War bonds, thus embarrassing the national banks; it spent generously on rivers and harbors, thus fulfilling another campaign promise of i860; it began—after 1883—to modernize the navy; it encouraged the enactment of generous pension legislation for Civil War veterans. Here was a fascinating example of having one's cake and eating it too. The Republican party had protectionism and at the same time it could claim the grateful support of the Grand Army of the Republic! The National Banking System. The wildcat banks of the antebellum West and South had plagued legitimate business enterprise for a long time. When the war broke out, banking was still unregulated. The war produced a new crop of problems. As war orders and bonds began to pour from Washington—along with the

INTRODUCTION suspension of specie payments—a sharp inflation set in. Bank-note issues multiplied, new banks sprang up, and once more there began to walk the specters of an unsound paper currency and of banking failure because of the absence of a reserve system. By 1863, there were 1,600 banks of issue with about 12,000 different kinds of notes in circulation. The Treasury took two important steps to stabilize banking—and both steps were more than wartime measures. T o make possible the ready absorption of federal bonds and to create a sound system of banks, under national control, Congress passed the National Banking Act of 1863 (rewritten in 1864). Second, state bank notes were virtually outlawed when, in March, 1865, an annual tax of 10 percent was imposed upon diem. By the banking law, commercial banking institutions might be incorporated under federal charter. Such banks were to have the right of note issue, but only against United States bonds, which were to be deposited with the Treasury. In the first place, such bonds were to be equal to at least one third of the bank's capital and not less than $30,000 in amount; in the second place, notes could be issued only up to 90 percent of the market value of the bonds. The maximum national bank-note issue was set at $300,000,000. The law also set certain reserve requirements for national banks. Country banks had to maintain reserves of 15 percent of specie and lawful money; "reserve" city banks had to have reserves of 25 percent. Part of such reserves could be maintained in New York G t y banks; subsequently, Chicago and St. Louis were also denominated "central reserve" cities. By the seventies, nine of New York City's banks held two thirds of bankers' deposits. In this way, a central banking system of sorts was set up, with these differences: note issue was based on bonds rather than on gold or commercial paper; there was no rediscount function established anywhere; and the reserves had no central control. But wildcat banking, at least, was a thing of the past.

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In time, the national banking system manifested serious defects. ( 1 ) Rural districts were being discriminated against because of the high capital requirements for the establishment of banks. (2) Tieing bank notes to bonds produced an inverted elasticity—so that there were no checks anywhere on the expansion and contraction of credit. When business was booming, bond prices dropped, with the result that banks bought and thus expanded their note issues. When business was declining, bonds sold at premiums, so that banks got rid of their holdings and thus contracted their loan portfolios. (3) Also, the concentration of reserves in New York led to most of the money being put out at call on brokers' loans. There was no machinery to direct the reserves for the relief of distressed areas, In consequence, in periods of emergency when reserves were called home, security markets were left unsupported and depression therefore spread out from New York in widening circles. This is what happened in the depressions of 1873 and 1893. It was not until 1913, when the Federal Reserve System was set up—indeed, not until 1935, when the act was thoroughly overhauled—that many of these defects were rectified. The Homestead Act. The Republican party fulfilled another of its campaign pledges with the enactment of the Homestead Act of 1862. Under it, heads of families or individuals 21 years of age or over, who were citizens or declarants, might receive free a quarter section (160 acres) of land from the public domain. Final title was to be entered after a five-year residence and the erection of an improvement. Other devices facilitated the quick settlement of the public lands. Great tracts were given to railway companies and these began to sell land at once—and at low prices. Land might be purchased from the states, wjiich had received grants to facilitate internal improvements and for the financing of public schools. In 1862, too, such holdings had been enormously increased through the passage of the Morrill Agricultural College Act, which gave every state establishing a public agricultural college

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30,000 teres for each representative it had in Congress. It should not be assumed that as a result of die Homestead Act most settlers obtained their preemptions for nothing. Indeed, there were many notorious evils associated with America's land system under which fraud and engrossment flourished. Many great fortunes were made out of land grabs and land jobbing. The point is this however: settlers bought lands but they bought them at low prices; and the West was settled quickly by freeholders. In no other country in the world were so many operators of farms also the owners of them. Despite all its faults, homesteadism was one of the great cornerstones of the American democratic system, fulfilling the hopes entertained for it by George W. Julian, one of the Radical Republicans: "Should it [the Homestead bill] become a law, the poor white laborers of the South as well as the North would flock to the territories, where labor would be respectable, our democratic theory of equality would be put in practice, closely associated communities could be established as well as a system of common schools offering to all equal educational opportunities." Pacific Railways. With Southern opposition finally silenced, the Republican party could enact another of its great projects: the crossing of the continent by at least one Pacific railway. In July, 1862, two federal corporations were chartered, the Union Pacific—to build west out of Omaha to the eastern boundary of California—and the Central Pacific—to build eastward from the Pacific coast until it effected a juncture with the Union Pacific. Generous support was rendered the railway companies. They were given the rights of way, protected from marauders, and granted free use of timber, earth, and stone from the public lands. More important were the land grants and federal loans. Following the precedent established in the Illinois Central charter of 1850, the government voted the Pacific railways huge land grants, to wit, twenty sections (in alternate plots on each side of the right of way) for

every mile of track laid down. The Federal government also pledged its credit to assist the builders. Originally taking a first mortgage, then making its claim a junior lien, the government lent the companies $16,000 for every mile built in level country, $32,000 for every mile built in the foothills, and $48,000 for every mile built in the mountains. In May, 1869, both lines were finished when a juncture was achieved at Promontory Point, Utah. Great frauds attended the building of both lines, particularly through the use of dummy construction companies. It may very well be that costs were doubled; and, of course, a few individuals profited, thus laying the basis for great private fortunes. But the roads were built and the continent spanned. In all, during the sixties and seventies, four other Pacific railways were chartered and each received land grants, some of the terms being even more generous than those offered the Union Pacific. From 1850 to 1873, when a stop was put to the practice, 155,500,000 acres of land were voted by Congress to land-grant railways, and of this amount, 131,400,000 acres were certified and finally patented. The money loans came to a very large sum. The Union Pacific got $27,200,000 in federal bonds, the Central Pacific got $25,800,000; four lesser companies received $11,500,000. By 1890, through the failure to pay interest, these accrued charges were augmented by another $50,000,000. Immigration. The Republican party had promised a federal immigration policy. This pledge Congress fulfilled when in 1864 it established an Immigration Bureau and also wrote a contract labor act. Although the latter law was on the statute books for only four years, contract laborers continued to enter the United States until 1885. American industry was thus assured a steady labor supply from Europe and the Orient; indeed, it was not until the late eighties that any attempt was made to put immigration even on a mildly selective basis. All could come—the old and young, the destitute and even the ill. And immigrants poured in.

INTRODUCTION In the fifties, immigration had accounted for an addition of 2,600,000 to our population; in the sixties, despite the war, the total was 2,300,000; in the seventies it was 2,800,000. These were our day laborers and our Western settlers; in a generation they were to become America's skilled workers .and agricultural freeholders. T o this extent, then, the program of the Civil War, as a revolution, was magnificently

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achieved. It freed industrial capitalism, and permitted it to mechanize our production, expand our productivity, increase our national income, and make American real wages the highest on the earth. The Gvil War had also started out by holding out the promise of equality for the Negro. Here it failed. The processes of Reconstruction therefore require examination.

7, THE FAILURE OF RECONSTRUCTION The Old Radicals and the New Radicals. Reconstruction failed because the Abolition· ists had no successors. During the Civil War the Radical Republicans were really made up of two factions which remained in alliance until the conflict was over. These may be called the Old Radicals and the New Radicals. Both were in agreement on this basic point: the War could be won only by the freeing and arming of the Negroes and the smashing of the economic and political power of the slave lords. The Old Radicals—the Abolitionists—were committed to this program for moral and emotional reasons; the New Radicals accepted it for political ones, largely. Wholeheartedly the younger men of Congress—Conkling of New York, Blaine of Maine, Sherman and Garfield of Ohio—followed the lead of their elders; they believed in the rising star of industrial capitalism; they completely accepted the tactic that the war had to be waged uncompromisingly. But they were too young themselves to have suffered in the Abolitionist crusade; and Negro emancipation, for them, was not a burning faith but a weapon. When the war was over, the N e w Radicals took over control of the Republican party. The test of Reconstruction—the establishment of civil and economic equality for the Negro and the poor whites, as well—really hinged on the land question. The Old Radicals, as early as 1861, had demanded the confiscation of the great estates of the rebel leaders and their distribution among the landlos. They had not succeeded in the so-

called Confiscation Acts of 1861 and 1862. With the war over, Stevens and Sumner returned to the attack but again they were unsuccessful. In fact, as early as 1871, it was already becoming evident that Reconstruction was not to succeed. The New Radicals wanted peace. As representatives of industrial capitalism, they saw that the South was an important element in die establishment of a vast domestic market Southern products were needed at home and to help balance international payments abroad. Southern coal and iron could be exploited by the investment of Northern capital. Southern railroads could be built, factories erected, cities furnished with public utilities—always provided the section was prepared to cooperate with Northern capital. T o achieve this, a political settlement was imperative. The South was permitted to "redeem" itself, with the tacit consent of the New Radicals. Why, then, were the N e w Radicals prepared to quit the South? It was because they had entrenched themselves so firmly in the North and West that there was little danger of the recapture of political power by an agrarian alliance. In fact, the first real threat to industrial capitalism did not come until 1896; and when Bryan was defeated, it was apparent that an epoch had ended. The Second American Revolution was secure. Reconstruction in Congress. At first, the Radicals were prepared to regard Andrew Johnson as their man: he favored the Wade-

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Davis program for Reconstruction and he was bitterly hostile to the great slave-owning planters. But the Radicals failed to reckon with these facts: as a Southern yeoman white—one of those to whom Helper had appealed—Johnson equally disliked the Negroes, and he was distrustful of industrial capitalism and all its works. Johnson, in short, was a Jacksonian; but a Jacksonian only as far as the white small farmers and petty artisans were concerned. By the end of 1865 the Radicals were aware of this and they turned with implacable fury on Johnson. They destroyed him politically, all but drove him out of office, and proceeded to take over the processes of Reconstruction into their own hands. From 1865 to 1870 the Radicals sought to reorder the political and economic institutions of the South; but by 1871 they were already retiring. In May, 1865, Johnson announced the presidential program for Reconstruction. He was willing to grant a general amnesty, and he was prepared to recognize "loyal" states and readmit them into the Union. This was to be on the following terms: constitutional conventions were to be summoned in which might participate all those whites who had taken an oath of allegiance or received presidential pardons (Negroes were not included); such conventions were to repeal the ordinances of secession, repudiate the Confederate debts, and abolish slavery. By December, 1865, all of the seceded states but Texas had fulfilled these requirements and were once again members of the Union. The loyal states and the Southern states proceeded to ratify the Thirteenth Amendment, freeing the Negroes, and in December, 1865, it became a part of the Constitution. And then Southern legislatures sat down to enact codes to curb vagrancy and establish judicial processes particularly applicable to the Negroes. These were the notorious "Black Codes": the real reason for them was to maintain the freedmen in an unequal civil and economic status. The Radicals realized it was necessary to abandon Johnson. They set up the Joint Com-

mittee of Fifteen on Reconstruction; they kept Southern Congressmen and Senators from their seats; ánd they entered the Congressional elections of 1866 against Johnson and defeated him. Then they took over and set to work to undo all of Johnson's labors. Congress voted the continuance of the Freedmen's Bureau (a general relief agency) ; it put Negro civil rights under the protection of the federal courts; and it passed the Fourteenth Amendment, which the Joint Committee had drawn up. By December, 1866, all the Southern states but Tennessee had rejected the Fourteenth Amendment. The war was on again, in the eyes of an Old Radical like Stevens who, in January, 1867, could say: If impartial suffrage is excluded in the rebel states then every one of them is sure to send a solid rebel representative delegation to Congress, and cast a solid rebel electoral vote. They, with their kindred Copperheads of the North, would always elect the President and control Congress. . . . Now you must divide them between loyalists, without regard to color, and disloyalists, or you will be the perpetual vassals of the free-trade, irritated, revengeful South. The New Southern Constitutions. In March, 1867, by the passage of the First Reconstruction Act, Johnson's reconstructed states were superceded. This law placed the Southern states (all but Tennessee) under military law; proclaimed universal Negro suffrage; called for the summoning of new conventions from which outstanding Confederates were to be excluded; and demanded that state legislatures were to ratify the Fourteenth Amendment. Only after Congress had approved these works were the military governors to be withdrawn and Southern representatives admitted to their seats. The conventions met and in all the states but Virginia were dominated by Republicans made up of Negroes, loyal whites (the so-called scalawags), and Northerners (the so-called carpetbaggers) who had come South as agents of the Freedmen's Bureau and as small capitalists looking for business opportunities.

INTRODUCTION These men wrote the new constitutions of 1868-70. The documents were liberal and frequently highly progressive. They established universal manhood suffrage (white and black) and they disfranchised the leaders of the Confederacy. But they went beyond this, for they were equalitarian codes which sought to guarantee the civil and economic rights of all smallproperty owners. (Interestingly enough, long after redemption, these constitutions were retained by the Southern states, in fact in some as late as 1902.) These provisions were to be found in many of the new constitutions: Negroes were enfranchised and were granted full and equal civil rights. The property rights of women were protected. A system of free and mixed education was set up. Local governments were reorganized and given a greater measure of self rule. The judiciary was placed under popular control. Imprisonment for debt was abolished. Property qualifications for voting and holding office were done away with. New tax systems were created based upon uniform rates of assessment on all types of property. Welfare agencies and institutions—orphanages, asylums, homes for the blind and deaf—were established. The new legislators were inexperienced and badly led. Undoubtedly, there were adventurers among them. They left the Southern states with a heavy burden of debt. But a good part of this indebtedness grew out of the fact that, in their zeal to erect public improvements and build schools, the Reconstructionists fell into the hands of dishonest promoters. Particularly was this true of railroad construction, in connection with which Southern states guaranteed the principle and interest of private bond issues. Also, many of the states had to sell their bonds at sizable discounts in Northern money markets. The question of corruption obscures the main issue, in any case. (Public morals were at a low point all over the country.) The Reconstructionists must be judged in terms of their intention, and here—there can be no doubt—they were honest and sin-

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cere. They sought to make the idea of equality work. The Election of ¡868. From 1866 on, Johnson had been resistant and in February, 1868, the House impeached him. He appeared for trial before the Senate the next month and failed of conviction by a single vote. Meanwhile, the presidential campaign of 1868 was under way. The Democrats named Horatio Seymour of New York and F. B. Blair of Missouri; they endorsed the Johnson policies, denounced Congressional Reconstruction as "unconstitutional, revolutionary and void," and came out for a mild form of paper inflation. The Republicans nominated U. S. Grant and Schuyler Colfax of Indiana. They approved of what was taking place in the South, sang the praises of their candidate, and adopted as their slogan the concluding words of Grant's letter of acceptance: "Let us have peace." Grant won by a vote of 214 to 80 in the electoral college, although his popular majority was only 310,000, out of j,7i6,ooo votes cast. In the election, Louisiana and Georgia voted for Seymour as did also Kentucky, Delaware, and Maryland among the Border states. These were signs for all to read. The Redemption of the Southern States. From 1871 on, Congressional interest in the South declined. The Old Radicals were disappearing; the New Radicals now dominated the Republican party. They refused to interfere as the Southern redemptionists (we call them the Bourbons) disfranchised the Negroes and seized power in the interests of a new largeproperty group in the South. The Negroes were not disfranchised by law; but by intimidation, threats, and violence they were persuaded to join the Democratic party or abstain from voting. The Ku Klux Klan, which flourished in the South during 1868-71, used murder to obtain submission. Beginning with 1869, the white groups—led by the Bourbons —regained power in the Southern states: during 1869-71 in Tennessee, Virginia, North Carolina, and Georgia; during 1874-76 in Ala-

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bama, Texas, Arkansas, and Mississippi; and in 1877 in Florida, Louisiana, and South Carolina. In 1872, the Freedmen's Bureau went out of existence; in the same year Washington stopped sending federal troops into the South to assure die observance of federal election

laws. And in 1872, also, all but a very small remnant of the former Confederate leaders were restored their civil rights. The South, again, had a leadership; and the Solid South appeared to proclaim the triumph of Bourbonism.

THE PARTY

PLATFORMS OF i860

of the i860 campaign could not avoid the issue of the impending crisis. As its name implies, the Constitutional Union party was for maintaining national existence by stressing bonds and ignoring tensions. Its convention met at Baltimore on May 9, i860, and named John Bell of Tennessee for President and Edward Everett of Massachusetts for Vice President. None of the other parties in the canvass chose that summary method of resolving the situation. T h e Republicans, who met at Chicago on May 16 and named Abraham Lincoln of Illinois and Hannibal Hamlin of Maine as their standard bearers, disappointed the Abolitionists in declaring merely for territorial limits to slavery. But on economic questions their forthright planks were calculated to attract votes in the industrial East and the agrarian West. The Republican platform appealed to manufacturers, railroad promoters, Western men who wanted readier access to the land, and such seaboard workers as might be won from the Democratic party by the promise of free homesteads on the public domain. The Democrats divided. The last major American institution still existing on a nationwide basis was shattered. The Democratic party met in convention at Charleston in April and split, with the main body reassembling at Baltimore on June 18. It named as its candidates, Stephen A. Douglas of Illinois and Benjamin Fitzpatrick of Alabama. The minority met, first at Baltimore and then at Richmond in June, when it nominated John C. Breckinridge of Kentucky and Joseph Lane of Oregon. The campaign proceeded in the atmosphere of bitterness and intrigue, of political jockeyT H E PARTY PLATFORMS

ing and conflict of principle which had characterized the party conventions. Loud threats came from the South. In the North, a split threatened as New York merchants became increasingly sensitive to cancellations of orders by Southern buyers. It was plain that neither the Douglas Democrats nor the Constitutional Union party could, alone, defeat Lincoln; but a fusion of the two might take the state from the Republicans. In an election as close as this was likely to be, no party could win without the electoral vote of New York. And if no candidate secured a majority of the electoral vote, choice of a President would fall to a House of Representatives voting by states. The "sectional" Republican candidate would be defeated. It was also entirely possible that the House would be unable to make that decision; it had been unable to name its own Speaker by majority vote at the previous session. The Constitutional interregnum between election and inauguration in March was difficult enough, but such an interregnum when no succeeding President had been chosen might easily lead to anarchy. The plan for fusion against Lincoln failed in New York. The Republican campaign was cleverly handled. The antislavery issue was soft-pedaled; appeal was made to the necessity of preserving the Union; Westerners were promised homesteads and a Pacific railway, and Pennsylvania and N e w Jersey manufacturers were won over by protectionism. Lincoln received only a popular plurality, but he obtained a majority in the electoral college; it was significant that not a single Southern vote was cast for him. The platforms are reprinted from the official proceedings of the conventions.

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THE SECOND AMERICAN REVOLUTION The Constitutional Union Platform

Whereas, Experience has demonstrated that Plat- rately and unitedly, this great principle of public forms adopted by the partisan Conventions of liberty and national safety, against all enemies, at the country have had the effect to mislead and home and abroad; believing that thereby peace deceive the people, and at the same time to widen may once more be restored to the country; the the political divisions of the country, by the crea- rights of the People and of the States reestabtion and encouragement of geographical and sec- lished, and the Government again placed in that tional parties; therefore condition of justice, fraternity and equality, Resolved, that it is both the part of patriotism which, under the example and Constitution of our and of duty to recognize no political principle fathers, has solemnly bound every citizen of the other than THE CONSTITUTION OF the C O U N T R Y , United States to maintain a more perfect union, THE U N I O N OF THE STATES, AND THE E N F O R C E M E N T establish justice, insure domestic tranquillity, proOF THE L A W S , and that, as representatives of the Constitutional Union men of the country, in Na- vide for the common defense, promote the gentional Convention assembled, we hereby pledge eral welfare, and secure the blessings of liberty to ourselves to maintain, protect, and defend, sepa- ourselves and our posterity.

The Democratic Platform 1. Resolved, That we, the Democracy of the Union in Convention assembled, hereby declare our affirmance of the resolutions unanimously adopted and declare as a platform of principles by the Democratic Convention at Cincinnati, in the year 1856, believing that Democratic principles are unchangeable in their nature, when applied to the same subject matters; and we recommend, as the only further resolutions, the following: 2. Inasmuch as difference of opinion exists in the Democratic party as to the nature and extent of the powers of a Territorial Legislature, and as to the powers and duties of Congress, under the Constitution of the United States, over the institution of slavery within the Territories, Resolved, That the Democratic party will abide by the decision of the Supreme Court of the United States upon these questions of Constitutional law. 3. Resolved, That it is the duty of the United States to afford ample and complete protection to all its citizens, whether at home or abroad, and whether native or foreign born. 4. Resolved, That one of the necessities of the age, in a military, commercial, and postal point of view, is speedy communication between the At-

lantic and Pacific States; and the Democratic party pledge such Constitutional Government aid as will insure the construction of a Railroad to the Pacific coast, at the earliest practicable period. j. Resolved, That the Democratic party are in favor of the acquisition of the Island of Cuba on such terms as shall be honorable to ourselves and just to Spain. 6. Resolved, That the enactments of the State Legislatures to defeat the faithful execution of the Fugitive Slave Law, are hostile in character, subversive of the Constitution, and revolutionary in their effect. 7. Resolved, That it is in accordance with the interpretation of the Cincinnati platform, that during the existence of the Territorial Governments the measure of restriction, whatever it may be, imposed by the Federal Constitution on the power of the Territorial Legislature over the subject of the domestic relations, as the same has been, or shall hereafter be finally determined Oy the Supreme Court of the United States, should be respected by all good citizens, and enforced with promptness and fidelity by every branch of the general government.

The Democratic (Breckinridge Faction) Resolved, That the platform adopted by the Democratic party at Cincinnati be affirmed, with the following explanatory resolutions: ι. That the Government of a Territory organized by an act of Congress is provisional and temporary, and during its existence all citizens of

Platform

the United States have an equal right to settle with their property in the Territory, without their rights, either of person or property, being destroyed or impaired by Congressional or Territorial legislation. ï. That it is the duty of the Federal Govern-

PRELIMINARIES ment, in all its departments, to protect, when necessary, the rights of persons and property in the Territories, and wherever else its constitutional authority extends. 3. That when the settlers in a Territory, having an adequate population, form a State Constitution, the right of sovereignty commences, and being consummated by admission into the Union, they stand on an equal footing with the people of other States, and the State thus organized ought to be admitted into the Federal Union, whether its Constitution prohibits or recognizes the institution of slavery. Resolved, That the Democratic party are in favor of the acquisition of the Island of Cuba, on such terms as shall be honorable to ourselves and just to Spain, at the earliest practicable moment. Resolved, That the enactments of State Legislatures to defeat the faithful execution of the Fugi-

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tive Slave Law are hostile in character, subversive of the Constitution, and revolutionary in their effect. Resolved, That the Democracy of the United States recognize it as the imperative duty of this Government to protect the naturalized citizen in all his rights, whether at home or in foreign lands, to the same extent as its native-bom citizens. WHEREAS, One of the greatest necessities of the age, in a political, commercial, postal and military point of view, is a speedy communication between the Pacific and Atlantic coasts. Therefore be it Resolved, That the National Democratic party do hereby pledge themselves to use every means in their power to secure the passage of some bill, to the extent of the constitutional authority of Congress, for the construction of a Pacific Railroad from the Mississippi River to the Pacific Ocean, at the earliest practicable moment.

The Republican Platform Resolved, That we, the delegated representatives of the Republican electors of the United States, in Convention assembled, in discharge of the duty we owe to our constituents and our country, unite in the following declarations: ι. That the history of the nation during the last four years, has fully established the propriety and necessity of the organization and perpetuation of the Republican party, and that the causes which called it into existence are permanent in their nature, and now, more than ever before, demand its peaceful and constitutional triumph. 2. That the maintenance of the principles promulgated in the Declaration of Independence and embodied in the Federal Constitution, "That all men are created ecjual; that they are endowed by their Creator with certain inalienable rights; that among these are life, liberty and the pursuit of happiness; that to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed," is essential to the preservation of our Republican institutions; and that the Federal Constitution, the Rights of the States, and the Union of the States must and shall be preserved. 3. That to the Union of the States this nation owes its unprecedented increase in population, its surprising development of material resources, its rapid augmentation of wealth, its happiness at home and its honor abroad; and we hold in abhorrence all schemes for disunion, come from whatever source they may. And we congratulate the

country that no Republican member of Congress has uttered or countenanced the threats of disunion so often made by Democratic members, without rebuke and with applause from their political associates; and we denounce those threats of disunion, in case of a popular overthrow of their ascendency as denying the vital principles of a free government, and as an avowal of contemplated treason, which it is the imperative duty of an indignant people sternly to rebuke and forever silence. 4. That the maintenance inviolate of the rights of the states, and especially the right of each state to order and control its own domestic institutions according to its own judgment exclusively, is essential to that balance of powers on which the perfection and endurance of our political fabric depends; and we denounce the lawless invasion by armed force of the soil of any state or territory, no matter under what pretext, as among the gravest of crimes. j. That the present Democratic Administration has far exceeded our worst apprehensions, in its measureless subserviency to the exactions of a sectional interest, as especially evinced in its desperate exertions to force the infamous Lecompton Constitution upon the protesting people of Kansas; in construing the personal relations between master and servant to involve an unqualified property in persons; in its attempted enforcement everywhere, on land and sea, through the intervention of Congress and of the Federal Courts, of the

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extreme pretensions of a purely local interest; and in its general and unvarying abuse of the power intrusted to it by a confiding people. 6. That the people justly view with alarm the reckless extravagance which pervades every department of the Federal Government; that a return to rigid economy and accountability is indispensable to arrest the systematic plunder of the public treasury by favored partisans; while the recent startling developments of frauds and corruptions at the Federal metropolis, show that an entire change of administration is imperatively demanded. 7. That the new dogma that the Constitution, of its own force, carries slavery into any or all of the territories of the United States, is a dangerous political heresy, at variance with the explicit provisions of that instrument itself, with contemporaneous exposition, and with legislative and judicial precedent; is revolutionary in its tendency, and subversive of the peace and harmony of the country. 8. That the normal condition of all the territory of the United States is that of freedom: That, as our Republican fathers, when they had abolished slavery in all our national territory, ordained that "no persons should be deprived of life, liberty or property without due process of law," it becomes our duty, by legislation, whenever such legislation is necessary, to maintain this provision of the Constitution against all attempts to violate it; and we deny the authority of Congress, of a territorial legislature, or of any individuals, to give legal existence to slavery in any territory of the United States. 9. That we brand the recent reopening of the African slave trade, under the cover of our national flag, aided by perversions of judicial power, as a crime against humanity and a burning shame to our country and age; and we call upon Congress to take prompt and efficient measures for the total and final suppression of that execrable traffic. 10. That in the recent vetoes, by their Federal Governors, of the acts of the legislatures of Kansas and Nebraska, prohibiting slavery in those territories, we find a practical illustration of the boasted Democratic principle of Non-Intervention and Popular Sovereignty, embodied in the Kansas-Nebraska Bill, and a demonstration

of the deception and fraud involved therein. H. That Kansas should, of right, be immediately admitted as a state under the Constitution recently formed and adopted by her people, and accepted by the House of Representatives. 11. That, while providing revenue for the support of the general government by duties upon imports, sound policy requires such an adjustment of these imports as to encourage the development of the industrial interests of the whole country; and we commend that policy of national exchanges, which secures to the workingmen liberal wages, to agriculture remunerative prices, to mechanics and manufacturers an adequate reward for their skill, labor, and enterprise, and to the nation commercial prosperity and independence. i j . That we protest against any sale or alienation to others of the public lands held by actual settlers, and against any view of the free-homestead policy which regards the settlers as paupers or suppliants for public bounty; and we demand the passage by Congress of the complete and satisfactory homestead measure which has already passed the House. 14. That the Republican party is opposed to any change in our naturalization laws or any state legislation by which the rights of citizens hitherto accorded to immigrants from foreign lands shall be abridged or impaired; and in favor of giving a full and efficient protection to the rights of afi classes of citizens, whether native or naturalized, both at home and abroad. ι j . That appropriations by Congress for river and harbor improvements of a national character, required for the accommodation and security of an existing commerce, are authorized by the Constitution, and justified by the obligation of Government to protect the lives and property of its citizens. 16. That a railroad to the Pacific Ocean is imperatively demanded by the interests of the whole country; that the federal government ought to render immediate and efficient aid in its construction; and that, as preliminary thereto, a daily overland mail should be promptly established. 17. Finally, having thus set forth our distinctive principles and views, we invite the co-operation of all citizens, however differing on other questions, who substantially agree with us in their affirmance and support.

THE SOUTH CAROLINA So FAR AS South Carolina was concerned, Lincoin's election was sufficient cause for seces-

REVOLUTION

CONVENTION

sion. The South could not consider its interests secure in a nation ruled b y a party which pro-

601

PRELIMINARIES claimed the intention to impose territorial limits on slavery. N o Republican declaration that the new administration would maintain a scrupulous respect for the rights of the states could gloss over the fact that Republican principles implied a gradual strangling of the South's "peculiar institution." The South Carolina legislature met immediately and summoned a Convention—to be elected by popular vote—for December 17, i860, to consider the state's relations to the Union. The Convention assembled and on December 20 voted unanimously to secede. By February 1, 1861, the six other states of the deep South—Georgia, Alabama, Florida, Mississippi, Louisiana, and Texas—had followed South Carolina's lead. On February 4, at Montgomery, Alabama, delegates from these states met and on February 8 they established the Confederate States of America. Jefferson Davis of Mississippi and Alexander H. Stephens of Georgia were elected President and Vice President respectively. Various attempts at compromise had appeared meanwhile, one being a series of Constitutional amendments presented by Senator Crittenden of Kentucky and, another, a socalled peace convention called by Virginia on

February 4, 1861. Neither attracted much support; in the meantime Lincoln made no move. Indeed he waited a whole month after his inauguration before he was prepared to consider the question of federal forts in the Southern states. Most of these strongholds had been surrendered to the Confederates, but Fort Pickens at Pensacola and Fort Sumter at Charleston still held out, although their supplies were running low. At the end of March, Lincoln decided to relieve Fort Sumter and an expedition was sent out. On April 12, 1861, the Confedente batteries at Charleston opened fire on the fort— before the relief squadron had appeared—and two days later Major Anderson at Sumter surrendered. The war had begun. On April 17, Virginia joined the Confederacy as did Arkansas on May 6, Tennessee on May 7, and North Carolina on May 20. The Border states of Maryland, Kentucky, Missouri, and Delaware did not throw in their lot with the seceding South; but in Virginia the western counties withdrew and formed West Virginia, which supported the Union. The selection here reprinted, issued by the South Carolina Convention on December 24, i860, is from a pamphlet printed at Charleston in 1860.

Declaration of the Immediate Causes Which

Induce and

Justify the Secession of South Carolina from the Federal PEOPLE of the State of South Carolina, in Convention assembled, on the 26th day of April, A. D., 185z, declared that the frequent violations of the Constitution of the United States, by the Federal Government, and its encroachments upon the reserved rights of the States, fully justified this State in then withdrawing from the Federal Union; but in deference to the opinions and wishes of the other slaveholding States, she forbore at that time to exercise this right. Since that time, these encroachments have continued to increase, and further forbearance ceases to be a virtue. And now the State of South Carolina having resumed her separate and equal place among nations, THE

Union deems it due to herself, to the remaining United States of America, and to the nations of the world, that she should declare the immediate causes which have led to this act. In the year 1765, that portion of the British Empire tmbracing Great Britain, undertook to make laws for the government of that portion composed of the thirteen American Colonies. A struggle for the right of self-government ensued, which resulted, on the 4th July, 1776, in a Declaration, by the Colonies, "that they are, and of right ought to be, FREE AND INDEPENDENT STATES; and that, as free and independent States, they have full power to levy war, conclude peace, contract alii-

602

THE SECOND AMERICAN REVOLUTION

anees, establish commerce, and to do all other acts and things which independent States may of right do." They further solemnly declared that whenever any "form of government becomes destructive of the ends for which it was established, it is the right of the people to alter or abolish it, and to institute a new government." Deeming the Government of Great Britain to have become destructive of these ends, they declared that the Colonies "are absolved from all allegiance to the British Crown, and that all political connection between them and the State of Great Britain is, and ought to be, totally dissolved." In pursuance of this Declaration of Independence, each of the thirteen States proceeded to exercise its separate sovereignty; adopted for itself a Constitution, and appointed officers for the administration of government in all its departments—Legislative, Executive and Judicial. For purposes of defence, they united their arms and their counsels; and, in 1778, they entered into a League known as the Articles of Confederation, whereby they agreed to entrust the administration of their external relations to a common agent, known as the Congress of the United States, expressly declaring, in the first article, "that each State retains its sovereignty, freedom and independence, and every power, jurisdiction and right which is not, by this Confederation, expressly delegated to the United States in Congress assembled." Under this Confederation the War of the Revolution was carried on, and on the 3d September, 1783, the contest ended, and a definitive Treaty was signed by Great Britain, in which she acknowledged the Independence of the Colonies in the following terms: "Article 1.—His Britannic Majesty acknowledges the said United States, viz: New Hampshire, Massachusetts Bay, Rhode Island and Providence Plantations, Connecticut, New York, New Jersey, Pennsylvania, Delaware, Maryland, Virginia, North Carolina, South Carolina and Georgia, to be F R E E , SOVEREIGN AND I N D E P E N D E N T S T A T E S ; that he treats them as such; and for himself, his heirs and successors, relinquishes all claims to the government, propriety and territorial rights of the same and every part thereof." Thus were established the two great principles asserted by the Colonies, namely: the right of a State to govern itself; and the right of a people to abolish a Government when it becomes destructive of the ends for which it was instituted. And concurrent with the establishment of these principles, was the fact, that each Colony became

and was recognized by the mother Country as a F R E E , SOVEREIGN AND I N D E P E N D E N T S T A T E .

In 1787, Deputies were appointed by the States to revise the Articles of Confederation, and on 17th September, 1787, these Deputies recommended, for the adoption of the States, the Articles of Union, known as the Constitution of the United States. The parties to whom this Constitution was submitted, were the several sovereign States; they were to agree or disagree, and when nine of them agreed, the compact was to take effect among those concurring; and the General Government, as the common agent, was then to be invested with their authority. If only nine of the thirteen States had concurred, the other four would have remained as they then were—separate, sovereign States, independent of any of the provisions of the Constitution. In fact, two of the States did not accede to the Constitution until long after it had gone into operation among the other eleven; and during that interval, they each exercised the functions of an independent nation. By this Constitution, certain duties were imposed upon the several States, and the exercise of certain of their powers were restrained, which necessarily implied their continued existence as sovereign States. But, to remove all doubt, an amendment was added, which declared that the powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States, respectively, or to the people. On 23d May, 1788, South Carolina, by a Convention of her people, passed an Ordinance assenting to this Constitution, and afterwards altered her own Constitution, to conform herself to the obligations she had undertaken. Thus was established, by compact between the States, a Government, with defined objects and powers, limited to the express words of the grant. This limitation left the whole remaining mass of power subject to the clause reserving it to the States or to the people, and rendered unnecessary any specification of reserved rights. We hold that the Government thus established is subject to the two great principles asserted in the Declaration of Independence; and we hold further, that the mode of its formation subjects it to a third fundamental principle, namely: the law of compact. We maintain that in every compact between two or more parties, the obligation is mutual; that the failure of one of the contracting parties to perform a material part of the agreement, entirely releases the obligation of the other; and that where no arbiter is provided, each party

PRELIMINARIES is remitted to his own judgment to determine the fact of failure, with all its consequences. In the present case, that fact is established with certainty. W e assert, that fourteen of the States have deliberately refused for years past to fulfil their constitutional obligations, and we refer to their own Statutes for the proof. The Constitution of the United States, in its 4th Article, provides as follows: "No person held to service or labor in one State, under the laws thereof, escaping into another, shall, in consequence of any law'or regulation therein, be discharged from such service or labor, but shall be delivered up, on claim of the party to whom such service or labor may be due." This stipulation was so material to the compact, that without it that compact would not have been made. The greater number of the contracting parties held slaves, and they had previously evinced their estimate of the value of such a stipulation by making it a condition in the Ordinance for the government of the territory ceded bv Virginia, which now composes the States north of die Ohio river. The same article of the Constitution stipulates also for rendition by the several States of fugitives from justice from the other States. The General Government, as the common agent, passed laws to carry into effect these stipulations of the States. For many years these laws were executed. But an increasing hostility on the part of the non-slaveholding States to the Institution of Slavery has led to a disregard of their obligations, and the laws of the General Government have ceased to effect the objects of the Constitution. The States of Maine, New Hampshire, Vermont, Massachusetts, Connecticut, Rhode Island, New York, Pennsylvania, Illinois, Indiana, Michigan, Wisconsin and Iowa, have enacted laws which either nullify the Acts of Congress or render useless any attempt to execute them. In many of these States the fugitive is discharged from the service or labor claimed, and in none of them has the State Government complied with the stipulation made in the Constitution. The State of New Jersey, at an early day, passed a law in conformity with her constitutional obligation; but the current of anti-slavery feeling has led her more recently to enact laws which render inoperative the remedies provided by her own law and by the laws of Congress. In the State of New York even the right of transit for a slave has been denied by her tribunals; and the States of Ohio and Iowa have refused to surrender to justice fugitives charged with murder, and with inciting servile insurrection in the State of Virginia. Thus the

603

constitutional compact has been deliberately broken and disregarded by the non-slaveholding States, and the consequence follows that South Carolina is released from her obligation. The ends for which this Constitution was framed are declared by itself to be "to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defence, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity." These ends it endeavored to accomplish by a Federal Government, in which each State was recognized as an equal, and had separate control over its own institutions. The right of property in slaves was recognized by giving to free persons distinct political rights, by giving them the right to represent, and burthening them with direct taxes for three-fifths of their slaves; by authorizing the importation of slaves for twenty years; and by stipulating for the rendition of fugitives from labor. We affirm that these ends for which this Government was instituted have been defeated, and the Government itself has been made destructive of them by the action of the non-slaveholding States. Those States have assumed the right of deciding upon the propriety of our domestic institutions; and have denied the rights of property established in fifteen of the States and recognized by the Constitution; they have denounced as sinful the institution of Slavery; they have permitted the open establishment among them of societies, whose avowed object is to disturb the peace and to eloign the property of the citizens of other States. They have encouraged and assisted thousands of our slaves to leave their homes; and those who remain, have been incited by emissaries, books and pictures to servile insurrection. For twenty-five years this agitation has been steadily increasing, until it has now secured to its aid the power of the Common Government. Observing the forms of the Constitution, a sectional party has found within that article establishing the Executive Department, the means of subverting the Constitution itself. A geographical line has been drawn across the Union, and all the States north of that line have united in the election of a man to the high office of President of the United States whose opinions and purposes are hostile to slavery. He is to be entrusted with the administration of the Common Government, because he has declared that that "Government cannot endure permanendy half slave, half free," and that the public mind must rest in the belief that Slavery is m the course of ultimate extinction. This sectional combination for the subversion

T H E SECOND A M E R I C A N R E V O L U T I O N of the Constitution, has been aided in some of the States by elevating to citizenship, persons, who, by the Supreme L a w of the land, are incapable of becoming citizens; and their votes have been used to inaugurate a new policy, hostile to the South, and destructive of its peace and safety. On the 4th March next, this party will take possession of the Government. It has announced, that the South shall be excluded from the common Territory; that the Judicial Tribunals shall be made sectional, and that a war must be waged against slavery until it shall cease throughout the United Sutes. T h e Guaranties of the Constitution will then no longer exist; the equal rights of the Sutes will be lost. T h e slaveholding States will no longer have the power of self-government, or self-protection, and the Federal Government will have become their enemy. Sectional interest and animosity will deepen the irritation, and all hope of remedy is rendered vain, by the fact that public opinion at the North has invested a great political error with the sanctions of a more erroneous religious belief. W e , therefore, the people of South Carolina, by our delegates, in Convention assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, have solemnly declared that the Union heretofore existing between this

State and the other Sutes of North America, is dissolved, and that the S u t e of South Carolina has resumed her position among the nations of die world, as a separate and independent Sute; with full power to levy war, conclude peace, contract alliances, establish commerce, and to do all other acts and things which independent States may of right do. A N ORDINANCE TO DISSOLVE THE UNION BETWEEN THE STATE OF SOUTH CAROLINA AND OTHER STATES UNITED WITH HER UNDER THE COMPACT ENTITLED " T H E CONSTITUTION OF THE UNITED STATES OP AMERICA."

We, the People of the State of South Carolina, m Convention assembled, do declare and ordain, and it is hereby declared and ordained,

That the Ordinance adopted by us in Convention, on the twenty-third day of May, in the year of our Lord one thousand seven hundred and eighty-eight, whereby the Constitution of the United States of America was ratified, and also, all Acts and parts of Acts of the General Assembly of this State, ratifying amendments of the said Constitution, are hereby repealed; and that the union now subsisting between South Carolina and other States, under the name of " T h e United States of America," is hereby dissolved.

T H E REPUBLICAN PROGRAM CHARLES F. DUNBAR LINCOLN AND HIS Republican counselors were sure it was to be a short war and the first volunteers were called up for only three months. But whether it was to be short or long, secession at least offered this opportunity: in the absence of Southern Democrats the Republicans could carry out their economic program. American industry could be protected; the American coasts linked by rail; the American territories settled by free farmers; and the American currency muddle brought into order, although this last had not been written into the i860 platform. Through the decade since California had become part of the Union, a Pacific Railroad had been a national issue. But North and South had divided on the location of the road and the ensuing struggle had helped delay congressional plans to grant a subsidy. In 1861, the struggle was over; the proponents of a Southern route no longer sat in Congress; a Pacific Railroad could be built along the Platte route into Utah where it would be joined by railroad construction moving eastward from the Pacific. T o help link the Missouri country and the East with California, the incorporators of the Union Pacific were to be lent funds in government bonds and given the right to take building materials from along their right of way. In addition, they were to receive—following the example set by the Illinois Central grant— alternate sections of the public lands on each side of the right of way, this time the grant running to ten alternate sections or twenty square miles for each mile of road built. T w o years later, in 1864, amendments to the original charter subordinated the government's lien on the road from a first to a second mortgage-

In the years thereafter, a controlling element among the original incorporators transferred the work of building the road—and the assets of land and subsidy—to the Credit Mobilier, a company in which they themselves had a leading interest. The resources of the railroad corporation were exploited, Union Pacific stock became a speculators' football, and the government's effort to collect its debt met defeat in the courts (at least, until the nineties); political reputations were tarnished following Congressional investigations. But the road was built. For three decades at least, long before a Pacific Railroad had been even a promoter's dream, proposals to make the public lands more available to actual settlers had been a subject of Congressional debate. That debate had considered many propositions: bills to grant preemptions; to price land according to its quality; to cede to the states the public lands within their borders; to lower prices and make donations to indigent settlers; to continue selling the public domain and divide the proceeds among the States; to grant homesteads on the public domain to actual settlers "without money and without price." All these proposals had as their declared object, the use of the public lands to promote the national welfare; according to its sponsors, each plan would check speculation and aid the pioneer. A general preemption law was passed in 1841, along with a short-lived measure for distributing the proceeds of public land sales among the states. During the fifties, however, the scheme to grant homesteads to actual settlers gained increasing support. The proposition was opposed by Southern representatives, who feared the growth of a barrier to the ex-

6o6

T H E SECOND A M E R I C A N R E V O L U T I O N

tension of slavery in the territories; by some Eastern and Northern conservatives, who believed free homesteads might actually initiate a drain of labor from urban and industrial centers; and by land speculators and subsidy seekers, who opposed earlier homestead bills which had clauses forbidding grants to any but actual settlers. A homestead bill, without that limitation, actually passed in 1859, only to be vetoed by Buchanan. In 1862, the Republican party set about fulfilling another of its platform's promises. A bill providing homesteads on the public domain was passed and signed. All male citizens and heads of families might claim 160 acres of unoccupied public land and, if they resided on their claims for five years, they were entitled to a patent without payment other than the land-office fee. Henceforth, any man might have a farm for the cultivating—unless the tract he had chosen was on land given to the states for education or to the railroads for subsidy; or lay within some speculator's claim or on a site which might be inside the elastic boundaries of an Indian tribe whose title had not yet been extinguished by government purchase. Following the failure of the Second Bank of the United States to win renewal of its charter and the subsequent establishment of the SubTreasury system, the issue of currency had been left to individual banks. Those on the Atlantic seaboard maintained specie payment, by and large, except in periods of economic depression; Southern and Western banks were less rigid in their concept of soundness, however, and a "Banknote Detector" became part of every merchant's equipment. The Whig party had fought Jackson's effort to eliminate the national bank; it had op-

The

posed the Sub-Treasury, too; and though proposals for a national system of banking played only a small part in the Republican campaign of i860, old-line Whig supporters of such a system remained strong in the party. Lincoln's Secretary of the Treasury, Salmon P. Chase, pressed Congress to reform American currency issues on Whig principles by organizing a banking system for the nation; but the proposal received slight support until the needs of war reinforced the Secretary's arguments. Then the national banking system was organized, not primarily to assure sound banking practice but rather to provide a uniform banknote currency of reasonable stability and also to afford a market for the United States bonds on which the currency was to be based. In the essay reprinted here, Charles Franklin Dunbar (1830-1900) describes the organization and the operation of the banking system which served the nation from the time of the Civil War up to the establishment of the Federal Reserve System. Though Dunbar was writing in the nineties, his work is an outgrowth of his activity as editor of the Boston Daily Advertiser, which he had made a leading New England newspaper in the decade when the national banking system was being organized. Dunbar was a Harvard professor of economics who had come to that post after varied experience in business, farming, the law, and journalism. As teacher and administrator in the seventies, when true university education was beginning in the United States, Dunbar helped formulate the canons of university instruction in economics. The selection here reprinted is from Dunbar's Economic Essays (New York, 1904) and is published by permission of The Macmillan Company.

Establishment of the National Banking BY

CHARLES

T H E PLAN of establishing a system of national banks, w h o s e notes should take the place of those issued b y the state banks, w a s first presented in

F.

System

DUNBAR

definite shape in the r e p o r t of the S e c r e t a r y of the T r e a s u r y , at the beginning of D e c e m b e r , 1 8 6 1 . M r . C h a s e started in his discussion of the s u b j e c t

T H E REPUBLICAN PROGRAM from the considération that by some process the advantage of issuing a paper circulation, amounting to not far from $150,000,000 in the loyal states, ought to be transferred from the issuing banks to the government, and that the moment was opportune for such a change. He referred to the lack of system in the existing circulation, the insecurity of the bank-notes, die heavy losses suffered by the public, and especially to the recent misfortunes of banks in the Mississippi Valley, to enforce upon Congress the duty of protecting the public from such evils in the future. T w o methods were suggested by him, in which all the objects aimed at in the proposed reform might be attained,—first, the issue of United States notes in place of bank-notes; and second, a national system for the issue of bank-notes, to be redeemed by the isuing banks, but secured by the pledge of United States bonds. The plan of issuing United States notes Mr. Chase rejected, believing that its possible disasters far outweighed its probable benefits. It is interesting to observe, in view of what soon followed, that the possible disasters which so powerfully affected his judgment were, the issue of notes under great temptation without adequate provision for redemption, the risk of "a depreciated, depreciating, and finally worthless paper money," and "the immeasurable evils of dishonored public faith and national bankruptcy," all then being "possible consequences of the adoption of a system of government circulation." 1 Mr. Chase turned, therefore, in accordance no doubt with some predilections as well as with logic, to the second plan, a secured national bank currency, and recommended this for adoption by Congress. A bank currency thus secured, Mr. Chase was careful to point out, besides its advantages of uniformity and security, would also offer the further advantage of a large demand for government securities and of facilities for obtaining the loans required by the war. In addition it would strengthen and diffuse the interest in preserving the Union, by making the government stocks the basis for the circulation in general use, and would also secure equality of value for the paper currency in every part of the Union. The device of securing bank-notes by a pledge of public stocks had been shown to be practicable and useful by the experience of New York and of some other states, and notes issued upon this system would now have a solid basis, in the large amount of specie retained in the United States by the requirement that duties on imports should be paid in coin. T o these considerations it was wisely added that by offering inducements to existing 1

Finance Report, 1861, p. 18.

607

solvent institutions to adopt the national system, the transition from a heterogeneous and unsafe currency to one which should be uniform and sound could be effected almost imperceptibly and the evils of a great and sudden change could be avoided. But although Mr. Chase believed that this plan might be perfected and passed by Congress before the end of the session of 1861-1862, and that it might be serviceable in obtaining the loans needed for the current year, it was after all a leisurely expedient for filling the treasury of a country in the throes of civil war, and events were already moving too fast for his calculations. Although his report made no reference to any immediate pressure on the Treasury and no suggestion of any new expedient for its rapid replenishment, the suspension of specie payment had already become as nearly certain as any fatare event can be. By some of the bank managers suspension had been contemplated for many weeks as the probable result of the locking op of their resources in government bonds and the gradual dissipation of their reserves by payments to the Treasury. By the first week in December this double process was so far advanced and the public disquiet was to great as to leave no doubt as to the issue in the minds of cool observers. The shock to credit was precipitated by a sudden alarm as to the possible war with England, and after some struggle the banks suspended on the 30th of December—earlier than they might have done had no special strain come upon them, but, after all, under the pressure of an irresistible movement, of which the cause was to be found in the policy pursued by the government in its dealings with them. As a consequence of the suspension of specie payments, Mr. Chase found himself confronted by the demand for an issue of government notes, as a ready source of supply for the Treasury, before it was possible for him to draft a bill for a bank system. Interest at once centred upon this apparently unexpected demand, and the discussion had its issue in the first legal-tender act, approved February 2j, 1862. By this act Congress, with a recommendation reluctantly çiven by the Secretary, adopted the expedient rejected by Mr. Chase in his report of December 9, and established a government currency, giving it, moreover, the quality of legal tender, which was probably not contemplated by him as possible, or as admissible even if possible. The plan of a bank currency, favored by Mr. Chase, then took the second place, and was finally thrown over to the next session of Congress.

6o8

THE SECOND AMERICAN REVOLUTION

It was pointed out at the time, and there seems to have been great force in the suggestion, that all the advantages of a secured currency could be gained b y a method much more expeditious than the elaboration of a complete system of national banks. A comparatively simple measure, by which w l á i n g banks should be required to secure their notes b y the pledge of United States bonds, to be placed m the custody of the Treasury, would have made their issues uniform and safe, and would have made them large permanent investors in government bonds. T h e banks of die three cities, N e w Y o r k , Boston, and Philadelphia, taken by them· selves, had at the date of tne suspension of payments an aggregate capital of $1,200,000,000, and against their liabilities f o r deposits and circulation Amounting to $181,600,000 held a specie reserve of $44,000,000, or twenty-four per cent. T h e issues of these banks, it was pointed out, if secured by bonds, could be used b y the government as safely as its own notes; the banks could be used as general depositories b y the Treasury without risk; die inconveniences of the Independent Treasury, which adjusted itself with difficulty to the new conditions created b y war, could be avoided; and the system which thus embraced the banks of the great cides could include without difficulty any bank anywhere that was strong enough to comply with the terms of such an arrangement. But whatever the financial merits of such an improvised national circulation may have been, it was not politically feasible. T h e existing banking interests were not then agreed as to the larger quesdons involved in their relations with the government; the public were not prepared for a revolution in the policy of the government with respect to banks; and finally tne Secretary himself, having in mind the comprehensive scheme of a permanent national banking system, was little inclined to adopt a measure which, falling short of his aim, might be found ultimately to stand in his w a y . T h e proposition had litde strength then and attracted but litde attention. W h e n Mr. Chase again brought forward his plan, 1 at the beginning of the session of 1862-1863, it was under gready altered conditions. T w o legal-tender acts had been passed, giving authority f o r the issue of $250,000,000 of United States notes, and of this amount all but $27,000,000 had been paid out. T h e price of gold had been rising through the year and now stood above 130, and the prices of merchandise were advancing. It was estimated b y the Secretary that the banks of the loyal states in the course of twelve months had increased their circulation from $130,000,000 to 1 Finance Report, 1862, p. 17.

$167,000,000, and their deposits from $205,000,000 to $354,000,000, making an increase of liabilities under both heads of about thirty per cent, and had increased their investments by not far from $70,000,000. With great ingenuity of reasoning hie contended that nearly the whole increase in the volume of the currency was "legitimately demanded by the changed condition or the country," but that if there were any redundancy it was due to the issues of the banks and not to the new element added to the circulation by the government. In this state of things, with what appeared to most observers an alarming depreciation well under way, the need of funds f o r the immediate wants of the Treasury was again pressing. T h e sale of the bonds authorized by the legal-tender acts had been trifling, and comparatively litde was to be counted upon from that source. Indeed, Congress had blocked the way to any important sales, b y providing that the bonds should be sold by the Treasury at the market price only,» and that legal-tender notes should oe exchangeable for bonds at the pleasure of the holder, thus in effect limiting the price of bonds to par, and leaving purchasers little chance for a profit. T h e repeal of these provisions Mr. Chase asked f o r and secured at the end of the session, together with authority f o r borrowing in other forms to a vast amount. It was not by his advice, 4 however, that Congress at the same time made its third resort to an issue of legal-tender notes, authorizing an increase of the active legal-tender currency to $400,000,000, and the issue of an equal amount of legal-tender notes in other forms. He still maintained that an issue of government notes as a permanent system was open to grave objection, and that if it were used for temporary relief, it must be with a sparing hand; and he was more firmly persuaded than ever that the cure f o r the increasing disorder of the currency must be found in the resort to national bank-notes as the substitute f o r * Chase construed the provision of the statute authorizing the sale of bonds "at the market value thereof to prevent sales below the current New York quotations, though in Congress the view was expressed tnat market rate signified whatever price the government could secure. Chase was clearly right, for otherwise the provision in question would have had no reason for its insertion. 4 As in the case of the earlier legal-tender acts, Chase readily acquiesced in the views of the majority in Congress. In January, 1863, he prepared a bill, in response to a request from the Senate Committee on Finance, as a substitute for a pending measure authorizing a further issue of greenbacks, and his substitute accepted that proposal, merely adding provisions to facilitate the sale of bonds.—Cong. Qlobe, p. 270.

T H E REPUBLICAN PROGRAM all other paper issues. He therefore pressed upon Congress at some length the considerations which weighed with him in favor of immediate legislation for this purpose. A comparison of the reasons urged by Mr. Chase in 1862 with those briefly indicated by him in 1861 shows little change in his general estimate of the advantages promised by a permanent system of national banking. He adds in 1862 the consideration that under such a system the banks could be used safely as depositories in connection with the Independent Treasury, with advantages which perlups experience had finally led him to rate more highly than at first. He also declares his opinion that in no way can the ultimate resumption of specie pavment be made so certain as by the conversion of the entire paper circulation into an issue of bank-notes, secured by bonds bearing coin interest. On the whole the suggested advantages of the system, although substantial, are remote. Even the direct gain expected from the absorption of bonds by the banks is described as a sale amounting to 1150,000,000 or more "within a very few years," promising, however, very little aid during the current year, and perhaps not much for the next. In this part of his recommendation, Mr. Chase, in December, 1862, was looking far beyond the wants of the moment, to the time when the legal-tender notes, after serving their temporary purpose, should have disappeared, and the bank-notes should have become the sole and permanent currency; and so far did he carry his forecast of the future in this respect that he even took note of the probable payment of the national debt, and the necessity in this case of finding some new basis for the bank circulation. "But these considerations," he said, "may be for another generation." The national currency bill, which by the strong influence of Mr. Chase and his supporters was passed by Congress and became a law February 2j, 1863,® was framed on the familiar lines of the N e w York system, with details perfected by comparison with the banking systems of other states. It prescribed no limit for the number of national banking associations, but fixed the aggregate of notes to be issued by them at $300,000,000. Of this aggregate one-half was to be apportioned among the states, territories, and the federal district in proportion to population, and one-half to have due regard to "existing banking capital, resources, and business." T h e notes were to be issued under the superintendence of a Comptroller of the Currency, to be secured by interest-bearing bonds of the United States, and to be redeemable in "law» 12 "Statutes at Large," p. 665.

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ful money," this term including legal-tender notes as well as specie. T h e banks were not required, however, to redeem their notes anywhere except at their own counters. Provision was made f o r the organization of banking associations b y any applicants who should comply with certain conditions named in the act, and also for the conversion of state banks into national banking associations upon application in due form. B y a provision inserted upon motion of a Senator from N e w York and but little discussed, it was also provided that any state bank, holding United States bonds to the extent of one-half its capital, might, upon transferring the bonds to the Treasurer of the United Sutes, be authorized to issue notes to the amount of eighty per cent of the bonds transferred, the notes thus issued being supplied by the Comptroller of the Currency and payable at the Treasury in case of the failure of the issuing bank, in the same manner as other notes issued tinder the act. This bill did not pass without difficulty. In the Senate the vote upon its passage was 13 yeas to 21 nays and in the House 78 yeas to 64 nays. These votes did not closely represent either political or sectional divisions, members of the same party from the same state being in some cases upon opposite sides. The bill had to encounter objections resting upon several different grounds. N o t only was it opposed by some f o r political reasons and merely as a measure of the administration, but it was also viewed with great distrust by others, as a proposition for a vast financial consolidation, incomparably more formidable than the former Bank of the United States. T h e friends of the state banks eyed it with special jealousy, believing that the two systems, national and local, could not long stand side by side; and in this they were justified by the avowed purpose of Mr. Chase, and by the strong language of some of his adherents. And among those who might not have been averse to a national banking system under some conditions, there was doubt and apprehension as to the opportuneness and the details of this particular measure. While the bill was under discussion, Congress was maturing the third legal-tender act, and the premium on gold, which had passed thirty in December, was rising from fifty to sixty, passing the latter point before the vote on the bank bill was taken in the House. T h e Secretary had seen in the bill a means for prescribing more surely for ultimate specie payment; but, it was asked, what safe reliance could there be upon a system under which solvency meant simply payment in depreciating paper and the security against insolvency was found in bonds which

6ío

THE SECOND AMERICAN REVOLUTION

were sinking with the paper? In ordinary times the bill probably could not have made its way against these various elements of opposition; but no inconsiderable part of its strength was due to the gloomy circumstances of the winter of 18621863. In Congress as well as among the people at large the resolution to stand by the government carried many to the point of relinquishing private objections to a measure declared necessary by the administration; and so the bank bill gained a majority, not resting altogether upon conviction. Capital showed but little alacrity in organizing under the bank act of 1863. Seven months after its passage only 66 banks, with a capital of little over $7,000,000, had begun operations, and ten months from its passage only 139, with a capital of $14,740,000, reported to the Comptroller. The six state«, Ohio, Indiana, Illinois, Michigan, Iowa, and Wisconsin, supplied 3$ out of the 66 banks reporting in October, 1863, and 79 out of the 139 reporting in January, 1864. At the latter date New England had organized but 14 national banks, N e w York 16, and Pennsylvania 20. The Comptroller of the Currency regretted the opening of so many new banks in states where there was no deficiency of banks already. In general, in the first year under the new act, a few strong banks had been established, as the First and Second National Banks of N e w York, the First of Philadelphia, the First of Pittsburg, the First of Cincinnati, and the First of Chicago; but the existing banks for the most part held aloof, and new capital came in but sparingly. The report of the banks in the beginning of April, 1864, showed an investment by them m United States bonds of but $41,175,100. A t this time, however, the importance of the new system as a market for government securities had pretty well disappeared. The desire of the administration, expressed on every occasion, was that the great mass of state banks, and especially the strong institutions in the older states, should be reorganized as national banks. These banks had already become large holders of government obligations, for reasons quite unconnected with any possible future reorganization under the national system. The depression of business which continued through the years 1862 and 1863 had diminished the demand for regular commercial loans, and many banks with large resources at command found it difficult to procure the usual amount of business proper. Tempted by the high rate of income which securities bearing gold interest began to pay, and anxious to employ their funds, banks were investing freely in bonds of the United States and also in one-year certificates of indebtedness issued by the Treasury. In Novem-

ber, 1863, the banks of Massachusetts, though but three among them were national banks, owned government securities to the amount of over $J32. T h e Populists met with an extraordinary success. Weaver received more than a million popular votes and obtained 22 votes in the electoral college. In many states of the South the Populists captured the Democracy. In Kansas they elected their whole state ticket and controlled the legislature. A total of ten Congressmen, five Senators, f i f t y state officials, and 1,500 county officers and state legislators was the Populist harvest in 1892. T h e off-year elections of 1894 repeated these triumphs. It had become clear that Cleveland's leadership had been repudiated by the Democracy of the South and that the West was lost to the Republican party. Everywhere, reformers were flocking to the new party's standards, upon which were inscribed this slogan: "People's transportation . . . people's money . . . people's land . . . people's wealth . . . and people's cooperation." A revolution seemed to impend as the Populists made ready for the 1896 campaign. The Depression of 1893-1897. With 1893, unrest moved out of the agrarian communities and swept over the whole United States. A financial panic appeared. Prolonged into a four-year depression, it reached into every small community as well as all the great commercial centers, bearing its train of credit deflation, business failure, and unemployment. The panic of 1893, like that of 1873, had started first in the European money markets, following the collapse of the London investment banking house of Baring Brothers. European-held securities were again returned in large quantities to the United States; and

INTRODUCTION again bank balances were withdrawn. T h e national banking svsteni had learned nothing f r o m 1873; and its incapacity to mobilize reserves effectively further aggravated the situation. C o u n t r y banks began to withdraw their deposits f r o m the banks in the central reserve cities; these, in turn, contracted their call money loans; and brokerage houses were rendered insolvent. These financial pressures spread out in widening circles and affected also those corporations and businessmen who had overexpanded their operations and, more particularly, their inventories. Railroads were hard hit. T h e y stopped purchasing steel; steel prices began to drop, and w a g e cuts took place. In J u l y , 1893, Erie Railroad failed; and before the year was over it was f o l l o w e d into the bankruptcy courts by the N o r t h e r n Pacific, the Union Pacific, and the Atchison. B y 1895, ' 5 6 railroads, operating 39,000 miles of track, were in receivership; these represented a valuation of t w o and one half billions of dollars, or one fourth of the total railroad capitalization of the country. Also, more than 600 banks and loan companies, among which were to be found 158 national banks, had closed their doors. A vast a r m y of unemployed appeared, who, because of the failure of government to furnish relief or other remedial measures, took to the road as vagabonds. Many strikes broke out, and the y e a r 1894 saw nearly 750,000 workers involved in industrial disputes. T h e great strike on the Western railroads, called by the American R a i l w a y Union, was only one of these bitterly f o u g h t trials of strength. T h e g r o w i n g impatience of labor, in the face of w a g e cuts, had been demonstrated t w o years earlier in the Homestead strike of 1892, called b y the Amalgamated Association of Iron and Steel Workers against the Carnegie Steel C o m p a n y . This union, at that time the most p o w e r f u l one in the country, had succeeded in obtaining company recognition and had pioneered in the writing of wage agreements. It was prepared to carry on a long struggle against the Carnegie Company, but

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the employment of private Pinkerton detectives and the calling out of the entire Pennsylvania national guard against the strikers broke the spirit of the men. T h e y gave up after a strike lasting six months; their union was smashed; and it did not reemerge as a significant force in the steel industry until 1936. T h e railway strike of 1894 originated in the Pullman Parlor Car C o m p a n y w o r k s in Illinois. A strike among the employees of this company—which resulted in their eviction from the company-owned homes—enlisted the sympathy of the American R a i l w a y Union, an industrial union which had been organized in 1893 by Eugene V . Debs. In J u n e , 1894, f h e American Railway Union voted not to handle the Pullman cars attached to trains on which its members worked; and in a f e w days the boycott had spread over the Middle W e s t and the Far West. As a result of the refusal of the railway managers to treat with the union, lawlessness broke out in Chicago. O n the ground that the carriage of the mails was being obstructed, Cleveland's A t t o r n e y General, Richard Olney, directed the federal attorney of Chicago to obtain an injunction against the American Railway Union. A s a result of OIney's opinion that the union could be proceeded against under the Sherman Anti-Trust Law, a court decree was issued ordering the officials of the union to desist f r o m obstructing the carriage of the mails. Similar injunctions were obtained elsewhere, and, to enforce them, Cleveland sent federal troops into the Chicago district without consulting the local authorities as to their necessity. In this w a y , the strike was broken. Debs and other union leaders were cited f o r contempt in violating the injunctions, and were jailed. It has already been pointed out how the Supreme Court's refusal to reverse the lower courts put organized labor into an ugly mood. President Cleveland's only e f f o r t to come to grips with the depression was a demand upon Congress f o r the repeal of the Sherman Silver Purchase A c t of 1890. T o him there

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was only a single reason for business failure and domestic tension; and this was silver. The world, he argued, fearing the inability of the United States to maintain a gold standard, was dumping American securities on our markets and in this way draining off our precious metal reserves. Congress reluctantly complied, having no proposals of its own to offer, and after a stormy debate in October, 1893, the Silver Law was rescinded. But Cleveland's troubles were not over with its repeal. The Treasury was still vulnerable because the gold reserve being maintained to safeguard the greenbacks was constantly being eaten into by the presentation of Treasury certificates and legal tenders for gold coin. The reserve was also being cut down through the withdrawal of European short-term bank credits and the sale of European-held securities. Whereas the gold reserve of the Treasury in 1891 had stood at 300 millions of dollars, in November, 1893, it was at 59 millions. The Treasury therefore resorted to four bond sales in an effort to build up its gold supply. The first three, sold in January, 1894, November, 1894, and February, 1895, were all placed with private bankers. The Treasury's operations were unsuccessful: for the 3The Conventions. Thus the stage was set for the crucial campaign of 1896. The Republicans met first and, under the skillful leadership of Mark Hanna of Cleveland, in their convention at St. Louis in June, 1896, they adopted a platform that boldly took up the challenge of the agrarians and their labor friends. This included a plank calling "unreservedly for sound money"; and another defending its protective tariff policy. For its standard bearer, it named Hanna's friend and protégé Governor William McKinley of Ohio and picked Garret A. Hobart of New Jersey for the vice presidency. Hanna himself was elected chairman of the Republican National Committee.

bankers got their gold largely from Washington through the presentation of legal tenders for redemption. The third loan, which was turned over to a syndicate headed by the houses of Belmont and Morgan, was floated on such unfavorable terms that a storm of indignation swept the country. It is true that the bankers promised not to obtain their gold from the Treasury itself; but they bought bonds for 104V2 at a time when the United States 4s were bringing 111 in the open market; and then they turned about and sold their bonds at prices averaging around 118. For the handling of a loan of sixty millions of dollars, the syndicate made more than seven millions in profits. Ironically enough, this flotation was no more successful than the first two, for by December, 1895, the gold reserve had dropped to 79 millions. A fourth loan in January, 1896, was now attempted, but this time it was sold to the public. It was heavily oversubscribed and the average price that the government obtained was i n . Floated for 100 millions of dollars, at least two fifths of the gold that the government obtained came from the Treasury itself. Gold came out of its hiding the very next year when the depression ended, but not soon enough to end Cleveland's troubles. 896 The Democrats met in Chicago in July, and it was at once apparent that their ranks were divided. It is true that in state convention after state convention, they had repudiated Cleveland and had passed resolutions favoring the free and unlimited coinage of silver. But Cleveland had control of the powerful federal patronage and therefore a large following committed to his cause was present at the convention. Nevertheless, as the throngs poured into Chicago, it was clear that the silver men would leave no stone unturned in their efforts to convert the Democracy into a free silver party. The fact is, this faction picked the convention's temporary chairman and took posses-

INTRODUCTION sion of the resolutions committee. T h e money plank that it wrote, defied the Cleveland "gold bugs" and the Republican party. It read: W e are unalterably opposed to monometallism, which has locked fast the prosperity of an industrial people in the paralysis of hard times. Gold monometallism is a British policy, and its adoption has brought other nations into financial servitude to London. . . . W e demand the free and unlimited coinage of both silver and gold at the present legal ratio of sixteen to one without waiting for the aid or consent of any other nation. The humiliation of Cleveland went even further. Other planks of the platform pledged the Democracy to opposition to the further issuance of interest-bearing bonds in times of peace and to the emission of bank notes by the national banks. T h e platform declared its loyalty to tariffs for revenues only. It attacked the Supreme Court for its decision against the income tax law and it spoke up against "government by injunction." It was in the debate on the platform—for a minority of the resolutions committee had brought in an adverse report—that William Jennings Bryan of Nebraska emerged as the " B o y Orator." Only thirty-six years of age at the time, he was the last of six speakers to discuss the currency plank: and before he had finished, the assembled host knew that it had found its leader. In the stirring peroration of his address, he threw down the gauge of battle: Therefore, we care not upon what lines the battle is fought. . . . If they dare to come out into the open field and defend the gold standard as a good thing, we will fight them to the uttermost. Having behind us the producing masses of this nation and the world, the laboring interests, and the toilers everywhere, we will answer their demand for a gold standard by saying to them: You shall not press down upon the brow of labor this crown of thorns—you shall not crucify mankind upon a cross of gold! There was little doubt of the result. T h e platform was adopted; and, on the fifth ballot, Bryan was named the candidate of the Demo-

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cratic party. As his running mate, the Democrats nominated for the vice presidency A r thur ΛΙ. Sewell of Maine. There was nothing for the People's party to do, when it assembled at St. Louis on J u l y 22, but to endorse the Bryan candidacy and accept the free silver issue as the outstanding one of the campaign. There were radicals in the ranks of the Populists who protested at the submergence of a third party movement that had gained such extraordinary victories in the first four years of its life; and they resented the dropping of the subtreasury plan. T h e y finally took Bryan, but insisted upon the nomination of Tom Watson of Georgia for the vice presidency. A good deal of confusion followed and, in some of the Southern states, independent Populist tickets were named. The Campaign. Bryan carried on a remarkable campaign. He moved up and down the whole country, visited twenty-nine states, and made six hundred speeches in all. T o his support rallied all the agrarians, all the monetary extremists and cranks, and all the laboring forces of the nation. Against him were mobilized the great industries, the banks, the railroads, and virtually the entire Eastern press. Mark Hanna's achievements were also cast in an heroic mold. H e established t w o headquarters, one at N e w Y o r k and one at Chicago; he hired 1,400 speakers; he subsidized country newspapers; he issued tons of leaflets, hired innumerable bands; and flooded the nation with posters, brassards, and buttons. McKinlev won, but it was a very close election. McKinley received seven million popular votes to Bryan's six and one half million; and 271 electoral votes to Bryan's 176. T h e swing of a few thousand votes would have put Bryan into the White House. McKinley's pluralities in Indiana and Ohio were very small, and in Kentucky, Delaware, West Virginia, North Dakota, and Oregon, thev were microscopic. But he carried every great industrial state. Bryan won in the Solid South, in Missouri, and in the Western states of Colorado, Idaho, Kansas, Montana, Nebraska, Nevada, South

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Dakota, Utah, Washington, and W y o m i n g . T h e defeat of Bryan, ironically enough, destroyed Populism. It is true that the People's party continued to nominate candidates in 1900, 1904, and 1908—but its force had been spent. In part this was due to the fact that the Democracy's ideology continued to contain a large leaven of Populist thinking. But more important was the return of prosperity, after 1897, to America's agrarian communities; from then on, the Middle W e s t and the Far West once more reappeared in the Republican column of states. T h e 1896 election, too, put an end to the free silver controversy. T h e rise in prices; the great additions to the gold supply of the world from the new Alaskan and A f r i c a n mines; bank

EXPANSION credit expansion with the return of prosperity —all these laid the ghost of bimetallism. W h e n the Currency A c t of March, 1900, was passed, there were f e w to say it nay. T h e new law founded the monetary system of the country on the gold standard; established a Treasury reserve fund of 150 millions of dollars; and provided f o r the maintenance of this reserve by the sale of short-term bonds. Some concessions were made to the agrarian demand f o r more credit facilities b y permitting the national banks to issue notes up to the par value of bonds deposited with the Treasury, instead of the 90 percent as had been the case before; and also national banks could be organized with a minimum capital of $25,000 in towns of 3,000 or less.

4. THE GILDED Social Contrasts. T h e Civil W a r had released the energies and imaginations of the industrial capitalist class, and with the manyfold opportunities presenting themselves on every hand —in the exploitation of raw material resources, in transportation, in manufacturing, mercantile pursuits—it grew to wealth and power. Ventures, requiring little capital, bloomed on every bush; and restraints were f e w . Money was made easily and frequently was spent riotously—often b y people w h o had no taste in food, clothing, architecture, and house furnishings. F o r the Doric simplicity of the Middle Period, there was substituted a crazy composite of styles and attitudes that seemed to combine all the faults of every preceding age. Nothing demonstrated this better than the homes in which the upper classes lived, and the interior decorations b y which they surrounded themselves. Houses were copied f r o m the Italian, the English, the Swiss, the Persian, and the French. It was the age of the jigsaw, the cupola, the mansard roof, and the castle. T h e interiors were no better. Rooms were loaded down with massive furniture of black walnut

AGE

or golden oak. T h e tables had jigsaw skirts, the sideboards were rarely complete without their rows of shelves, topped b y pointed arches. On the walls, in whatnots, on top of moldings, were statuettes, bronzes, shells and vases, and china and porcelain—all representing the poor taste of peoples from every corner of the earth. Men and women overate and overdressed. " S o c i e t y " engaged in barbaric displays, seeking its inspiration apparently from the vulgarity of imperial Rome. A t the other extreme of the social scale lived the tens of thousands of the country's industrial population, massed together in the tenement houses and the slums of the great cities of the United States. These wretched dwellings were cheerless, cold, closed to the sun and air, and often without running water. Here came to live the new immigrants f r o m southern, central, and eastern Europe; and as they filled the rookeries of N e w Y o r k and Chicago, they also fell under the exploitation of the sweatshop proprietors. Because cities grew in advance of their public services, contagious and infectious diseases swept through the slum communities. T h e death rate f o r

INTRODUCTION children under five years was appallingly high; but the death rate among young men and women—notably from tuberculosis—was also great. It was not until the appearance of rapid transit facilities and the development of a more vigilant policy on the part of municipal authorities that the meaner congested areas of the metropolises began slowly to melt away. By the next century, urban dwellings began to improve somewhat. Despite these great extremes of wealth and poverty, as expressed in the lives of the new industrial capitalists and the immigrant slum dwellers, America was still the land of the middle class. Millions of American families lived in thousands of towns and small cities up and down the land where they spent their days quietly and pleasantly. For the most part these people were small merchants or skilled factory craftsmen; their incomes were adequate for the enjoyment of a modest and secure life; they were already possessing, before the century was over, bathrooms, central heating, and plumbing. T h e community living of America's towns still had about it much of the neighborliness of the antebellum period. Here lived the people who supported America's great evangelical churches and its small denominational colleges; who joined the W o men's Christian Temperance Union and the Anti-Saloon League; who maintained local opera houses, which were visited by touring theatrical companies; and who thronged the lyceums of the seventies and the Chautauqua assemblies of the eighties and nineties. Its men had their fraternal lodges and mechanics' halls; its women their clubs for the study of Shakespeare, Browning, and the civilizations of Greece and Rome; its young people their singing societies and bicycle groups. The great world of Europe and the Far East—except through the agency of the foreign missions— rarely knocked on the doors of this America. Social Progress. On every hand there were signs of social progress. Public education, during this period, increased by leaps and bounds. The first compulsory school attendance law

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had not been passed until 1854 by Massachusetts; but by 1900, nearly all of the states and territories in the North and West carried such legislation on their statute books. In 1870, seven million of America's children were enrolled in public schools; by 1900, their numbers had more than doubled. The public high school also was emerging, and in 1900 six thousand such schools had half a million students. Americans were not yet going to college in large numbers. However, the lyceum and the Chautauqua brought adult education and the new scientific knowledge into every crossroads of the country. The great, intellectually and artistically, traveled these circuits as did also America's humorists and politicians. T h e Chautauqua Literary and Scientific Circle was first organized in 1873, starting as a summer assembly devoted especially to Sunday-school teaching methods. But it quickly developed an elaborate curriculum of home study and readings, and its texts and study courses were soon to be found in a great many of America's middle class homes. By the end of the century, hundreds of small communities saw each summer the familiar pitched tent of their own local, or an itinerant, Chautauqua assembly, where, for a week or ten days, small town America gathered to hear concerts, listen to lectures on foreign missions, and addresses on political, literary, and scientific subjects by the celebrities of the day. The evangelical churches continued to play a prominent role in the life of post-Civil W a r America. B y 1870, there were more than 70,000 separate church organizations in the country, with the Methodists and Baptists leading and the Presbyterians third. Church attendance was a common middle class practice and most Americans continued to look to the clergy for guidance in intellectual, scientific, and social problems. T h e flame of evangelicalism was kept burning brightly. Dwight L. Moody and Ira D. Sankey were the heads of a revivalist movement which had great influence for at least two decades. During this period, too,

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there Appeared the Young Men's Christian Association and the Salvation Army, the first to bring evangelicalism to the young and the second into the homes of the poor. Also, the Catholic Church was growing in numbers and power; and by 1900, it could claim nine million communicants, largely among the Irish, German, and Italian immigrants. The development of the popular newspaper was another sign of the times. In the eighties appeared Joseph Pulitzer, a Hungarian immigrant who had settled in St. Louis and who then came to New York to buy the World. In two years, Pulitzer made the World an aggressive and flamboyant journal and ran its circulation from 16,000 up to 116,000. While Pulitzer appealed to the tastes and fancies of the great masses, his news columns and editorial page were of a very high order, for he was a friend of the common people and was ready to do battle against local corruption and injustice everywhere. The successes of Pulitzer attracted William Randolph Hearst, the son of a wealthy California pioneer, who also came to New York and who in 1895 acquired and modernized the New York Journal. Hearst even surpassed the achievements of Pulitzer, for his circulation before long was 400,000. He filled his pages with feature writers and artists, introduced the garish Sunday supplement, and, in fact, was the founder of yellow journalism. He, too, espoused popular causes in the beginning; later, he was to become the archreactionary of the American press. The power of the new journalism was demonstrated when, following the destruction of the U.S.S. Maine, both the World and the Journal did everything they possibly could to involve the United States in a war with Spain. Philanthropy, too, was becoming modernized. Social settlements—taking a leaf from the experiences and achievements of the English Christian Socialists—were founded in America. The most famous of these, Jane Addams' Hull House of Chicago, was opened in 1889. These established themselves in slum neighborhoods and sought to bring adult edu-

cation and decency and good taste into the tenement districts. The settlement house workers ran nurseries and diet kitchens, encouraged talent among the youth they reached, and led in the fight for new factory and public welfare codes. The same was true of the charity organization societies. Their basic philosophy still assumed that need stemmed from shiftlessness; and that all dependency required was outdoor relief. But these societies did yeoman work in the battle against the slums. Thus there were shadows and some light; there were vulgarity and social courage; everywhere there was vitality. Particularly this was so in the realms of intellectual striving and artistic endeavor. America could boast of great innovators in the field of collegiate and university education like Daniel Coit Gilman of Johns Hopkins and Charles W . Eliot of Harvard; of seminal thinkers like Charles S. Peirce and William James in philosophy; of poets like Walt Whitman and Emily Dickinson; and of novelists like Mark Twain, Henry James, and William Dean Howells. In the field of architecture, John A. Roebling, H. H. Richardson, and Louis H. Sullivan were outstanding. The paintings of Thomas Eakins, Winslow Homer, and Albert P. Ryder are still permanently displayed in American museums. In the sciences, America contributed important innovators like Willard Gibbs in physics, Simon Newcomb in astronomy, Lewis H. Morgan in anthropology, and John William Draper in chemistry. There were defenders of economic orthodoxy in the persons of William G . Sumner and John Bates Clark, who spoke for the laissez-faire doctrines of industrial capitalism. On the other hand, there were voices raised in dissent, of whom the greatest were Henry George and Thorstein Vehlen. Other protestants were Wendell Phillips of Boston who, after the Abolitionist fight was won, became a stalwart friend of the working classes; George William Curtis of New York, who was an outstanding civil service reformer; and

INTRODUCTION Henry D. Lloyd of Chicago, whose Wealth against Commoiiiuealth was the first searching examination of the processes by which monopoly was establishing itself in America. These were wholly authentic thinkers and artists; they were innovators, too, as were the industrial capitalists. The America in which

j. EXPANSION It was inevitable that American horizons should grow as the United States became one of the great economic powers of the world. The end of the century saw us embarking upon a series of adventures overseas; we fought a war, obtained an empire, and assumed responsibilities in distant lands. Cuba. The war with Spain took place because of our growing concern over Cuba. Cuba did not suddenly burst upon our eyes in the nineties: because of its proximity it had had the attention of American Presidents and their Secretaries of State, on and off, since the beginning of the nineteenth century. And its opportunities for trade and capital investment had been appreciated by enterprising Americans and, to a small extent, been taken advantage of. American political leaders feared that Spain might lose Cuba and some mightier Power, Great Britain, for example, would take possession of the island to dominate the Caribbean. Therefore, as Americans became increasingly interested in the building of a Panama Canal, the establishment of security in this region became the key to American policy. Earlier, we had labored to maintain Spanish sovereignty; then, in the fifties, we had sought to purchase the island; and, with the outbreak of insurrection in Cuba, from 1868 to 1878, Americans began to talk of Cuban independence. But the so-called Ten Years' War failed. It did lead, however, to the exile of sizable numbers of leaders of the insurgents, who settled in the Unites States and who kept alive the agitation for Cuban freedom.

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they moved they expressed in stone and steel, poetry and novels, economic manifestoes and educational plans. T h e outer crust of this Gilded Age was cruel and hard and frequently vulgar; but underneath were cool springs to sustain the genius of an Emily Dickinson, an Albert Ryder, and a Louis Sullivan.

OVERSEAS Another Cuban war of independence began in February, 1895. Again Spain made a determined effort to put down the insurrection, sending a great army to the island for this purpose; in time, the Spanish expeditionary force numbered 200,000 men. T h e Spanish troops, however, found it difficult to cope with the guerilla tactics of the insurgents. The revolutionists took to the hills and carried on a silent but deadly economic warfare against plantations, transportation centers, and collaborationists. Before long, the normal life of the island was on the verge of breakdown. T h e next year Spain decided to meet terror with terror and dispatched General Valeriano Weyler to the island with orders to hunt down the guerillas. Weyler built a series of blockhouses across Cuba in the hope of corralling the insurgent forces in a gradually restricted area; he took measures to stop the rebels from living off the countryside by ordering the collection of the islanders in concentration camps. In time some 400,000 Cubans were living in such areas where, because of Spanish indifference, ignorance, and cruelty, they died in large numbers of hunger and disease. It was this famous "reconcentration" system that excited the general indignation of Americans. The popular press took up the cause of the Cubans and brought tales of their piteous sufferings to the attention of the American people. In October, 1897, a Spanish liberal ministry came into power; it recalled Weyler; and assurances were given to the American minister at Madrid that autonomy would be

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granted to Cuba as soon as order had been restored. But all Cubans, apparently, did not seek freedom or even autonomy. The fact is, the inhabitants of Havana, the island's capital city, continued loyal to the Spanish crown. Disorders broke out as a result of encounters between autonomists and anti-autonomists; American lives and property were in danger; and at the request of our consul general an American warship was sent to Cuban waters. This was the mission of the U.S.S. Maine, which appeared in Havana harbor in January, 1898. It was received with every token of friendship and its officers and men were made much of. On the evening of February 15, however, America was horrified to learn that the Maine had been blown up, with a loss of 260 lives. A naval court of inquiry, dispatched to the spot, submitted a report which declared that the Maine had been blown up by a submarine mine which, in turn, had led to the partial explosion of some of the cruiser's magazines. The court was not able to establish responsibility f o r the destruction of the Maine. In the minds of the American people, however, there were no doubts. The Maine had been destroyed by agents of the Spanish government; and its loss had to be redressed. On March 9, before even the court of inquiry had reported, Congress appropriated $50,000,000 for the national defense and placed the fund in the hands of the President to be used at his discretion. "Remember the Maine" became a popular cry of yellow journals and politicians. A series of misunderstandings led to the formal declaration of war. Demands were made upon the Spanish government for the establishment of an armistice on the island and the immediate revocation of the reconcentration order. About the second point there was no debate. On the first, however, Spain, fearful of losing face, hedged. It was prepared to terminate hostilities only if the insurgents asked for the armistice. A good deal of backing and filling took place, but

finally, on April 8 and 9, the American minister at Madrid was able to cable Washington that Spain had yielded on every point. Apparently, however, it was too late; President McKinley had decided to join the war party. On April 1 1 , he sent a message to Congress which declared that he had exhausted every means calculated to relieve the Cuban situation. He asked that he be given power to take measures to put an end to hostilities in Cuba and to use the military and naval forces of the United States if need be. This was a request for war declaration; and, on April 19, Congress complied. The War ivith Spain. The Spanish-American War was a short and glorious one. It drove the declining Spanish power out of the Western Hemisphere; gave us an overseas empire; cemented the friendship between the United States and Britain; subjected our new navy to its baptism by fire; created a military reputation for Theodore Roosevelt; and reassured the triumph of the Republican party in the next election. The United States emerged as one of the world's great nations as a consequence. The brief war between the United States and Spain consisted of four operations: ( 1 ) The defeat of the Spanish fleet at Manila; (2) the blockade of Cuba; (3) the tracking down of the main Spanish fleet commanded by Admiral Cervera; (4) the invasion of Puerto Rico. The initial blow at Manila was successful because of the foresight of Assistant Secretary of the Navy Theodore Roosevelt, who ordered Commodore George Dewey, then in charge of the Asiatic Squadron, to keep in readiness for any eventuality. Five days after the war declaration, Dewev was out of Hong Kong and, on April 30, he was entering Manila Bav. The Spanish squadron was outnumbered; and it had been taken completely unawares. Within seven hours the Spanish fleet was entirely destroyed and most of the shore batteries had been silenced. American casualties consisted of seven wounded.

INTRODUCTION But Dewey was accompanied by no transports; and it was necessary that he await the arrival of military reinforcements before the city of Manila could be assaulted. As he fretted in Manila harbor, his position was made increasingly uncomfortable by the arrival of a large German squadron of five ships, which had appeared presumably to protect the interests of German nationals. The Germans were looking for trouble; but a British squadron soon appeared—to watch the Germans and to help Dewey. It was not until July that D e w e y was able to breathe easier, for then the transports came. Manila was attacked —with Filipino insurgents taking part—and on August 13 it surrendered. By that time Spain had already capitulated. It was in the West Indies theater that the American navy made its superiority felt at once. A blockade was thrown about the island of Cuba by two American squadrons, so that it was impossible for the Spaniards to send any assistance to their beleaguered armies. Meanwhile the departure from home waters of the main Spanish fleet under Admiral Cervera and its disappearance into the blue produced panic on the American eastern seaboard. Vainly the hunt for Cervera continued as Boston, N e w York, and Philadelphia spent sleepless nights worrying about imminent bombardment; actually, Cervera was headed for Cuba and he put into Santiago harbor on M a y 19. Here he was in time bottled up by Admiral Schley's Flying Squadron and Admiral Sampson's Atlantic Fleet. Cervera's position was made impossible when an American army landed on the Cuban coast and proceeded to assault Santiago from the rear. There took place a series of engagements for the capture of the heights overlooking the city; one of these was San Juan Hill. In the fight for this hill there participated the famous First Volunteer Cavalry Regiment headed by Colonel Leonard Wood and Lieutenant Colonel Theodore Roosevelt. Roosevelt had quit the Navy Department and had recruited the so-called Rough Riders from

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among the cowboys of the Southwest ranching country; Wood, who had been a surgeon in the regular army, was nominally in charge. San Juan Hill fell on the night of July 1, as did the other heights commanding Santiago. Cervera had to quit the harbor. On July 3 he led his ships out and the Spanish fleet streaked off to the West, with Schley in hot pursuit. A running fight took place and in less than four hours the whole Spanish navy had been wiped out. Only one American sailor had been killed. On J u l y 17, Santiago surrendered. General Miles, in charge of the American army, now proceeded to Puerto Rico; and in two weeks the greater part of the island had been yielded up. Americans had lost in battle combat only a handful of men. Nevertheless, there were heavy casualties; these took place in home encampments where, because of lack of medical knowledge on the part of American officers and because of inadequate supply arrangements, many men died of disease and food poisoning. The Peace Settlement. On July 26, Spain sued for peace; the war was over after only one hundred and thirteen days of fighting. Under the armistice terms, Spain had agreed to the surrender of her sovereignty over Cuba, the cession of Puerto Rico to the United States, and the occupation of the city, bay, and harbor of Manila by American forces. T h e peace treaty was to decide the disposition of the Philippines. American peace commissioners were sent to Paris in October, and they sat around unhappily waiting for Washington to make up its mind. Captain Alfred T . Mahan and his friends were sure we wanted the Philippines; Bryan and his friends were equally sure we did not; President McKinley did not know. Finally, as his officiai biographer has it, the President sought guidance in prayer. And thtn he was led to understand that the United States had a mission to perform—none other than the Christianizing of the Filipinos. (He did not know, apparently, that the Filipinos had been converted to

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Catholicism by Spanish monks at least three hundred years earlier.) T h e American commission was ordered to demand the whole archipelago, and to pav something to Spain for her property rights in the islands. Upon these terms—for $20,000,000—Puerto Rico, Guam, and the Philippines were ours. Opposition to the acquisition of the Philippines was not lacking. Indeed, during the whole month of January, 1899, the Senate debated the treaty. Annexationists or "Big Americans," as they came to be called, demanded our retention of the islands f o r the usual imperialist reasons. (Not the least of which was the necessity for the protection of American interests in China.) On the other hand, the so-called "Little Americans" were hostile to any programs of expansion; in this company most of the Democratic Senators were to be found. Late in January, Bryan appeared in Washington to urge upon Democratic Senators that the issue was much too important to be decided by a senatorial debate. He advised his fellow party members to vote for ratification of the treaty and leave the final determination of the Philippine question to the electorate in the presidential campaign of 1900. In short, the issue of imperialism would be the ground on which McKinley's reelection would be contested. A vote was finally taken early in February and ratification won, but only by a single vote more than the required two thirds. T h e division was almost entirely on party lines. The Election of 1900. Thus the issue for 1900 was predetermined. The Republicans renominated McKinley and named as his running mate Theodore Roosevelt who, after his return from the Cuban campaign, had been elected governor of N e w York. T h e Democrats once more chose William Jennings Byran and nominated Adlai E. Stevenson of Illinois for the vice presidency. The Populists, disappointed over their defeat in the 1896 campaign, entered an independent ticket. There also appeared for the first time at the polls the Social Democratic party, later the Socialist

party, which nominated Eugene V . Debs for the presidency. The issue was never in doubt, and Bryan was able to carry but four states outside of the Solid South; and all these were silver mining states of the Far West. T h e electoral college vote was 292 to 155; and a Republican Congress was also returned to Washington. But the rejoicings of the Republicans were brief. Early in September, President McKinley had gone to Buffalo to attend the so-called Pan American Exposition and here, on the fifth, he advocated tariff reciprocity as a means of uniting the United States with Latin American countries in greater bonds of amity. As he spoke he was shot down by a demented anarchist. Eight days later McKinley was dead and the young Roosevelt was President of the United States. The United States and China. Before the decade ended, our State Department clearly outlined a Chinese policy which American Presidents and Secretaries of States were to follow without significant change fc> D for the next half century. In part, this grew out of America's newly established position in the South China Sea; in part, it was a continuation of that earlier policy which had first been outlined by Caleb Cushing in 1844; in part, it was a response to the new European imperialist pretentions in eastern Asia. First, Japan had humiliated China in the war of 1895, obtaining the island of Formosa and the recognition of Japanese sovereignty in Korea. And then the European powers, seeing how vulnerable the Chinese were, had begun to establish footholds in the empire. In 1898, the Germans had obtained a long term lease on Kiaochow Bay; Russia had occupied Port Arthur in Manchuria; and the French and the British had obtained additional spheres of influence along the Chinese coast. McKinley's Secretary of State, John Hay, felt that the status of American trade with China was seriously jeopardized bv these activities. Therefore, on September 6, 1899, Hay sent a circular note to the American ambas-

INTRODUCTION sadors at London, Berlin, and St. Petersburg, which was, in effect, his famous so-called Open Door Note. This statement contained three propositions: ( i ) That the powers claiming spheres of influence in China should commit themselves to keeping the treaty ports open. (2) That the powers allow the application of the Chinese treaty tariff to the ports under their control without discrimination against other nationals. (3) That the powers would not levy higher harbor charges on vessels of other nationals calling at their ports, or fix higher railroad rates. Hay, in short, was seeking to protect the territorial integrity of China, and, at the same time, to acquire equal economic rights for American nationals in those spheres of influence which the European powers had carved out for themselves. Great Britain quickly agreed to the American demands; and it was soon followed by Germany, France, and Russia. Japan and Italy, when approached later, also gave their assent. On March 20, 1900, Hay made a public announcement in which he expressed himself as satisfied with the results of American intervention. The guarantees of the powers, he said, were "final and definitive": that the Open Door to China would be maintained and Chinese sovereignty in the spheres of influence respected. America was soon called upon to demonstrate its good will. A band of Chinese patriots, known as the Boxers, early in 1900 began to march on Peking and sought to overthrow the government because of its weakness in the face of foreign domination. An international force was mobilized—with American troops participating—and it proceeded to the relief of the invested Peking. Peking was entered; and the Chinese government was called upon to pay an indemnity for the damages suffered by foreign nationals at the hands of the Chinese irregulars. The American government, however, renounced its share of the indemnity and helped in the creation of an educational fund to provide scholarships for Chinese students studying in the United

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States. Thus, our friendship had been tested and not found wanting. The United States and the Philippines. W e were not doing as well, however, in the other areas of our newly developed interest. Until 1913, our attitude toward the Filipinos was not much unlike that of the other Powers established in eastern Asia: the Philippines were ours and were to be used entirely for the benefit of the United States. Indeed, in the beginning, the basis of policy was military terrorism. American troops in Luzon had been given effective aid by Filipino insurgents during the war; but the claim of the insurgents' leaders to recognition was flouted by the American command. The result was the outbreak of hostilities between Filipinos and Americans in February, 1899. For the next three years an American army, 60,000 strong, sought to pacify the islands; and it was not until 1902 that Washington was able to announce the end of the insurrection. Meanwhile, it had cost the United States 175 millions of dollars and the lives of 4,300 men to convince the Filipinos that our intentions were pacific. The process of establishing self-government developed slowly. In July, 1902, the American Congress passed the first organic law for the islands, under which Filipinos were given the protection of the Bill of Rights. In 1907, the Philippines Assembly was established; in 1913, the islands became a full part of the American customs union. It was under the Jones Law, passed in August, 1916, that complete legislative power was granted Filipino representatives; by this time, too, the greater part of the civil service was native. The executive authority continued, however, in the hands of the American governor general. The Tydings-McDuffie Act (Philippine Independence Act) of 1934 redeemed the promises of self-government the Americans had been making since 1913. A Philippine Commonwealth was set up; the islands were to have their own legislative and executive o f ' fices; the American high commissioner—rep-

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resenting American sovereignty—was to be an adviser and observer; and independence was to be granted after ten years of self-rule. On July 4, 1946, this pledge was honored, and the Philippine Republic was pronounced. Meanwhile, America had been helping the Filipinos prepare for self-rule by spending great sums on education, health, and public works. In a region of the world where imperialism had uniformly taken the shape of a cruel exploitation of native populations, the Filipinos were singularly well off. They had been made ready for independence in less than fifty years. Cuba. American practices in Cuba left much to be desired, too. Up to 1902, an American military occupation continued in the island and, under the dictatorial rule of General Leonard Wood, the United States laid the groundwork for a stable government. Church and state were separated; extraordinary sanitation programs were inaugurated; a school system was set up; and public finances were put on a sound basis. Meanwhile, Congress had passed the so-called Piatt Amendment early in 1901. This demanded that a Cuban constitutional convention, already sitting, recognize the right of the United States to intervene in Cuban affairs at its pleasure. In 1903, the amendment was written into a permanent treaty between the two countries. The most important provision of the Piatt Amendment declared: T h a t the g o v e r n m e n t of Cuba consents that the U n i t e d States m a y exert the right to intervene f o r the preservation of C u b a n independence, the maintenance of a g o v e r n m e n t adequate for the protection of life, p r o p e r t y , and individual liberty, and f o r discharging the obligations with respect to

Cuba imposed by the Treaty of Paris on the United States, now to be assumed and undertaken by the government of Cuba. The Piatt Amendment also compelled Cuba to grant the American Navy leases of Cuban harbors for the establishment of coaling and naval stations. In line with this policy, American forces intervened in Cuba in 1906, and again in 1912 and in 1917; this last occupation did not end until 1922. Meanwhile, American business interests were moving into the island on a large scale, investing in sugar and tobacco lands and in iron mines. In the 1920s the American capital stake in Cuba was in excess of a billion dollars. It was not until the thirties, as a result of Franklin D. Roosevelt's Good Neighbor policy, that the Piatt Amendment was repealed. Cuba was now a free and sovereign state for the first time. Thus the expansion of the United States as the nineteenth century ended. It is doubtful whether this was imperialism, European style. America continued to be a debtor nation; its new-found strength, industrially, was being used to develop its own resources rather than to exploit hapless peoples overseas. As the century turned, American foreign investments came to only 685 millions of dollars; Europeans, on the other hand, had claims of more than three billions of dollars against American properties. We ended the century still a debtor nation. But our industrial capitalist class was now the greatest on earth. In this fashion, the Second American Revolution—in the economic sector, at any rate—had more than realized the wildest dreams of its projectors.

WILLIAM JOSIAH ROYCE ( 1 8 5 5 - 1 9 1 6 ) e m e r g e d f r o m the

hardships of his pioneer California background to accept and develop a philosophy which would not have sounded at all strange in the most conservative university of Europe. His metaphysics was intellectualist, f o r all the stress he lay on the role of volition; and the ethics he based on that metaphysics was almost Prussian in its emphasis on social order and in its insistence that only by identification with a larger social whole could the individual realize his true and essential self. In practical application of that philosophy, R o y c e all but expounded the "leadership principle." William James (1842-1910), born to comfort and exposed to the influences of a cosmopolitan education, gave form and popularity to the one distinctively American development in modern philosophy. Thus, during the middle eighties and nineties, Harvard philosophy students heard William James set forth the premises of pragmatism in one classroom while, in another, they listened to R o y c e discussing Hegelian idealism. James came to his philosophy almost as the result of personal necessity, f o r he had relinquished painting for medicine and then had turned to the study of psychology because of a neurotic disorder out of which he brought himself by an act of will. As James went on from psychology to philosophy, from which the former was only beginning to be separated as a discipline, he began to develop the pragmatism with which his name is associated. The pragmatic criterion of truth was not entirely novel with James. In his book on the Religious Affections, Jonathan Edwards had made difference in conduct the test for the validity of an individual's conversion. Charles Saunders Peirce (1839-1914), one of the semi-

JAMES nal minds in the development of American philosophy, had presented pragmatism as early as 1868. Later, he expounded his theory in more complete form in his Illustrations of the Logic of Science, which appeared in the Popular Science Monthly during 1877 and 1878. Working on mathematical foundations, Peirce argued that "natural law" was made; it did not exist in the blue awaiting discovery. Consequently, disputants on metaphysical issues should first attempt to find out whether their argument had any reason by asking, "If this were true, what actual difference would it make?" James extended Peirce's ideas and phrased them in a fashion better adapted to win general understanding and approval. So attractive was James's language, in fact, and so well adapted to the current vernacular, that he found some of his concepts being distorted by popular acceptance, especially the core idea of his Will to Believe, which he would have preferred to call the "Right to Believe." James's germinal idea—the essentially active and "interested"' character of thought—had been characterizing his teaching for years, but it was not until he delivered his lecture on Philosophical Conceptions and Practical Remits in 1898 that pragmatism received its label and began to give philosophers cause for battle. Addressing the Philosophical Union of the University of California, James showed how Peirce's criterion of "practicalism" might be used to strip philosophical argument of superfluity. "What difference in action will a given difference in idea make?" James asks. If no such difference can be found, then the argument is an exercise in futility. James devotes most of his lecture to moral problems, however, and that, in itself, shows how much stress his philosophy put on con-

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duct and on individual response to the world. H e differentiates between the verbalisms of theology and "the p o w e r " which people feel within themselves when thev set their attitudes in certain ways. More important, James seeks and finds moral law in the universe. He prefers the concept of " G o d " to that of "natural l a w " because the former gives permanent warrant f o r our highest expectations. Materialism denies that the moral order is eternal; theism affirms it, and so leaves room f o r hope. If compelled to reply to John Stuart Mill's remark that that which is conformable to human desire is not necessarily true, James probably would have stressed his pragmatic criterion. T h e truth of a hypothesis is to be tested b y its consequences in action. T o intellectuals particularly, the materialist or even the agnostic hypothesis generally means depression and inability to act. Hence, James asserted the right to believe and refused to confine belief within the bounds of the evidence available, for even the suspension of judgment might hinder or inhibit the action which was life.

Philosophical

EXPANSION In this fashion, James made philosophy live f o r the general public. He refused to close his mind to anv source of information, even the dubious information to be won from psychical research. He described the "Varieties of R e ligious Experience" (in his book of that name) with a care untainted by the crudities of "rationalism." H e appreciated the emotional aspects of human activity so intensely that he sought a "Moral Equivalent for W a r " ; he was too good a psychologist to attempt to replace something exciting by short cuts and subterfuges. Let youth learn the realities of life b y serving an apprenticeship to the hard and disagreeable work of the world, James suggested. In that w a y , those shielded by money would find out upon what their easy lives depended, and human sympathy would broaden to replace the present acquisitive society with something more honorable and generous. T h e selection reprinted here is from Philosophical Conceptions and. Practical Results, which appeared originally in the University Chronicle f o r September, 1898 (Berkeley, Calif., 1898).

Conceptions BY

and Practical

WILLIAM

. . . I WILL SEEK to define w i t h y o u merely what seems to be the most likely direction in w h i c h to start upon the trail of truth. Y e a r s ago this direction w a s given to me b y an A m e r i c a n philosopher w h o s e home is in the East, and w h o s e published w o r k s , f e w as they are and scattered in periodicals, are no fit expression of his p o w e r s . I r e f e r to M r . Charles S. Peirce, with w h o s e v e r y experience as a philosopher I dare say m a n y of y o u are unacquainted. H e is one of the most original of cont e m p o r a r y thinkers; and the principle of practicalism—or pragmatism, as he called it, w h e n I first heard him enunciate it at C a m b r i d g e in the early '70's—is the clue or compass b v f o l l o w i n g w h i c h I find myself more and m o r e c o n f i r m e d in believing w e m a y keep our feet upon the p r o p e r trail. Peirce's principle, as w e m a v call it, m a y be expressed in a variety of w a y s , all of them v e r v simple. In the Popular Science Monthly for Janua r y , 1878, he introduces it as f o l l o w s : T h e soul and meaning of thought, he says, can never be

Results

JAMES

made to direct itself t o w a r d s a n y t h i n g but the production of belief, belief being the demicadence w h i c h closes a musical phrase in the s y m p h o n y of our intellectual life. T h o u g h t in m o v e m e n t has thus f o r its o n l y possible motive the attainment of thought at rest. But w h e n our thought about an object has f o u n d its rest in belief, then o u r action o n the subject can firmly and s a f e l y begin. Beliefs, in short, are really rules f o r action; and the w h o l e f u n c t i o n of thinking is but one step in the p r o d u c t i o n of habits of action. If there w e r e any part of a thought that made no d i f f e r e n c e in the thought's practical consequences, then that part w o u l d be no p r o p e r element of the thought's significance. T h u s the same thought m a y be clad in d i f f e r e n t w o r d s ; but if the d i f f e r e n t w o r d s suggest no d i f f e r e n t conduct, thev are mere outer accretions, and have no part in the thought's meaning. I f , h o w e v e r , they determine c o n d u c t d i f f e r e n t l y , thev are essential elements of the significance. "Please open the d o o r , " and, "Veuillez

T H E AMERICAN MIND ouvrir la porte," in French, mean just the same thing; but " D — η you, open the door," although in English, means something very different. Thus to develop a thought's meaning we need only determine what conduct it is fitted to produce; that conduct is for us its sole significance. And the tangible fact at the root of all our thoughtdistinctions, however subtle, is that there is no one of them so fine as to consist in anything but a possible difference of practice. T o attain perfect clearness in our thoughts of an object, then, we need only consider what effects of a conceivably practical kind the object mav involve—what sensations we are to expect from it, and what reactions we must prepare. Our conception of these effects, then, is for us the whole of our conception of the object, so far as that conception has positive significance at all. This is the principie of Peirce, the principle of pragmatism. I think myself that it should be expressed more broadly than Mr. Peirce expresses it. The ultimate test for us of what a truth means is indeed the conduct it dictates or inspires. But it inspires that conduct because it first foretells some particular turn to our experience which shall call for just that conduct from us. And I should prefer for our purposes this evening to express Peirce's principle by saying that the effective meaning of any philosophic proposition can always be brought down to some particular consequence, in our future practical experience, whether active or passive; the point lying rather in the fact that the experience must be particular, than in the fact that it must be active. T o take in the importance of this principle, one must get accustomed to applying it to concrete cases. . . . One of its first consequences is this. Suppose there are two different philosophical definitions, or propositions, or maxims, or what not, which seem to contradict each other, and about which men dispute. If, by supposing the truth of the one, you can foresee no conceivable practical consequence to anybody at any time or place, which is different from what you would foresee if you supposed the truth of the other, why then the difference between the two propositions is no difference,—it is only a specious and verbal difference, unworthy of further contention. Both formulas mean radically the same thing, although they may say it in such different words. It is astonishing to see how many philosophical disputes collapse into insignificance the moment you subject them to this simple test. There can be no difference which doesn't make a difference—no difference in abstract truth which does not ex-

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press itself in a difference of concrete fact, and of conduct consequent upon the fact, imposed on somebody, somehow, somewhere, and somewhen. . . . If we start off with an impossible case, we shall perhaps all the more clearly see the use and scope of our principle. Let us, therefore, put ourselves, in imagination, in a position from which no forecasts of consequence, no dictates of conduct, can possibly be made, so that the principle of pragmatism finds no field of application. Let us, I mean, assume that the present moment is the absolutely last moment of the world, with bare nonentity beyond it, and no hereafter for either experience or conduct. Now I say that in that case there would be no sense whatever in some of our most urgent and envenomed philosophical and religious debates. The question, "Is matter the producer of all things, or is a God there too?" would, for example, offer a perfectly idle and insignificant alternative if the world were finished and no more of it to come. Many of us, most of us, I think, now feel as if a terrible coldness and deadness would come over the world were we forced to believe that no informing spirit or purpose had to do with it, but it merely accidentally had come. T h e actually experienced details of fact might be the same on either hypothesis, some sad, some joyous; some rational, some odd and grotesque; but without a God behind them, we think they would have something ghastly, they would tell no genuine story, there would be no speculation in those eyes that they do glare with. With the God, on the other hand, they would grow solid, warm, and altogether full of real significance. But I say that such an alternation of feelings, reasonable enough in a consciousness that is prospective, as ours now is, and whose world is partly yet to come, would be absolutely senseless and irrational in a purely retrospective consciousness summing up a world already past. For such a consciousness, no emotional interest could attach to the alternative. T h e problem would be purely intellectual; and if unaided matter could, with any scientific plausibility, be shown to cipher out the actual facts, then not the faintest shadow ought to cloud the mind, of regret for the God that by the same ciphering would prove needless and disappear from our belief. For just consider the case sincerely, and say what would be the worth of such a God if he •were there, with his work accomplished and his world run down. He would be worth no more than just that world was worth. T o that amount of result, with its mixed merits and defects, his

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UNREST AND EXPANSION

creative power could attain, but go no farther. And since there is to be no future; since the whole value and meaning of the world has been already paid in and actualized in the feelings that went with it in the passing, and now go with it in the ending; since it draws no supplemental significance (such as our real world draws) from its function of preparing something yet to come; why then, by it we take God's measure, as it were. He is the Being who could once for all do that; and for that much we are thankful to him, but for nothing more. But now, on the contrary hypothesis, namely, that the bits of matter following their "laws" could make that world and do no less, should we not be just as thankful to them? Wherein should we suffer loss, then, if we dropped God as an hypothesis and made the matter alone responsible? W h e r e would the special dcadness, "crassness," and ghastliness come in? And how, experience being what it is once for all, would God's presence in it make it any more "living," anv richer in our sight? . . . Thus if no future detail of experience or conduct is to be deduced from our hypothesis, the debate between materialism and theism becomes quite idle and insignificant. Matter and God in that event mean exactly the same thing—the power, namely, neither more nor less, that can make just this mixed, imperfect, yet completed world—and the wise man is he who in such a case would turn his back on such a supererogatory discussion. Accordingly most men instinctivelv—and a large class of men, the so-called positivists or scientists, deliberately—do turn their backs on philosophical disputes from which nothing in the line of definite future consequences can be seen to follow. T h e verbal and empty character of our studies is surely a reproach with which you of the Philosophical Union are but too sadlv familiar. An escaped Berkeley student said to me at Harvard the other day—he had never been in the philosophical department here—"Words, words, words, are all that vou philosophers care for." W e philosophers think it all unjust; and yet, if the principle of pragmatism be true, it is a perfectly sound reproach unless the metaphysical alternatives under investigation can be shown to have alternative practical outcomes, however delicate and distant these may be. T h e common man and the scientist can discover no such outcomes. And if the metaphysician can discern none either, the common man and scientist ccrtainly are in the right of it, as against him. His science is then but pompous trifling; and the endowment of a professorship for such a being would be something really absurd.

Accordingly, in every genuine metaphysical debate some practical issue, however remote, is really involved. T o realize this, revert with me to the question of materialism or theism; and place yourselves this time in the real world we live in, the world that has a future, that is yet uncompleted whilst we speak. In this unfinished world the alternative of "materialism or theism?" is intensely practical; and it is worth while for us to spend some minutes of our hour in seeing how truly this is the case. . . . Theism and materialism, so indifferent when taken retrospectively, point when we take them prospectively to wholly different practical consequences, to opposite outlooks of experience. F o r , according to the theory of mechanical evolution, the laws of redistribution of matter and motion, though they are certainly to thank for all the good hours which our organisms have ever yielded us and for all the ideas which our minds now frame, are yet fatally certain to undo their work again, and to redissolve everything that they have once evolved. You all know the picture of the last foreseeable state of the dead universe, as evolutionary science gives it forth. I cannot state it better than in Mr. Balfour's words: " T h e energies of our system will decay, the glory of the sun will be dimmed, and the earth, tideless and inert, will no longer tolerate the race which has for a moment disturbed its solitude. Man will go down into the pit, and all his thoughts will perish. T h e uneasy consciousness which in this obscure corner has for a brief space broken the contented silence of the universe, will be at rest. Matter will know itself no longer. 'Imperishable monuments' and 'immortal deeds,' death itself, and love stronger than death, will he as if they had not been. Nor will anything that is, be better or worse for all that the labor, genius, devotion, and suffering of man have striven through countless ages to effect." That is the sting of it, that in the vast driftings of the cosmic weather, though many a jewelled shore appears, and many an enchanted cloud-bank floats away, long lingering ere it be dissolved— even as our world now lingers, for our joy—yet when these transient products are gone, nothing, absolutely nothing remains, to represent those particular qualities, those elements of preciousness which they may have enshrined. Dead and gone are they, gone utterly from the very sphere and room of being. Without an echo; without a memory; without an influence on aught that may come after, to make it care for similar ideals. This utter final wreck and tragedy is of the essence of scientific materialism as at present understood. T h e lower and not the higher forces are the

T H E A M E R I C A N MIND eternal forces, or the last surviving forces within the only cycle of evolution which we can definitely see. Mr. Spencer believes this as much as anyone; so whv should he argue with us as if we were making silly xsthetic objections to the "grossness" of "matter and motion,"—the principles of his philosophy,—when what really dismays us in it is the disconsolateness of its ulterior practical results? No, the true objection to materialism is not positive but negative. It would be farcical at this day to make complaint of it for what it is, for "grossness." Grossness is what grossness does—we now know that. W e make complaint of it, on the contrary, for what it is not—not a permanent warrant for our more ideal interests, not a fulfiller of our remotest hopes. T h e notion of God, on the other hand, however inferior it may be in clearness to those mathematical notions so current in mechanical philosophy, has at least this practical superiority over them, that it guarantees an ideal order that shall be permanently preserved. A world with a God in it to say the last word, may indeed burn up or freeze, but we then think of Him as still mindful of the old ideals and sure to bring them elsewhere to fruition; so that, where He is, tragedy is only provisional and partial, and shipwreck and dissolution not the absolutely final things. This need of an eternal moral order is one of the deepest needs of our breast. And those poets, like Dante and Wordsworth, who live on the conviction of such an order, owe to that fact the extraordinary tonic and consoling power of their verse. Here then, in these different emotional and practical appeals, in these adjustments of our concrete attitudes of hope and expectation, and all the delicate consequences which their differences entail, lie the real meanings of materialism and theism— not in hairsplitting abstractions about matter's inner essence, or about the metaphysical attributes of God. Materialism means simply the denial that the moral order is eternal, and the cutting off of ultimate hopes; theism means the affirmation of an eternal moral order and the letting loose of hope. Surely here is an issue genuine enough, for anyone who feels it; and, as long as men are men, it will yield matter for serious philosophic debate. Concerning this question, at any rate, the positivists and pooh-pooh-ers of metaphysics are in the wrong. . . . Now if we look at the definitions of God made by dogmatic theology, we see immediately that some stand and some fall when treated by this test. God, for example, as any orthodox text-book will tell us, is a being existing not only per se,

or by himself, as created beings exist, but a se, or from himself; and out of this "aseity" flow most of his perfections. He is, for example, necessary; absolute; infinite in all respects; and single. He is simple, not compounded of essence and existence, substance and accident, actuality and potentiality, or subject and attributes, as are other things. He belongs to no genus; he is inwardly and outwardly unalterable; he knows and wills all things, and first of all his own infinite self, in one indivisible eternal act. And he is absolutely self-sufficing and infinitely happy.—Now in which one of us practical Americans here assembled does this conglomeration of attributes awaken any sense of reality? And if in no one, then why not? Surely because such attributes awaken no responsive active feelings and call for no particular conduct of our own. How does God's "aseity" come home to you? What specific thing can I do to adapt myself to his "simplicity"? Or how determine our behavior henceforth if his "felicity" is anyhow absolutely complete? . . . The attributes which I have quoted have absolutely nothing to do with religion, for religion is a living practical affair. Other pans, indeed, of God's traditional description do have practical connection with life, and have owed all their historic importance to that fact. His omniscience, for example, and his justice. With the one he sees us in the dark, with the other he rewards and punishes what he sees. So do his ubiquity and eternity and unalterability appeal to our confidence, and his goodness banish our fears. Even attributes of less meaning to this present audience have in past times so appealed. One of the chief attributes of God, according to the orthodox theology, is his infinite love of himself, proved by asking the question, "By what but an infinite object can an infinite affection be appeased?" An immediate consequence of this primary self-love of God is the orthodox dogma that the manifestation of his own glory is God's primal purpose in creation; and that dogma has certainly made very efficient practical connection with life. It is true that we ourselves are tending to outgrow this old monarchical conception of a Deity with his "court" and pomp—"his state is kingly, thousands at his bidding speed," etc.—but there is no denying the enormous influence it has had over ecclesiastical history, nor, by repercussion, over the history of European states. And vet even these more real and significant attributes have the trail of the serpent over them as the books on theology have actually worked them out. One feels that, in the theologians' hands, they are only a set of dictionary-adjectives, mechanically deduced; logic has stepped into the place of vision, professional-

8O4

UNREST AND EXPANSION

ism into that of life. Instead of bread we get a stone; instead of a fish, a serpent. Did such a conglomeration of abstract general terms give really the gist of our knowledge of the Deity, divinityschools might indeed continue to flourish, but religion, vital religion, would have taken its flight from this world. What keeps religion going is something else than abstract definitions and systems of logically concatenated adjectives, and something different from faculties of theology and their professors. All these things are aftereffects, secondary accretions upon a mass of concrete religious experiences, connecting themselves with feeling and conduct that renew themselves in sœcula st might be objected that a simple average does not indicate the general percentage of increase or decrease; so the figures have been averaged according to their importance, each industry relative to all industries, as represented by the number employed in each. On this basis, taking i860 as represented by 100 again, it is found that the general average of wages in 1840 is represented by 82.5, in 1866 by 15J.6, and in 1891 by 168.6; that is to say, on this basis wages have increased since i860, as is shown by percentages, to the extent of 68.6 per cent; and this figure shows the course of wages in this country since that year. On the basis of 100 in i860, the increase has been from 82.5 in 1840 to 168.6 in 1891, the close of the period discussed. It is difficult always to make a statement concerning the course of prices for any considerable period of time that will be satisfactory to all students. T h e actual price of different articles does not alone indicate such course, because one article enters into the consumption of the people in slight degree, the price of such article having a wide range, while another article, entering largely into consumption, may be represented by a price quite steady; so there is always contention as to whether the price represented by the basis of con1 This method was adopted by the Senate Committee on Finance in its repon on "Wholesale Prices and Wages," being Senate Report No. 1394, Fifty-second Congress, second session.

AMERICAN PROBLEMS sumption or the degree of consumption of each group of articles has risen or fallen. In the Sixteenth Annual Report of the Massachusetts Bureau of Statistics of Labor there are very extensive quotations of the prices of commodities covering the period from 17J2 to 1883 and general comparisons from 1830 to i860. Without going into the details of these comparisons, it appears that from 1830 to i860 agricultural products advanced in price 62.8 per cent; burning oils and fluids, 29 per cent; candles and soap, 42.6 per cent; dairy products, 38.8 per cent; fish, 9.8 per cent; flour and meal, 26 per cent; fuel, meaning by this wood only, 554 per cent; meats, which included turkey in this particular comparison, 53 per cent. On the other hand, prices declined for boots and shoes 38.9 per cent; clothing and dress goods, 24.7 per cent; dry goods, 30.9 per cent; food preparations, 17.5 per cent; letter paper, 35.1 per cent; spices and condiments, 36.5 per cent. By a consolidation of the percentages showing either an advance or decline in pnces for the fourteen classes of articles just cited, the general percentage of increase in price is found to be 9.6 per cent. If, on the other hand, the averages for the same classes of articles be considered, and not the percentages obtained for each class, it is found that the general average increase in prices was 15.7 per cent. The mean of these two percentages is 12.7, and this more probably indicates the correct position of the fourteen classes of articles just named in their general tendency between 1830 and 18Ó0. If, however, wages for the same period, as given for the various occupations named in the report cited above, be consolidated and averaged, the general average increase shown for the period ending with i860, as compared with that ending with 1830, is 52.3 per cent. These facts clearly indicate that for that thirty years wages advanced to a much greater degree than prices. It is fortunate that the public can now have recourse to the report of the Senate Committee on Finance, which has been referred to. Wholesale prices are given in this report for 223 leading articles of consumption form 1840 to 1890, and taking the prices of these articles as a whole, and considering them on the same basis as that on which wages were considered, that is, assuming the quotations for 1860 to be 100, or par, it is found that the percentages are, for 1840, 97.7 per cent relatively to 100 in i860, 187.7 f ° r 1866, and 94.4 for 1891; or, in other words, prices generally, so far as the 223 leading articles are concerned, fell from 100 in i860 to 94.4 in 1891.

857

Placing wages and prices in juxtaposition in a general comparison, it is found that wages, considered relatively to the importance of one industry to all industries, stood at 168.6 in 1891 relatively to 100 in i860, and that the prices of 223 commodities entering into consumption, on the basis of the importance of each article in proportion to the importance of all, fell from 100 in i860 to 94.4 in 1891. The conclusion, therefore, must be positive and absolute that, while the percentage of increase in prices rose in 1866 to a point far beyond the increase in wages, prices had, by 1891, fallen to a point lower, on the whole than they were in 1840, and wages had risen even above the high point they reached in 1866. It should be stated that in these percentages the prices of rents have not been considered. Rents have increased greatly, but taking the rise in rents into consideration, as well as the rise in food products and some other things, and drawing a general conclusion relative to real wages, the statements just made most hold as practically and generally established. . . . CHAPTER

XXVII:

T H E INFLUENCE

or

MACHINEKY

ON LABOR

In the manufacture of agricultural implements new machinery has, in the opinion of some of the best manufacturers of such implements, displaced fully fifty per cent of the muscular labor formerly employed, as, for instance, hammers and dies have done away with the most particular labor on a plow. In one of the most extensive establishments engaged in the manufacture of agricultural implements in one of the Western States it is found that 600 men, with the use of machinery, are now doing the work that would require 2,145 m en, without the aid of machinery, to perform; that is to say, there has been in this particular establishment a loss of labor to 1,54; men, the proportion of loss being as 3.57 to 1. In the manufacture of small arms, where one man, by manual labor, was formerly able to "turn" and "fit" one stock for a musket in one day of ten hours, three men now, by a division of labor and the use of power machinery, will turn out and fit from 125 to 150 stocks in ten hours. By this statement, it is seen that one man individually turns out and fits the equivalent of forty-two to fifty stocks in ten hours, as against one stock in the same length of time under former conditions. In this particular calling, then, there is a displacement of forty-four to forty-nine men in one operation. . Looking at a cruder industry, that of brickmaking, improved devices have displaced ten per cent of labor, while in making fire-brick forty per cent

858

UNREST AND EXPANSION

of the labor formerly employed is now dispensed with, and yet in many brickmaking concerns no displacement whatever has taken place. T h e manufacture of boots and shoes offers some v e r y wonderful facts in this connection. In one large and long-established manufactory in one of the Elastern States the proprietors testify that it would require five hundred persons, working by hand processes and in the old w a y in the shops by the roadside, to make as many women's boots and shoes as one hundred persons now make with the aid of machinery and b y congregated labor, a contraction of eighty per cent in this particular case. In another division of the same industry the number of men required to produce a given quantity of boots and shoes has been reduced one half, while, in still another locality, and on another quality of boots, being entirely f o r women's wear, where formerly a first-class workman could turn out six pairs in one week, he will now turn out eighteen pairs. A well-known firm in the West engaged in the manufacture of boots and shoes finds that it would take one hundred and twenty persons, working b y hand, to produce the amount of work done in its f a c t o r y b y sixty employees, and that the handwork would not compare in workmanship and appearance b y fifty per cent. By the use of Goodyear's sewing machine for turned shoes one man will sew two hundred and fifty pairs in one day. It would require eight men, working b y hand, to sew the same number in the same time. B y the use of a heel-shaver or trimmer one man will trim three hundred pairs of shoes a day, while formerly three men would have been required to do the same w o r k ; and with the McK a y machine one operator will handle three hundred pairs of shoes in one day, while without the machine he could handle but five pairs in the same time. So, in nailing on heels, one man, with the aid of machinery, can heel three hundred pairs of shoes per day, while five men would have to work all day to accomplish this b y hand. A large Philadelphia house which makes boys' and children's shoes entirely, has learned that the introduction of new machinery within the past thirty years has displaced employees in the proportion of six to one, and that the cost of the product has been reduced one half. . . . In another line labor has been displaced to such an extent that only one third the number of operatives formerly required is now in employment. In the days of the single-spindle hand-wheel, one spinner, working fifty-six hours continuously, could spin five hanks of number thirty-two twist. A t the present time, with one pair of self-acting mule-spinning machines, having 2,124 spindles, one

spinner, with the assistance of two small boys, can produce 55,098 hanks of number thirty-two twist in the same time. It is quite generally agreed that there has been a displacement, taking all processes of cotton manufacture into consideration, in the proportion of three to one. T h e average number of spindles per operative in the cottonmills of this country in 1831 was 1 J . 2 ; it is now over 64.82, an increase of nearly 157 per cent; and along with this increase of the number of splindles per operative there has been an increase of product per operative of over 145 per cent, so f a r as spinning alone is concerned. In weaving in the olden time, in this country, a fair adult handloom weaver wove from forty-two to forty-eight yards of common shirting per week. N o w a weaver, tending six power-looms in a cotton f a c tory, will produce j,joo yards and over in a single week; and now a recent invention will enable a weaver to double this product. . . . And so illustrations might be accumulated in very many directions—in the manufacture of furniture, in the glass industry, in leather-making, in sawing lumber, in the manufacture of machines and machinery, in the production of metals and metallic goods of all kinds, or of wooden-ware, in the manufacture of musical instruments, in mining, in the oil industry, in the manufacture of paper, in pottery, in the production of railroad supplies, in the manufacture of rubber boots, of saws, of silk goods, of soap, of tobacco, of trunks, in building vessels, in making wine, and in the production of woolen goods. It is impossible to arrive at an accurate statement as to the number of persons it would require under the old system to produce the goods made by the present industrial system with the aid of invention and power machinery. A n y computation would be a rough estimate. In some branches of work such a rough estimate would indicate that each employee at the present represents, on an average, fifty employees under the old system. In many other branches the estimate would involve the employment of one now where three were employed. Looking at this question without any desire to be mathematically accurate, it is fair to say, perhaps, that it would require from fifty to one hundred million persons in this country, working under the old system, to produce the goods made and do the work performed by the workers of to-day with the aid of machinery. This computation may, of course, be very wide of the truth, but any computation is equally startling, and when it is considered that in spinning alone 1,100 threads are easily spun now at one time where one was spun under the old

AMERICAN PROBLEMS system, no estimate can be successfully disputed. All these facts and illustrations simply show that there has been, economically speaking, a great displacement of labor by the use of inventions; power machinery has come in as a magical assistant to the power of muscle and mind, and it is this side of the question that usually causes alarm. Enlightenment has taught the wagereceiver some of the advantages of the introduction of inventions as his assistants, but he is not yet fully instructed as to their influence in all directions. H e does see the displacement; he does see the difficulty of turning his hand to other employment or of finding employment in the same direction. These are tangible influences which present themselves squarely in the face of the man involved, and to him no philosophical, economic, or ethical answer is sufficient. It is therefore impossible to treat of the influence of inventions, so far as the displacement of labor is concerned, as one of the leading influences, on the individual basis. W e must take labor abstractly. So, having shown the powerful influence of the use of ingenious devices in the displacement or contraction of labor, as such, it is proper to show how such devices have influenced the expansion of labor or created employments and opportunities for employment which did not exist before their inception and application. A separate chapter is given to this part of the subject. CHAPTER X X V I I I : ON

T H E I N F L U E N C E OF MACHINERY

LABOR.—EXPANSION

As incredible as the facts given in the preceding chapter appear to one who has not studied them, the ability to crystallize in individual cases and show the fairly exact displacement of labor exists. A n examination of the opposite influence of inventions, that of the expansion or creation of employments not before existing, reveals a more encouraging state or condition of things, but one in which the statistician can make but very little headway. T h e influences under the expansion of labor have various ramifications. T h e people at large, and especially those who work for wages, have experienced these influences in several directions, and contemporaneous with the introduction and use of inventions, the chief economic influence being in the direction of expansion, the other influences being more thoroughly ethical, and these should be considered under that broad title. T h e statistical method helps in some respects in studying the expansive power of inventions, and especially in the direction of great staples used as raw material in manufacturing processes and in the increase of the number of people employed

859

relative to the number of the population. If there has been a great increase in the consumption per capita of great staples for manufacturing purposes, there must have been a corresponding expansion of labor necessary for the production of goods in like directions. Taking up some of the leading staples, the facts show that the per capita consumption of cotton in this country in 1830 was 5.9 pounds; in 1880, 13.91 pounds; while in 1890 the per capita consumption had increased to nearly 19 pounds. These figures are for cotton consumed in our own country, and clearly and positively indicate that the labor necessary for such consumption has been kept up to the standard, if not beyond the standard, or the olden time—that is, as to the number of people employed. In iron the increase has been as great proportionately. In 1870 the per capita consumption of iron in the United States was 105.64 pounds, in 1880 it had risen to 104.99, and in 1890 to 283.38. While processes in manufacturing iron have been improved, and labor displaced to a certain extent by such processes, this great increase in the consumption of iron is a most encouraging fact, and proves that there has been an offset to the displacement. The consumption of steel shows like results. In 1880 it was 46 pounds per capita, and in 1890, 144 pounds. T h e application of iron and steel in all directions, in the building trades as well as in the mechanic arts, in great engineering undertakings, and in a multitude of directions, only indicates that labor must be actively employed, or such extensions could not take place. But a more conclusive offset to the displacement of labor, considered abstractly, is shown bv the statistics of persons engaged in all occupations. From i860 to 1890, a period of thirty years, and the most prolific period in this country of inventions, and therefore of the most intensified influence in all directions of their introduction, the population increased 99.16 per cent, while during the same period the number of persons employed in all occupations—manufacturing, agriculture, domestic service, everything— increased 176.07 per cent. In the twenty years, 1870 to 1890, the population increased 62.41 per cent, while the number of persons in all occupations increased 81.80 per cent. An analysis of these statements shows that the increase of the number of those engaged in manufacturing, mechanical, and mining industries, those in which the influence of inventions is most keenly felt, for the period from i860 to 1890 was 172.27 per cent, as against 99.16 per cent increase in the total population. If statistics could be as forcibly applied to

86ο

UNREST

AND

show the new occupations brought into existence by invention, it is believed that the result would be still more emphatic. If we could examine scientifically the number of created occupations, the claim that inventions have displaced labor on the whole would be conclusively and emphatically refuted. Taking some of the great industries that now exist, and which did not exist prior to the inventions which made them, we must acknowledge the power of the answer. In telegraphy thousands and thousands of people are employed where no one has ever been displaced. T h e construction of the lines, the manufacture of the instruments, the operation of the lines—all these divisions and subdivisions of a great industry have brought thousands of intelligent men and women into remunerative employment where no one had ever been employed before. T h e telephone has only added to this accumulation and expansion, and the whole field of electricity, in providing for the employment of many skilled workers, has not trenched upon the privileges of the past. Electroplating, a modern device, has not only added wonderfully to the employed list by its direct influence, but indirectly by the introduction of a class of goods which can be secured by all persons. Silverware is no longer the luxury of the rich. Through the invention of electroplating, excellent ware, with most artistic design, can be found in almost every habitation in America. T h e application of electroplating to nickel furnished a subsidiary industry to that of electroplating generally, and nickelplating had not been known half a dozen years before more than thirty thousand people were employed in the industry, where no one had ever been employed prior to the invention. . . . It is certainly true—and the statement is simply cumulative evidence of the truth of the view that

EXPANSION

expansion of labor through inventions has been equal or superior to any displacement that has taken place—that in those countries given to the development and use of machinery there is found the greatest proportion of employed persons, and that in those countries where machinery has been developed to little or no purpose poverty reigns, ignorance is the prevailing condition, and civilization consequently far in the rear. The expansion of values as the result of the influence of machinery has been quite as marvelous as in any other direction, for educated labor, supplemented by machinery, has developed small quantities of inexpensive material into products of great value. This truth is illustrated by taking cotton and iron ore as the starting-point. A pound of cotton, costing at the time this calculation was made but 13 cents, has been developed into muslin which sold in the market for 80 cents, and into chintz which sold for $4. Seventy-five cents' worth of common iron ore has been developed into $ j worth of bar-iron, or into $10 worth of horse-shoes, or into $180 worth of table knives, or into $6,800 wortK.of fine needles, or into $29,480 worth of shirt buttons, or $200,000 worth of watch-springs, or $400,000 worth of hair-springs, and the same quantity of common iron ore can be made into $2,500,000 worth of pallet arbors. 1 The illustrations given, both of the expansion of labor and the expansion of values, are sufficiently suggestive of a line of study which, carried in any direction, will show that machinery is the friend and not the enemy of man, especially when man is considered as a part of society and not as an individual. 1 This calculation was made by G e o r g e W o o d s , L L . D . , of Pittsburg, Pa., and given by him in an address on "Technical Education,' in 1874.

THE CRISIS OF 1893

JOHN DEWITT WARNER DESPITE GREAT INDUSTRIAL ADVANCES a n d s t e a d y

improvements in standards of living, the American economic system knew nothing about smoothing out the sharp fluctuations of the business cycle. A n inadequate banking and credit mechanism and the helplessness of government w e n t hand in hand with disorderly speculative activities: revivals led to booms and

booms were followed b y contractions and crises. T h e crisis of 1893—which hit the count r y in the summer of that y e a r — w a s aggravated by the troubles of agriculture and b y businessmen's lack of confidence in the currency tinkering of Washington. John D e W i t t Warner's ( 1 8 5 1 - 1 9 2 5 ) pamphlet shows h o w , because of the absence of a

A M E R I C A N PROBLEMS central banking mechanism, banks all over the country were compelled to fall back upon all sorts of ingenious devices to relieve the currency stringency. The fear for the gold standard is clearly indicated in Warner's analysis; but, more important, is the description of a

The Currency B Y

J O H N

banking system that was incapable of functioning either in time of too great credit expansion or in time of too great contraction.

Warner's pamphlet, The Currency

Famine of

D E W I T T

C I R C U M S T A N C E S THAT PRECEDED THE C R I S I S G E N E R A L CONDITIONS

THE CIRCUMSTANCES that preceded the currency famine of 1893 are as yet too recent to be free f r o m controversy as to their causes and consequences. In a general w a y , however, the situation has already become historic, so that somewhat of an apparendy significant succession of facts may properly be noted. F o r the ten years preceding 1890, though local disturbances had not been lacking, the commercial, manufacturing and agricultural world as a whole had been enjoying steady prosperity, until the accumulation of raw materials and manufactures was greater than ever before in the world's history; and ten years of prosperity had made general throughout the world that state of mind which prompts borrowers to new enterprises and induces lenders freely to extend credits. F r o m the beginning of the year 1890, however, g r o w i n g caution and watchfulness seemed as general as theretofore had been confidence approaching carelessness. T h e first symptom was generally an attempt to dispose of surplus stocks even at a sacrifice. This brought about a shrinkage of values, which, in its turn, lessened margins and increased the apprehensions of creditors. On this side of the water a suggestion of the situation is found in the foreclosure during the first six months of 1890 of no less than twenty-one railroad companies, with an aggregate of stock and bonds of $92,000,000; while the collapse of the Barings in England during the autumn of 1890 called attention to the shrinkage in colonial and South American securities, and to the precarious standing of world famous houses. THE S H E R M A N ACT

It was just at this time, too, that the agitation f o r cheap money reached its highest tide in Congress and the Sherman A c t became a law. B y this, instead of coinage at $2,000,000 per month, bullion

Famine

of 18$3 (New York, 1895) w a s published b y the New York Reform Club.

1893

W A R N E R

certificates at the rate of $4,500,000 per month were added to our currency, already out of all proportion to the commercial wants of our people; while free coinage—that is, forced coinage of silver at a par of ιό to 1 of gold—was pressed on every hand, largely by those w h o confessed their aim to be partial repudiation. It may be questioned how far this last factor contributed to the gravity of the situation here; there can be no doubt that it increased it. For, just at this time, creditor Europe was forced b y her necessities to return in large measure our securities which she had theretofore eagerly taken, and we were thrown more and more upon our own resources for capital wherewith to develop our country. T o the flood of our own obligations, thus thrust upon us, were now added those of holders who had become apprehensive of A m e r ican good faith, and who hastened to realize, even at a sacrifice, before they should be made worse off by the repudiation which some of them thought close at hand. Again, tò the sentimental factors noted there was now added what might almost be termed a physical force, tending to drive gold out of the country, and, through our currency system, draining the treasury as well. Just how much currency the business of a country will absorb at any given moment, it is hard to say; but it is nevertheless certain that when the channels of finance are full, additions will cause them to o v e r f l o w , and that the overflow will be of that portion which is acceptable elsewhere. A s is pretty generally agreed, the growing dullness of business had left our currency superabundant as far back as 1890; while in that year the rate at which depreciated silver was poured into it was increased from $24,000,000 a year to more than double that rate. T h e effect was as though water were poured into a measure already filled with oil. T h e Sherman notes, whose circulation was bounded by national lines, went to the bottom of the measure—that is stayed in this country; the gold, free to move—that is, cur-

UNREST AND EXPANSION

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rent everywhere—overflowed to foreign countries. Another effect now began to be prominent. T o a small extent our holders of mortgages (which in this country are usually f o r short terms, even though intended as permanent investments) promptly secured themselves by requiring renewals under contracts payable in gold; but many lenders—to some extent f r o m individual hesitancy in exacting unusual terms of borrowers, and to some extent f r o m apprehension lest the legislation threatened in many States against such discrimination might prove valid—refused to make or renew time loans, thus forcing a stagnation of enterprise in many directions and in many others a realization of assets under unfavorable circumstances. HOARDING OF GOLD I N U N I T E D

STATES

Concurrent with this was developed a disposition to hoard gold and to discriminate in its favor b y withholding it f r o m payments. T h a t this was markedly true in 1893 is universally understood. It seems to have been forgotten in many quarters how much earlier than that year this practice became general; though an inspection of the treasury accounts shows that in September, 1890, the first month after the passage of the Sherman act, the Treasury lost $38,000,000 of its gold reserve. June 30, 1890, the net treasury assets were $255,893,000, of which $190,232,000 was in gold and gold bullion. A year later similar assets were $176,459,000, of which $117,667,000 was in gold and gold bullion—the " f r e e gold," that is the amount above the $100,000,000 reserve f o r greenback redemption, having been reduced during the year from $90,232,000 to $17,667,000. Recalling that the customs receipts are the principal streams which feed the Treasury, we can investigate one step further. In June, 1890, above ninety per cent, of our customs receipts were in gold. T h e proportion of gold steadily declined thereafter until in June, 1891, but twelve per cent, of the customs receipts were in gold. T h e circle of investigation is complete for the period. T h e T r e a s u r y was diluting the currency by silver inflation at the rate of $4,500,000 each month; and at the same time it was rapidly losing power to maintain its parity in gold; while the selection by which gold was retained and silver used f o r payments to G o v e r n m e n t indicated that gold was being hoarded outside. TREASURY

EXPEDIENTS

T h e National Administration, though doing nothing to avert the crisis, was sensible of its ap-

proach. In the spring of 1891 the T r e a s u r y by refusing to furnish gold bars, of which it had plenty, practically charged gold exponers onetenth per cent, premium; at which price during that year they took above $60,000,000; and during the summer of 1891 the Government attempted to gain gold by selling legal tender Western exchange at a price sixty cents per $1,000 less than the normal rates, on condition of being paid in gold, some $12,000,000 of which was promptly thus secured. Finally, to accelerate the rate at which we were moving toward disaster, the joint effect of the tariff revision of 1890 and the liberal appropriations of the fifty-second Congress had been to turn the late annual surplus, averaging $110,000,000 per annum for the years 1888-1890, into a deficit which for the year beginning J u l y 1, 1893, amounted to more than $69,000,000; so that a constantly weaker Treasury faced a steadily increasing responsibility. T h e time thus rapidly approached when the sole resource to maintain our currency upon a natural basis would be the steadily diminishing gold receipts of the T r e a s u r y ; which, so far as concerncd customs revenues, had shrunken to less than four per cent, in September, 1892, and never again rose above ten per cent, until in the currency famine of 1893 the hoarded gold coin was forced from the bank vaults. Such was the course along which the Treasury steadily drifted f o r years, until in February, 1893, the outgoing Administration by private appeal to its friends securcd some $6,500,000 of gold from N e w York bankers, just in time to enable it, going out on the 4th of March, to escape the breaking of the dam behind which for years it had seen the waters steadily piling. As the Cleveland Administration settled into its place the flood was still rising, though not faster than had been the case for months previous. But soon the actual impairment of the $100,000,000 Treasury gold reserve showed the water trickling over the levee, and on every side each weak spot seemed about to give way. T H E CURRENCY

FAMINE

For years liquidation had been progressing, and really solvent institutions had been contracting their loans and centralizing their resources, so that they were never better buttressed; but the same proccss of liquidation had drained the weaker ones of their available funds, and left them with holdings of unmerchantable assets, enormous in the aggregate, which the first break would throw upon an already overburdened market. T h e very air was charged with ruin. In April, 1893, business failures reported by Bradstreet's were 905,

AMERICAN PROBLEMS as c o m p a r e d with 703 in the same month of 1892; in M a y there were 969, as c o m p a r e d with 680 the M a y previous, and b y J u n e not merely had the ratio of disaster f u r t h e r increased above the average, but all over the c o u n t r y , especially in the W e s t , the banks were breaking. U p to M a y 9th the number of bank suspensions had not been extraordinary—only eleven of N a t i o n a l banks during the preceding six months—but on that date the Chemical N a t i o n a l B a n k of C h i c a g o closed its doors; on the n t h the Columbia N a t i o n a l Bank of the same city and the Capital N a t i o n a l Bank of Indianapolis followed its example; on the 16th the First National Bank of Cedar Falls, la., and on the 18th the First N a t i o n a l and O g l e t h o r p e National of Brunswick, G a . , and the Evanston National of Evanston, 111., suspended. B e f o r e the month was over six other N a t i o n a l banks had broken; in J u n e twenty-five, and in J u l y seventythree others f o l l o w e d suit; while the mortality was equally m a r k e d a m o n g State banking associations and private bankers, so that b y A u g u s t first the condition was one of panic. T h e n developed the feature that will f o r e v e r characterize the stringency of 1893—instructive to those who have not already learned h o w immaterial is any ordinary supply of legal currency when compared with credit in its various f o r m s , the real currency of the country. F o r years business credit had been shrinking in the U n i t e d States —this largely, though b y no means wholly, as the result of the constant inflation of our c u r r e n c y b y silver legislation at a time when normal business demands f o r currency were g r o w i n g less and less; and now this credit was largely d e s t r o y e d ; so that each (largely in p r o p o r t i o n to the extent to which his lack of information left him a r e a d y victim to f e a r ) preferred currency in hand to any credit account, however " g i l t - e d g e d . " A l m o s t between morning and night the scramble f o r c u r r e n c y had begun and culminated all over the c o u n t r y , and the preposterous bulk of our circulating medium had been swallowed up as effectually as, in a scarcely less brief period, gold and silver had disappeared b e f o r e the premium on specie a generation before. Currency was hoarded until it b e c a m e so scarce that it had to be b o u g h t as merchandise at a premium of 1% to 3 % in checks payable through the clearing house; and to enable their families to meet petty bills at the summer resorts the merchants and professional men of the cities were f o r c e d to purchase and send b y express packages of bills or coin; while savings banks hawked their government b o n d investments about the money centers in a vain e f f o r t to secure currency. T h e panic was naturally worst a m o n g those of

863

t o o little financial standing to use bank accounts f o r their ordinary business, so that the action of bank depositors but inadequately suggests the general tendency. B u t the deposits in N a t i o n a l banks alone, which had been $1,750,000,000 M a y ist, 1893, were about $1,550,000,000 on J u l y ist, and b y O c t o b e r ist but $1,450,000,000. It is with the most striking result of this situation that w e have to deal. It involved an absolutely unique experience—that of a highly ingenious and enterprising people, inhabiting a wealthy and civilized country, and b r o u g h t f a c e to f a c e with an absolute necessity f o r the use of an extraordinary amount of currency, at the same time that they were inhibited b y law f r o m o r d i n a r y sources of supply. FAILURE OF NATIONAL BANK CURRENCY S Y S T E M

O u r laws p r o v i d e d but one resource—additional issues of N a t i o n a l - b a n k notes. T h e N a tional banks w e r e urgently summoned to p e r f o r m their most important legitimate function—that of giving elasticity to a c u r r e n c y admittedly rigid at every other point. T h e only result was to d e m o n strate the worthlessness of the N a t i o n a l banking system itself. W e had had it f o r thirty years. Its original aim had really been, not to p r o v i d e bank note currency—there was a plethora of that when the National banking system was established—but rather to starve the business public into purchasing G o v e r n m e n t bonds as a condition of being permitted to d o business at all. S o far was it f r o m a c c o m m o d a t i n g itself to the wants of developing communities that it t o o k $11 in f u n d s f r e e f o r investment in any given locality to secure f o r that locality $9 in currency. S o far was it f r o m expanding to meet the g r o w i n g demands of the c o u n t r y that, while t w e n t y years a g o the then outstanding $340,000,000 of N a t i o n a l bank notes represented m o r e than 45 per cent, of all our circulation, ten years later the $347,000,000 of similar notes then outstanding represented but 28 per cent, of o u r c u r r e n c y , and in J u n e , 1893— the latest date at which conditions were n o r m a l — the $172,000,000 of N a t i o n a l - b a n k notes then in circulation outside of the T r e a s u r y w e r e less than 11 per cent, of o u r currency, of which they had ceased to be a material f a c t o r . S o far was it f r o m being elastic that w e had c o m e to expect a period of stringency in each year—in the late summer and early a u t u m n — which invariably arrived; while a careful survey of the course of our National-bank note circulation showed that the general tendency, at first to its increase and a f t e r w a r d s to its withdrawal, had

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864

absolutely no connection with present or prospective, however certain, business demands for currency. National banks had long since ceased even pretended obedience to law, and habitually made discounts in times of stringency in the face of depleted reserves. This practice was possible because the initiative was in the hands of the banks, and the Government had power only to punish; a power which it forebore to exercise. In the other particular, however, that of furnishing currency, the initiative was in the hands of the Comptroller. The banks were thus powerless to break the law, no matter how beneficent might have been such violation. And nothing is more instructive than to contemplate the futile writhing and contortions of our National-bank note currency system in the strait jacket with which it had been pinioned, and to see the not merely inadequate, but positively ludicrous, results of its strenuous efforts to respond to the most urgent demands for relief that this generation has heard. The increase of our currency by additions to National-bank circulation during the stringency was only about i¥¿ per cent, and was far less than the amount by which the banks of a single city virtually increased it by clearing-house certificates alone—little more than half the amount by which individual bankers increased it by actually buying gold in Europe and shipping it hither—and was in great part accomplished only after the necessity for it was over, millions of dollars of the additional currency taken out being returned to the treasury with the packages unbroken. It was to such a dead fetich that our stricken business appealed when caught in the panic of August, 1893. Never was there offered a more conclusive proof of the self-reliance of our citizens and the superiority of business expedients over Government direction. Not merely by financiers in our great cities, and by great corporations experienced in handling such crises but in every part of the country, with the exception of the far Southwest, did the people work out their own salvation. EMERGENCY

CURRENCY

The experience of August-September, 1893, was unique. There were no gradually developed plans for mutual assistance. Mutual helpfulness there was in plenty between individuals and localities; but it was in prompt response to sudden appeals; and before any general system could be devised the occasion for it was over. Financial clouds had long been lowering; but it was within a single month that the currency famine became general, its worst effect felt, such relief as was had ex-

tended, and the crisis over, with a tendency toward a glut of circulating medium. In other cases, nations or communities had simply found themselves thrown upon their own resources. Our people found themselves not merely drained of currency but forbidden by most carefully drawn statutes to utilize the expedients which would have been most natural and most effective. N o civilized nation has ever experienced such a currency famine. None has ever found itself so fettered by positive law in its efforts to rescue itself. None ever so promptly arose to the emergency. Never was there so prompt a return to normal conditions. It is this that I have found a peculiarly interesting study. Not that I have been able to estimate or even trace it in anything like full measure. One of its most striking peculiarities was the extent to which—partly on account of the suddenness with which it was called for and the promptness with which the need of it was over—partly, perhaps, because everyone assumed that its use was in defiance of law—the actual practice in each locality was in general unknown outside of it, and evidence and mention of it hard to secure afterwards. The specimens I quote are, therefore, but a few score of the hundreds of cases that careful inquiry would reveal; and, except in the case of clearing house certificates proper, give but a faint idea of the extent to which in all parts of the country this emergency currency sprang into being. T h e y are, however, I trust sufficiently varied to illustrate the methods used and the more characteristic sorts of currency—as distinguished from more strictly "credit" expedients—that were thus called into being. Clearing House Certificates. First come actual clearing house certificates—new, not in invention, but rather in the novel extent of their use. Their office was simply to extend indefinitely the brief term of mutual credit involved in all clearing house settlements. Contrary to the general impression, they were not used as currency; but their effect was to add just their face to the volume of currency in circulation, by releasing, for use outside, that which would otherwise have been reserved for clearing house settlements. So far as the banks using them transgressed law, it was in renewing loans and extending discounts when their reserves were depleted below the legal limit. The use of clearing house certificates simply enabled this to be done with less risk of other than legal consequences. And to the writer, not the least interesting of the data that he has gathered in this connection has been the proof—in instance after instance—where

AMERICAN he has been proudly assured that a particular city had not been forced to extraordinary expedients such as had been seized upon in their desperation b y less favored centers—either that the boaster had been saved by aid extended by those whom he so patronizingly pities, or that the self-sufficient town had already adopted such practices that its ordinary way of doing business left nothing in the w a y of liberal financiering yet to be exploited. It was to the banks that did use clearing house certificates in the emergency that the country owes its escape from unparalleled disaster; and at once to anticipate and answer all inquiries as to the form and use of the legitimate clearing house certificates. Denominations were as follows: N e w York, $20,000, $10,000 and $5,000; Philadelphia, $5,000 only; Boston, $10,000 and $5,000; N e w Orleans, $500 to $10,000; Baltimore, $6,000, $3,000 and $1,000; Pittsburg, $10,000, $5,000 and $1,000; Detroit, $5,000 only; Buffalo, $5,000 and $1,000. Their issue, it will be noticed, was mainly in the Northeast, N e w Orleans being the only Southern and Detroit the most Western example. And in each case it will be observed that use of the certificate is limited strictly to settlement of mutual accounts between members of the clearing house association in question. Other devices of similar character were "Clearing House Due Bills," exchanges of clearing house balances, such as are so generally used at Chicago, that an extension of their use made unnecessary special issues of clearing house certificates; and utilization of the custom in smaller cities of considering exchange drawn on "reserve cities" as equivalent to cash in transactions between banks. Next in order, and in some respects the most interesting of all, were the notes called clearing house certificates, but in fact intended f o r circulation, frequently issued by temporary committees of banks in towns where no clearing house existed, and—though thoroughly effectual f o r the worthy purpose for which they were issued—a travesty on the paper after which they were named. T h e term "clearing house certificates" was, however, used, not with the idea of deceiving any one, but as the only ready-made term that indicated the one fact that the public cared to know—viz., that the associated banks of the locality were bound to make them good. . . . Certified Checks. Another expedient, favored in all parts of the country, was the sale by banks of certified checks against themselves for currency denominations which, when signed by the purchaser, were used by him as currency. T h e few given are illustrations of hundreds of instances

PROBLEMS

8 65

which seem to have been pretty evenly distributed in all parts of the country except the Southwest. Pay Checks. Most generally used of all, however, were pay checks in currency denominations, which, in scores of manufacturing towns, mainly in the Northeast, but largely in the West and Southeast, were the only currency that was available for weekly payrolls and cash purchases by wage earners. Miscellaneous Expedients. In addition to these well defined classes, there were others so varied that but a suggestion of them can be made here— negotiable certificates of deposit; ninety-day and other short time paper in currency denominations, with and without interest; bond certificates; grain purchase notes; credit and corporation store orders ; improvement fund orders; teachers' warrants; shingle scrip; specimens of each of which are given below, and which are noteworthy here as the adaptation to use for general circulation, by issue in small currency denominations, of paper devised for other and widely differing purposes. The foregoing will, I trust, have indicated somewhat of the resourceful vigor with which we met a sudden demand. And the result was as creditable as was the promptness with which our people arose to the occasion. THE COURSE OF NATIONAL BANK CURRENCY

But the performances of the National banking system turned tragedy into farce. June ι, 1893, there was a surplus of about $21,000,000 in excess of legal reserve lying in N e w York banks awaiting investment, and the amount of National bank currency then outstanding was about $177,000,000. During that month the surplus reserve in the N e w York banks decreased to $1,250,000, while the National bank notes outstanding increased to $178,700,000. August 1, the bank funds were drained $14,000,000 below their legal reserve; the demand f o r money to move the crops was increasing, the stress was almost a panic; yet the National bank currency had increased but $5,000,000. September 1, the situation was improving, and the deficit had fallen to $1,500,000; and, now that it was less needed, the National bank note circulation began to expand rapidly and stood at $199,000,000. October ι, the deficit had turned to an embarrassing surplus of $28,000,000; but the National bank currency expansion was as hard to stop as it had been to start, and aggravated the plethora by an increase of $10,000,000 during September—on October ι standing at $208,700,000. November 1, the idle funds had increased to over $50,000,000, but the National bank issues were still expanding,

UNREST AND EXPANSION

8 66

standing on that date at $109,300,000. December 1, the unused surplus had risen to $76,000,000, but the National bank circulation had contracted less than $500,000. January 1, 1894, the banks had $80,000,000 more than anybody wanted, but the National bank issues had remained stationary for three months at above $208,000,000. By February ι, the surplus seeking employment had risen to $110,000,000, while the National bank note circulation was still about $208,000,000; during February the $50,000,000 loan to the Treasury was floated, the most of which was taken from this surplus; yet it stood on March 1 at $76,000,000; on April 1, at $81,000,000; on May 1, at $83,000,000, and meanwhile the National bank currency had remained stationary at about $208,000,000. In June, 1893, therefore, when there was the greatest demand that this country had ever seen for currency, the National bank issues constituted a smaller percentage of our total circulation than at any other time except during the preceding year; the almost frenzied efforts of the National banks were utterly futile in bringing material assistance until after the crisis had passed; and the result of their attempt to aid .us has been to keep an increased volume of National bank currency outstanding, while the amount of unemployed currency was greater than it had ever been before, at the highest point it has reached for five years. And this is not all. The law permits but $3,000,000 contraction monthly in any event. It will not be possible, therefore, to get back to a normal basis before the annual stringency due next September. RESULTS

Throughout New England, so generally that it may be deemed to have characterized its manufacturing centers; in so many portions of the South that it might be considered general there; in the West and in the Northwest; sporadically in the Middle States, the necessity for local currency developed at once a supply of it; and, where this was not the case, from city after city comes the word of how unfortunate were those who, not assisted by the enterprise of others, had none of their own to fall back upon. There is one general exception to be made—an exception which, however, proves the rule. It is this: T o the precise extent that—either by the use of clearing house certificates within the law, or by the violation of law in continuing discounts when their reserves were depleted—the banks of any section thus met the emergency, their customers and the community dependent upon them were relieved from the necessity which so generally came upon others of providing a special local cur-

rency. It was the New York banks that issued the greatest amount of clearing house certificates, and at the same time continued to assist their customers, even while their reserves were depleted; and, therefore, it was in the neighborhood of N e w York and her own great manufacturing establishments, in those of Newark, of Brooklyn, and of Long Island City, that it was unnecessary to look further for a supply of the currency they needed. The same was the case in Philadelphia, Chicago, Boston and their neighborhoods, in each of which cases either clearing house certificates, or loans of clearing house credits, enabled strong banks to aid weak ones. But in every case where the associated banks of a section were not in a position to supply the lack of currency or obviate the necessity of its use, individuals and corporations were compelled to do this. In this way after the machinery so carefully adjusted by Government had utterly failed to work, the business common sense of our people readjusted its finances; and in every part of the land business started up again, manufacture continued, the laborer received his hire, and the merchant disposed of his goods. In not an instance, so far as I have been able to learn, did any community find any trouble in the use of what, in the absence of all restrictive laws, would have been—and what in defiance of them actually was—a perfectly natural bank-note currency. T h e whole American people promptly accepted—each locality upon its knowledge of the conditions there—the paper of individuals and institutions. And as a result of this experience—most widespread, and had under conditions least favorable to security other than the integrity of those who issued the notes, and the intelligence of those who were asked to accept them—there was not a single dollar lost. Such was the honorable record of the emergency currency of 1893. H o w

RELIEF

CAME

By September ist, 1893, the passage by the House of the repeal of the purchasing clause of the Sherman Act had both stopped inflation and quieted the worst apprehensions; and to $30,000,000 additional national bank currency and the volume of the emergency currency noted, which can be but vaguely estimated at $80,000,000, was already being added the $40,000,000 of gold which had been purchased in Europe for import hither. The panic collapsed as suddenly as it had been blown up; and, with dull business conditions for a year to come, the currency proved excessive. With accession of confidence among the masses the petty hoards were returned to the savings

A M E R I C A N PROBLEMS banks or paid out to merchants, and by them used to swell their bank credits; so that from $1,450,000,000 in October 1, 1893, the aggregate deposits in National banks alone arose to $1,529,000,000, December 19, 1894; $1,586,000,000, February 2, 1894; $1,671,000,000, May 4, 1894; $1,678,000,000, July 18, 1894, and $1,718,000,000, October 2, 1894. T h e emergency currency gave no trouble. By the process of natural redemption it disappeared so promptly that before the end of the year specimens became curiosities.

Such was the crisis of 1893, a situation brought about by the wanton interference of Government with business not its own; aggravated by legislation which had to be broken before the people could help themselves; relieved by enterprise overriding and evading restrictive law; and turned into a theme for the gayety of nations by the grotesque exhibition thus afforded of how depraved was the elaborate bank note currency system, upon which had been lavished so much of thankless labor.

THE MONEY of 1893 and the continuing depression, Populists and agrarians generally became convinced that the root of all evil was to be found in an inadequate currency. The money debate, in America, therefore took on curious, flamboyant and emotional tones. The literature—on both sides—usually had little relation to economic fact; and, indeed, next to no effort was made to explore fundamental causes. That agriculture was suffering from a faulty credit mechanism—there was a complete absence of long-term and intermediateterm credit facilities—was completely lost sight of as the participants in the debate wrangled over silver and gold. Coin's Financial School (the work of W. H. Harvey and published in 1894)—an amazing piece of propaganda and misinformation, filled with tales of plots and conspiracies—had an enormous popularity. It had many imitators, consequently, of which one of the better ones was Ignatius Donnelly's The People's Money (Chicago, 1895). Donnelly is not quite as brash as "Coin" Harvey; but he is almost as naïve and certainly as evangelical in fervor. The people, by political action, will triumph and, next to God, government fiat money is the "biggest thing on the planet." J . Laurence Laughlin (1850-1933) entered W I T H T H E CRISIS

867

DEBATE

the lists against Harvey and Donnelly and went up and down the country debating the silverites and fiat-money advocates. Laughlin had been trained at Harvard and had come to the new University of Chicago as professor of political economy. His Facts about Money (Chicago, 1895) is the record of one such debate. Laughlin seeks to answer seriously the misstatements of Harvey. And one of his more telling points has to do with the relationship between prices and gold. It is this chapter which is reprinted here. But Laughlin can be almost as emotional as Harvey and Donnelly, and at one place in his argument he is ready to accuse the silver interests of a conspiracy to destroy American civilization and drive us into economic barbarism along with silverstandard China and Mexico. The result was confusion, of course, and the election campaign of 1896 was carried on in a highly charged atmosphere. It was not until 1913-16 that the first serious and statesmanlike efforts were made in the United States to do something about agricultural credit. (The relevant documents are presented in Part IX, below.) The selections here reprinted are from Donnelly's The People's Money and Laughlin's Facts about Money.

868

U N R E S T

A N D

E X P A N S I O N

The People's Money BY THIRD

IGNATIUS

DAY T H E GOSPEL OF CREED

"GOOD MORNING, M r . Sanders. A r e y o u too tired to talk this bright d a y ? " " N o t at all; there are some themes I never tire o f . I can say with H a m l e t : " " W h y , I will fight with him upon this theme, Until m y eyelids d o no longer wag.' " T a l k is w o r d s ; but behind this discussion are tremendous things—the progress of development, the happiness of the world, the whole onflood or arrestment of humanity." T h e r e w a s a pleasant-faccd, fair-haired lady, of t w o or three and twenty, sitting upon the next seat across the aisle of the car. At this point «he spoke up, addressing M r . Sanders. " P a r d o n , " she said, " m y mingling in your conversation; but 1 could not help but hear much of it yesterday, and I was greatly interested. 1 would like to ask y o u a question." " C e r t a i n l y , " replied M r . Sanders. M r . H u t c h i n s o n rose to his feet and said: " T a k e m y seat, madam, alongside of Mr. Sanders. Y o u will hear better, and it does not affect me to ride b a c k w a r d s . " " T h a n k y o u , " said the young lady, changing her place. " I do not k n o w , " she continued, "anything about the financial questions, and I find many gentlemen equally ignorant; but I perceive that something is w r o n g . T h r e e years ago my father was esteemed a rich man; now he is so poor that our family is b r o k e n up, and I am on my w a y to California to visit m y father's brother, and hope to get a position as a teacher, so that I will not be a burden on any one. But I cannot understand why it is, while the earth retains its fertility and mankind continue industrious, that labor cannot perpetually create wealth; why it is that food is less in price than the cost of producing it, and yet millions cannot secure enough to buy it?" " I tried to show yesterday," replied M r . Sanders, "that these evils are due to a limitation upon the governmental medium of exchange, caillcd money; an artificial interference with the natural conditions y o u speak of; a something, crearcd by man, which cries out to the earth, 'stop multiplying thy seed;' to the muscles of man, 'stop thy toil;' to the mine, 'close up thy mouth;' to the s;hip, 'sweep

DONNELLY no more before the streaming and triumphant wind;' to the wild beasts, 'you are safe in y o u r fastnesses, for man shall advance no more;' t o the whole human family, 'stand still and shrink and suffer.' " "But is there not," asked the y o u n g lady, " a deeper cause than all this? W h y , at this stage of the world's development, should this great calamity burst forth upon the w o r l d ? " " Y o u are right, m a d a m , " replied Mr. Sanders, "there is a deeper cause—a something g r o u n d e d on the very nature of the animal man. It is HUMAN

SELFISHNESS

" T h e r e are, we are told b y the scientists, t w o great agencies operating upon the heavenly bodies —the centripetal f o r c e and centrifugal f o r c e ; the one draws them together, and the other keeps them apart. T h e sun, by the first, would drag the earth into the fiery embrace of its gigantic flames; the other would send it flying off into boundless space. In the just balance and "equipoise of these two huge powers the planets are held in their orbits and the harmony of the universe preserved. " S o there is in human nature a centripetal f p r c e of selfishness which draws everything to the individual, and a centrifugal f o r c e called philanthropy, which reaches out to the mass; and it is only by the interplay of these great powers that human society is possible. . . . " A n d kraft, power, degenerates into craft, cunning; and king is derived f r o m the same root as cunning. N o better man lives than the individual Englishman, but this ruling class, in all ages, has been cruel, arrogant and heartless; as merciless to its own people as it was to all the rest of the world. But we need not abuse them. T h e y are worse than others probably because they have had more opportunity than others. T h e qualities that go to make oppression are simply inordinate selfishness, which grabs all it sees and would m a k e a dining table of the bodies of its dead victims. It has given up cannibalism, simply because there was an abundance of other kinds of f o o d ; but there isn't much difference between eating a man's b o d y and devouring his substance so that he perishes. One is a physical, the other a moral cannibalism. And there are many men who would rather be eaten after death than eaten before death. "But, oh! greed, greed, greed! . . . " This whole battle between gold and silver is

AMERICAN PROBLEMS nothing but the outcome of 'the hog in human nature.' " "Indeed," said the y o u n g lady, " h o w do y o u prove that?" "Simply enough," replied Mr. Sanders. THE GOLD AND SILVER QUESTION

" G o l d and silver were not made money b y law. N o international convention ever met, in the first instance, in the past ages, and agreed to adopt them. A s I said the other day, they were first the sacred metals of our ancestors, and then became the precious metals, because they were used to adorn the temples of the earth's greatest gods, the sun and the moon. Merchants bought them wherever they traded, along savage or civilized coasts, because they knew the priests, on their return home, w o u l d give them f o o d and clothes and jewels for them. But their whole use is a survival of primeval superstition. T h e i r beauty and compactness made them, it is true, desirable, and so they passed from hand to hand in a world-wide barter; and hence, when governments came to coin money, the stamp was naturally affixed to fragments of these convenient yellow and white metals. T h e y were valuable before they were money, and money before they "were coined; and the barbarian races—rude and crude—had no idea of money that could not be weighed and melted; like some of our modern philosophers w h o will not believe there is anything in the universe that is not a ponderable entity. T h e limitations of their senses they mistake for the limitations of Divinity; and what they cannot see they swear is not. A n d hence w e have a superstition of too little belief in place of the old-time superstition of too much belief. One set of old women has been driven off, and another set of old women, of the other sex, called philosophers, substituted ip their place. " W e l l , " he continued, "just as the sun and moon moved through the heavens, in silent and harmonious beauty—the greater and the lesser lights — s o these metals which represented them, the one golden and sun-like, the other silvern and moonlike, rode through the domain of human civilization,' holdinge a relation in value much like the relat tion of the sun and moon in apparent size and power. A n d as G o d permitted kings, as temporary leaders, until republics could be established, so he gave to man the use of these metals, until the power and majesty of vast and civilized peoples could be understood and stamped upon paper, and the intrinsic money theory forever relegated to the limbo of old world superstitions. "But d o w n the ages these t w o metals came hand in hand f o r probably more than 20,000 years.

869

T h e r e is no doubt they were the sacred metals-of Atlantis eleven thousand years ago; and the legends tell us that there were ten thousand years between the settlement of Atlantis and its destruction. D u r ing many ages, when sun and moon worship was the religion of all civilized peoples these metals were honored next to the heavenly luminaries themselves. "In all that vast lapse of time no attempt was ever made to divorce them until a quarter of a century ago, except in one instance, and that was in the year 221 A . D . , and the lessons it teaches are most prophetic. T h r o u g h Egyptian, Assyrian, Grecian and Roman civilization, the y e l l o w and the white metals moved hand in hand, as the basis of commerce and the symbols of wealth. But in A . D . 221, in the reign of a vile emperor, f o r the purpose of still farther oppressing the suffering tax-payers of R o m e and its provinces, and increasing the value of the money in w h i c h the taxes were paid, it was resolved to demonetize silver and make gold the only legal tender. T h e consequences were v e r y much the same as those which have overtaken ourselves. A recent writer says: " 'Consequently prices fell lower and lower, the money-lenders received more and more in interest and principal, taxes became more and more burdensome, and producers were further discouraged b y the constant depreciation of their property, which gradually fell into the hands of the creditor classes. T h e property of the producing classes being exhausted without paying their debts, they became the slaves of their creditors. A l l incentive to energy was destroyed and the classes that once formed the strength of Rome, f r o m which the invincible legions were drawn—reduced as they were to s l a v e r y — w e r e ready to welcome any change as a relief. A t the same time while the producing classes were reduced to a state of slavery, the creditor classes fell into a state of g r o w i n g moral corruption—a state that is always brought about b y the possession of unearned gains. T h u s reduced to impotency b y slavery, ignorance, heathenism and moral corruption, the R o m a n E m pire fell an easy victim to the hordes of barbaric Germans, w h o marched from one end of Italy to the other without meeting any serious resistance.' " . . . THE S U N AND

MOON

"But the point I was trying to call y o u r attention to was that, just as the sun and moon moved together through the heavens, so these, their t y p ical metals, moved side b y side, f o r hundreds of centuries, in the affairs of mankind; and that it w o u l d be as great an invasion of the orderly ar-

870

UNREST AND EXPANSION

rangements of nature to seek to pluck the moon from its orbit as it was to tear the white metal from the commercial firmament. "If any great cause had rendered it probable that such a course would be advantageous to mankind, then it would have been proper for the civilized nations to have fully considered it, in newspapers, conventions, legislative chambers, and in discussions b y a million firesides; weighing carefully all the arguments for and against such a step, before taking action upon it. See the tremendous debate that is now going on, all over the world, as to the restoration of silver to its ancient orbit. Even such a debate, with such a clamor of tongues, with such an array of facts, figures and authorities, should have preceded any attempt to tear it out of the commercial sky. Instead of that, silver was not the victim of an open and public war; it was secretly slain by the stilettos of hired banditti, in the darkness of the night." HOW SILVER W A S DEMONETIZED

" T h a t charge," said Mr. Hutchinson, "has been made a hundred times and a hundred times disproved." "Yes," said the young lady, "I read an article on the subject in ' T h e Light of Zion,' the day before I left home, which clearly shows that it was publicly repealed with the full knowledge of the whole country. I do not know much upon the subject myself, but I cannot believe a respectable newspaper would misrepresent the facts." "Misrepresent!" cried Mr. Sanders; " w h y , my dear young lady, the newspapers of to-day would misrepresent anything. If there was any considerable sum of money to be made by it they would unite in denying the existence of God! If a million dollars were at stake they would so blackguard the memory of George Washington that the State of Virginia would rise up and throw his ashes into the Potomac! 'Misrepresent!' G o d gave man the alphabet, and the devil gave him the daily press. T h e first widens the area of his knowledge and the second perverts truth and darkens understanding. "But here," he continued, "is the proof that the demonetization of silver was a secret fraud and trick and crime. G o search all the newspapers of the United States for the year 1873, for weeks and months before and after the passage of the act, and you cannot find the slightest reference to the fact that the mints of the United States had been closed against the coinage of a money-metal more ancient than the pyramids or the tower of Babel. N o t a word; not a syllable. There were numerous telegrams from Washington, at that time, on all sorts

of inconsequential matters, but not a sentence as to a change in our laws which is now widely and deeply agitating the people of our whole country, and indirectly of the whole world. " T a k e all the platforms, state or national, of all the parties, since the formation of our government down to and including 1873, and I challenge the defenders of this iniquity to put their fingers upon a single declaration demanding the demonetization of silver, or demanding anything hostile to the white metal. There is nothing of the kind. By what right did Congress dare to make such a radical and fundamental change in the- financial system of this country without being urged to do so by any political party of any kind? Nothing but bribery and corruption of the rankest description could account for such a step. "Call the roll of all the eminent men of this nation, since the constitution was adopted, down to and including 1873—men of all creeds and parties and sections—and where can a word or a line be quoted from any of their written or spoken utterances, asking that the doors of the mints be closed in the face of the prehistoric white metal? There is not one. D o y o u know of any?" "I cannot say I do," replied Mr. Hutchinson. " W e l l , do y o u know of any declaration of any platform, prior to 1873, demanding the demonetization of silver?" "I have not looked into the matter," said Mr. Hutchinson, "and therefore cannot answer your question." "I will go a step farther," said Mr. Sanders. "I undertake to say that from 1873 to this hour no national political party has ever dared to commend or make itself responsible for that act of 1873, or to sustain the demonetization of silver, except b y trick and indirection." " D o you mean to s?y," inquired the banker, "that the Republican party did not, in 1892, declare for the gold standard?" "Certainly not," said the farmer. " H e r e is what they said" (consulting his note book): " 'The American people, from tradition and interest, favor bi-metallism, and the Republican party demands the use of both gold and silver as standard money, with restrictions and under such provisions to be determined by legislation, as will secure the maintenance of the parity of values of the two metals, so that the purchasing and debt-paying power of the dollar, whether of silver, gold or paper, shall be at all times equal.' " " A h , " said Mr. Hutchinson, "there you see the proviso is bigger than the resolution." "I have no doubt," was the reply, "that the man w h o drew that plank intended it for a trick and

AMERICAN a subterfuge; but even then there is no approval of the act of 1873, and there is nothing in it inconsistent with the restoration of silver to its ancient position." "I do not so understand it," said the other. " O b serve what it says about 'parity of values' and debtpaying powers. Does not that mean demonetization of silver?" "I do not undertake to say," was the reply, "what the trickster meant who drew it, but the resolution, I repeat, is not inconsistent with true bi-metallism. T h e 'parity of values' we had at all times prior to 1873. If there was any difference it was o n the side of silver, which was at a premium over gold when it was demonetized. A n d even now, in spite of demonetization, the silver dollar in this country is at a parity of value with the gold dollar, and yet there is no law to compel the government to redeem silver in gold." " D o y o u mean to say," inquired the young lady traveler, "that silver was worth more than gold when it was denied the right of being coined?" "Certainly," said Mr. Sanders. "That is well understood." " W h a t excuse was there, then," she inquired, " f o r demonetizing silver, especially if no political party and no leading statesmen had demanded it?" " T h e r e was none. It was sheer villainy. N o t even the supple newspapers asked for anything of the kind. In the midst of silence, and in the darkness of the night, the evil deed was consummated, and to this hour nobody will stand sponsor for it." "I deny," said Mr. Hutchinson, "that it was done in the darkness of the night." . . . HOW THE CRIME WAS ACCOMPLISHED

" T h a t the demonetization of silver was, as these Congressional witnesses testify (and every word, be it observed, is taken from the official record, page and book given), that it was, I say, a 'colossal swindle,' the work of a 'burglar in the house at midnight,' is shown by the very nature of the bill. W a s it entitled 'an act to demonetize silver? ' N o t at all. It seemed to be purely a measure in relation to the mints and the details of coinage. N o r does it anywhere appear that the act, by any section or part of section, pronounces the doom of the white metal in any direct fashion. N o t at all. T h e deadly work is accomplished not by a declaration of purpose or principle, but by an omission, in a catalogue of coins, to name the standard silver dollar of the fathers! Here is the cunning shape in which the villainy hides itself—this is the language that did the work we are all lamenting to-day: " 'That the gold coins of the United States shall

PROBLEMS

871

be a one dollar piece, which, at the weight of twenty-five and eight-tenth grains shall be the unit of value. " 'That the silver coins of the United States shall be a trade dollar, a half dollar or fifty-cent piece, a quarter dollar or twenty-five-cent piece, a dime or ten-cent piece; and said coins shall be a legal tender at their nominal value for any amount not exceeding five dollars in any one payment. " 'That no coins, either gold or silver, or minor coinage shall hereafter be issued from the mint, other than those of the denominations, standards and weights herein set forth.' (17 statutes, 424.) "Imagine an honest member of Congress trying, in the midst of the uproar of legislation, to keep track of what that bill meant. H e could only do so by comparing it word for word with the existing statute; thereby he might have discovered that the standard dollar was omitted from the list of silver coins. . . . "But our Republican newspapers," said M r . Hutchinson, "have claimed that whole columns of the Congressional Record were devoted to the discussion of the bill." "That is another trick," replied the farmer; "a bill to codify existing laws as to the mints had been up before two or three successive congresses, and had been discussed, but the discussion did not touch the question of the demonetization of silver. Indeed, the bill of 1873 as it passed the house contained the standard silver dollar, but, as Senator Allison says, it was 'doctored' in the Senate, and the standard dollar was stricken out and the 'trade dollar' substituted, and this was declared legal tender only for debts of five dollars or less. T h e r e is where the knife went in." THE TRADE DOLLAR

" W h a t was the trade dollar?" inquired the young lady. "It was called the 'trick dollar,' " replied Mr. Sanders. "It contained 420 grains of silver, while the standard dollar contained only 412% grains. It was part of the work of the conspiracy. It was coined on the pretense that it would be preferred by the people of China and India, in trade, because it contained more silver. It was really made to fit into the niche of the demonetization of the standard dollar. It was easier to slip in 'trade' f o r 'standard' in the act than to name no silver dollar of any kind. That vacuum might attract attention." " W h a t became of the trade dollar?" inquired the young lady. "I do not remember seeing any of them." " N o ; they soon disappeared," replied Mr. Sanders. "Three years after they had been fraudu-

872

U N R E S T

A N D

lently used to displace our legal tender dollars, the subservient Congress passed an act, J u l y , 1876, which provided that 'the trade dollar shall not hereafter be a legal tender.' T h a t finished their hash." " H o w s o ? " said the young lady. " T h e bankers, Mr. Hutchinson's brethren," said M r . Sanders with a smile, "having deprived them of their legal tender character, and the object f o r which they had been coined having been accomplished, refused to take them f o r more than 90 cents on the dollar; and the price at once fell to that. T h e y showed great magnanimity; they might just as well have made it 40 cents on the dollar. E v e r y one w h o had a legal tender dollar had to take it to a bank and swap it for ninety cents, and take his pay in standard dollars. Thus he exchanged 420 grains of silver f o r 412% at a discount of 10 per cent.; gave more f o r less and paid a bonus to effect the trade."

E X P A N S I O N

" W h y , " said the young lady, " I thought the value of money was fixed b y the intrinsic value of the metals of which it was composed." " A l l nonsense," replied the farmer. " T h e r e is the demonstration of it. T h e coin with jV¡ grains more of silver in it would not circulate at all, because it was not legal tender, while the coin with the 7Vj grains less silver, being legal tender, is worth 10 per cent, more than the coin of greater intrinsic value. Intrinsic humbug!" " A h , there is the mistake all y o u r school of statesmen make," said M r . Hutchinson. " Y o u rest all your faith on 'fiat.' But it is time to give up the discussion. I see our young friend is yawning. L e t us resume the subject to-morrow." "I am not at all tired," replied the young lady. "Indeed, I am intensely interested. I have obtained many new ideas. W e women are going to vote some day, and we should inform ourselves on all governmental questions."

Facts about BY

J.

LAURENCE

CHAPTER X I I I : SHRINKAGE OF PRICES AND SCARCITY OF G O L D

T H E CONSTANT ITERATION o f statements about the

scarcity of gold, the "demonetization of silver" in 1873, and the fall of prices since 1873, have led many people to acquiesce in the opinion that a shrinkage of prices has taken place since 1873 owing to a contraction of the metallic circulation. T h i s belief has been too long accepted without an examination of the facts underlying it. Facts, not theories about what may happen if something is done f o r silver, are now needed. Since silver has been given up quite largely by Europe in and after 1873, the argument generally rests on the insufficient supply of gold. A s gold is now the usual money of commerce, and since prices have fallen, it is argued that gold has risen away from goods. A n d to strengthen this reasoning, it is said that silver and goods have kept together in price relatively to gold; so that the apparent fall of silver and goods is said to be really only an appreciation of gold. A n d if silver and goods did really keep together in value this argument might have some plausibility. F o r if silver should buy as many goods to-day as in 1873, it might naturally appear that silver and goods had not fallen, but that gold had risen away from them. On these points let us examine the facts. ( ι ) T h e argument that the general fall of prices

Money LAUGHLIN

since 1873 has been due to a scarcity, and consequent dearness of gold, is fatally defective, because it does not agree with the facts. In looking at general prices, money on the one hand is to be compared with all commodities on the other hand; if the fall in prices has been due to a scarcity of gold, the effect should have been felt upon all the commodities in general which are compared with gold. T h e table of Hamburg prices of 100 articles published b y Dr. Soetbeer furnishes material to test this question. I have collected twenty-one articles, out of the 100 quoted at Hamburg, which show an upward tendency, b y comparing the average prices of 1881-85 with those of 1874-7j. T h e average of the numbers representing the prices of these twenty-one articles in the period of 1 8 7 1 - 7 5 was 164.2, and in 1881-85 183.8. In the same lists there can be found at least twenty-one articles which have shown a decided tendency to fall in price. T h e remaining articles do not show a market movement in either direction. Forsell makes an interesting analysis of the whole 100 into two groups, classifying those which show a tendency to rise and those which show a tendency to fall. In the first class he includes fifty-one articles, and in the second forty-nine articles, with the following results in averages: '1847-50 1851-60 1861-70 1871-75 1876-80 1881-85 I . . . 100 115.3 130.3 147.ι 143.7 '464 io I I . . . 100 9-7 114.6 121.7 1037 96.7

AMERICAN PROBLEMS Whether to draw inferences as to a scarcity of gold from forty-nine articles, or to infer that gold was abundant, according to the prices of fiftyone articles, is an awkward dilemma for those who think that "prices give direct evidence as to the quantity of money." From this it can be seen that the fall of prices has not been universal; and that it is unsafe to ascribe the fall of prices of some goods to a cause like an appreciation of gold, which ought to affect the prices of all goods alike. (2) There are other difficulties, however, in the way of accepting the theory that prices fell because of the demonetization of silver and the scarcity of gold. The extravagant statement has been made by the advocates of free silver that demonetization in 1873 cut off from the world an enormous volume of silver coin hitherto used in performing the world's exchanges. Now, there is absolutely no truth in this. Even granting that prices would have fallen because of a diminution of the money metal, there is, as I have shown in Chapter V , more silver in circulation in the world to-day than in 1873. Therefore, on the theory that the level of prices depends solely on the quantity of metallic money, which I cannot admit, prices ought not to have fallen. When Germany replaced silver with gold it did not eject in all more than $300,000,000 of silver; about $110,000,000 of the old silver thalers are still in circulation. Moreover, although the Latin Union stopped free coinage of silver in 1874, it continued to coin and accumulate silver until 1878. In 1878 the United States began to introduce silver into circulation, which now amounts to over $550,000,000. A great deal more silver has been added to the world's circulation of money than was subtracted from it by Germany; and every other country is using as much or more of it than in 1873. Now these are substantial facts. If, then, there has been no diminution of the use of silver as money, surely even on the quantity theory there can be no reason whatever to believe that the fall of prices has been due to a contraction of the world's supply of money. This is the less possible when we consider how enormous has been the production of gold annually up to the present time. (3) Moreover, instead of gold being "scarce," there is every evidence that it is abundant, and that it is the easiest thing to get when one has valuable articles to offer for it. In the last chapter it was found to be difficult to explain where all the enormous existing supply of gold, amounting to $7,500,000,000, had gone. At least $1,000,000,000 was unaccounted for. There seems to be this amount in excess of the visible demand for gold both for money and for the arts.

873

The great production of gold since 1850 has been filling up the countries of the world. Dr. Soetbeer made a study in 1886 of the gold in the civilized countries, and found a steadily increasing stock as follows (in millions of dollars): 1877 1878 1879 1880 1881 1881 1883 1884 1885 722 712 875 947 975 " , ° ' 7 ' . ' 5 ° 1,170 ',16o So that in 1885 there was nearly double the amount of gold to be found as compared with that of 1877. Taking another method, I have examined the reservoirs of gold in civilized countries in the leading banks, with the result that there is in 1895 50 per cent more gold than in 1887, as may be seen from the following table (in millions of dollars): Year

'893 1895 (end first quarter)

Gold

Silver

. . . ι, 1973 . . . 1,248.2

421.9 416.2 424.8 437-7 442.8

.... ....

The slight increase in the holdings of silver is significant of the distrust of the future value of that metal. Moreover, the paper money of the world is better protected with gold than it was about 1873. "In 1871-74 there was $1 of gold for every $3.60 of paper circulation. In 1885 there was $1 of gold for every $2.40." And in 1893 there was $1 of gold for about $2.30. In short, wherever we put in the probe there is to be found evidence of an increasing and abundant supply of gold. Nor can it be said that the general volume of money in the United States has been contracted. . . . This shows that from i860 to 1892 the volume of currency increased 367.7 per cent, while prices fell on an average only 8 per cent. But, if it be objected that, even with this increase of currency, transactions had increased so much that the money was insufficient to keep prices from falling, we have a record by which to judge of this increase of transactions. This record is to be found in the clearings. Now, mark the result. T o appeal to the clearings is, of course, the only record; but, yet, the clearings furnish the amounts of exactly those transactions which, as has been carefully explained in Chapter VIII., are settled without the use of money to any extent. From this chart, then, it is to be seen that the movement of prices has

874

UNREST AND EXPANSION

not shown any correspondence with the change in the volume of currency. W h i l e the currency increased in volume, and while about $600,000,000 of silver have even been added to our circulation since 1878, prices have at least not risen. (4) In arguing about the scarcity of gold and the fall of prices, some people compare gold with the price of a particular unit of product, as a yard of cloth, a pound of sugar. N o w that is an error which shows our inability to understand what is really going on in the industrial world. T h e fallacy is in comparing gold, not with the whole value of the product of the industry, but with a single piece of the product. Suppose a cotton mill producing 100,000 yards of cotton cloth at 10 cents per yard, equal to $10,000. N o w , improvements are adopted b y which the mill puts forth 150,000 yards; then the price falls, say, to 6 2 - } cents a yard. Thereupon the 150,000 yards at 6 2-3 cents sells f o r $10,000, as before. Although the production in yards is larger, no more money is needed to exchange the goöds; and although the price has fallen, it does not at all follow that gold is scarce. There are, therefore, two wrong assumptions made by the silver men: (a) T h a t greater quantity of product requires more money; and, (b) T h a t a fall of price means a scarcity of money. N o w , just such movements in production and price as are here described are the characteristics of modern trade and business. T h e y are patent to everyone. ( 5 ) Moreover, it is false reasoning to assume that because prices have fallen gold is scarce. T h e price of an article, we know, is the amount of money f o r which it will exchange. Price is the ratio between gold and a commodity. T h e value of the ratio may change either from causes affecting the money term of the ratio, or the commodity term. A ton of steel, f o r instance, will exchange f o r the number of grains of gold in $60. F o r example, if nothing has happened to affect gold in any w a y , and yet, bv reason of improved processes, a ton of steel could be made for one-half its former cost, a ton of steel would exchange f o r but onehalf as much gold as formerly; that is, f o r the number of grains in $30. T h e price of steel thus has fallen f o r reasons affecting the commodity term of the ratio in the ratio between gold and steel. In so simple a case as this, we can understand at once that prices may fall or rise from causes affecting alone the commodities which are compared with gold. It may happen, of course, that a change of price may come about from causes affecting only the gold side of the ratio; but this is

not always or necessarily the case. Therefore, to argue that the decline of prices since 1873 is an evidence of scarcity of gold is pure assumption; because of the abundance of goods, the fall may have nothing whatever to do with the abundance or scarcity of gold. If gold is cheapened, goods buy more of gold (or prices rise); or, if goods are cheapened, without any change whatever affecting gold, goods buy less of gold (or prices fall). T h e r e is nothing sacerdotal about gold; it is not an unvarying measure. W h y ? Clearly because there never can be anything which remains absolutely unchanged in value. A n d the reason is very simple. G o l d is compared with goods in general: the value of gold is what it will exchange for of these goods. Hence, if there be a change, a cheapening, f o r instance, of any one of the thousands of goods exchanged against gold, gold will exchange f o r a different amount of these goods—that is, its value will have changed. It is perfectly clear, then, that gold can change in value because of alterations in any of the goods f o r which gold is exchanged. This, it is equally clear, can take place without implying any change whatever in the money or gold term of the ratio. This cannot be too clearly stated, f o r it is often assumed that a change in the value of gold relatively to goods—or prices—necessarily implies an abundance or scarcity of gold. These causes may act, but they are f a r from being the only ones. This explanation shows how just was Secretary Carlisle's statement in his speech at Memphis: "I presume, however, that even the most ardent advocate of free coinage would be willing to admit that the invention and use of labor-saving machinery, the extension of our railroad systems, the improvement of our waterways and the great reductions in the rates for carrying freight, the employment of steamships, the use of the telegraph on the land and under the sea, the application of electricity in the production of light, heat and power, the utilization of by-products which were formerly wasted, the introduction of more economical methods in the processes of production, the wonderful advance made by our laborers in skill and efficiency, the greatly reduced rates of interest paid for the use of capital, and many other things which it would require much time to enumerate and explain have affected prices in some measure, at least, and yet they ignore all these great influences in their argument upon the subject and attribute the lower prices of commodities to a single alleged and inadequate cause—the appreciation of gold." E v e n if gold had retained its usual conditions of production, yet such a set of forces working to

AMERICAN PROBLEMS reduce the cost of goods would have disclosed a general, although varying, fall of prices, in so far as improvements affected goods in general. Yet, contemporaneously with the phenomenal cheapening in the cost of the goods, there has appeared the most extraordinary increase in the production of gold ever known since the world began. N e v e r before in history has the gold product equaled that of 1894, or $182,000,000; and remember that the exceptional production of gold has been going on since 1850; and remember, too, that gold is durable and that the total supply is all that has been brought over f r o m all past years. So that there have been two great changes going on, each capable of affecting prices; and what is the resultant? Goods ought to have fallen in a special way, because of cheapened cost; f o r that would have lowered their prices expressed in gold. W h y have prices not fallen more than 8 per cent since i860? Because the great production of gold has come just at the same time to lower its own value; for this would tend to raise prices and offset the opposite fall of goods. So the one force counteracted the other; the fall in gold masked the cheapened cost of goods. Both gold and goods have been cheapened together; and that is the reason why labor can to-day command more both of gold and goods than ever before. T h a t is w h y workingmen see no help in free coinage of silver. T h e y have no desire to put up prices of the articles they buy by introducing a depreciated standard. R a c k ing the standard of prices up and down b y tampering with its value is a wild and reckless policy. And to assume that the present standard needs tampering with on the ground that prices have fallen because gold is scarce, is to propose a reckless policy on a reason absolutely contrary to the facts and based merely on theoretical abstractions. But yet it may be seriously believed that prices have already been depressed by the creditor class in order to increase the load of indebtedness on the people. It is said that the act of 1873 established a standard of gold, that gold is insufficient in supply, and that prices estimated in gold have consequently fallen. T h e reader, however, will recall that gold has been the standard in which prices have been expressed since soon after 1834 (with the exception of the period of depreciated paper money, 1862-1879) up to date, and that no silver was driven out by the act of 1873. T h e r e has, therefore, been no contraction whatever of our circulation since 1873. In fact, since resumption of specie payments in 1879, the amount of our circulation has steadily expanded. A n d there is more gold and silver by over $1,000,000,000 in circula-

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tion in the United States to-day than in 1873. It has been shown that the phenomenal production of gold since 1850 of $5,840,000,000 has made it abundant; that it is difficult to account f o r a demand f o r the whole of it. A n d it was this abundance that led France f r o m 1850 to 1865 and even later to absorb gold and let silver go; the United States in 1853 clung to its gold and let the silver be reduced in weight f r o m 371% grains to 345.6 grains; Germany took of the abundant supply of gold and also let its silver mainly go in 1873; after 1874, when silver, finding itself elbowed out of the currencies b y gold, fell in value, then the Latin Union refused to accept the depreciating silver at its old value of 15% to 1 at the mints and ceased to allow its free coinage at that price. T h e whole difficulty was that gold, being abundant and being preferred b y modern commercial nations having international transactions on a large scale, the heavier metal was discarded. It was just the same as discarding the slower stage coach when railways became available. Gold as the better instrument was preferred to silver. A l l legislation merely reflected the commercial needs and preferences of Europe. It was not mere law which caused the fall of silver. It was the discarding of silver b y the needs of commerce which led to its fall; and this was done because gold had become abundant. T h e real cause of the fall in the value of silver, back of legislation, was the abundance of gold. But if the fall of prices since 1873 were due (as it was not) to a scarcity of gold, w h y is it that wages, as expressed in gold, have risen? A day's labor to-day commands more gold b y 8 per cent than in 1873. If we go back farther than 1873 we find an exceptional increase of wages. T h e increase in wages in the last fifty years is a well-known fact in our statistical investigations. A most decisive point, therefore, to convince us that gold has become cheaper, is found in this well-known rise of wages of late years. T h a t is, as compared with gold, labor, or the services of human beings, can command more gold to-day than at any other time in the history of the world. This is a striking and important fact upon which we may well ponder. If gold is becoming scarce, w h y should labor command an increasing share of it? In short, it is a mere theory, unsupported by facts, that prices fell since 1873 because of a lack of gold. Prices have fallen, as producers all know, because of improved means of manufacture, diminished cost of production, opening up of the new wheat and agricultural regions, and because of all the results of the most marvelous march of invention the world has ever seen in any century. G o l d has also fallen in value because of its lessened cost, and the

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joint result of the fall of goods and the fall of gold is that prices are not much different from the level of i860. And labor commands both more gold and more goods than before. N o r could prices have fallen since 1873 because of the disuse

EXPANSION of silver, because there is more legal tender silver in circulation to-day than in 1873. In short, this talk of silver and prices is based on mere imagination. It is, therefore, not true that prices have been depressed by a shrinkage of gold. . . .

THE UNITED STATES AND THE WORLD EXPANSION CLEAR AS America's future as a world empire seemed to Josiah Strong in 1882, that mission was even more apparent at the end of the next decade. American naval power had driven Spain from the seas; Cuba was free, Puerto Rico was an American possession, and the Philippines were coming under American control in spite of revolt and some dissenters at home. Yet, while America was extending her power across the Pacific and European nations wrangled over the remaining spoils of China and Africa, the Russian Czar summoned a Peace Conference to meet at The Hague in 1899. One of the accomplishments of the meeting was the creation of a Permanent Court of Arbitration and it was concerning this achievement that Captain Mahan, one of the United States' delegates at the conference, chose to express his dissent. Alfred Thayer Mahan (1840-1914) had won wide European recognition by his Influence of Sea Power upon History (1890) and the Influence of Sea Power on the French Revolution and Empire (1892). Mahan had been called from routine naval duties to lecture on naval tactics and history at the W a r College in 1885 and his later work had grown out of those studies. His books discussed the role of sea power in history just as events were bringing the significance of naval strength into sharper focus: a new power was rising on the Continent and Wilhelm II's Germany meant to be strong on sea as well as on land. Mahan had retired in 1896 but when the Spanish-American W a r broke out he was summoned to serve on the board of naval strategy. His real influence was with statesmen and the public rather than among professional naval

men, however; Mahan seems to have suffered from his Annapolis repute for punctiliousness as well as for his fame as a writer on naval history. A f t e r the war, Mahan turned to the magazines to give a popular view of the basic concepts of naval warfare. Such knowledge would help prevent outbursts of panic like that which had shaken the people of the Atlantic seaboard when the Spanish fleet sailed west. An informed public, moreover, could exert "intelligent pressure" on its representatives and so provide for war during peace rather than in the atmosphere of actual conflict. Mahan's appeal to public opinion went beyond recommending mere preparation for war. He urged that the American people be cautious in their acceptance of any plan for the compulsory arbitration of disputes among nations. Even in domestic affairs there may be a higher rule than law; but since law is supported by force, a citizen may yield to law against his judgment without necessarily violating his conscience. But if a nation yields to what it considers the unjust decision of an international tribunal, it submits to an authority imposed by itself and therefore, Mahan argues, commits an offense against true morality. W a r is not the worst resort, he continues, for mankind has ascended by means of the sword. Nations are obligated to maintain right by force in proportion to the power God has seen fit to repose in them. While nations are to hold that power under the control of heart and intellect, they cannot be hampered by compulsory arbitration agreements: world history is too complicated to be governed by the rules or even the principles of law.

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In his essay o n the f u t u r e of the U n i t e d States as a colonial p o w e r , M a h a n continues t o d e v e l o p his ideas on the moral duties of nations. T o p r o t e c t the n e w possessions of the U n i t e d States requires an increase of naval p o w e r ; m o r e o v e r , n e w island bases are needed as positions f r o m w h i c h naval p o w e r m a y be exerted. T h e c o m m e r c i a l advantages of such outposts called f o r n o discussion or support, but the m e t h o d of g o v e r n i n g them w a s a matter f o r consideration. Britain's example in India and E g y p t w a s serviceable at this point, since it w a s an o b j e c t lesson in the w i s d o m of a colo-

EXPANSION nial p o l i c y at once firm and b e n e f i c e n t . F o r , w h a t e v e r might be the e c o n o m i c and strategic uses of overseas possessions, t h e y must be ruled in the interests of local w e l f a r e . P o w e r b r o u g h t rewards, b u t it also b r o u g h t responsibilities. A s a mature nation, the U n i t e d States must shirk neither advantage n o r the duties imposed b y it. T h u s Mahan, A m e r i c a ' s philosopher of w a r and of imperialism. T h e selections f r o m The Lessons of the War •with Spain (Boston, 1899), w h i c h o r i g i n a l l y appeared as magazine articles, are reprinted here b y permission of Little, B r o w n and C o m p a n y .

The Lessons of the War with Spain BY

ALFRED

T H E P E A C E C O N F E R E N C E AND THE M O R A L

ASPECT

OF W A R

THERE IS unquestionably a higher law than Law, concerning obedience to which no other than the man himself, or the state, can give account to Him that shall judge. T h e freedom of the conscience may be fettered or signed away by him w h o owes to it allegiance, yet its supremacy, though thus disavowed, cannot be overthrown. T h e Conference at T h e Hague has facilitated future recourse to arbitration, b y providing means through which, a case arising, a court is more easily constituted, and rules governing its procedure are ready to hand; but it has refrained f r o m any engagements binding states to have recourse to the tribunal thus created. T h e responsibility of the state to its own conscience remains unimpeached and independent. T h e progress thus made and thus limited is to a halting place, at which, whether well chosen or not, the nations must perforce stop for a time; and it will be wise to employ that time in considering the bearings, alike of that which has been done, and of that which has been left undone. Our own country has a special need thus carefully to consider the possible consequences of arbitration, understood in the sense of an antecedent pledge to resort to it; unless under limitations v e r y carefully hedged. There is an undoubted popular tendency in direction of such arbitration, which would be "compulsory" in the highest moral sense,—the compulsion of a promise. T h e world at large, and we especially, stand at the opening of a new era, concerning whose problems Iitde can be foreseen. A m o n g the peoples, there is

T.

MAHAN

manifested intense interest in the maturing of our national convictions, as being, through Asia, newcomers into active international life, concerning whose course it is impossible to predict; and in many quarters, probably in all except Great Britain, the attitude toward us is watchful rather than sympathetic. . . . It was inevitable that thoughts like these should recur frequently to one of the writer's habit of thought, when in constant touch with the atmosphere that hung around the Conference, although the latter was by it but little affected. T h e poet's words, " T h e Parliament of man, the federation of the world," were much in men's mouths this past summer. There is no denying the beauty of the ideal, but there was apparent also a disposition, in contemplating it, to contemn the slow processes of evolution by which Nature commonly attains her ends, and to impose at once, b y convention, the methods that commended themselves to the sanguine. Fruit is not best ripened b y premature plucking, nor can the goal be reached by such short cuts. Step by step, in the past, man has ascended by means of the sword, and his more recent gains, as well as present conditions, show that the time has not yet come to kick down the ladder which has so far served him. T h r e e hundred years ago, the people of the land in which the Conference was assembled wrenched with the sword civil and religious peace and national independence from the tyranny of Spain. T h e n began the disintegration of her empire, and the deliverance of peoples from her oppression, but this was completed only last year, and then again b y the sword—of the United States.

THE UNITED STATES AND THE WORLD In the centuries which have since intervened, what has not "justice, with valor armed," when confronted by evil in high places, found itself compelled to effect by resort to the sword? T o it was due the birth of our own nation, not least among the benefits of which was the stern experience that has made Great Britain no longer the mistress, but the mother, of her dependencies. The control, to good from evil, of the devastating fire of the French Revolution and of Napoleon was due to the sword. The long line of illustrious names and deeds, of those who bore it not in vain, has in our times culminated—if indeed the end is even yet nearly reached—in the new birth of the United States by the extirpation of human slavery, and in the downfall, but yesterday, of a colonial empire identified with tyranny. What the sword, and it supremely, tempered only by the stern demands of justice and of conscience, and the loving voice of charity, has done for India and for Egypt, is a tale at once too long and too well known for repetition here. Peace, indeed, is not adequate to all progress; there are resistances that can be overcome only by explosion. What means less violent than war would in a half-year have solved the Caribbean problem, shattered national ideas deep rooted in the prepossessions of a century, and planted the United States in Asia, face to face with the great world problem of the immediate future? What but war rent the veil which prevented the English-speaking communities from seeing eye to eye, and revealed to each the face of a brother? Little wonder that a war which, with comparatively little bloodshed, brought such consequences, was followed by the call for a Peace Conference! Power, force, is a faculty of national life; one of the talents committed to nations by God. Like every other endowment of a complex organization, it must be held under control of the enlightened intellect and of the upright heart; but no rriore than any other can it be carelessly or lightly abjured, without incurring the responsibility of one who buries in the earth that which was intrusted to him for use. And this obligation to maintain right, by force if need be, while common to all states, rests peculiarly upon the greater, in proportion to their means. Much is required of those to whom much is given. So viewed, the ability speedily to put forth the nation's power, by adequate organization and other necessary preparation, according to the reasonable demands of the nation's intrinsic strength and of its position in the world, is one of the clear duties involved in the Christian word "watchfulness,"—readiness for the call that may come, whether expectedly or not.

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Until it is demonstrable that no evil exists, or threatens the world, which cannot be obviated without recourse to force, the obligation to readiness must remain; and, where evil is mighty and defiant, the obligation to use force—that is, war— arises. Nor is it possible, antecedently, to bring these conditions and obligations under the letter of precise and codified law, to be administered by a tribunal; and in the spirit legalism is marked by blemishes as real as those commonly attributed to "militarism," and not more elevated. The considerations which determine good and evil, right and wrong, in crises of national life, or of the world's history, are questions of equity often too complicated for decision upon mere rules, or even principles, of law, international or other. The instances of Bulgaria, of Armenia, and of Cuba, are entirely in point, and it is most probable that the contentions about the future of China will afford further illustration. Even in matters where the interest of nations is concerned, the moral element enters; because each generation in its day is the guardian of those which shall follow it. Like all guardians, therefore, while it has the power to act according to its best judgment, it has no right, for the mere sake of peace, to permit known injustice to be done to its wards. The present strong feeling, throughout the nations of the world, in favor of arbitration, is in itself a subject for congratulation almost unalloyed. It carries indeed a promise, to the certainty of which no paper convenants can pretend; for it influences the conscience by inward conviction, not by external fetter. But it must be remembered that such sentiments, from their very universality and evident laudableness, need correctives, for they bear in themselves a great danger of excess or of precipitancy. Excess is seen in the disposition, far too prevalent, to look upon war not only as an evil, but as an evil unmixed, unnecessary, and therefore always unjustifiable; while precipitancy, to reach results considered desirable, is evidenced by the wish to impose arbitration, to prevent recourse to war, by a general pledge previously made. Both frames of mind receive expression in the words of speakers, among whom a leading characteristic is lack of measuredness and of proportion. Thus an eminent citizen is reported to have said: "There is no more occasion for two nations to go to war than for two men to settle their difficulties with clubs." Singularly enough, this point of view assumes to represent peculiarly Christian teaching, willingly ignorant of the truth that Christianity, while it will not force the conscience by other than spiritual weapons, as "compulsory" arbitration might, distinctly recognizes

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the sword as the resìster and remedier of evil in the sphere "of this world." Arbitration's great opportunity has come in the advancing mord standards of states, whereby the disposition to deliberate wrongdoing has diminished, and consequently the occasions for redressing wrong by force the less frequent to arise. In view of recent events however, and very especially of notorious, high-handed oppression, initiated since the calling of the Peace Conference, and resolutely continued during its sessions in defiance of the public opinion—the conviction—of the world at large, it is premature to assume that such occasions belong wholly to the past. Much less can it be assumed that there will be no further instances of a community believing, conscientiously and entirely, that honor and duty require of it a certain course, which another community with equal integrity may hold to be inconsistent with the rights and obligations of its own members. It is quite possible, especially to one who has recently visited Holland, to conceive that Great Britain and the Boers are alike satisfied of the substantial justice of their respective claims. It is permissible most earnestly to hope that, in disputes between sovereign states, arbitration may find a way to reooncile peace with fidelity to conscience, in the case of both; but if the conviction of conscience remains unshaken, war is better than disobedience, —better than acquiescence in recognized wrong. T h e great danger of undiscriminating advocacy of arbitration, which threatens even the cause it seeks to maintain, is that it may lead men to tamper with equity, to compromise with unrighteousness, soothing their conscience with the belief that war is so entirely wrong that beside it no other tolerated evil is wrong. Witness Armenia, and witness Crete. W a r has been avoided; but what of the national consciences that beheld such iniquity and withheld the hand? THE

RELATIONS OF THE U N I T E D

NEW

STATES TO THEIR

DEPENDENCIES

In modern times there have been two principal colonizing nations, which not merely have occupied and administered a great transmarine domain, but have impressed upon it their own identity—the totality of their political and racial characteristics—to a degree that is likely to affect permanently the history of the world at large. These two nations, it is needless to say, are Great Britain and Spain. Russia, their one competitor, differs from them in that her sustained advance over alien regions is as wholly by land as theirs has been by sea. France and Holland have occupied and administered, and continue to oc-

cupy and administer, large extents of territory; but it is scarcely necessary to argue that in neither case has the race possessed the land, nor have the national characteristics been transmitted to the dwellers therein as a whole. T h e y have realized, rather, the idea recently formulated by Mr. Benjamin Kidd for the development of tropical regions,—administration from without. The unexpected appearance of the United States as in legal control of transmarine territory, which as yet they have not had opportunity either to occupy or to administer, coincides in time with the final downfall of Spain's colonial empire, and with a stage in the upward progress of that of Great Britain, so marked, in the contrast it presents to the ruin of Spain, as to compel attention and comparison, with an ultimate purpose to draw therefrom instruction for the United States in the new career forced upon them. The larger colonies of Great Britain are not indeed reaching their majority, for that they did long ago; but the idea formulated in the phrase "imperial federation" shows that they, and the mother country herself, have passed through and left behind the epoch when the accepted thought in both was that they should in the end separate, as sons leave the father's roof, to set up, each for himself. T o that transition phase has succeeded the ideal of partnership, more complex indeed and difficult of attainment, but trebly strong if realized. The terms of partnership, the share or each member in the burdens and in the profits, present difficulties which will delay, and may prevent, the consummation; time alone can show. The noticeable factor in this change of mind, however, is the affectionate desire manifested by both parent and children to ensure the desired end. Between nations long alien we have high warrant for saying that interest alone determines action; but between communities of the same blood, and when the ties of dependence on the one part are still recent, sentiments—love and mutual pride—are powerful, provided there be good cause for them. And good cause there is. Since she lost what is now the United States, Great Britain has become benevolent and beneficent to her colonies. It is not in colonies only, however, that Great Britain has been beneficent to weaker communities; nor are benevolence and beneficence the only qualities she has shown. She has been strong also,—strong in her own interior life, whence all true strength issues; strong in the quality of the men she has sent forth to colonize and to administer; strong to protect by the arm of her power, by land, and, above all, by sea. The advantage of the latter safeguard is common to all her depend-

THE UNITED STATES AND THE WORLD encies; but it is among subject and alien races, and not in colonies properly so called, that her terrestrial energy chiefly manifests itself, to control, to protect, and to elevate. Of these functions, admirably discharged in the main, India and E g y p t are the conspicuous illustrations. In them she administers from without, and cannot be said to colonize, f o r the land was already full. . . . W e have the two great examples. Great Britain has been, in the main, and increasingly, beneficent and strong. Spain, from the very first, as the records show, was inhumanly oppressive to the inferior races; and, after her own descendants in the colonies became aliens in habit to the home country, she to them also became tyrannically exacting. But, still more, Spain became weaker and weaker as the years passed, the tyranny of her extortions being partially due to exigencies of her political weakness and to her economical declension. Let us, however, not fail to observe that the beneficence, as well as the strength, of Great Britain has been a matter of growth. She was not always what she now is to the alien subject. T h e r e is, therefore, no reason to despair, as some do, that the United States, who share her traditions, can attain her success. T h e task is novel to us; we may make blunders; but, guided b y her experience, we should reach the goal more quickly. And it is to our interest to do so. Enlightened self-interest demands of us to recognize not merely, and in general, the imminence of the great question of the farther East, which is rising so rapidly before us, but also, specifically, the importance to us of a strong and beneficent occupation of adjacent territory. In the domain of color, black and white are contradictory; but it is not so with self-interest and beneficence in the realm of ideas. This paradox is now too generally accepted for insistence, although in the practical life of states the proper order of the two is too often inverted. But, where the relations are those of trustee to ward, as are those of any state which rules over a weaker community not admitted to the full privileges of home citizenship, the first test to which measures must be brought is the good of the ward. It is the first interest of the guardian, f o r it concerns his honor. Whatever the part of the United States in the growing conflict of European interests around China and the East, we deal there with equals, and may battle like men; but our new possessions, with their yet minor races, are the objects only of solicitude. Ideas underlie action. If the paramount idea of beneficence becomes a national conviction, we may stumble and err, we may at times sin, or be betrayed b y unworthy representatives; but we

shall advance unfailingly. I have been asked to contribute to the discussion of this matter something from m y own usual point of view; which is, of course, the bearing of sea power upon the security and the progress of nations. W e l l , one great element of sea power, which, it will be remembered, is commercial before it is military, is that there be territorial bases of action in the regions important to its commerce. That is selfinterest. But the history of Spain's decline, and the history of Great Britain's advance,—in the latter of which the stern lesson given b y the revolt of the United States is certainly a conspicuous factor, as also, perhaps, the other revolt known as the Indian Mutiny, in 1857,—alike teach us that territories beyond the sea can be securely held only when the advantage and interests of the inhabitants are the primary object of the administration. T h e inhabitants may not return love f o r their benefits,—comprehension or gratitude may fail them; but the sense of duty achieved, and the security of the tenure, are the reward of the ruler. . . . I have, therefore, but one thing which I have not already often said to offer to such men, who affect these great issues through their own aptitudes and through their far-reaching influence upon public opinion, which they touch through many channels. Sea power, as a national interest, commercial and military, rests not upon fleets only, but also upon local territorial bases in distant commercial regions. It rests upon them most securely when they are extensive, and when they have a numerous population bound to the sovereign country by those ties of interest which rest upon the beneficence of the ruler; of which beneficence power to protect is not the least factor. Mere just dealing and protection, however, do not exhaust the demands of beneficence towards alien subjects, still in race-childhood. T h e firm but judicious remedying of evils, the opportunities f o r fuller and happier lives, which local industries and local development afford, these also are a part of the duty of the sovereign power. A b o v e all, there must be constant recognition that self-interest and beneficence alike demand that the local welfare be first taken into account. It is possible, of course, that it may at times have to yield to the necessities of the whole body; but it should be first considered. T h e task is great; who is sufficient f o r it? T h e writer believes firmly in the ultimate power of ideas. Napoleon is reported to nave said: "Imagination rules the world." If this be generally so, how much more the true imaginations which are worthy to be called ideas! There is a nobility in

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man which welcomes the appeal ro beneficence. May it find its way quickly now to the heads and hearts of the American people, before less worthy ambitions fill them; and, above all, to the kings of men, in thought and in action, under whose leadership our land makes its giant strides. There is in this no Quixotism. Materially, the interest of the nation is one with its beneficence; but if the ideas get inverted, and the nation sees in its new responsibilities, first of all, markets and profits, with incidental resultant benefit to the natives, it will go wrong. Through such mistakes Great Britain passed. She lost the United States; she suffered bitter anguish in India; but India and Egypt testify to-day to the nobility of her repentance. Spain repented not. T h e examples are before us. Which shall we follow? And is there not a stimulus to our imagination, and to high ambition, to read, as we easily may, how the oppressed have been freed, and the degraded lifted, in India and in Egypt, not only by political sagacity and courage, but by administrative capacity directing the great engineering enterprises, which change the face of a land and increase a hundredfold the opportunities for life and happiness? T h e profession of the writer, and the subject consequently of most of his writing, stands for organized force, which, if duly developed, is the concrete expression of the nation's strength. But while he has never concealed his opinion that the endurance of civilization, during a future far beyond our present foresight, depends ultimately upon due organization of force, he has ever held, and striven to say, that such force is but the means to an end, which end is durable peace and progress, and therefore beneficence. T h e triumphs and the sufferings of the past months

EXPANSION have drawn men's eyes to the necessity for increase of force, not merely to sustain over-sea dominion, but also to ensure timely use, in action, of the latent military and naval strength which the nation possesses. T h e speedy and inevitable submission of Spain has demonstrated beyond contradiction the primacy of navies in determining the issue of transmarine wars; for after Cavité and Santiago had crippled hopelessly the enemy's navy, the end could not be averted, though it might have been postponed. On the other hand, the numerical inadequacy of the troops sent to Santiago, and their apparently inadequate equipment, have shown the necessity for greater and more skilfully organized land forces. T h e deficiency of the United States in this respect would have permitted a prolonged resistance by the enemy's army in Cuba,—a course which, though sure ultimately to fail, appealed strongly to military punctilio. These lessons are so obvious that it is not supposable that the national intelligence, which has determined the American demand for the Philippines, can overlook them; certainly not readers of the character of those to whom this paper is primarily addressed. But when all this has been admitted and provided for, it still remains that force is but the minister, under whose guardianship industry does its work and enjoys peaceably the fruits of its labor. T o the mechanical industries of the country, in their multifold forms, our new responsibilities propound the questions, not merely of naval and military protection, but of material development, which, first beneficent to the inhabitants and to the land, gives also, and thereby, those firm foundations of a numerous and contented population, and of ample local resources, upon which alone military power can securely rest.

THE OPEN DOOR THE ANNEXATION of the Philippines made the United States a Pacific power during the last stages of the dissolution of Manchu rule in China. T h e European nations used China's decline as a means of securing portions of her territory as "spheres of influence" for their own exploitation, a practice calculated to hinder an increase of trade and investment there by the nationals of other countries. A t the same time, the European balance of power was disturbed by increased German influence and ambition on the Continent and by the expan-

sion of Russia in the Far East. England found it necessary to seek new allies, therefore, and received willing cooperation from American circles where admiration for the most successful imperialist power ruled American expansionists like Lodge, Roosevelt, and W h i t e l a w Reid. Though England and the United States w e r e competitors in the Chinese textile and railroadequipment market, both saw their interests threatened by the prospect of a division of China among the Great Powers. Germany's

T H E UNITED STATES AND THE WORLD concession at Kiaochow 2nd Russia's acquisition of Fort Arthur seemed to bring that prospect nearer, as neither country returned anything but evasion to inquiries concerning freedom of commerce in those areas. B y the winter of 1899, American business groups were moving toward greater interest iif China, an interest which was stimulated by hints from the State Department and bv such essays in propaganda as Lord Charles Beresford's (1846-1919) Break-up of China ( N e w Y o r k , 1899). His Lordship had set off on a tour of the Far East as representative of the British Associated Chambers of Commerce. He had kept America's Secretary of State John H a y informed of his progress and the Break-up of China was intended for American as well as English readers. Though the book is no more than a long after-dinner speech in print, its contemporary popularity, its advocacy of the Open Door—equal opportunity for the sale of goods in China—and its stress on united action b y the United States and Great Britain combine to make it illuminate the genesis of Hay's famous "Open Door" notes. Actually, those identic notes were the work of William Rockhill, Hay's personal adviser on Far Eastern affairs. Rockhill, who was born at Philadelphia in 1854, had studied Chinese and military science in France. After a period of service with the United States diplomatic corps in China, he had been appointed chief clerk and then assistant secretary of the State Department. In the summer of 1899, Rockhill held the post of Director of the Bureau of American Republics. Rockhill, in his turn, was strongly influenced by his own friend and adviser, Alfred Hippisley, a British subject who, since 1867, had been a member of the Chinese Imperial Maritime Service, which administered the Chinese customs. Hippisley was returning to England on leave that summer and he urged

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Rockhill to take measures to get the United States to assume the initiative in the Far East. The United States should call the attention of the Powers to the present situation in China and attempt to obtain an undertaking that existing tariffs would be applied without discrimination in the areas which had been taken over from the Chinese. Thus, from the dissolution of the Manchu Empire, Hippisley hoped to save at least the equal treatment of commerce; equal opportunity f o r capital investment already appeared Utopian, but the United States, by acting secretly and promptly, might still open the door to trade before that should be closed forever. In August, accordingly, Rockhill presented these views to Hay and, a f e w days later, on the twenty-fourth, Hay asked Rockhill to draft a set of instructions on commercial freedom in China. Rockhill's memorandum in reply included the material in Hippisley's earlier draft and was itself embodied in the Open Door notes attributed to John H a y (1838-1905). Though the Open Door policy was, at the time, as much a failure in fact as in formal reception, Hay won American popular acclaim as the savior of China. He may not have secured freedom for American trade, nor won a guarantee of China's territorial integrity, but he did incorporate in American foreign policy a principle which, like the Monroe Doctrine, has had the allegiance and support of both the American people and American governments. The Beresford selection is reprinted from his book, The Break-up of China through the permission of Harper and Brothers. T h e Hippisley and Rockhill Memoranda are reprinted from A . W . Griswold's The Far Eastern Policy of the United States ( N e w York, 1938) through the permission of Harcourt, Brace and Company.

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The Break-up BY XXIX:

CHARLES

T H E U N I T E D STATES

. . . THE PRINCIPLE of the "Open D o o r " is unanimously held to be the policy necessary f o r the increase of the United States' trade with China; but there the matter rests. 1 heard no sentiments expressed which conveyed to me any opinion on the part of any of the American Chambers of Commerce as to how the "Open D o o r " principle was to be insured, although 1 did hear many opinions expressed that the time could not be far distant when the Chinese Empire would be added to the list of those countries which had fallen to pieces f r o m internal decay. T h o u g h the great trading classes of the United States, as far as I could gather, are keenly alive to the necessity of safeguarding the future of the United States' commercial interests, it was quite apparent to me that those in authority, and indeed the people as a whole, arc, f o r the present, at any rate, going to allow Chinese affairs to take care of themselves. It was very satisfactory to me to be frequently told that the fact of the British Associated Chambers having sent a Mission of Inquiry to China would provoke an interest among the commercial classes of the United States with regard to the future of China. T h e attitude taken up by the commercial classes in Japan was totally different from that which I found in the United States. Both saw the necessity of keeping the D o o r open in China if full advantage was to be taken of the possible development of American or Japanese trade; but while on the Japanese side there was every indication of a desire to act in some practical manner in order to secure the Open Door, I could discover no desire on the part of the commercial communities in the United States to engage in any particular effort f o r preserving what to them might become in the future a trade, the extent of which no mortal can conjecture. On many occasions 1 suggested that some sort of understanding should exist between Great Britain and the United States for the mutual benefit of the two countries with regard to the future development of trade in China; but while receiving the most cordial support to this proposal, nothing of a definite character was suggested to me that I could present to the Associated Chambers. Looking at the matter fairly, the public mind in the United States is occupied with an entirely novel policy, which, being an actual fact, must be

of China BERESFORD

more engrossing to the American public than matters which up to now even have not advanced into the region of discussion. I refer to the policy of expansion, as illustrated by the difficult problem which has to be solved in the Philippine Islands. Added to this, the actual trade between the United States and China at the present moment is a v e r y small proportion of the whole foreign trade of that country, only 8 per cent. T h e American trade with China is, however, very much larger than appears in the import list contained in the returns of the Imperial Maritime Customs of the Chinese Empire. Taking the question of the import of plain cotton goods alone f o r the years 1887-1897 inclusive, referred to in this R e p o r t in the chapter on "Shanghai," it will be seen that American goods during those ten years have increased in quantity 1 2 1 . 1 1 per cent., and 59.45 per cent, in value, while the British import of the same class of goods has decreased 13.77 P e r c e n t · quantity, and 7.9 per cent, in value. In examining these trade returns the question of ownership and manufacture is an all-important one. A t the time of import this cotton is owned by the British merchant and shipped in British bottoms, but the competition of the United States is directly with the Lancashire cotton manufacturer. I was much impressed b y the good feeling and friendship towards Great Britain expressed by all with whom I came in contact in the United States. These kindly sentiments were particularly marked on all occasions when the health of her Majesty the Queen was proposed. I believe that a great deal of the enthusiasm with which I was received during my journey throughout the United States was actuated b y the sentiments of kindly feeling towards the British. There is a very large and increasing export trade of flour from America to China. T h e Chinese are appreciating this class of food more every year. There is also a great export of American machinery of all sorts to China. T h e whole of the Russian railway plant in Manchuria—viz., rolling-stock, rails, and sleepers—comes f r o m the United States. There is also a large import of American machinery into Japan. Although the American percentage of trade with China is only 8 per cent, of the whole, it is important to remember in what a comparatively short time this has been built up, and if to this percentage was added the proportion of British-

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American trade is increasing in volume and importance. The problems connected with the future development of trade in China will be solved more easily if the powerful Anglo-Saxon races can come to some mutual understanding regarding them. As the interests of the United States and Great Britain are absolutely identical in China, an understanding must conduce to the benefit of both great nations, and certainly make for the peaceful solution of the difficulties. Both nations are essentially trading nations, neither want territory, they both wish to increase their trade. With an equal opportunity throughout China, they would not only increase their trade but do much towards increasing the prosperity of the whole world.

owned trade in commodities of American origin, I am of opinion that it would be found that the actual American manufactured goods represent a very much larger percentage than is generally known. As it is, American trade represents 8 percent., as against 28 per cent, of all other nations (excluding Great Britain) combined. T h e only direction in which I found a falling off in American trade was in kerosene-oil, in which industry Russia and Sumatra are becoming America's chief competitors. A noteworthy fact that was brought to my notice by the Commissioner of Customs at Newchwang was, that American manufactured goods at that port now represent about 50 per cent, of the whole foreign import, showing that, at any rate in North China,

Basis of the "Open I. THE HIPF1SLEY THE MERCANTILE COMMUNITIES of the United States and Gt. Britain, realising the important field f o r their enterprise which under existing conditions is afforded bv China, and the vastly extended field for it which they might legitimately look forward to under improved conditions in the future, earnestly desire the maintenance of the "open door," i.e., of the rights possessed under the existing treaties of Tientsin. In other words, they ask that they be assured the equality of opportunity which all nations alike have hitherto enjoyed under those treaties for (a) commerce, (b) navigation, and (c) exploitation of mines and railroads. Last year when the British Govt, was energetically insisting on the necessity of maintaining the "open door" in China, Mr. Balfour's speeches foreshadowed a policy which, though nominally aiming at that object, conceded to the various Powers the possession of spheres cf influence or interest in which thev would enjoy special rights and privileges in respect of railroad and mining enterprises: and the undertakings entered into by Gt. Britain with Germany as regards Shantung and with Russia as regards Manchuria go to show that this is the policv which the British Govt, has definitely adopted to govern its relations with other Powers in China. A policy the object of which is to maintain the "open door" and at the same time to recognise spheres of interest with special, and practically exclusive, rights as regards mines and railroads, is possibly feasible; but it certainly is feasible only on the condition that adequate steps are taken to prevent the special mining and railroad rights being so stretched as

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MEMORANDUM

to include territorial jurisdiction and the power to impose discriminating taxation in any form. In any case the undertakings above referred to have already practically deprived Britishers of equality of opportunity as regards mines and railroads in certain important districts of China, and would appear to render it difficult for other nationalities to insist on the maintenance of their equality of opportunity as regards those enterprises in the districts concerned—though the importance of this curtailment of previously existing rights is much reduced by the facts that the concessions for mines and railroads already granted in China will require years to fulfil, even if thev do nor require a larger amount of capital than is likely to be forthcoming for investment in that country, and that these concessions are distributed among all of the wealthy nations. Equality of opportunity as regards (c) having practically then already gone by the board, it would seem that the utmost that can now be attempted is to safeguard equality of opportunity as regards (a) and (b)—commerce and navigation. T o do this it appears essential that the nations in favour of the "open door" policy should bind themselves, and secure undertakings from the other powers, to the effect that each in its respective spheres of interest or influence ( 1 ) will in no way interfere with any treaty port in such sphere or with the interests vested in it: (2) will promise that, unless the ports opened to trade in it are declared free ports, the Chinese treaty tariff as existing or as hereafter amended

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shall apply to all merchandise landed or shipped, no matter to what nationality such merchandise may belong; and that the dues and duties so leviable shall be collected by the Chinese Govt.: and ( j ) will levy no higher harbour dues on vessels of another nationality frequenting any port in such sphere than shall be levied on vessels of its own nationality, and no higher railroad charges on merchandise belonging to subjects of other Powers transported through such sphere than shall be levied on similar merchandise belonging to its own nationals transported over equal distances. Such an arrangement would go far to secure an open market for merchandise in China and to remove dangerous sources of international conflict: and it is not anticipated that any serious difficulty would be experienced in attaining it. If the declarations of responsible British statesmen mean anything, they should ensure hearty support from Gt. Britain. Germany by her enlightened policy in sanctioning the establishment of a Chinese Customs-house at Kiaochow and in rendering it all possible assistance—in marked contrast to the narrow, unjust, and shortsighted policy of Gt. 2.

THE

ROCKHILL

N o one person has done more within the last few months to influence public opinion in the United States on the Chinese question than Lord Charles Beresford, by his book " T h e Break-Up of China," and by the speeches he has made in the United States. By these means he has sought to prove the identity of interests of our two countries and the necessity of an Anglo-American policy in China. It seems desirable to preface the following remarks by examining the data supplied by Lord Charles, endeavoring to control his views, and to show, if possible, the truth or fallacy of his conclusions. For one who has devoted the better part of his life to the study of Chinese affairs, the book of Lord Beresford comes as an agreeable surprise— so far as regards foreign commercial relations with China, and is on the whole rather encouraging than dispiriting. T h e volume of foreign trade has steadily increased, and everywhere signs are not wanting of its further extension; the Chinese Government has not failed to fulfill any of its pecuniary obligations to foreigners, and is endeavoring, in a clumsy, uncertain way it is t r u e but that is not entirely its fault, to take some further steps in the direction needed for its internal development. If, on the other hand, the Empire is in a disturbed condition, and if foreign interests suffer thereby, this is entirely due to the unseemly

Britain in expelling the Chinese Customs-house from the Kowloon extension, inevitably to the enormous increase of smuggling—shows that little opposition is to be anticipated on her part. T h e doubtful Powers have hitherto been Russia and France, but the Ukase issued by the Czar on the ijth inst. declaring "Talien-wan a free port during the whole period of the treaty for the merchant ships of all nations" removes all doubt as to Russia's attitude and justifies the expectation that she would co-operate in such an undertaking as that proposed; and it is little likely that France would refuse to listen to Russia's advice— opposed though it is to her traditional policy in China of insisting that, whenever in any degree possible, territorial jurisdiction is included in any rights conceded—and so stand out in opposition alone. The issue of the Czar's ukase just referred to opens the door for pourparlers on this subject and renders the present a specially opportune moment for entering on them. Α. Ε. H . 17-VÜÍ-99 MEMORANDUM haste of some of the Treaty Powers in their scramble for commercial advantages and acquisition of territory. This they lament but do not seek to remedy. Lord Beresford's interviews with the various foreign mercantile organizations at the treaty ports of China bring clearly before us the fact that they have not in the last twenty years had any new ground for complaint against the Chinese Government, that they are to-day suffering, not perhaps even quite so severely as years ago, from the existence of certain restrictions, especially those resulting from internal revenue taxes, which have been the subject of endless correspondence between the diplomatic representatives in Peking and the Chinese Government for the last quarter of a century and with which every one interested in affairs in that Empire must by this time be pretty familiar. T h e grievances of which the foreign mercantile class in China has to complain and a remedy to which lies with the Chinese Government, are all proper subjects for diplomatic discussion and no one can doubt that if within the last two years steady and united pressure had been brought to bear on it by the Treaty Powers, some of them would be in a fair way to settlement at the present time. Take for example likin. In the rush for conces-

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sions to foreigners in China and the necessity for that country to find funds to insure the payment of interest on the loans she has been forced to contract to carry out more or less urgent public works recommended by them, the Treaty Powers have compelled her to increase her internal revenue taxes and have permanently fastened on the country this very tax (likin) they had for twentyfive years and more been trying to have suppressed. Again take the transit pass system by which foreign goods are allowed to be carried throughout the Empire on the payment of onehalf the import duty, and which system the British merchants claim is an utter failure, we know by the successful endeavors of the French Government in enforcing this right under the treaties for goods imported into southwestern China, that if failure it is in other parts of the Empire, the fault lies with the foreigners themselves.

hopelessly corrupt as China until the first and initial step is taken of giving authority to those in power which only an effective military and police can supply," is a hasty and erroneous conclusion. That the existence of a strong and well officered and disciplined army and navy in China might assist that country to ward off .the attacks of a foreign foe, is likely; that, in the absence of such a force, and with the present aggressive policy of some of the Treaty Powers, the creation of "spheres of interest" (or influence) easily reached by rail or by the sea by the interested Power from its own territory, should be held to be the only way of insuring China against complete partition, is comprehensible; but that the United States should lend a hand to the carrying out of either of these two policies seems absolutely suicidal to our vast and growing interests in that part of the world.

Lord Beresford's opinion that it is primarily necessary for the development of China to make a military and naval power of that Empire, is, I think, the weakest part of his work, and his opinion is at variance with that of all those who know best China and the Chinese. So far as the protection of foreign interests is concerned, the Chinese Government is, and has been since the suppression of the Taiping rebellion, able to protect them whenever and wherever it has chosen to, as innumerable cases familiar to the Department can show. In the various memoranda submitted to Lord Beresford by the British merchants of China and published in his book, the need for China to increase her armament to insure their security, is no where hinted at, but in all of them we find the cause of the present stagnation of trade attributed, and rightly to mv mind, to the vacillating policy of the home Governments, frequently brought about by apathy and lack of knowledge regarding Chinese affairs, the resulting ability of the Chinese Government to escape the performance of its treaty obligations, and to the jealousies and lack of concerted action of the Powers in treating questions of general interest. . . .

British writers on Chinese questions, and especially Lord Beresford, have advocated id the strongest terms the "open door policy" or equality of treatment and opportunity for all comers, and denounce in the strongest terms the system of "Spheres of Influence" (or interest); but such spheres have now been recognized by Great Britain as well as by France, Germany and Russia, and they must be accepted as existing facts. But while adopting the policy of spheres of interest, which, we will admit, political reasons may have forced it to do, Great Britain has tried to maintain also the "open door" policy, the only one which meets with the approval of its business classes, for by it alone can they be guaranteed equality of treatment in the trade of China. In this attempt to minimize the evils brought about by the necessities of her foreign policy, Great Britain has been, however, unable to secure to her people perfect equality of opportunity, for she has recognized special and exclusive rights first of Germany and then of Russia in their areas of activity, more particularly those relating to railways and mines. What these rights may eventually be claimed to include, no one can at present foretell, though it would not be surprising if the exercise of territorial jurisdiction and the imposition of discriminating taxation were demanded under them—at least by France. Should such rights be conceded, our trade interests would receive a blow, from which they could not possibly recover.

That the task of strengthening the central government is a comparatively easy one, the history of China's progress in the last fifty years conclusively shows. The introduction of telegraphic lines throughout the Empire, the Maritime Customs service, the more recent organization of a system of imperial railways and their successful working, and a variety of other reforms are all operating in the same direction, so that Lord Beresford's statement (p. 231) "no reforms . . . can possibly be brought about in a country so

T o sum up then, we find to-day in China that the policy of the "open door," the untrammeled exercise of the rights insured to Treaty Powers by the treaty of Tientsin, and other treaties copied on it or under the most favored nation clause, is claimed by the mercantile classes of the United

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States and other powers as essential to the healthy extension of trade in China. W e see, on the other hand, that the political interests and the geographical relations of Great Britain, Russia and France to China have forced those countries to divide up China proper into areas or spheres of interest (or influence) in which they enjoy special rights and privileges, the ultimate scope of which is not yet determined, and that at the same time Great Britain, in its desire not to sacrifice entirely its mercantile interests, is also endeavoring to preserve some of the undoubted benefits of the "open door" policy, but "spheres of influence" are an accomplished fact, this cannot be too much insisted on. This policy is outlined by Mr. Balfour in his Manchester speech of January 10, 1898. Such then being the condition of things, and in v i e w of the probability of complications soon arising between the interested powers in China, w h e r e b y it will b e c o m e difficult, if not impossible, f o r the United States to retain the rights guaranteed them b y treaties with China, what should be our immediate policy? T o this question there can, it seems, be but one answer, w e should at once initiate negotiations to obtain f r o m those P o w e r s w h o have acquired zones of interest in China formal assurance that ( 1 ) they will in no w a y interfere within their so-called spheres of interest with any treaty port or with vested rights in it of any nature; ( 2 ) that all ports they may open in their respective spheres shall either be f r e e ports, o r that the Chinese treaty tariff at the time in f o r c e shall apply to all merchandise landed o r shipped, no matter to what nationality belonging, and that the dues and duties provided f o r by treaty shall be collected b v the Chinese G o v e r n ment; and ( 3 ) that they will levy no higher harbor dues on vessels of other nationalities frequenting their ports in such spheres than shall be levied on their national vessels, and that they will also levy no higher railroad charges on merchandise helonging to or destined f o r subjects of other p o w ers transported through their spheres than shall be levied on similar merchandise belonging to its o w n nationality. In other words, w e should insist on absolute equality of treatment in the various zones, for equality of opportunity with the citizens of the f a v o r e d powers w e cannot hope to have, in view of the well k n o w n methods n o w in vogue f o r securing privileges and concessions, though w e should continually, b y e v e r y proper means, seek to gain this also. Such understandings with the various Powers, and it is confidently believed that they could be reached at present, w o u l d secure an open market

throughout China f o r our trade on terms of equality with all other foreigners, and w o u l d f u r ther remove dangerous sources of irritation and possible conflict between the contending powers, greatly tend to re-establish confidence, and prepare the w a y f o r concerted action b y the P o w e r s to bring about the reforms in Chinese administration and the strengthening of the Imperial G o v ernment recognized on all sides as essential to the maintenance of peace. G r e a t stress has been laid b y British writers on the role of Russia in China w h i c h they c o n tend is a "purely political and military conquest" and w h o , "though she may mean to eventually build up a commerce, only wants f o r the present the Chinese seaboard and ports f o r strategic purposes." (Colquhom. "China in Transformation." 326.) L o r d Beresford says ( 3 2 ) that he w a s told at Niuchuang b y the British residents that " t h e y regarded Manchuria as really a Russian p r o v i n c e . . . that though the Russians might not impose a tariff on goods just at present, they w e r e placing themselves in such a p o w e r f u l military position that they would be able to do so in the near f u ture, . . . and the merchants considered their trade threatened b y such exhibition of military p o w e r . " In the face of these apprehensions of the British merchants at Niuchuang, w h o were but feeling in their persons the discomforts and restrictions which all foreigners may sooner or later have to experience when settled in the sphere of influence of some rival power, it is agreeable to have to record the opening of the port of T a lien-wan (near Port Arthur and an infinitely better port than Niuchuang, being below the line of winter and ice), to the merchant ships of all nations during the whole of the lease under which it is held bv the E m p e r o r of Russia's ukase of A u gust ι j t h of this year. T h i s I conceive will greatly help to allay fears and doubts as to Russia's attitude in China, and justifies the belief entertained that she would co-operate in bringing about such international understanding as is here outlined. T h e rccent statement of a Russian writer inspired bv a personage enjoying f o r years the friendship of the E m p e r o r of Russia, that "the independence and integrity of China is a fundamental principle of Russia's policy in Asia" ( Ν . A. Rev., J u l y , '99, p. 16), may or may not be absolutely correct; at all events, it may well be taken as indicating the present trend of Russia's policy, and seems to insure the friendly consideration at St. Petersburg of the arrangement here suggested. W h a t e v e r the ulterior object of Russia may be, its present one is unquestionably conciliation, f o r any haste might prove the spark which would cause the explosion

THE UNITED STATES AND T H E by which the Chinese Empire would be shattered. Nor does the assent of Germany to the proposed agreement seem very doubtful; she has declared Kiaochao a free port and allowed a Chinese custom house to be established there, in pleasing contrast by the way with the illiberal and shortsighted policy of Great Britain which has expelled the Chinese custom house from the Kowloon extension in front of Hongkong, and while she has insisted on certain exclusive mining and railroad rights in her sphere of interest, it seems highly probable that as German capital flows slower and slower into these enterprises, as it undoubtedly will as the vast requirements for long years to come of the already granted concessions are more exactly determined, she will find it greatly to her advantage to encourage and foster the enterprises of other nations. N o reference has been made to the way in which the Japanese Government would consider the propositions here suggested, because these measures are so clearly advantageous to Japan and so much in line with its own policy in China, that it must meet with its hearty approval. It is particularly important for obvious reasons of both domestic and foreign policy that the initiative for these negotiations should be taken by the United States. Such a policy cannot be construed

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as favorable to any power in particular, but is eminently useful and desirable for the commerce of all nations. It furthermore has the advantage of insuring to the United States the appreciation of Chinese Government, who would see in it a strong desire to arrest the disintegration of the Empire and would greatly add to our prestige and influence at Peking. France is the only doubtful country from whom some opposition might be anticipated, it being her well known policy in China to claim all implied jurisdictional rights wherever possible, but it is little likely that in this question, as in others, she would decline to listen to Russia's advice and stand out in opposition alone. The prospect seems bright therefore at the present moment of bringing to a successful conclusion the negotiations needed to attain the ends here indicated and which will, it is thought, relieve our commercial world from the just apprehension and perturbation in which recent events have thrown it, giving it equal treatment so far as commerce and navigation go, with the subjects of any other Power. Respectfully submitted, W . W . Rockhill Washington, 28th of August, 1899.

Part Nine THE NEW FREEDOM

/. THE POLITICAL Theodore Roosevelt. From 1901 to 1910, the personality of Theodore Roosevelt dominated the American political scene. He was not quite 43 years of age when he was sworn in as President of the United States on September 14, 1901. As a youth he had flirted with the Republican Mugwumps and had indicated a zest for reform. But there was a curious ambivalence in his character: he could speak the language of social change; and yet he could vote the regular Republican tickets at election time. He received his rewards in a long series of appointive offices and in his election to the governorship of New York in 1900. Roosevelt was an exciting personality— despite the paucity of his domestic achievements—and he succeeded in capturing the fancy and good-will of the American people. He preached the strenuous life and himself lived it. He was capable of coining fighting and derogatory phrases, and this pleased the man in the street; he adopted a vigorous foreign policy, and this fed the American national ego. In a certain sense, he did carry out his own precept of "speak softly and carry the big stick." For by strengthening the American navy he was able successfully to defy Germany and Japan and compel their recognition of the United States as a force not to be easily disregarded. But in the domestic scene, Roosevelt moved with great caution. He sought to win over the confidence of the Republican party machine, at the same time that he was making himself into a popular leader. When Mark Hanna died early in 1904, all opposition to Roosevelt collapsed and reluctantly the party elders accepted him. He was not to disappoint them until 1912. Roosevelt's Second Term. Roosevelt's first

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Congressional message, delivered on December 3, 1901, was an elaborate text in public affairs. He called for a greater degree of regulation of corporations and trusts; the extension of the powers of the Interstate Commerce Commission; an immigration policy; more reciprocity treaties; governmental encouragement of a merchant marine; the conservation of natural resources; and the extension of the Civil Service. He obtained none of these measures. But he did intervene to stop the continuance of a crippling coal strike; and he did "take Panama"—as he himself later boasted. The Republicans were compelled to nominate him, when they met in national convention in June, 1904; Charles W . Fairbanks of Indiana was named as his running mate. The Democrats, who had lost twice with Bryan, sought a more conservative standard bearer and picked Alton B. Parker, Chief Justice of the New York State Court of Appeals, as their nominee. The campaign was without incident and resulted in the reelection of Roosevelt with the greatest popular and electoral majorities given to a candidate up to that time. Roosevelt received more than seven million popular votes to Parker's five million; and 336 electoral votes to Parker's 140. Parker won only the Solid South. The Socialists, again led by Eugene V . Debs, polled almost a half million votes; and the Populists, this time with Thomas E. Watson of Georgia as their candidate, obtained 117,000 votes. T h e Republicans also swept both houses of Congress. So pleased was Roosevelt with his personal triumph that on the night of the election he made a public announcement in which he declared that "under no circumstances will I be a candidate for or accept another nomination."

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Despite this easy victory, again domestic like ninepins; and unemployment became accomplishment was small. Roosevelt's two severe. Roosevelt took a rather curious step to reCongresses failed to pass bills calling for the following: the rehabilitation of the merchant store confidence. On the advice of J . P. Mormarine, currency and banking reform, the gan, he gave his approval to the purchase by federal control of child labor, copyright and the United States Steel Corporation of the patent reform, and the limitation of the pow- Tennessee Coal and Iron Company, because, ers of the federal courts in injunction pro- presumably, the latter was in danger. T h e only ceedings. Roosevelt had biting things to say real result was the strengthening of the United about "the malefactors of great wealth"; but States Steel Corporation's control over the his Department of Justice did not overexert leading heavy industry in the United States. itself in the enforcement of the Sherman Anti- B y the middle of January, 1908, the short deTrust Law. He excoriated the conservative pression had spent itself, and employment and judiciary; but he led no movement to protect expansion in business once more were rehuman rights. Big Business came to flower sumed. The Republicans, therefore, could enter the presidential election of 1908 with during his administrations. The following were the slender achieve- confidence. Election of /poi. Roosevelt dominated the ments of his Congresses: The Hepburn Act of Republican convention and named as his suc1906 which further extended the powers of cessor his personal friend and Secretary of the Interstate Commerce Act, but failed to give the commission the right to fix the valu- W a r William Howard T a f t of Ohio. James ations of the railways; the Meat Inspection S. Sherman, a N e w York Congressman, was Act and the Pure Food Act, both also of 1906; nominated for the vice presidency. T h e Demothe Employers' Liability Act of 1908, affect- crats once more selected Bryan and named ing common carriers and relating to work- James W . Kern of Indiana to run with him. men's compensation protection; an act, passed Both Debs and Watson again became the nomiin 1908, limiting the hours of trainmen and nees of the Socialist and Populist parties, retelegraph operators working on interstate spectively. There was no uncertainty about railroads; and an act, passed in 1907, pro- the outcome despite the fact that Samuel Gompers, the president of the American hibiting contributions to political campaign Federation of Labor, gave Bryan his support. funds by industrial corporations. The Panic of 190η. One event appeared to Bryan did somewhat better than Parker, cardarken, for a brief time, the pleasant skies rying, in addition to the Solid South, all the under which Roosevelt lived. This was the Border states (except Maryland) and the three financial panic which hit the country in the Western states of Colorado, Nebraska, and fall of 1907. Again, as in 1873 and in 1893, Nevada. The electoral vote was 321 for T a f t the outstanding cause was the primitive nature and 162 for Bryan. Debs's vote went up of the American banking system; the absence somewhat; Watson's dropped sharply—and of proper control over reserves deposited in with it Populism disappeared. T h e Republicans also captured both Houses and seemed New York banks, and the manipulation of these by the great investment banking houses, to be safely installed in Washington. Theohad given spur to stock market speculation. dore Roosevelt, having seen his protégé inIn 1907, as the business cycle turned down- ducted in office, took his departure immediward, many brokerage houses and banks ately from the United States to hunt big failed; country banks were hard hit; and they game in Africa and to make a triumphal tour contracted their credit activities. The over- of the European capitals. capitalized railroads once more began to fall The Taft Administration. Roosevelt was

INTRODUCTION sure that "his policies" were safe in Taft's hands. But Taft had neither the personal magnetism nor the political skills of his predecessor. He was a big, jolly man—innately conservative, and willing to let the leaders of his party dominate his administration. It was Taft's unhappy lot to reap the whirlwind that Roosevelt had sown. His term in office, despite some good work, ended in disaster, with public confidence gone and the Republican party rent by factional quarrels. Theodore Roosevelt, it is true, had made Taft President; but Theodore Roosevelt's unredeemed promises of a new day and a square deal led to a general revolt—in and outside of the halls of Congress—against Republican rule. That conservatism was once more in the saddle was apparent to all when—despite campaign pledges of tariff revision—the Republican Congress wrote the high protective Tariff Act of 1909. Republican insurgents in the Senate—led by La Follette of Wisconsinexposed the bill for the shabby thing it was; Taft's tardy efforts at leadership were unavailing; and it became law. But the insurgents voted against it; and Taft's public defense of the measure only made matters worse. The result was, the Republicans lost the lower House to the Democrats in 1910. Insurgency swept the Western states; while Democratic governors were elected in Massachusetts, Connecticut, New York, Ohio, and New Jersey. In New Jersey, the new executive was the president of Princeton University, who had been born in Virginia but who had gone north to complete his studies and enter upon an academic career. His name was Woodrow Wilson. The New Nationalism. A Congress thus divided was incapable of constructive labors. The next two years therefore were concerned with the clarification of party issues and the preparation of political manifestoes. In fact, in January, 1911, the insurgents organized the National Progressive Republican League and issued a declaration of principles which called for a complete overhauling of the country's

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domestic policy. In addition to demanding better railroad, tariff, and corporation legislation, the League spoke up for "wise, comprehensive and impartial reconstruction of banking and monetary laws, the conservation of coal, oil, gas, timber, water powers, and other natural resources belonging to the public, and the enactment of legislation solely for the common good." Government had to be returned to the people; and this was to be done through the direct election of Senators, the initiative, referendum and recall, and presidential primaries. Theodore Roosevelt was quick to see that the cause of his friend T a f t was a lost one. He had returned to the United States in June, 1910, and had kept his counsel for a number of months. And then on August 31, 1910, in an address delivered at Osowatomie, Kansas, he joined the new legions of reform; in fact more, he offered his leadership. What the country needed was a N e w Nationalism: government had to participate actively in the social and economic life of the nation. And this was his creed: 1 stand f o r the square deal. B u t w h e n I say I am for the square deal I mean not merely that I stand f o r fair play under the present rules of the game but that I stand f o r having those rules changed so as to w o r k f o r a m o r e substantial equality of o p portunity and of r e w a r d f o r equally g o o d service.

In the light of these utterances, the insurgents called upon Roosevelt to join hands with them formally. Roosevelt replied evasively; but he gave his blessings to La Follette's candidacy for the Republican nomination. In 1911 the La Follette campaign was launched and it won wide approval; and so successful was it that Roosevelt began to take insurgency seriously. He let it be known he would not be averse to running again; and in February, 1912, a group of his friends appeared to urge him to do so. Later in the month Roosevelt announced his "hat was in the ring." In other words, he was ready to abandon both Taft and La Follette. In this fashion, the lines were drawn for the struggle over the Republican nomination of 1912.

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2. BIG BUSINESS

AND FINANCE

What had caused this rising of America's middle classes? Most important was a growing awareness of the fact that the country's economic life was being dominated by Big Business, and its banking institutions and money markets by Finance Capital. Consolidations in Business. After the depression of 1893-97, f he processes of corporate consolidation and business integration had been pushed energetically, with leadership not in the hands of enterprisers themselves but in those of investment banking houses. During the three years, 1899 to 1902, when the movement was at its height, 79 huge integrations were completed with a combined capital in excess of four billions of dollars. The greatest of these was the United States Steel Corporation, set up in 1901 and having a capitalization of one billion dollars in common and preferred stock and almost half a billion dollars in bonds. This was the country's first billion dollar corporation; and it controlled, virtually in a complete monopoly, the production of the heavy steel and a good part of the light steel output of the United States. Whether a monopoly or not, in the formal sense, United States Steel's price leadership was recognized by all American steel companies for the next two decades. Steel prices were "managed"; and monopoly profits were so great that the 50 percent water in United States Steel's securities was got rid of in less than fifteen years. Other giant corporations put together by J . P. Morgan and Company and others were: the Amalgamated Copper Company, the American Tobacco Company, the American Woolen Company, the General Electric Company, the American Car and Foundry Company, the United States Leather Company, the United States Rubber Company, the International Paper Company, the Diamond Match Company, and the National Biscuit Company. By 1904, almost every field in

CAPITAL

American heavy industry and many in light industry were dominated by these new great corporate powers. In 1904, John Moody, writing in his Truth about the Trusts, found that there existed in the country 318 industrial corporations with a combined capital in excess of seven billions of dollars. On his list were 10 with capitalizations of 100 million dollars or over; and 128 with capitalizations of 10 millions or over. All but 82 of these new corporations had appeared between January, 1898 and January, 1904. More than half of these corporations controlled price and production policies in the industries with which they were associated. It is true that by 1904 this movement had largely spent itself. The reasons are interesting: ( 1 ) Most of the goals of the promoters had been achieved; in other words, all the significant industries capable of integration were already organized. (2) The greater part of the companies thus created were heavily overcapitalized, and their inability to earn profits on watered stock and fictitious values led to a growing distrust on the part of the investing public. In October, 1903, the securities of 100 of these new consolidations showed a shrinkage of 47 percent from their top prices. (3) In 1903 the Bureau of Corporations had been established by Congress and, while it had no judicial powers, its investigations did expose many of the more unsavory monopoly practices. (4) And, in 1904, the Supreme Court finally acted and used the Sherman Anti-Trust Law to order the dissolution of the Northern Securities Company—a railway holding company put together by the two great investment banking houses of J . P. Morgan and Company and Kuhn, Loeb and Company. The Supreme Court. It was not until 1911 that the Supreme Court took cognizance of the existence of industrial monopoly. In that year, it handed down two decisions in which

INTRODUCTION it found that both the Standard Oil Company of N e w Jersey and the American Tobacco Company were combinations in restraint of trade under the Sherman L a w . T h e Court was troubled, however, by the too sweeping nature of the restraints to be found in the Sherman Act; "the exercise of judgment" was therefore necessary. Hence a "rule of reason" was required; and the only agency that might employ it was the Court itself. Thus, two of the largest holding companies in the country were broken up and competition again, presumably, reigned in oil and tobacco. Of course nothing of the sort occurred; f o r the same persons w h o had dominated the holding companies were now in charge of the smaller companies; nor did prices go down. It was no wonder that reformers were not impressed over what President T a f t hailed as a great victory. The Investment Bankers. Attention has been called to the leading role played by the investment banking houses in the creation of these new monopoly groups. Greatest of these was the house of J . P. Morgan and Company, which had originated as early as 1837, but which had not become important until the 1880S when Morgan had entered the field of railroad refinancing. In 1887, the Morgan firm rehabilitated the Baltimore and Ohio; in 1888, it became prominent in the destinies of the Chesapeake and Ohio; and in 1893, it created the Southern Railway Company. During the depression of 1893-97, it reorganized, recapitalized, and came to dominate many of the great railways systems of the United States. In the nineties, the Morgan firm turned to heavy industry and created a great rival to the Carnegie Steel Company in the newly formed Federal Steel Company. T h e contest between Federal Steel and Carnegie Steel led to the creation of the United States Steel Corporation of 1901. In the early 1900s, the Morgan firm also became an important influence in the destinies of the following huge corporations: the International Harvester Company, the General Electric Company, the

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American Telephone and Telegraph Company, the Western Union Telegraph Company, and the International Mercantile Marine Company. What alarmed Americans more than anything else was the growing community of interest between the investment bankers on the one hand and the country's fiduciary and banking institutions on the other. F o r not only did the Morgan partners sit on the boards of directors of railroads, industrial corporations, and communications systems; they also seemed to be controlling the largest insurance companies, the trust companies, and the commercial banks of America. Morgan partners were to be found on the boards of the Mutual L i f e Insurance Company, the N e w Y o r k L i f e Insurance Company, and the Equitable L i f e A s surance Company; the Manhattan, Bankers, and Guaranty trust companies; and the Chase, Liberty, Hanover, and Astor national banks. In all, Morgan and his partners held 77 interlocking directorates in 47 of the greatest financial, industrial, and transportation corporations in the country. T h e total capitalization and resources of these companies came to ten billions of dollars. Other such communities of interest were dominated by the Rockefeller fortune, operating through the National City Bank of N e w Y o r k ; by George F. Baker, the president of the First National Bank of N e w Y o r k ; by Kuhn, Loeb and Company, headed by Jacob H. Schiff; and by the Boston houses of Lee, Higginson and Company and Kidder, Peabody and Company. The Pujo Committee Investigation. Upon these, the Pujo Committee—a subcommittee of the Democratic House's Committee on Banking and Currency—descended in M a y , 1912. It made a searching examination of the communities of interest existing and it found a resulting concentration of credit and money. This had been brought by the following methods: mergers of competitive banks and trust companies; purchase of stock in competitive banks; interlocking directorates; the

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extension of banking influence into insurance companies, railroad companies, and public utilities; and syndicate financing of security issues. T h e Pujo Committee came to this conclusion: Your committee is satisfied from the proofs submitted . . . that there is an established and welldefined identity and community of interest be-

FREEDOM tween a few leaders of finance . . . which has resulted in great and rapidly growing concentration of the control of money and credit in the hands of these few men. It was inevitable that the revelations of the committee, as they were made from day to day in the public press, should play a large part in the mobilization of public opinion and in the outcome of the election of 1912.

OTHER INFLUENCES ON THE REFORM MOVEMENT The reform movement had also drunk at other springs. Reform had first appeared in the states and had gained notable victories. Led by men like Robert La Follette in Wisconsin, it had fought and broken the alliance between Big Business and machine politics, had passed welfare legislation, and had established direct government. Socialism, too, was making its message known to the United States. Joined by many native born Americans, and penetrating deeply into the trade union movement, it was educating Americans in the greater progress European countries were making in the fields of social legislation. The Socialists possessed a very capable press which, in dailies, weeklies and monthlies, was going out regularly to hundreds of thousands of American urban and rural homes. The Muckrakers. Not least among these forces were the so-called Muckrakers, who wrote sensational articles of "exposure" in the new and cheap popular magazines. They had been given their name by Theodore Roosevelt in 1906, and he had used the term invidiously. The time had come for a halt on the mere collection of unsavory facts about business and government; let us, said Roosevelt, turn our attention to constructive work. But there was no denying that public enlightenment could not have advanced very far had it not been for the sensational tales of these young magazine writers. Encouraged by the editors of magazines like McClure's,

Everybody's, Collier's and the Cosmopolitan, the Muckrakers went up and down the land and pried into the doings of the big corporations and public officials. They wrote articles of corrupt franchise sales, the fraudulent letting of contracts, payroll padding; of the slums and of the suffering of the poor; of the alliance of the police with vice. T h e y visited state capitals and came back with tales of the influence of lobbyists, the bribing of legislators, and the workings of the "invisible government" of machine politics. T h e y looked into the conduct of business enterprise and exposed worthless stock schemes, dishonest insurance companies, and the monopoly practices of great companies. Outstanding among these exposés was Ida M. Tarbell's History of the Standard Oil Company, which McClure's began to print in 1903; Lincoln Steffens' Shame of the Cities, printed in McClure's in 1904; Ray Stannard Baker's Railroads on Trial, also in McClure's in 1905 and 1906; Thomas W . Lawson's Frenzied Finance, in Everybody's in 1905. Novelists took up the tale, and a series of important social documents came from the pens of men like Upton Sinclair, whose Jungle (1906), was concerned with the Chicago stockyards; Frank Morris's Octopus ( 1 9 0 1 ) , which told of the struggles of the farmers against the domination of the Southern Pacific Railroad; Winston Churchill's Coniston

INTRODUCTION (1906), which had to do with the political processes of a N e w England state. This company was joined by political and social theorists, who began to explain the need for the assumption of a greater responsibility on the part of the government toward business and the social processes. Among these were to be found Herbert Croly's Promise of American Life (1909); Walter Lippmann's A Preface to Politics ( 1 9 1 3 ) ; Walter Weyl's New Democracy ( 1 9 1 2 ) ; and Jane Addams' The

Spirit of Youth and the City Streets (1909). Accomplishments. These pressures had their effect; and there began to appear on state statute books many reform acts, which had to do with the extension of direct government, the more careful supervision of corporate practices, and welfare legislation. Characteristic of the first were laws establishing the direct primary, the initiative and referendum, and the recall of elective officials. Legislators were being held responsible f o r the naming of United States Senators chosen b y the people themselves; and in 1913, the Seventeenth Amendment, for their popular election everywhere, went into effect. Similar progress had been made in connection with the grant of the franchise to women in state elections; in 1920, the Nineteenth Amendment, giving all women the vote, was proclaimed. Reformers also sought to attack corporate privilege in the states by passing antilobbying

4. THE The American Federation of Labor. During this period, the trade union movement was on the defensive. T h e American Federation of Labor had got off to a good start, in the late 1 8 8 0 S , when it was able to claim the affiliation of twelve national trade unions with a membership of 1 4 0 , 0 0 0 . Samuel Gompers, who continued to be elected president of the A.F. of L. annually until 1924 (except for the single year 1 8 9 4 ) , was the movement's un-

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laws, laws controlling the granting of franchises, and laws creating public utilities commissions, to regulate the practices of transportation, electric, gas, and water companies. T h e number of state elective officials was reduced, the executive budget was created, and the civil service was extended. Municipal governmental processes similarly were improved; home rule was granted to many cities; new charters were written, providing f o r the centralization of responsibility in the hands of small elective commissions; and city manager plans, executive budgets, the standardization of salaries, and public letting of contracts were widely adopted. T h e municipal ownership of water supply system, gas and electric plants, and transportation facilities became common. Finally in many of the sutes, welfare legislation began to make its appearance. These new codes included workmen's compensation laws; laws raising the ages of entry of children into industry; laws fixing maximum hours of work for children, women, and even men; minimum wage laws for women; safety and health codes; mothers' assistance acts to furnish public aid to dependent children; and old age pension laws. This was trail-blazing of a significant character. Another two decades were to elapse, however, before the Federal government was to enter the field of social legislation.

WORKERS contested leader and source of inspiration. Trade unions—largely based upon the crafts —were to be free and independent associations; they were to eschew government aid; they were to take care of their own unemployed, sick, aged, and needy through friendly benefits; and they were to be militant. Using the weapons of the strike and boycott, the unions were to fight for recognition—through the trade agreement and the

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closed shop—and f o r higher wages and shorter working hours. T h i s was "pure and simple trade unionism" to Gomper's enemies: f o r American c r a f t unionism had neither a political program nor a radical ideology. This was the principle of voluntarism; it remained at the heart of American trade union theory and tactics until 1935. T h e A . F . of L . unions made notable advances f r o m 1893 to 1907. T h e y won eighthour day contracts in many industries; succeeded in writing trade agreements; and sometimes even obtained the recognition of the union shop. B y 1900, the A . F . of L . unions claimed a membership of 550,000; by 1905, this had g r o w n to 1,600,000, in 90 national and international bodies. But from 1907 to 1914, trade unionism made no headway. T h e great corporations were able to fight back effectively, and they met fire with fire. T h e y locked out workers; banded together to resist the union shop; and appealed—successfully— to the courts, through injunctions, to stop boycotts and halt strikes. Unions were even sued f o r damages under the Sherman AntiT r u s t L a w and, as a result of the Danbury Hatters case, even the property of workers themselves was attached in satisfaction of one such judgment. This so-called open-shop movement was successful; so that, in 1914, A . F . of L . unions had only 2,000,000 members. Unionism had made no progress in the metals and machinery industries, in meat packing, water transport, and oil refining.

Socialism. Upon the inadequacies of the labor movement, the growing disparities between wealth and poverty, and the inability of real wages to climb—for the first time in American history—radicalism thrived. Socialism grew by leaps and bounds. It was revisionist and gradualist; it had the inspiring leadership of 'Gene Debs; it had a fine press and an excellent youth organization. In 1910, it elected a mayor of Milwaukee and sent the first Socialist Congressman to Washington. In 1 9 1 2 , Debs polled almost a million votes. Socialist officials were no longer rarities and were to be found everywhere in the United States in state legislatures and municipal councils. It appeared that here was America's third party movement finally and permanently emerging.

American trade unionism had displayed structural weaknesses as well. Organization on the basis of crafts inevitably led to jurisdictional disputes between the unions themselves. This was true not only of those industries where a certain degree of skill continued to exist; it was more particularly so of those where technological advances had wiped out all the lines of demarcation between crafts. In these so-called mass production industries, unionism got nowhere. Industrial unionism was the only answer; and this did not appear until the 1930s.

T h e l . W . W . made its strongest appeal to the migratory workers of the Far W e s t ; the unorganized workers of the South; and the new immigrants from southern and eastern Europe. It waged many aggressive strikes and some of its huge demonstrations took on the aspect of mass uprisings. Meeting with successes among the metal miners and lumbercamp workers of the Far West, it moved east in the 1910s and appeared among the steel workers of Pennsylvania and the textile w o r k ers of Paterson, N e w Jersey, and L a w r e n c e , .Massachusetts. Because it was a revolutionary

The l.W.W. Farther to the left was another home-grown radical organization, the Industrial Workers of the W o r l d . Appearing in 1905, the l . W . W . espoused a syndicalist philosophy, that is, the revolutionary organization of workers into industrial unions to preach the class struggle and to organize the future classless society. T h e I . W . W . , like all syndicalist movements, was hostile to the state, and therefore refused to enter politics. Its leaders were fearful of the effects of industrial collaboration, and would sign no trade agreements. Their chief tactic was sabotage; their " m y t h " the general strike. U n d e r such relentless pressures, capitalism would succumb and the "syndicates" would take over.

INTRODUCTION movement, it was savagely resisted. But it had a fatal weakness: it could not build stable

THE NEW The Election of 1912. Out of such a background of discontent and unrest emerged the New Freedom. The deep division in the ranks of the Republicans indicated that now, for the first time in two decades, the Democracy once more had its opportunity. T h e Republican convention met in June, 191 i. T h e delegations pledged to Roosevelt were given short shrift and the hand-picked T a f t supporters were seated. T a f t and Sherman were renominated. The platform paid no attention to the clamor for change and sought the support of the electorate on the basis of Taft's achievements in office.

The Democrats assembled at the end of June in Baltimore, where immediately a bitter contest developed between the backers of Champ Clark, Democratic speaker of the House, and Woodrow Wilson, New Jersey's governor. Bryan stood on the sidelines (hoping that the supporters of the two leading candidates would remain deadlocked); but when he saw Tammany Hall switching its support to Clark, he turned to Wilson. Because the rules of the Democratic convention still required a two-thirds vote for a choice, it was not until the forty-sixth ballot that Woodrow Wilson was named for the presidency. Governor Thomas R. Marshall of Indiana was nominated as his running mate. The platform was a Bryan document and had something in it for every reformist group. On August 5, the Roosevelt supporters assembled at Chicago for the purpose of creating the Progressive party. Roosevelt was nominated by acclamation and to run with hiiti Hiram W . Johnson, California's reform governor, was chosen. The Progressive platform called " A Contract with the People"—was not very much unlike that of the Democrats, except that it was more solemnly phrased and

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unions, and its membership was floating and transitory.

FREEDOM spoke in the language of

high evangelical

endeavor. It was plain that T a f t was out of the run-

ning; the contest was between the Democratic and the so-called Bull Moose forces, and it was wordily waged. Roosevelt called for a strongly organized central government, which was to act as the reforming agency. Wilson placed his faith in the states. Roosevelt regarded the processes of concentration and corporate activity as inevitable, but he advocated the strictest governmental supervision to protect the consumer and the small busi" nessman. Wilson was not opposed to Big Business, but only to those concerns that had established monopolies; these had to be broken up. Small business, following Louis D. Bran-

déis, he regarded as the normal; Big Business was suspect. There was an important difference in philosophy here; but Wilson's was much harder to realize than Roosevelt's. The electorate made little effort to differentiate between the two, Roosevelt's " N e w Nationalism" and Wilson's " N e w Freedom" sounding very much the same to untrained ears. It is doubtful if the independents voted for either; for Debs's large vote indicated that here is where the real protestants went. Wilson was elected to the presidency, although he obtained only a plurality of all the ballots cast. Wilson's popular vote was 6,286,000; Roosevelt's 4,126,000; Taft's 3,484,000; and Debs's 987,000. The electoral vote which made Wilson President was as follows: Taft 8, Roosevelt 88, and Wilson 435. The Democrats, too, swept the Congressional and Senatorial elections for the first time since 1892. State Interventionism. The implementation of the New Freedom marked a landmark in American public affairs: it was the beginning of state interventionism on a large scale. Un-

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der Woodrow Wilson, government seemed to move over the whole economic landscape to regulate and control. Not quite the whole: for while labor—it was assumed—was to be protected from the injunction and child labor, presumably, was outlawed, not even a start was made in the field of social insurance. T o this extent, it may be said that the New Deal took up where the New Freedom left off; and only then was completely realized the original program of the social reformers of the first decade of the twentieth century. Tariff of ι pi 5. In his First Inaugural, Wilson pledged his administration to the support of three major domestic policies: tariff revision, banking and currency reform, and additional trust legislation. In less than a year and a half, acts covering these subjects were passed; they represented achievement of the highest order. The so-called Underwood Tariff Act of 1913 revised sharply downward most of the rates in all its fourteen schedules. In all there were reductions on 958 items; and an over-all cut of 10 percent from the average of duties in the Tariff Act of 1909. This was moderate protectionism, to be sure, but it was a protectionism that sought to cover only infant industries; and the act's free list, particularly of daily necessities and of articles in common use by farmers, was very large. Finally, it was the first tariff law to incorporate an income tax, which had been authorized through the ratification of the Sixteenth Amendment in 1913. Federal Reserve Act. Next came the writing of the Federal Reserve Act, which President Wilson signed on December 23, 1913. The inadequacies of the national banking system, by this time, had been generally recognized by legislators, bankers, and businessmen. It had provided the country with an inelastic currency; the reserve svstem it had set up was largely a fictitious one; and it had no machinery—through the rediscount rate and open market operations—to control the booms and depressions of the business cycle. Following the panic of 1907, Congress had

sought to write new financial and monetary legislation; and it had passed the AldrichVreeland Act of 1908. The most important part of this law was the provision for the creation of a National Monetary Commission to be made up of Senators and Congressmen. This commission, under the chairmanship of Senator Aldrich, from 1908 to 1912 made a series of elaborate examinations into the banking and currency systems of European nations; and it prepared a bill which had some influence upon the final shaping of the Federal Reserve Act. The new banking law was largely written by the House Committee on Banking and Currency, of which Carter Glass was chairman. First introduced in June, 1913, a completed measure emerged in less than six months. The outstanding characteristics of the Federal Reserve System, thus created, were the following: (1) There were to be twelve federal reserve banks as against a central bank. (2) There was to be an elastic currency based on commercial and agricultural paper. (3) There was provided the mobilization of reserves in the federal reserve banks, which made them, as Glass said, "instead of private banks in the money centers, custodians of the reserve funds of the nation." (4) Government money (federal reserve notes), in place of the bank notes of the former national banking system, was to be the basis of the country's currency. (5) The federal reserve banks were invested with the rediscount function, so that member banks were in a position to sell their commercial paper and government securities to these agencies; and the reserve banks, by raising and lowering their rediscount rates—and the reserve requirements—could contract and expand the flow of commercial credit. Also, the federal reserve banks might engage in open market operations, and they were to issue the federal reserve notes. The whole svstem was placed under the control of a Federal Reserve Board of seven members, two of whom were to be the Secretary of the

INTRODUCTION Treasury and the Comptroller of the Currency and the other five were to be appointed for ten year terms by the President with the consent of the Senate. For the first time, some attention was paid to the needs of the agricultural communities of the country for an expanded credit. The rediscount period for commercial paper was to be three months; but for agricultural paper it was to be six months. Anti-Trust Legislation. On January 20, 1914, President Wilson once again appeared before Congress, this time to ask for the vindication of his campaign pledges concerning the trusts, and more particularly for legislation to establish free competition once more in the American business life. The keystone of the President's trust program was the proposition that "private monopoly is indefensible and intolerable." Congress immediately complied and in September, 1914, it passed the Federal Trade Commission Act and in October, 1914, the Clayton Anti-Trust Act. The Federal Trade Commission Act abolished the Bureau of Corporations and in its place created an agency which was to have both investigative and regulatory powers. It could conduct investigations on its own account or at the request of the President or Congress. As a regulatory body, it was empowered to declare "unfair methods of competition and commerce" illegal. Having determined that such unfair methods existed, upon complaint, it could issue "cease and desist orders," which were enforceable in the federal courts. It is to be observed that criminal or civil penalties for violations of the commission's orders were not incorporated in the act; rather, it was the intention of Congress to utilize the commission, through investigation and publicity, for the purpose of establishing the existence of practices that were curtailing "effective competition." Once unlawful restraints of trade were indicated, the government had at its command the Sherman Law and the newly enacted Clayton Law as punitive devices.

The Clayton Law was, in effect, an amendment to the Sherman Law and it contained principally three distinct sets of provisions: (1) It prohibited certain corporate practices, notably those that had to do with interlocking directorates in industrial corporations and banks. (2) It prescribed remedies for relief. (3) And it excepted organized labor from the provisions of the anti-trust laws. The labor provisions of the act were to be found in Sections 6 and 20. Section 6 was hailed as trade unionism's Magna Carta, because it declared that "the labor of a human being is not a commodity or article of commerce; nothing contained in the anti-trust laws shall be construed to forbid the existence and operation of labor, agricultural, and horticultural organizations." Section 20 sought to protect workers from the indiscriminate use of injunctions by the federal courts. Unfortunately, in the twenties, the federal courts and more particularly the Supreme Court found big enough loopholes in both the sections to render them virtually nugatory. It was not until the passage of the Norris-La Guardia Anti-Injunction Law of 1932 that labor was finally given adequate defenses against legal abuses; and not until the passage of Section 7(a) of the National Industrial Recovery Act of 1933 and the Wagner Labor Relations Act of 1935 that the independence of trade unionism in the United States was finally recognized. Farm Legislation. Nor did the New Freedom neglect the needs of the farmers. The Federal Reserve Act had given attention to their demands for more short-term credit facilities. The Federal Farm Loan Act of 1916 created a machinery for the financing of their long-term credit requirements. Patterned after the Federal Reserve System, the Federal Farm Loan System set up 12 federal land banks, in as many districts, which were to help finance the activities of cooperative farm loan associations and joint-stock land banks. Each farmer could borrow up to 50 percent of the value of his land and 20 percent of the

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value of his permanent improvements. Finally, in 1923, Congress rounded out this program when it established the federal intermediate credit banks, to rediscount agricultural paper and to lend directly to farm cooperatives. In addition, Wilson's Congresses passed the L a Follette Seamen's A c t of 1 9 1 5 , which was a charter of liberties f o r America's seamen; the Keating-Owen Child L a b o r A c t of 1916, which was designed to prevent the entry into interstate commerce of the products of child

6. FOREIGN

labor; and the Adamson L a w of 1916, which established the eight-hour day on interstate railways. T h e N e w Freedom might have continued exploring other fields; but dark clouds were forming over the skies of Europe, and before long the world was plunged in a sanguinary war. Although the United States proclaimed its neutrality at once, it was inevitable that Washington should be involved in w a r questions. A n examination of the foreign policies of Roosevelt and T a f t is in order first, however.

AFFAIRS UNDER ROOSEVELT, TAFT, AND WILSON

Foreign Policy Uiider Roosevelt. In his relations with other nations, Theodore Roosevelt pursued an aggressive course. He defended and extended the Monroe Doctrine; he acquired the Panama Canal; he intervened actively in African and Asiatic affairs; and he built up the American navy until its power was second only to Britain's. When Roosevelt left the White House, these two precepts had become the common coin of American foreign policy. T h e United States, with economic interests all over the world, was an international power, whose spokesmen were entitled to an equal place at the council tables of the world. And the United States was sovereign in the Western Hemisphere; it was to us that Europe might look for the maintenance of the peace and the discharge of their financial obligations by Latin American nations. (This meant intervention, of course; and it took almost a quarter century before the United States was ready to recognize it had erred when it claimed this right.) Panama. In 1902, when European Powers threatened to land in Venezuela to force the satisfaction of the financial claims of their nationalists, Roosevelt at once interceded and compelled the establishment of an arbitral machinery. Panama, also, had his constant attention. Reference has already been made to

the fact that Great Britain had consented to a revision of the earlier Clayton-Bulwer Treaty of 1850, under which any isthmian canal constructed by either the United States or Great Britain would be jointly controlled and would be neutralized for the service of all nations. In February, 1902, the HayPauncefote Treaty between the two countries was ratified under which the early convention was abrogated and the United States' exclusive rights in the building and fortification of a canal were recognized. Meanwhile, a French company had begun the construction of a canal across the isthmus, but it had gone into bankruptcy. Its properties and claims had been taken over by the so-called N e w Panama Canal Company, which had placed a value of $110,000,000 on its rights. But Congress was much more responsive to the idea of building across Nicaragua; and, in fact in 1902, the House had passed a measure authorizing such a project. Roosevelt himself favored Panama; brought pressure to bear on Congress; and Congress, in turn, yielded. In June, 1902, it passed an act which authorized the purchase of the N e w Panama Canal Company's claims for $40,000,000 and the opening of negotiations with Colombia for the acquisition of perpetual control of a canal zone at Panama. But Colombia now be-

INTRODUCTION gan to delay and evinced no interest in the ratification of a convention with the United States, It was at this point that Roosevelt intervened. T h e province of Panama, in N o vember, 1903, revolted and was immediately recognized as an independent nation by the United States. T h e history of this uprising is somewhat obscure; but there is no doubt that the immediate appearance of American warships on the scene prevented the Colombian army from effectively coping with the insurgents. In any case, on November 18, Panama formally signed a treaty with the United States, The United States recognized Panama. In return: we were granted in perpetuity the use of a Canal Zone ten miles wide; the Republic of Panama transferred to the United States the properties of the N e w Panama Canal Company and the Panama Railroad Company; and Panama was to receive $10,000,000 in gold and an annuity of $250,000. Construction was commenced in 1907 and seven years later the first ocean steamer passed through the completed Panama Canal. It had cost the United States $275,000,000 to build and another $113,000,000 to equip with military and naval defenses. T h e protection of the seaways leading to the Canal continued to be the basis of American interest in the Caribbean region. The Roosevelt Corollary. It was because of this preoccupation that Roosevelt, during 1904-5, was to enunciate the so-called Roosevelt Corollary of the Monroe Doctrine. As a result, for twenty-five years, Latin American countries continued to regard the United States with hostility. In effect, the corollary meant that the United States assumed complete responsibility for the maintenance of civil order and the protection of property rights, European as well as American, in the Western Hemisphere; the Monroe Doctrine, said Roosevelt, forced the United States "to the exercise of an international police power." The outbreak of a series of insurrections in the Dominican Republic, between 1899 and

905

1905, had encumbered the government with a great debt, two thirds of which was held in Europe. The inability, or the failure, of the Dominican government to service these obligations led to continued pressures by European nations on the Dominican officials. These threatened to intervene; and the impending crisis prompted Roosevelt, in his Congressional message of December 2, 1904, to enunciate his doctrine. T h e Dominican Republic bowed before the inevitable, and wrote a treaty with the United States which accepted American supervision of its custom houses and management of its finances, T h e Senate was reluctant to ratify the original convention; but in 1907 finally consented. T h e Dominican Republic, later Haiti and Nicaragua—in fact the Caribbean region and Central America—virtually became American protectorates. Asia and Africa. Roosevelt was to be found interesting himself in the Far East and in the Mediterranean as well. T h e Russo-Japanese W a r had broken out in February, 1904 and, after it had dragged on for a year, Roosevelt proffered his services as mediator. T h e United States, because of the Philippines, was in the Pacific; furthermore, Roosevelt did not want to see a decisive victory for either Japan or Russia lest the balance of power in the Far East be upset. In the summer of 1905, Roosevelt's good offices were accepted, and on August 9 a peace conference was assembled at Portsmouth, N e w Hampshire. T h e treaty that followed was a triumph for Roosevelt and American diplomacy; Japan and Russia both remained in eastern Asia to watch each other. Roosevelt also insisted that America had rights in the Mediterranean which the European powers had to consider in their fight over the partition of Morocco. A conference at Algeciras, Spain, was held in January, 1906, in which American delegates participated. T h e convention that followed recognized Morocco's territorial integrity; guaranteed the Open Door to the merchants and investors

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of all nations; and created a police force under the joint supervision of France and Spain. Toft's Foreign Policy. President Taft continued along the lines laid down by his predecessor. The United States intervened in Honduras and Nicaragua; and it pressed vigorously for the right of American capital to participate in the development of China. In the latter case, we were not too successful, for American bankers were admitted to participation in only one railway loan—and that a joint one. W e were not yet powerful enough financially to push our claims to recognition as an investor nation. But the 1940s were to tell another story. Wilson and the Caribbean. Woodrow Wilson—despite his lofty pretentions—made no effort to jettison the policies of Roosevelt and Taft. They had been engaged in adventures in "dollar diplomacy"; and he regarded with disfavor intervention to protect property rights. Thus, at Mobile, in October, 1913, he could say: "It is a very perilous thing to determine the foreign policy of a nation in terms of material interest. It not only is unfair to those with whom you are dealing, but it is degrading as regards your own actions." This was a distinction without a difference; for Wilson was to meddle in the Caribbean and in Mexico for security reasons, if not for economic ones; in any case, it was intervention. Marines were landed and a naval administration was set up in Haiti in 1915; the same tale was repeated in the Dominican Republic in 1916; our forces continued to dominate Nicaragua. And, in 1917, the United States bought the Virgin Islands from Denmark for $25,000,000. Mexico. Wilson's record in Mexico was no better. He laid down the dubious principle that governments established by revolution were not to receive recognition; and then violated it himself by seeking to distinguish between "good" and "bad" revolutionists. In 1911, under the leadership of Francisco

Madero, Jr., the dictatorial Diaz government of Mexico was challenged and in May of that year Diaz, recognizing the inevitable, abdicated. Madero entered Mexico City in triumph; but the next year was to sec internecine warfare breaking out among the revolutionary generals. The United States was cool to Madero; he could not cope with the insurgent armies; and in February, 1913, he was killed by the order of Victoriano Huerta. Huerta proceeded at once to install himself as provisional president. In March, 1913, Wilson indicated his displeasure. He declared that he would have nothing to do with Huerta or with any government based on military seizure. He was interested in seeing a truly democratic government established in Mexico, and such he was prepared to assist; but he would not, he promised, send an armed force into Mexico to protect American business interests. Wilson's refusal to recognize Huerta had no effect on the European Powers, which, by the middle of 1913, had generally recognized the de facto government. Wilson called his policy one of "watchful waiting"; this, however, did not prevent the running of guns into Mexico to assist the anti-Huerta forces. In 1914 he was intervening when Mexican ports were blockaded and American marines seized Vera Cruz. Huerta gave up the unequal struggle; he was succeeded by Venustiano Carranza; and soon the insurgent leaders fell to quarreling—and fighting—among themselves. In October, 1915, Wilson decided to recognize Carranza, and in this he was followed by the Latin American and European nations. Francisco Villa, another popular leader, was displeased. He engaged in reprisals against Americans in Mexico and then, in March, 1916, he crossed the American border and raided the town of Columbus, New Mexico. An American punitive expedition was immediately dispatched into Mexico, headed by Brigadier General John J. Pershing; and in June, 1916, Wilson called upon all the state

INTRODUCTION militias of the nation to mass on the border. Pershing stayed in Mexico nine months and came out in February, 1917, without however, having caught Villa. Our involvement in Mexican affairs did not terminate here. A new Mexican constitution was drawn up in the spring of 1917, which not only incorporated progressive social legislation; it secularized education, nationalized Church properties, and declared that the soil and subsoil of Mexico belonged to the Mexican

people. The Catholic Church was alarmed, as were British and American interests, which had obtained their concessions for a song from the corrupt Diaz government. Both these groups brought pressure to bear on Wilson and, in fact, there was a party in his Cabinet that urged our intervention again. But Wilson was now deeply immersed in European problems; indeed, when the radical Mexican constitution was promulgated we were already at war.

7. WORLD WAR I Neutrality. World W a r I had broken out in August, 1914 and, despite America's sincere efforts to remain neutral, it became at once apparent that die United States could not keep clear of the struggle. The concept of "neutrality" had been devised for a simpler day: for it was based on the assumption that a nonbelligerent could continue trading with both parties in a war—as long as the rules were observed—without real risk to itself. Wilson called upon Americans to remain "impartial in thought as well as in action"; but we could supply and finance both sides—as far as we were willing and able. For this the President was universally applauded; but it was soon clear that American isolation could not be safeguarded. On the one hand, American neutrality was being sorely tried by the British, whose rewriting in their own interest of maritime law gravely abridged American freedom of the seas; and on the other hand, the declaration by Germany of unrestricted submarine warfare jeopardized American lives and shipping. From the legal point of view, both Britain and Germany were violating America's neutral rights; morally, however, it was becoming Wilson's conviction increasingly that Germany was the threat to the peace of the whole world. It should be observed in passing that Secretary of State Bryan did not see eye to eye

with his chief; and he protested vigorously against the violation of America's neutral rights by the British navy. Bryan, however, received neither the support of Woodrow Wilson nor that of the American ambassador at London, Walter Hines Page. The result was, not only did the British set up an illegal blockade, but they also vastly extended the contraband lists until virtually there was no longer a distinction between goods destined for the aid of the armed forces and those for the civilian populations. Further, Britain extended the right of search, and brought American ships into British ports in order to examine their cargoes and frequently to detain them for many months on end. It was felt by many Americans that Britain was as much interested in preventing American goods from entering legitimate European markets as it was in starving the German civilian population and crippling the German military machine. In any case, American protests against the British practices went unheeded, so that in effect, by 1916, we were actually adopting a policy of benevolent neutrality toward the British blockade. The Lusitania. Ironically enough, the Germans, when they launched their submarine attacks, claimed that the illegal British blockade forced them to resort to desperate measures. For, in February, 1915, the Germans declared that all the waters surrounding Great

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Britain and Ireland constituted a war zone and that all vessels entering the area would do so at their own risk. This was the opening of Germany's campaign of unrestricted submarine warfare.

In March an American lost his life as a result of submarine action when a British ship was sunk; on May i, an American ship was attacked and two Americans were killed. And then on May 7 the Lusitonia, the British Cunard line's crack ship in the North Atlantic passenger trade, was struck by two torpedoes and sank in eighteen minutes. More than 1,100 passengers and crew went down with the ship, among them 124 American citizens. Immediately, Woodrow Wilson issued a solemn warning to the Germans: the American government refused to accept the utilization of the submarine as a lawful device of warfare; we would hold the German government to "strict accountability." The failure of the Germans to give assurance that submarine attacks would terminate led to a second note in June. This Bryan refused to sign and he resigned from the State Department. The third note of July 1 1 was actually an ultimatum. In September, the Germans gave way before the American pressure and promised the abandonment of unrestricted submarine warfare against passenger ships. But in March, 1916, the sinking of the French steamer Sussex, with a loss of three American lives, led to a demand that submarine warfare be entirely terminated. If the Germans refused, Wilson went on to say, diplomatic relations between the two governments would terminate. In May, 1916, the Germans capitulated and the threat of war was laid at rest for another nine months. The Election of 1916. It was in the midst of war alarms that the election of 1916 took place. The conservatives were once more in control of the Republican party and. when its convention met at Chicago in June, thev nominated Supreme Court Justice Charles E. Hughes of New York for President and Fair-

FREEDOM

banks of Indiana for Vice President. The Progressives also assembled at Chicago and again they named Theodore Roosevelt for their candidate; as had the Republicans, the Progressives attacked Wilson's foreign policy. But Roosevelt knew he had run his brief race, and he declined the Progressive nomination. He called upon "all progressive-minded and patriotic-minded men" to support Hughes; and in doing so, he killed the movement that had sought to reform the Republican party. The Democrats renamed Wilson and Marshall; and, naturally, they pointed with pride to their impressive achievements during the previous four years. The canvass itself was conducted with much heat and little light. Both parties insisted that the United States be kept out of the war; but the Republicans made more mistakes than the Democrats. The Republicans cultivated pro-German groups; and Hughes, when he went to California, refused to meet Hiram Johnson. This last was fatal to his cause, for he lost California by a handful of votes—and the election, as a result. Wilson received 9,130,000 votes; Hughes got 8,540,000; Allen L. Benson (the Socialist candidate) got only 585,000. In the electoral college the vote was 277 to 254. The Democrats again captured both Houses. American Entry into World War I. Wilson's followers had used tellingly the slogan "He kept us out of the War," and this undoubtedly had had a great effect in the Middle West. Yet every conceivable influence was being utilized, willfully or not, to drag us into the conflict. The land was filled with the propaganda of British and French agents. The British controlled the Atlantic cables so that only the news favorable to their cause reached the American reading public; this was particularly true of the tales of German "atrocities" in Belgium. On the other hand, the Germans here handled themselves without skill. They identified themselves with the wrong people; were caught red-handed in

INTRODUCTION

90g

plots to destroy American munition plants; ing to establish its political hegemony over and suffered the ignominy of having their mili- the whole world; if Britain failed, the United tary and naval attachés recalled from Wash- States would inevitably be the next victim òf the German might. (That this analysis was ington. Nor must our growing industrial and finan- not wide of the mark was indicated by the cial ties to the Allied powers be disregarded. publication of the so-called Zimmermann When war broke out not only did the New note. This secret dispatch was sent to the York Stock Exchange close, but a business Mexicans by the German foreign office and recession hit the country. Prosperity slowly offered Mexico an alliance on the basis of the returned only because of the following: restoration of the "lost territory" of Texas, ( 1 ) Americans began to supply Allied needs N e w Mexico, and Arizona.) Those hostile to for munitions, raw materials, and foodstuffs Germany, therefore, pressed for the passage in growing quantities. (2) American foreign of preparedness measures; and Wilson, who trade was also growing in other regions, was beginning to read the future in a somelargely at the expense of the English. (3) Eu* what similar fashion, fell in with these plans. ropean loans were being raised in this coun- In August, 1916, he signed an army appropritry; and this in turn led to an expansion of ation act which called for the setting Up of a Council of National Defense; and another act bank credit and of industrial enterprise. authorizing the expenditure of a half billion In the beginning, the English and the dollars for an augmented navy. French sought to finance their war purchases in the United States by shipping gold and. T w o factors forced the United States into repatriating European-owned American se- the war, the first psychological and the seccurities. But the bottoms of these barrels were ond military. First, it was hard to claim that scraped clean very soon; Americans had to World War I was a war for democracy as assist financially if their wartime prosperity long as in the company of the allied powers Was to continue. The result was the flotation was to be found the absolutist and despotic of the first great Anglo-French loan for 500 Imperial Russian Government. But in March, million dollars in October, 1915. In 1916, four 1917, the Czarist regime Was overthrown artd additional loans brought in another half bil- the so-called Kerensky government establion. In addition, the Allies continued to lished a ministry representing a coalition of finance their purchases through short-term all the democratic forces in Russia. American treasury bills. By the end of 1916, the Federal liberals could now support the Allied cause Reserve Board took alarm. T o o much, it without reservations. pointed out, of the liquid funds of American Second, somewhat earlier in January, 1917, banks Were being tied up in the treasury bills Germany, more and more constricted by thé of the Allied governments; member banks British blockade, decided to resume unreWere warned against the continuance of such stricted submarine warfare. The Germans practices. On the other hand, it is important knew that this meant war with the United to observe that because of the blockade, the States; but they hoped that, with the withGermans could make few purchases in this drawal of the pressure of the Russians on the country; and not more than 20 million dol- eastern front, they could succeed in striking lars in German securities were disposed of a quick knockout blow on land and undersea here. before America was ready. President Wilson, Meanwhile, throughout the country, more on February 3, took the inevitable Step: he and more voices were being raised in behalf announced to Congress that diplomatic relaof American intervention. Germany was seek- tions between the United States and Germany

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had been ended. A n d when it was discovered —as has been said—that German intrigue in Mexico was seeking to cause turmoil in the Western Hemisphere, events moved toward the inevitable decision. In March, three American ships, homeward bound, w e r e sunk without warning. On March 2 i , Wilson called Congress to meet in special session on April 2. On the evening of that day, Wilson asked Congress to declare war. It was

8. WINNING

FREEDOM not simply that the German government had violated its pledges; our entry had broader grounds. W e w e r e fighting f o r "the ultimate peace of the w o r l d and f o r the liberation of its peoples, the G e r m a n people included; f o r the right of nations great and small and the privilege of men e v e r y w h e r e to choose their w a y of life and of obedience. T h e w o r l d must be made safe f o r D e m o c r a c y . " Congress passed a w a r resolution on A p r i l 6.

THE WAR ¿ ND LOSING THE

PEACE

Mobilization at Home. The ability with General and the Postmaster General v i g o r which the United States was able to prepare ously—and frequently oppressively—engaged itself, psychologically and industrially, f o r in tracking d o w n and punishing dissent. the military effort astounded Americans and T h e speeches and messages of W o o d r o w the whole world. Before hostilities were over, Wilson were America's most important w e had inducted into the national service al- weapon in the campaign of psychological most three million men, which, with the 750,- warfare waged all over the earth. In his ad000 members of the regular army and the dress at Washington on J u n e 14, 1 9 1 7 , W i l s o n National Guard, made a potential fighting called the w a r a "People's W a r . " In his mesf o r c e of three and one half million soldiers. sage to Congress, on J a n u a r y 8, 1 9 1 8 , he outA total of five popular loans was floated lined in his famous Fourteen Points, the kind during the period June, 1917, to April, 1919, of peace America was striving f o r : it was to and these brought in upwards of 21 billions be based on open covenants, the removal of of dollars. From borrowings and taxes, the economic barriers between all nations, selfUnited States not only financed its own war determination, and the formation of a " g e n expenditures, but it also was able to lend its eral association of nations." A n d in his C o n allies more than 10 billions of dollars. A whole gressional message of February 1 1 , 1 9 1 8 , he group of wartime agencies was erected to pledged the United States to a program which mobilize America's industrial might, among was to include " n o annexations, no contribuwhich the following were the most important: tions, no punitive damages." the W a r Industries Board, the Railway AdA t only one point did American organiministration, the Emergency Fleet Corpora- zation f o r w a r fail, and this was in connection tion, the W a r Trade· Board, the Food Admin- with control over prices and the checking of istration, and the Fuel Administration. T h e inflation. T h e upshot was that the cost of railroads were taken over by the Federal living climbed steadily. F r o m 1 9 1 4 through government; America's foreign trade was 1918, wholesale prices increased 100 percent; centralized in the hands of a governmental f r o m 1918 into 1920, they went u p another authority; and some 50 million acres of new 20 percent. F r o m 1 9 1 4 through 1 9 1 8 , real lands were opened to the cultivation of food wages dropped more than 20 percent; but b y crops. A Committee on Public Information 1920 they had been almost restored to 1 9 1 4 sought to enlighten Americans and peoples levels. all over the world, as well, about the United T r a d e unions failed as f a r as w a g e increases States' idealistic motives; while the Attorney w e r e concerned; but organizational drives

INTRODUCTION met with greater successes. In 1914, the membership of the unions affiliated with the American Federation of Labor was 2,021,000; by 1918, this had increased to 2,726,000; and by 1920, to more than 5,000,000. There were many wartime strikes; but in 1918, due to the erection of machinery f o r conciliation and to wage increases on railroads and in stockyards and munition plants, the number of industrial disputes fell off sharply. T h e W a r Labor Conference Board, set up in 1918, adopted a program which was based upon the recognition of collective bargaining, the eight-hour day, and a living wage f o r workers everywhere. Military Operations. Despite the continuance of the submarine campaign, America was able to move large amounts of supplies and a great army of men overseas. In the nineteen months of American participation, more than two million men were sent to Europe; a half million were carried across in the first thirteen months and a million and a half in the last six months. General John J . Pershing was named Commander-in-Chief of the American Expeditionary Force and he appeared in Paris to begin the w o r k of preparing an American army f o r combat in June, 1917. T h e Allies sought to brigade American troops with the British, French, and Italian divisions; but Pershing was insistent that an independent American army under his own command be established. In August, 1918, Foch, the generalissimo of the Allied forces, yielded, and the First American A r m y was created. It took over a section of the Western Front and, before the war was over, American troops under their own officers were defending almost a fourth of the whole line. T h e final German offensive was begun in March, 1918, and continued through J u l y . In these battles, Americans took part, the most important one being at Château-Thierry. Here, the American stand prevented the G e r mans from crossing the Marne and continuing on to Paris. N o w the Allied armies took the offensive, and from J u l y 18 until the Armis-

911

tice on November 1 1 , they struck again and again at the weakening German host. In September, more than a half million Americans took part in the battle of the Meuse-Argonne. These attacks broke the back of the German resistance. T h e American navy also played its role in the war, although its feats were less spectacular. American warships harried the submarines and so well did they succeed that, b y 1918, f e w undersea boats were daring to leave German waters. T h e y also sowed mines, engaged in mine sweeping, reinforced the British blockade, and convoyed the great American transport fleet. Before the war was over, there were stationed in European waters at least 300 American warships. American casualties were as follows: battle deaths, 48,909; wounded, 237,135; missing in action and prisoners, 7,347. In addition 57,000 men died of disease. T h e Germans knew that the war had been lost by the midsummer of 1918; and in October, they began to send out peace feelers. Finally, on November 8, the Kaiser abdicated and on November 1 1 armistice terms were signed. T h e y were largely based upon W i l son's Fourteen Points. The Congressional Elections of 1918. In October, 1918, Wilson made an appeal to the American people f o r the election of a Democratic Congress. This was a curious step to take in view of the fact that the Republicans had supported every war measure wholeheartedly. It was an unfortunate one as well, f o r Wilson's request was spurned b y the American electorate. T h e Republicans captured both houses of Congress; and indeed, it was to be a Republican Foreign Relations Committee in the Senate that was to discuss the new treaty Wilson was to bring home. Wilson was responsible f o r another unfortunate blunder for, in his creation of the American Peace Commission which was to accompany him to Paris, he failed to include representatives either from the Senate or from the company of outstanding Republicans.

912

THE NEW

The Treaty and Its Defeat. The Peace Conference assembled at Versailles in January, 1919, and by May had prepared a voluminous document containing more than 400 articles and covering in exact detail all kinds of territorial, economic, industrial, and legal arrangements. On June 28, Germany signed, and the war was over. Most important, as far as Americans were concerned, was the incorporation in the treaty of a Covenant calling for the establishment of a League of Nations. Wilson had gone off to Paris his hopes high; and, despite the fact that the Conference was filled with bickering and many bad compromises were effected, he had failed to lose heart. If there were injustices written into the treaty, the League of Nations would see to it in time that an enduring peace was established throughout the world. But Wilson had committed errors and these turned out to be tragic. He had refused to treat with the victorious Republicans, or in fact to take them into his councils; he had failed to reckon with the ingrained isolationism of large sections of the American people; and he had shown an incapacity to compromise with the Senate in order to salvage what he could. T h e result was he lost control; and a small and vindictive company of Senators had their w a y and spurned the treaty. T h e United States did not join the League of Nations and our withdrawal into isolationism, political and economic, for the next ten years had as much to do with the depression and the rearming of the world in the thirties as any other single factor. Our unhappy fate during the twenties was that we hung suspended between two worlds: our economy and our influence in world affairs prevented the adoption of a purely nationalist policy; and, on the other hand, we were unwilling to pursue a course based on full international collaboration. T h e League Covenant, in addition to setting up an assembly, a council, a permanent secretariat, and a world court, included a

FREEDOM number of provisions for the maintenance of peace. In particular, Article X bound the signatories to protect the territorial integrity and political independence of all members of the League; and Article X V I pledged its members to impose economic penalties, or sanctions, upon those nations which waged war in disregard of their promises to submit their disputes for arbitration or judicial settlement. The council, in such cases, might recommend to members of the League the adoption of military measures against the aggressor nations. President Wilson ran into difficulties virtually from the beginning. The treaty, including the League Covenant, was placed before the Senate in July; and there followed a long and sometimes confused debate in which Congress, the press, and the public generally participated. The opposition to the treaty and the League was led by Senator Lodge of Massachusetts, who took his stand on the necessity of including in any settlement certain specific reservations: ( 1 ) T h e United States could not accept the obligations placed upon the members of the League under Article X. (2) The United States should reserve specifically the right of withdrawal from the League. (3) The United States should reserve specifically the power to decide what questions came within its domestic jurisdiction, and therefore lay outside of the competence of the League. (4) The United States ought to decline to submit for inquiry and arbitration any questions affecting the Monroe Doctrine. These were the stated reasons f o r the rejection of Wilson's handiwork; beneath the surface, however, ran powerful and bitter currents of partisanship and personal animosities. There can be no doubt that such considerations were at the basis of Lodge's illnatured attacks on Wilson. The discussion ebbed and flowed, with both sides refusing to find means of accommodation. Finally in September, Wilson decided to take the issue directly to the people and started out on a speaking tour of the

INTRODUCTION Middle West and Far West; but he collapsed at Pueblo, Colorado, and suffered a paralytic stroke. He was never again a well man. Meanwhile in September, Lodge as chairman of the Senate Committee on Foreign Relations, had reported out the treaty with a large number of amendments to it and the four reservations enumerated above to the League Covenant. The Senate rejected the amendments; and then it proceeded to draw up fourteen reservations, once again under Lodge's leadership. Here Wilson erred again, for he ordered the administration supporters to insist upon all or nothing, the treaty without the Lodge reservations—or defeat. Defeat it was. On N o vember 19, two votes were taken: one on the treaty with reservations, which was lost; and the second, on the treaty without the reservations, which was also lost. The special session was then terminated. Once more Wilson tried and this was the last time. In March, 1920, after five weeks

9'3

of debate, the Senate again voted. For the treaty with reservations the vote was 49; against the treaty, 35. Because the necessary two thirds was lacking, the resolution was defeated. The United States did not sign the treaty; was out of the League; and had washed its hands of all those special and general perplexities that were to trouble Europe in the following ten years. It is hard to assess culpability. Was it Wilson's fault? Was it Lodge's fault? Or was it the indifference of the American people who were failing to realize that America no longer could live alone? In July, 1921, with President Harding now in the White House, a joint resolution was passed by both houses of Congress which declared simply that the war with Germany was over. And thus ended the N e w Freedom. And so also failed that crusade to make the world safe for democracy for which Woodrow Wilson had taken the United States into World W a r I.

THORSTEIN THORSTEIN

VEBLEV

(1857-1929)

was

born

into a N o r w e g i a n immigrant's household, reared on the Minnesota frontier, and educated at a denominational college whose creed he did not share. Philosophy was his first interest as a student; but, after receiving his doctorate in 1884, he left that field for the study of economics as he became convinced that the mass habits of thought and behavior, which constitute "cultures," are shaped by men's methods of earning a living. It was the economist's province to explain the culture in which he functioned, Vehlen argued, but academic economics had failed to do so because economists asked the wrong questions. T h e y justified instead of inquiring. T h e y sought the " w h a t " rather than the " h o w c o m e " of institutions; and they based their reasoning on an antiquated view of human nature. All this led them to accept as " g i v e n " the very institutions that required explanation. T h e marginal utility economists, for example, completely ignored the institutional framework within which individual man had his being and made his choices. Thus, John Bates Clark, the American leader of the school, was obviously engaging in the impossible when he sought to explain the theoretical dynamics of a society f r o m which he had carefully abstracted all the elements necessary to its dynamic character. Similarly, economists studying a money economy disregarded money itself and denied that it was the end of any entrepreneur's desire, though' they had the facts of the market place to prove them in error. If economists and their supporters in sociology proceeded on incorrect premises concerning the nature of current activities, there

VEBLEN was no reason to regard them as more accurate concerning the pattern of social evolution in the past. Veblen undertook to sketch his o w n view of that evolution, starting with the assumption that man is endowed with instincts, the result of primitive "tropismatic drives," which use intelligence as a means of achieving their ends. In time, instincts give rise to institutions which are habits of thought and action widely current in a social group. Such institutions then proceed to shape the individual almost as effectively as the fundamental instincts which they express. For the economic process, "the parental bent," "the instinct of workmanship" and "idle curiosity" are the serviceable tendencies, while the "predatory drives" and a contaminating "metaphysics" hamper output and make f o r the pursuit of self-interest rather than concern f o r the welfare of the group. Western European man, Veblen argues, has moved from the simplicities of a Neolithic savagery dominated by "the parental bent" and "the instinct of workmanship" through the predatory barbarian stage (which established "invidious distinctions" derived from the possession of private property based on fraud and violence), into the handicraft econo m y (where the "instinct f o r workmanship" expressed itself in the concepts of natural rights and natural law), and thence into the modern world. T h e modern world is the result of the technological and economic devices that made up the Industrial Revolution as influenced by the strong residue of barbarian culture in the upper or "leisure" class. Modern production is controlled b y those w h o own, not those w h o make, and their aim is gain, not productivity. From this f a c t stems the essential conflict between the interest of

THE AMERICAN the community, which wants goods, and the businessman, who wants profit. Within the economic process, the conflict lies between technologist and financier, between "industrial and pecuniary employments."

In the Theory

of

Business

Enterprise

(1904), Veblen expounds the manner in which business has taken over the industrial process and transmuted the production of goods into the dealing in those symbols which are the evidences of corporate ownership. Property itself has become utterly attenuated, but the more intangible it becomes the more real is its control over every aspect of modern life. In

MIND

the vein of the great comic writers, Vebleti thus continued to probe and analyze; but because he used an involved vocabulary and made irony his main tool, f e w among his generation felt his stings. America was still so certain of itself and so confident of its destiny that Veblen's warning that even the cherished institutions of our middle-class culture were not permanent could be disregarded. But a later generation of Americans was to rediscover Veblen and read him closely. T h e selection here reprinted appeared orig-

inally in the Journal of Political

THORSTEIN

THE LIMITATIONS of the marginal-utility economics are sharp and characteristic. It is from first to last a doctrine of value, and in point of form and method it is a theory of valuation. T h e whole system, therefore, lies within the theoretical field of distribution, and it has but a secondary bearing on any other economic phenomena than those of distribution—the term being taken in its accepted sense of pecuniary distribution, or distribution in point of ownership. N o w and again an attempt is made to extend the use of the principle of marginal utility beyond this range, so as to apply it to questions of production, but hitherto without sensible effect, and necessarily so. . . . In all this the marginal-utility school is substantially at one with the classical economics of the nineteenth century, the difference between the two being that the former is confined within narrower limits and sticks more consistently to its teleological premises. Both are teleological, and neither can consistently admit arguments from cause to effect in the formulation of their main articles of theory. Neither can deal theoretically with phenomena of change, but at the most only with rational adjustment to change which may be supposed to have supervened. T o the modern scientist the phenomena of growth and change are the most obtrusive and most consequential facts observable in economic life. For an understanding of modern economic life the technological advance of the past two centuries—e.g., the growth of the industrial arts —is of the first importance; but marginal-utility theory does not bear on this matter, nor does this

Economy,

V o l . X V I I (Chicago, 1909).

The Limitations of Marginal BY

915

Utility

VEBLEN

matter bear on marginal-utility theory. As a means of theoretically accounting f o r this technological movement in the past or in the present, or even as a means of formally, technically stating it as an element in the current economic situation, that doctrine and all its works are altogether idle. T h e like is true f o r the sequence of change that is going forward in the pecuniary relations of modern life; the hedonistic postulate and its propositions of differential utility neither have served nor can serve an inquiry into these phenomena of growth, although the whole body of marginalutility economics lies within the range of these pecuniary phenomena. . . . It is characteristic of the school that wherever an element of the cultural fabric, an institution or any institutional phenomenon, is involved in the facts with which the theory is occupied, such institutional facts are taken for granted, denied, or explained away. If it is a question of price, there is offered an explanation of how exchanges may take place with such effect as to leave money and price out of the account. If it is a question of credit, the effect of credit extension on business traffic is left on one side and there is an explanation of how the borrower and lender co-operate to smooth out their respective income streams of consumable goods or sensations of consumption. T h e failure of the school in this respect is consistent and comprehensive. . . . T h e infirmity of this theoretical scheme lies in its postulates, which confine the inquiry to generalizations of the teleological or "deductive" order. These postulates, together with the point of view

THE NEW FREEDOM and logical method that follow from them, the marginal-utility school shares with other economists of the classical line—for this school is but a branch or derivative of the English classical economists of the nineteenth century. The substantial difference between this school and the generality of classical economists lies mainly in the fact that in the marginal-utility economics the common postulates are more consistently adhered to at the same time that they are more neatly defined and their limitations are more adequately realized. Both the classical school in general and its specialized variant, the marginal-utility school, in particular, take as their common point of departure the traditional psychology of the early nineteenthcenturv hedonists, which is accepted as a matter of course or of common notoriety and is held quite uncritically. T h e central and well-defined tenet so held is that of the hedonistic calculus. Under the guidance of this tenet and of the other psychological conceptions associated and consonant with it, human conduct is conceived of and interpreted as a rational response to the exigencies of the situation in which mankind is placed; as regards economic conduct it is such a rational and unprejudiced response to the stimulus of anticipated pleasure and pain—being, typically and in the main, a response to the promptings of anticipated pleasure, for the hedonists of the nineteenth century and of the marginal-utility school are in the main of an optimistic temper.1 Mankind is, on the whole and normally, (conceived to be) clearsighted and far-sighted in its appreciation of future sensuous gains and losses, although there may be some (inconsiderable) difference between men in this respect. Men's activities differ, therefore, (inconsiderably) in respect of the alertness of the response and the nicety of adjustment of irksome pain-cost to apprehended future sensuous gain; but, on the whole, no other ground or line or guidance of conduct than this rationalistic calculus falls properly within the cognizance of the economic hedonists. Such a theory can take account 1 T h e conduct of mankind differs from that of the brutes in being determined by anticipated sensations of pleasure and pain, instead of actual sensations. Hereby, in so far, human c o n d u c t is taken out of the sequence o f cause and effect and falls instead under the rule of sufficient reason. B y virtue o f this rational faculty in man the connexion between stimulus and response is teleological instead of causal. T h e reason for assigning the first and decisive place to pleasure, rather than to pain, in the determination of human conduct, appears to be the (tacit) acceptance of that optimistic doctrine of a beneficent order of nature which the nineteenth century inherited from the eighteenth.

of conduct only in so far as it is rational conduct, guided by deliberate and exhaustively intelligent choice—wise adaptation to the demands of the main chance. The external circumstances which condition conduct are variable, of course, and so they will have a varying effect upon conduct; but their variation is, in effect, construed to be of such a character only as to vary the degree of strain to which the human agent is subject by contact with these external circumstances. The cultural elements involved in the theoretical scheme, elements that are of the nature of institutions, human relations governed by use and wont in whatever kind and connexion, are not subject to inquiry but are taken for granted as pre-existing in a finished, typical form and as making up a normal and definitive economic situation, under which and in terms of which human intercourse is necessarily carried on. This cultural situation comprises a few large and simple articles of institutional furniture, together with their logical implications or corollaries; but it includes nothing of the consequences or effects caused by these institutional elements. The cultural elements so tacitly postulated as immutable conditions precedent to economic life are ownership and free contract, together with such other features of the scheme of natural rights as are implied in the exercise of these. These cultural products are, for the purpose of the theory, conceived to be given a priori in unmitigated! force. They are part of the nature of things. . . . Now, it happens that the relation of sufficient reason enters very substantially into human conduct. It is this element of discriminating forethought that distinguishes human conduct from brute behaviour. And since the economist's subject of inquiry is this human conduct, that relation necessarily comes in for a large share of his attention in any theoretical formulation of economic phenomena, whether hedonistic or otherwise. But while modern science at large has made the causal relation the sole ultimate ground of theoretical formulation; and while the other sciences that deal with human life admit the relation of sufficient reason as a proximate, supplementary, or intermediate ground, subsidiary, and subservient to the argument from cause to effect; economics has had the misfortune—as seen from the scientific point of view—to let the former supplant the latter. . . . It deals with this conduct only in so far as it may be construed in rationalistic, teleological terms of calculation and choice. But it is at the same time no less true that human conduct, economic or otherwise, is subject to the sequence of cause and effect, by force of such elements as habituation

THE AMERICAN MIND and conventional requirements. But facts of thit order, which are to modern science of graver interest than the teleological details of conduct, necessarily fall outside the attention of the hedonistic economist, because they cannot be construed in terms of sufficient reason, such as his postulates demand, or be fitted into a scheme of teleological doctrines. . . . In so far as modern science inquires into the henomena of life, whether inanimate, brute, or uman, it is occupied about questions of genesis and cumulative change, and it converges upon a theoretical formulation in the shape of a lifehistory drawn In causal terms. In so far as it is a science in the current sense of the term, any science, such as economics, which has to do with human conduct, becomes a genetic inquiry into the human scheme of life; and where, as in economics, the subject of inquiry is the conduct of man in his dealings with the material means of life, the science is necessarily an inquiry into the life-history of material civilization, on a more or less extended or restricted plan. N o t that the economist's inquiry isolates material civilization from all other phases and bearings of human culture, and so studies the motions of an abstractly conceived "economic man." On the contrary, no theoretical inquiry into this material civilization that shall be at all adequate to any scientific purpose can be carried out without taking this material civilization in its causal, that is to say, its genetic, relations to other phases and bearings of the cultural complex; without studying it as it is wrought upon by other lines of cultural growth and as working its effects in these other lines. But in so far as the inquiry is economic science, specifically, the attention will converge upon the scheme of material life and will take In other phases of civilization only in their correlation with the scheme of material civilization. Like all human culture, this material civilization is a scheme of institutions—institutional fabric and institutional growth. But institutions are an outgrowth of habit. The growth of culture is a cumulative sequence of habituation, and the ways and means of it are the habitual response of human nature to exigencies that vary incontinently, cumulatively, but with something of a consistent sequence in the cumulative variations that so go forward—incontinently, because each new move creates a new situation which induces a further new variation in the habitual manner of response; cumulatively, because each new situation is a variation of what has gone before it and embodies as causal factors all that has been effected by what went before; consistently, because the underlying

E

9»7

traits of human nature (propensities, aptitudes, and what not) by force of which the response takes place, and on the ground of which the habituation takes effect, remain substantially unchanged. Evidently an economic inquiry which occupies itself exclusively with the movements of this consistent, elemental human nature under given, stable institutional conditions—such as is the case with the current hedonistic economics—can reach statical results alone; since it makes abstraction from those elements that make for anything but a statical result. On the other hand an adequate theory of economic conduct, even for statical purposes, cannot be drawn in terms of the individual simply—as is the case in the marginal-utility economics—because it cannot be drawn in terms of the underlying traits of human nature simply; since the response that goes to make up human conduct takes place under institutional norms and only under stimuli that have an institutional bearing; for the situation that provokes and inhibits action in any given case is itself in great part of institutional, cultural derivation. Then, too, the phenomena of human life occur only as phenomena of the life of a group or community: only under stimuli due to contact with the group and only under the (habitual) control exercised by canons of conduct imposed by the group's scheme of life. Not only is the individual's conduct hedged about and directed by his habitual relations to his fellows in the group, but these relations, being of an institutional character, vary as the institutional scheme varies. The wants and desires, the end and aim, the ways and means, the amplitude and drift of the individual's conduct are functions of an institutional variable that is of a highly complex and wholly unstable character. The growth and mutations of the institutional fabric arc an outcome of the conduct of the individual members of the group, since it is out of the experience of the individuals, through the habituation of individuals, that institutions arise; and it is in this same experience that these institutions act to direct and define the aims and end of conduct. It is, of course, on individuals that the system of institutions imposes those conventional standards, ideals, and canons of conduct that make up the community's scheme of life. Scientific inquiry in this field, therefore, must deal with individual conduct and must formulate its theoretical results in terms of individual conduct. But such an inquiry can serve the purposes of a genetic theory only if and in so far as this individual conduct is attended to in those respects in which it counts toward habituation, and so toward change (or

çi8

THE NEW FREEDOM

stability) of the institutional fabric, on the one hand, and in those respects in which it is prompted and guided by the received institutional conceptions and ideals on the other hand. The postulates of marginal-utility, and the hedonistic preconceptions generally, fail at this point in that they confine the attention to such bearings of economic conduct as are conceived not to be conditioned by habitual standards and ideals and to have no effect in the way of habituation. They disregard or abstract from the causal sequence of propensity and habituation in economic life and exclude from theoretical inquiry all such interest in the facts of cultural growth, in order to attend to those features of the case that are conceived to be idle in this respect. All such facts of institutional force and growth are put on one side as not being germane to pure theory; they are to be taken account of, if at all, by afterthought, by a more or less vague and general allowance for inconsequential disturbances due to occasional human infirmity. Certain institutional phenomena, it is true, are comprised among the premises of the hedonists, as has been noted above; but they are included as postulates a priori. So the institution of ownership is taken into the inquiry not as a factor of growth or an element subject to change, but as one of the primordial and immutable facts of the order of nature, underlying the hedonistic calculus. Property, ownership, is presumed as the basis of hedonistic discrimination and it is conceived to be given in its finished (nineteenth-century) scope and force. There is no thought either of a conceivable growth of this definitive nineteenthcentury institution out of a cruder past or of any conceivable cumulative change in the scope and force of ownership in the present or future. Nor is it conceived that the presence of this institutional element in men's economic relations in any degree affects or disguises the hedonistic calculus, or that its pecuniary conceptions and standards in any degree standardize, colour, mitigate, or divert the hedonistic calculator from the direct and unhampered quest of the net sensuous gain. . . . The modern economic situation is a business situation, in that economic activity of all kinds is commonly controlled by business considerations. The exigencies of modern life are commonly pecuniary exigencies. That is to say, they are exigencies of the ownership of property. Productive efficiency and distributive gain are both rated in terms of price. Business considerations are considerations of price, and pecuniary exigencies of whatever kind in the modern communities are exigencies of price. The current economic situation is a price system. Economic institutions in the

modern civilized scheme of life are (prevailingly) institutions of the price system. The accountancy to which all phenomena of modern economic lite are amenable is an accountancy in terms of price; and by the current convention there is no other recognized scheme of accountancy, no other rating, either in law or in fact, to which the facts of modern life are held amenable. Indeed, so great and pervading a force has this habit (institution) of pecuniary accountancy become that it extends, often as a matter of course, to many facts which properly have no pecuniary bearing and no pecuniary magnitude, as, e.g., works of art, science, scholarship, and religion. More or less freely and fully, the price system dominates the current common-sense in its appreciation and rating of these non-pecuniary ramifications of modern culture; and this in spite of the fact that, on reflection, all men of normal intelligence will freely admit that these matters lie outside the scope of pecuniary valuation. Current popular taste and the popular sense of merit and demerit are notoriously affected in some degree by pecuniary considerations. It is a matter of common notoriety, not to be denied or explained away, that pecuniary ("commercial") tests and standards are habitually made use of outside of commercial interests proper. Precious stones, it is admitted, even by hedonistic economists, are more esteemed than they would be if they were more plentiful and cheaper. A wealthy person meets with more consideration and enjoys a larger measure of good repute than would fall to the share of the same person with the same habit of mind and body and the same record of good and evil deeds if he were poorer. It may well be that this current "commercialization" of taste and appreciation has been overstated by superficial and hasty critics of contemporary life, but it will not be denied that there is a modicum of truth in the allegation. Whatever substance it has, much or little, is due to carrying over into other fields of interest the habitual conceptions induced by dealing with and thinking of pecuniary matters. These "commercial" conceptions of merit and demerit are derived from business experience. The pecuniary tests and standards so applied outside of business transactions and relations are not reducible to sensuous terms of pleasure and pain. . . . It is the institution of property that gives rise to these habitual grounds of discrimination, and in modern times, when wealth is counted in terms of money, it is in terms of money value that these tests and standards of pecuniary excellence are applied. This much will be admitted. Pecuniary institutions induce pecuniary habits of thought

T H E AMERICAN MIND •which affect men's discrimination outside of pecuniary matters; but the hedonistic interpretation alleges that such pecuniary habits of thought do not affect men's discrimination in pecuniary matters. Although the institutional scheme of the price system visibly dominates the modern community's thinking in matters that lie outside the economic interest, the hedonistic economists insist, in effect, that this institutional scheme must be accounted of no effect within that range of activity to which it owes its genesis, growth, and persistence. T h e phenomena of business, which are peculiarly and uniformly phenomena of price, are in the scheme of the hedonistic theory reduced to non-pecuniary hedonistic terms and the theoretical formulation is carried out as if pecuniary conceptions had no force within the traffic in which such conceptions originate. It is admitted that preoccupation with commercial interests has "commercialized" the rest of modern life, but the "commercialization" of commerce is not admitted. Business transactions and computations in* pecuniary terms, such as loans, discounts, and capitalization, are without hesitation or abatement converted into terms of hedonistic utility, and conversely. . . . T h e point may perhaps be made clearer. Money and the habitual resort to its use are conceived to be simply the ways and means by which consumable goods are acquired, and therefore simply a convenient method by which to procure the pleasurable sensations of consumption; these latter being in hedonistic theory the sole and overt end of all economic endeavour. Money values have therefore no other significance than that of purchasing power over consumable goods, and money is simply an expedient of computation. Investment, credit extensions, loans of all kinds and degrees, with payment of interest and the rest, are likewise taken simply as intermediate steps between the pleasurable sensations of consumption and the efforts induced by the anticipation of these sensations, other bearings of the case being disregarded. T h e balance being kept in terms of the hedonistic consumption, no disturbance arises in this pecuniary traffic so long as the extreme terms of this extended hedonistic equation—pain-cost and pleasure-gain—are not altered, what lies between these extreme terms by being merely algebraic notation employed for convenience of accountancy. But such is not the run of the facts in modern business. Variations of capitalization, e.g., occur without its being practicable to refer them to visibly equivalent variations either in the state of the industrial arts or in the sensations of consumption. Credit extensions tend to inflation of credit, rising prices, over-stocking of markets, etc., likewise

919

without a visible or securely traceable correlation in the state of the industrial arts or in the pleasures of consumption; that is to say, without a visible basis in those material elements to which the hedonistic theory reduces all economic phenomena. Hence the run of the facts, in so far, must be thrown out of the theoretical formulation. T h e hedonistically presumed final purchase of consumable goods is habitually not contemplated in the pursuit of business enterprise. Business men habitually aspire to accumulate wealth in excess of the limits of practicable consumption, and the wealth so accumulated is not intended to be converted by a final transaction of purchase into consumable goods or sensations of consumption. Such commonplace facts as these, together with the endless web of business detail of a like pecuniary character, do not in hedonistic theory raise a question as to how these conventional aims, ideals, aspirations, and standards have come into force or how they affect the scheme of life in business or outside of it; they do not raise those questions because such questions cannot be answered in the terms which the hedonistic economists are content to use, or, indeed, which their premises permit them to use. T h e question which arises is how to explain the facts away: how theoretically to neutralize them so that they will not have to appear in the theory, which can then be drawn in direct and unambiguous terms of rational hedonistic calculation. T h e y are explained away as being aberrations due to oversight or lapse of memory on the part of business men, or to some failure of logic or insight. O r they are construed and interpreted into the rationalistic terms of the hedonistic calculus by resort to an ambiguous use of the hedonistic concepts. So that the whole "money economy," with all the machinery of credit and the rest, disappears in a tissue of metaphors to reappear theoretically expurgated, sterilized, and simplified into a "refined system of barter," culminating in a net aggregate maximum of pleasurable sensations of consumption. But since it is in just this unhedonistic, unrationalistic pecuniary traffic that the tissue of business life consists; since it is this peculiar conventionalism of aims and standards that differentiates the life of the modern business community from any conceivable earlier or cruder phase of economic life; since it is in this tissue of pecuniary intercourse and pecuniary concepts, ideals, expedients, and aspirations that the conjunctures of business life arise and run their course of felicity and devastation; since it is here that those institutional changes take place which distinguish one

T H E N E W FREEDOM

920

phase or era of the business community's life from any other) since the growth and change of these habitual, conventional elements make the growth and character of any business era or business community; any theory of business which sets these elements aside or explains them away misses the main facts which it has gone out to seek. Life and its conjunctures and institutions being of this comlexion, however much that state of the case may e deprecated, a theoretical account of the phenomena of this life must be drawn in these terms in which the phenomena occur. It is not simply that the hedonistic interpretation of modern eco-

E

JOHN THE

GREAT

FIGURES

in

modern

American

philosophy are Charles Saunders Peirce, William James, and John Dewey. Hence the peculiar interest of Dewey's exposition of James to a French audience, in an article on the development of American pragmatism first published in the Revue de la Métaphysique et de Morale of October, 1922. T h e essay itself not only explains James but also illustrates several of Dewey's characteristics. T o define pragmatism, he tells of its genesis· to describe it, he sketches its newer aspects in the instrumentalism he himself had developed; to defend it, Dewey denies that pragmatism is a glorification of mere energy and therefore reflects only America's concern with moneymaking. T h e future as well as the past can give meaning to life, Dewey notes; and if the exercise of the intellect is a genuine human delight, it should be accessible to more than its present handful of votaries. And this is Dewey's particular contribution: philosophy is not a mode of observation nor a mere "universe of discourse"; it is a guide to action. For intelligence is a means of dealing with reality and philosophy is intelligence rounded to completion. Much in John Dewey's background helps explain this concept. He was born in Vermont in 1859 and grew up in an environment that held few intellectual challenges. Evolution and the Positivists wakened Dewey's interest in the interaction between social conditions and the formulation of scientific and philosophic

nomic phenomena is inadequate or misleading; if the phenomena are subjected to the hedonistic interpretation in the theoretical analysis they disappear from the theory; and if they would bear the interpretation in fact they would disappear in fact. If, in fact, all the conventional relations and principles of pecuniary intercourse were subject to such a perpetual rationalized, calculating revision, so that each article of usage, appreciation, or procedure must approve itself de novo on hedonistic grounds of sensuous expediency to all concerned at every move, it is not conceivable that the institutional fabric would last over night.

DEWEY concepts, and the influence of William James altered the direction of Dewey's psychological approach to philosophy. Experience at the University of Michigan and in the experimental school at Chicago drew Dewey to greater concern with the learning process. Education should improve the mutual adjustment of organism and environment, but the teaching methods practiced at the turn of the century violated the laws of normal growth. In an effort to harmonize psychology and educational methods, Dewey began work at the "Laboratory School" in 1894 and it was a dispute over the administration of the school which finally separated him from the University of Chicago. That did not occur before his lectures to raise money for the school had produced Dewey's most influential book, The School and Society. In 1905, Dewey came to Columbia. N e w York gave a new turn to his thinking, by pointing up the conflict between democracy and monopoly. If intelligence was made up of more than invisible spectacles distorting the vision of actuality, it must contribute to fruitful action. Hence, Dewey's later work struck at the conventional approach to philosophy that set knowledge above action and formulation above practice. Dewey, on the contrary, insisted that man's beliefs about his world must be integrated with his beliefs about right conduct; ethical systems which were not rooted in the facts of science were irrelevant.

T H E AMERICAN Foremost among the beliefs requiring adjustment were those derived from isolating the cognitive experience and exalting it above the other experiences of man. That isolation stemmed from a prescientific social structure and a psychology which had formulated the absurdity of a discrete "individual" who was the passive recipient of a ready-made experience instead of himself a determining element in that experience. Exalting thought above

MIND

921

other modes of experience had made philosophy a variety of self-indulgence instead of a guide to life. As D e w e y sees it, the object of pragmatism is to restore intelligence to its proper function, lighting the road to action. T h e selection here reprinted is from Studies in the History of Ideas, V o l . II ( N e w Y o r k , 1925) and is published by permission öf the Columbia University Press.

The Development of American Pragmatism BY

JOHN

. . . THE ESSAY in which Peirce developed his theory bears the title: How to make our Ideas Clear. There is a remarkable similarity here to Kant's doctrine in the efforts which he made to interpret the universality of concepts in the domain of experience in the same Way in which Kant established the law of practical reason in the domain of the a priori. "The rational meaning of every proposition lies in the future. . . . But of the myriads of forms into which a proposition may be translated, what is that one which is to be called its very meaning? It is, according to the pragmatist, that form in which the proposition becomes applicable to human conduct, not in these or those special circumstances, nor when one entertains this or that special design, but that form which is most directly applicable to self-control under every situation, and to every purpose." So also, "the pragmatist does not make the summum bonum to consist in action, but makes it to consist in that process of evolution whereby the existent comes more and more to embody generals . . ."—in other words—the process whereby the existent becomes, with the aid of action, a body of rational tendencies or of habits generalized as much as possible. These statements of Peirce are quite conclusive with respect to two errors which are commonly committed in regard to the ideas of the founder of pragmatism. It is often said of pragmatism that it makes action the end of life. It is also said of pragmatism that it subordinates thought and rational activity to particular ends of interest and profit. It is true that the theory according to Peirce's conception implies essentially a certain relation to action, to human conduct. But the rôle of action is that of an intermediary. In order to be able to attribute a meaning to concepts, one must be able to apply them to existence.

DEWEY Now it is by means of action that this application is made possible. And the modification of existence which results from this application consitutes the true meaning of concepts. Pragmatism is, therefore, far from being that glorification of action for its own sake which is regarded as the peculiar characteristic of American life. . . . This theory was American in its origin in so far as it insisted on the necessity of human conduct and the fulfillment of some aim in order to clarify thought. But at the same time, it disapproves of those aspects of American life which make action an end in itself, and which Conceive ends too narrowly and too practically. In considering a system of philosophy in its relation to national factors it is necessary to keep in mind not only the aspects of life which are incorporated in the system, but also the aspects against which the system is a protest; There never Was a philosopher who has merited the name for the simple reason that he glorified the tendencies and characteristics of his social environment; just as it is also true that there never has been a philosopher who has not seized upon certain aspects of the life of his time and idealized them. The Work commenced by Peirce was continued by William James. In one sense James narrowed the application of Peirce's pragmatic method, but at the same time he extended it. The articles which Peirce wrote in 1878 commanded almost no attention from philosophical circles, which were then under the dominating influence of the neokantian idealism of Green, of Caird, and of the Oxford School, excepting those circles in which the Scottish philosophy of common sense maintained its supremacy. In 1898 James inaugurated the new pragmatic movement in an address entitled, "Philosophical Conceptions and Practical

9«

THE NEW FREEDOM

Results," later reprinted in the volume, "Collected Essays and Reviews." Even in this early study one can easily notice the presence of those two tendencies to restrict and at the same time to extend early pragmatism. . . . William James alluded to the development which he gave to Peirce's expression of the principle. In one sense one can say that he enlarged the bearing of the principle by the substitution of particular consequences for the general rule or method applicable to future experience. But in another sense this substitution limited the application of the principle since it destroyed the importance attached by Peirce to the greatest possible application of the rule, or the habit of conduct—its extension to universality. That is to say, William James was much more of a nominalist than Peirce. One can notice an extension of pragmatism in the above passage. James there alludes to the use of a method of determining the meaning of truth. Since truth is a term and has consequently a meaning, this extension is a legitimate application of pragmatic method. But it should be remarked that here this method serves only to make clcar the meaning of the term, and has nothing to do with the truth of a particular judgment. The principal reason which led James to give a new color to pragmatic method was that he was preoccupied with applying the method to determine the meaning of philosophical problems and questions and that moreover, he chose to submit to examination philosophical notions of a theological or religious nature. He wished to establish a criterion which would enable one to determine whether a given philosophical question has an authentic and vital meaning or whether, on the contrary, it was trivial and purely verbal; and in the former case, what interests were at stake, when one accepts and affirms one or the other of two theses in dispute. Peirce was above all a logician; whereas James was an educator and wished to force the general public to realize that certain problems, certain philosophical debates have a real importance for mankind, because the beliefs which they bring into play lead to very different modes of conduct. If this important distinction is not grasped, it is impossible to understand the majority of the ambiguities and errors which belong to the later period in the pragmatic movement. . . . William James accomplished a new advance in Pragmatism by his theory of the will to believe, or as he himself later called it, the right to believe. The discovery of the fundamental consequences of one or another belief has without fail a certain influence on that belief itself. If a man cherished

novelty, risk, opportunity and a variegated esthetic reality, he will certainly reject any belief in Monism, when he clearly perceives the import of this system. But if, from the very start, he is attracted by esthetic harmony, classic proportions, fixity even to the extent of absolute security and logical coherence, it is quite natural that he should put faith in Monism. Thus William James took into account those motives of instinctive sympathy which play a greater rôle in our choice of a philosophic system than formal reasonings; and he thought that we would be rendering a service to the cause of philosophical sincerity if we would openly recognize the motives which inspire us. He also maintained the thesis that the greater part of philosophic problems and especially those which touch on religious fields are of such a nature that they are not susceptible of decisive evidence one way or the other. Consequently he claimed the right of a man to choose his beliefs not only in the presence of proofs or conclusive facts, but also in the absence of all evidence of this nature, and above all when he is forced td choose between one meaning or another, or when by refusing to choose, his refusal is itself equivalent to a choice. The theory of the will to believe gives rise to misunderstandings and even to ridicule; and therefore it is necessary to understand clearly in what way James used it. W e are always obliged to act in any case; our actions and with them their consequences actually change according to the beliefs which we have chosen. Moreover it may be that, in order to discover the proofs which will ultimately be the intellectual justification of certain beliefs—the belief in freedom, for example, or the belief in God —it is necesary to begin to act in accordance with this belief. In his lectures on Pragmatism, and in his volume of essays bearing the title "The Meaning of Truth," which appeared in 1909, James extended the use of the pragmatic method to the problem of the nature of truth. So far we have considered the pragmatic method as an instrument in determining the meaning of words and the vital importance of philosophic beliefs. Now and then we have made allusion to the future consequences which are implied. James showed, among other things, that in certain philosophic conceptions, the affirmation of certain beliefs could be justified by means of the nature of their consequences, or by the differences which these beliefs make in existence. But then why not push the argument to the point of maintaining that the meaning of truth in general is determined by its consequences? W e must not forget here that James was an empiricist before he was a pragmatist, and repeatedly stated

THE AMERICAN MIND

923

that pragmatism is merely empiricism pushed to its legitimate conclusions. From a general point of view, the pragmatic attitude consists in "looking away from first things, principles, 'categories,' supposed necessities; and of looking towards last things, fruits, consequences, facts." It is only one step further to apply the pragmatic method to the problem of truth. . . . W h a t direction therefore, must an empirical philosopher take who wishes to arrive at a definition of truth by means of an empirical method? He must, if he wants to apply this method, and without bringing in for the present the pragmatic formula, first find particular cases from which he then generalizes. It is therefore in submitting conceptions to the control of experience, in the process of verifying them, that one finds examples of what is called truth. T h e r e fore the philosopher who applies this empirical method, without the least prejudice in favor of pragmatic doctrine, can be brought to conclude that truth "means" verification, or if one prefers, that verification either actual or possible, is the definition of truth. . . . Pragmatism, thus, presents itself as an extension of historical empiricism with this fundamental difference, that it does not insist upon antecedent phenomena but upon consequent phenomena; not upon the precedents but upon the possibilities of action, and this change in point of view is almost revolutionary in its consequences. An empiricism which is content with repeating facts already past has no place for possibility and for liberty. It cannot find room for general conceptions or ideas, at least no more than to consider them as summaries or records. But when we take the point of view of pragmatism we see that general ideas have a very different rôle to play than that of reporting and registering past experiences. T h e y are the bases for organizing future observations and experiences. Whereas, for empiricism, in a world already constructed and determined, reason or general thought has no other meaning than that of summing up particular cases, in a world where the future is not a mere word, where theories, general notions, rational ideas have consequences for action, reason necessarily has a constructive function. Nevertheless the conceptions of reasoning have only a secondary interest in comparison with the reality of facts, since they must be confronted with concrete observations. 1 Pragmatism thus has a metaphysical implication.

T h e doctrine of the value of consequences leads us to take the future into consideration. And this taking into consideration of the future takes us to the conception of a universe whose evolution is not finished, of a universe which is still, in James' term, "in the making," "in the process of becoming," of a universe up to a certain point still plastic. Consequently reason, or thought, in its more general sense, has a real, though limited function, a creative, constructive function. If we form general ideas and if we put them in action, consequences are produced which could not be produced otherwise. Under these conditions the world will be different from what it would have been if thought had not intervened. This consideration confirms the human and moral importance of thought and of its reflective operation in experience. It is therefore not true to say that James treated reason, thought and knowledge with contempt, or that he regarded them as mere means of gaining personal or even social profits. For him reason has a creative function, limited because specific, which helps to make the world other than it would have been without it. It makes the world really more reasonable; it gives to it an intrinsic value. One will understand the philosophy of James better if one considers it in its totality as a revision of English empiricism, a revision which replaces the value of past experience, of what is already given, by the future, by that which is mere possibility. These considerations naturally bring us to the movement called instrumentalism. T h e survey which we have just made of James' philosophy shows that he regarded conceptions and theories purely as instruments which can serve to constitute future facts in a specific manner. But James devoted himself primarily to the moral aspects of this theory, to the support which it gave to "meliorism" and moral idealism, and to the consequences which followed from it concerning the sentimental value and the bearing of various philosophical systems, particularly to its destructive implications for monistic rationalism and for absolutism in all its forms. H e never attempted to develop a complete theory of the forms or "structures" and of the logical operations which are founded on this conception. Instrumentalism is an attempt to constitute a precise logical theory of concepts, of judgments and inferences in their

1 William James said in a happy metaphor, that they must be "cashed in," by producing specific consequences. This expression means that they must be able to become concrete facts. But for those who are not familiar with American idioms, James' formula was

taken to mean that the consequences themselves of our rational conceptions must be narrowly limited by their pecuniary value. Thus Mr. Bertrand Russell wrote just recently that pragmatism is merely a manifestation of American commercialism.

9*4

THE NEW FREEDOM

various forms, by considering primarily how thought functions in the experimental determinations of future consequences. T h a t is to say, that it attempts to establish universally recognized distinctions and rules of logic b y deriving them from the reconstructive or mediative function ascribed to reason. It aims to constitute a theory of the general forms of conception and reasoning, and not of this or that particular judgment or concept related to its own content, or to its particular implications. . . . T h e psychological tendencies which have exerted an influence on instrumentalism are of a biological rather than a physiological nature. T h e y are closely related to the important movement whose promoter in psychology has been Doctor J o h n Watson and to which he has given the name of Behaviourism. Briefly, the point of departure of this theory is the conception of the brain as an organ f o r the co-ordination of sense stimuli (to which one should add modifications caused b y habit, unconscious memory, or what are called today "conditioned reflexes") f o r the purpose of effecting appropriate motor responses. On the basis of the theory of organic evolution it is maintained that the analysis of intelligence and of its operations should be compatible with the order of known biological facts, concerning the intermediate position occupied by the central nervous system in making possible responses to the environment adequate to the needs of the living organism. It is particularly interesting to note that in the "Studies in Logical T h e o r y " (1903), which was their first declaration, the instrumentalists recognized how much they owed to William James for having forged the instruments which they used, while at the same time, in the course of the studies, the authors constantly declared their belief in a close union of the "normative" principles of logic and the real processes of thought, in so far as these are determined b y an objective or biological psychology and not by an introspective psychology of states of consciousness. But it is curious to note that the "instruments" to which allusion is made, are not the considerations which were of the greatest service to James. T h e y precede his pragmatism and it is in one of the aspects of his "Principles of P s y c h o l o g y " that one must look for them. T h i s important w o r k (1890) really developed two distinct theses. T h e one is a re-interpretation of introspective psychology, in which James denies that sensations, images and ideas are discrete and in which he replaces them by a continuous stream which he calls "the stream of consciousness." This conception necessitates a consideration of relations as an

immediate part of the field of consciousness, having the same status as qualities. . . . T h e other aspect of his "Principles of Psycholo g y " is of a biological nature. It shows itself in its full force in the criterion which James established f o r discovering the existence of mind. " T h e pursuance of future ends and the choice of means for their attainment are thus the mark and criterion of the presence of mentality in a phenomenon." T h e force of this criterion is plainly shown in the chapter on Attention, and its relation to Interest considered as the force which controls it, and its teleological function of selection and integration; in the chapter on Discrimination and Comparison (Analysis and Abstraction), where he discusses the way in which ends to be attained and the means f o r attaining them evoke and control intellectual analysis; and in the chapter on Conception, where he shows that a general idea is a mode of signifying particular things and not merely an abstraction f r o m particular cases or a superempirical function,—that it is a teleological instrument. James then develops this idea in the chapter on reasoning where he says that "the only meaning of essence is teleological, and that classification and conception are purely teleological weapons of mind." . . . Given the point of view which we have just specified, and the interest attaching to a logical theory of conception and judgment, there results a theory of the following description. T h e adaptations made by inferior organisms, f o r example their effective and co-ordinated responses to stimuli, become teleological in man and therefore give occasion to thought. Reflection is an indirect response to the environment, and the element of indirection can itself become great and very complicated. But it has its origin in biological adaptive behaviour and its ultimate function in its cognitive aspect is a prospective control of the conditions of its environment. T h e function of intelligence is therefore not that of copying the objects of the environment, but rather of taking account of the w a y in which more effective and more profitable relations with these objects may be established in the future. . . . Such a summary survey can hardlv pretend to be either convincing or suggestive. H o w e v e r , in noting the points of resemblance and difference between this phase of pragmatism and the logic of neo-hegelian idealism, we are bringing out a point of great importance. According to the latter logic, thought constitutes in the last analysis its own object and even the universe. It is possible to affirm the existence of a series of forms of judgment, because our first judgments, which are nearest to

THE AMERICAN MIND sense, succeed in constituting objects in only a partial and fragmentary fashion, even to the extent of involving in their nature an element of contradiction. T h e r e results a dialectic which permits each inferior and partial type of judgment to pass into a more complete form until we finally arrive at the total judgment where the thought which comprehends the entire object or the universe as an organic whole of interrelated mental distinctions. It is evident that this theory magnifies the rôle of thought beyond all proportion. It is an objective and rational idealism which is opposed to and distinct from the subjective and perceptual idealism of Berkeley's school. Instrumcntalism, however, assigns a positive function to thought, that of reconstituting the present stage of things instead of merely knowing them. As a consequence, there cannot be intrinsic degrees, or a hierarchy of forms of judgment. Each type has its own end, and its validity is entirely determined by its efficacy in the pursuit of its end. A limited perceptual judgment, adapted to the situation which has given it birth, is as true as is the most complete and significant philosophic or scientific judgment in its place. Logic, therefore, leads to a realistic metaphysics in so far as it accepts facts and events for what they are independently of thought, and to an idealistic metaphysics in so far as it contends that thought gives birth to distinctive acts which modify future facts and events in such a way as to render them more reasonable, that is to say, more adequate to the ends which we propose for ourselves. T h e ideal element is more accentuated by the inclusion progressively of social factors in human environment over and above natural factors; so that the needs which are fulfilled, the ends which are attained are no longer of a merely biological or particular character, but include also the ends and activities of other members of society. It is natural that continental thinkers should be interested in American philosophy as it reflects, in a certain sense, American life. Thus it is clear after this rapid survey of the history of pragmatism that American thought merely continues European thought. W e have imported our language, our laws, our institutions, our morals, and our religion from Europe, and we have adapted them to the new conditions of our life. T h e same is true of our ideas. For long years our philosophical thought was merely an echo of European thought. T h e pragmatic movement which we have traced in the present essay as well as neo-realism, behaviourism, the absolute idealism of Royce, the naturalistic idealism of Santayana, are all attempts at readaptation; but they are not creations de novo.

915

T h e y have their roots in British and European thought. Since these systems are re-adaptations they take into consideration the distinctive traits of the environment of American life. But as has already been said, they are not limited to reproducing what is worn and imperfect in this environment. T h e y do not aim to glorify the energy and the love of action which the new conditions of American life exaggerated. T h e y do not reflect the excessive mercantilism of American life. W i t h out doubt all these traits of the environment have not been without a certain influence on American philosophical thought; our philosophy would not be national or spontaneous if it were not subject to this influence. But the fundamental idea which the movements of which we have just spoken, have attempted to express, is the ideal that action and opportunity justify themselves only to the degree in which they render life more reasonable and increase its value. Instrumentalism maintains in opposition to many contrary tendencies in the American environment, that action should be intelligent and reflective, and that thought should occupy a central position in life. T h a t is the reason for our insistence on the teleological phase of thought and knowledge. If it must be teleological in particular and not merely true in the abstract, that is probably due to the practical element which is found in all the phases of American life. H o w ever that may be, what we insist upon above all else is that intelligence be regarded as the only source and sole guarantee of a desirable and happy future. It is beyond doubt that the progressive and unstable character of American life and civilization has facilitated the birth of a philosophy which regards the world as being in continuous formation, where there is still place for indeterminism, for the new and for a real future. But this idea is not exclusively American, although the conditions of American life have aided this idea in becoming self-conscious. It is also true that Americans tend to underestimate the value of tradition and of rationality considered as an achievement of the past. But the world has also given proof of irrationality in the past and this irrationality is incorporated in our beliefs and our institutions. T h e r e are bad traditions as there are good ones: it is always important to distinguish. Our neglect of the traditions of the past, with whatever this negligence implies in the way of spiritual impoverishment of our life, has its compensation in the idea that the world is re-commencing and being re-made under our eyes. T h e future as well as the past can be a source of interest and consolation and give meaning to the present. Pragmatism and instrumental experimentalism bring into promi-

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nence the importance of the individual. It is he who is the carrier of creative thought, the author of action, and of its application. Subjectivism is an old story in philosophy; a story which began in Europe and not in America. But American philosophy, in the systems which we have expounded, has given to the subject, to the individual mind, a practical rather than an epistemologica! function. T h e individual mind Is important because only the individual mind is the organ of modifications in traditions and institutions, the vehicle of experimental creation. One-sided and egoistic individualism in American life has left its imprint in

our thought. For better or for worse, depending on the point of view, it has transformed the esthetic and fixed individualism of the old European culture into an active individualism. But the idea of a society of individuals is not foreign to American thought; it penetrates even our current individualism which is unreflective and brutal. And the individual which American thought idealises is not an individual per se, an individual fixed in isolation and set up for himself, but an individual who evolves and develops in a natural and human environment, an individual who can be educated. . . .

T H E AMERICAN SCENE THE

MUCKRAKERS

of investigation and exposure, which had its first great popularity in the work of H e n r y Demarest L l o y d , became almost a commonplace of journalism in the years before the first W o r l d W a r . These factual presentations (although many w e r e luridly told) of some of the more unpleasant features of the American scene were read widely with the result that the age was not only that of the muckraker but also of the successful reformer.

T H E TECHNIQUE

Of the newspapermen w h o set about putting the portrait of their time into print, f e w were abler than Lincoln Steffens ( 1 8 6 6 - 1 9 3 6 ) , who came to N e w Y o r k after his California education had been supplemented by a period in Europe. Steffens became a notable reporter as well as a fortunate operator in the stockmarket, and then turned f r o m the dailies to the more unhampered field of the popular magazine. In 1903, McChire's began printing his series of articles on the political life of the American city. General opinion had settled into the conviction that corruption in

politics was limited to the larger cities flooded b y immigrants; the political life in a city with a population of sound native inhabitants was bound to be pure. Steffens tested that opinion b y observed f a c t and proved it false. Despite their complex populations, the larger cities w e r e making the most strenuous efforts to escape boss rule. On the other hand, home-owning Philadelphia was the most disheartening spectacle in the nation, f o r Philadelphia was aware of corruption and acquiesced in it. M o r e disturbing still, Steffens found that dishonesty in politics was only the reflection of dishonesty in business; and this was the force which was threatening the foundations of American morals. T h e foundations w e r e strong enough to withstand these attacks, said Steffens; the people simply needed education—and then they would find leaders w h o would reestablish good government in America. In v e r y considerable measure his optimism was justified. T h e selection here reprinted is f r o m The Shame of the Cities ( N e w Y o r k , 1904).

The Shame of the Cities BY

LINCOLN

INTRODUCTION; AND S O M E CONCLUSIONS

THIS IS NOT a book. It is a collection of articles reprinted from McClure's Magazine. Done as journalism, they are journalism still, and no further pretensions are set up for them in their new dress. . . . T h e y were written with a purpose, they were published serially with a purpose, and they are reprinted now together to further that same purpose, which was and is—to sound for the civic pride of an apparendy shameless citizenship. There must be such a thing, we reasoned. All

STEFFENS our big boasting could not be empty vanity, nor our pious pretensions hollow sham. American achievements in science, art, and business mean sound abilities at bottom, and our hypocrisy a race sense of fundamental ethics. E v e n in government we have given proofs of potential greatness, and our political failures are not complete; they are simply ridiculous. But they are ours. N o t alone the triumphs and the statesmen, the defeats and the grafters also represent us, and just as truly. W h y not see it so and say it? . . . W h e n I set out on m y travels, an honest N e w Yorker told me honestly that I would find that the

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Irish, the Catholic Irish, were at the bottom of it ali everywhere. T h e first city I went to was St, Louis, a G e r m a n city. T h e next was Minneapolis, a Scandinavian city, with a leadership of N e w Englanders. T h e n came Pittsburg, Scotch Presbyterian, and that was what m y N e w York friend was. " A h , but they are all foreign populations," I heard. T h e next city was Philadelphia, the purest American community of all, and the most hopeless. A n d after that came Chicago and N e w York, both mongrel-bred, but the one a triumph of ref o r m , the other the best example of good government that I had seen. T h e " f o r e i g n element" e x · cuse is one of the hypocritical lies that save us f r o m the clear sight of ourselves. Another such conceit of our egotism is that which deplores our politics and lauds our business. T h i s is the wail of the typical American citizen. N o w , the typical American citizen is the business man. T h e typical business man is a bad citizen; he is busy. If he is a " b i g business m a n " and very busy, he does not neglect, he is busy with politics, oh, very busy and very businesslike. I found him buying boodlers in St. Louis, defending grafters in Minneapolis, originating corruption in Pittsburg, sharing with bosses in Philadelphia, deploring reform in Chicago, and beating good government with corruption funds in N e w York. H e is a self-righteous fraud, this big business man. H e is the chief source of corruption, and it were a boon if he would neglect politics. But he is not the business man that neglects politics; that worthy is the g o o d citizen, the typical business man. H e too is busy, he is the one that has no use and theref o r e no time for politics. W h e n his neglect has permitted bad government to g o so far that he can be stirred to action, he is unhappy, and he looks around f o r a cure that shall be quick, so that he may hurry back to the shop. Naturally, too, when he talks politics, he talks shop. His patent remedy is quack; it is business. " G i v e us a business man," he says ("like me," he means). " L e t him introduce business methods into politics and government; then I shall be left alone to attend to my business." T h e r e is hardly an office from United States Senator d o w n to Alderman in any part of the country to which the business man has not been elected; yet politics remains corrupt, government pretty bad, and the selfish citizen has to hold himself in readiness like the old volunteer firemen to rush forth at any hour, in any weather, to prevent the fire; and he goes out sometimes and he puts out the fire (after the damage is done) and he g e e s back to the shop sighing for the business man

in politics, T h e business man has failed in politics as he has in citizenship. W h y ? Because politics is business. T h a t ' s what's the matter with it. T h a t ' s what's the matter with everything,—art, literature, religion, journalism, law, medicine,—they're all business, and all—as y o u see them. Make politics a sport, as they do in England, or a profession, as they do in G e r m a n y , and we'll have—well, something else than we have now,—if we want it, which is another question. But don't try to reform politics with the banker, the lawyer, and the dry-goods merchant, f o r these are business men and there are t w o great hindrances to their achievement of reform: one is that they are different from, but no better than, the politicians; the other is that politics is not "their line," . . . T h e commercial spirit is the spirit of profit, not patriotism; of credit, not honor; of individual gain, not national prosperity; of trade and dickering, not principle. " M y business is sacred," says the business man in his heart. " W h a t e v e r prospers m y business, is good; it must be. W h a t e v e r hinders it, is wrong; it must be. A bribe is bad, that is, it is a bad thing to take; but it is not so b a d to give one, not if it is necessary to my business." "Business is business" is not a political sentiment, but our politician has caught it. H e takes essentially the same view of the bribe, only he saves his selfrespect by piling all his contempt upon the bribegiver, and he has the great advantage of candor. It is wrong, maybe," ne says, "but if a rich merchant can afford to do business with me for the sake of a convenience or to increase his already great wealth, I can afford, f o r the sake of a living, to meet him half way. I make no pretensions to virtue, not even on S u n d a y . " A n d as f o r giving bad government or good, how about the merchant who gives bad goods or good goods, according to the demand? . . . But do the people want good government? T a m many says they don't. Are the people honest? Are the people better than T a m m a n y ? A r e they better than the merchant and the politician? Isn't our corrupt government, after all, representative? . . . N o , the contemned methods of our despised olitics are the master methods of our braggart usiness, and the corruption that shocks us in public affairs we practice ourselves in our private concerns. T h e r e is no essential difference between the pull that gets your wife into society or for your book a favorable review, and that which gets a heeler into office, a thief out of jail, and a rich man's son on the board of directors of a corporation; none between the corruption of a labor

E

THE AMERICAN SCENE union, a bank, and a political machine; none between a dummy director of a trust and the caucusbound member of a legislature; none between a labor boss like Sam Parks, a boss of banks like John D. Rockefeller, a boss of railroads like J. P. Morgan, and a political boss like Matthew S. Quay. The boss is not a political, he is an American institution, the product of a freed people that have not the spirit to be free. . . . W e are pathetically proud of our democratic institutions and our republican form of government, of our grand Constitution and our just laws. W e are a free and sovereign people, we govern ourselves and the government is ours. But that is the point. W e are responsible, not our leaders, since we follow them. W e let them divert our loyalty from the United States to some "party"; we let them boss the party and turn our municipal democracies into autocracies and our republican nation into a plutocracy. W e cheat our government and we let our leaders loot it, and we let them wheedle and bribe our sovereignty from us. True, they pass for us strict laws, but we are content to let them pass also bad laws, giving away public property in exchange; and our good, and often impossible, laws we allow to be used for oppression and blackmail. And what can we say? W e break our own laws and rob our own government, the lady at the custom-house, the lyncher with his rope, and the captain of industry with his bribe and his rebate. The spirit of graft and of lawlessness is the American spirit. . . . The people are not innocent. That is the only "news" in all the journalism of these articles, and no doubt that was not new to many observers. It was to me. W h e n I set out to describe the corrupt systems of certain typical cities, I meant to show simply how the people were deceived and betrayed. But in the very first study—St. Louis—the startling truth lay bare that corruption was not merely political; it was financial, commercial, social; the ramifications of boodle were so complex, various, and far-reaching, that one mind could hardly grasp them, and not even Joseph W . Folk, the tireless prosecutor, could follow them all. This state of things was indicated in the first article which Claude H. Wetmore and I compiled together, but it was not shown plainly enough. Mr. Wetmore lived in St. Louis, and he had respect for names which meant little to me. But when I went next to Minneapolis alone, I could see more independently, without respect for persons, and there were traces of the same phenomenon. The first St. Louis article was called "Tweed Days in St. Louis," and though the "better citizen" received attention

929

the Tweeds were the center of interest. In "The Shame of Minneapolis," the truth was put into the title; it was the Shame of Minneapolis; not of the Ames administration, not of the Tweeds, but of the city and its citizens. And yet Minneapolis was not nearly so bad as St. Louis; police graft is never so universal as boodle. It is more shocking, but it is so filthy that it cannot involve so large a part of society. So I returned to St. Louis, and 1 went over the whole ground again, with the people in mind, not alone the caught and convicted boodlers. And this time the true meaning of "Tweed days in St. Louis" was made plain. The article was called "The Shamelessness of St. Louis," and that was the burden of the story. In Pittsburg also the people was the subjcct, and though the civic spirit there was better, the extent of the corruption throughout the social organization of the community was indicated. But it was not till I got to Philadelphia that the possibilities of popular corruption were worked out to the limit of humiliating confession. That was the place for such a study. There is nothing like it in the country, except possibly, in Cincinnati. Philadelphia certainly is not merely corrupt, but corrupted, and this was made clear. Philadelphia was charged up to—the American citizen. . . . . . . If I could—and I will some day—I should show that one of the surest hopes we have is the politician himself. Ask him for good politics; punish him when he gives bad, and reward him when he gives good; make politics pay. Now, he says, you don't know and you don't care, and that you must be flattered and fooled—and there, I say, he is wrong. I did not flatter anybody; I told the truth as near as 1 could get it, and instead of resentment there was encouragement. After "The Shame of Minneapolis," and "The Shamelessness of St. Louis," not only did citizens of these cities approve, but citizens of other cities,, individuals, groups, and organizations, sent in invitations, hundreds of them, "to come and show us up; we're worse than they are." W e Americans may have failed. W e may be mercenary and selfish. Democracy with us may be impossible and corruption inevitable, but these articles, if they have proved nothing else, have demonstrated beyond doubt that we can stand the truth; that there is pride in the character of American citizenship; and that this pride may be a power in the land. So this little volume, a record of shame and yet of self-respect, a disgraceful confession, yet a declaration of honor, is dedicated, in all good faith, to the accused—to all the citizens of all the cities in the United States.

9JO

T H E N E W FREEDOM

WEALTH

AND

B Y THE FIRST DECADE of the twentieth century,

the social settlement movement and English studies like Charles Booth's Life and Labor in London had stimulated American sociologists to more careful observation and recording of the actual conditions of certain segments of American life. Two such studies are represented by Frank H. Streightoff's Standards of Living among the Industrial People of America (Boston, 1911 ) and Robert Hunter's Poverty (New York, 1904). Poverty, the older of the two, deals with the very first years of the century and concerns itself with the "marginal" worker whose reward, according to the marginal-utility economists, measured the contribution of labor to the ultimate product. Robert Hunter (1874), who became one of the early settlement workers in America, attempts to define poverty, to describe its meaning to the people who endure it, and to relate how poverty passes into pauperism. Hunter relies on his own professional experiences for the body of his facts, but he makes use of government reports and the books of other observers. Poverty he defines as the condition of life of those whose income is not sufficient to keep them in a state of genuine physical efficiency. There is little factual information about the extent of poverty: we lack statistics on wages, unemployment, pauperism, and the number of men killed by accidents. Certain inferences may be drawn from what facts are available, however. About one fifth of the population of the industrial states and about a tenth of the remainder of the country live in poverty. Poverty is a social wrong, Hunter argues, and requires social remedy. Remedial action is hindered, however, by the structure of the American government, where the still backward South defeats Northern efforts to raise the standard of living. Consequently, nothing in the way of justice or reform is to be ex-

INCOME

pected in the next few years. Hunter has a program, none the less. He recommends government regulation of working hours, the prohibition of child labor, social insurance, and the restriction of immigration. If such measures were enacted, the United States might see an end of the process by which society forces people into poverty, whereupon charity proceeds to pauperize them. Frank H. StreightofFs study of the standard of living is factual in method and lacks the indignation animating Hunter's survey. The facts, as Streightoff's tables present them, afford material for Hunter's conclusions. Unemployment was widespread, averaging three months in the year in the cases studied; 80 percent of its incidence was for reasons beyond control of the unemployed. Wage differentials seemed to depend on the length of time during which a trade had been organized. Industry was leaving the larger centers to take advantage of the cheaper and more docile labor available in smaller towns. Though crowding might be less in such areas, people were no better housed; the semi rural one-industry regions lodged their workers in quarters worse than any New York tenement. The low-income groups were inadequately housed, they were poorly clad and badly fed because they lacked sufficient knowledge of nutrition to make the most of the food they could buy. Also, earning power was further lessened by the high incidence of accidents. Insufficient education decreased earning power, too, for the poor took their children from school before they had completed the elementary grades. Even if the children remained in school, they would get no proportionate benefit since teaching was often incompetent and the curriculum usually unsuited to the needs of boys and girls who must earn their living or make homes soon after leaving grammar school. Thus, Streightoff's careful statistical compilations. Higher incomes were necessary

T H E AMERICAN to assure America's continued economic advance. A half decade later, Willford Isbell King (1880) published another careful statistical analysis in his Wealth and Income of the People of the United States ( N e w York, 1 9 1 5 ) . He studies national income and savings f o r the first time; seeks to determine the distribution of the national product among its various classes of receivers; and reviews the course of real hourly wages historically. Over the long term, there has been extraordinary progress, due to great increases in productivity. And from 1865 to 1896, there has been a generally upward movement of real wages. But, apparently since 1906, a downward movement appears to have set in; and thus King and the others—as far as the contemporary scene is concerned—are in essential agreement. (Later statisticians were to question King's conclusions about the first decade of the new century. See below, Part X I . ) Though it is impossible to picture the distribution of income among the people as a whole, King finds that 1.6 percent of the population is receiving 19 percent of the income, while 88 percent get 62 percent of it. In 1896, King notes, 88 percent got 65 percent of the nation's income.

SCENE

931

Despite all this, King points out that the American worker is better off than his fellows in any other country. T h e great increase in America's wealth and productivity would have further increased the worker's share of the national income had it not been f o r the pressure of immigration from Southern and Eastern Europe, which bears heavily on the wages of unskilled labor and thereby brings down the general standard. It is immigration that has reduced labor's gains therefore; a loss without compensation on the east shore of the Atlantic, f o r the European birth rate has been raised not lessened b y emigration so that no improvement of European living standards has taken place. T h e world's great need, King concludes, is not "social legislation" but measures to decrease the birth rate and so help man "escape from the chains of want forged b y his own passions." T h e selections are from Poverty (1904), reprinted by permission of T h e Macmillan Company; Standards of Living among the Industrial People of America ( 1 9 η ) , b y permission of Houghton Mifflin Company; and Wealth and Income of the People of the United States ( 1 9 1 5 ) , by permission of T h e Macmillan Company.

Poverty BY

ROBERT

. . . BUT TO ESTIMATE in the most conservative way possible, let us take more or less arbitrarily $460 a year as essential to defray the expenses of an average family,—a father, a mother, and three children,—in the cities and industrial communities of the New England states, of New York, Pennsylvania, Indiana, Ohio, and Illinois. In the cities the amount ought to be placed higher and in the smaller towns the estimate would naturally be lower, but on the whole the average seems a fair one. In the South about $300 a year would probably cover the cost of like necessaries. This estimate of $300 for a family of average size in the South, and of $460 for a family of average size in the industrial states of the North, would approach very nearly a fair standard for the poverty line; that is to say, if any working-class family should

HUNTER

be unable to obtain this wage, they would in all likelihood be unable to obtain the necessaries for maintaining physical efficiency. Even if all were agreed upon these amounts, as fair estimates of necessary yearly wages in the North and South, there is still an obstacle in the way of measuring the extent of poverty by this method. This obstacle consists in the inadequacy of our wage statistics. It is hardly to be doubted that the mass of unskilled workers in the North receive less than $460 a year, or that the same class of laborers in the South receive less than $300. But, unfortunately, that cannot be proved by any statistics obtainable. There are, however, some figures which show that a very large number of workmen are unable to obtain for themselves and families an average income equal to these stand-

93*

THE NEW FREEDOM

ards. Testimony was given before the Industrial Commission showing that the 150,000 track hands, working on the railroads of the United Sutes, received wages ranging from 47V¿ cents a day, in the South, to $1.25 a day in the North. About half of these men are not employed in the winter, so that their yearly wages are further reduced by a period of idleness. But, leaving that out of account, the sum received in the South would amount to less than J i j o a year, and the yearly wage in the North would amount to less than $375. T h e same witness testified that these wages were also paid to the carmen and shopmen in the North and South. There were 100,000 men employed in these latter trades. Before the same Commission testimony was given concerning the wages of the street-car employees. For these workers the wages ranged from $320 a year to $460. Mr. Elsas, of the Georgia cotton milk, confessed that the average wage paid his employees was $234 a year. Even men were given only from 75 to 90 cents a day for twelve hours' work. Dr. Peter Roberts says that the average yearly wage in the anthracite district is less than Jjoo, and that about 60 per cent of the workers do not receive $4jo. . . . While the above figures are altogether too inadequate to permit us to base upon them any estimate as to the extent of poverty, it seems reasonable to assume that the wages of the unskilled laborers in this country rarely rise above the poverty line. A certain percentage are doubtless able to maintain a state of physical efficiency while they have work, but when unemployment comes, and their wages cease, a great mass of the unskilled workers find themselves almost immediately in poverty, if not indeed in actual distress. It can be assumed, therefore, fairly, I think, that the problem of poverty in this country is in ordinary times confined to a certain percentage of the unskilled laborers who have employment, to most unskilled laborers without employment, and to many unemployed skilled workers. In addition to these workers in poverty, there are those who are weak, infirm, unfortunate, the widows, the families of the sick or the injured, and those who are too incompetent, drunken, or vicious, etc., to be reliable workmen. These are, in the main, the classes of persons in poverty in this country. It is safe to say that a large number of workers, the mass of unskilled and some skilled workmen with their families, fall beneath the poverty line at least three times during their lives,—during childhood, in the prime of life, and at old age. . . . In this way laborers of the poorest class pass backward and forward over the poverty line. The coming of children, the leaving of children, the

periods of employment and of unemployment, the days of health, the days of sickness, the coming of infirmity, the hour of death,—all of these things either force the workers of this class backward, or carry them forward over the poverty line. A large immigration, insanitary tenements, dangerous trades, industrial changes, panics and bankruptcies —in a word, the slightest economic disturbance or rearrangement—may precipitate them into misery. The margin of life upon which many of them live is so narrow that they must toil every possible hour of working time, and the slightest economic change registers its effect upon this class of workers. Any one going carefully through the figures which have been given will agree that poverty is widespread in this country. While it is possible that New York State has more poverty than other states, it is doubtful if its poverty is much greater proportionately than that of most of the industrial states. Twelve years ago I made what was practically a personal canvass of the poor in a small town of Indiana. There were no tenements, but the river banks were lined with small cabins and shanties, inhabited by the poorest and most miserable people I have almost ever seen. About the mills and factories were other wretched little communities of working people. All together the distress extended to but slightly less than 14 per cent of the population, and the poverty extended to not less than 20 per cent of the people. I cannot say how typical this town is of other Indiana towns, but I have always been under the impression that conditions were rather better there than in other towns of the same size. In Chicago the conditions of poverty are certainly worse, if anything, than in the smaller towns, and that is also true of the poverty of New York City. On the whole, it seems to me that the most conservative estimate that can fairly be made of the distress existing in the industrial states is 14 per cent of the total population; while in all probability no less than 20 per cent of the people in these states, in ordinarily prosperous years, are in poverty. This brings us to the conclusion that one-fifth, or 6,600,000 persons in the states of N e w York, Massachusetts, Connecticut, New Jersey, Pennsylvania, Ohio, Illinois, Indiana, and Michigan are in poverty. Taking half of this percentage and applying it to the other states, many of which have important industrial communities, as, for instance, Wisconsin, Colorado, California, Rhode Island, etc., the conclusion is that not less than 10,000,000 persons in the United States are in poverty. This includes, of course, the 4,000,000 persons who are estimated to be dependent upon some form of

THE AMERICAN SCENE public relief. While the estimate is unquestionably a conservative one, it may be thought that, although the percentage, as applied to the industrial states, is fair, half of that percentage, as applied to the states largely agricultural, is too high. I think, however, that the figures concerning the number of farms rented and mortgaged would warrant the use of this percentage, if, indeed, there were not many other facts to warrant an assumption of that amount of poverty. . . . T h e conclusion that about 10,000,000 persons in the United States are in poverty is, of course, largely based upon the figures of distress and of unemployment which have been given; and it would be warranted, were there no other indications of widespread poverty. H o w e v e r , many indications lend themselves to the support of this conclusion. A very large proportion of the working classes are propertyless; a very large mass of people, not only in our largest cities, but in all industrial communities as well, live in most insanitary conditions; there is a high death-rate from tuberculosis in most of our states; a large proportion of the unskilled workers receive, even when employed, wages insufficient to obtain the necessaries f o r maintaining physical efficiency; from all indications, the number injured and killed in dangerous trades is enormous; and, lastly, there is uncertainty of employment f o r all classes of workers. About 30 percent of the workers in the industrial states are employed only a part of each year, and, in consequence, suffer a serious decrease in their yearly wages, which, in the case of the unskilled, at least, means to suffer poverty. N e v e r theless, the estimate that somewhat over 10,000,000 persons in this country are in poverty does not indicate that our poverty is as great proportionately as that of England. But it should be said that a careful examination would, in all probability, disclose a greater poverty than the estimate indicates. . . . . . . There are probably in fairly prosperous years no less than 10,000,000 persons in poverty; that is to say, underfed, underclothed, and poorly housed. Of these about 4,000,000 persons are public paupers. Over 2,000,000 working-men are unemployed from four to six months in the year. About 500,000 male immigrants arrive yearly and seek work in the very districts where unemployment is greatest. N e a r l y half of the families in the country are propertyless. Over 1,700,000 little children are forced to become wage-earners when they should still be in school. About 5,000,000 women find it necessary to work and about 2,000,000 are employed in factories, mills, etc. Probably no less

933

than 1,000,000 workers are injured or killed each year while doing their work, and about 10,000,000 of the persons now living will, if the present ratio is kept up, die of the preventable disease, tuberculosis. W e know that many workmen are overworked and underpaid. W e know in a general way that unnecessary disease is far too prevalent. W e know some of the insanitary evils of tenements and factories; we know of the neglect of the street child, the aged, the infirm, the crippled. Furthermore, we are beginning to realize the monstrous injustice of compelling those who are unemployed, who are injured in industry, who have acquired diseases due to their occupation, or who have been made widows or orphans b y industrial accidents, to become paupers in order that they may be housed, fed, and clothed. Something is known concerning these problems of poverty, and some of them at least are possible of remedy. T o deal with these specific problems, I have elsewhere mentioned some reforms which seem to me preventive in their nature. T h e y contemplate mainly such legislative action as may enforce upon the entire country certain minimum standards of working and of living conditions. T h e y would make all tenements and factories sanitary; they would regulate the hours of work, especially f o r women and children; they would regulate and thoroughly supervise dangerous trades; they would institute all necessary measures to stamp out unnecessary disease and to prevent unnecessary death; they would prohibit entirely child labor; they would institute all necessary educational and recreational institutions tro replace the social and educational losses of the home and the domestic workshop; they would perfect, as far as possible, legislation and institutions to make industry pay the necessary and legitimate cost of producing and maintaining efficient laborers; they would institute, on the lines of foreign experience, measures to compensate labor for enforced seasons of idleness, due to sickness, old age, lack of work, or other causes beyond the control of the workman; they would prevent parasitism on the part of either the consumer or the producer and charge up the full costs of labor in production to the beneficiary, instead of compelling the worker at certain times to enforce his demand f o r maintenance through the tax rate and b y becoming a pauper; they would restrict the power of employer and of ship-owner to stimulate f o r purely selfish ends an excessive immigration, and in this w a y to beat down wages and to increase unemployment. . . .

THE NEW FREEDOM

934

The Standard BY FRANK H . . . . T H E M O S T SATISFACTORY wage statistics however are those published as Bulletin no. 93 of the permanent Census Bureau. In 1904, an investigation was made of 123,703, or 62.9 per cent, of the manufacturing establishments, and 3,297,819, or 47 per cent, of the wage-earners employed during the busy week. The crowning achievement of this investigation was the schedule copied as Table XXII in this essay.

of

Living

STREIGHTOFF Assuming fifty weeks as the normal working year, this table shows 92,535 grown men earning less than $3 per week, or $150 per year; 338,635 receiving less than I5 weekly, or $250 annually; 1,116,199 paid no more than $8 a week, or (400 per annum; 2,009,914 who are compensated at less than $10 per week, or $500 yearly; and 2,664,349 who are not considered worth more than Six a week, or $600 a year, to their employers. T o these

TABLE XXII ESTIMATED DISTRIBUTION BY WEEKLY EARNINGS OF AVERAGE NUMBER OF ALL WAGE-EARNERS, AND M E N , W O M E N , AND CHILDREN,

All Wage-earners Weekly earnings Less than S3 $3 t o *4 4 to 5 5 to 6 6 to 7 7 to 8 8 to 9 9 to 10 10 to 12 12 to 15 15 to 20 20 to 25 25 and over Total Less than $3 $3 to *4 4 to 5 5 to 6 6 to 7 7 to 8 8 to 9 9 to 10 10 to 12 12 to 15 15 to 20 20 to 25 25 and over Total

Number «5.793 264,626 340. " J 363,693 454-185 453>2°3 423,689 619,465 708,858 741,036 618,314 171,844 85,402

Men 16 years and over

Percentage in groups 4·« 4.8 6.2 6.7 8.3 8.3 7.8 11.3 13.0 135 11.3 3·« 1.6 100.0

Cumulative percentage 100.0 95-9 91.1 84.9 78.2 69.9 61.6 53-8 4M 29.5 16.0 4-7 1.6

7-3 10.9 14.9 .6.3 .6.5 11.7 8.1 5.8 5« 1-5 0.8 0.1 C)

100.0 92.7 81.8 66.9 50.6 34·' 22.4 '4-3 8.5 3·4 ο·9 O.I (')

5.47°.311 Women 16 years and over 77,826 « «5.74« 158,926 , 73·7 , 3 176,224 124,061 86,467 62,193 54.340 26,207 8,516 «.173 397 1,065,884

(•) Less than one tenth of 1 per cent.

19O5

Percentage Cumulative Number in groups •percentage 2.2 100.0 92.535 96,569 97.8 »•3 «49-53« 3-5 95-5 92.0 '77.550 4» 272,288 6.4 87.8 327.7*6 814 7·7 336,669 7-9 73-7 65.8 557.046 «3« 654435 '5-4 J»-7 714,816 16.9 37-3 20-4 609,797 14.4 4.0 6.0 170,571 85,005 2.0 2.0 100.0 4.144.538 Children under 16 years 55431 52,316 31,656 12430 5-773 1,416 553 226 83 '3 I 159,899

34-7 31-7 19.8 7.8 3.6 0.9 0.3 0.1 0.1 (") (')

100.0 65.3 32.6 12.8 5.0 «•4 0.5 0.2 0.1 C) (*)

THE AMERICAN SCENE can be added at least half a million coal-miners and railroad hands, with the result that in manufacture, transportation, and mining over three million men, about half of whom bear the entire burden of supporting their families, are unable to command incomes of $600 per year. It must be remembered that persons occupied in the mechanical pursuits, three fourths of those engaged in trade and transportation, and all those interested in the field of domestic and personal service, in fact about one half of the men more or less directly connected with manufacturing and urban pursuits, have been left entirely out of this account. It would be conservative to estimate the number of adult males, usually classed as industrial workers and persons engaged in personal service, who receive less than $600 a year for their labor, at five million. Again, by multiplying the figures for persons engaged in manufactures, some of the building trades, coal-mining, clerks in trade and transportation, and bartenders, and of the railway employees, as classified in the abstract of the Twelfth Census and the Statistical Report of the Interstate Commerce Commission (figures of 1900), by the percentages which may be readily calculated from those given by the Commissioner of Labor, it is developed that 4,979,000 adult males are employed at less than $12 a week, the equivalent of $600 a year. Since many trades are not mentioned at all in this computation, it is safe to consider the five million before mentioned as a conservative estimate of the number of male industrial workers who do not earn $600 a year. Professor Ryan wrote, "the conclusion seems justified that at least 60 per cent of male workers in the cities of the United States are to-day (1905) receiving less than $600 annually." . . . " A prominent official in one of the largest charities in New York City thinks that $2.00 a day, or about $624 a year is necessary for a family of five in that city." Professor Ryan is willing to accept $600. H e thus summarizes his conclusions: "Anything less than $6oo per year is NOT a Living W a g e in any of the cities of the United States; second, this sum is PROBABLY a Living W a g e in those cities in the Southern States in which fuel, clothing, food, and some other items of expenditure are cheaper than in the North; third, it is POSSIBLY a Living W a g e in the moderately sized cities of the West, North, and East; and fourth, in some of the largest cities of the last named regions, it is certainly NOT a Living W a g e . " It was such a surprise to many when the committee of the New York State Conference of Charities and Corrections decided that $825 was the necessary income to allow a family of five to

935

maintain a fairly proper standard of living in N e w York City, that it may well be questioned whether $600 is not too low a minimum for the large majority of the smaller cities in the North, East, and West. T o test this criterion, a very intelligent man who works at odd jobs in Middletown, Connecticut, was consulted. At first he was confident that a decent living could not be obtained for less than $750 per year. It was impressed upon him that it was a minimum wage, merely enough to maintain physical and mental efficiency that was sought. On the basis of his accounts for 1908, and much careful calculation, he finally produced the following as his minimum estimate: Minimum

cost of living for one for family of five

year

Rent Fuel, 5 tons of coal ι cord of wood Food, Groceries Milk, ι quart per day at 8 cents Vegetables Meat and fish Clothing Church and other organizations Pleasure Doctor Miscellaneous

$120. 35· 5· 168. 29.20 2 4· 96. 140. 20. 20. 12. 40.

Total

709.20

This estimate can be summarized thus: Rent Food Clothing Fuel

$120. 317.20 140. 40.

16.9% 44.8 19.7 J·1

This leaves 13.5 per cent for other expenditures which, in comparison with the standards in chapter on budgets, is not excessively large. Now assume arbitrarily that the family consists of a husband, a wife, a boy between eleven and fourteen, a child, between seven and ten, and a baby under three; the total food consumption will be that of 3.70 adult males. At twenty-two cents per man per day, it would cost $297 a year to provide adequate nourishment for this household. T h e estimate of this man, then, was not too high. His family, especially his wife, is not by any means well clothed in the usual sense of the term, but appears to be equipped with the minimum for health and comfort. Reduce his figure for clothing to $120. It will be remembered that Dr. Chapín concluded that a family could not be clothed for less than $100, and did not affirm that this sum would suffice. His estimate makes absolutely no

936

T H E

N E W

provision f o r night-clothes, overshoes and other equipment necessary f o r encountering storms, and the amount allowed f o r foot wear, particularly f o r each b o y , is incredibly small. So $ 1 2 0 for clothing is certainly not too high, especially in the light of the standard fixed b y the Iowa Bureau of Labor Statistics. One hundred and twenty dollars a year will not hire a very good house, but diminish this figure to $100. T h e necessary expenses now are: Food Rent Clothing Fuel Church and other organizations Medical attendance Amusement Miscellaneous Total

$297 100 120 40 20 12 20 40 649

F R E E D O M

Surely this is not a high estimate f o r a Living W a g e . It makes no provision f o r saving. Middletown is a small city, and its prices are comparatively low. T h e estimate was v e r y carefully made as a minimum and then reduced by sixty dollars. It is, then, conservative to set $ 6 j o as the extreme low limit of the Living W a g e in cities of the North, East, and West. Probably $600 is high enough f o r the cities of the South. A t this wage there can be no saving and a minimum of pleasure. Y e t there are in the United States, at least five million industrial workmen w h o are earning $600 or less a year. It will be remembered that 1 , 1 1 6 , 1 9 9 men engaged in manufacture alone are earning no more than $400 per annum, and 2,009,914 are receiving no more than $500. If all industrial occupations are considered, probably four million men are not enjoying annual incomes of $600.

Wealth and Income BY THE

NATIONAL

WILLFORD

DIVIDEND

B Y DEDUCTINC the total capital savings from the book income, we arrive at the national dividend. T a b l e X X I I gives us a v e r y rough estimate of the total savings and of the value of the goods actually consumed by the people. . . . But, after all reasonable allowances have been made, the fact remains, practically, that, beginning

I.

KING

with 1870, there has been an increase in the national dividend so enormous that it cannot logically be ascribed to anything but the tremendous advance in productive power due to the revolutionary improvements in industry which have characterized the last half century. It seems improbable that any other great nation has ever experienced such sweeping gains in the average income of the inhabitants. It has, almost necessarily,

T A B L E XXII THE N A T I O N A L

DIVIDEND

FOR T H E C O N T I N E N T A L UNITED STATES M E A S U R E D IN PURCHASING

POWER

Estimates Based on Production,

Census Year 1850 i860 1870 1880 1890 [900 1910

Estimated Total Income in Millions of Dollars 2,214 3,636 6,720 7.39' 12,082 17.964 3°'529

Estimated Capital Savings in Millions of Dollars » 400 843 1.047 1,267 1,612 1,569 2,000

Net Goods Consumed in Millions of Dollars b 1,814 2.793 5. ö 73 6,124 10,470 i6,395 28,529

Value at Prices of 1890-1899 of all G o o d s Consumed Index of Price Level 139.2 141.3 221.6 132.4 113.6 101.7 126.5

Total in Millions of Dollars

Per Capita in Dollars

i.3°3 '.977 2,560 4,626 9,218 16,121

56 63 66 9* 146 212 2

45

* Estimated by deducting from the average annual increase in w ealth for the decade, the average annual increase in land values for the same period. b Column 2 minus column 3.

T H E

A M E R I C A N

been accompanied by a great rise in the standard of living. T h e increase has not been so much in the quantity as in the quality of the goods thought of as necessaries by the average citizen. T o d a y , the urban housewife, f o r example, looks upon running water, a bath room, electric lights, a gas range, and a piano as necessary household equipments. She demands that her food be purchased not in bulk, but in air-tight sanitary packages. She does not care to go to market but expects her purchases to be delivered in small amounts at frequent intervals. She must have clothing not only sufficient f o r comfort and neatness but also strictly à la mode. Her children must not thumb dog-eared books and dirty slates while seated in a dingy little room on rough wooden benches in the presence of a pedagogue who pieces out his wages as a farm laborer b y teaching "the three R ' s " during the winter. On the contrary, they must have an endless chain of interesting reading books, must write in pretty clean tablets, and must work with up-tothe-minute laboratory equipment under the direction of highly trained teachers in a beautiful, light, airy school room. Neither are the children expected to quit school when they have learned to " f i g g e r " and to parse. T h e y must go to high school and become versed in the scientific knowledge of the day, with a little home economics, music, and manual training on the side. W h e n supper is over, the children and their parents do not entertain each other or visit the neighbors, but instead hire the services of paid entertainers at the theatre or moving picture show or take a ride in the boat or car or automobile. N o matter which w a y one turns, the demand is f a r better and better quality, more and more elaborate service, greater and greater variety. . . . But, after all, absolute figures are of but little interest to most of us. Which has been gaining at the expense of the others? W h i c h has been losing out in the race? T h e answer to these questions is presented in Table X X X I . TABLE XXXI T H E E S T I M A T E D P E R C E N T A G E S OF T H E TOTAL N A T I O N A L I N C O M E RECEIVED R E S P E C T I V E L Y B Y LABOR, C A P I T A L , L A N D , AND T H E E N T R E P R E N E U R

Shares of Product Census Year

Wages and Interest Rent Profits Total Salaries

1850

35.8

I2.J

7.7

44.0

100.0

I860

37·*

»4-7

8.8

39.3

100.0

1870

48.6

Ι2·9

6.9

31.6

100.0

1880

5I.5

Ι8.6

8.7

21.3

IOO.I

S C E N E

937

1890

53.J

14.4

7.6

24.6

IOO.I

1900

47.3

15.0

7.8

30.0

IOO.I

1910

46.9

16.8

8.8

27.5

100.0

THE

S H A R E S OF C A P I T A L

AND T H E

ENTREPRENEUR

T h e combined share of interest and profits showed a striking decline between I860 and 1870 and has since tended to remain practically constant. T h e decline was probably largely a result of the freeing of the slaves and the destruction of capital due to the Civil W a r . W h e n the slaves were largely transformed into wage earners, the natural outcome was a large increase in the wages bill at the expense of interest and profits. T h e industry of the South was so disorganized by the conflict that it took a number of years f o r business to get on its feet again; hence, the share of profits and interest was cut down even further though this effect was partially offset by the higher interest rates prevailing f o r the capital which escaped destruction. T H E S H A R E OF L A B O R

Since rent has constituted a share relatively stationary and comparatively unimpotant in amount, wages have been practically the complement of the combined factors of injerest and profits. T h e great rise of the share of wages during the decade i860 to 1870 has therefore just been accounted for in explaining the fall of interest and profits. It will be noted that the rise in the percentage received by wages continued slowly until 1890 and has since been gradually declining. Is there any logical explanation of this change? Statistical studies of the fraction of the total income going to wages are so rare that f e w if any laws on this score have yet been inductively formulated. Economists are not even united upon any deductive theory f o r this case. A n y reasons assigned, therefore, must be purely hypothetical. T h e most probable causes for the decline of the last two decades are perhaps the disappearance of free land, with the attendant increase in the pressure upon our natural resources, and the great influx from abroad of labor of a low degree of efficiency. Whether these are or are not the correct explanations of the changing trend, the fact remains that the total share going to labor has, of recent years, been falling off despite the efforts of labor unions and combinations. It still remains a mooted question whether any labor organization not monopolizing practically the whole wage earning class can, through combination, cause a larger share of the total national income to be paid as wages than would fall to the lot of labor under a regime of free competition. It is the worker's share of the product which

93 8

THE NEW FREEDOM

seems to appeal most to the imagination of present day writers. This is the period in which " d o w n trodden labor" is at least coming to have its importance recognized. But the question of primary importance is not how much does labor as a whole receive but how much, on the average, does each laborer get. Is the w o r k e r being treated justly? Does the unskilled toiler receive a fair living wage? If not, how can his condition be bettered? A n d these queries are rightly considered of the first importance. T h e overwhelming majority of our population are dependent primarily upon wages f o r their income and, therefore, the economic welfare of the nation is largely synonymous with the wages of the working people measured in purchasing power; in other words, it depends upon the extent to which the money wages received are adequate to furnish the necessities and customary luxuries of life. But nothing is more futile than the denunciation of the employers as a wicked and heartless class because they refuse to pay higher wages. T h e employer is the slave of existing competitive conditions. In the established and better understood industries, he cannot long pay higher wages for the same grade of labor than do his competitors or he will soon be forced to the wall. But these competitive conditions may be changed. T h e y are the results of law and custom and society can, by legal enactment, largely revolutionize them at its pleasure. Suppose, that, by radical legislative changes, the largest possible fraction of the national dividend was diverted to the share of wages. How would it affect the wage earners? In 1910, the wages bill of the nation was approximately $14,303,600,000. It is possible that the government might tax away all rent and turn the proceeds to the benefit of labor. Interest cannot be decreased without resulting in a loss of saving; hence, the interest bill could scarcely be lessened without destructive effects to the capital supply of the country, thus ruining our industries. Nothing, therefore, could be gained from that source. Average profits, as will be seen by reference to Table X X X I I , are only about half as large again as average wages. W e could not get the services of entrepreneurs for nothing and it must be conceded that the farmers and planters and business men, as a rule, rank higher in efficiency than does the average employee; therefore, these entrepreneurs must necessarily be paid somewhat more than the average wage of the latter. Suppose, that, as the maximum possible allowance, we took one fourth of all profits and diverted those also to the benefit of the employees. T h e total allowance f o r wages

and salaries would now amount to about $19,079,500,000, or a gain of almost exactly one third over and above the present payments f o r labor. But not nearly all of this one third addition would be a gain to the income of the employed classes, f o r very many employees own land and derive a considerable fraction of their income from its rent. T h e commonest example of this is the case of homeowners who enjoy the services of the land on which their residence stands. Many others receive rent and profits indirectly through the ownership of the stocks or bonds of corporations. A f e w obtain profits through business ventures of their own. For these employees, the transfer of rent and profits to the wages fund means taking money out of one pocket and transferring it to another, though the amount lost might be greater or less than that gained. T h u s , it would seem improbable that, with our present national productive power, any feasible system of distribution could increase the average wage earner's income in purchasing power by more than one fourth and this is an extreme rather than a moderate estimate. While such a change might or might not be desirable, it would, at least, work no startling revolution in the condition of the employees of the United States. T h e grim fact remains that the quantity of goods turned out absolutely limits the income of labor and that no reform will bring universal prosperity which is not based fundamentally upon increasing the national income. A f t e r all, the Classical Economists were right in emphasizing the side of production in contradistinction to that of distribution. Nature refuses to yield her bounty except in return f o r effort expended. Demands for higher wages have never vet unlocked her storehouses. W e have talked about the possibilities, through a new system of distribution, of increasing the income of the laboring classes. W e have observed that labor has been fairlv successful in retaining about a half of the total product, but this tells us nothing about the portion going to each individual and the last is a question of vastly more importance than the study of the share obtained b y labor en masse. Has the compensation f o r the efforts of the average laborer increased as fast as should be the case considering the tremendous improvements in industrial processes? Has the entrepreneur distanced the employee in the race, constantly securing the lion's share of the added spoils? Some light will be thrown upon these questions by reference to Table X X X I I . According to generally accepted economic theory, the price of labor is determined b y the value

THE AMERICAN SCENE

939

TABLE XXXII THE ESTIMATED RETURNS FOR PERSONAL EFFORTS IN THE CONTINENTAL UNITED STATES

Total Wages and Salaries in Index of Millions Census Price of Year Level » Dollars 1850 792.8 139.2 i860 141.3 i,3ji.i 1870 221.6 1880 1324 3,803.6 1890 113.6 6,461.8 1900 101.7 8490-7 1910 126.5 14,303.6

Number of Employees inTnousands 3,880 j,090 8,240 11,790 16,220 20,350 '28,200

Average Money Wage per Employee per Annum $204 265 397 3*3 398 417

Average Wage Total per Em- Profits ployee in in Pur- Millions chasing of Power b Dollars

507

»47 188 «79 »44 35° 410 401

973-9 MJ0.7 2,122.9 1,571.6 2,967.1 5,382.1 8408.1

Number of Entrepreneurs in T h o u sands 2,200 3>'J° 4»27° 5.600 7,100 8,720 9.3JO

Average MoneyProfits in Dollars per Entrepreneur 443 4J4 497 281 418 6.7 899

Average Profits per Entrepreneur in Purchasing Power e 318 3» "4 212 368 607 7"

* United States Bureau of Labor wholesale price index for year preceding the Census* b Purchasing power of the money wage at the price* of 1890-1899. c Purchasing power of the money profits at the prices of 1890-1899. of its product. W h e n labor has much capital and natural resources with which to work, the price of labor is high, and vice versa. W e have seen that the capital supply has more than kept pace with the number of workers but that the land supply per man has decreased. W e shall examine into the net effects which this change has produced on labor. In considering the price of labor as a commodity, each occupation and industry has been given a constant weight in order that the results might not be vitiated by a varying composition of the wage earning body at different dates. T h e weights are roughly proportional to the number of workers at some date chosen. T h e results are all computed f r o m the reports of governmental investigations, have been carefully checked, and are believed to be reasonably accurate for the entire ground covered, except in the case of agricultural labor. This is subject to a considerable degree of error but is based on the only government reports available, those published by the Department of Agriculture. T h e figures for wages preceding 1890 are all based on the Aldrich Report prepared by Roland P. Falkner. T h e weights there used were varied according to the reported number of workers in each industry from year to year. This gives an index of average earnings per hour rather than an index of the price of labor. T h e distinction is important, but it is unlikely that the difference in the weighting systems would noticeably change the indices obtained. It is almost certain that the trend of wages shown would not be materially affected. T h e fact should be noted that, while we have

heretofore been dealing with the earnings of all employees, the following tables take into consideration wage earners only, entirely omitting all salaried workers. The first tables show changes in the hourly rates. It was impossible to get accurate statistics concerning the wages of women before 1890, hence the figures for the years 1850 to 1890 are wholly for male workers. . . . It is only necessary to call attention to a "few salient features. It is noticeable that the price of labor is much more stable than the price of other commodities. T h e tremendous rise of the latter in 1865, due to the greenback inflation, was accompanied by a smaller increase in money wages resulting in a marked drop in the purchasing power of an hour's work. In almost every instance, wages have failed to respond fully to short time price fluctuations and, as a result, there is close inverse correlation between the short time changes in the commodity price level and average real wages. From 1865 to 1896, the general trend of real wages was very steadily toward higher levels, except for temporary backsets. After 1896, the progress upward ceased and, since 1906, there are some suspicious indications of a general decline. T h e important feature is that the ascent has been checked, and that, right in the face of the greatest industrial development that the world has ever seen. A little further vision on the part of our statesmen at Washington seems, at present, even more essential to the welfare of the working classes than does the inventive genius of the scientist in his laboratory, the monopolizing power of the labor union, or the organizing ability of the great captain of industry. . . .

THE NEW FREEDOM TABLE XXXIV INDICES

OF

COMMODITY

PRICES

AND OF

HOURLY

WAGES KOR MEN IN ALL INDUSTRIES

Base 1890-1899

Year

Index of Money Wages»

Index of Commodity Prices

Index of Wages in Purchasing Power

1850

47·«

100.6

46.8

1851

47.6

III.2

42.8

1852

48.8

1104

I8J3

49· ι 5«-4

118.4

I8J4 .85J

Index of Wages in P u r chasing Power

Year

Index of Money Wages »

Index of Commodity Prices

1870

94.8

162.8

58.2

1871 1872

94.8

1873

94.2

1184

4«-5 43-4

1874

153-4 «49-3 '45-4

61.5

44.2

94-4

92.2

146.5

62.9 62.9

«3-5 64.8

123.1

4M

1875

914

126.6

41.9

1876

145-3

87.6

138.2

634

128.5

42.2

1877

83.2

128.1

64.9

.8j7

5 J -3 53« 54·*

1858

J3.0

127.6

41.6

1878

81.5

117.9

69.1

1859

53-5

116.0

46.1

1879

80.6

107.1

75-3

1856

I860

54·*

112.7

48.1

1880

82.7

118.3

69.9

1861

J4.6

106.1

5 1 -5

1881

87.2

122.2

1862

117.4

48.8

1882

88.4

I23.O

7 1 -3

57·*

1863

65.J

149.0

44.0

1883

92.1

120.2

76.6

1864

73-9

194.0

38..

1884

89.7

115.7

77.6

71.9

186$

82.7

261.8

3..6

1885

90.2

IO5.2

85.7

1866

85.8

211.6

40.6

1886

91.0

IO5.3

1867

90.J

186.9

48.4

1887

I06.6

864 87.5

1868

92.7

196.1

47-3

1888

I08.5

86.7

1869

94.1

93-3 94·'

I7I.7

54.8

1889

97.0

I I I.I

87.3

1890

100.2

105.6

94-9

•Computed from Tables 41 and 44, Senate Report 1394, Part I, 1893, pp. 176-8.

THE AMERICAN SCENE

94,

TABLE XXXV RELATIVE PRICES OF COMMODITIES AND M E N ' S LABOR PER HOUR IN ALL INDUSTRIES

Base 1890-1899

Index of Commodity Value of Labor

Index of Commodity Value of Labor

Year

Labor Index

Commodity Index

1890

100.1

105.6

94.8

1905

125.5

115.3

108.8

1891

100. J

105.8

9J.O

1906

132.0

120.0

1892

101.8

103.7

98.1

110.0

1907

137.1

125.8

109.0

189J

101.6

104.6

1908

984

«5-4

1894

98.J

»33-5

1064

96.7

97-1

130.0

102.2

1895

98.2

96.0

102.3

1910

137.6

135.2

101.8

1896

99.0

94.6

104.7

1911

141.0

105.8

1897 1898

99-3

94-7

104.8

1912

141.0

103.0

99.6

97.1

102.6

1899

10J.0

99-J

103.J

Av. price of labor per hour.

145.2

»33-3

1890-99

1900

107.0

10J.3

101.6

1901

107.J

102.5

1902

110.2 114.4

112.6

101.6

1903

119.8

114.J

104.6

1904

122.6

115.0

106.6

Year

1909

Labor Index

132.9

$0.1 j 10

Av. price of labor per hour, 1912

$0.2192

Commodity Index

CORPORATE

AND FINANCE IN AMERICA

CAPITALISM

COMMISSIONER OF CORPORATIONS IN 1904, the gathering protest against corporate abuses reached President Theodore Roosevelt. Through his influence, a provision for a Bureau of Corporations was inserted into the bill organizing the new Department of Commerce and Labor. This Bureau was to turn the salutary light of publicity on certain corporate activities and, if nothing else, to make Americans aware of the dangers of monopoly practices. Notable among the Bureau's reports is the Report on the Steel Industry (1911), which tells part of the story of the organization of the United States Steel Corporation. T h e consolidation of plants had created a situation in which several large units in the steel industry competed for the market in heavy steel products. Competition operated with sufficient effect to cause marked discomfort among rival interests, the report declares, and the great steelmakers of the country, under the guidance of the elder Morgan, decided that union was desirable. This was notably so because Andrew Carnegie, the greatest manufacturer of heavy steel, was threatening to go into the light steel field in order to join battle with the rivals created by the investment bankers. A holding company was organized in 1901, therefore, and its billion dollars in capital stock and more than three hundred millions of bonds were exchanged for the plants and

goodwill of the competing Carnegie, Rockefeller, Morgan and Moore interests in steel. Carnegie was eliminated as a source of disturbance and harmony was restored by the erection of a system integrating all the elements in steel production—from the ore beds of the Great Lakes area to the mills of Pittsburgh and Chicago for fabricating steel wire. Also, the downward movement of prices in steel was checked—the era of "administered prices" had begun. In addition to detailing the story of the merger, the Commissioner of Corporations attempted a physical valuation of the plant and material assets belonging to the new holding company. That appraisal made clear the extent to which corporate stock represented an intangible asset rather than a tangible one; even at a current market valuation of plants and other assets, the "billion dollar" United States Steel Corporation was worth no more than $700 million; almost half of its securities represented "capitalized goodwill." T h e Bureau of Corporations continued to exist until 1914 when it \vas replaced by the Federal Trade Commission having amplified powers to check unfair methods of competition. The selections here reprinted are from the Bureau's Report on the Steel Industry ( 1 vols., Washington, 1 9 1 1 ) .

AMERICAN

Report

on the United States Steel BY

THE

943 Corporation

B U R E A U OF CORPORATIONS "

ORGANIZATION OF THE UNITED STATES S T E E L CORPORATION IN

PROBLEMS

Ι90Ι

FUNDAMENTAL CAUSES OF THIS CONSOLIDATION

of the formation of the United States Steel Corporation were substantially the same as in the case of the earlier consolidations described above, namely, ( 1 ) restriction or prevention of competition by combination; (2) integration; (3) stock inflation. While in the case of the several consolidations thus far considered all three of these causes were not invariably present, all of them were factors in the organization of the Steel Corporation, and the same processes already described were repeated there in a more comprehensive manner and on a vaster scale. The restriction of competition was the controlling motive in the organization of the Steel Corporation. While competition had already been greatly restricted in certain branches of tne steel industry, a striking result of the consolidation movement above described was that competition was not thereby destroyed. Instead it soon developed that the formation of these great consolidations was likely to bring on an era of competition more severe than any the industry had yet experienced. This unforeseen outcome of consolidation, as explained below, was largely due to the tendency of these great consolidations to secure greater integration and thus to make themselves practically independent in all stages of production from the ore up. T H E FUNDAMENTAL CAUSES

The economies and commercial advantages rendered possible by integration through a still greater merger were also considerable, and, moreover, furnished a convenient argument in attempts to justify the merging of these competing concerns. The third factor, namely, the inflation of securities, was also extremely important. The upward swing of trade and industry in the United States had not exhausted its vigor, and the business world was still ready to support vast commercial and financial undertakings. There was thus brought about a temporary conjunction of conditions in the industry which presented an extraordinary inducement to prevent a bitter commercial conflict, and at the same time a remarkable opportunity to organize a consolidation which promised to yield unexampled profits

from the flotation of an enormous amount of watered stock. For a clear understanding of the real significance of the organization of the Steel Corporation, it is necessary to describe the situación in some detail. POSITION OF THE STEEL I N D U S T R Y . — T h e preceding discussion has shown that a remarkable condition had been reached in the iron and steel industry by the close of the year 1900. In the first place, the manufacture of crude and semifinished steel was largely in the hands of a comparatively few great concerns. The manufacture of several of the more finished lines, such as wire and wire products, tin plate, sheets, and tubes, moreover, had been substantially transferred to another group of consolidations, cach of which with few exceptions had a more or less monopolistic position. These latter concerns were in great measure dependent upon the larger steel makers for a supply of their raw material, namely, semifinished steel. The larger steel concerns, on the other hand, were chieflv engaged in the manufacture of crude and semifinished steel or of heavier finished steel products, such as rails and structural material, which did not bring them directly in conflict with the group of concerns making the more elaborated products. The relationships of the companies in these two groups to one another have already been partly indicated in the preceding discussion. These relationships had, however, such a vital bearing'upon the organization of the Steel Corporation that tney may be briefly summarized at this point. The large consolidations which were subsequently merged into the Steel Corporation may be conveniently grouped in two classes—(1) the "primary group," or those making chiefly semifinished steel and heavy steel products, and (2) the "secondary group," consisting of those making lighter and more elaborated products. The primary group of companies comprised the Carnegie Company, the Federal Steel Company, and the National Steel Company. Of these, the Carnegie Company was, of course, the most important. As already shown, it was a highly integrated concern, completely independent as to the production of its raw materials, and also pig iron and crude steel. It also had very important transportation facilities. The company, however, depended to a considerable extent for the market-

944

THE NEW FREEDOM

ing of its semifinished steel products (which comprised a v e r y large portion of its total output) upon other steel manufacturers, who used such semifinished steel as their raw material. Some of its most important customers, in fact, were concerns in the second group of consolidations just noted. T h e Federal Steel Company was in much the same general position as the Carnegie Company, being v e r y thoroughly integrated, with extensive holdings of iron-ore and coking-coal lands, and with even more important transportation facilities. A rather larger proportion of its crude steel was worked up into finished forms (chiefly heavy lines) than in the case of the Carnegie Company; nevertheless, the company depended upon other steel manufacturers f o r an outlet f o r a part of its production. T h e National Steel Company, while thoroughly integrated with respect to raw materials, was almost entirely dependent upon other manufacturers f o r a market f o r its steel, which, as already shown, consisted chiefly of such semifinished products as billets, sheet bars, and tin-plate bars. T h i s company, however, had a ready market for the bulk of its steel products, because of its close affiliation with the other so-called "Moore" concerns, the T i n Plate, Sheet Steel, and Steel Hoop companies. It is obvious, therefore, that all three of these steel-making concerns, despite their great size, were in a measure dependent upon other manufacturers. A very important concern closely connected with this primary group of steel-making companies was the Lake Superior Consolidated Iron Mines, controlled b y Standard Oil interests. This company had enormous holdings of ore in the Lake region, as well as a very important ore railroad to upper Lake ports—the Duluth, Missabe and Northern. Moreover, as previously stated, the controlling interests in this concern also controlled the Bessemer Steamship Company, which owned the largest fleet of vessels on the Great Lakes. These interests were not engaged in steel manufacture in any w a y . T h e principal concerns in the secondary group were the American Steel and W i r e Company, the National T u b e Company, the American Tin Plate Company, the American Sheet Steel Company, the American Steel H o o p Company, and the American Bridge Company. . . . A t the organization of these great companies, therefore, there was a marked degree of interdependence among them. F o r a short time after their formation this general situation was fairly

well maintained. T h e three largest concerns—the Carnegie Company, the Federal Steel Company, and the National Steel Company—still restricted their operations f o r the most part to the production of crude steel or the cruder and simpler steel products which they had previously made, while those consolidations making more highly finished products continued to buy a large portion of their requirements of iron and steel from the principal steel-making concerns just named. T h i s balance or adjustment of trade conditions was, however, speedily disturbed. A s already shown, the makers of the lighter forms of steel products began to extend the scope of their activities, or to plan such extensions, with a view to supplying themselves with the raw material of manufacture, namely, the semifinished steel hitherto purchased from others. In other words, just at the time that concerns like the Carnegie and Federal Steel companies had extended their investment in raw materials and transportation facilities and had greatly enlarged their plant capacity, they were confronted with the loss of the patronage of some of their best customers, because the latter, in turn, had been extending their activities in the same directions. Under these circumstances a counterpolicy of extension into finished lines b y the larger steel concerns became almost imperative. This counterstroke was, in fact, promptly threatened, and the whole industry was unsettled b y the prospect of an era of extremely severe competition. This threatened competition should be regarded particularly from two standpoints—first, it meant an enormous enlargement of productive capacity, and one which would apparently exceed the normal consuming power of the country f o r a long time to come, and, second, it meant the breaking down of the extremely profitable quasi-monopolies already established in particular products of the industry, such as wire, tubes, tin plate, and sheets. Both considerations obviously threatened to reduce profits in the steel industry to a decidedly lower level. In the year 1900 the prospective loss of business f o r the great steel-producing companies, accompanied b y a slackened activity in the trade, developed an exceedingly acute situation. T h e Federal Steel Company prepared to take up the manufacture of several lines of finished products, namely, structural material, universal plates, and tubes. In the summer of the same year it was reported that the Carnegie Company would go into the manufacture of wire rods on an extensive scale, thus "invading" the territory of the secondary group. This action was generally regarded as

A M E R I C A N

a blow at the American Steel and Wire Company, which had just threatened to erect additional blast furnaces and a large steel plant. Reports of further important plans of the Carnegie Company for extending its lines of production of finished products were current during the year 1900, and early in 1901 the definite announcement was made that the company was about to take up the manufacture of steel tubes in a new plant of enormous capacity, to be constructed at Conneaut Harbor, Ohio. This announcement, moreover, was made in such a way that it could be interpreted only as a declaration on the part of the Carnegie interests that they did not propose to submit idly to the loss of tonnage threatened by the plans of some of the larger consolidations making finished products, which previously had been among their largest customers. . . . This unmistakable evidence of an aggressive policy of retaliation on the part of the Carnegie concern, accompanied as it was by the important extensions into the manufacture of finished articles announced by the Federal Steel Company, revealed sharply the trend of the existing conditions, and naturally had a very disquieting effect in the trade and in financial circles. Both the trade journals and the financial press were filled with articles to the effect that a "battle of the giants" in the steel industry was at hand. In such a contest it was apparent to all that the Carnegie Company, while likely at first to lose some business, might be expected in the long run to maintain, and even to increase, its dominating position in the industry. Its long established business, the modern character of its plants, its efficient technical and commercial organization, as well as its strong financial position, made it easily superior to any of its competitors. It had a distinct advantage in all these respects over even the Federal Steel Company, which was its largest rival, but whose plants were for the most part less modern and also widely separated geographically. There was no question that if the Carnegie Company, with its unlimited means and efficient organization, went into the manufacture of wire, tubes, sheets, or tin plate it would be more than able to hold its own against the respective large consolidations which produced those products, and which in their efforts to monopolize the business had been constrained to include in their respective organizations many plants of inferior character. T H E F I N A N C I A L S I T U A T I O N . — T h i s unsettled trade situation was aggravated because of the importance which the securities of several of these steel concerns had assumed in the stock market. A period of violent competition in the steel industry

P R O B L E M S

945

would inevitably have been followed by a great decline in the value of these securities. A still more important matter was that the financial backers of some of these steel concerns had extensive commitments in other directions, which might be jeopardized by such an acute struggle in the steel industry. From the standpoint of these financiers, therefore, the situation presented at once a great danger and a great opportunity. From a financial point of view there were four important steel groups, which were more or less distinct, namely, the Morgan group, the Moore group, and the Carnegie and the Rockefeller interests. The Morgan group, which included the Federal Steel, National Tube, and American Bridge companies, enjoyed of course the advantage of a strong financial support, but these financial interests were extensively committed in other lines of business, especially in railroad financiering. T h e y naturally would be especially concerned in preventing the outbreak of the threatened competition in the steel business. It may be noted that there were reports at this time that the Carnegie interests were contemplating the construction of a railroad from Pittsburg to the Atlantic seaboard. This threat, if made good, would have created an extremely disturbing factor in the trunk-line situation. The Moore concerns, already described, were the most heavily over-capitalized and suffered from a distinctly speculative backing. The Carnegie interests had abundant capital and credit, and their securities did not figure on the stock market, while their organization and management were unequaled. They were apparently in the best position of any of these groups to meet a price war. The Rockefeller interests were entirely concerned with the production and transportation of iron ore. Their financial resources were of course abundant for any emergency. Their stocks did not figure to any appreciable extent on the exchanges. The American Steel and Wire Company apparently was not closely affiliated with any of the foregoing groups. Despite its great earnings, its position was vulnerable. It apparently had no especial banking support. It is evident, therefore, that, both from the point of view of the iron and steel industry and that of the stock market, the threatened outbreak of violent competition between these rival interests involved serious consequences. It might have meant the sudden termination of the extraordinary period of speculative activity and profit. On the

946

THE NEW FREEDOM

other hand, an averting of this conflict by a merger of the various great consolidations, if successfully financed, would be a tremendous "bull" argument. It would afford its promoters an opportunity for enormous stock-market profits through the à i e of its securities. The advantages to these interests, through the concentration of profits in different stages of the industry under a single control, would also be considerable, and there was undoubtedly some advantage to be gained through the further integration which such a consolidation would render possible. It was clear to everyone that no consolidation of this sort could be made successful unless it included the Carnegie Company, which was the most powerful factor in the situation, which had long been noted for its aggressive tactics, and which, as above shown, had precipitated this crisis. Moreover, there can be little doubt that many interests in the steel industry regarded Mr. Carnegie's personal influence as β menace to their success, and desired to secure his retirement from the trade. A t the same time the enormous earning power of the Carnegie concern would be an exceedingly important consideration both in the profits of the new company and also in facilitating the flotation of its securities. T h e primary solution of the situation, therefore, from the standpoint of these interests, was to buy out Mr. Carnegie. Mr. Carnegie's wellknown willingness to sell made the problem largely one of terms. Negotiations were promptly undertaken and speedily concluded by arranging to take over his large interest in his concern in exchange for bonds of the new consolidation. On March 2, 1901, announcement was made by J. P. Morgan & Co., as bankers, that arrangements had been completed for the organization of the United States Steel Corporation to acquire control of the following concerns: Carnegie Company (of New Jersey), Federal Steel Company, American Steel and W i r e Company, National Tube Company, National Steel Company, American T i n Plate Company, American Steel Hoop Company, and American Sheet Steel Company. T h e preliminary incorporation papers of the new company, under New Jersey laws, had already been taken out. The terms offered the constituent companies were speedily accepted by a great majority of the stockholders of these concerns, and, on April 1, 1901, within a very few weeks after the first serious intimation that negotiations were under way the United States Steel Corporation was definitely launched and in actual operation. T h e authorized capital stock was S ι, 100,000,000, equally divided between preferred

and common shares. In addition there was a bond issue of $304,000,000 (exclusive of underlying indebtedness aggregating approximately $81,000,000, this including sundry mortgages and purchasemoney obligations). About (425,000,000 of each class of stock and all of the bonds were issued for the companies named and for other purposes. Very soon after its organization the Corporation made three further important acquisitions, namely, the Lake Superior Consolidated Iron Mines, the Bessemer Steamship Company, and the American Bridge Company. It also acquired a one-sixth interest in the Oliver Iron Mining Company and the Pittsburg Steamship Company, the other fivesixths having been secured in the purchase of the Carnegie Company. During the following summer it purchased the Shelby Steel Tube Company. A s a result of these acquisition^ its issue of stock was increased to over $500,000,000 of each class, giving it an issued capitalization in stock alone of more than $1,000,000,000. Thus, the threatened conflict in the steel industry was averted, while, as shown later, an unprecedented profit was reaped by the organization syndicate. ESSENTIAL CHARACTER OF THE STEEL CORPORATION IN I9OI

The United States Steel Corporation, by including in its organization both of the first two groups of companies described, insured to itself on tne one hand an abundant capacity for the production of crude steel and a large proportion of the country's output of heavy rolled products, and, on the other hand, secured control of several quasimonopolistic concerns manufacturing particular lines of the more elaborated products, such as sheets, tin plate, tubes, and wire. The abundant steel-making capacity of the first group made it easy, of course, to supply all the steel required by this second group of concerns. Furthermore, while the companies in the first group taken together were very well fortified with reserves of raw materials, the acquisition of the -Lake Superior Consolidated Iron Mines furnished an enormous additional supply and gave to the Corporation an exceptional degree of strength in this respect. It also contributed to the combination one of the most important railroads in the Lake ore region. The position taken by the Steel Corporation is that this great aggregation of property was in the main an assembling and coordination of different branches in the industry, the primary object of which was to secure greater efficiency and integration, and, of course, the saving of the payment of profits to others. The Corporation contends

AMERICAN

PROBLEMS

947

special kinds of pig iron which really did not inthat most of its constituent concerns were not in actual competition with one another, and it is dis- volve competition with the Corporation. T h e Corporation's share of the production of pig iron posed to minimize the restriction of competition f o r strictly steel-making purposes was probably brought about as a result of this great merger. . . . not less than j 8 per cent. These possible economies of consolidation, however, probably were a subordinate consideration T h e Corporation had hundreds of millions of in the formation of the Steel Corporation except tons of desirable Lake ore in reserves, over 50,000 those of a commercial character, i. e., those that acres of the choicest coking-coal lands, over 1,000 did away with the necessity of paying a profit to miles of railroad, exclusive of subsidiary tracksomebody else on the raw materials or transporta- age, a fleet of 1 1 2 Lake steamers and barges, not tion of raw materials. T h e possibilities of real to mention large investments in docks, naturalmanufacturing economies could be but slowly gas and limestone properties, and other kindred realized in most cases, and, as already stated, the branches of the industry. controlling motive in the organization of the comDespite its enormous size the United States Steel pany was to avert the competitive struggle then Corporation did not secure a monopoly of the threatened. Meanwhile, however, the argument of iron and steel industry as a whole, although its economy and increased earning power was used position in several branches was monopolistic to justify the formation of the combination, and (that is, tending toward monopoly). In the case also to facilitate the flotation of its securities. of a f e w products, such as tin plate, sheets, wire, and nails, its control was at first very nearly comT h e crude-steel (ingot) capacity of the Corporation at its organization was fully 9,400,000 plete, but in other branches of the industry it had a number of important rivals from the start. Thus, tons, this representing substantially 66 per cent of it will be seen that the Corporation did not inthe total f o r the country, while its capacity f o r the clude such concerns as the Pennsylvania Steel various finished products which it manufactured Company, the Cambria Steel Company, the Lackwas approximately 7,700,000 tons, this representawanna Iron and Steel Company, Jones & Laughing about 50 per cent of the total of the country lins (Ltd.), the Bethlehem Steel Company, the R e f o r these lines. In certain products, however, the Corporation's percentage approached a complete public Iron and Steel Company, and the Colorado Fuel and Iron Company, not to mention several monopoly. Its larger percentage of crude than of others of magnitude. A t the start, moreover, the finished steel is explained b y the fact that some Corporation did not acquire the Tennessee Coal, of the principal steel-making concerns did not Iron and Railroad Company, that concern not behave finishing mills f o r more than a portion of ing taken over until 1907. . . . their output. Roughly speaking, it may be said that the Corporation at its organization secured control of COMPARISON OF VALUATIONS OF STEEL CORPORATION'S three-fifths of the steel business of the country. Its PROPERTY IN I9OI WITH ITS CAPITALIZATION proportion of the pig-iron business was somewhat T h e Bureau's valuations of the Steel Corporasmaller, about 44 per cent, its actual capacity of tion's property in 1901, arrived at b y these differthis product being about 7,400,000 tons. These ent methods, may now be compared with its outfigures, however, do not fairly state the position standing capitalization at that time. This is done in of the Corporation, because of the large producthe following table: tion b y outsiders of foundry pig iron and certain COMPARISON OF ESTIMATES

OF VALUE OF PROPERTY OF UNITED STATES STEEL CORPORATION AT ITS

ORGANIZATION IN I 9 O I , WITH PAR VALUE OF ITS SECURITIES

Total capitalization in April, 1901, including underlying bonds and purchase-money obligations $1,402,846,817» Investment in tangible property alone, indicated b y historical analysis 676,000,000 Value of all property, tangible and intangible, as indicated b y market prices of securities of constituent concerns 793,000,000 Value of tangible property as estimated b y departments of the business 682,000,000 8

Excess of securities over estimates $726,846,817 609,846,817 720,846,817

Excluding $535,407 unacquired stock in constituent concerns for which no corresponding deduction was made in the first and third estimates.

948

T H E

N E W

It will be seen at once that the securities issued b y the Steel Corporation v e r y greatly exceeded the indicated value of the property acquired, as established b y any one of the three methods of valuation. T h e valuation of the tangible property arrived at b y historical study, as well as that by departments of the business, shows an excess of capitalization greater than the indicated value itself. T h e valuation b y departments, namely, (682,000,000, shows an excess of nearly $721,000,000. E v e n taking the indicated market value of the securities of the subsidiary concerns, namely, $793,000,000, which valuation includes the public estimate f o r intangible considerations as well as physical property, the excess of the Steel Corporation's capitalization was still over $609,000,000. N a t u r a l l y the valuation arrived at by this method exceeded those obtained in the other two cases. . . . OVERCAPITALIZATION COMMISSION

TO

INDICATED

BY

UNDERWRITING

ENORMOUS

SYNDICATE

V e r y convincing evidence of a ruling tendency toward excessive capitalization is afforded by the enormous payment the Steel Corporation allowed its underwriting syndicate. T h i s syndicate, as shown elsewhere, provided the Corporation with $25,000,000 of cash capital and also incurred expenses of about $3,000,000 either in buying scattered parcels of stock or otherwise, making its total cash expenditure $28,000,000. F o r this cash consideration, plus its underwriting services, the syndicate received f r o m the Steel Corporation the enormous total of practically 1,300,000 shares of its stock (half preferred and half c o m m o n ) of an aggregate par value of practically $130,000,000. T h i s stock appears to have realized approximately

F R E E D O M

$90,500,000 (counting $4,000,000 unsold preferred stock at p a r ) , leaving as profit to the syndicate, over and above the $18,000,000 cash expenditure noted, a net sum of about $62,500,000. Of this, onefifth, or $12,500,000, went to the syndicate managers f o r their services as such, the remaining $50,000,000 being distributed to the syndicate members. . . . T h i s extravagant compensation to the underwriting syndicate may fairly be cited as further evidence of a general disposition toward excessive issue of securities. T h i s huge commission, it should be noted, f o l lowed v e r y liberal commissions allowed at earlier dates to the promoters of several of the various constituent companies. Assuming that of the total o f , roughly, $65,000,000 par value each of preferred and common stock allowed the Steel C o r poration underwriting syndicate, $28,000,000 of each class (a common basis of compensation in such cases) was f o r the cash consideration noted, there would be left as a commission alone $37,000,000 par value of each class, or a total of $74,000,000 par value. A d d i n g to this the amounts allowed f o r similar commissions in the case of constituent companies at the dates of their respective organizations, and taking into account that the stock so issued by constituent companies received the same terms of exchange f r o m the Steel C o r poration as other stock of the same class, it w o u l d appear that of the Steel Corporation's stock in 1901 at least $150,000,000 (this including o v e r $40,000,000 of the p r e f e r r e d ) was issued either directly or indirectly f o r such promotion or underwriting services, this being over and above the enormous amounts of common stock issued as a bonus f o r property and f o r cash.

THE PUJO COMMITTEE N E W Y O R K STATE'S i n v e s t i g a t i o n o f t h e i n s u r -

k n o w n as the P u j o C o m m i t t e e R e p o r t a f t e r its

a n c e business in 1 9 0 5 , t h e revelations of m u c k -

c h a i r m a n , C o n g r e s s m a n P u j o of L o u i s i a n a .

r a k e r s like T h o m a s L a w s o n , the panic of 1907,

g o o d deal of the e f f e c t i v e n e s s of the r e p o r t —

A

and the c a p t u r e of the l o w e r H o u s e of C o n -

and not a little of its sensational

gress b v the D e m o c r a t s in 1 9 1 0 , all c o n t r i b -

w a s o w i n g to the skillful examination o f f r e -

u t e d to c o n g r e s s i o n a l readiness to investigate

q u e n t l y r e l u c t a n t witnesses b y the c o m m i t t e e ' s

t h e c o n c e n t r a t i o n of t h e c o n t r o l of m o n e y and

counsel, S a m u e l U n t e r m e y e r of N e w

c r e d i t in the U n i t e d States. A

subcommittee

character—

York.

A c c o r d i n g to the m a j o r i t y m e m b e r s o f the

of the H o u s e C o m m i t t e e on B a n k i n g and C u r -

C o m m i t t e e , the t e s t i m o n y p r o v e d that

r e n c y w a s a p p o i n t e d t o m a k e the i n q u i r y . Its

existed an i d e n t i t y and c o m m u n i t y of i n t e r e s t

labors p r o d u c e d f o u r l a r g e v o l u m e s of

b e t w e e n a f e w leaders of

mony

and

a

report

which

was

testi-

popularly

those

in

the

investment

finance,

there

particularly

banking

business.

A M E R I C A N PROBLEMS They controlled money and credit through voting trusts and interlocking directorates. Their domination over banks, trust companies, and insurance companies gave them a control over other people's money and credit which, to the Committee, was even more serious than concentration of control in industry. Notable among the observations of the Committee are its remarks on the effects of the spreading ownership of securities and the activities of the securities affiliates of national banks. Scattered stockholders were increasingly helpless against management and promoters; the diffusion of stock ownership tended to concentrate rather than spread economic power. T h e securities affiliates, identical with the banks in ownership and control, had been organized to do what the law forbade national banks to do on their own account. The affiliates engaged in underwriting and speculation and gave bank directors the opportunity to play the market with the bank's deposits. The Committee recommended the abolition of voting trusts and interlocking directorates

949

among national banks; the comptroller of the currency should have a veto on mergers of such institutions. Further, national banks should be forbidden to have securities affiliates, to act as the fiscal agents of corporations, or to engage in securities underwriting. Financial transactions between banks and their directors should be forbidden and the ban enforced by checking the financial activities of bank directors. The minority interest in a corporation should be protected by some plan f o r cumulative voting, moreover, and the Interstate Commerce Commission should be given the right to supervise all schemes f o r the reorganization of railroads. Some of these proposals were embodied in the Clayton Act of 1914 and the Transportation Act of 1920; but the separation of securities affiliates and national banks did not take place until the passage of the Banking A c t of 1933. And by the 1930s, in fact, the power of the great investment houses was largely spent. The Pujo Committee report was printed as House Document No. 504, 6îd Congress, 2d Session (Washington, 1913).

Report on Concentration of Control of Money and Credit B Y SECTION

I.—Two

K I N D S OF

T H E

P U J O

CONCENTRATION

at the outset to distinguish between concentration of the volume of money in the three central reserve cities of the national banking system—New York, Chicago, and SL Louis—and concentration of control of this volume of money and consequently of credit into fewer and fewer hands. They are very different things. An increasing proportion of the banking resources of the country might be concentrating at a given point at the same time that control of such resources at that point was spreading out in a wider circle. Concentration of control of money, and consequently of credit, more particularly in the city of New York, is the subject of this inquiry. With concentration of the volume of money at certain points, sometimes attributed, so far as it is unnatural, to the provision of the national-banking act permitting banks in the 47 other reserve cities to deposit with those in the three central reserve I T IS IMPORTANT

C O M M I T T E E

cities half of their reserves, we are not here directly concerned. Whether under a different currency system the resources in our banks would be greater or less is comparatively immaterial if they continued to be controlled by a small group. We therefore regard the argument presented to us to show that the growth of concentration of the volume of resources in the banks of New York Gty has been at a rate slightly less than in the rest of the country, if that be the fact, as not involved in our inquiry. It should be observed in this connection, however, that the concentration of control of credit is by no means confined to New York City, so that the argument is inapplicable also in this respect. SECTION

Í . — F A C T OF INCREASING

CONCENTRATION

ADMITTED

The resources of the banks and trust companies of the city of New York in 1911 were $5,121,245,-

95°

THE NEW FREEDOM

1 7 $ , which is 2 1 . 7 } per cent of the total banking resources of the country as reported to the C o m p troller of the C u r r e n c y . T h i s takes no account of the unknown resources of the great private banking houses whose affiliations to the N e w Y o r k financial institutions w e are about to discuss. T h a t in recent years concentration of control of the banking resources and consequently of credit b y the group to which w e will refer has g r o w n apace in the city of N e w Y o r k is defended b y some witnesses and regretted b y others, but acknowledged b y all to be a fact. A s appears f r o m statistics compiled b y accountants f o r the committee, in 1 9 1 1 , of the total resources of the banks and trust companies in N e w Y o r k City, the 20 largest held 42.97 per cent; in 1906, the 20 largest held 38.24 per cent of the total; in 1901, 34.97 per cent. SECTION 3.—PROCESSES OF CONCENTRATION

T h i s increased concentration of control of monev and credit has been effected principally as follows: First, through consolidations of competitive or potentially competitive banks and trust companies, which consolidations in turn have recently been brought under sympathetic management. Second, through the same p o w e r f u l interests becoming large stockholders in potentially competitive banks and trust companies. T h i s is the simplest w a y of acquiring control, but since it requires the largest investment of capital, it is the least used, although the recent investments in that direction f o r that apparent purpose amount to tens of millions of dollars in present market values. T h i r d , through the confederation of potentially competitive banks and trust companies b y means of the system of interlocking directorates. Fourth, through the influence which the more p o w e r f u l banking houses, banks, and trust companies have secured in the management of insurance companies, railroads, producing and trading corporations, and public utility corporations, b y means of stockholdings, voting trusts, fiscal agency contracts, or representation upon their boards of directors, or through supplying the money requirements of railway, industrial, and public utilities corporations and thereby being enabled to participate in the determination of their financial and business policies. F i f t h , through partnership or joint account arrangements between a f e w of the leading banking houses, banks, and trust companies in the purchase of security issues of the great interstate corporations, accompanied b y understandings of re-

cent growth—sometimes called "banking ethics" —which have had the effect of effectually destroying competition between such banking houses, banks, and trust companies in the struggle f o r business or in the purchase and sale of large issues of such securities. SECTION 4.—AGENTS OF CONCENTRATION

It is a fair deduction from the testimony that the most active agents in forwarding and bringing about the concentration of control of money and credit through one or another of the processes above described have been and are— J . P. M o r g a n & Co. First National Bank of N e w Y o r k . National City Bank of N e w Y o r k . Lee, Higginson & Co., of Boston and N e w Y o r k . Kidder, Peabody & Co., of Boston and N e w Y o r k . Kuhn, Loeb & Co. W e shall describe, First, the members of this group separately, showing the part of each in the general movement and the ramifications of its influence; Second, the interrelations of members of the group; and T h i r d , their combined influence in the financial and commercial life of the country as expressed in the greater banks, trust companies and insurance companies, transportation systems, producing and trading corporations, and public utility corporations. SECTION 5 . — J . P. MORGAN &

Co

Organization.—}. P. Morgan & Co. of N e w Y o r k and Drexel & Co. of Philadelphia are one and the same firm, composed of 1 1 members: J . P. Morgan, Ε . T . Stotesburv, Charles Steele, J . P. Morgan, jr., H e n r y P. Davison, A r t h u r E . N e w bold, William P. Hamilton, W i l l i a m H . Porter, T h o m a s W . Lamont, Horatio G . L l o y d , and T e m p l e Bowdoin. G e o r g e W . Perkins was a member f r o m 1902 until January 1, 1 9 1 1 . A s a firm, it is a partner in the London banking house of J . S. Morgan & Co. and the Paris house of M o r gan, Harjes & Co. General character of business.—It accepts deposits and pays interest thereon and does a general banking business. It is a large lender of m o n e y on the N e w Y o r k Stock Exchange. M o r e especially it acts as a so-called issuing house f o r securities; that is, as purchaser or underwriter or fiscal agent, it takes f r o m the greater corporations their issues of securities and finds a market f o r them either amongst other banking houses, banks and trust companies, or insurance companies, or the general public.

AMERICAN PROBLEMS Resources, deposits, and profits.—Neither the resources and profits of the firm nor its sources of profit have been disclosed. Nor has your committee been able to ascertain its revenues from private purchases or sales of the securities of interstate corporations, nor from such of them as it controls under voting trusts, exclusive fiscal agency agreements, or other arrangements or influences, nor the identity of the banks, trust companies, life insurance companies, or other corporations that have participated in its security issues except where they were for joint account. On November i, 191z, it held deposits of $162,491,819.65, of which $81,96842147 was deposited by 78 interstate corporations on the directorates of j 2 of which it was represented. The committee is unable to state the character of its affiliations, if any, with the 46 corporations on the directorates of which it is unrepresented by one or more members of thefirm,as their identity was not disclosed. Security issues marketed.—During the years 1902 to 1912, inclusive, the firm directly procured the public marketing of security issues of corporations amounting in round numbers to $1,950,000,ooo, including only issues of interstate corporations. The volume of securities privately issued or marketed by it, and of intrastate corporations, does not appear. Nor is there information available of the extent to which they participated as underwriters in issues made by banks or banking houses other than those shown on the charts and lists in evidence. . . . SEC.

H.—INTERRELATIONS

OF

MEMBERS

OF

THE

GROUP

Morgan & Co. and First National Bank.—Mr. Morgan, head of the firm of Morgan & Co., of New York, and Drexel & Co., of Philadelphia, and Mr. Baker, head officer and dominant power in the First National Bank since shortly after its organization, have been close friends and business associates from almost the time they began business. . . . Next to Mr. Baker, Morgan & Co., is the largest stockholder of the First National, owning 14,500 shares, making the combined holdings of Mr. Baker and his son and Morgan & Co. about 40,000 shares out of 100,000 outstanding—a joint investment, based on the market value, of $41,000,000 in this one institution. Three of the Morgan partners—Mr. Morgan himself, Mr. Davison, and Mr. Lamont—are directors of the First National, and Mr. Morgan is a member of the executive committee of four, which has not, however, been active and has rarely met.

95'

The First National has been associated with Morgan & Co. in the control of the Bankers Trust Co. As before stated, when the company was organized, its entire capital stock was vested in George W. Perkins, H. P. Davison, and Daniel G. Reid as voting trustees. Mr. Perkins was then a Morgan partner and Mr. Davison and Mr. Reid were, respectively, vice president and a large stockholder of the First National. Mr. Davison, who has since become a Morgan partner, and Mr. Reid have continued as such trustees. Mr. Perkins has been succeeded by the attorney of the company, who is also Mr. Davison's personal counsel. Mr. Davison and Mr. Lamont, of the Morgan firm, and Mr. Hine, president, Mr. Norton, vice president, and Mr. Hepburn, member of the executive committee of the First National, are codirectors of the Bankers Trust Co., Mr. Hine being also a member of its executive committee. The First National likewise has been associated with Morgan & Co. in the control of the Guaranty Trust Co., Mr. Baker of the former being joined with Mr. Davison and Mr. Porter of the latter as voting trustees. In the Astor Trust Co., controlled by Morgan & Co. through the Bankers Trust Co., Mr. Baker and Mr. Hine, chief officers of the First National, are directors. In the Liberty National Bank, controlled by Morgan & Co. through the Bankers Trust Co., Mr. Hine is also a director. . . . But nothing demonstrates quite so clearly the close and continuing cooperation between Morgan & Co. and the First National Bank as their joint purchases and underwritings of corporate securities. Since 1903 they have purchased for their joint account, generally with other associates, 70 odd security issues of 30 different corporations, aggregating approximately $1,080,000,000. It is thus seen that through stockholdings, interlocking directors, partnership transactions, and other relations, Morgan & Co. and the First National Bank are locked together in a complete and enduring community of interest. Their relations in this regard are, indeed, a commonplace in the financial world. Thus, Mr. Schiff being asked whether he knew "the close relations between Messrs. Morgan and the First National Bank," replied "I do." Morgan it Co., First National Bank, and National City Bank.—Mr. Stillman, as president, chairman of the board of directors and largest stockholder, for a long time has held a position of dominance in the National City Bank correspond-

95 2

THE NEW FREEDOM

ing to Mr. Morgan's in his firm and Mr. Baker's in the First National Bank. For many years while Morgan & Co. and the First National Bank were in close business union the National City Bank apparently occupied a position of independence. More recently, however, it has been drawn into the community of interest long existing between the two first named, as is evidenced by a series of important transactions. First. Within three or four years Morgan & Co. acquired $1,500,000 par value of the capital stock of the National City Bank, representing an investment at the stock's present market price of $6,000,000, and J. P. Morgan, jr., became a director. Second. In 1910 Mr. Morgan, in conjunction with both Mr. Baker, his long-time associate, and Mr. Stillman, head of the National City Bank, purchased from Mr. Ryan and the Harriman estate $51,000, par value, of the stock of the Equitable Life Assurance Society, paying therefor what Mr. Ryan originally paid with interest at 5 per cent— about $3,000,000—the investment yielding less than one-eighth of 1 per cent. Mr. Stillman and Mr. Baker each agreed to take a one-fourth interest in the purchase if requested to do so by Mr. Morgan. N o such request has yet been made by him. No sufficient reason has been given for this transaction, nor does any suggest itself, unless it was the desire of these gentlemen to control the investment of the $504,000,000 of assets of this company, or the disposition of the bank and trust company stocks which it held and was compelled by law to sell within a stated time. . . . Third, about a year later Mr. Stillman and Mr. Baker, pursuant to an understanding between them and J. P. Morgan & Co., purchased approximately one-half of the holdings of the Mutual and Equitable Life insurance companies in the stock of the National Bank of Commerce, amounting altogether to some 42,200 shares. Mr. Baker being a member of the finance committee of the Mutual, it was arranged that he should purchase the Equitable's stock—about 15,250 shares—and Mr.

(a) Bankers Trust Co., resources (b) Guaranty Trust Co., resources (c) Astor Trust Co., resources (d) National Bank of Commerce, resources (e) Liberty National Bank, resources (f) Chase National Bank, resources (g) Fanners Loan & Trust Co., resources in all, 7, with total resources of

Stillman the Mutual's. Pursuant to the understanding, Mr. Stillman turned over 10,000 shares to Morgan & Co., who already owned 7,000 shares. Mr. Baker kept 5,000 shares, turned over 5,000 to the First Security Co., and distributed the rest among various persons; 3,000 shares were allotted by Mr. Stillman and Mr. Baker to Kuhn, Locb & Co. . . . The acquisition by Morgan & Co. of a large block of stock of the National City Bank with representation upon its board of directors, and the transactions that followed, in which those two institutions and the First National Bank were joined, as above set forth, show a unison of interest and a continuity of cooperation between the three, such as for many years previously had existed between two of them—Morgan & Co. and the First National. Combined power of Morgan «ir Co., the First National, and National City Banks.—In earlier pages of the report the power of these three great banks was separately set forth. It is now appropriate to consider their combined power as one group. First, as regards banking resources: The resources of Morgan & Co. are unknown; its deposits are $163,000,000. The resources of the First National Bank are $150,000,000 and those of its appendage, the First Security Co., at a very low estimate, $35,000,000. The resources of the National City Bank are $274,000,000; those of its appendage, the National City Co., are unknown, though the capital of the latter is alone $10,000,000. Thus, leaving out of account the very considerable part which is unknown, the institutions composing this group have resources of upward of $632,000,000, aside from the vast individual resources of Messrs. Morgan, Baker and Stillman. Further, as heretofore shown, the members of this group, through stock holdings, voting trusts, interlocking directorates, and other relations, have become in some cases the absolutely dominant factor, in others the most important single factor, in the control of the following banks and trust companies in the city of New York: $205,000,000 232,000,000 27,000,000 190,000,000 29,000,000 150,000,000 135,000,000 968,000,000

AMERICAN

PROBLEMS

953

which, added to the known resources of members of the group themselves, makes . . $1,600,000,000 as the aggregate of known banking resources in the ciry of New York under their control or influence. If there be added also the resources of the Equitable Life Assurance Society controlled through stock ownership of J. P. Morgan 504,000,000 the amount becomes 2,104,000,000 Second, as regards the greater transportation systems. (a) Adams Express Co.: Members of the group have two representatives in the directorate of this company. (b) Anthracite-coal carriers: With the exception of the Pennsylvania and the Delaware & Hudson, the Reading, the Central of N e w Jersey (a majority of whose stock is owned by the Reading), die Lehigh Valley, the Delaware, Lackawanna & Western, the Erie (controlling the N e w York, Susquehanna & Western), and the N e w York, Ontario & Western, afford the only transportation outlets from the anthracite coal fields. A s before stated, they transport 80 per cent of the output moving from the mines and own or control 88 per cent of the entire deposits. The Reading, as now organized, is the creation of a member of this banking group—Morgan & Co. One or more members of the group are stockholders in that system and. have two representatives in its directorate; are stockholders of the Central of N e w Jersey and have four representatives in its directorate; are stockholders of the Lehigh Valley and have four representatives in its directorate; are stockholders of the Delaware, Lackawanna & Western and have nine representatives in its directorate; are stockholders of the Erie and have four representatives in its directorate; have two representatives in the directorate of the New York, Ontario & Western; and have purchased or marketed practically all security issues made by these railroads in recent years. ( c ) Atchison, Topeka & Santa Fe Railway: One or more members of the group are stockholders and have two representatives in the directorate of the company; and since 1907 have purchased or procured the marketing of its security issues to the amount of $107,244,000. (d) Chesapeake & Ohio Railway: Members of the group have two directors in common with this company, and since 1907, in association with others, have purchased or procured the marketing of its security issues to the amount of $85,000,000. (e) Chicago Great Western Railway: Members of the group absolutely control this system through a voting trust.

(f) Chicago, Milwaukee & St. Paul Railway: Members of the group have three directors or officers in common with this company, and since 1909, in association with others, have purchased or procured the marketing of its security issues to the amount of $112,000,000. (g) Chicago & Northwestern Railway: Members of the group have three directors in common with this company, and since 1909, in association with others, have purchased or procured the marketing of its security issues to the amount of $31,250,000. (h) Chicago, Rock Island & Pacific Railway: Members of the group have four directors in common with this company. (») Great Northern Railway: One or more members of the group are stockholders of and have marketed the only issue of bonds made by this company. (j) International Mercantile Marine Co.: A member of the group organized this company, is a stockholder, dominates it through a voting trust, and markets its securities. (k) New York Central Lines: One or more members of the group are stockholders and have four representatives in the directorate of the company, and since 1907 have purchased from or marketed for it and its principal subsidiaries security issues to the extent of $343,000,000, one member of the group being the company's sole fiscal agent. (/) New York, New Haven & Hartford Railroad: One or more members of the group are stockholders and have three representatives in the directorate of the company, and since 1907 have purchased from or marketed for it and its principal subsidiaries security issues in excess of $150,000,000, one member of the group being the company's sole fiscal agent. (m) Northern Pacific Railway: One member of the group organized this company and is its fiscal agent, and one or more members are stockholders and have six representatives in its directorate and three in its executive committee. (n) Southern Railway: Through a voting trust, members of the group have absolutely controlled this company since its reorganization in 1894. (o) Southern Pacific Co.: Until its separation

9J4

THE NEW FREEDOM

from the Union Pacific, lately ordered by the Supreme Court of the United States, members of the group had three directors in common with this company. ( p ) Union Pacific Railroad: Members of the group have three directors in common with this company. Third, as regards the greater producing and trading corporations. (a) Amalgamated Copper Co.: One member of the group took parr in the organization of the company, still has one leading director in common with it, and markets its securities. (b) American Can Co.: Members of the group have two directors in common with this company. (c) J . I. Case Threshing Machine Co.: The president of one member of the group is a voting trustee of this company and the group also has one representative in its directorate and markets its securities. (d) William Cramp Ship & Engine Building Co.: Members of the group absolutely control this company through a voting trust. (e) General Electric Co.: A member of the group was one of the organizers of the company, is a stockholder, and has always had two representatives in its directorate, and markets its securities. ( f ) International Harvester Co.: A member of the group organized the company, named its directorate and the chairman of its finance committee, directed its management through a voting trust, is a stockholder, and markets its securities. (g) Lackawanna Steel Co.: Members of the group have four directors in common with the company and, with associates, marketed its last issue of securities. (h) Pullman Co.: The group has two representatives, Mr. Morgan, and Mr. Baker, in the directorate of this company. (i) United States Steel Corporation: A member of the group organized this company, named its directorate, and the chairman of its finance committee (which also has the powers of an executive committee) is its sole fiscal agent and a stockholder, and has always controlled its management. Fourth, as regards the greater public utility corporations. (a) American Telephone & Telegraph Co.: One or more members of the group are stockholders, have three representatives in its directorate, and since 1906, with other associates, have marketed f o r it and its subsidiaries security issues in excess of $300,000,000.

(b) Chicago Elevated Railways: A member of the group has two officers or directors in common with the company, and in conjunction with others marketed for it in 1911 security issues amounting to $66,000,000. (c) Consolidated Gas Co. of New York: Members of the group control this company through majority representation on its directorate. (d) Hudson & Manhattan Railroad: One or more members of the group marketed and have large interests in the securities of this company, though its debt is now being adjusted by Kuhn, Loeb & Co. (e) Interborough Rapid Transit Co. of New York: A member of the group is the banker of this company, and the group has agreed to market its impending bond issue of $170,000,000. ( f ) Philadelphia Rapid Transit Co.: Members of the group have two representatives in the directorate of this company. (g) Western Union Telegraph Co.: Members of the group have seven representatives in the directorate of this company. Summary of directorships held by these members of the group.—Exhibit 134-B shows the combined directorships in the more important enterprises held by Morgan & Co., the First National Bank, the National City Bank and the Bankers and Guaranty Trust Cos., which latter two, as previously shown, are absolutely controlled by Morgan & Co. through voting trusts. It appears there that firm members or directors of these institutions together hold: One hundred and eighteen directorships in 34 banks and trust companies having total resources of $2,679,000,000 and total deposits of $1,983,000,000. Thirty directorships in 10 insurance companies having total assets of $2,293,000,000. One hundred and five directorships in 32 transportation systems having a total capitalization of $11,784,000,000 and a total mileage (excluding express companies and steamship lines) of 150,200. Sixty-three directorships in 24 producing and trading corporations having a total capitalization of $3,339,000,000. Twenty-five directorships in 12 public utility corporations having a total capitalization of $2,150,000,000. In all, 341 directorships in 112 corporations having aggregate resources or capitalization of $21,245,000,000. The members of the firm of J. P. Morgan & Co. hold 72 directorships in 47 of the greater corporations; George F. Baker, chairman of the board,

AMERICAN F. L . Hine, president, and G e o r g e F. Baker, jr., and C. D. Norton, vice presidents, of the First National Bank of N e w Y o r k , hold 46 directorships in 37 of the greater corporations; and James Stillman, chairman of the board, Frank A . Vanderlip, president, and Samuel McRoberts, J . T . T a l bert, W . A . Simonson, vice presidents, of the National City Bank of N e w Y o r k , hold 32 directorships in 26 of the greater corporations; making in all f o r these members of the group 150 directorships in 1 1 0 of the greater corporations. W e are not unmindful of the important and valuable part that the gentlemen w h o dominate this inner group and their allies have played in the development of our prosperity. T h e r e should be no disposition to hamper their activities if a situation can be brought about where their capital, prestige, and connections can be independently employed in free and open competition. Without the aid of their invaluable enterprise and initiative and their credit and financial power the money requirements of our vast ventures could not have been financed in the past, and much less so in the future. It is also recognized that cooperation between them is frequently valuable, and often essential to the public interest as well as their own, in order to permit of the furnishing or guaranteeing of the requirements of our vast enterprises of the present day and of the still larger ones that are probably in store f o r us. But these considerations do not involve their taking control of the resources of our financial institutions or of the savings of the people in our life insurance companies nor that they shall be able to levy tribute upon every large enterprise; nor that commercial credits or stock exchange markets and values shall wait upon their beck and call. Other countries finance enterprises quite as important as our own without employing these methods. Far more dangerous than all that has happened to us in the past in the w a y of elimination of com-

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petition in industry is the control of credit through the domination of these groups over our banks and industries. It means that there can be no hope of revived competition and no new ventures on a scale commensurate with the needs of modern commerce or that could live against existing combinations, without the consent of those who dominate these sources of credit. A banking house that has organized a great industrial or railway combination or that has offered its securities to the public, is represented on the board of directors and acts as its fiscal agent, thereby assumes a certain guardianship over that corporation. In the ratio in which that corporation succeeds or fails the prestige of the banking house and its capacity f o r absorbing and distributing future issues of securities is affected. If competition is threatened it is manifestly the duty of the bankers from their point of view of the protection of the stockholders, as distinguished from the standpoint of the public, to prevent it if possible. If they control the sources of credit they can furnish such protection. It is this element in the situation that unless checked is likely to do more to prevent the restoration of competition than all other conditions combined. T h i s power standing between the trusts and the economic forces of competition is the f a c tor most to be dreaded and guarded against b y the advocates of revived competition. . . . T h e acts of this inner group, as here described, have nevertheless been more destructive of competition than anything accomplished b y the trusts, f o r they strike at the very vitals of potential competition in every industry that is under their protection, a condition which if permitted to continue, will render impossible all attempts to restore normal competitive conditions in the industrial world. It accordingly behooves us to see to it that the bankers who require and are bidding f o r the money held b y our banks, trust companies, and life insurance companies to use in their ventures are not permitted to control and utilize these funds as though they were their own.

LABOR IN AMERICA OLIVER WENDELL HOLMES IN 1904, when N e w Y o r k State revised its code of factory legislation, the hours of w o r k for bakers were set at not more than ten hours a day or sixty hours a week. A Utica balceshop owner, sentenced to pay a $ 5 0 fine for

a second violation of the law, brought the case before the Supreme Court on the constitutional issue. T h e Court divided five to four, with t w o separate dissenting opinions, one b y Justices

T H E N E W FREEDOM

956

health, restrict their freedom to contract to work as long as they pleased. Finally, except in instances where the Federal Constitution has been violated "beyond all question," it is the duty of the Supreme Court to sustain state laws. The scope of the Fourteenth Amendment is being enlarged "far beyond its original purpose." In his dissent, Holmes casts aside legal and factual detail to strike at the majority's major premise. Freedom of contract is not an absolute, it is a developing premise. The business of the Supreme Court is the interpretation of the law, not the canonization of social philosophies. And Holmes refers specifically to the Spencerian evolutionary doctrines which W i l Both dissenting opinions stressed the broad liam Graham Sumner had succeeded in writdiscretion of state legislatures. In borderline ing into American social attitudes a generation cases of the exercise of the police power, the previously. It took still another generation bebalance of doubt must be resolved in the state's fore those attitudes came to be questioned serifavor; the wisdom of legislative action is no ously. After 1937, Holmes's famous dissents beconcern of the Supreme Court. Turning to the came the backbone of the American legal sysrealm of fact, the three dissenters argued tem, certainly as regards the relations between jointly that baking was an unhealthful occu- American legislatures and problems of social pation. Most countries of Western Europe welfare. have the legal ten-hour day, and New York The case and decision are reported in 198 certainly could, in the interests of the bakers' United States 45 (April 17, 1905).

Harlan, White, and Day, the other, and more celebrated, by Justice Oliver Wendell Holmes ( 1 8 4 1 - 1 9 3 5 ) . T h e majority opinion declared the right to make a contract was part of the "liberty" protected by the Fourteenth Amendment. That liberty included the prerogatives of purchasing and selling labor except as controlled by a legitimate exercise of the state's police power. Since a baker's work could not be shown to be unhealthful, there was no ground for restricting hours of labor in that trade; hence the N e w York law was an "unreasonable, unnecessary and arbitrary" exercise of the police power, and so void under the Federal Constitution.

Dissenting Opinion in Lochner v. New BY

OLIVER

WENDELL

MR. JUSTICE HOLMES DISSENTING:

I regret sincerely that I am unable to agree with the judgment in this case, and that I think it m y duty to express my dissent. T h i s case is decided upon an economic theory which a large part of the country does not entertain. If it w e r e a question whether I agreed with that theory, I should desire to study it further and long b e f o r e making up m y mind. But I do not conceive that to be m y duty, because I strongly believe that my agreement or disagreement has nothing to do with the right of a majority to embody their opinions in law. It is settled by various decisions of this court that state constitutions and state laws may regulate life in many ways which w e as legislators might think as injudicious, or if y o u like as tyrannical, as this, and which, equally with this, interfere with the liberty to contract.

York

HOLMES

Sunday laws and usury laws are ancient examples. A more modern one is the prohibition of lotteries. T h e liberty of the citizen to do as he likes so long as he does not interfere with the liberty of others to do the same, which has been a shibboleth f o r some well-known writers, is interfered with b y school laws, b y the Postoffice, b y e v e r y state or municipal institution which takes his money f o r purposes thought desirable, whether he likes it or not. T h e 14th Amendment does not enact M r . Herbert Spencer's Social Statics. T h e other d a y we sustained the Massachusetts vaccination l a w . Jacobson v. Massachusetts, 197 U . S . 1 1 , ante, 643, 25 Sup. Ct. R e p . 358. United States and state statutes and decisions cutting down the liberty to contract by w a y of combination are familiar to this court. Northern Securities Co. v. United

AMERICAN States, 193 U.S. 197, 48 L. ed. 679, 24 Sup. Ct. Rep. 436. T w o years ago we upheld the prohibition of sales of stock on margins, or for future delivery, in the Constitution of California. Otis v. Parker, 187 U.S. 606, 47 L. ed. 323, 23 Sup. Ct. Rep. 168. The decision sustaining an eight-hour law for miners is still recent. Holden v. Hardy, 169 U.S. 366, 42 L. ed. 780, 18 Sup. Ct. Rep. 383. Some of these laws embody convictions or prejudices which judges are likely to share. Some may not. But a Constitution is not intended to embody a particular economic theory, whether of paternalism and the organic relation of the citizen to the state or of laissez faire. It is made for people of fundamentally differing views, and the accident of our finding certain opinions natural and familiar, or novel, and even shocking, ought not to conclude our judgment upon the question whether statutes embodying them conflict with the Constitution of the United States. General propositions do not decide concrete cases. The decision will depend on a judgment or

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intuition more subtle than any articulate major premise. But I think that the proposition just stated," if it is accepted, will carry us far toward the end. Every opinion tends to become a law. I think that the word "liberty," in the 14th Amendment, is perverted when it is held to prevent the natural outcome of a dominant opinion, unless it can be said that a rational and fair man necessarily would admit that the statute proposed would infringe fundamental principles as they have been understood by the traditions of our people and our law. It does not need research to show that no such sweeping condemnation can be passed upon the statute before us. A reasonable man might think it a proper measure on the score of health. Men whom I certainly could not pronounce unreasonable would uphold it as a first instalment of a general regulation of the hours of work. Whether in the latter aspect it would be open to the charge of inequality I think it unnecessary to discuss.

SAMUEL GOMPERS SAMUEL GOMPERS opposed Supreme Court decisions limiting the activities of organized labor. Y e t his social attitude was so like that of the judges whose decisions he resented that the examples of his thinking printed here might have made part of the utterances of any "conservative" majority opinion of the Court. Still, f o r all the similarity in phrase, the approach was subtly different. Conservatives opposed state intervention to protect labor because such intervention was in itself contrary to social truth, the philosophy of evolutionary laissez faire. Gompers opposed state action because government was in the hands of those essentially hostile to the aspirations of labor. Hence, protective legislation would end as strait-jacket legislation; it would hamper labor organization in its w o r k and make the w o r k ingman completely subject to his enemies, w h o controlled the state. Such an attitude was natural to a man whose experience had been that of Samuel Gompers ( 1 8 5 0 - 1 9 2 4 ) . His parents, w h o were Dutch Jews, left the Netherlands f o r England where

the elder Gompers practiced the cigarmaker's craft. T h e family came to American in 1863, when the Civil W a r was stimulating British emigration to the United States. In N e w Y o r k , Samuel Gompers turned to his father's trade, joined the Cigarmaker's Union, and helped organize the craft on militant trade union lines. In 1881, Gompers was one of the leaders active in forming the Federation of Organized Trades and Labor Unions, when it became evident that membership in the Knights of Labor tended to restrict craft autonomy. In 1886, again under Gompers's leadership, the Federation was reformed into the American Federation of Labor. H e became its president and except f o r a single year remained at the head of the A . F . of L . until his death. Under Gompers, the A . F . of L . attempted to combine autonomy and union among the separate crafts. It insisted on the principle of a single union organization within each trade and avoided all political action except strenuous lobbying f o r particular measures. On the economic front, the A . F. of L . sought to organize the unorganized, pushed the campaign

9J8

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N E W FREEDOM

f o r the union label, and fostered boycotts of firms unfair to union labor. B y 1915, however, the use of most of labor's effective weapons had been denied b y the courts. T h e boycott was outlawed; strikes were regularly broken b y the injunction; and labor had been declared a commodity within the meaning of the AntiT r u s t law of 1890. Government had shown itself hostile to labor, then, but labor's remedy was not to make government friendly through the elective process or b y working for socialism. L a bor, Gompers argued to the day of his death, must remain faithful to the philosophy of "voluntarism." It must fight for freedom to organize, to strike, and to make collective agreements with employers. Free unions would raise wages and improve workers' liv-

Two

ing standards. N o program of social insurance could do as much. Such a program, like proposals for compulsory arbitration, was a real threat to labor's freedom. Once the camel of government intervention thrust its nose inside the tent flap, free, independent, and voluntary trade unionism was doomed. It was not until the nineteen thirties that the A . F. of L . indicated its willingness to accept government intervention. Even so, it never sought alliance with a political party, as was the case of its great rival, the Congress of Industrial Organizations. T h e t w o selections reprinted here are from The American Federationist, the official organ of the A . F . of L . T h e first appeared in the February, 1 9 1 5 , issue; the second in the issue of January, 1 9 1 7 .

Editorials from the American BY

Ι . S E L F - H E L P IS T H E B E S T

S A M U E L

HELP

WHITHER are w e drifting?

There is a strange spirit abroad in these times. The whole people is hugging the delusion that law is a panacea. W h a t e v e r the ill or the wrong or the ideal, immediately follows the suggestion—enact a law. . . . Whether as a result of laziness or incompetency there is a steadily growing disposition to shift responsibility f o r personal progress and welfare to outside agencies. W h a t can be the result of this tendency but the softening of the moral fibre of the people? W h e n there is unwillingness to accept responsibility for one's life and f o r making the most of it there is a loss of strong, red-blooded, rugged independence and will power to grapple with the wrong of the world and to establish justice through the volition of those concerned. Many of the things f o r which many are now deludedly demanding legislative regulation should and must be worked out by those concerned. Initiative, aggressive conviction, enlightened selfinterest, are the characteristics that must be dominant among the people if the nation is to make substantial progress toward better living and higher ideals. Legislation can not secure these characteristics but it can facilitate or impede them.

Federationist

G O M P E R S

Laws can not create and superimpose the ideals sought, they can only free people from the shackles and give them a chance to w o r k out their own salvation. Many conscientious and zealous persons think that every evil, every mistake, every unwise practice, can be straightway corrected b y law. There is among some critics of prevailing conditions a belief that legislation is a short-cut to securing any desired reform—merely enact a law and the thing is done. N o w enacting a law and securing the realization of the purpose the law is aimed to secure are two vastly different matters. Of the making of many laws there is apparendy no end, f o r legislative and congressional mills yearly grind out thousands. But f o r the enforcement of these laws there is little effort unless enforcement is demanded b y public opinion or by interested groups of citizens. As a rule the laws affect conditions and ieople little, and society is glad to escape with so ittle damage. A law that really is a law, is a result of public thought and conviction and not a power to create thought or conviction. T h e enforcement of the law follows naturally because the people will it. T o enact a law with the hope and for the purpose of educating the people is to proceed b y indirection and to waste energy. It is better to begin w o r k

f

AMERICAN for securing ideals by directing activity first for fundamentals. Frequently, when the people concerned become mindful and eager for what will promote their own welfare, they find that they are much more able to secure what will benefit and adapt their methods to changing circumstances than is any law or the administration of that law. T h e virile spirit that has given our young nation a foremost place among the nations of the world is the spirit of aggressive initiative and independence, the ability of our people to grapple with hard problems and to solve them for their own benefit and f o r the benefit of the nation. W e must not as a nation allow ourselves to drift upon a policy of excessive regulation by legislation—a policy that eats at and will surely undermine the very foundations of personal freedom. These principles and facts apply to the working people, the organized wage earners, as fully and completely as to any other group or to the people as a whole. Labor seeks legislation from the hands of government for such purposes only as the individuals or groups of workers can not do for themselves, and for the freedom and the right to exercise their normal activities in the industrial and social struggle for the protection and promotion of their rights and interests and for the accomplishment of their highest and best ideab. Thus Labor asks legislation providing for the abolition of child labor; security and safety in life and work; sanitation in factory, shop, mill and home; workmen's compensation in preference to employers' liability; the regulation of convict labor and the like; the enactment of laws such as the proposed seamen's bill and the labor provisions of the Clayton law already enacted; the regulation of the issuance of injunctions and the trials of contempt cases; these latter work for freedom, for right, for justice. These reforms the workers and groups can not secure without law, because they are governmental functions and can not be accomplished by private agencies. In a word, the labor movement undertakes to secure from government, both state snd nation, the enactment of laws for the accomplishment of such things as the working people can not secure or enforce for themselves. W e know no better way of illustrating this thought than by quoting the report we made to the Denver (1908) Convention, on economic power, as follows: " T h e trade union movement, true to its history, its traditions and aspirations has done, is doing, and will undoubtedly do more in the interests of mankind to humanize the human family than all

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other agencies combined. Devoting primarily our efforts to the membership of our organizations, yet there is not a declaration which we can make, or an action we can take for their protection and their advancement but which will have its correspondingly beneficent influence upon the unorganized workers and upon the masses of the people. Resistance to wage reductions by union workers is the check upon still further encroachments upon the unorganized. T o secure an advance either in wages or to prevent a reduction of hours of labor by union workers is to bring these advantages correspondingly to the unorganized toilers. W e can not obtain legislative enactment to protect the rights and interests of the organized, but that it must equally include all our peopie. "Our movement is the barrier and check to aggression and tyranny on the one hand; on the other, it is the leaven for the common uplift of all. It is therefore that the economic power and influence of the labor movement is die most potent. W e have exercised, and we shall continue to exercise, our political power; and that, too, without becoming politically partisan. W e shall aim to select our law-making bodies, national, state, and municipal, men from the ranks of labor; men who are earnest, honest, intelligent, and sincerely devoted to the cause of the toilers and the people generally. "In whatever form or shape the men of labor may exercise their energies and activities, in inception and result the effort is for the common uplift of all, though our political activities must of necessity be primarily devoted to acquire for our economic movement its freest and fullest natural development. "Our movement has not asked and will not ask at the hands of government anything which the workers can and should do for themselves. T h e movement of labor is founded upon the principle that that which we do for ourselves, individually and collectively, is done best. It is therefore that the exercise by the workers of their economic power is after all the greatest and the most potent power which they can wield. "The possession of great economic power does not imply its abuse, but rather its right use. Consciousness and possession of economic power bring with them responsibility, wisdom, and care in its exercise. These have made the labor movement of our country a tower of strength inspiring the confidence and respect of the masses of our workers as well as the sympathetic support of students, thinkers and liberty-loving people. " T h e labor union movement as understood and

ç6o

T H E

N E W

expressed by the American Federation of Labor is the historic struggle of the toilers; it has brought light and hope into the factory, the workshop, into the lives and homes of our workers; it has borne the brant of battle and bears the honorable scars of past battles. It embodies Labor's hopes and aspirations for a brighter and a better day, not only for the future, but for today, tomorrow, and tomorrow's tomorrow, each a better day than the one which has gone before."

z . N O T EVEN COMPULSORY BENEVOLENCE W a x

Do

During the month of December a National Conference on Social Insurance was held in W a s h ington, D.C. T h e conference was arranged by the Federal Bureau of Labor Statistics of the Department of Labor. As the advocates of social insurance have of late pressed their theories upon public attention, this conference was of importance and interest. T h e r e were many viewpoints presented and many theories advanced. It was evident that there were represented two diametrically different groups of thinkers, those who were looking upon the problems of the wage-earners from the outside and viewing them with sympathetic concern and benevolent thought, and those who were looking upon the problems of wage-earners through the experience and eyes of wage-earners. T h e one group wanted t o do something for wageearners to relieve their suffering and need. T h e other group wanted to do something for itself, to solve its own problems and to establish itself in a position to take care of the emergencies of life. After all had presented their thoughts and courses of action it was evident that the consensus of opinion was in favor of maintaining voluntary institutions. This fundamental fact stood out paramount, that social insurance can not remove or prevent poverty. It does not get at the causes of social injustice. T h e only agency that does get at the causes of poverty is the organized labor movement. Social insurance in its various phases of sickness insurance, unemployment insurance, death benefits, etc., only provides the means for riding over an emergency. T h e labor movement aims at constructive results—higher wages, which mean better living for the worker and those dependent upon him; better homes, better clothing, better food, better opportunities and shorter hours of work, which mean relief from over-fatigue, time for recuperation, workers with better physical development and with sustained producing power. Better physical development is in itself an insurance against illness and a certain degree of unemployment. T h e short hour workmen with

F R E E D O M

higher wages become better citizens; better able to take care of themselves. T h e real permanent benefits that come into the lives of the workers, those which are felt from day to day and not merely during times of special need, are brought about by the trade union movement. T h e trade union movement represents the organized economic power of the workers. Through the development, the organization and the exercise of this economic power the workers themselves establish higher standards of living and work. Although this economic power from the superficial standpoint seems indirect, it is in reality the most potent and the most direct social insurance the workers can establish. It is the only agency that really guarantees to them protection against the results of the eventualities of life and give them a feeling of security. The trade union movement does not detract from the power or the opportunity of wageearners. On the other hand, methods for providing social insurance delegate to outside authorities some of the powers and opportunities that formerly belonged to wage-earners. At first only a limited amount of authority and power may be delegated to the governmental agent, but the apilication of even that little power constitutes a imitation upon the rights and freedom of wageearners and creates a situation which has in it the germs of tyranny and autocratic power. Governmental power grows by what it feeds upon. Give an agency any political power and it at once tries to reach out after more. Its effectiveness depends upon increasing power. This has been demonstrated by the experience of the railroad workers in the enactment of the Adamson law. W h e n Congress exercised the right to establish eight hours for railroad men it also considered a complete program for regulating railroad workers which culminated in taking from them the right to strike and the conscription act providing for compulsory service. Compulsory social insurance can not be administered without exercising some control over wage-earners. T h i s is the meat of the whole matter. Industrial freedom exists only when wageearners have complete control over their labor power. T o delegate control over their labor power to an outside agency takes away from the economic power of those wage-earners and creates another agency for power. W h o e v e r has control of this new agency acquires some degree of control over the workers. There is nothing to guarantee control over that agency to the employed. It may also be controlled by employers. In other words, giving the government control over indus-

f

AMERICAN

PROBLEMS

961

W e have institutions w h e r e b y v o l u n t a r y i n s u r ance could be increased. It is t r u e that in m a n y o f these institutions there a r e evils, b u t the c u r e f o r these evils is to m a k e i n s u r a n c e c o m p a n i e s o r g a n ize f o r mutual b e n e f i t a n d t o p r o v i d e p r o p e r r e g u lation and control, and in a d d i t i o n , if those w h o really h a v e the w e l f a r e o f w a g e - e a r n e r s at h e a r t will turn their activities a n d their i n f l u e n c e t o w a r d securing f o r w a g e - e a r n e r s t h e o p p o r t u n i t y t o o r ganize, there w i l l b e n o p r o b l e m s , n o s u f f e r i n g and no need that w i l l necessitate t h e c o n s i d e r a tion of b e n e v o l e n t assistance of a c o m p u l s o r y character.

trial relations creates a f u l c r u m w h i c h means g r e a t p o w e r f o r an u n k n o w n user. C o m p u l s o r y social insurance is in its essence und e m o c r a t i c . T h e first step in establishing social i n s u r a n c e is to d i v i d e p e o p l e into t w o g r o u p s — those eligible f o r benefits and those c o n s i d e r e d c a p a b l e t o c a r e f o r themselves. T h e division is based u p o n w a g e - e a r n i n g c a p a c i t y . T h i s g o v e r n m e n t a l r e g u l a t i o n tends to fix the citizens of the c o u n t r y into classes, and a long established insura n c e s y s t e m w o u l d tend to m a k e these classes rigid. T h e r e is in o u r c o u n t r y m o r e v o l u n t a r y social i n s u r a n c e than in a n y o t h e r c o u n t r y of the w o r l d .

EUGENE V. DEBS As

GOMPERS

represented

conservative

its career in 1 9 1 2

labor

w h e n D e b s , as his p a r t y ' s

unionism and the I . W . W . spoke f o r the mass

presidential candidate, r e c e i v e d almost a m i l -

of t h e disinherited, so " G e n e " D e b s presented

lion votes. F r o m then on, decline set i n — d u e

t h e socialist v i e w p o i n t to the v o t i n g w o r k i n g -

to the p a r t y ' s rejection o f A m e r i c a n i n t e r v e n -

m a n in t h e U n i t e d States. D e b s ' s part in the

tion in the first W o r l d W a r

Pullman

to all

tellectuals quit) and t o t h e a p p e a r a n c e o f t h e

t r a d e unionists, and w h e n he a c c e p t e d social-

C o m m u n i s t s ( w h o m t h e m o r e militant a m o n g

ism and helped in the creation of the Socialist

the Socialists

strike had m a d e him k n o w n

p a r t y in 1 9 0 1 , it w a s inevitable that he should

The

b e c o m e its leader.

Debs:

D e b s w a s no doctrinaire o r theoretician, as

joined).

selections His

Lije,

( w h e n many in-

here

reprinted

Writings

are

and Speeches

c a g o , 1 9 0 8 ) and are published b y

permission

these examples of his w o r k clearly s h o w . B u t

of Charles H . K e r r and C o m p a n y .

he w a s a w a r m l y

t i o n " appeared in the New

human

person

filled

with

York

from (Chi-

"Revolu-

Worker

of

g r e a t compassion f o r his f e l l o w men, and un-

A p r i l 2 7 , 1907; " T h e Socialist P a r t y and t h e

d e r his leadership the Socialist p a r t y g r e w in

W o r k i n g C l a s s " w a s delivered at Indianapolis,

n u m b e r s and influence. It w a s at the height of

Ind., on S e p t e m b e r 1, 1 9 0 4 .

Two BY Ι.

Speeches

EUGENE

REVOLUTION

THIS IS THE FIRST and o n l y International L a b o r D a y . It b e l o n g s to the w o r k i n g class and is dedic a t e d t o the R e v o l u t i o n . T o d a y the slaves of all the w o r l d are taking a f r e s h b r e a t h in the l o n g and w e a r y m a r c h ; pausing a m o m e n t t o clear their lungs and shout f o r j o y ; c e l e b r a t i n g in festal f e l l o w s h i p their c o m i n g F r e e dom. A l l hail the L a b o r D a y of M a y ! T h e d a y of the proletarian protest; T h e d a y of stern resolve; T h e d a y of noble aspiration.

V.

DEBS

Raise high this d a y the b l o o d - r e d S t a n d a r d o f the R e v o l u t i o n ! T h e banner of the W o r k i n g m a n ; T h e flag, the o n l y flag, o f F r e e d o m . S l a v e r y , even the most a b j e c t — d u m b and d e spairing as it m a y s e e m — h a s y e t its inspiration. C r u s h e d it may b e , but e x t i n g u i s h e d n e v e r . C h a i n the slave as y o u w i l l , O M a s t e r s , brutalize h i m as y o u m a y , y e t in his soul, t h o u g h d e a d , he y e a r n s f o r f r e e d o m still. T h e great d i s c o v e r y the m o d e r n slaves h a v e m a d e is that t h e y t h e m s e l v e s their f r e e d o m m u s t achieve. T h i s is t h e secret o f their s o l i d a r i t y ; t h e

THE N E W

962

heart of their hope; the inspiration that nerves them all with sinews of steel. They are still in bondage, but no longer cower; N o longer grovel in the dust. But stand erect like men. Conscious of their growing power the future holds out to them her outstretched hands. A s the slavery of the working class is international, so the movement for its emancipation. The salutation of slave to slave this day is repeated in every human tongue as it goes ringing round the world. The many millions are at last awakening. For countless ages they have suffered; drained to the dregs the bitter cup of misery and woe. A t last, at last the historic limitation has been reached, and soon a new sun will light the world. Red is the life-tide of our common humanity and red our symbol of universal kinship. Tyrants deny it; fear it; tremble with rage and terror when they behold it. W e reaffirm it and on this day pledge anew our fidelity—come life or death—to the blood-red Banner of the Revolution. Socialist greetings this day to all our fellowworkers! T o the god-like souls in Russia marching grimly, sublimely into the jaws of hell with the Song of the Revolution in their death-rattle; to the Orient, the Occident and all the Isles of the Sea! VIVE L A

REVOLUTION!

The most heroic word in all languages is

REVO-

LUTION.

It thrills and vibrates; cheers and inspires. T y rants and time-servers fear it, but the oppressed hail it with joy. The throne trembles when this throbbing word is lisped, but to the hovel it is food for the famishing and hope for the victims of despair. Let us glorify today the revolutions of the past and hail the Greater Revolution yet to come before Emancipation shall make all the days of the year May Days of peace and plenty for the sons and daughters of toil. It was with Revolution as his theme that Mark Twain's soul drank deep from the fount of inspiration. His immortality will rest at last upon this royal tribute to the French Revolution: "The ever memorable and blessed revolution, which swept a thousand years of villainy a w a y in one swift tidal wave of blood—one: a settlement of that hoary debt in the proportion of half a drop of blood for each hogshead of it that had been pressed by slow tortures out of that people in the

FREEDOM weary stretch of ten centuries of wrong and shame and misery the like of which was not to be mated but in hell. There were two Reigns of Terror, if we would but remember it and consider it: the one wrought murder in hot passion, the other in heartless cold blood; the one lasted mere months, the other lasted a thousand years; the one inflicted death on ten thousand persons, the other upon a hundred millions; but our shudders are all for the horrors of the minor Terror, so to speak; whereas, what is the horror of swift death by the axe compared with lifelong death from hunger, cold, insult, cruelty and heartbreak? W h a t is swift death by lightning compared with death by slow fire at the stake? A city cemetery could contain the coffins filled by that brief Terror, which we have all been so diligently taught to shiver at and mourn over, but all France could hardly contain the coffins filled by that older and real Terror which none of us has been taught to see in its vastness or pity as it deserves."

2 . T H E SOCIALIST P A R T Y AND THE W O R K I N G

CLASS

M R . C H A I R M A N , C I T I Z E N S AND C O M R A D E S :

There has never been a free people, a civilized nation, a real republic on this earth. H u m a n society has always consisted of masters and slaves, and the slaves have always been and are today, the foundation stones of the social fabric. Wage-labor is but a name; wage-slavery is the fact. The twenty-five millions of w a g e - w o r k e r s in the United States are twenty-five millions of twentieth century slaves. This is the plain meaning of what is known as THE LABOR MARKET

And the labor market follows the capitalist flag. T h e m o s t b a r b a r o u s f a c t in all C h r i s t e n d o m is the labor market. T h e mere t e r m s u f f i c i e n t l y e x presses t h e a n i m a l i s m of c o m m e r c i a l c i v i l i z a t i o n .

T h e y who buy and they who sell in the labor market are alike dehumanized by the inhuman traffic in the brains and blood and bones of human beings. The labor market is the foundation of so-called civilized society. W i t h o u t these shambles, without this commerce in human life, this sacrifice of manhood and womanhood, this barter of babes, this sales of souls, the capitalist civilizations of all lands and all climes would crumble to ruin and perish from the earth. T w e n t y - f i v e millions of wage-slaves are bought and sold daily at prevailing prices in the A m e r i c a n Labor Market. This is the

AMERICAN P A R A M O U N T ISSUE

in the present national campaign. Let mc say at the very threshold of this discussion that the workers have but the one issue in this campaign, the overthrow of the capitalist system and the emancipation of the working class from wage-slavery. T h e capitalists may have the tariff, finance, imperialism and other dust-covered and moth-eaten issues entirely to themselves. T h e rattle of these relics no longer deceives workingmen whose heads are on their own shoulders. T h e y know by experience and observation that the gold standard, free silver, fiat money, protective tariff, free trade, imperialism and anti-imperialism all mean capitalist rule and wage-slavery. T h e i r eyes are open and they can see; their brains are in operation and they can think. T h e very moment a workingman begins to do his own thinking he understands the paramount issue, parts company with the capitalist politician and falls in line with his own class on the political battlefield. T h e political solidarity of the working class means the death of despotism, the birth of freedom, the sunrise of civilization. Having said this much by way of introduction 1 will now enter upon the actualities of my theme. T H E CLASS STRUGGLE

W e are entering tonight upon a momentous campaign. T h e struggle for political supremacy is not between political parties merely, as appears upon the surface, but at bottom it is a life and death struggle between two hostile economic classes, the one the capitalist, and the other the working class. T h e capitalist class is represented by the R e publican, Democratic, Populist and Prohibition parties, all of which stand for private ownership of the means of production, and the triumph of any one of which will mean continued wageslavery to the working class. As the Populist and Prohibition sections of the capitalist partv represent minority elements which propose to reform the capitalist system without disturbing wage-slavery, a vain and impossible task, thev will be omitted from this discussion with all the credit due the rank and file for their good intentions. T h e Republican and Democratic parties, or, to be more exact, the Republican-Democratic party, represent the capitalist class in the class struggle. T h e y are the political wings of the capitalist sys-

PROBLEMS

963

tem and such differences as arise between them relate to spoils and not to principles. W i t h either of these parties in power one thing is always certain and that is that the capitalist class is in the saddle and the working class under the saddle. Under the administration of both these parties the means of production are private property, production is carried forward for capitalist profit purely, markets are glutted and industry paralyzed, workingmen become tramps and criminals while injunctions, soldiers and riot guns are brought into action to preserve "law and order" in the chaotic carnival of capitalistic anarchy. Deny it as may the cunning capitalists who are clear-sighted enough to perceive it, or ignore it as may the torpid workers who are too blind and unthinking to see it, the struggle in which we are engaged today is a class struggle, and as the toiling millions come to see and understand it and rally to the political standard of their class, they will drive all capitalist parties of whatever name into the same party, and the class struggle will then be so clearly revealed that the hosts of labor will find their true place in the conflict and strike the united and decisive blow that will destroy slavery and achieve their full and final emancipation. In this struggle the workingmen and women and children are represented by the Socialist party and it is my privilege to address you in the name of that revolutionary and uncompromising party of the working class. ATTITUDE O F T H E WORKERS

W h a t shall be the attitude of the workers of the United States in the present campaign? W h a t part shall they take in it? W h a t party and what principles shall they support by their ballots? And why? These are questions the importance of which are not sufficiently recognized by workingmen or they would not be the prey of parasites and the service tools of scheming politicians who use them only at election time to renew their masters' lease of power and perpetuate their own ignorance, poverty and shame. In answering these questions I propose to be as frank and candid as plain-meaning words will allow, for I have but one object in this discussion and that object is not office, but the truth, and I shall state it as I see it, if I have to stand alone. But I shall not stand alone, for the party that has my allegiance and may have my lire, the Socialist party, the party of the working class, the party of emancipation, is made up of men and women who know their rights and scorn, to com-

THE NEW FREEDOM

964

promise with their oppressors; who want no votes that can be bought and no support under any false pretense whatsoever. T h e Socialist party stands squarely upon its proletarian principles and relies wholly upon the forces of industrial progress and the education of the working class. T h e Socialist party buys no votes and promises no offices. Not a farthing is spent for whiskey or cigars. Every penny in the campaign fund is the voluntary offerings of workers and their sympathizers and every penny is used for education. W h a t other parties can say the same? Ignorance alone stand in the way of socialist success. T h e capitalist parties understand this and use their resources to prevent the workers from seeing the light. Intellectual darkness is essential to industrial slavery. Capitalist parties stand for Slavery and Night. T h e Socialist party is the herald of Freedom and Light. Capitalist parties cunningly contrive to divide the workers upon dead issues. T h e Socialist party is uniting them upon the living issue: Death to Wage Slavery! W h e n industrial slavery is as dead as the issues of the Siamese capitalist parties the Socialist party will have fulfilled its mission and enriched history. And now to our questions: First, all workingmen and women owe it to themselves, their class and their country to take an active and intelligent interest in political affairs. T H E BALLOT

T h e ballot of united labor expresses the people's will and the people's will is the supreme law of a free nation. T h e ballot means that labor is no longer dumb, that at last it has a voice, that it may be heard and if united shall be heeded. Centuries of struggle and sacrifice were required to wrest this symbol of freedom from the mailed clutch of tyranny and place it in the hand of labor as the shield and lance of attack and defense. T h e abuse and not the use of it is responsible for its evils. T h e divided vote of labor is the abuse of the ballot and the penalty is slavery and death. T h e united vote of those who toil and have not will vanquish those who have and toil not, and solve forever the problem of democracy. THF. HISTORIC STRUGGLE OF CLASSES

Since the race was young there have been class

struggles. In every state of society, ancient and modern, labor has been exploited, degraded and in subjection. Civilization has done little for labor except to modify the forms of its exploitation. Labor has always been the mudsill of the social fabric—is so now and will be until the class struggle ends in class extinction and free society. Society has always been and is now built upon exploitation—the exploitation of a class—the working class, whether slaves, serfs or wagelaborers, and the exploited working class in subjection have always been, instinctively or consciously, in revolt against their oppressors. Through all the centuries the enslaved toilers have moved slowly but surely toward their final freedom. T h e call of the Socialist party is to the exploited class, the workers in all useful trades and professions, all honest occupations, from the most menial service to the highest skill, to rally beneath their own standard and put an end to the last of the barbarous class struggles by conquering the capitalist government, taking possession of the means of production and making them the common property of all, abolishing wage-slavery and establishing the co-operative commonwealth. T h e first step in this direction is to sever all relations with CAPITALIST PARTIES

They are precisely alike and I challenge their most discriminating partisans to tell them apart in relation to labor. T h e Republican and Democratic parties are alike capitalist parties—differing only in being committed to different sets of capitalist interests— they have the same principles under varying colors, are equally corrupt and are one in their subservience to capital and their hostility to labor. T h e ignorant workinginan who supports either of these parties forges his own fetters and is the unconscious author of his own misery. H e can and must be made to see and think and act with his fellows in supporting the party of his class and this work of education is the crowning virtue of the socialist movement. . . . THE SOCIALIST PARTY

In what has been said of other parties I have tried to show why they should not be supported by the common people, least of all bv workingmen, and I think I have shown clearly enough that such workers as do support them are guilty, consciously or unconsciously, of treason to their class. T h e y are voting into power the enemies of

AMERICAN labor and are morally responsible for the crimes thus perpetrated upon their fellow-workers and sooner or later they will have to suffer the consequences of their miserable acts. The Socialist party is not, and does not pretend to be, a capitalist party. It does not ask, nor does it expect the votes of the capitalist class. Such capitalists as do support it do so seeing the approaching doom of the capitalist system and with a full understanding that the Socialist party is not a capitalist party, nor a middle class party, but a revolutionary working class party, whose historic mission it is to conquer capitalism on the political battle-field, take control of government and through the public powers take possession of the means of wealth production, abolish wage-slavery and emancipate all workers and all humanity. T h e people are as capable of achieving their industrial freedom as they were to secure their political liberty, and both are necessary to a free nation. T h e capitalist system is no longer adapted to the needs of modern society. It is outgrown and fetters the forces of progress. Industrial and commercial competition are largely of the past. T h e handwriting blazes on the wall. Centralization and combination are the modern forces in industrial and commercial life. Competition is breaking down and co-operation is supplanting it. T h e hand tools of early times are used no more. Mammoth machines have taken their places. A few thousand capitalists own them and many millions of workingmen use them. All the wealth the vast army of labor produces above its subsistence is taken by the machine owning capitalists, who also own the land and the mills, the factories, railroads and mines, the forests and fields and all other means of production and transportation. Hence wealth and poverty, millionaires and beggars, castles and caves, luxury and squalor, painted parasites on the boulevard and painted poverty among the red lights. Hence strikes, boycotts, riots, murder, suicide, insanity, prostitution on a fearful and increasing scale. T h e capitalist parties can do nothing. T h e y are a part, an iniquitous part, of the foul and decaying system. There is no remedy for the ravages of death. Capitalism is dying and its extremities are already decomposing. T h e blotches upon the surface show that the blood no longer circulates. T h e time is near when the cadaver will have to be removed and the atmosphere purified.

965

PROBLEMS

In contrast with the Republican and Democratic conventions, where politicians were the puppets of plutocrats, the convention of the Socialist party consisted of workingmen and women fresh from their labors, strong, clean, wholesome, self-reliant, ready to do and dare for the cause of labor, the cause of humanity. Proud indeed am I to have been chosen by such a body of men and women to bear aloft the proletarian standard in this campaign, and heartily do I endorse the clear and cogent platform of the party which appeals with increasing force and eloquence to the whole working class of the countyT o my associate upon the national ticket I give my hand with all my heart. Ben Hanford typifies the working class and fitly represents the historic mission and revolutionary character of the Socialist party. CLOSING WORDS

These are stirring days for living men. T h e day of crisis is drawing near and Socialists are exerting all their power to prepare the people for it. T h e old order of society can survive but little longer. Socialism is next in order. T h e swelling minority sounds warning of the impending change. Soon that minority will be the majority and then will come the co-operative commonwealth. Every workingman should rally to the standard of his class and hasten the full-orbed day of freedom. Every progressive Democrat must find his way in our direction and if he will but free himself from prejudice and study the principles of Socialism he will soon be a sturdy supporter of our party. Every sympathizer with labor, every friend of justice, every lover of humanity should support the Socialist party as the only party that is organized to abolish industrial slavery, the prolific source of the giant evils that afflict the people. W h o with a heart in his breast can look upon Colorado without keenly feeling the cruelties and crimes of capitalism! Repression will not help her. Brutality will only brutalize her. Private ownership and wage-slavery are the curse of Colorado. Only Socialism will save Colorado and the nation. T h e overthrow of capitalism is the object of the Socialist party. It will not fuse with any other party and it would rather die than compromise. T h e Socialist party comprehends the magnitude of its task and has the patience of preliminary defeat and the faith of ultimate victory.

ç66

THE NEW

The working class must be emancipated by the working class. Woman must be given her true place in society by the working class. Child labor must be abolished by the working class. Society must be reconstructed by the working class. The working class must be employed by the working class. The fruits of labor must be enjoyed by the working class.

FREEDOM War, bloody war, must be ended by the w o r k ing class. These are the principles and objects of the Socialist part}' and we fearlessly proclaim them to our fellowmen. W e know our cause is just and that it must prevail. With faith and hope and courage we hold our heads erect and with dauntless spirit marshal the working class f o r the march from Capitalism to Socialism, from Slavery to Freedom, from Barbarism to Civilization.

VINCENT ST. JOHN IN 1905, a g r o u p of labor representatives met at C h i c a g o and organized the Industrial W o r k e r s of the W o r l d . Here gathered Socialists like E u g e n e V . Debs, delegates f r o m A . F . of L . unions which were restive under their old-line leadership, and members of such dissident labor groups as the Western Federation of Miners. A m o n g the many viewpoints—socialist, anarchist, industrial unionist — w h i c h made themselves vocal at the Chicago meeting, one element stood out as binding, a rejection of the A . F . of L.'s premise that organization on a c r a f t basis was the foundation of a successful labor movement. T h e f o l l o w i n g y e a r , after the failure of a vigorous dual union campaign, schism split the n e w movement and the comparatively skilled w o r k e r s represented b y the dissident A . F . of L . unions withdrew. T h e Western Federation of Miners seceded in 1907; these w e r e f o l l o w e d , in 1908, b y the socialist groups led b y Daniel D e Leon. T h e I . W . W . now fell into its ultimate pattern, a propaganda organization w o r k i n g among unskilled and migrat o r y w o r k e r s with its greatest strength in the F a r W e s t . Freed of socialist doctrinaire dissenters and potential craft unionists, the I . W . W . passed into the control of what De L e o n labeled the "Overall Brigade,"—men intensely suspicious of parties, parliamentarism, votine, c r a f t unionism and leaders of all varieD1

ties, including their o w n . T h e I . W . W . brought new methods into lab o r organizing. It rejected trade agreements,

refused to establish benefit programs that might transform it into a " c o f f i n s o c i e t y , " and devoted its energies to propaganda and o r ganizing. T h e social philosophy behind that propaganda was never precisely f o r m u l a t e d , though those w h o feared the movement talked forebodingly of "anarchism" and " s y n d i c a l ism" and other threats to social stability. T h e fact is, its ideology took on aspects of both these radical movements. I . W . W . aims and methods are described in the testimony of Vincent St. J o h n , its general secretary, before the Commission on Industrial Relations which Congress had appointed to inquire into the condition of labor. T w o y e a r s had passed since the L a w r e n c e strike of 1 9 1 2 , when the I . W . W . led unorganized textile workers against a w a g e cut, to the accompaniment of violence, conflict with c r a f t unions, the new technique of c r o w d i n g local jails w i t h men willing to suffer f o r exercising the right of free speech, and a flood of apprehensive publicity. T h e L a w r e n c e strike had ended in an I . W . W . victory that brought a general wage increase in which the unskilled w o n the largest share. In its unorthodox fashion, the I . W . W . had shown the p o w e r latent in the unskilled and underemployed w h o m the c r a f t unions had never attempted to organize. Shortly after the publication of the Industrial Commission's report, there was another flare-up of I . W . W . activity in the W e s t . T h e 1916 e f f o r t was not unsuccessful. T h e m o v e ment's opposition to the w a r led to its being

AMERICAN outlawed in m a n y states t h r o u g h the passage of so-called criminal syndicalism laws. In 1 9 1 9 , I . W . W . leaders w e r e tried f o r violation of the federal acts against seditious a c t i v i t y in w a r time and w h e n its general s e c r e t a r y , W i l l i a m D. H a y w a r d , j u m p e d his bail and fled to Soviet Russia, the b a c k b o n e of the m o v e m e n t was broken. It continues to exist t o d a y b u t it

PROBLEMS

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is not m u c h m o r e than a paper organization. St. J o h n ' s testimony is reprinted f r o m the

Final Report and Testimony Submitted to Congress by the Commission on Industrial Relations ( 1 5 vols., W a s h i n g t o n , 1 9 1 6 ) . It appeared as Senate D o c u m e n t N o . 4 1 5 , 64th Congress, ist Session.

Testimony Concerning the l.W.W. before the Commission on Industrial Relations B Y

V I N C E N T

MR. THOMPSON. W h a t are the purposes, general scope, and plan of the Industrial W o r k e r s of the World? T a k e your time and make y o u r statement in regard to that. Mr. ST. JOHN. T h e primary purpose is the organization—to organize the working class on a class basis. That is, to organize and educate the workers with the understanding that the workers of this and every other country constitute a distinct and separate economic class in society, with interests that are distinct and separate from the employing class, as such, in society. That is, the organization divides society to-day into two broad classifications—the employing class on the one hand and the wageworking class on the other. T h e purpose of the organization is to organize and educate the wageworking class into a knowledge of economic position f o r the purpose of gaining requisite power in order to advance their interests, defend their interests, and advance them wherever possible, with the ultimate object of placing the control and operation of industries in which workers work into the hands and under the jurisdiction of the organized wageworkers of the country, so that the result of their efforts, the wealth produced by them and by their collective efforts, will accrue to those who are responsible f o r its creation without having to pay tribute to any employing class over any other parasitical class whatever. It is proposed to accomplish that b y organizing the workers in such a manner that it will be possible f o r them, through their organization, to control their labor power, their brain and muscular energy that is used from day to day and year to year in the operation of industries, which to-day is a commodity sold on the labor market under the same rules, governed by the same conditions, that any other commodity is sold; and the Industrial Workers of the W o r l d propose that the wageworkers organize in such a manner that they

ST.

J O H N

will control a sufficient amount of this commodity required to operate the industries so that they will be able to dictate the terms upon which it is used. I think, f o r a general statement, that covers the matter, so far as I can go. . . . Chairman W A L S H . N O W , after that union was formed the local unions were formed, and you had this national union, what means would you propose to see that those men get the profit of their own labor? What means would you adopt to see that these men so formed into a union would receive what I believe you said was the product of their toil and not divide it with anyone else? Mr. ST. JOHN. That would be impossible, so far as the railroad workers themselves were concerned. T h e y could not accomplish that individually; that is, it would be impossible f o r the employees of the different railroad systems to arrange matters to that extent simply as the employees of the railway system, of the railway industry. T h e ultimate object of the organization would have to stand until such time as the organization in all of the industries reached the point that gave them the required power to attain that object. . . . Chairman WALSH. Assuming, Mr. St. John, that you succeed in perfecting such an organization in the leading industries of the Nation, the large employers of labor, what steps would you then take to bring about the conditions that you mentioned in the statement of your general object, to wit, that the workers should have the product of their own labor and not give any proportion or divide it with the parasitical class or with the class of nonworkers? Mr. ST. JOHN. W e l l , when that stage arrives the organization will have gradually increased its control over the industries. Chairman WALSH. H o w is that? Mr. S T . J O H N . I say when that stage arrives the

THE NEW FREEDOM

968

organization will have gradually increased its control and domination over industry to such an extent that they will be able to operate the industry and exchange the products through the medium of our own organization. Chairman WALSH. A t what point would you take in what you call the officials or the administratives? Mr. ST. JOHN. Whenever we were strong enough to dominate them and know that they would work for our interest. Chairman WALSH, W o u l d your plan require a political action? Mr. S T . J O H N . I don't know what you mean by political action. Chairman WALSH. T h a t is, would it require control of the legislative body of the Nation? M r . S T . JOHN. N o ,

sir.

Chairman WALSH. O r of the various States, or a change in the organic law of the Nation, or constitutions of the various States? Mr. ST. JOHN. None, whatever. Chairman WALSH. T h a t is all. M r . THOMPSON. I understand, Mr. St. John, from your answers to the chairman's questions, that what you have stated in reference to the program of your organization in regard to the production and distribution of wealth is a future program. T h a t at present you are concerned with the organization of the workers to better their hours and their working condition and to increase their wages. Mr. ST. JOHN. T h e organization, in order to represent the interests of the working class, must necessarily have a twofold function. It has to be able to handle the everyday problem of the workers, which is one of shorter hours, better wages, and improved shop conditions, and ultimately the education of the workers, so that they can assume control of industry. T h e fundamental purpose of the organization is to drill, have the workers drilled, and to educate themselves so that they can control industry; and as a training school or preparation for that task, the everyday struggle of the workers is the first struggle in front of the organization. Mr. THOMPSON. Mr. St. John, what is the method of organization you pursue in any given industry, if you have such? . . . Mr. S T . J O H N . Y O U mean by that how we build up an organization—start it? Mr. THOMPSON. Yes. D o you have any organized? D o you have any distinct plans, different from those of other labor organizations that are commonly understood and known? Mr. ST. JOHN. W e l l , I think that is the general

proposition. All organization work is pretty much the same. T h e plan the I . W . W . follows is by organizers. For a local union in a given locality it carries on the organization work, through its members, through its membership, educational work, the distribution of leaflets, circulation of the papers of the organization, holding of public meetings in halls and on the streets, in front of factory gates, in fact any method by which the attention of the workers employed can be attracted; either carrying on agitation inside or outside of the factories. Mr. THOMPSON. W h e n as a result of such methods as you may use for basing an organization in a given city or faeton·, how do you present or make your demands to such factory, in reference to any subject which you take up? D o you have a shop organization? Mr. ST. JOHN. W e have a shop organization. If the local, if the industry in question has several different establishments in the same locality, the workers in the shops have meetings of their own wherein they take up the questions that they are interested in, with a view to the particular shop that they are working, and their demands or ideas are formulated into demands, and these different shops, branches, elect delegates who receive the report from the meetings of the shop branches; that is, the demands formulated for the different shops, and harmonize the whole. T h a t is, they compile from the different demands a general set of demands, embracing whatever particular demands may apply to each shop or each establishment, either combined into a set of demands covering the entire district or the jurisdiction of that industry, or that industrial charter, or whatever it may be; and thev are presented to whoever has the authority to receive them on the part of the employers. Mr. THOMPSON. W h o in the cases you have mentioned would present such demand on your organization? Mr. ST. JOHN. T h e committee elected by the different branches of the workers involved. Mr. THOMPSON. What, if any, arrangement does your organization countenance with the different factories that you may have an organization in? Mr. ST. JOHN. W e do not make any agreements for any stated length of time; but, as an example, if there was a—if the effort to gain better conditions resulted in a strike and this strike resulted in a victory for the workers involved, work would be resumed simply upon the representatives of the employer, the qualified representatives of the employer, saying that they agreed to the terms for which the workers were fighting, and a notice

AMERICAN PROBLEMS posted in the mill to that effect. That is the extent of the effect of any agreement we enter into. Mr. THOMPSON. Take a case, for instance, where there has been no strike, where your representatives meet with the firm, and an agreement is reached in reference to the several matters in dispute, have your representatives power to agree to any conditions, or hours, or wages for any given length of time, or are they to last for the day only? Mr. ST. JOHN. They do not agree upon a length of time. They do not have any power to agree to anything of the kind. All they have power to do is to report back to a meeting of the workers involved wherever they report and whatever their report is, and their report is either accepted or rejected. If it is rejected then the practice is simply to require that a notice be posted in the establishment stating that these conditions will govern. Mr. THOMPSON. Assuming that, as a result of the conference of the representatives of your organization, the firm should agree to the demands of the men, but should attach to the agreement the conditions that such demands should be in existence and be the law between the two for the time of a year, is it the purpose of your organization to countenance or encourage the making of such agreements? Mr. S T . JOHN. N O ; on the contrary the organization is emphatically opposed to the entering into of any agreement for any stated length of time. Mr. THOMPSON. Would the representatives of the workers under your plan of organization have the right to submit such a question to the mass meeting of the workers? Mr. ST. JOHN. They would not have the right, but if the question was put up to them they would be supposed to do so. They are not judges of what conies before the membership on matters of that kind. Mr. THOMPSON. Then, suppose they submitted such a plan to the membership at a mass meeting and the membership unanimously voted for it, and such an agreement or arrangement was made on such a vote of the mass meeting, would your international organization or your general organization stand back of such an agreement? Mr. ST. JOHN. The possibilities are that the acceptance of any such agreement, any time agreement, on the part of any local connected with the I.W.W. would sever their connection. That has been the practice in the past. Mr. THOMPSON. That is to say that the fundamental policy of your organization is this: That they do not countenance any time agreements, and that the making of time agreement automat-

969

ically severs the organization making it from your parent body? Mr. ST. JOHN. That has been the policy in the past; yes, sir. Mr. THOMPSON. And consequently and naturally you would not encourage the carrying out of such an agreement? That goes without saying. M r . ST. JOHN. Certainly not. . . .

Mr. THOMPSON. When demands are made by your organization on the factory or firm, and they are not acceded to, what are the general plans of your organization for enforcing such plans, if you have any? Mr. ST. JOHN. Well, we have no general plan, because the circumstances surrounding each particular case is what determines the plan of operation. The general plan might be stated as the withdrawing of the labor power from the establishment in question, or from the industry in question, in that locality, and if necessary from the industry in question throughout the country, in an effort to stop production in that manner. That is generally known as a strike. If circumstances were such as to prevent, such as to indicate that a strike would probably not give the results, would be inopportune, the conditions in the industry were not favorable, why, different methods would be resorted to; we would try to slow up the production in the factory; turn out poor work; in fact, interfere with the process of production so as to destroy the possible chance for revenue or profit accruing to the owners from that particular industry or mill. Mr. THOMPSON. Is that what you call sabotage? Mr, ST. JOHN. That is what it is generally known as; yes, sir. Mr. THOMPSON. How else do you carry that principle out? Say, when you are out on a strike and not in the mill, how would you carry that same principle out? Mr. ST. JOHN. W e couldn't very well carry that principle out if we were out on a strike, excepting it would be to interfere with the products turned out in that particular mill, in transportation, or interfere with the raw material going into the mill. W e would make an effort, if the organization was in shape, to control an influence sufficient with the isolated plant in question, so that no raw material or anything they use in the manufacture got very far. Mr. THOMPSON. If, in carrying it out, it is necessary to destroy property, would your organization countenance that? Mr. ST. JOHN. If the destruction of property would gain the point for the workers involved, that is the only consideration we would give to it. The fact that property was destroyed would not

970

THE NEW FREEDOM

have anything to do with determining whether we adopted the plan or not. Mr. THOMPSON. Then, the criterion of your action on a strike is whether or not the proposed action will gain the point of the strike? Mr. ST. JOHN. That is the only one. Mr. THOMPSON. Would that same reasoning apply to questions of violence against persons? M r . ST. JOHN. Certainly. . . .

Mr. T H O M P S O N . I wish you would explain the reasons whv your organization would not make a time agreement, and why you countenance the destruction of property or the injury of persons in order to carry out any desired point as workmen? Mr. ST. JOHN. Well, in the matter of the time agreements, the entering into time agreements is of no value to the working class. It is of no value to that particular part of the working class who arc directly involved in the agreement. It is, as a rule, a distinct—it places them at a disadvantage for the future period. In the first place, it is simply saying to the employer that on a certain date, after the lapse of a certain number of months, we are going to make a demand on you for increased wages or change in the working conditions. That is what it means to them. The consequence is that if he has any semblance of intelligence at all he prepares for it, and he has got a year's time to get ready for it. H e makes up his stock ahead—his warehouse is piled with stock where he is dealing in goods that he can handle that way; and when the time comes and you make your demands, he has made arangements so that he is able to get along without you. H e places you at a disadvantage. Another thing, it prevents the workers from taking advantage of any favorable opportunity that might arise during the term of this agreement, by which they could get better conditions. For instance, the market or demand for the commodities that were being produced might become lively, and the plant becomc rushed with orders, why, from that circumstance the worker has an advantage in making terms and demands. There is an added demand for the commodity they are selling—their labor power; and there is that added demand there, and they are in a more favorable position to force recognition for their claims and gain what they are after. In addition to that, it destroys the active spirit in an organization to work under a contract period. The membership, as a rule, working under a time contract, as soon as the contract is signed and they are back to work, they lose everything exccpt a mere passing interest in their organization;

and they think things are settled for the time being, and they do not need to bother until their contract is about to expire. Those are a few of the reasons; and as far as the destruction of property is concerned, the property is not ours. W e haven t any interest at all in it; it is used simply—it is used to make the lot of the workers, as a class, harder; and the only property that we have, experience in the past has shown that the employers, as a class, are not at all particular whether they injure our property or not. They take us into the mills before we are able—before we have even the semblance of an education, and they grind up our vitality, brain and muscular energy into profits, and whenever we can not keep pace with the machine speeded to its highest notch, they turn us out onto the road to eke out an existence as best we can, or wind up on the poor farm or in the potter's field. And we think what is good for the working class —rather, what is good for the employing class is certainly good for us. And he has not shown any respect at all for our property, that it is not incumbent upon us to show any respect for his property; and we do not propose to do it; and we do not propose to make any bones about having that attitude clearly understood; that we are getting somewhat intelligent, and at least beginning to notice things. And the same holds true with regard to life and violence. N o t that the Industrial Workers of the World are advocating the destruction of life to gain any particular point or the use of violence; because the destruction of life is not going to gain any point, and if life happens to be lost in strikes that we are implicated in, the blame generally, and has been up to date, on the other side. But we are not going to tell our membership to allow themselves to be shot down and beat up like cattle. Regardless of the fact that they are members of the working class, they still have a duty that they owe to themselves and their class of defending themselves whenever they are attacked and their life is threatened. Violence is not always the choosing of the working class; as a general rule, it is forced on them as a simple act of self-defense. They have to strike back when they are struck at, and that is the spirit and that is the idea the organization is trying to educate the workers into. W e do not—we do not want to be understood as saying that we expect to achieve our aims through violence and through the destruction of human life, because, in my judgment, that is impossible. The achievement of success—the success of this organization—the realization of what it is striving for—depends on one thing only, and that is gaining the control of a sufficient amount of

A M E R I C A N

the labor power that is necessary in the operation of industry. Now, when we have that control, then through organization the necessity for violence will be reduced; in fact, it will almost disappear. It will disappear. T h e necessity for using any tactics that will lead to violence will disappear, and the protection and the safeguarding of human life will increase just in proportion as we have that control. And we will not only be able to take care of ourselves, and therefore it will become unnecessary for us to injure anybody else so far as life is concerned. Mr. THOMPSON. In getting your control of an industry, Mr. St. John, do you—and in your advocacy of the method of gaining that control, do you tell your membership only to use force in case it is necessary for self-defense? Mr. ST. JOHN. W e don't tell them anything of the kind. T h e y are supposed to have sense enough to know that. If they did not have sense enough to know when to take care of themselves, no amount of telling on our part would do them any good. Mr. THOMPSON. In other words, your general policy is that whatever violence is necessary to carry the point, and if violence will carry the point, they must use it to gain the point? Mr. ST. JOHN. Most assuredly; yes. . . . Mr. THOMPSON. T h a t is to say, if violence will bring the point that the workers want, then it is countenanced? Mr. ST. JOHN. Well, violence is not going to bring the point that the workers want except in rare instances. Mr. THOMPSON. T a k e the case of workers filling the place of strikers, for instance. If your people believe that by committing acts of violence against the people who take the places, they would cause a determination of the struggle in favor of the strikers, then you would countenance such violence? M r . ST. JOHN. C e r t a i n l y .

Commissioner H A R R I M A N . I would like to ask you, Mr. St. John, what was the underlying cause for the creation of your organization? Mr. ST. JOHN. W e l l , the organization came into existence mainly because of the lack of unity on the part of labor as it was and is organized today.

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Commissioner LENNON. I wish the witness would face that way [indicating audience], and we could hear just as well. Mr. ST. JOHN. Strikes in different sections of the country were fought out and lost by the workers, not because they did not put up a good fight themselves, those that were directly involved—not because of the fact that the employers were in an advantageous position, but simply because that, in addition to fighting the employers who were solid as a unit on the proposition, they also had to contend against the assistance rendered to the employers by workers in the same industry or in other industries. T h e only show for the winning of a strike is stopping the production of the commodity that is being manufactured by the workers that are on strike, curtailing the profits of the corporation or the individual who has title to that establishment; and as long as he can transfer his work to other workers or operate his factories with scab labor and the products turned out by scab labor are distributed around the country by union men with union cards in their pockets, and the raw materials are furnished to the scab labor in this particular factory and pass through the hands of men with union cards in their pockets, the chances of any body of workers winning a strike in any important industry are reduced to a minimum, to say the least. And it was to overcome that state of affairs that the union has come into existence. Commissioner HARRIMAN. Do you think that cooperation between employers and the wageearning class is possible or impossible—peaceful cooperation? Mr. ST. JOHN. It is not possible except by a loss to the wage earners. It might be brought about, but the only ones that would gain by it would be the employers. T h e wage earners would be the ones to suffer. Commissioner H A R R I M A N . I would like to ask you what is the attitude of your organization toward the Government? . . . Mr. ST. JOHN. Well, they simply look on the Government as a committee employed to look after the interests of the employers. That is all the Government means to it. It is simply a committee employed to police the interests of the employing class. . . .

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THE NEW W O O D R O W THE

PRESIDENTIAL

CAMPAIGN

of

1912

bears

witness to the political impact of a decade and a half of agitation, investigation, publicity, and reform. William Howard T a f t , the Republican party candidate, carried the conservative label—though his administration had secured more progressive legislation than the more flamboyant regime it succeeded—while Theodore Roosevelt and Woodrow Wilson both put themselves down as progressives. Each advocated a carefully devised government program f o r dealing with the economic problems associated with the growth of great enterprises, and each insisted that he was the champion of the American people. The Democratic candidate, Woodrow Wilson (1856-1924), was born in Virginia four years before the outbreak of the Civil War. His family was of Scotch-Irish origin and sufficiently prosperous to send their son to Princeton and the University of Virginia, where he studied law. The effort to build a practice in Atlanta proved uncongenial to a man of scholarly tastes, and Wilson decided to prepare for teaching, joining the group of brilliant pioneers in American graduate study who worked in Professor Herbert B. Adams's seminar at Johns Hopkins in the early eighties. Congressional Government won Wilson his degree, a reputation, calls to teach at Bryn Mawr and Wesleyan, and finally an appointment to the chair of political science at Princeton. In 1902, Wilson was elected president of his university and set about reversing the trends which had transformed the rigors of the Princeton of Witherspoon and Ashbel Smith into the "rich man's club" of the nineties. For the next seven years, Wilson sought to establish higher academic standards and to eliminate some of the undemocratic practices among the undergraduates. Almost prophetically, what had begun as a dispute over principle became

FREEDOM W I L S O N

a personal quarrel; and he was ultimately forced into a position that left him small choice but retirement. Wilson's Princeton program had made him a symbol of the struggle to restore the people's rights; his defeat gave him the political glamor of martyrdom. T o a New Jersey Democratic machine that saw victory likely in 1910, the ex-president of Princeton seemed to combine a vote-getting aura of liberalism and integrity with sufficient lack of experience in practical politics to assure the continuance of sound policy—maintaining New Jersey laws against pressure for reform was important to interests which had made the state notorious for laxity in granting corporate charters and firmness against such innovations as employers' liability. The Democratic machine named Wilson its candidate for governor, accordingly. When he was elected, machine leaders learned that they had given power to a man who had in no way forgotten that he numbered Presbyterian ministers in both lines of his ancestry. As governor, Wilson showed many of the traits he was to give evidence of in higher office: he was stubbornly certain of his own Tightness, fearless in defying machine rule, and ready to appeal to the people against slackness in legislators. T w o years as governor of New Jersey made Wilson a leader among contenders for the Democratic presidential nomination; his only serious rival was Champ Clark of Missouri. The Baltimore Convention, like that of 1908, was under William J. Bryan's control, though he had refused to be a candidate. Defeated for the post of temporary chairman, Bryan dictated the Democratic platform and all but ruled the convention from the floor. And, in the balloting for nominee, it was Bryan's influence which gave the vote of his delegation,

AMERICAN instructed for Clark, to W o o d r o w Wilson, and so made Wilson the presidential candidate. Bryan had switched when the N e w York delegation, led by Tammany Hall, went over to Clark on the tenth ballot; but forty-six ballots were taken before the convention gave Wilson the two-thirds vote then necessary to name a Democratic candidate. W o o d r o w Wilson carried on a vigorous campaign. His speeches—largely reprinted in The New Freedom ( 1 9 1 3 ) — n o t only present his own idea of reform but also reject that of his chief opponent, Theodore Roosevelt. The people must rule their economic life di-

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rectly, Wilson argues, and not through the trusteeship of great enterprise. Monopoly never can be trusted, even under regulation, for what assurance is there that the regulators will act in the interest of the people? Regulation is not sufficient, therefore; competition must be restored. Only then can the creative middle class return to its true task and, with energies released, take up its appointed mission of enriching American life. T h e selection here reprinted is from The New Freedom ( N e w York, 1 9 1 3 ) and is published by permission of Doubleday and Company, Inc.

The New Freedom BY FREEMEN NEED N O

W O O D R O W

GUARDIANS

THERE ARE TWO theories of government that have been contending with each other ever since government began. One of them is the theory which in America'is associated with the name of a very great man, Alexander Hamilton. A great man, but, in my judgment, not a great American. H e did not think in terms of American life. Hamilton believed that the only people who could understand government, and therefore the only people who were qualified to conduct it, were the men who had the biggest financial stake in the commercial and industrial enterprises of the country. That theory, though few have now the hardihood to profess it openly, has been the working theory upon which our government has lately been conducted. It is astonishing how persistent it is. It is amazing how quickly die political party which had Lincoln for its first leader,—Lincoln, who not only denied, but in his own person so completely disproved the aristocratic theory,—it is amazing how quickly that party, founded on faith in the people, forgot the precepts of Lincoln and fell under the delusion that the "masses" needed the guardianship of "men of affairs." For indeed, if you stop to think about it, nothing could be a greater departure from original Americanism, from faith in the ability of a confident, resourceful, and independent people, than the discouraging doctrine that somebody has got to provide prosperity for the rest of us. And yet that is exactly the doctrine on which the government of the United States has been conducted lately. W h o have been consulted when important

W I L S O N

measures of government, like tariff acts, and currency acts, and railroad acts, were under consideration? T h e people whom the tariff chiefly affects, the people f o r whom the currency is supposed to exist, the people who pay the duties and ride on the railroads? Oh no! What do they know about such matters. T h e gentlemen whose ideas have been sought are the big manufacturers, the bankers, and the heads of the great railroad combinations. T h e masters of the government of the United States are the combined capitalists and manufacturers of the United States. It is written over every intimate page of the records of Congress, it is written all through the history of conferences at the White House, that the suggestions of economic policy in this country have come from one source, not from many sources. T h e benevolent guardians, the kind-hearted trustees who have taken the troubles of government off our hands, have become so conspicuous that almost anybody can write out a list of them. T h e y have become so conspicuous that their names are mentioned upon almost every political platform. T h e men who have undertaken the interesting job of taking care of us do not force us to requite them with anonymously directed gratitude. W e know them by name. . . . T h e government of the United States at present is a foster-child of the special interests. It is not allowed to have a will of its own. It is told at every move: "Don't do that; you will interfere with our prosperity." And when we ask, " W h e r e is our prosperity lodged?" a certain group of gentlemen say, " W i t h us." T h e government of the United

974

THE NEW FREEDOM

States in recent years has not been administered by the common people of the United States. You know just as well as I do,—it is not an indictment against anybody, it is a mere statement of the facts,—that the people have stood outside and looked on at their own government and that all they have had to determine in past years has been which crowd they would look on at; whether they would look on at this little group or that little group w h o had managed to get the control of affairs in its hands. Have you ever heard, for example, of any hearing before any great committee of the Congress in which the people of the country as a whole were represented, except it may be by the Congressmen themselves? T h e men who appear at those meetings in order to argue for or against a schedule in the tariff, for this measure or against that measure, are men w h o represent special interests. T h e y may represent them very honestly, they may intend no wrong to their fellow-citizens, but they are speaking from the point of view always of a small portion of the population. I have sometimes wondered why men, particularly men of means, men w h o didn't have to work f o r their living, shouldn't constitute themselves attorneys f o r the people, and every time a hearing is held before a committee of Congress should not go and ask: "Gentlemen, in considering these things suppose you consider the whole country? Suppose you consider the citizens of the United States?" . . .

class feeling of any kind. But I do mean to suggest this: That the wealth of the country has, in reccnt years, come from particular sources; it has come from those sources which have built up monopoly. Its point of view is a special point of view. It is the point of view of those men w h o do not wish that the people should determine their own affairs, because they do not believe that the people's judgment is sound. T h e y want to be commissioned to take care of the United States and of the people of the United States, because they bel :eve that they, better than anybody else, understand the interests of the United States. I do not challenge their character; I challenge their point of view. W e cannot afford to be governed as we have been governed in the last generation, b y men who occupy so narrow, so prejudiced, so limited a point of view.

I am one of those w h o absolutely reject the trustee theory, the guardianship theory. I have never found a man who knew how to take care of me, and, reasoning from that point out, I conjecture that there isn't any man who knows how to take care of all the people of the United States. I suspect that the people of the United States understand their own interests better than any group of men in the confines of the country understand them. T h e men who are sweating blood to get their foothold in the world of endeavor understand the conditions of business in the United States very much better than the men who have arrived and are at the top. T h e y know what the thing is that they are struggling against. T h e y know how difficult it is to start a new enterprise. T h e y know how far they have to search for credit that will put them upon an even footing with the men w h o have already built up industry in this country. T h e y know that somewhere, by somebody, the development of industry is being controlled.

I believe, as I believe in nothing else, in the average integrity and the average intelligence of the American people, and I do not believe that the intelligence of America can be put into commission anywhere. I do not believe that there is any group of men of any kind to whom w e can afford to give that kind of trusteeship. I will not live under trustees if I can help it. N o group of men less than the majority has a right to tell me how I have got to live in America. I will submit to the majority, because I have been trained to do it,—though I may sometimes have m y private opinion even of the majority. I do not care how wise, how patriotic, the trustees may be, I have never heard of any group of men in whose hands I am willing to lodge the liberties of A m e r ica in trust.

I do not say this with the slightest desire to create any prejudice against wealth; on the contrary, I should be ashamed of myself if I excited

T h e government of our country cannot be lodged in any special class. T h e policy of a great nation cannot be tied up with any particular set of interests. I want to say, again and again, that my arguments do not touch the character of the men to whom I am opposed. I believe that the very wealthy men who have got their money b y certain kinds of corporate enterprise have closed in their horizon, and that they do not see and do not understand the rank and file of the people. It is f o r that reason that I want to break up the little coterie that has determined what the government of the nation should do. . . .

If any part of our people want to be wards, if they want to have guardians put over them, if they want to be taken care of, if they want to be children, patronized by the government, w h y , I am sorry, because it will sap the manhood of America. But I don't believe they do. I believe they want to stand on the firm foundation of law and right and take care of themselves. I, f o r m y part, don't

AMERICAN PROBLEMS want to belong to a nation, I believe that I do not belong to a nation, that needs to be taken care of by guardians. I want to belong to a nation, and I am proud that I do belong to a nation, that knows how to take care of itself. If I thought that the American people were reckless, were ignorant, were vindictive, I might shrink from putting the government into their hands. But the beauty of democracy is that when y o u are reckless you destroy your own established conditions of life; when you are vindictive, y o u wreak vengeance upon yourself; the whole stability of a democratic polity rests upon the fact that every interest is every man's interest. . . . In a former generation, half a century ago, there were a great many men associated with the government whose patriotism we are not privileged to deny nor to question, w h o intended to serve the people, but had become so saturated with the point of view of a governing class that it was impossible f o r them to see America as the people of America themselves saw it. T h e n there arose that interesting figure, the immortal figure of the great Lincoln, who stood up declaring that the politicians, the men who had governed this country, did not see from the point of view of the people. W h e n I think of that tall, gaunt figure rising in Illinois, I have a picture of a man free, unentangled, unassociated with the governing influences of the country, ready to see things with an open eye, to see them steadily, to see them whole, to see them as the men he rubbed shoulders with and associated with saw them. W h a t the country needed in i860 was a leader who understood and represented the thought of the whole people, as contrasted with that of a class which imagined itself the guardian of the country's welfare. N o w , likewise, the trouble with our present political condition is that we need some man w h o has not been associated with the governing classes and the governing influences of this country to stand up and speak for us; we need to hear a voice from the outside calling upon the American people to assert again their rights and prerogatives in the possession of their own government. . . . Do our masters of industry speak in the spirit and interest even of those whom they employ? When men ask me what I think about the labor question and laboring men, I feel that I am being asked what I know about the vast majority of the people, and I feel as if I were being asked to separate myself, as belonging to a particular class, from that great body of my fellow-citizens who sustain and conduct the enterprises of the country. Until w e get away f r o m that point of view it

975

will be impossible to have a free government. I have listened to some very honest and eloquent orators whose sentiments were noteworthy f o r this: that when they spoke of the people, they were not thinking of themselves;, they were thinking of somebody whom they were commissioned to take care of. T h e y were always planning to do things for the American people, and I have seen them visibly shiver when it was suggested that they arrange to have something done b y the people f o r themselves. T h e y said, " W h a t do they know about it?" I always feel like replying, " W h a t do you know about it? Y o u know your own interest, but w h o has told you our interests, and what do you know about them?" F o r the business of every leader of government is to hear what the nation is saying and to know what the nation is enduring. It is not his business to judge for the nation, but to judge through the nation as its spokesman and voice. I do not believe that this country could have safely allowed a continuation of the policy of the men w h o have viewed affairs in any other light. T h e hypothesis under which we have been ruled is that of government through a board of trustees, through a selected number of the big business men of the country who know a lot that the rest of us do not know, and who take it f o r granted that our ignorance would wreck the prosperity of the country. T h e idea of the Presidents we have recently had has been that they were Presidents of a National Board of Trustees. T h a t is not m y idea. I have been president of one board of trustees, and I do not care to have another on m y hands. I want to be President of the people of the United States. T h e r e was many a time when I was president of the board of trustees of a university when the undergraduates knew more than the trustees did; and it has been in m y thought ever since that if I could have dealt directly with the people who constituted Princeton University I could have carried it forward much faster than I could dealing with a board of trustees. . . . I tell you the men I am interested in are the men who, under the conditions we have had, never had their voices heard, who never got a line in the newspapers, w h o never got a moment on the platform, w h o never had access to the ears of G o v ernors or Presidents or of anybody w h o was responsible f o r the conduct of public affairs, but who went silently and patiently to their w o r k every day carrying the burden of the world. H o w are they to be understood b y the masters of finance, if only the masters of finance are consulted? T h a t is what I mean when I say, "Bring the government back to the people." I do not mean

976

THE NEW

anything demagogic; I do not mean to talk as if we wanted a great mass of men to rush in and destroy something. That is not the idea. I want the people to come in and take possession of their own premises; f o r I hold that the government belongs to the people, and that they have a right to that intimate access to it which will determine every turn of its policy. America is never going to submit to guardianship. America is never going to choose thralldom instead of freedom. Look what there is to decide! There is the tariff question. Can the tariff question be decided in favor of the people, so long as the monopolies are the chief counselors at Washington? T h e r e is the currency question. Are we going to settle the currency question so long as the government listens only to the counsel of those who command the banking situation? Then there is the question of conservation. What is our fear about conservation? The hands that are being stretched out to monopolize our forests, to prevent or pre-empt the use of our great power-producing streams; the hands that are

FREEDOM being stretched into the bowels of the earth to take possession of the great riches that lie hidden in Alaska and elsewhere in the incomparable domain of the United States, are the hands of monopoly. A r e these men to continue to stand at the elbow of government and tell us how we are to save ourselves,—from themselves? You cannot settle the question of conservation while monopoly is close to the ears of those who govern. And the question of conservation is a great deal bigger than the question of saving our forests and our mineral resources and our waters; it is as big as the life and happiness and strength and elasticity and hope of our people. There are tasks awaiting the government of the United States which it cannot perform until every pulse of that government beats in unison with the needs and the desires of the whole body of the American people. Shall we not give the people access of sympathy, access of authority, to the instrumentalities which are to be indispensable to their lives?

THE NATIONAL MONETARY COMMISSION T H E DEFECTS of the National Banking A c t of 1864 had been evident at e v e r y banking crisis f r o m 1 8 7 3 to 1907. B u t popular interest in financial r e f o r m had centered in efforts to secure cheaper money rather than in plans f o r revising the nation's banking and currency system. T h e panic of 1907, occurring after the U n i t e d States had adopted the gold standard, p r o m p t e d legislative measures to create a c u r r e n c y m o r e responsive to business needs than that created b y the National Banking A c t . T h o s e measures provided only f o r temp o r a r y e m e r g e n c y issues, h o w e v e r ; further action was postponed until the National M o n e t a r y Commission should make its final report. T h e Commission was d u l y appointed. It inquired into the banking systems of the principal nations of the w o r l d as well as into the shortcomings of the American scheme. In 1 9 1 0 , a f t e r considerable criticism of its delays, the Commission summarized the defects of the N a t i o n a l Banking system as a guide to f u t u r e legislation. F o r , even as supplemented

b y the new e m e r g e n c y measures, the present system was inadequate. So far, general agreement prevailed, but the law suggested b y Senator N e l s o n W . A l d r i c h ( 1 8 4 1 - 1 9 1 5 ) of R h o d e Island, w h o had been instrumental in establishing the Commission, w o n less acceptance. T h e A l d r i c h bill provided f o r a central bank, in the f o r m of a reserve association controlled b y the larger banks, w h i c h was to have no formal public representation b e y o n d the Secretaries of A g riculture, C o m m e r c e and L a b o r , and the T r e a s u r y serving ex officio. In addition to issuing banknotes against a gold reserve of 33 % percent, this central bank was to rediscount commercial paper, provide a more elastic c u r r e n c y , and make use of the g o v e r n m e n t funds n o w kept idle in the subtreasuries. T h e A l drich bill's conservative sponsorship and the predominance of banker control in its p r o v i sions w e r e not likely to win support in the insurgent y e a r 1 9 1 0 . W h e n the W i l s o n administration undertook to fulfill campaign pledges f o r banking r e f o r m , it proceeded f r o m d i f -

A M E R I C A N PROBLEMS ferent premises and reached a markedly different end, though it did make use of some of the technical features of the Aldrich bill. The selection h".re reprinted is from the

Defects BY

THE

Publications of the National Monetary Commission (Washington, 1910) and appeared originally as Senate Document No. 243, 6ià Congress, 2d Session.

of the National NATIONAL

Banking

MONETARY

, . . THE ACT of May 30, 1908, providing for the appointment of the National Monetary Commission was a direct consequence of the panic of 1907. W e shall not attempt to recount the severe losses and misfortunes suffered by the American people of all classes as the result of this and similar crises. T o seek for means to prevent the recurrence or to mitigate the severity of grave disasters of this character was, however, one of the primary purposes of its creation. W e have made a thorough study of the defects of our banking system, which were largely responsible for these disasters and have sought to provide effective remedies for these and other defects, in the legislation we propose. The principal defects in our banking system we believe may be summarized as follows: j. W e have no provision for the concentration of the cash reserves of the banks and for their mobilization and use wherever needed in times of trouble. Experience has shown that the scattered cash reserves of our banks are inadequate for purposes of assistance or defense at such times. 2. Antiquated Federal and State laws restrict the use of bank reserves and prohibit the lending power of banks at times when, in the presence of unusual demands, reserves should be freely used and credit liberally extended to all deserving customers. 3. Our banks also lack adequate means available for use at any time to replenish their reserves or increase their loaning powers when necessary to meet normal or unusual demands. 4. Of our various forms of currency the banknote issue is the only one which we might expect to respond to the changing needs of business by automatic expansion and contraction, but this issue is deprived of all such qualities by the fact that its volume is largely dependent upon the amount and price of United States bonds. 5. W e lack means to insure such effective cooperation on the part of banks as is necessary to protect their own and the public interests in times of stress or crisis. There is no cooperation of any kind among banks outside the clearing-house cities. While clearing-house organizations of banks

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System

COMMISSION

have been able to render valuable services within a limited sphere for local communities, the lack of means to secure their cooperation or affiliation in broader fields makes it impossible to use these or similar local agencies to prevent panics or avert calamitous disturbances affecting the country at large. These organizations have, in fact, never been able to prevent the suspension of cash payments by financial institutions in their own localities in cases of emergency. 6. We have no effective agency covering the entire country which affords necessary facilities for making domestic exchanges between different localities and sections, or which can prevent disastrous disruption of all such exchanges in times of serious trouble. 7. W e have no instrumentality that can deal effectively with the broad questions which, from an international standpoint, affect the credit and status of the United States as one of the great financial powers of the world. In times of threatened trouble or of actual panic these questions, which involve the course of foreign exchange and the international movements of gold, are even more important to us from a national than from an international standpoint. 8. The lack of commercial paper of an established standard, issued for agricultural, industrial, and commercial purposes, available for investments by banks, leads to an unhealthy congestion of loanable funds in great centers and hinders the development of the productive forces of the country. 9. The narrow character of our discount market, with its limited range of safe and profitable investments for banks, results in sending the surplus money of all sections, in excess of reserves and local demands, to New York, where it is usually loaned out on call on Stock Exchange securities, tending to promote dangerous speculation and inevitably leading to injurious disturbances in reserves. This concentration of surplus money and available funds in New York imposes upon the managers of the banks of that city the vast responsibilities which are inherent in the control

97®

THE NEW FREEDOM

of a large proportion of the banking resources of the country. 10. T h e absence of a broad discount market in our system, taken together with the restrictive treatment of reserves, creates at times when serious financial disturbances are anticipated a condition of dependence on the part of individual banks throughout the country, and at the same time places the farmers and others engaged in productive industries at a great disadvantage in securing the credit they require for the growth, retention, and distribution of their products. • ι. T h e r e is a marked lack of equality in credit facilities between different sections of the country, reflected in less favored communities, in retarded development, and great disparity in rates of discount. 12. Our system lacks an agency whose influence can be made effective in securing greater uniformity, steadiness, and reasonableness of rates of discount in all parts of the country. ι ). W e have no effective agency that can surely provide adequate banking facilities for different regions promptly and on reasonable terms to meet the ordinary or unusual demands for credit or currency necessary for moving crops or for other legitimate purposes. 14. W e have no power to enforce the adoption of uniform standards with regard to capital, reserves, examinations, and the character and publicity of reports of all banks in the different sections of the country. ι j . W e have n o American banking institutions in f o r e i g n countries. T h e organization of such banks is necessary f o r the development of our foreign trade. 16. T h e provision that national banks shall not make loans upon real estate restricts their p o w e r to serve f a r m e r s and other borrowers in rural communities. 17. T h e provision of law under which the G o v ernment acts as custodian of its o w n funds results in irregular withdrawals of money f r o m circulation and bank reserves in periods of excessive G o v e r n m e n t revenues, and in the return of these f u n d s into circulation only in periods of deficient revenues. R e c e n t e f f o r t s to m o d i f y the Independent T r e a s u r y system b y a partial distribution of the public m o n e y s among national banks have resulted, it is c h a r g e d , in discrimination and f a v o r itism in the treatment of different banks. T h e r e is a general agreement among intelligent students of the subject that to remedy these and other defects it is necessary to provide a comprehensive reorganization of credit and a thorough reconstruction of o u r banking systems and meth-

ods. W e submit herewith our recommendation providing f o r such reorganization in the f o r m of a bill which, if enacted into law, will, w e believe, accomplish these results. It is proposed to incorporate the National R e serve Association of the United States with an authorized capital equal to 20 per cent of the capital of all subscribing banks, of which one-half shall be paid in and the remainder shall become a liability, subject to call under the provisions of section 3 of the bill. It is also provided that b e f o r e the reserve association can commence business $100,000,000 of capital must be paid in cash. A l l State banks and trust companies c o n f o r m i n g to the provisions of the bill with reference to capitalization and reserves and all National banks are entitled to subscribe f o r stock and to become members of the association. Shares in the association are not transferable and can not be o w n e d otherwise than by a subscribing bank or in any other than the proportion named. It is proposed to group into local associations all subscribing banks located in contiguous territory. T h e local associations are to be organized into district associations, in each of which shall be located a branch of the National R e s e r v e A s s o ciation; and the district associations, which shall be so arranged as to include all the territory of the United States, are combined to f o r m the National Reserve Association of the United States. T h e s e several associations are analogous in their organization to our political divisions, into c o u n ties, States, and the United States. E a c h has distinctive functions quite unlike in their character and each has representative self-government. In the local association the individual bank is the voting unit. A majority of banks, without r e f e r e n c e to their size or their holdings of stock in the reserve association, elect three-fifths of the directors, and a majority in stock interest elect t w o fifths. T h i s method of electing directors is, w e believe, quite novel in corporate government. It is more democratic in form, with more liberal representation to minorities than any method in general use. One of the principal functions of the local associations is to guarantee, upon application, the c o m mercial paper of individual banks which may be offered to the branches f o r rediscount, as provided in section 27 of the bill. T h e local association m a y , and in most cases would, require f r o m the bank making the application satisfactory security f o r the guaranty. Local associations are authorized in serious emergencies to guarantee the direct obligations of subscribing banks with adequate security, in accordance with the provisions of section 28 of

A M E R I C A N PROBLEMS the bill. A local association may decline to give the guaranties provided for under either of these sections. Local associations may also, b y vote of three-fourths of their board of directors and the approval of the National Reserve Association, as-

979

sume and exercise the powers and functions of clearing houses. T h e y are required also to perform such services in facilitating domestic exchanges as, in the opinion of the National Reserve Association, the public interests may require. . . .

CARTER GLASS C A R T E R G L A S S ( 1 8 5 8 - 1 9 4 6 ) of Virginia was the chairman of the House Banking and Currency Committee when the Democrats took control after their triumph in the elections of 191 o. He began to give close study to the problem of the reorganization of the nation's banking system—paralleling the activities of the National Monetary Commission—and by 1913 had whipped into shape a measure called the Currency Bill. In his Adventure in Constructive Finance ( 1 9 2 7 ) , Glass tells in detail the political background and fortunes of his bill as it moved through both Houses of Congress and was debated by the country. It met with stubborn opposition: from the banking community, which was largely supporting the Aldrich plan of a central bank controlled by the private banking houses themselves; and from the agrarians, who had not yet lost their zest for fiat money. T h e fact is, the Senate wrote a measure of its own and Glass needed all his skill as a political leader and parliamentarian to win out. H e pays tribute to Wilson, who came over to Glass's position, for Wilson's personal influence had much to do with overcoming a threatened attack on the Glass bill by a coalition of Republican

and Democratic conservatives in the Senate. On December 22, 1913, Glass presented before the House the Conference report on the Currency bill. In this speech, reprinted here, Glass details the structure of the Federal Reserve System and defends the Conference Committee report against the attacks of agrarians and conservatives alike. T h e Conference Committee report was passed by both Houses and the bill was signed by President Wilson on December 23, 1913. It is known not as the "Currency Bill" but the "Federal Reserve Act"; its title declared its purpose to be: "An Act to provide for the establishment of Federal Reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes." One of the great achievements of the Wilsonian N e w Freedom, the act created a banking mechanism that certainly was more sensitive to the country's banking and currency requirements than had been true of the old National Banking System. Glass's speech is reprinted from the Congressional Record, December 22, 1913.

Speech on the Federal Reserve BY

CARTER

MR. GLASS. Mr. Speaker, on the 18th day of last September this House, b y a vote of 286 to 85, passed H . R . 7837, known as the currency bill. T h e conferees on the part of the House to reconcile the differences with the Senate now have the pleasure of reporting the bill back without one single fundamental alteration of its structure. . . .

Act

GLASS FEDERAL RESERVE BOARD

T h e Senate amendment eliminated from membership on the Federal Reserve Board the Secretary of Agriculture and the Comptroller of the Currency. This action b y the Senate reflected the deliberate opinion of the Democratic Party caucus

THE NEW FREEDOM and apparently represented the unanimous conviction of the caucus and the Senate. The House conferees signified a willingness to yield with respect to the Secretary of Agriculture, but strenuously resisted the proposition to eliminate the Comptroller of the Currency. T h e conferees on the part of the Senate long persisted in the determination not to permit this official to hold membership on the Federal Reserve Board, but the House conferees, with equal pertinacity, insisted that the Comptroller of the Currency, already charged by law with the supervision and with a large power of control of the national banks of the country, was by virtue of his official duties peculiarly suited for membership on the board. T h e House conferees prevailed; so that the Federal Reserve Board will be composed of the Secretary of the Treasury, the Comptroller of the Currency, and five members to be appointed by the President for terms of 10 years each, instead of 6 years, as originally provided in the House bill, and with salaries of $12,000 per annum, instead of $10,000 per annum, as provided in the House bill.

or employees of member banks. T h e Senate st« amended the provision as to prohibit stockholders of member banks from being directors of class Β in the regional reserve banks; but on this point the Senate receded. CAPITALIZATION

The House bill provided that the capital of the regional reserve banks should be in amount equal to 20 per cent, of the capital of member banks, one-half to be paid in, and the other half subject to call, being in the nature of a double liability. T h e Senate so altered this provision as to provide that the aggregate capital of a regional reserve bank should be in amount equal to 6 per cent, of the capital and surplus of member banks. T h e House provision was based upon the theory that a bank's capital stock is less liable to variation than its surplus. Nevertheless, the House yielded on this point, not regarding it as at all vital. Indeed, the aggregate capital under the one provision will be approximately the same as that provided by the other plan. . . .

N U M B E R O F BANKS

P O W E R S O F RESERVE BOARD

Concerning the number of regional reserve banks to be established, the House bill, as y o u k n o w , provided that there should not be less than h , leaving subsequent increase in the number of banks to the judgment of the Federal R e s e r v e B o a r d . T h e Senate amended the bill in that particular so as to provide that the number of banks should not be less than 8 nor more than 1 1 . O n that point the House conferees yielded.

T h e powers of the Federal Reserve B o a r d w e r e in some minor particulars and in one or t w o material aspects altered by the Senate amendment, notably where the House authorized the Federal Reserve Board to compel one Federal reserve bank to rediscount the discounted paper of another Federal reserve bank under certain restrictions. Such authority could only be exercised in time of emergency and only by the affirmative action of five of the seven members of the Federal R e s e r v e Board. T h e Senate amendment swept a w a y e v e r y one of the restrictions imposed by the H o u s e bill and vested the Federal Reserve Board with plenary power to order the rediscount at its pleasure and by a majority vote. T h e House conferees insisted upon a restoration of the requirement that at least five members of the Federal Reserve B o a r d must concur in the proposed action.

VOTING FOR DIRECTORS

In this connection, the H o u s e bill provided that the directors of classes A and Β of the regional reserve banks—the first class peculiarly representative of the banking interest and the second class representative of the business community-—should be selected f r o m approved lists to be supplied b y the stockholding banks. T h e Senate so amended this provision as to extend the field of choice, permitting the electors to vote f o r any individual in the regional reserve district. Regarding this as an utterly impracticable, if not interminable, process, the House conferees stood firm and the Senate yielded. T h e House accepted the Senate modification concerning a preferential ballot, so as to prevent the possibility of a tie vote f o r directors. QUALIFICATIONS O F DIRECTORS

Concerning the qualification of directors of regional reserve banks, the H o u s e bill provided that directors of class Β could not be officers, directors,

REDISCOUNTS

In the matter of rediscount operations the o n l y material change made b y the Senate amendment to the House bill relates to the time limit of certain agricultural credits. T h i s , you will recall, was an item of the bill which provoked considerable controversy in the House Democratic caucus and in the House itself. In the judgment of some of us the difference is more apparent than real, and certainly more political than economic. T h e H o u s e bill, keeping constantly in view the capital p u r pose of establishing regional reserve banks with

AMERICAN PROBLEMS quick and liquid assets, promptly and certainly rensive to the commercial, agricultural, and intrial requirements of the country, provided a 90-day maturity for paper subject to discount, making no discrimination whatsoever for or against the merchant, the manufacturer, or the farmer. The Senate amendment, in the case of agricultural credits, extended the period of maturity to six months. The House having reversed itself on this particular proposition and having instructed the House conferees to yield on the Senate amendment, the conferees acquiesced. . . .

r

RESERVES

In dealing with the reserve requirements, the Senate amendment to the House bill somewhat strengthened the reserve by advancing the minimum requirement from 33% to 40 per cent, of gold or lawful money, prescribing a flat penalty of ι per cent, on all impairment of the reserve behind the notes between 40 per cent, and 31% per cent, and authorizing the Federal Reserve Board to assess a graduated tax of 1% per cent, per annum upon each 2% percent, or fraction thereof that such reserve falls below 31% per cent. The reserve requirement for individual banks was very materially reduced by the Senate amendment; indeed, it was loosened up to an alarming extent, making inflation dangerously probable. The Senate amendment did not require a dollar of reserve to be kept in the vaults of individual banks, but made it possible for every dollar of the reserve to be kept in the regional reserve banks, thus frustrating the purpose of the House to put a stop to the vicious practice of pyramiding reserves under which the tendency to inflation is always possible and inviting. The House conferees adjusted this point of difference not entirely to their satisfaction, but vastly to the betterment of the provision, so that while the reserve requirements as to individual banks are somewhat less exacting than they were in the House bill they are very much more exacting than they were in the Senate amendment to the House bill. BOND REFUNDING

The Senate radically altered the bond provision of the House bill. The pivotal point of banking and currency reform in this country around which controversy has raged for a quarter of a century has been the rigid and inelastic nature of a currency based on Government bonds. The demand of the banker, the textbook writer, the business man, and other currency experts has been for the abrogation of the bond-secured currency system and the gradual substitution therefor of a currency

981

based on commercial assets and immediately responsive to business requirements. That has been the universal contention of all persons who have a clear comprehension of the question. It has been the declared policy of the Democratic Party for years, the declaration having appeared in specific terms in three of its recent national platforms. Nevertheless, the Senate in its wisdom radically altered that provision of the House bill so as to make an appreciable retirement of the bondsecured currency unlikely, if not impossible. The House conferees gained a measure of advantage by so modifying the Senate amendment as to make probable the retirement of at least $300,000,000 of the bond-secured currency within a period of 20 years, and the possible retirement of $500,000,000 of that currency, to be superseded by elastic Federal reserve currency, based upon a gold reserve and commercial assets, expanding and contracting automatically with the business requirements of the country. NO CHARGE FOR EXCHANGE

One of the most important provisions of the currency bill passed by this House was that which sought to put an end to the flagrant abuse involved in excessive charges by banks throughout the country for collections and exchanges. The House bill provided that exchanges should be made at par and that charges for collections should not exceed the actual cost to the banks. This item of the bill, as most of you remember, was bitterly controverted in the Democratic caucus, and also in the House. Naturally thousands of banks deriving large profits from the practice of charging constructive interest upon checks in transit and very arbitrary charges for collections and for exchanges exhibited great distaste to this provision of the bill. They vigorously protested to members against the inclusion of this prohibition, and thus the effort to remove this tax burden upon the business of the country was contested with the utmost pertinacity. However, those of us in the House who sought to tear down these tollgates upon the highways of commerce prevailed. The nght was renewed in the Senate, and that body so modified the House provision as to leave it solely within the discretion of the Federal Reserve Board to diminish or abolish the evil complained of, as it might please. The House conferees declined to yield on this point. They insisted upon such a modification of the Senate amendment as will exact exchanges at par and restrict charges for collections to the actual cost of such transactions to the banks. In brief, as the bill now is reported to the House the banks cannot make exchange and collection charges a

THE NEW FREEDOM source of profit; they cannot any longer charge constructive interest; they cannot exact a tax for a theoretical transfer of funds from point to point when no transfer is actually made, but only an entry on the books. They can no longer harass the commerce of the country nor penalize the business men of the Nation by an unjust tax. . . . GOVERNMENT DEIOSITS

In the matter of Government deposits the House bill required that the regional reserve banks should be constituted fiscal agents of the United States Government and required the Secretary of the Treasury to deposit all of the current funds of the Government in these banks, omitting, of course, the Treasury trust funds. T h e Senate so altered this provision of the House bill as to make it optional with the Secretary of the Treasury to so deposit the Government funds and to place it within the discretion of that official to constitute the regional reserve banks fiscal agents of the United States Government. I have been unable to get any clear perception of the reason for this alteration of the House bill further than that I a little suspect that it was done for tactical purposes, perhaps to enable the Secretary of the Treasury to combat the schemes of intractable bankers, should there be such. T h e object of the framers of the House bill in making the provision mandatory instead of discretionary was to furnish the regional reserve banks with the idle funds of the Government as a basis f o r active business transactions, and at the same time to correct the unscientific and senseless process of withdrawing these funds from business channels and impounding them in the Treasury and sub-treasuries. It is scarcely thinkable that we shall ever have a Secretary of the Treasury who would not so exercise the discretion conferred upon him by the bill, as now reported, as to carry out the real purpose which the House had in view when it made this provision mandatory; hence, the House conferees reluctantly yielded the point about 3 o'clock this morning. . . . THE NOTE ISSUES

The note provision of the House bill has been bitterly assailed, both in the other branch of Congress and by certain men of large experience and influence in banking. T h e president of the largest banking institution in the Western Hemisphere went all over the country recently, charging that the Federal reserve notes provided by the House bill and by the Senate amendment to the House bill, substantially now reported from the confer-

ence committee, constitute "fiat money." This charge was vehemently echoed, without investigation or reflection, as I am obliged to believe, in the other branch of Congress. Mr. Speaker, the characterization is not only inaccurate, is not only untrue, is not only amazing, but is positively wanton. I have said in speeches elsewhere what I shall now repeat here. There is not in this country and there has never been in any country of the civilized world a government issue or a bank-note issue comparable in security to the Federal reserve notes provided by the bill which you are now asked to enact into law. [Applause.] NOT AN E L E M E N T OF FIAT1SM

Fiat money! W h y , sir, never since the world began was there such a perversion of terms; and a month ago I stood before a brilliant audience of 700 bankers and business men in N e w York City, and there challenged the president of the National City Bank to name a single lexicographer on the face of the earth to whom he might appeal to just i f y his characterization of these notes. I twined him with the fact that not 1 per cent, of the intelligent bankers of America could be induced to agree with his definition of these notes, and asked him to name a single financial writer of the metropolitan press of his own town, to whom he might confidently appeal to justify his absurd charge. "Fiat money' is an irredeemable paper money with no specie basis, with no gold reserve, but the value of which depends solely upon the taxing power of the Government emitting it. This Federal reserve note has 40 per cent, gold reserve behind it; has 100 per cent, short-term, gilt-edge commercial paper behind it, which must pass the scrutiny, first, of the individual bank, next of the regional reserve bank, and finally of the Federal Reserve Board. In addition to this, it constitutes a first and paramount lien on all the assets of the regional reserve bank, including the double liability of the member banks; and, superadded to this, it has behind it the taxing power, the credit, and the honor of a Nation of 95,000,000 of free people. There is not a semblance of fiatism about these notes; and at the very moment that Mr. Vanderlip, of the National Citv Bank of N e w York, was in Chicago recklessly characterizing these notes as "fiat"—meaning without sufficient security—Paul M. Warburg, perhaps the greatest international banker in America, was here in Washington protesting to me that the security behind the notes was entirely too exacting! Mr. Vanderlip misses the mark a mile, while Mr. Warburg is not far from being right; but we

AMERICAN have thought it better to err on the side of prudence rather than incur the risks of insecurity. . . . AS TO INFLATION

This bill, in its House form, has likewise been subjected to the criticism of providing a wide range of "inflation." On this point I have been more amused than exasperated, because the startling inconsistencies of the critics have been simply ludicrous. On the very day that Mr. Forgan, a great banker, was asserting before the Senate committee that the bill "immensely contracted commercial credits," his fellow townsman, M r . Dawes, ex-Comptroller of the Currency, was proclaiming out West that the bill "enormously inflated commercial credits." Surely it could not do both things at the same time; nor will it ever do either at any time. It will afford a large expansion of credits, when needed, upon a perfectly sound basis and insure certain contraction of credits at the end of legitimate commercial transactions. T h i s was what it was designed to do, and without the power to do which the bill would be manifestly deficient. This charge of "inflation," like the criticism in regard to the "fiat" nature of the notes, was echoed in the Senate; and yet the bill came back from the Senate with the possibilities of inflation vastly increased. T h e only thing done in the other body to diminish the possibilities of over-expansion was slightly to increase the gold reserve; but at the same time the bill was so amended in the other body as to permit the banks to count the Federal

PROBLEMS

983

reserve notes as reserve; the reserve requirements were appreciably reduced; banks were accorded the dangerous privilege of unrestricted "acceptances," and other things were done that made the bill, f o r the first time, amenable to the charge that it provided "inflation." But the House conferees insisted upon a restoration of safeguards. A s the bill now stands we have provided against inflation in almost every conceivable w a y — b y the requirement of a substantial gold reserve; b y the requirement of a secondary reserve of short-time commercial paper; b y restricting the power of the reserve board to issue notes except upon application from the banks; b y the interposition of banking instinct and experience applied in a threefold degree—that is to say, banking discretion is applied in the original discount operation of the individual bank; banking discretion is applied in the rediscount operation of the regional reserve bank; banking discretion is applied when the Federal Reserve Board passes upon the application of the regional reserve bank f o r additional currency. T h u s inflation is held in check, first, b y the limited supply of gold; second, b y the limited amount of short-time commercial paper; third, b y the banking discretion of the individual bank; fourth, by the banking discretion of the regional reserve bank; fifth, b y the banking discretion of the Federal Reserve Board, with a broad view of conditions not in a single district, but throughout the entire country. . . .

ROBERT J. BULKLEY A N O T H E R IMPORTANT c o n t r i b u t i o n o f t h e

New

Freedom was the writing of the Federal FarmLoan A c t ( 1 9 1 6 ) after long years of struggle on the part of agrarians to obtain long-term credit relief. Throughout the eighties and nineties, and again just before W o r l d W a r I, farmer parties and organizations had clamored for fiat money or government warehouses (the subtreasury scheme) to meet their credit requirements; but without avail. T h e Democratic Congresses under Wilson—in the face of the skepticism and frequently the hostility of the country's mortgage and life insurance companies—applied themselves to the difficult problem and after many years of labor finally

produced the Federal Farm-Loan A c t . It constitutes a landmark in the history of American agricultural legislation. Robert J . Bulkley ( 1 8 8 0 ), Congressman from Ohio, was one of the leaders in drawing up the bill and steering it through the House. In this article, which appeared in The Journal of Political Economy in February, 1 9 1 7 , he tells the history of the bill and describes its outstanding provisions. T w o sets of institutions were provided: cooperatively owned farm-loan associations and joint-stock land banks; and a new government agency, the Farm-Loan Board, which was to supervise the entire system.

9®4

THE NEW

FREEDOM

The Federal Farm-Loan BY

ROBERT J .

THE AMERICAN FARMER has had a harder tune to get credit and has had to pay more interest on his loans than the American business man or the European farmer. This is not altogether due to his inability to give good security, nor to any doubt about his ultimate ability to pay his debts, but is principally because he has wanted the use of money for longer periods than the commercial banks like to lend it and because rural credits have not been organized in such a way as to suit the convenience of the long-time investor, or to provide adequately for the safety of his investment. This condition has been recognized for several years and diligent efforts have been made to provide a remedy. I Conditions are unsatisfactory in respect to both land-mortgage long-term and personal short-term credit, but the former is generally conceded to be the more fundamental and important problem. Notwithstanding all difficulties, the farmer has succeeded in getting a good deal of money on mortgage security. T h e total is estimated at more than 3 Mi billion dollars. Much of this amount is loaned at reasonable rates, but in many sections interest is unreasonably and unnecessarily high, and, for the most part, the loans are made for relatively short terms—three to five years. . . . V e r y little of the farm-mortgage business is done on the amortization plan, and some of the institutions operating on that plan compel the repayment of principal in rather too short a time. As the amortization-plan business is an insignificant part of the whole, renewals are necessarily frequent, with the attendant commission charges and other costs. It is obvious that notwithstanding the fact that large amounts are already loaned on farm mortgages and that many cases can be cited in which the interest charges are not unreasonable, there is nevertheless a big national problem to be solved in improving and extending agricultural land mortgage credit. It is a problem in which the nation is even more vitally interested than the farmer himself, for availability of funds at reasonable rates is encouragement to the farmer to improve his lands and so increase his yield of foods. T h e fanner's temptation to "rob the soil" which might be another's after the old-fashioned three-year or fiveyear mortgage should fall due does not exist under the long-term, non-callable, amortization-plan

Act

BULKLEY

mortgage which gives the farmer a satisfactory sense of permanence in his land ownership and makes him the most interested and diligent conservator of his soil. Such a change in attitude interests and benefits us all, for it is certain to increase our national agricultural productiveness. But improvement of farm lands and increase of food supply are not the only important changes which may be brought about by improved rural credits. W e may also expect that better credit facilities will increase the number of independent home-owners working their own lands and reduce the number, or at least reduce the proportion, of tenants laboring on the lands of absentee landlords. This would surely represent an advance, for in this country of ours there is already enough absentee landlordism on the farm to give us very serious cause for apprehension. W e may hope, too, that improvement in rural credits will tend noticeably to check the drift of population to great cities, which, it is generally recognized, has gone too far for the good of the country. . . . In the spring of 1913 a commission of seven members appointed by the President traveled through Europe co-operating with a commission made up of members appointed by governors of the several states and some of the Canadian provinces, to study agricultural-credit conditions in the Old World. This commission concluded from a study of European experience that long-term land-mortgage credit presents a problem so distinct from that of short-term personal credit that the two forms of credit cannot well be handled by the same bank or system of banks. T h e commission believed that the consideration of shortterm personal credit should be deferred until after a land-mortgage system had been established, because the principles to be applied to the establishment of land-mortgage credit involve a more radical departure from existing practice in the United States and because it must remain uncertain to what extent existing institutions can cope with short-term agricultural credits until we shall have had the opportunity to observe the effect of the Federal Reserve act and an adequate land-mortgage system, both of which should have a distinctly helpful cffect on agricultural short-term credits. The commission appointed by the President embodied its recommendations for the establishment of an agricultural land-mortgage system in a spe-

AMERICAN PROBLEMS cific bill, which was introduced simultaneously in the Senate b y Senator Fletcher of Florida and in the House of Representatives by Representative Moss of Indiana in January, 1914. . . . This bill was generally condemned b y farmers' organizations because it was believed that under the conditions prescribed joint-stock banks would be organized rather than co-operative banks and that the bill was on the whole rather a bankers' than a farmers' measure. . . . . . . In January, 1910, the joint committee made its land-mortgage report to Congress, and submitted a bill to create an agricultural land-mortgage system, the bill being introduced simultaneously in the Senate by Senator Hollis and in the House by Mr. Moss. This bill was debated and passed b y both Houses with some amendments, but in all essentials it passed as reported by the joint committee. It is worth while to recall how nearly unanimously this measure was passed. It passed the Senate on May 4 by 57 to 5, and the House on M a y i j b y 295 to 10. T h e conference report was adopted in the House b y 3 1 1 to 12 and in the Senate without objection. T h e act was approved b y the President and became a law on J u l y 17, 1916. Ill Those who were charged with framing agricultural land-mortgage legislation were confronted with the problem of making a national system to apply to lands under many state sovereignties and under greatly varying conditions of climate, soil, crops, character of ownership, and methods of cultivation; they were confronted on the one hand with the American farmer's individualism and lack of co-operative experience, and on the other hand with his distrust of a system operated by bankers f o r banking profits; they were called upon to devise a system of land appraisal liberal enough to satisfy the borrower, yet careful enough to satisfy the investor in land-mortgage bonds, and to devise a system of management efficient in operation yet without the payment of large salaries or commissions; they were called upon to reduce interest on farm mortgages without unduly enhancing values of farm lands; they had to establish long-term loans in a country in which the amortization system was practically unknown, and they had to reconcile widely divergent views as to the proper function of the government in the premises. T h e r e should be no surprise that the act as passed comprises 35 sections and covers 25 large pages. . . . In presenting the bill to the Senate last April Senator Hollis said: " T h e plan has been criticized

985

because it is cumbersome and complicated and because the bill is long. . . . But the bill is not really long. It is as long as it is in order to make the operation simple and certain. It is not cumbersome. T h e r e could not be anything simpler than this bill." This is substantially true. Y e t the act contains nearly sixteen thousand words. A recital of all of its provisions would be tedious, and, unless special stress were laid on the vital points, it would tend only to confuse. F o r the present purpose the important things may be conveniently emphasized b y the entire omission of minor details and technicalities. T o get in a f e w words the essence of what is in the law, we may turn to the description of it that Senator Hollis gave to the Senate when he presented his bill: T h e pending rural-credits bill provides f o r a F a r m L o a n Board w h i c h shall have general control over the system; t w e l v e or m o r e land banks w h i c h make loans on mortgage to the f a r m e r ; and m a n y farm-loan associations w h i c h represent the farmers in their dealings w i t h the land banks. T h e F a r m - L o a n Board is non-partisan, consisting of f o u r members, in addition to the Secretary of the Treasury. E a c h land bank must have a capital of at least $500,ooo. 1 If the public does not subscribe the entire amount, the government will take the balance. T h e farm-loan associations are purely co-operative, made up entirely of b o r r o w i n g farmers. T e n or more farmers m a y apply to the land bank of the district f o r a charter. E v e r y f a r m e r w h o wishes to b o r r o w must b e c o m e a member of the loan association, taking stock to the amount of 5 per cent of the f a c e of his loan. T h e loan association takes out an equal amount of stock in the land bank, f o r w a r d i n g the m o n e y at once to the land bank. T h e land bank sends an official appraiser to examine the land, and, if the loan is made, f o r w a r d s the f u n d s to the f a r m e r through the loan association. AVhen the land bank has mortgages 011 hand to the amount of $50,000, it m a y issue a like amount of f a r m loan bonds on the security of the mortgages as collateral. T h e land bank is limited in its issue of bonds to 20 times its capital and surplus. But as each b o r r o w e r puts up 5 per cent of his loan in cash f o r capital stock, the issuing p o w e r of the land bank increases automatically. T h e loan associations are purely co-operative and m a y be of limited (double) liability or unlimited liability. 2 A l l mortgages taken b y the land bank f r o m the members of a loan association are indorsed b y it. T h e mortgages f r o m the t w o classes of associations are kept separate, and bonds issued on the unlimited liability mortgages should sell on a better basis than the others. Farm-loan bonds issued b y a n y land bank are guar1

T h i s w a s amended. T h e act provides a minimum c a p ital of $750,000. 2 T h e "unlimited liability" provision w a s eliminated b y amendment.

9

86

T H E

N E W FREEDOM

anteed b y all the other land banks, so that they have a broad insurance. E v e r y farm-loan bond is secured as follows: ι . B y the capital, reserves, and earnings of the land bank which issues it. 2. B y the capital, reserves, and earnings of the n other land banks. 3. B y the collective security of all the mortgages in its division (limited or unlimited) of the land bank, the mortgages pledged being at least equal in amount to the outstanding bonds. E v e r y mortgage pledged as collateral is secured as follows: ι . B y the personal undertaking of the borrower. 2. B y the security of the mortgaged land, in value at least double the amount of the loan. 3. By the capital, reserves, and earnings of the local association indorsing the loan. 4. B y the individual liability of the members of the indorsing association. It is believed that these bonds will be marketed at par on a 4 per cent basis. T h e maximum charge f o r expenses and profits of the system is 1 per cent on the f a c e of outstanding mortgages, so that the farmer should get his money at 5 per cent. A l l the profits go to the loan associations in dividends and thus to the borrowers w h o are the shareholders in the local associations. Loans to farmers are on long term, and may be as long as thirty-six 3 years. T h e y are on the amortization plan, so that with each interest payment the borr o w e r will pay in a small amount on his principal. If he pays in 1 per cent of the principal yearly, he will pay out in thirty-six years. Loans must be on first mortgage and may not exceed ço per cent of the appraised value of the land. T h e loan committee and the board of directors first pass on the value of the land and the character of the farmer. Before the land bank makes the loan its board of directors passes upon it and has the land appraised b y a landbank appraiser, w h o is a government official. In this w a y absolute safety is secured f o r each loan. T h e interest of the members of the loan association is secured b y their ownership of stock, and b y their double or unlimited liability, 4 as the case may be. Most of the local w o r k of investigation, collecting payments, and f o r w a r d i n g funds is done b y them without expense. T h e i r expenses will be very light. T h e mortgages and farm-loan bonds will be exempt f r o m taxation and the bonds will be a legal investment f o r trust funds. It is believed that the system of land banks outlined affords a safe and attractive farm-land bond f o r the investing public; l o w interest rates, long-term mortgages, and easy payments f o r the farmers; l o w cost of administration; simplicity of organization and operation; adaptability to the needs of every section; and 3

Bill amended to provide f o r a maximum period of f o r t y years. 4 T h e "unlimited liability" provision was eliminated b y amendment.

stimulation to the among farmers.

spirit of

generous

co-operation

T h e system thus described is founded on sound principles. T h e mobilization of farm mortgages behind the several series of farm-loan bonds and the mutual guaranties of the Federal Land Banks make possible the creation of a national security in which investment m a y be made without the risks attendant upon the possible mismanagement or failure of individual farmers or upon sectional crop failures or catastrophes. Certainly through a period of years most of our farmers will succeed in paying their debts, and through this well-organized mobilization of mortgages will absorb the losses incident to individual failures, so that the investor will have a security so safe that he can afford to accept a return representing only the actual value of the use of the credit, without adding anything to compensate f o r the risk which has hitherto been involved in farm mortgages. T h e exemption of the mortgages and farm-loan bonds from taxation only avoids double or treble taxation, since the lands which are the real basis of value remain subject to taxation according to the laws of the several states. T h e tax-exemption feature makes the bonds a more desirable investment and should substantially reduce the rate of interest demanded b y the investor. Another valuable feature of this co-operative land-mortgage system is that it is so organized that it will be to the advantage of all w h o have a voice in controlling it to reduce the interest rate to the farmer; all self-interest in raising rates has been eliminated. Quite properly whatever profits may arise from the operation of the system will ultimately go back to the borrowers in the form of dividends upon the stock of the local associations which they are required to purchase. T h e amortization plan is established on absolutely sound principles. Amortization-plan loans cannot well be made by individual investors or by small institutions, since such lenders cannot use to advantage the small driblets of repayment on capital account which come in from year to year over a long period. Amortization loans should be made b y institutions of large size, so that the annual amortization payments will be in sufficient volume f o r efficient reinvestment or f o r retiring obligations of the loaning institution. T h e concentration of the bond-issuing p o w e r in the twelve land banks adequately covers this point, as each of the institutions will undoubtedly have out enough loans so that the annual repayments on principal account will be considerable. T h e act v e r y wisely provides that the loans are

AMERICAN PROBLEMS to be made through small local co-operative associations. This gives the system the benefit of the knowledge which the farming members have concerning neighborhood land values and the personal character and ability of the applicants f o r loans. W e may be assured that this knowledge will be used to protect the banks against making questionable loans, since every loan is guaranteed by the local associations and thus its ultimate repayment is a matter of direct financial interest to each and every member stockholder of the association. Of course the land banks and bondholders are still further protected b y the close government supervision provided. Co-operation is relatively new to the American farmer, and we often hear it said that he will not take kindly to a system which forces his co-operation with his neighbors and makes known to them the details of his land-mortgage operations. T h e r e is no doubt some force in this, but the loan applications already received b y the Federal FarmLoan Board are abundantly sufficient to insure the successful inauguration of the system, and there is every reason to believe that the actual operation of the svstem will provide such an object-lesson in the benefits of farmers' co-operation that the objections which have been suggested will, as time goes on, more and more fade into insignificance. In order to accelerate the farm-

987

ers' education in the co-operative idea as well as the other features of the operation of the FarmLoan act, the Farm-Loan Board is authorized from time to time to prepare and distribute bulletins on the subject. W i t h the help of this provision f o r propaganda the sound principles underlying the system should soon commend themselves to American farmers generally, and there is every reason to believe that the Farm-Loan act marks the beginning of a great and valuable co-operation among farmers hitherto unknown and believed to be impossible. . . . T h e Farm-Loan act provides adequately f o r the mobilization of farm-mortgage credit; it establishes the amortization system of repayment; it provides adequately f o r care and conservatism coupled with real sympathy in the making of loans; and it provides some safeguards against the undue use of the benefits of the system f o r land speculation. It has given us a well-qualified and efficient Farm-Loan Board, and has committed the government, without party division, to the great task of establishing an adequate American agricultural land-mortgage system. A great reform, agitated and labored with f o r years, has already begun to bear fruit, and bids fair in the course of the next f e w years to fulfil most of the hopes that have been aroused by the discussion of it. . . .

T H E UNITED S T A T E S AND THE WORLD SIR GEORGE A M O N G THE RESULTS o f t h e p a n i c o f 1907 w a s

the appointment of the National Monetary Commission to provide information for a legislative program of reform in the United States currency system. T h e Commission's most important activity was the publication of a series of monographs, among them Sir George Paish's study of the Trade Balance of the United States. Sir George (1867), the distinguished English economist, who was a close student of American railway securities, discussed American foreign trade in its relation to the nation's specie reserve and currency system. Of particular significance in Sir George's analysis was the description of America's position as a debtor nation. He pointed out that Britain was our chief creditor—having helped in the financing of many of the important railw a y systems of the United States—but that German, French, and other European investments w e r e quite heavy. As offsets, and these w e r e n e w developments, Americans were beginning to send capital out into the rest of the Western Hemisphere. On long-term and short-

PAISH term operations, w e owed $6,500,000,000; others owed us $1,500,000,000, leaving a net unfavorable balance of $5,000,000,000, w h i c h required a net payment b y the United States annually of $225,000,000 to other countries for interest and dividends. T e n years earlier, in 1900, an American, N a thaniel Bacon, had sought to arrive at an estimate of American obligations to foreigners. A s of 1898, he calculated that British investments here totaled $2,500,000,000; Dutch $241,000,000; German $200,000,000; Swiss $75,000,000; French $50,000,000; Belgian $20,000,000; and Russian $15,000,000. In all, the total came to somewhat less than $3,000,000,000. American overseas investments, on the other hand, w e r e still slight. T h e net result was an annual payment to foreigners of $90,000,000 f o r interest and dividends. T h e selection here reprinted is f r o m Sir George Paish, Trade Balance of the United States (Washington, 1 9 1 0 ) and appeared as Senate Document N o . 579, 61st Congress, 2d Session.

Trade Balance of the United States BY

SIR

GEORGE

V I I I : LENDING AND BORROWING COUNTRIES PRIOR TO dealing specially with the trade balance of the United States it may be useful to discuss briefly the effect upon trade balances of the more important countries of the world of exports and imports of capital and of the receipt and payment of interest thereon. T h e r e is practically no country which neither exports nor imports capital with the exception of Thibet. This type of coun-

PAISH

try may be left out of consideration. T h e chief countries which supply capital to other lands are Great Britain, Germany, France, Holland, Belgium, and Switzerland. O f these countries, G r e a t Britain is by far the most important lender. T h i s country has about $15,000,000,000 of capital invested abroad and is adding to its colonial and f o r eign investments at the rate of upwards of $ j o o , 000,000 a year. Germany and France come next with investments of about $8,000,000,000 each.

THE UNITED STATES AND THE WORLD The investments of Holland, Belgium, and Switzerland are of much smaller amount, but are nevertheless considerable. The imports of all these five countries largely exceed their exports in consequence of the receipt of interest and of tourist expenditures. In the case of Great Britain the excess of imports over the exports is further largely increased by the earnings of British ships, the tonnage of which forms so large a portion of the world's international shipping facilities. T h e fleets of other countries are not much more than sufficient to take care of their own trade in the aggregate; indeed, in most cases they are insufficient for this purpose, and the deficiency is made good by the British mercantile marine. The principal countries whose exports exceed their imports in consequence of the large amount of interest they have to pay on capital borrowed from other lands are the United States, the Australasian colonies of Great Britain, British India, Argentina, Brazil, and Mexico. Several other countries whose imports now exceed their exports will eventually come into this category. At the present time Canada's imports largely exceed her exports in consequence of the vast amount of capital—about $200,000,000 a year—which she is borrowing from other lands—almost entirely from Great Britain. In the course of time the Canadian indebtedness to other countries and the expenditures of her tourists, etc., will be so great that her exports will exceed her imports, although large amounts of capital will continue to flow into the country each year. Of course Canada will have no difficulty in making these interest payments, having regard to the rapid growth in the annual amount of wealth created by means of the capital she is importing. China, Japan, and Chile are other instances of borrowing countries whose imports exceed their exports in consequence of the inflow of large amounts of foreign capital. Parenthetically, I would ask the reader to note that in the case of the United States the excess of exports over imports arises only in part from payment of interest on capital previously borrowed. The excess of exports is in part due to the expenditures of American visitors to Europe, to Egypt, and elsewhere, in part to the remittance of money by American citizens to friends in other lands, and in part to the payment for ocean transport of freight. But at the moment I wish to refer more particularly to the effect upon trade balances of the lending and borrowing of capital and of the receipt and payment of interest thereon. In this respect it should be noted that Great Britain is by far the largest lender of capital, and that the United States has obtained a greater amount of

989

capital from other countries than any other State, that in the case of Great Britain the great balance of imports over exports is mainly due to the receipt of interest on capital invested in other lands, and that in the case of the United States the excess of exports over imports arises in large part from the payments of interest upon capital borrowed from other countries. . . . . . . Great Britain possesses about $3,500,000,000 of American securities. T o this sum has to be added the considerable amounts invested by the Continent. Laxge amounts of German, Dutch, and French capital are embarked in American undertakings, principally railways. A statement drawn up in 1902 at the instance of the French Minister of Finance from reports supplied by French diplomatic agents and consuls in various parts of the world placed the total amount of French capital invested at that time in the United States at 600,000,000 francs, or $120,000,000, but this figure appears to have been an underestimate. It is true that few issues of American securities are publicly quoted on the Paris Bourse, but relatively large amounts have been purchased privately by French investors in London and in N e w York. The French investments in the United States, including the Pennsylvania Railroad and other loans placed in Paris since 1902, amount to nearly 2,500,000,000 francs, or $500,000,000. Estimates of the amount of capital invested by Germany in the United States were made in 1905 by the German Admiralty and published in a work entitled "Die Entwicklung der Deutschen Seeinteressen im letzten Jahrzehnt." These estimates placed the amount of German capital in the United States and Canada in 1904 at from 2,500,000,000 marks to 3,000,000,000 marks, say, $625,000,000 to $750,000,000. Since 1904 considerable additional sums of German capital have been invested in the United States. German bankers place the amount of the German investments in American securities at about $1,000,000,000. The amount of Dutch capital in the United States is about $750,000,000. American securities are also held in Belgium, Switzerland, and in other countries. In the aggregate the amount of European capital invested in "permanent" securities in the United States is approximately $6,000,000,000. Beyond the fixed capital invested by Europe in the United States account has to be taken of the floating loans made by Europe to America. These floating loans are mainly incurred in the spring and summer months in anticipation of the produce shipments from the States in the fall months and they are then largely liquidated. The amount of the floating debt of the United States to Europe

THE NEW FREEDOM

99°

in the form of produce bills, finance bills, loans against securities, overdrafts, etc., averages about $400,000,000, reaching a larger sum in July and early August and falling to a much lower sum at the end of December. The rate of interest paid upon this floating debt insofar as it consists of produce bills is a very low one, the rate of interest chargcd on this class of loan being less than that on any other kind of security. Including both the fixed investments and the floating loans, the amount of capital borrowed by the United States from other countries is about $6,500,000,000, the annual interest charge upon which is about $300,000,000. A n offset to the large amount of capital invested in the United States is the capital invested by American citizens in other countries, more especially in Mexico, Canada, in the South American States, in the Philippines, in Cuba, etc. It is true that a portion of the capital of these foreign undertakings in which American capital is invested has been provided b y European investors; nevertheless, as these corporations are American and the amounts invested in the United States by Europe include investments in these foreign companies, it is necessary to place the interest received from these foreign investments b y American corporations against the interest paid to Europe. Beyond the capital of public corporations which have been formed under state laws in America the capital invested privately b y American citizens in other lands reaches to a considerable total. T h e amount of American capital invested in other lands in this manner both publicly and privately is probably $1,500,000,000, yielding an income of about $75,000,000 a year. B y deducting the interest—$75,000,000—received upon American capital placed abroad f r o m the interest—$300,000,000—which the United States pay upon capital supplied to them b y other lands, I arrive at a net payment of $225,000,000 b y the United States to other countries f o r interest and dividends upon capital. This sum the United States has to remit each year by exports of produce. XVII:

EFFECT

UPON

UNITED STATES TRADE

BAL-

A N C E OF I M P O R T S AND E X P O R T S OF C A P I T A L

I have already shown that European countries, especially Great Britain, make large investments in the United States. T h e inflow of this capital is more or less spasmodic. A t times the amount invested in a single year reaches to large figures, at others there is practically no investment of new capital, while on rare occasions the United States pays back a portion of the capital previously borrowed. These movements of capital into and out of the country p o w e r f u l l y affect either the im-

ports or the exports. In periods of capital inflow the imports of goods are swollen, while exports are relatively light. Capital can only be imported by one country f r o m another by the remittance of goods, hence the effect upon imports or upon exports of the import or repayment of capital. Nevertheless, it is necessary to recollect that the obligations of the borrowing countries to the lending countries is, after a period of years, much greater than is indicated by the amount of capital actually received b y that country. N o t infrequently the undertakings in which foreign capital is invested use a large portion of their profits f o r betterments and f o r capital purposes, and do not distribute it in dividends. T h e retention of this profit for capital expenditure increases the indebtedness of the borrowing countries, although no actual remittance of capital f r o m one country to the other has taken place. Undivided profits of one year become capital in the next. T h i s practice of using profits f o r capital purposes is responsible f o r no inconsiderable portion of the capital invested by other countries in the United States. Thus, if it were possible to ascertain the actual amount of capital that was remitted f r o m other countries to the United States, the total would not nearly reach the amount of capital now belonging to other nations and employed b y the United States. T h e method of raising capital f o r railway companies in the past has largely contributed to securing for the United States a larger amount of capital than that which was directly borrowed. A great number of the railways of the country raised their capital bv selling bonds to E u r o p e , and to place the bonds they issued a considerable amount of common stock for which no additional payment was required. By accumulating profits instead of by dividing them in dividends, and by using those profits for capital purposes, the stock which was originally issued as an inducement to investors to subscribe for bonds has been gradually paid up, and at the present time the railway companies possess actual assets to an extent equal to if not exceeding the nominal amount of their bonds and stock. This latter method of borrowing capital does not appreciably affect either exports or imports. If anything, it tends to check both the exports and the imports, as it means that the b o r r o w ing country has to remit a smaller amount to other lands for interest and has to receive a smaller amount of foreign produce for capital investment. On the whole, however, the investment of capital through the accumulation of profits has v e r y little immediate effect either upon imports or upon the exports. Ultimately, of course, by increasing the productive power of the country and increasing its ability to exchange produce f o r the goods of

THE UNITED STATES AND THE WORLD other countries, it tends to increase both the exports and the imports. Further, the payment of interest upon capital accumulated in this manner to its owners in other lands increases the exports of produce but not the imports. T h e inflow of capital f r o m other countries is sometimes nearly $250,000,000 in a y e a r and, on the other hand, the repayments have reached to about $ 150,000,000 in a year. T h e normal course of events, h o w e v e r , is f o r capital to flow into the United States y e a r after y e a r and f o r repayments to be made but v e r y seldom. A l l through the earlier years of the last century up to the later seventies capital w a s sent into the United States in considerable amounts, and this explains the reason f o r the large excess of imports over the exports in this period notwithstanding the increasing annual payments of interest to other lands and the considerable annual sums that even then w e r e expended f o r tourist outlays, remittances to friends, and ocean freights. In the later seventies a w a v e of distrust passed over E u r o p e and f o r the moment investments of capital b y E u r o p e in the United States came to an end. T h i s explains the reason f o r excesses of exports over imports of $262,000,000 in 1878 and of $270,000,000 in 1879 in place of an excess of imports over exports of $116,000,000 in 1872. These figures include the combined balances of merchandise and the precious metals. In the eighties capital was invested v e r y f r e e l y in the United States b y E u r o p e , and notwithstanding the v e r y large amount of the annual interest and dividend obligations, expenditures b y tourists, and remittances to friends, the imports into the United States again exceeded the exports in 1888 by a sum of $40,000,000, a figure w h i c h reflected the v e r y large inflow of capital in that year. T h e financial crisis which took place in J u l y , 1893, again checked the imports of capital into the country and the exports once more began to exceed the imports b y large sums annually. T h e obligations of the United States to E u r o p e were curtailed at this time b y default of interest and

absence of dividends upon large amounts of railw a y stocks and bonds. Further, the severe depression greatly diminished A m e r i c a n tourist expenditures in other lands and severely contracted the remittances to friends. W i t h the r e c o v e r y in trade that took place in 1897 and 1898 interest payments w e r e largely resumed and expenditures became freer. Nevertheless the e c o n o m y of the American people was so great that the excess of exports over imports rose to figures which enabled a considerable amount of the capital previously invested in the States to be repaid. T h i s is the explanation f o r an excess of $534,000,000 of exports over imports —merchandise, gold, and silver—in 1898, of an excess of $504,000,000 of exports over imports in 1898-99, of $570,000,000 in 1899-1900, and of $680,000,000 in 1900-1901. In these f o u r years not only did the United States b o r r o w no fresh capital f r o m abroad, but it repaid considerable sums bey o n d meeting its interest obligations, tourist expenditures, and making remittances to friends. T h e great prosperity of the country since 1901 has enabled the American people to resume their normal rate of expenditure, and in this period they have again imported large amounts of capital f r o m abroad. I calculate that in the past y e a r to J u n e , 1909, European countries invested about $184,000,000 in the country. In this period the excess of merchandise exports over imports has been $ 3 5 1 , 000,000, the excess of gold exports over imports has been $48,000,000, the excess of silver exports over imports has been $12,000,000, and the total excess of exports over imports has been $411,000,000, whereas the sum needed to c o v e r interest payments, tourist outlays, remittances to friends, and freight charges has been about $595,000,000. T h e difference between the t w o sums has been met b y investments of capital b y E u r o p e in the United States. Perhaps the situation will be more clearly realized if I set it out in tabular f o r m . T h i s balance of $184,000,000 has been liquidated b y permanent or temporary investments of capital b y other countries in the United States.

Foreign trade of the United States, 1 ¡108-9 Merchandise: Exports— Domestic Foreign

$1,638,000,000 25,000,000

Total Imports Excess of merchandise exports over imports Gold: Exports Imports Excess of gold exports over imports

991

$1,663,000,000 1,312,000,000 $351,000,000 $92,000,000 44,000,000 48,000,000

THE NEW

99* Silver: Exports Imports

FREEDOM $j6,ooo,ooo 44,000,000

Excess of silver exports over imports

12,000,000

Total excess of merchandise, gold, and silver exports over imports Remittances for interest, etc.: Interest Tourist expenditures Remittances to friends Freight Total remittances

$411,000,000 $2 jo,000,000 170,000,000 ijo,ooo,ooo 25,000,000 595,000,000

Excess of sum remitted for interest, tourists, to friends, and for freights over trade balance

THEODORE IN FEBRUARY, 1904, within three months of Theodore Roosevelt's recognition of the Republic of Panama, his Secretary of State, Elihu Root, undertook to justify that action not on grounds of national interest, but as an instance of ethical conduct between states. T o reach that conclusion, Elihu Root turned to the treaty of 1846, by which the United States guaranteed freedom of transit across the isthmus of Panama. Had we then permitted Colombian troops to land and suppress the Panama Revolution last October, the ensuing struggle might have been prolonged to the point where such free transit would be hindered. Since the United States stood charged with responsibility for maintaining free passage, it was necessary for it to recognize Panamanian independence if it meant to fulfill its international obligations. Though Theodore Roosevelt (1858-1919) had followed Root's argument in his message to Congress of January 4, 1904, he spoke more forthrightly in his Outlook article seven years later. From first to last, said Roosevelt, he had acted in the interest of the United States and of the world's commerce. W e had been in the right when we demanded that Colombia accept the Hay-Herran convention precisely as drafted, and we had been in the right when we paid the New Panama Canal Company $40,000,000. The Panama revolt was inevitable and the duty of the United States government com-

184,000,000

ROOSEVELT pletely clear: the end justified the means of its attaining and an American president must necessarily prefer the interests of the people of the United States to that of any group of bandits, "foreign or domestic." But the background of American intervention was not quite so simple. In 1894, a N e w Jersey corporation, the Panama Canal Company of America, was organized. It exchanged its securities for those of the N e w Panama Canal Company, which had taken over the rights of the De Lesseps organization on the latter's failure to construct an isthmian canal. Soon after, the agents of the new company, William N. Cromwell of New York and Philippe Bunau-Varilla, representing French interests, began their effort to sell their rights to the United States before 1904, when those rights would revert to the Colombian government. The first purpose of the canal company agents was to keep Congress from ordering the canal to be dug across Nicaragua. And here nature aided. Although a congressional committee had recommended the Nicaragua route in 1901, volcanic eruptions on the island of Martinique, and even on the Nicaraguan mainland, produced a change in American opinion. T h e Spooner Act of 1902, therefore, provided that the canal be built across Panama if arrangements with Colombia could be concluded within a "reasonable time."

THE UNITED STATES AND THE

WORLD

993

T h e H a y - H e r r a n pact between the United States and Colombia was drafted at the turn of 1903, accordingly. B y its terms, the United States acquired w h a t Colombia considered sovereign rights over the canal strip, and C o lombia was required to waive any claim to a share in the $40,000,000 set as the price the United States was prepared to pay f o r the rights of the N e w Panama Canal C o m p a n y .

D u r i n g that summer of 1903, C r o m w e l l and Bunau-Varilla w e r e talking of a revolution to promote the secession of Panama f r o m C o lombia. W i t h the administration's insistence that Bogota r a t i f y the H a y - H e r r a n pact w i t h out modification f o r evidence, the representatives of the canal c o m p a n y decided that the United States w o u l d not be likely to permit Colombia to reduce a Panama rising b y force.

T h e Colombian Congress delayed action on the pact. T i m e w e n t b y , and one may infer anxiety among the agents of the canal c o m pany. T h e n Colombia refused to ratify the H a y - H e r r a n convention. T o some Americans, including the President, Colombia was attempting to l e v y blackmail on the United States to the sum w e seemed bound to pay f o r the canal company's rights. O t h e r Americans, less clearsighted perhaps, could not appreciate the distinction between $40,000,000 paid into the treasury of a Latin American semidictatorship and the same amount paid t o a corporation whose control seemed obscure at the time and proved impossible to ascertain on investigation later.

T h e likelihood of trouble on the Isthmus seemed so patent b y mid-October, 1903, that the United States ordered its n a v y to hold w a r ships within striking distance. T h e Panama insurgents did not move until N o v e m b e r third. O n the fourth, Colombian troops w e r e refused passage across the Isthmus. T w o days later, Panama proclaimed its independence and, within an hour, the United States recognized the revolutionists as a de jacto government.

Roosevelt would not pay tribute to a C o lombian Congress, however, nor w o u l d he obey the behest of his o w n legislature and accept the l o n g e r — a n d possibly v o l c a n i c — N i c a ragua route because of Colombia's procrastination. Instead, he studied the case f o r the United States to exercise a right of "eminent domain" over the Isthmus and listened, noncommittally, to the protests of the canal-company agent, Bunau-Varilla.

The BY How

T h e selection here reprinted is f r o m the Outlook f o r O c t o b e r 7, 1911.

Fanama Canal

THEODORE

THE U N I T E D STATES ACQUIRED THE RIGHT TO

D I G THE P A N A M A

T h e rest of the story is familiar enough: Panama granted the United States jurisdiction over the ten-mile strip within w h i c h the canal was to be built; the canal company received its $40,000,000; and w o r k began on the canal. In 1914, W i l s o n recommended that $25,000,000 be paid to Colombia. Senate Republicans led b y H e n r y Cabot L o d g e blocked the agreement. But w h e n a Republican once again o c cupied the W h i t e House, and Colombian petroleum deposits had become important, even L o d g e did not protest against the payment to Colombia. B y this time, Roosevelt was no longer alive to defend himself.

CANAL

No OTHER great work now being carried on throughout the world is of such far-reaching and lasting importance as the Panama Canal. Never before has a work of this kind on so colossal a scale been attempted. Never has any work of the kind, of anything approaching the size, been done with

ROOSEVELT such efficiency, with such serious devotion to the well-being of the innumerable workmen, and with a purpose at once so lofty and so practical. N o three men in the service of any Government anywhere represent a higher, more disinterested, and more efficient type than the three men now at the head of this work—the Secretary of W a r , Mr. Stimson; Col.' Goethals, the man who is actually doing the digging; and Dr. Gorgas, who has turned

994

THE NEW FREEDOM

one of the festering pestholes of the world into what is almost a health resort. In eighteen months or so the canal will probably be in shape that will warrant sending small vessels through it to test its actual working. Under these circumstances, it is worth while to remember just how it was that America won for itself and the world the right to do a world job which had to be done by some one, and the doing of which by anyone else would have been not merely a bitter mortification but a genuine calamity to our people. On December 7, 1903, and again on January 4, 1904, as President of die United States, in messages to the two Houses of Congress, I set forth in full and in detail every essential fact connected with the recognition of the Republic of Panama, the negotiation of a treaty with that Republic for building the Panama Canal, and the actions which led up to that negotiation—actions without which the canal could not have been built, and would not now have been even begun. Not one important fact was omitted, and no fact of any importance bearing upon the actions or negotiations of the representatives of the United States not there set forth has been, or ever will be, discovered, simply because there is none to discover. It must be a matter of pride to every honest American, proud of the good name of his country, that the acquisition of the canal and the building of the canal, in all their details, were as free from scandal as the public acts of George Washington and Abraham Lincoln.

judgment, history had taught the lesson that the President has very great powers if he chooses to exercise those powers; but that, if he is a timid or selfish man, afraid of responsibility and Afraid of risks, he can of course manufacture ingenious excuses for failure to exercise them. A t a great crisis in American history Mr. Buchanan had shown himself to belong to the latter type of President; Mr. Lincoln had represented the other type, the type which gave the people the benefit of the doubt, which was not afraid to take responsibility, which used in large fashion for the good of the people the great powers of a great office. I very strongly believe that Abraham Lincoln had set the example which it was healthy for the people of the United States that their President should follow.

The facts were set forth in full at the time in the two messages to which I have referred. I can only recapitulate them briefly, and in condensed form. Of course there was at the time, and has been since, much repetition of statements that I acted in an "unconstitutional" manner, that I "usurped authority" which was not mine. These were the statements that were made again and again in reference to almost all I did as President that was most beneficial and most important to the people of this country, to whom I was responsible, and of whose interests I was the steward. The simple fact was, as I have elsewhere said, that when the interest of the American people imperatively demanded that a certain act should be done, and I had the power to do it, I did it unless it was specifically prohibited by law, instead of timidly refusing to do it unless I could find some provision of law which rendered it imperative that 1 should do it. In other words, I gave the benefit of the doubt to the people of the United States, and not to any group of bandits, foreign or domestic, whose interests happened to be adverse to those of the people of the United States. In my

In October and November, 1903, events occurred on the Isthmus of Panama which enabled me, and which made it my highest-duty to the people of the United States, to carry out the provisions of the law of Congress. I did carry them out, and the canal is now being built because of what I thus did. It is also perfectly true that, if I had wished to shirk my responsibility, if I had been afraid of doing my duty, I could have pursued a course which would have been technically defensible, which would have prevented criticism of the kind that has been made, and which would have left the United States no nearer building the canal at this moment than it had been for the preceding half century. If I had observed a judicial inactivity about what was going on at the Isthmus, had let things take their course, and had then submitted an elaborate report thereon to Congress, I would have furnished the opportunity for much masterly debate in Congress, which would now be going on—and the canal would still be 50 years in the future.

For many years prior to 190J our Government had been negotiating with foreign powers to provide for the building of a Panama Canal. By 190z, on the conclusion of the Hay-Pauncefote treaty, we had cleared the way sufficiently to enable Congress to pass an act actually providing for the construction of a canal across the Isthmus. B y this act the President was authorized to secure for the United States the property of the French Panama Canal Co. and the perpetual control of a strip of territory across the Isthmus of Panama from the Republic of Colombia within a reasonable time and at a reasonable price, and, if the endeavor failed, the adoption of the Nicaragua route was authorized.

The interests of the American people demanded that I should act just exactly as I did act; and I

THE UNITED STATES AND THE WORLD would have taken the action I actually did take even though I had been certain that to do so meant my prompt retirement f r o m public life at the next election, f o r the only thing which makes it worth while to hold a big office is taking advantage of the opportunities the office offers to do some big thing that ought to be done and is worth doing. Under the terms of the act the Government finally concluded a very advantageous agreement with the French Canal Co. T h e French Co. had spent enormous sums on the Isthmus. W e felt justified in paying the company only a very small fraction of what it had thus spent. T h e treaty we made was advantageous to us in a v e r y high degree, and we got what in value was much more than what we paid f o r it; but the French Co. did get something, and if we had not stepped in it would have gotten absolutely nothing. E v e r y step taken by the Government in connection with its negotiations with the French Co. and the payment to its official representatives in accordance with the agreement entered into was taken with the utmost care, and every detail has been made public. E v e r y action taken was not merely proper, but was carried out in accordance with the highest, finest, and nicest standards of public and governmental ethics. Doubtless in Paris, and perhaps to a lesser extent in N e w Y o r k , there were speculators w h o bought and sold in the stock market with a view to the varying conditions apparent f r o m time to time in the course of the negotiations, and with a view to the probable outcome of the negotiations. T h i s was precisely what speculators did in England in connection with the outcome of the Battle of Waterloo, and in our own country in connection with Abraham Lincoln's issuance of the emancipation proclamation and other acts during the Civil W a r . T h e rights of the French Co. having been acquired, and the difficulties caused b y our previous treaties having been removed b y the Hay-Pauncefote treaty, there remained only the negotiations with the Republic of Colombia, then in possession of the Isthmus of Panama. Under the Hay-Pauncefote treaty it had been explicitly provided that the United States should build, control, police, and "protect" (which incidentally means to f o r t i f y ) the canal. T h e United States thus assumed complete responsibility for, and guaranteed the building of, the canal. N e a r l y 50 years before, our Government had announced that it would not permit the country in possession of the Isthmus " t o close the gates or interfere" with opening one of the "great highways of the world," or to justify such an act b y the pretension that this avenue of trade and travel belonged to that country and that it chose to shut it. W e had always insisted upon

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the doctrine thus declared, and at last the time had come when I could reduce it to action. W e negotiated with the representatives of Colombia a treaty f o r building the canal, a treaty which granted to Colombia even greater advantages than were subsequently granted to the Republic of Panama, a treaty so good that after it had been rejected by Colombia, and after we had recognized Panama, Colombia clamored f o r leave to undo the past and enter into the treaty. But the Colombian Government, f o r reasons which, I regret to say, were apparently v e r y bad indeed, declined to consummate the treaty to which their representatives had agreed. T h e Isthmus of Panama was then a part of the Colombian Republic, and the representatives of Panama in the Colombian legislature at once warned Colombia that the people of Panama would not submit quietly to what they regarded as an utter ignoring of their vital interests. W e also, courteously and diplomatically, but emphatically, called the attention of the Colombia representatives to the v e r y serious trouble they were certain to bring upon themselves if they persisted in their action. I felt v e r y strongly that the position that the one-time Secretary of State, Cass, had taken nearly 50 years before was the proper position, and that the United States would be derelict to its duty if it permitted Colombia to prevent the building of the Panama Canal. I was prepared, if necessary, to submit to Congress a recommendation that we should proceed with the work in spite of Colombia's opposition, and indeed had prepared a rough draft of a message to that effect, when events on the Isthmus took such shape as to change the problem. T h e Isthmus was seething with revolutionary spirit. T h e central government of the Republic of Colombia was inefficient and corrupt. Lawlessness had long been dominant in every branch. During a period of something like 70 years there had been only one or two instances in which a president had served out his term. T h e Republic had repeatedly undergone internal convulsions which completely changed its aspect. Our Government first entered into a treaty with the possessors of the Isthmus of Panama in 1846. A t that time the nation with which we treated was known as N e w Granada. A f t e r a while N e w Granada split up and the Republic of Columbia, another confederation, took its place; and Panama was at one time a sovereign state and at another time a mere department of the consecutive confederations known as Colombia and N e w Granada. In addition to scores of revolutions which affected successively N e w Granada and Columbia as a whole, the Isthmus of Panama during 57 years saw 53 revolutions, re-

THE NEW FREEDOM bellions, insurrections, civil wars, and other outbreaks, some of the revolutions being successful, some unsuccessful, one civil war lasting nearly three years and another nearly a year. T w i c e there had been attempted secessions of Panama, and on six different occasions the marines and sailors from United States warships were forced to land on the Isthmus in order to protect property and to see that transit across the Isthmus was kept clear, a duty we were by treaty required to perform, for by treaty we already possessed and exercised on the Isthmus certain proprietary rights and sovereign powers which no other nation possessed. O n four different occasions the Government of Colombia itself requested the landing of troops to protect its interests and to maintain order on the Isthmus—the order which it was itself incompetent to maintain. O n several different occasions only the attitude of the United States prevented European powers from interfering on the Isthmus. In short, Colombia had shown itself utterly incompetent to perform the ordinary governmental duties expected of a civilized State, and yet it refused to permit the building of the canal under conditions which would have perpetuated its control of the Isthmus and which would at the same time have put a stop to what can legitimately be called government by a succession of banditti. T h e United States would have shown itself criminal, as well as impotent, if it had longer tolerated this condition of things. I was prepared to advocate our openly avowing that the position had become intolerable, and that, in pursuance of our duty to ourselves as well as to the world, we should begin the building of the canal. But my knowledge—a knowledge which, as regards most of the essential points, was shared by all intelligent and informed people—of the feeling on the Isthmus was such that I was quite prepared to see the people of the Isthmus themselves act in such a way as to make our task easier. T h e y felt that it was of vital importance to them to have the canal built, for they would be its greatest beneficiaries; and therefore they felt such bitter indignation at Colombia's indifference to their interests and refusal to permit the fruition of their hopes that among them there was a literally unanimous desire for independence. Not only was there not a single man on the Isthmus who wished to perpetuate Colombian control, but all Colombians sent hither, even the soldiers, after a very short residence grew to share the desire of all Panamsns for the establishment of a separate republic. Hitherto the knowledge that the United States would interfere to stop all disturbances on the Isthmus that interrupted traffic across it had re-

sulted to the benefit of Colombia, and it was this knowledge that had been the chief preventive of revolutionary outbreak. T h e people of Panama now found themselves in a position in which their interests were identical with the interests of the United States, for the Government of Colombia, with elaborate care, and with a shortsightedness equal to its iniquity, had followed out to its end the exact policy which rendered it morally impossible as well as morally improper for the United States to continue to exercise its power in the interest of Colombia and against its own interest and the interest of Panama. There was no need for any outsider to excite revolution in Panama. There were dozens of leaders on the Isthmus already doing their best to excite revolution. It was not a case of lighting a fuse that would fire a mine —there were dozens of such fuses being lit all the time; it was simply a case of its ceasing to be the duty of the United States to stamp on these fuses, or longer to act in the interest of those who had become the open and malignant foes of the United States—and of civilization and of the world at large. Every man who read the newspapers knew that with the failure of Colombia to ratify the HayHerran treaty, revolutionary attempts became imminent on the Isthmus. T h e papers published on the Isthmus themselves contained statements that these revolutions were about to occur, and these statements were published in the Washington and New York and New Orleans papers. From these published statements it appeared that if the canal treaty fell through, a revolution would in all probability follow, that hundreds of stacks of arms were being imported, that the Government forces in Panama and Colon were themselves friendly to the revolution, and that there were several distinct and independent centers of revolutionary activity on the Isthmus. It was also announced that the Government at Colombia was hurrying preparations to send troops to Panama to put down the revolution. O f course I did not have to rely merely upon what I saw in the newspapers. From various sources I had gathered enough to satisfy me that the situation was at least as bad as the papers depicted it. Through two Army officers who had visited the Isthmus in September I gained concrete and definite information. T h e y informed me that, owing to the dissatisfaction because of the failure of Colombia to ratify the Hav-Herran treaty, a revolution was certain to break out on the Isthmus, and that the people were in favor of it, and that it might be expected immediately on the adjournment of the Colombian Congress without ratification of the treaty. In response to my questioning

THE UNITED STATES AND THE WORLD they said they were certain that a revolution—several different revolutionary movements were being planned independently of one another—would occur immediately after the adjournment of the Colombian Congress in October; while on the Isthmus they had calculated that it would not occur until after October 20, because not until then would a sufficient quantity of arms and munitions have been landed to supply the revolutionaries. Acting in view of all these facts, I sent various naval vessels to the Isthmus. The orders to the American naval officers were to maintain free and uninterrupted transit across the Isthmus, and, with that purpose, to prevent the landing of armed forces with hostile intent at any point within 50 miles of Panama. These orders were precisely such as had been issued again and again in preceding years—1900, 1901, and 1902, for instance. They were carried out. Their necessity was conclusively shown by the fact that a body of Colombian troops had landed at Colon and threatened a reign of terror, announcing their intention of killing all the American citizens in Colon. The prompt action of Capt. Hubbard, of the gunboat Nashville, prevented this threat from being put into effect; he rescued the imperiled Americans, and finally persuaded the Colombian troops to reembark and peacefully return to Colombia. With absolute unanimity the people of the Isthmus declared themselves an independent republic, and offered immediately to conclude with our Government the treaty which Colombia had rejected, and to make its terms somewhat more favorable to the United States. N o bloodshed whatever had occurred, and it could not occur unless we permitted Colombian troops to land. The Republic of Panama was the de facto Government and there was no other on the Isthmus. There were, therefore, two courses open to us. One was to turn against the people who were our friends, to abandon them, and permit the people who were our foes to reconquer Panama, with frightful bloodshed and destruction of property, and thereby to reestablish and perpetuate the anarchic despotism of the preceding 50 years—inefficient, bloody, and corrupt. The other course was to let our foes pay the penalty of their own folly and iniquity and to stand by our friends, and, as an incident, to prevent all bloodshed and disturbance on the Isthmus by simply notifying Colombia that it would not be permitted to land troops on Panama. Of course we adopted the latter alternative. T o have adopted any other course would have been an act not merely of unspeakable folly but of unspeakable baseness; it would have been even more ridiculous than infamous. W e recognized the

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Republic of Panama. Without firing a shot we prevented a civil war. W e promptly negotiated a treaty under which the canal is now being dug. In consequence Panama has for eight years enjoyed a degree of peace and prosperity which it had never before enjoyed during its four centuries of troubled existence. Be it remembered that unless I had acted exactly as I did act there would now be no Panama Canal. It is folly to assert devotion to an end, and at the same time to condemn the only means by which the end can be achieved. Every man who at any stage has opposed or condemned the action actually taken in acquiring the right to dig the canal has really been the opponent of any and every effort that could ever have been made to dig the canal. Such critics are not straightforward or sincere unless they announce frankly that their criticism of methods is merely a mask and that at bottom what they are really criticising is having the canal dug at all. The United States has done very much more than its duty to Colombia. Although Colombia had not the slightest claim to consideration of any kind, yet, in the interests of Panama, and so as to close all possible grounds of dispute between Panama and Colombia, the United States some time ago agreed to a triparty treaty between herself, Colombia, and Panama, by which, as a simple matter of grace and not of right, adequate and generous compensation would have been given Colombia for whatever damage she had suffered; but Colombia refused to agree to the treaty. On this occasion, in my judgment, the United States went to the very verge of right and propriety in the effort to safeguard Panama's interests by making Colombia feel satisfied. There was not the slightest moral obligation on the United States to go as far as she went; and at the time it seemed to me a grave question whether it was not putting a premium upon international blackmail to go so far. Certainly nothing more should be done. There is no more reason for giving Colombia money to soothe her feelings for the loss of what she forfeited by her misconduct in Panama in 1903 than for giving Great Britain money for what she lost in 1776. Moreover, there is always danger that in such cases an act of mere grace and generosity may be misinterpreted by the very people on whose behalf it is performed, and treated as a confession of wrongdoing. W e are now so far away from 1776 that this objection does not apply in that case, and there would be no particular reason why any sentimental persons who feel so inclined should not agitate to have Great Britain paid for the nervous strain and loss of property consequent upon our action in that year and the

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immediately subsequent years. But we are still too near the Panama incident to be entirely certain that base people would not misunderstand our taking such action in her case; and as there was literally and precisely as much moral justification for what we did in Panama in 1903 as for what we did in our own country in 1776—and, indeed, even more justification—it is as foolish now to claim that Colombia is entitled, or ever has been entitled, to one dollar because of that transaction as to claim that Great Britain is entitled to be compensated because of the Declaration of Independence. Nót only was the course followed as regards Panama right in every detail and at every point,

COROLLARY

FREEDOM but there could have been no variation from this course cxcept f o r the worse. W e not only did what was technically justifiable, but we did what was demanded by every ethical consideration, national and international. W e did our duty b y the world, we did our duty by the people of Panama, we did our duty by ourselves. W e did harm to no one save as harm is done to a bandit b y a policeman who deprives him of his chance f o r blackmail. T h e United States has many honorable chapters in its history, but no more honorable chapter than that which tells of the way in which our right to dig the Panama Canal was secured and of the manner in which the work itself has been carried out.

TO THE MONROE

IN 1 8 1 3 , J a m e s M o n r o e declared the Western H e m i s p h e r e closed to European colonizers. H e n c e f o r t h , a n y E u r o p e a n effort to subvert the i n d e p e n d e n c e of an American nation or to extend E u r o p e a n systems across the Atlantic w o u l d b e considered an unfriendly act b y the U n i t e d States. T h i s seemed plain enough; but b y 1905 the M o n r o e Doctrine was being given a new reading. F o r b y ' 9 0 5 , nations had discovered that d e f a u l t e d debts w e r e as serviceable an entering w e d g e f o r the establishment of political control as had been the " f a c t o r i e s " of the old t r a d i n g companies. A n d Latin America was a d m i r a b l y suited f o r such ventures in the dev e l o p m e n t of trade. T h o u g h constitutional in f o r m , m a n y L a t i n A m e r i c a n governments were military dictatorships in f a c t . T h e ruling elements in those dictatorships w o n profit from their p o w e r , a f a c t w h i c h encouraged violent struggles f o r control of governments and indiscretion in the incurring of debt. Political instability and defaulted payments on such obligations had established a pattern f o r f o r e i g n intervention as early as the 1850s. I n 1 9 0 2 , t h e principal f o r e i g n creditors of d i c t a t o r - r i d d e n V e n e z u e l a delivered an ultim a t u m , w i t h d r e w their legations, and planned to seize the Venezuelan gunboats and then b l o c k a d e V e n e z u e l a n ports unless the nation m a d e g o o d h e r debts and paid an indemnity

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f o r damage to the p r o p e r t y and persons o f foreigners. T h o u g h G r e a t Britain t o o k the lead in advocating intervention, it w a s G e r m a n y which, in 1 9 0 1 , i n f o r m e d the U n i t e d States that Venezuelan default m i g h t f o r c e t e m p o rary seizure of the c o u n t r y ' s customs houses. N o t until the f o l l o w i n g y e a r did the G e r m a n s proceed to action, h o w e v e r , and action w a s then taken jointly w i t h G r e a t Britain, w h o s e leaders had declared t h e y did not intend to land troops or o c c u p y V e n e z u e l a n t e r r i t o r y . In December, 1902, the British, G e r m a n , and Italian governments ordered a f o r m a l b l o c k a d e . T h e A m e r i c a n g o v e r n m e n t , in the meantime, had been making e f f o r t s to p r e v e n t p r o l o n g e d display of f o r c e . A m e r i c a n bankers a t t e m p t e d to arrange a financial settlement; the A m e r i c a n ambassadors at Berlin and in L o n d o n transmitted an indefinite Venezuelan proposal f o r arbitration. A f t e r some hedging, and w i t h the reservation of certain claims, both Britain and G e r m a n y finally justified the U n i t e d States hope that the P o w e r s w o u l d agree t o arbitrate. T h e Venezuelan g o v e r n m e n t , w h i c h had insisted that the claims be settled in her c o u r t s and according to her law, w a s thus f o r c e d to submit to a diplomatic settlement. T h e U n i t e d States refused to serve as arbitrator, t h o u g h both sides requested her to act. P a r t of the controversy was r e f e r r e d to the H a g u e T r i -

T H E UNITED STATES AND T H E WORLD bunal accordingly and the remainder to a mixed claims commission. It was after this incident that the Roosevelt Corollary to the Monroe Doctrine began to take shape. Again, debt and disorder provoked foreign intervention and again the United States was involved in the controversy. In this instance, it was Santo Domingo which precipitated the conflict. T h e dictator in power until 1899 had borrowed far beyond Santo Domingo's ability to pay interest out of current revenues. T h e men who seized the government, when assassination ended the dictator's thirteen years of rule, proceeded to repudiate the debt he had incurred and to use the Dominican revenues for their own benefit. Quarrels among the revolutionary leaders kept the island in disorder even after a two-year civil war had abated: intrigue continued; foreign creditors pressed their governments to help them collect. In 1901, the receipts of specific customs houses were pledged to the French and Belgian governments. T w o years later, the German, Italian, and Spanish governments secured a pledge of monthly payments from customs to their nationals. In 1904, the arbitrators appointed to devise the manner of paying the $4,500,000 owed the Santo Domingo Improvement Company, an American firm, decided that in default of payment, the company was to have a customs house assigned to it. Since this threatened the lien of the other foreign claimants, European intervention seemed likely. T o prevent that, the Dominican President turned to the United States on the assumption that American financial agents in his customs houses might assure the stability of his government. It was the suggestion of the United States Minister, at the direction of Secretary of State John Hay, which finally urged the Dominican President to a course opposed by his cabinet and people. Though even Roosevelt was not eager for American intervention in the Dominican tangle, the danger of a possible foreign intervention on the Venezuelan pattern won him to action. On December 2, 1904, in his

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message to Congress, Roosevelt made this bold announcement: "If a nation shows that it knows how to act with reasonable efficiency and decency in social and political matters, if it keeps order and pays its obligations, it need fear no interference from the United States. Chronic wrongdoing, or an impotence which results in a general loosening of the ties of civilized society may in America, as elsewhere, ultimately require intervention by some civilized nation, and in the Western Hemisphere the adherence of the United States to the Monroe Doctrine may force the United States, however reluctantly, in flagrant cases of such wrongdoing or impotence, to the exercise of an international police power." That month, Roosevelt dispatched a naval officer as special commissioner to Santo Domingo. Discussions now were opened up and a treaty was negotiated. It provided for United States control of Dominican customs houses: 55 percent of their revenues were to be turned over to the country's creditors while the government received the remainder. In the light of these events, the Venezuela affair and the opening of construction of the Panama Canal, one may read Roosevelt's special message to the Senate with greater appreciation of its significance. T h e treaty failed in spite of that appeal. Foreign creditors again threatened when an Italian cruiser arrived off the coast of Santo Domingo. An executive agreement then provided for the President of the United States to name receivers of customs, who would be appointed by the President of Santo Domingo. These receivers were to dispose of the Dominican revenues according to the terms of the treaty which had failed of ratification. In his second message on Dominican affairs, which is reprinted here, Roosevelt expounded the Latin American policy which came to be known as the Roosevelt Corollary to the Monroe Doctrine: to prevent foreign intervention, the United States would itself intervene to restore order and financial decorum in those Latin American countries

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whose behavior might provoke action by European powers. In spite of American supervision of the customs, disorder continued in Santo Domingo until 1906, when the long period of revolution finally came to a halt. The following year, the Senate ratified a revised treaty. This deleted such objectionable clauses as that which pledged United States assistance in the internal affairs of Santo Domingo and which had the United States agree to determine the validity of the amount of the claims against the island republic. In this fashion, according to Roosevelt, the Monroe Doctrine was to be used against Latin American powers as much as against European. As a consequence, it was difficult to break down suspicion and hostility in the Western Hemisphere; for twenty-five years, "Yankee Imperialism" was the unflattering description of the American policy. But late in the nineteen twenties, the direction of American foreign affairs became more realistic: the Latin American nations were sovereign powers and their domestic concerns were their own; they were as interested in safeguarding the security of the Western Hemisphere as we were. In March,

1930, the State Department, therefore, repudiated the Roosevelt Corollary. It made public a memorandum written by J. Reuben Clark in 1928 when he was Undersecretary of State, which clearly defined the intentions and limits of the Monroe Doctrine. Said this document: ι. The Monroe Doctrine is unilateral. 2. "The Doctrine does not concern itself with purely inter-American relations." 3. "The Doctrine states a case of the United States versus Europe, not of the United States versus Latin America." 4. The United States has always used the Doctrine to protect Latin American nations from the aggressions of European powers. 5. The Roosevelt Corollary is not properly a part of the Doctrine itself, nor does it grow out of the Doctrine: ". . . it is pot believed that this Corollary is justified by the terms of the Monroe Doctrine, however much it may be justified by the application of the doctrine of selfpreservation." Thus Secretary of State Henry L. Stimson, preparing the way for Franklin D. Roosevelt's "Good Neighbor" policy. The selections here reprinted are from A. H. Lewis, ed., Compilation of the Messages and Speeches of Theodore Roosevelt, 2 vols. (Washington, 1906).

Corollary to the Monroe BY

THEODORE

ONE OF THE MOST effective instruments f o r peace is the Monroe Doctrine as it has been and is being gradually developed by this Nation and accepted by other nations. N o other policy could have been as efficient in promoting peace in the Western Hemisphere and in giving to each nation thereon the chance to develop along its own lines. If we had refused to apply the doctrine to changing conditions it would now be completely outworn, would not meet any of the needs of the present day, and, indeed, would probably by this time have sunk into complete oblivion. It is useful at home, and is meeting with recognition abroad because we have adapted our application of it to meet the growing and changing needs of the hemisphere. W h e n we announce a policy such as the Monroe Doctrine we thereby commit ourselves to the consequences of the policy, and those

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ROOSEVELT consequences from time to time alter. It is out of the question to claim a right and yet shirk the responsibility for its exercise. N o t only w e , but all American republics who are benefited b y the existence of the doctrine, must recognize the obligations each nation is under as regards foreign peoples no less than its duty to insist upon its own rights. That our rights and interests are deeply concerned in the maintenance of the doctrine is so clear as hardly to need argument. T h i s is especially true in view of the construction of the Panama Canal. As a mere matter of self-defense we must exercise a close watch over the approaches to this canal; and this means that we must be thoroughly alive to our interests in the Caribbean Sea. T h e r e are certain essential points which must

THE UNITED STATES AND THE WORLD never be forgotten as regards the Monroe Doctrine. In the first place we must as a Nation make it evident that we do not intend to treat it in any shape or way as an excuse for aggrandizement on our part at the expense of the republics to the south. W e must recognize the fact that in some South American countries there has been much suspicion lest we should interpret the Monroe Doctrine as in some way inimical to their interests, and we must try to convince all the other nations of this continent once and for all that no just and orderly Government has anything to fear from us. There are certain republics to the south of us which have already reached such a point of stability, order, and prosperity that they themselves, though as yet hardly consciously, are among the guarantors of this doctrine. These republics we now meet not only on a basis of entire equality, but in a spirit of frank and respectful friendship, which we hope is mutual. If all of the republics to the south of us will only grow as those to which I allude have already grown, all need for us to be the especial champions of the doctrine will disappear, for no stable and growing American Republic wishes to see some great non-American military power acquire territory in its neighborhood. All that this country desires is that the other republics on this continent shall be happy and prosperous; and they cannot be happy and prosperous unless they maintain order within their boundaries and behave with a just regard for their obligations toward outsiders. It must be understood that under no circumstances will the United States use the Monroe Doctrine as a cloak for territorial aggression. W e desire peace with all the world, but perhaps most of all with the other peoples of the American Continent. There are, of course, limits to the wrongs which any selfrespecting nation can endure. It is always possible that wrong actions toward this Nation, or toward citizens of this Nation, in some State unable to keep order among its own people, unable to secure justice from outsiders, and unwilling to do justice to those outsiders who treat it well, may result in our having to take action to protect our rights; but such action will not be taken with a view to territorial aggression, and it will be taken at all only with extreme reluctance and when it has become evident that every other resource has been exhausted. Moreover, we must make it evident that we do not intend to permit the Monroe Doctrine to be used by any nation on this Continent as a shield to protect it from the consequences of its own misdeeds against foreign nations. If a republic to the south of us commits a tort against a foreign nation,

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such as an outrage against a citizen of that nation, then the Monroe Doctrine does not force us to interfere to prevent punishment of the tort, save to see that the punishment does not assume the form of territorial occupation in any shape. T h e case is more difficult when it refers to a contractual obligation. Our own Government has always refused to enforce such contractual obligations on behalf of its citizens by an appeal to arms. It is much to be wished that all foreign governments would take the same view. But they do not; and in consequence we are liable at any time to be brought face to face with disagreeable alternatives. On the one hand, this country would certainly decline to go to war to prevent a foreign government from collecting a just debt; on the other hand, it is very inadvisable to permit any foreign power to take possession, even temporarily, of the custom houses of an American Republic in order to enforce the payment of its obligations; for such temporary occupation might turn into a permanent occupation. T h e only escape from these alternatives may at any time be that we must ourselves undertake to bring about some arrangement by which so much as possible of a just obligation shall be paid. It is far better that this country should put through such an arrangement, rather than allow any foreign country to undertake it. T o do so insures the defaulting republic from having to pay debt of an improper character under duress, wllile it also insures honest creditors of the republic from being passed by in the interest of dishonest or grasping creditors. Moreover, for the United States to take such a position offers the only possible way of insuring us against a clash with some foreign power. The position is, therefore, in the interest of peace as well as in the interest of justice. It is of benefit to our people; it is of benefit to foreign peoples; and most of all it is really of benefit to the people of the country concerned. This brings me to what should be one of the fundamental objects of the Monroe Doctrine. W e must ourselves in good faith try to help upward toward peace and order those of our sister republics which need such help. Just as there has been a gradual growth of the ethical element in the relations of one individual to another, so we are, even though slowly, more and more coming to recognize the duty of bearing one another's burdens, not only as among individuals, but also as among nations. Santo Domingo, in her turn, has now made an appeal to us to help her, and not only every principle of wisdom but every generous instinct within us bids us respond to the appeal. It is not of the

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slightest consequence whether w e grant the aid needed b y Santo D o m i n g o as an incident to the wise development of the M o n r o e Doctrine or because we regard the case of Santo Domingo as standing wholly b y itself, and to be treated as such, and not on general principles or with any reference to the Monroe Doctrine. T h e important point is to give the needed aid, and the case is certainly sufficiently peculiar to deserve to be judged purely on its own merits. T h e conditions in Santo D o m i n g o have f o r a number of years g r o w n f r o m bad to worse until a year ago all society was on the verge of dissolution. Fortunately, just at this time a ruler sprang up in Santo D o mingo, who, with his colleagues, saw the dangers threatening their country and appealed to the friendship of the only great and powerful neighbor who possessed the power, and as they hoped also the will to help them. T h e r e was imminent danger of foreign intervention. T h e previous rulers of Santo D o m i n g o had recklessly incurred debts, and owing to her internal disorders she had ceased to be able to provide means of paying the debts. T h e patience of her foreign creditors had become exhausted, and at least two foreign nations were on the point of intervention, and were only prevented from intervening by the unofficial assurance of this Government that it would itself strive to help Santo D o m i n g o in her hour of need. In the case of one of these nations, only the actual opening of negotiations to this end by our G o v ernment prevented the seizure of territory in Santo D o m i n g o by a European power. Of the debts incurred some were just, while some were not of a character which really renders it obligatory on or proper for Santo D o m i n g o to pay them in full. But she could not pay any of them unless some stability was assured her Government and people. Accordingly, the Executive Department of our G o v e r n m e n t negotiated a treaty under which we are to try to help the Dominican people to straighten out their finances. T h i s treaty is pending b e f o r e the Senate. In the meantime a temporary arrangement has been made which will last until the Senate has had time to take action upon the treaty. U n d e r this arrangement the Dominican Government has appointed Americans to all the important positions in the customs service, and they are seeing to the honest collection of the revenues, turning over 45 per cent, to the G o v ernment for running expenses and putting the other 55 per cent, into a safe depository for equitable division in case the treaty shall be ratified, among the various creditors, whether European or American.

T h e Custom Houses offer well-nigh the only sources of revenue in Santo D o m i n g o , and the different revolutions usually have as their real aim the obtaining of these Custom Houses. T h e mere fact that the Collectors of Customs are Americans, that they are performing their duties with efficiency and honesty, and that the treaty is pending in the Senate gives a certain moral p o w e r to the Government of Santo D o m i n g o which it has not had before. T h i s has completely discouraged all revolutionary movement, while it has already produced such an increase in the revenues that the Government is actually getting more f r o m the 4J per cent, that the American Collectors turn over to it than it got formerly when it took the entire revenue. It is enabling the poor, harassed people of Santo D o m i n g o once more to turn their attention to industry and to be free f r o m the cure of interminable revolutionary disturbance. It offers to all bona-fide creditors, A m e r i c a n and European, the only really g o o d chance to obtain that to which they are justly entitled, while it in return gives to Santo D o m i n g o the only opportunity of defense against claims which it ought not to pay, f o r now if it meets the views of the Senate we shall ourselves thoroughly examine all these claims, whether American or foreign, and see that none that are improper are paid. T h e r e is, of course, opposition to the treaty f r o m dishonest creditors, foreign and American, and f r o m the professional revolutionists of the island itself. W e have already reason to believe that some of the creditors who do not dare expose their claims to honest scrutiny are endeavoring to stir up sedition in the island and opposition to the treaty. In the meantime, I have exercised the authority vested in me by the joint resolution of the Congress to prevent the introduction of arms into the island for revolutionary purposes. Under the course taken, stability and o r d e r and all the benefits of peace are at last coming to Santo Domingo, danger of foreign intervention has been suspended, and there is at last a prospect that all creditors will get justice, no more and no less. If the arrangement is terminated by the failure of the treaty chaos will follow; and if chaos follows, sooner or later this Government may be involved in serious difficulties with foreign G o v e r n m e n t s over the island, or else may be f o r c e d itself to intervene in the island in seme unpleasant fashion. U n d e r the proposed treaty the independence of the island is scrupulously respected, the danger of violation of the Monroe Doctrine by the intervention of foreign powers vanishes, and the interference of our Government is minimized, so that we

THE UNITED STATES AND THE shall only act in conjunction with the Santo Domingo authorities to secure the proper administration of the customs, and therefore to secure the payment of just debts and to secure the Dominican Government against demands for unjust debts. The proposed method will give the people of Santo Domingo the same chance to move onward and upward which we have already given to the

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people of Cuba. It will be doubly to our discredit as a Nation if we fail to take advantage of this chance; for it will be of damage to ourselves, and it will be of incalculable damage to Santo Domingo. Every consideration of wise policy, and, above all, every consideration of large generosity, bids us meet the request of Santo Domingo as we are now trying to meet it. . . .

Message to the Senate on the Dominican White House, March 6, 190J T o THE SENATE: I wish to call the attention of the Senate at this executive session to the treaty with Santo Domingo. I feel that I ought to state to the Senate that the condition of affairs in Santo Domingo is such that it is very much for the interest of that Republic that action on the treaty should be had at as early a moment as the Senate, after giving the matter full consideration, may find practicable. I call attention to the following facts: ι. This treaty was entered into at the earnest request of Santo Domingo itself, and is designed to afford Santo Domingo relief and assistance. Its primary benefit will be to Santo Domingo. It offers the method most likely to secure peace and to prevent war in the island. 2. T h e benefit to the United States will consist chiefly in the tendency under the treaty to secure stability, order, and prosperity in Santo Domingo, and the removal of the apprehension lest foreign powers make aggressions on Santo Domingo in the course of collecting claims due their citizens; f o r it is greatly to our interest that all the islands in the Caribbean Sea should enjoy peace and prosperity and feel good will toward rhis country. T h e benefit to honest creditors will coinè from the fact that for the first time under this treaty a practicable method of attempting to settle the debts due them will be inaugurated. 3. Many of the debts alleged to be due from Santo Domingo to outside creditors unquestionably on their face represent far more money than ever was actually given Santo Domingo. T h e proposed treaty provides for a process by which impartial experts will determine what debts are valid and what are in whole or in part invalid, and will apportion accordingly the surplus revenue available for the payment of the debts. This treaty offers the only method for preventing the collection of fraudulent debts, whether owed to Americans or to citizens of other nations. 4. This treaty affords the most practicable means

Treaty

of obtaining payment for the just claims of American citizens. 5. If the treaty is ratified, creditors belonging to other nations will have exactly as good treatment as creditors who are citizens of the United States, and at the same time Santo Domingo will be protected against unjust and exorbitant claims. If it is not ratified, the chances are that American creditors will fare ill as compared with those of other nations; for foreign nations, being denied the opportunity to get what is rightfully due their citizens under the proposed arrangement, will be left to collect the debts due their citizens as they see fit, provided, of course, there is not permanent occupancy of Dominican territory. As in such case the United States will have nothing to say as to what debts should or should not be collected, and as Santo Domingo will be left without aid, assistance, or protection, it is impossible to state that the sums collected from it will not be improper in amount. In such event, whatever is collected by means of forcible intervention will be applied to the creditors of foreign nations in preference to creditors who are citizens of the United States. 6. The correspondence between the Secretary of State and the Minister of Haiti, submitted to the Senate several days ago, shows that our position is explicitly and unreservedly that under no circumstances do we intend to acquire territory in or possession of either Haiti or Santo Domingo, it being stated in these letters that even if the two republics desired to become a part of the United States the United States would certainly refuse its assent. 7. Santo Domingo grievously needs the aid of a powerful and friendly nation. This aid we are able, and I trust that we are willing, to bestow. She has asked for this aid, and the expressions of friendship, repeatedly sanctioned by the people and the Government of the United States, warrant her in believing that it will not be withheld in the hour of her need. Theodore Roosevelt

T H E N E W FREEDOM

WOODROW April 2, 1917, and July 10, 1919, when Wilson made these two speeches, the United States had entered World War I and had helped win it. But the interval stood for more than that: for an instrument presumably had been created by which war was to be driven from the earth. Woodrow Wilson offered the world peace, and it was no wonder that simple people all over the earth honored his name. But the mechanics of peace were far more complex than affirmations of devotion no matter how splendid. Highly intricate treaties had to be drawn up with a whole series of defeated belligerents; sporadic uprisings all over Europe had to be put down; treaties had to be ratified. Most important of all, the League of Nations, whose Covenant Wilson brought back with him to America from the Versailles Peace Conference, had to be joined by the United States to insure the establishment of a peaceful world. Wilson had made a number of mistakes. In the congressional elections of November, 1918, he had gone to the country and asked for the return of a Democratic Congress; only such a body would support him properly. He had been defeated—and his political enemies gleeBETWEEN

WILSON fully insisted that this was tantamount to a repudiation of his policies by the American people. Again, he had failed to name members of the Senate to his Peace Commission—a slight of the Senate's role in the treaty-making process. Again, he had insisted upon coupling the Covenant with the Treaty—and the weaknesses and injustices in the Treaty only ended by damaging the Covenant. Finally, he had been adamant on the matter of amendments to the Covenant; although the good faith of some of those who urged reservations and amendments is open to question. These were failures of judgment, but they showed no vital flaws of character. If Wilson's political enemies had been less implacable and if his health had not failed him, he might have succeeded and America might have joined the League. In any case, the two speeches reveal Wilson at the height of his powers. He was calling upon America to join in a great human crusade and to give of its strength and leadership in the cause of an enduring world peace. The selections here reprinted are from R. S. Baker and W . E. Dodd, eds., The Public Papers of Woodrow Wilson (6 vols., New York, 1927) and are published by permission of Harper and Brothers.

Two Addresses to Congress BY Ι . FOR DECLARATION OF W A R

AGAINST

WOODROW GERMANY

(ADDRESS DELIVERED AT A J O I N T SESSION OF THE T W O HOUSES OF CONGRESS, APRIL 2 , 191 7 )

1 HAVE CALLED the C o n g r e s s into extraordinary session because there are serious, v e r y serious, c h o i c e s of p o l i c y t o be m a d e , and made immediately, w h i c h it w a s neither right nor constitutionally permissible that I should assume the responsibility of making. O n the third of F e b r u a r y last I officially laid b e f o r e y o u the e x t r a o r d i n a r y announcement of the Imperial G e r m a n G o v e r n m e n t that o n and after the first d a y of F e b r u a r y it w a s its purpose to put

WILSON

aside all restraints of law or of humanity and use its submarines to sink e v e r y vessel that s o u g h t t o approach either the ports of G r e a t Britain and Ireland o r the western coasts of E u r o p e o r a n y of the ports controlled b y the enemies of G e r m a n y within the Mediterranean. . . . I was f o r a little w h i l e unable t o believe that such things w o u l d in fact be done b y any g o v e r n ment that had hitherto subscribed to the h u m a n e practices of civilized nations. International l a w had its origin in the attempt to set up some law w h i c h w o u l d be respected and observed u p o n the seas, w h e r e no nation had right of domination and w h e r e lay the free h i g h w a y s of the w o r l d . B y pain-

THE UNITED STATES AND THE WORLD ful stage after stage has that law been built up, with meager enough results, indeed, after all was accomplished that could be accomplished, but always with a clear view, at least, of what the heart and conscience of mankind demanded. This minimum of right the German Government has swept aside under the plea of retaliation and necessity and because it had no weapons which it could use at sea except these which it is impossible to employ as it is employing them without throwing to the winds all scruples of humanity or of respect for the understandings that were supposed to underlie the intercourse of the world. I am not now thinking of the loss of property involved, immense and serious as that is, but only of the wanton and wholesale destruction of the lives of noncombatants, men, women, and children, engaged in pursuits which have always, even in the darkest periods of modern history, been deemed innocent and legitimate. Property can be paid for; the lives of peaceful and innocent people cannot be. The present German submarine warfare against commerce is a warfare against mankind. It is a war against all nations. American ships have been sunk, American lives taken, in ways which it has stirred us very deeply to learn of, but the ships and people of other neutral and friendly nations have been sunk and overwhelmed in the waters in the same way. There has been no discrimination. The challenge is to all mankind. Each nation must decide for itself how it will meet it. The choice we make for ourselves must be made with a moderation of counsel and a temperateness of judgment befitting our character and our motives as a nation. W e must put excited feeling away. Our motive will not be revenge or the victorious assertion of the physical might of the nation, but only the vindication of right, of human right, of which we are only a single champion. W h e n 1 addressed the Congress on the twentysixth of February last I thought that it would suffice to assert our neutral rights with arms, our right to use the seas against unlawful interference, our right to keep our people safe against unlawful violence. But armed neutrality, it now appears, is impracticable. Because submarines are in effect outlaws when used as the German submarines have been used against merchant shipping, it is impossible to defend ships against their attacks as the law of nations has assumed that merchantmen would defend themselves against privateers or cruisers, visible craft giving chase upon the open sea. . . . There is one choice we cannot make, we are incapable of making: we will not choose the path of submission and suffer the most sacred rights of our Nation and our people to be ignored

or violated. The wrongs against which we now array ourselves are no common wrongs; they cut to the very roots of human life. W i t h a profound sense of the solemn and even tragical character of the step I am taking and of the grave responsibilities which it involves, but in unhesitating obedience to what I deem my constitutional duty, I advise that the Congress declare the recent course of the Imperial German Government to be in fact nothing less than war against the government and people of the United States; that it formally accept the status of belligerent which has thus been thrust upon it; and that it take immediate steps not only to put the country in a more thorough state of defense but also to exert all its power and employ all its resources to bring the Government of the German Empire to terms and end the war. . . . While we do these things, these deeply momentous things, let us be very clear, and make very clear to all the world what our motives and our objects are. M y own thought has not been driven from its habitual and normal course by the unhappy events of the last two months, and I do not believe that the thought of the Nation has been altered or clouded by them. I have exactly the same things in mind now that I had in mind when I addressed the Senate on the twenty-second of January last; the same that I had in mind when I addressed the Congress on the third of February and on the twenty-sixth of February. Our object now, as then, is to vindicate the principles of peace and justice in the life of the world as against selfish and autocratic power and to set up amongst the really free and self-governed peoples of the world such a concert of purpose and of action as will henceforth insure the observance of those principles. Neutrality is no longer feasible or desirable where the peace of the world is involved and the freedom of its peoples, and the menace to that peace and freedom lies in the existence of autocratic governments backed by organized force which is controlled wholly by their will, not b y the will of their people. W e have seen the last of neutrality in such circumstances. W e are at the beginning of an age in which it will be insisted that the same standards of conduct and of responsibility for wrong done shall be observed among nations and their governments that are observed among the individual citizens of civilized states. W e have no quarrel with the German people. W e have no feeling towards them but one of sympathy and friendship. It was not upon their impulse that their government acted in entering this war. It was not with their previous knowledge

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or approval. It was a war determined upon as wars used to be determined upon in the old, unhappy days when peoples were nowhere consulted by their rulers and wars were provoked and waged in the interest of dynasties or of little groups of ambitious men who were accustomed to use their fellow men as pawns and tools. Self-governed nations do not fill their neighbor states with spies or set the course of intrigue to bring about some critical posture of affairs which will give them an opportunity to strike and make conquest. Such designs can be successfully worked out only under cover and where no one has the right to ask questions. Cunningly contrived plans of deception or aggression, carried, it may be, from generation to generation, can be worked out and kept from the light only within the privacy of courts or behind the carefully guarded confidences of a narrow and privileged class. T h e y are happily impossible where public opinion commands and insists upon full information concerning all the nation's affairs. . . . One of the things that has served to convince us that the Prussian autocracy was not and could never be our friend is that from the very outset of the present war it has filled our unsuspecting communities and even our offices of government with spies and set criminal intrigues everywhere afoot against our national unity of counsel, our peace within and without, our industries and our commerce. Indeed, it is now evident that its spies were here even before the war began; and it is unhappily not a matter of conjecture but a fact proved in our courts of justice that the intrigues which have more than once come perilously near to disturbing the peace and dislocating the industries of the country have been carried on at the instigation, with the support, and even under the personal direction of official agents of the Imperial Government accredited to the Government of the United States. Even in checking these things and trying to extirpate them we have sought to put the most generous interpretation possible upon them because we knew that their source lay not in any hostile feeling or purpose of the German people towards us (who were no doubt as ignorant of them as we ourselves were), but only in the selfish designs of a Government that did what it pleased and told its people nothing. But they have played their part in serving to convince us at last that that Government entertains no real friendship for us and means to act against our peace and security at its convenience. T h a t it means to stir up enemies against us at our very doors the intercepted note to the German Minister at Mexico City is eloquent evidence.

W e are accepting this challenge of hostile purpose because we know that in such a Government, following such methods, we can never have a friend; and that in the presence of its organized power, always lying in wait to accomplish we know not what purpose, there can be no assured security for the democratic Governments of the world. W e are now about to accept gage of battle with this natural foe to liberty and shall, if necessary, spend the whole force of the Nation to check and nullify its pretensions and its power. W e are glad, now that we see the facts with no veil of false pretense about them, to fight thus for the ultimate peoples, the German people included: for the rights of nations great and small and the privilege of men everywhere to choose their way of life and of obedience. T h e world must be made safe for democracy. Its peace must be planted upon the tested foundations of political liberty. W e have no selfish ends to serve. W e desire no conquest, no dominion. W e seek no indemnities for ourselves, no material compensation for the sacrifices we shall freely make. W e are but one of the champions of the rights of mankind. W e shall be satisfied when those rights have been made as secure as the faith and the freedom of nations can make them. Just because we fight without rancor and without selfish object, seeking nothing for ourselves but what we shall wish to share with all free peoples, we shall, I feel confident, conduct our operations as belligerents without passion and ourselves observe with proud punctilio the principles of right and of fair play we profess to be fighting for. . . . It will be all the easier for us to conduct ourselves as belligerents in a high spirit of right and fairness because we act without animus, not in enmity towards a people or with the desire to bring any injury or disadvantage upon them, but only in armed opposition to an irresponsible government which has thrown aside all considerations of humanity and of right and is running amuck. W e are, let me say again, the sincere friends of the German people, and shall desire nothing so much as the early reëstablishment of intimate relations of mutual advantage between us,—however hard it may be for them, for the time being, to believe that this is spoken from our hearts. W e have borne with their present Government through all these bitter months because of that friendship,—exercising a patience and forbearance which would otherwise have been impossible. W e shall, happily, still have an opportunity to prove that friendship in our daily atti-

THE UNITED STATES AND THE tude and actions towards the millions of men and women of German birth and native sympathy who live amongst us and share our life, and we shall be proud to prove it towards all who are in fact loyal to their neighbors and to the Government in the hour of test. T h e y are, most of them, as true and loyal Americans as if they had never known any other fealty or allegiance. T h e y will be prompt to stand with us in rebuking and restraining the few who may be of a different mind and purpose. If there should be disloyalty, it will be dealt with with a firm hand of stern repression; but, if it lifts its head at all, it will lift it only here and there and without countenance except from a lawless and malignant few. It is a distressing and oppressive duty, Gentlemen of the Congress, which I have performed in thus addressing you. There are, it may be, many months of fiery trial and sacrifice ahead of us. It is a fearful thing to lead this great peaceful people into war, into the most terrible and disastrous of all wars, civilization itself seeming to be in the balance. But the right is more precious than peace, and we shall fight f o r the things which we have always carried nearest our hearts,—for democracy, for the right of those who submit to authority to have a voice in their own Governments, f o r the rights and liberties of small nations, f o r a universal dominion of right by such a concert of free peoples as shall bring peace and safety to all nations and make the world itself at last free. T o such a task we can dedicate our lives and our fortunes, everything that we are and everything that we have, with the pride of those who know that the day has come when America is privileged to spend her blood and her might f o r the principles that gave her birth and happiness and the peace which she has treasured. G o d helping her, she can do no other. 2. PRESENTING THE T R E A T Y FOR RATIFICATION (ADDRESS TO THE JULY

IO,

SENATE

OF

THE

UNITED

STATES,

I919)

G E N T L E M E N OF THE S E N A T E :

The treaty of peace with Germany was signed at Versailles on the twenty-eighth of June. I avail myself of the earliest opportunity to lay the treaty before you for ratification and to inform you with regard to the work of the Conference by which that treaty was formulated. . . . T h e United States entered the war upon a different footing from every other nation except our associates on this side the sea. W e entered it, not because our material interests were directly threatened or because any special treaty obligations to which we were parties had been violated, but only

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1007

because we saw the supremacy, and even the validity, of right everywhere put in jeopardy and free government likely to be everywhere imperiled by the intolerable aggression of a power which respected neither right nor obligation and whose very system of government flouted the rights of the citizen as against the autocratic authority of his governors. And in the settlements of the peace we have sought no special reparation f o r ourselves, but only the restoration of right and the assurance of liberty everywhere that the effects of the settlement were to be felt. W e entered the war as the disinterested champions of right and we interested ourselves in the terms of the peace in no other capacity. T h e hopes of the nations allied against the Central Powers were at a very low ebb when our soldiers began to pour across the sea. There was everywhere amongst them, except in their stoutest spirits, a somber foreboding of disaster. T h e war ended in November, eight months ago, but you have only to recall what was feared in midsummer last, four short months before the armistice, to realize what it was that our timely aid accomplished alike f o r their morale and their physical safety. . . . A great moral force had flung itself into the struggle. T h e fine physical force of those spirited men spoke of something more than bodily vigor. T h e y carried the great ideals of a free people at their hearts and with that vision were unconquerable. Their very presence brought reassurance, their fighting made victory certain. . . . But I speak now of what they meant to the men by whose sides they fought and to the people with whom they mingled with such utter simplicity, as friends who asked only to be of service. T h e y were f o r all the visible embodiment of America. W h a t they did made America and all that she stood f o r a living reality in the thoughts not only of the people of France but also of tens of millions of men and women throughout all the toiling nations of a world standing everywhere in peril of its freedom and of the loss of everything it held dear, in deadly fear that its bonds were never to be loosed, its hopes forever to be mocked and disappointed.. An the compulsion of what they stood for was upon us who represented America at the peace table. It was our duty to see to it that every decision we took part in contributed, so far as we were able to influence it, to quiet the fears and realize the hopes of the peoples who had been living in that shadow, the nations that had come by our assistance to their freedom. It was our duty to do everything that it was within our power to do to make the triumph of freedom and of right a

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lasting triumph in the assurance of which men might everywhere live without fear. Old entanglements of every kind stood in the way,—promises which Governments had made to one another in the days when might and right were confused and the power of the victor was without restraint. Engagements which contemplated any dispositions of territory, any extensions of sovereignty that might seem to be to the interest of those who had the power to insist upon them, had been entered into without thought of what the peoples concerned might wish or profit by; and these could not always be honorably brushed aside. It was not easy to graft the new order of ideas on the old, and some of the fruits of the grafting may, I fear, for a time be bitter. But, with very few exceptions, the men who sat with us at the peace table desired as sincerely as we did to get away from the bad influences, the illegitimate purposes, the demoralizing ambitions, the international counsels and expedients out of which the sinister designs of Germany had sprung as a natural growth. . . . T h e atmosphere in which the Conference worked seemed created, not by the ambitions of strong governments, but by the hopes and aspirations of small nations and of peoples hitherto under bondage to the power that victory had shattered and destroyed. T w o great empires had been forced into political bankruptcy, and we were the receivers. Our task was not only to make peace with the Central Empires and remedy the wrongs their armies had done. T h e Central Empires had lived in open violation of many of the very rights for which the war had been fought, dominating alien peoples over whom they had no natural right to rule, enforcing, not obedience, but veritable bondage, exploiting those who were weak for the benefit of those who were masters and overlords only by force of arms. There could be no peace until the whole order of Central Europe was set right. . . . And out of the execution of these great enterprises of liberty sprang opportunities to attempt what statesmen had never found the way before to do; an opportunity to throw safeguards about the rights of racial, national and religious minorities by solemn international covenant; an opportunity to limit and regulate military establishments where they were most likely to be mischievous; an opportunity to effect a complete and systematic internationalization of waterways and railways which were neccssary to the free economic life of more than one nation and to clear many of the normal channels of commerce of unfair obstructions of law or of privilege; and the very welcome oppor-

tunity to secure for labor the concerted protection of definite international pledges of principle and practice. These were not tasks which the Conference looked about it to find and went out of its way to perform. They were inseparable from the settlements of peace. They were thrust upon it by circumstances which could not be overlooked. T h e war had created them. In all quarters of the world old-established relationships had been disturbed or broken and affairs were at loose ends, needing to be mended or united again, but could not be made what they were before. T h e y had to be set right by applying some uniform principle of justice or enlightened expediency. And they could not be adjusted by merely prescribing in a treaty what should be done. New states were to be set up which could not hope to live through their first period of weakness without assured support by the great nations that had consented to their creation and won for them their independence. Ill-governed colonics could not be put in the hands of governments which were to act as trustees for their people and not as their masters if there was to be no common authority among the nations to which they were to be responsible in the execution of their trust. Future international conventions with regard to the control of waterways, with regard to illicit traffic of many kinds, in arms or in deadly drugs, or with regard to the adjustment of many varying international administrative arrangements could not be assured if the treaty were to provide no permanent common international agency, if its execution in such matters was to be left to the slow and uncertain processes of cooperation by ordinary methods of negotiation. If the Peace Conference itself was to be the end of cooperative authority and common counsel among the governments to which the world was looking to enforce justice and give pledges of an enduring settlement, regions like the Saar basin could not be put under a temporary administrative régime which did not involve a transfer of political sovereignty and which contemplated a final determination of its political connections by popular vote to be taken at a distant date; no free city like Danzig could be created which was, under elaborate international guarantees, to accept exceptional obligations with regard to the use of its port and exceptional relations with a State of which it was not to form a part; properly safeguarded plebiscites could not be provided for where populations were at some future date to make choice what sovereignty they would live under; no certain and uniform method of arbitration could be secured for the settlement of antici-

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pated difficulties of final decision with regard to many matters dealt with in the treaty itself; the long-continued supervision of the task of reparation which Germany was to undertake to complete within the next generation might entirely break down; the reconsideration and revision of administrative arrangements and restrictions which the treaty prescribed but which it was recognized might not prove of lasting advantage or entirely fair if too long enforced would be impracticable. The promises governments were making to one another about the way in which labor was to be dealt with, by law not only but in fact as well, would remain a mere humane thesis if there was to be no common tribunal of opinion and judgment to which liberal statesmen could resort for the influences which alone might secure their redemption. A league of free nations had become a practical necessity. Examine the treaty of peace and you will find that everywhere throughout its manifold provisions its fra mers have felt obliged to turn to the League of Nations as an indispensable instrumentality for the maintenance of the new order it has been their purpose to set up in the world,—the world of civilized men.

tion was to be secured, the authority without which, as they had come to see it, it would be difficult to give assured effect either to this treaty or to any other international understanding upon which they were to depend for the maintenance of peace. The fact that the Covenant of the League was the first substantive part of the treaty to be worked out and agreed upon, while all else was in solution, helped to make the formulation of the rest easier. The Conference was, after all, not to be ephemeral. The concert of nations was to continue, under a definite Covenant which had been agreed upon and which all were convinced was workable. They could go forward with confidence to make arrangements intended to be permanent. The most practical of the conferees were at last the most ready to refer to the League of Nations the superintendence of all interests which did not admit of immediate determination, of all administrative problems which were to require a continuing oversight. What had seemed a counsel of perfection had come to seem a plain counsel of necessity. The League of Nations was the practical statesman's hope of success in many of the most difficult things he was attempting.

That there should be a League of Nations to steady the counsels and maintain the peaceful understandings of the world, to make, not treaties alone, but the accepted principles of international law as well, the actual rule of conduct among the governments of the world, had been one of the agreements accepted from the first as the basis of peace with the Central Powers. The statesmen of all the belligerent countries were agreed that such a league must be created to sustain the settlements that were to be effected. But at first I think there was a feeling among some of them that, while it must be attempted, the formation of such a league was perhaps a counsel of perfection which practical men, long experienced in the world of affairs, must agree to very cautiously and with many misgivings. It was only as the difficult work of arranging an all but universal adjustment of the world's affairs advanced from day to day from one stage of conference to another that it became evident to them that what they were seeking would be little more than something written upon paper, to be interpreted and applied by such methods as the chances of politics might make available if they did not provide a means of common counsel which all were obliged to accept, a common authority whose decisions would be recognized as decisions which all must respect.

And it had validated itself in the thought of every member of the Conference as something much bigger, much greater every way, than a mere instrument for carrying out the provisions of a particular treaty. It was universally recognized that all the peoples of the world demanded of the Conference that it should create such a continuing concert of free nations as would make wars of aggression and spoliation such as this that has just ended forever impossible. A cry had gone out from every home in every stricken land from which sons and brothers and fathers had gone forth to the great sacrifice that such a sacrifice should never again be exacted. It was manifest why it had been exacted. It had been exacted because one nation desired dominion and other nations had known no means of defense except armaments and alliances. W a r had lain at the heart of every arrangement of the Europe,—of every arrangement of the world,—that preceded the war. Restive peoples had been told that fleets and armies, which they toiled to sustain, meant peace; and they now knew that they had been lied to: that fleets and armies had been maintained to promote national ambitions and meant war. They knew that no old policy meant anything else but force, force,—always force. And they knew that it was intolerable. Every., true heart in the world, and every enlightened judgment demanded that, at whatever cost of independent action, every government that took thought for its people or for

And so the most practical, the most skeptical among them turned more and more to the League as the authority through which international ac-

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THE NEW FREEDOM

justice or f o r ordered freedom should lend itself to a new purpose and utterly destroy the old order of international politics. Statesmen might see difficulties, but the people could see none and could b r o o k no denial. A w a r in which they had been bled white t o beat the terror that lay concealed in every Balance of Power must not end in a mere victory of arms and a new balance. T h e monster that had resorted to arms must be put in chains that could not be broken. T h e united power of f r e e nations must put a stop to aggression, and the w o r l d must be given peace. If there was not the will o r the intelligence to accomplish that now, there must be another and a final war and the world must be swept clean of every power that could renew the terror. T h e League of Nations was not merely an instrument to adjust and reme d y old w r o n g s under a new treaty of peace; it w a s the only hope f o r mankind. Again and again had the demon of war been cast out of the house of the peoples and the house swept clean by a treaty of peace; only to prepare a time when he would enter in again with spirits worse than himself. T h e house must now be given a tenant who could hold it against all such. Convenient, indeed indispensable, as statesmen found the newly planned L e a g u e of Nations to be for the execution of present plans of peace and reparation, they saw it in a new aspect before their work was finished. T h e y saw it as the main object of the peace, as the only thing that could complete it or make it worth while. T h e y saw it as the hope of the world, and that hope they did not dare to disappoint. Shall w e or any other free people hesitate to accept this great duty? Dare we reject it and break the heart of the world? And so the result of the Conference of Peace, so far as G e r m a n y is concerned, stands complete. T h e difficulties encountered were very many. Sometimes they seemed insuperable. It was impossible to a c c o m m o d a t e the interests of so great a b o d y of nations,—interests which directly or indirectly affected almost every nation in the world, —without many minor compromises. T h e treaty, as a result, is not exactly what we would have written. It is probably not what any one of the national delegations would have written. But results were worked out which on the whole bear test. I think that it will be found that the compromises which were accepted as inevitable nowhere cut to the heart of any principle. T h e work of the Conference squares, as a whole, with the principles agreed upon as the basis of the peace as well as with the practical possibilities of the international situations which had to be faced and dealt with as facts.

I shall presently have occasion to lay b e f o r e you a special treaty with France, whose object b the temporary protection of France from unprovoked aggression by the Power with w h o m this treaty of peace has been negotiated. Its terms link it with this treaty. I take the liberty, however, of reserving it for special explication on another occasion. T h e rôle which America was to play in the Conference seemed determined, as I have said, before my colleagues and I got to Paris,—determined b y the universal expectations of the nations whose representatives, drawn from all quarters of the globe, we were to deal with. It was universally recognized that America had entered the war to promote no private or peculiar interest of her own but only as the champion of rights which she was glad to share with free men and lovers o f ¡astice everywhere. W e had formulated the principles upon which the settlement was to' be made,—the principles upon which the armistice had been agreed to and the parleys of peace undertaken,— and no one doubted that our desire was to see the treaty of peace formulated along the actual lines of those principles,—and desired nothing else. W e were welcomed as disinterested friends. W e were resorted to as arbiters in many a difficult matter. It was recognized that our material aid would be indispensable in the days to come, when industry and credit would have to be brought back to their normal operation again and communities beaten to the ground assisted to their feet once more, and it was taken for granted, I am proud to say, that we would play the helpful friend in these things as in a i r others without prejudice or favor. W e were generously accepted as the unaffected champions of what was right. It was a very responsible rôle to play; but I am happy to report that the fine group of Americans who helped with their expert advice in each part of the varied settlements sought in every transaction to justify the high confidence reposed in them. And that confidence, it seems to me, is the measure of our opportunity and of our duty in the days to come, in which the new hope of the peoples of the world is to be fulfilled or disappointed. T h e fact that America is the friend of the nations, whether they be rivals or associates, is no new fact; it is only the discovery of it by the rest of the world that is new. America may be said to have just reached her majority as a world power. It was almost exactly twenty-one years ago that the results of the war with Spain put us unexpectedly in possession of rich islands on the other side of the world and brought us into association with other govern-

T H E UNITED STATES AND THE ments in the control of the West Indies. It was regarded as a sinister and ominous thing b y the statesmen of more than one European chancellery that we should have extended our power beyond the confines of our continental dominions. T h e y were accustomed to think of new neighbors as a new menace, of rivals as watchful enemies. There were persons amongst us at home who looked with deep disapproval and avowed anxiety on such extensions of our national authority over distant islands and over peoples whom they feared we might exploit, not serve and assist. But we have not exploited them. W e have been their friends and have sought to serve them. And our dominion has been a menace to no other nation. W e redeemed our honor to the utmost in our dealings with Cuba. She is weak but absolutely free; and it is her trust in us that makes her free. W e a k peoples everywhere stand ready to give us any authority among them that will assure them a like friendly oversight and direction. T h e y know that there is no ground for fear in receiving us as their mentors and guides. Our isolation was ended twenty years ago; and now fear of us is ended also, our counsel and association sought after and desired. There can be no question of our ceasing to be a world power. T h e only question is whether we can refuse the moral leadership that is offered us, whether we shall accept or reject the confidence of the world. T h e war and the Conference of Peace now sit-

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ting in Paris seem to me to have answered that question. Our participation in the war established our position among the nations and nothing but our own mistaken action can alter it. It was not an accident or a matter of sudden choice that we are no longer isolated and devoted to a policy which has only our own interest and advantage f o r its object. It was our duty to go in, if we were indeed the champions of liberty and of right. W e answered to the call of duty in a w a y so spirited, so utterly without thought of what we spent of blood or treasure, so effective, so worthy of the admiration of true men everywhere, so wrought out of the stuff of all that was heroic, that the whole world saw at last, in the flesh, in noble action, a great ideal asserted and vindicated, by a Nation they had deemed material and now found to be compact of the spiritual forces that must free men of every nation from every unworthy bondage. It is thus that a new rôle and a new responsibility have come to this great Nation that we honor and which we would all wish to lift to yet higher levels of service and achievement. T h e stage is set, the destiny disclosed. It has come about b y no plan of our conceiving, but by the hand of G o d who led us into this way. W e cannot turn back. W e can only go forward with lifted eyes and freshened spirit, to follow the vision. It was of this that we dreamed at our birth. America shall in truth show the way. T h e light streams upon the path ahead, and nowhere else.

HENRY CABOT LODGE H E N R Y CABOT LODGE led the fight against the

League in the U n i t e d States Senate w h e r e he had b e c o m e chairman of the F o r e i g n Relations Committee b y virtue of the R e p u b l i c a n v i c t o r y in the 1 9 1 8 elections. L o d g e ' s o w n The Senate and the League of Nations ( N e w Y o r k , 1 9 2 5 ) reveals something of the spirit in w h i c h that struggle w a s carried on. L o d g e was a partisan, an isolationist, a bitter and perhaps even envious f o e ; it is difficult to disentangle motives in such a complex situation. A t the same time, it must not be f o r g o t t e n that there w e r e those among Wilson's opponents w h o honestly feared E u r o p e a n entanglements, w h o k n e w the T r e a t y was a bad one, and w h o w e r e dismayed at Wilson's stubbornness. A l l these combined to demand an immediate and f o r m a l end to the

w a r ; the L e a g u e c o u l d be discussed later and w i t h o u t heat. H a d t h e y reversed the process, it m a y be said parenthetically, t h e y might have been closer to the realities. W i l s o n made a n u m b e r of appeals to the Senate. In A u g u s t , he met w i t h its C o m m i t t e e on F o r e i g n Relations and again sought to p r o v e that the U n i t e d States had nothing to f e a r f r o m the L e a g u e . W e w e r e f r e e to w i t h d r a w w h e n w e chose; the M o n r o e D o c t r i n e w a s recognized in the C o v e n a n t — t h u s b e c o m i n g part of the b o d y of received international law f o r the first time; and our obligations w e r e moral rather than legal in their essence. T h o u g h the Committee w a s not c o n v i n c e d b y the President's arguments, less than a dozen Senators opposed the L e a g u e in a n y f o r m . M o s t of the

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FREEDOM Democrats vote against them. Ratification with reservations was thus defeated; unconditional ratification failed even more signally. Since the Senate showed itself recalcitrant —whether in response to Wilson's obstinacy or in answer to deliberate maneuvering to secure the Treaty's defeat; a choice the reader must make for himself on the basis of Lodge's book—Wilson's last hope was to appeal to the people against the Senate. He made a tour of the Middle and Far West; he was followed by Republican orators; spokesmen f o r European minority groups who felt they had been wronged by the Treaty also joined their voices to the debate—and the confusion. T h e question of world peace itself was hopelessly lost in the wrangling. Then Wilson fell ill, Congress completely escaped his control, and the battle was lost. The United States never ratified the Treaty, and in 1921 by resolution simply declared the war was over.

Senate agreed with Republicans like T a f t , Root, Hughes and Hoover: the Treaty and the League should be accepted with certain modifications. As chairman of the Senate's Foreign Relations Committee, Lodge reported the Treaty out with a series of reservations. These released the United States from obligation to implement Article X of the Covenant, to accept a mandate, to serve on a League committee, or to engage in economic sanctions without the consent of Congress. As a further safeguard of sovereignty, the United States was to be sole judge of the fulfillment of its obligations. T h e Senate proceeded to adopt a preamble to the Treaty which declared that it was not to be binding until three of the four associated powers should accept the United States reservations. At this point, Wilson interposed: if the Powers were to comply with the Senate's conditions, the entire conference must reassemble and the Treaty be re-submitted to Germany. Since Wilson considered that the reservations vitiated the Treaty, he urged that the

The selections here reprinted are from Lodge's book and are published by permission of Charles Scribner's Sons.

The Senate and the League of Nations BY CHAPTER V I I :

HENRY

CABOT

T H E C O M I N G OF P E A C E

. . . ON T H E M O R N I N G of Sunday, March 2nd, Senator Brandegce came to my house soon afrer breakfast and told me that it seemed to him of the last importance that at that juncture some declaration should be made, securing for it if possible the signatures of more than one-third of the Senate, to the effect that a League of Nations such as it was understood was to be proposed, and the outlines of which had been given through the press, could not be passed. 1 was very much struck by the proposition, and he had no difficulty in convincing me of its essential and even vital importance. W e discussed it f o r some time and then went to see Senator Knox and asked him to draft the declaration, which he did, and we went over his draft with him later in the day. I then took the draft on Monday morning and went first to see Senator Cummins, who was one of the oldest and most distinguished Senators on our side, and asked him to consider it and told him that I hoped he

LODGE

would be ready to sign it. He went over it with care, suggested two amendments, as I remember, to which no one could object and which I regarded as improvements, and then those of us who had been interested in getting it up signed it and proceeded to circulate it on our side of the chamber. W e did not think it desirable to ask anv Democrats to sign. W e knew there were Democratic Senators opposed to the League, but we did not wish to involve or embarrass them, and we also were able to exercise a greater freedom in taking this position than was possible f o r them. Just before midnight on the 3rd of March I arose in the Senate and read the declaration and the signatures, which made certain the printing of the declaration in the Record. Its consideration was clearly out of order in the condition of the existing business; one objection was certain to put it over and that objection was made by Senator Swanson of Virginia. Our purpose, however, had been served. T h e declaration went out to the world and before the next morning we had by the

T H E U N I T E D S T A T E S AND T H E WORLD arrival of Senator Elkins of West Virginia and a telegram from Senator Fall of New Mexico two additional signatures, making in all thirty-nine signers. One-third of the Senate was of course 32, so that it was perfectly clear that a proposal for a League of Nations which did not have reservations meeting the objections expressed in the declaration could not pass the Senate; that is the Senate would not advise and consent to it. The declaration with the signatures read as follows: "Whereas under the Constitution it is a function of the Senate to advise and consent to, or dissent from, the ratification of any treaty of the United States, and no such treaty can become operative without the consent of the Senate expressed by the affirmative vote of two-thirds of the Senators present; and "Whereas owing to the victory of the arms of the United States and of the nations with whom it is associated, a peace conference was convened and is now in session at Paris for the purpose of settling the terms of peace; and " W h ereas a committee of the conference has proposed a constitution for a league of nations and the proposal is now before the peace conference for its consideration: Now, therefore, be it "Resolved by the Senate of the United States m the discharge of its constitutional duty of advice m regard to treaties, That it is the sense of the Senate that while it is their sincere desire that the nations of the world should unite to promote peace and general disarmament, the constitution of the league of nations in the form now proposed to the peace conference should not be accepted by the United States; and be it "Resolved further, That it is the sense of the Senate that the negotiations on the part of the United States should immediately be directed to the utmost expedition of the urgent business of negotiating peace terms with Germany satisfactory to the United States and the nations with whom the United States is associated in the war against the German Government, and that the proposal for a league of nations to insure the permanent peace of the world should be then taken up for careful and serious consideration. "The undersigned Senators of the United States, Members and Members elect of the Sixty-sixth Congress, hereby declare that, if they had had the opportunity, they would have voted for the foregotng resolution: Henry Cabot Lodge. Philander C. Knox. Lawrence Y. Sherman. Harry S. New.

William M. Calder. Henry W. Keyes. Boies Penrose. Carroll S. Page.

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George H. Moses. George P. McLean. J. W. Wadsworth, Jr. Joseph Irwin France. Bert M. Femald. Medili McCormick. Albert B. Cummins. Charles Curtis. F. E. Warren. * Lawrence C. Phipps. James E. Watson. Seldon P. Spencer. Thomas Sterling. Hiram Johnson. J. S. Frelinghuysen. Charles E. Townsend. W. G. Harding. William P. Dillingham. Frederick Hale. 1.1.. Lenroot. William E. Borah. Miles Poindexter. ' Walter E. Edge. Howard Sutherland. Reed Smoot. * Truman H. Newberry. Asie J. Gronna. * L. Heislcr Ball, Added the next morning. Davis Elkins of W e « Virginia Albert B. Fall of New Mexico." I call attention to this declaration and the manner in which it was made and then published not only to the people of the United States but to the people of Europe, because it has an especial significance which must not be overlooked. The United States and the Senate were much criticized in Europe, and the President and the Allied Powers kept urging directly or by implication to the proposition that we were bound to accept the Versailles Treaty because President Wilson had negotiated and signed it. On the part of the President, this was an attempt to overthrow the powers of the Senate and thus indirectly to violate and set aside the provisions of the Constitution. On the part of the Allied Powers, it was the business of their official representatives to know what our constitutional provisions were and that no treaty would bind the United States unless accepted and approved by the Senate, whether with or without amendments or reservations. The public men of England and France, especially those of England, knew this fact; in any event, it was their business to know it, whether they actually knew it or not. . . . CHAPTER X : T H E LEAGUE IN THE SENATE

. . . I will frankly confess that in the time which has elapsed since the Senate's discussion of the League I have become more and more satisfied, although I voted in the opposite way, that the final decision of the Senate was correct. Every day of the League's existence has convinced me of the wisdom of the United States in holding itself aloof from its useless and at the same time dangerous provisions. In practice the League has thus far proved futile for the purpose for which it was ostensibly designed and loudly proclaimed. It has * Senators Elect.

THE NEW FREEDOM done nothing to stop wars. . . . In the nature of things and in its own being the League cannot d o anything to stop wars. As a meeting of the representatives of the governments, not of the people, of the different nations, it has engaged in a great deal of debate and conversation; but it has effected nothing of vital consequence to the cause of world peace. Those matters in which it has taken action were in some instances innocent and meritorious and in others trifling or futile. Really to fulfill the advertised intention of its framers, it would have been necessary to put force behind the League, and if there had been an international army and an international commander to carry out the behests of the assembly and the council of the League, the covenant would have become a breeder of wars and not a promoter of peace. As it is, it can at least be said of the League that it is harmless and that occasional international conferences or conversations may be beneficial. T h e value of the great and, I think I may say, historic debate in the Senate was that every day the American people learned more clearly what the covenant of the League of Nations which Mr. Wilson presented to them really meant, what dangers it threatened and what perilous purposes it might conceal. It was a very remarkable debate. It rendered an immense service in the instruction of the people. It vindicated the wisdom of the provisions of the American Constitution in regard to the treaty-making power and also the capacity of the Senate as a body to rise to the heights of a very great occasion. T h e failure of the Senate to give its advice and consent to the ratification of the T r e a t y of Versailles on the second vote, in March, i ç i o , however, came much nearer defeat than is generally realized. Those who voted f o r the acceptance of the T r e a t y voted in good faith; so did those of the Democrats w h o voted against it, and all the Republicans. Without a thought of self they were guided by a deep sense of duty to this country. A s the final vote drew near, however, I felt convinced that it was quite possible that the treaty with the reservations would be adopted by the Senate because it was obvious to me that on this final and crucial test a majority of the Democrats would be unwilling to vote against ratification. But 1 also felt convinced that President Wilson would prevent the acceptance of the treaty with reservations if he possibly could. I based this opinion on the knowledge which I had acquired as to Mr. Wilson's temperament, intentions and purposes. I had learned from a careful study of the President's acts and utterances during those trying days—and it was as important for me to understand him as it was f o r his closest friends—that

the key to all he did was that he thought of everything in terms of Wilson. In other words, Mr. Wilson in dealing with every great question thought first of himself. H e may have thought of the country next, but there was a long interval, and in the competition the Democratic Party, I will do him the justice to say, was a poor third. Mr. Wilson was devoured by the desire f o r power. If he had been a soldier and a man of fighting temperament, the Government of the United States would have been in grave danger. H e was obstinate and up to a certain point determined, but he was not a fighting man and he never could have led an army or controlled those w h o would have led it f o r him, as was done by a v e r y inferior type of man, the 3rd Napoleon. W h e n it came to actual conflict he lacked nerve and daring, although with his temperament I doubt if he lacked the will. H e had as great an opportunity as was ever given in human history to one man. H e could have settled the affairs of the world from the White House and taken a position both at the time and in the opinion of posterity which it would have been hard to rival. He would have had the world at his feet, but he could think only of himself, and his own idea was and had been f o r a long time that the part f o r him to play was that of the great peacemaker. First there was to be no war; we were "too proud to fight." Then when the war came, it was to be "a little w a r " ; then it was to be "a peace without victory." W h e n the great forces let loose by the war got beyond his control and the final settlement came, his one thought appeared to be, as disclosed by his words and acts, to create a system of which he would be the head, and to that everything was made subservient. T h e people with whom he was associated during his visits to E u rope soon discovered this, and b y yielding to his demand for the establishment of a League of N a tions at just that time, and then b y judiciously threatening its defeat, they compelled him to do everything they desired, and many of the evil things that were· done and to which Mr. Wilson unwillingly assented, notably the surrender of Shantung to Japan, it is only fair to say were forced upon him because he was ready to sacrifice everything to his own purposes, to the League upon which he had pinned his hopes; in other words, to himself. T h e most striking illustration of his absorption in himself to the exxlusion of everything else was shown at the time of the last vote in the Senate on the Versailles Treaty. A f t e r the vote had been taken and the Treaty defeated, Senator Brandegee, an "irreconcilable," turned to me and said, " W e can always depend on Mr. Wilson. H e never

THE UNITED STATES AND THE WORLD has failed us. H e has used all his powers to defeat the T r e a t y , because we would not ratify it in just the form which he desired." I replied, " T h a t is quite true. Without his efforts the Treaty would have been accepted by the Senate today." This is shown by the figures. Of the 47 Democratic Senators, we had 2 j f o r the T r e a t y . T w e n t y - f o u r Democrats voted against it and, combined with the 15 irreconcilables on the Republican side they were more than enough to deprive the T r e a t y of the two-thirds vote necessary f o r ratification. If Mr. Wilson had said a favorable word to his personal supporters, the T r e a t y with the reservations would have been accepted by the Senate. As it was, he was obliged to exert all his power to prevent its acceptance with the reservations, and two of his Cabinet officers were on the floor of the Senate on that last day using every possible effort to keep enough Democrats in line to assure the defeat of the T r e a t y . As I have already said, I do not regret the result now. I think it was a fortunate result. But the Treaty would have been accepted by the Senate on the 19th of March, 1920, if it had not been f o r Mr. Wilson, and the defeat of the T r e a t y with the reservations was owing entirely to his determination to have his own way, and to dominate the situation. I do not wish to be unjust to Mr. Wilson in any way, and, therefore, it is only fair f o r me to say that the final defeat of the T r e a t y of V e r sailles and the League of Nations was owing to his efforts and to his unyielding attitude. . . . Rather than yield in any degree or upon any essential point in the treaty which he submitted, he was ready to join with those who were opposed to the covenant of the League of Nations on any terms and defeat the whole T r e a t y of Versailles. He had already in his speech at Salt Lake City declared this position upon Article 10, the article of which he was the author. H e would not consult, he would not advise, he would not consider any change of meaning or consequence. H e was determined to have the T r e a t y in every essential point exactly as he had approved it in Paris, and nothing else. In other words he was so set upon having his own w a y that he was ready to destroy the Treaty of Versailles, which was framed to replace a victorious war with a victorious peace, rather than permit any modification in the terms of the League of Nations which he had identified with himself. I do not emphasize this point f o r the purpose of placing upon Mr. Wilson the responsibility f o r the defeat in the Senate of the Versailles T r e a t y . This is a wholly secondary point and there were plenty of men holding positions of power and with profound convictions, into

which no thought of self entered, who believed that the acceptance of the League of Nations would be a betrayal of this country and who were quite ready to share with him, although f o r totally different motives, the responsibility of defeating the T r e a t y . I have dwelt upon the President's attitude toward the T r e a t y while pending in the Senate not to criticise or censure him but because his attitude and his action in this great crisis throw a flood of light upon Mr. Wilson himself, exhibit his temperament and demonstrate the soundness of m y estimate of him at the time and the truth of the proposition that the key to his action always was to be found in the fact that he thought of everything and of every question in terms of his own personal interest. T h e thought of self always overshadowed in the ultimate decision and effaced every other consideration. It was shown in his well known dislike to consult with any one w h o disagreed with him. It was displayed in the cold w a y in which he dropped into the well of forgetfulness some of those nearest to him, who, whether rightly or wrongly, had served and followed him with the utmost loyalty. . . . That he was a man of ability cannot be questioned. H e always spoke well, although he was criticised f o r having an academic manner, which was not to me a disparagement. His style in writing and speaking was clear and forcible. His E n g lish was excellent, although he had a fondness for phrasemaking, which, as often happens, proved on several occasions a dangerous gift. H e had thought and written much in regard to systems of government, particularly our own, and he was a writer upon and a student of American history. H e was entirely capable of thinking f o r himself and quite independently, as his writings show, containing as they do many statements which attained to a wide subsequent interest when they came into conflict with opinions and views which the events of the time caused him to express after he was President. H e was not a scholar in the true sense at all, although the newspapers were fond of applying that term to him, as they are apt to apply it to anyone who has held a position of educational importance. T o give one little illustration of what I mean. Universal negatives are always perilous, but I can only say that I have never noticed but once in any of Mr. Wilson's writings or speeches a classical allusion. . . . It is not possible, however, to discuss Mr. W i l son, even in the most general way, or to make any attempt to give an impression of his temperament and character without some allusion to what was constantly being said b y his unlimited admirers about his idealism—that he was a self-sacrificing

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idealist; I think the word "martyr" was not infrequently used. He and a certain group of supporters were especially fond of talking about vision," and I took occasion to say in my speech of August i l , 1919, that "vision" and "men of vision" are one thing but that "visionaries" are something entirely different. T h e same may be said in regard to idealism. Mr. Wilson was a master of the rhetorical use of idealism. He spoke the language very well and he convinced many people who were content with words that he was a man of vision and one ready to sacrifice all to his ideals. He had a selection of phrases which he used very skilfully. I might say, for instance, that "breaking the heart of the world" was one and "making the world safe for democracy" was another, while "vision," "uplift" and "forward-looking" were seldom absent. These are fair examples of his successful use of this form of popular appeal. But no one who ever studied Mr. Wilson's acts, whether as an opponent or as a supporter, if at all clear-sighted, could fail to perceive that in dealing with political or international questions, whether great or small, Mr.

Wilson was extremely practical and always had in view some material and definite purposes which would result, if successful, possibly in benefit to the world, certainly in benefit to himself. . . . There are those still extant who speak of Mr. Wilson as a "very great man." An able man in certain ways, an ambitious man in all ways he certainly was; by no means a commonplace man. But "very great men" are extremely rare. Mr. Wilson was not one of them. He was given the greatest opportunity ever given to any public man in modern times which we may date from the Revival of Learning in Europe. Having this opportunity he tried to use it and failed. The failure necessarily equalled the opportunity in magnitude and the failure was complete and was all his own. N o one could have destroyed such a vast opportunity except the man to whom it was given, and in this work of destruction unaided and alone Mr. Wilson was entirely successful. Difficult as such an achievement in the face of such an opportunity was, it does not warrant describing the man who wrought the destruction in any sense as a "very great man."

Part Ten THE GOLDEN N I N E T E E N TWENTIES

/. WORK AND Population

Growth

and Changes. In the

thirty years from 1870 to 1900, the population of the United States had doubled in size; but in the thirty years from 1900 to 1930, its increase was but little more than 60 percent. In 1930, the population of the United States was 122,800,000. T h e slowing d o w n of the country's growth was due to the f o l l o w ing factors: the restriction of immigration; the movement from the country to the cities; and the wider exercise of birth control, particularly as more and more of the residents of the cities became members of the middle class. T o o , America's inhabitants were concentrating in specific areas. N e w Y o r k and California were growing greatly; as were also Michigan, Texas, Illinois, and Florida. O n the other hand, the primacy of N e w England was n o w a thing of the past; indeed, the three Pacific coast states held a larger population than all the six N e w England commonwealths. T h e trend towards urbanization was continuing. In 1900, 33 percent of the population was living in communities having 8,000 or more inhabitants; in 1930, this ratio had increased to 49 percent. Americans were thronging into cities because of superior job opportunities and because of the more modern conveniences and facilities of apartment houses, the greater variety of diversions, the theaters, educational institutions, and other cultural centers. Nothing was more typical of American civilization in the postwar era than metropolitan N e w Y o r k , where within a radius of fifty miles of Manhattan Island were closely located together 290 cities, boroughs, and villages, with a combined population of more than ten millions. T h e country, on the other hand, offered its attractions, and with the automobile more and more members

WEALTH

of the middle class were seeking at least parttime residence in suburban and rural communities. During the twenties there was some talk of decentralization, on the part of city planners and industrialists; nevertheless, little real progress was made, and the cities grew, as they attracted youth seeking new opportunities and workers a more mobile labor market. Significant occupational changes were also taking place in the United States. T h e country had been built up b y its farming families and, as late as 1870, one half of all those gainfully employed w e r e still engaged in agriculture. By 1930, however, this ratio had fallen to one fifth. And—on the other side of the coin—almost f o u r fifths of the persons gainfully enployed in the United States were working for wages and salaries, as compared with about one half of those gainfully employed in 1870. A t first glance this might have seemed to indicate the proletarianizing of the American labor force. But this was not true, for these reasons: ( 1 ) W i t h i n the salary and wage population was a g r o w i n g group of salary earners (the so-called white-collar class) whole attitudes and valuéis continued to be those of middle-class Americans. (2) Even within the so-called laboring population there existed a v e r y sizable group whose identification with the middle class was also very real. Such w o r k e r s frequently owned their o w n homes, possessed life insurance, and tried to send at least one of their children to college. T h e United States, despite its industrialization and an expanding corporate institutionalism, was still middle class at heart. N o w h e r e else in the world did a country's culture and e c o n o m y rest upon such a broad base. A s long as the American

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T H E GOLDEN NINETEEN

middle class continued so large, and as long as many workers continued to identify themselves with it, the prospects of violent change in the United States were remote. Industry's Growth. More and more the machine was becoming the hallmark of our culture. It is true that the machine broke down privacy, swept away old skills, created technological unemployment, wasted natural resources, and standardized taste. Yet the machine was a beneficent master: for it released American men, women, and children from the backbreaking toil of centuries and produced a vast quantity of consumer goods whose prices were being steadily lowered. Thanks to the machine and its increase in productivity, it was possible to raise the school-attending age of America's youth, so that the boys and girls of the nation were graduating from high school, and the proportion attending college was steadily increasing. The machine, too, made for color and variety in America's daily living: it put amusements within the reach of all and produced cheap fabrics and clothing that made possible an improved taste everywhere. When Americans and Europeans came to view some of the outstanding characteristics of this Machine Age, they were able to agree that the following were of particular note: ( i ) The unrivaled natural resources of the country. (2) The relative scarcity of labor and the high standard of living. ( 3 ) The great increase in labor productivity, and the use of machinery in agriculture, transportation, and manufacture, as well as the remarkable utilization of hydroelectric power. (4) The vast domestic market. (5) Scientific management in industry and commerce. (6) Industrial peace, because of the more conservative and nonpolitical outlook of organized labor. (7) The dominant national trait of optimistic energy. Said Recent Economic Changes, in 1929, on this last: " T h e individual in America is mobile as to place and calling; he is moving upward. . . . The way to education and to promotion is wide open; indeed many ladders

TWENTIES

to advancement are available and their rungs are all intact, so he may climb w ho will." America's capacity to produce was indeed impressive. It possessed 14 percent of the total world area, excluding the polar regions, and about 7.5 percent of the world's arable land. It produced 40 percent of the whole world's steel, 35 percent of the world's coal, 40 percent of the world's cotton, 60 percent of the world's petroleum and refined oil. The horsepower capacity of its electrical central stations and industrial power plants exceeded the combined electrical generating capacities of Germany, France, Great Britain, Canada, and the Soviet Union. The United States possessed 45 percent of the whole world's wealth. Increases in productivity were startling: At the end of the 1920s, each American worker, on the average, was turning out half again as much goods as he had been able to create at the beginning of the decade. From 1900 on, the national output of goods and services had more than doubled, while the country's population had increased only 50 percent in the thirty years. Nothing indicated America's advance so significantly as these figures: in 1900 the country's national income was 19 billions of dollars; in 1915, 36 billions of dollars; in 1921, 58 billions of dollars, and in 1929, 83 billions of dollars. For the same years, the real income per worker had been $1,543, J'>650, $1,637, and $1,776. In the golden 1920s America's great industries were textiles, machinery, steel and its products, automobiles, foodstuffs, paper and printing, chemicals, transportation and equipment, lumber and lumber products, stone, glass and clay, and nonferrous metals. Thus the United States had continued to develop evenly, producing both capital goods and consumer goods. But the twenties also had seen pioneering in new fields to employ new capital investments and to create job opportunities for fresh skills and for many of those workers who were being displaced by advancing mechanization in older industries. During the decade, radio, aviation, sound

INTRODUCTION movies, and the chemical industries had suddenly appeared and quickly grown to maturity. The Automobile. Most important was the fact that the 1920s was the age of the automobile. It entered into mass production; its prices were lowered; and it made possible the appearance of a vast company of new activities and services. T h e Federal and state governments spent great sums on the improvement and hard-surfacing of highways; and Americans erected garages and repair shops and roadstands and tourist camps. America took to the road—seeking jobs, sunshine, and recreation. In 1910, there were only 458,000 cars registered in the country; by 1929 there were 23,000,000. The name of Henry Ford became the symbol of American mechanical progress. Entering the automobile industry in the early nineties, and utilizing mass-production methods, in 1910 he turned out his first famous Model T . In 1928, when Model Τ was discontinued for a more luxurious car, 15,000,000 of these unattractive but amazingly efficient little vehicles had been manufactured and sold. The change-over from Model Τ to Model A pointed up another characteristic of the times. T h e change cost the Ford Company 100 millions of dollars; and the willingness to spend such large sums for conversion —always leading to greater productivity— demonstrated the bold leadership of large numbers of America's enterprisers. Technological Unemployment. It is true that greater productivity per unit of labor meant the utilization of new machine techniques and the creation of new investment opportunities for savings. On the other hand, greater productivity made for labor displacement—and technological unemployment. Thus, over the 1920s, in manufacturing, there was an increase in productivity of 30 percent and a net loss of 546,000 workers; in railroad transportation, the increase in productivity was 20 percent and the net loss of workers was 253,000; in mining, there was an increase

IOZI

of productivity of 20 percent and a net loss of 100,000 workers. But what technological unemployment meant was really this: it required the retraining of workers and their shifting into other areas where expansion was occurring. If there were fewer jobs in railroading, there were more in trucking; if there were fewer opportunities in manufacturing, there were more in the service industries. The fact is, from 1922 to 1929, on an average, the total unemployed each year in the country was only between two and two and one-half million workers; and many of these were out of work because of choice or because of the fact that they were associated with seasonal trades. The Position of Labor. Increases in national · wealth, income, and real wages—along with the absence of serious unemployment during the greater part of the decade—helped to account for the growing conservatism of American labor. Organized labor continued largely to function among the skilled crafts, and saw no necessity for deviating from its traditional policies of voluntarism and pureand-simple trade unionism. Many unions, like many corporations, were not averse to freezing the hard-won gains achieved through such tactics. These unions resisted the introduction of labor-saving machinery, insisted upon the maintenance of so-called featherbed jobs to make possible the sharing of the work among the whole union membership, limited entrance by requiring long apprenticeships and high initiation fees, and demanded the closed shop under which the union recruited the workers for the employer. This was an uninspired leadership. Organized labor, too, had no programs to offer the workers in the country's new mass-production industries—automobiles, rubber, petroleum and its products. On the other hand, management was more aggressive—and more successful. It adopted welfare programs; installed profit-sharing devices; and encouraged workers to buy stock. It also fought the unions bitterly—with labor spies, terrorism, and

IOZ2

T H E GOLDEN NINETEEN

court injunctions. All these helped to account f o r the decline in trade-union membership and militancy. In 1920, there had been 5 , 1 1 1 , 000 trade unionists; in 1929, there were only 4,330,000, with more than 40,000,000 persons in the laboring force of the country. In 1920, there had been 3,411 strikes involving 1,463,000 workers; in 1927, there were 921 strikes involving 288,500 workers. Real Wages. As plants expanded and wealth accumulated, the real wages of America's workers improved. As has been pointed out earlier, the period 1900-14 was one of no advances; and that of 1914-18 showed setbacks. But the forward march was resumed at the end of World W a r I. From 1918 to 1930, the increase in real wages was 100 percent! Most of these gains, however, had been achieved during 1918-22. From 1922 to 1930, during the country's great prosperity, the rise in real wages was only 20 percent. At this point we may anticipate our story a little. Productivity was increasing faster than real wages; prices were not dropping as sharply as they might have because of "price management" in many industries; and a real profit inflation was occurring. In other words, capital was getting too much—and some savings therefore were entering speculative channels; while labor was not getting enough. This was one of the distortions in the economy of the 1920s that accounted for boom —and depression. This fact can be demonstrated in another way—by an analysis of the distribution of family income. T h e Brookings Institution, in its well-known study, America's Capacity to Consume, showed that in 1929 the following great disparities existed: Families receiving $5,000 a year or better constituted but 8.2 percent of the country's family population, while they got 42 percent of the country's income. On the other hand, families receiving $2,000 a year or less made up 59.5 percent of the country's family population, and they got only 23.7 percent of the country's income. The Role of the Corporation.

T h e units of

TWENTIES

enterprise naturally grew larger as the dependence upon capital for investment in plant became more and more an outstanding attribute of the Machine Age. The corporation was as typical of the times as was the assembly line. In 1929, corporations accounted for 86 percent of the business done in transportation and other public utility fields, 92 percent in manufacturing, and 96 percent in mining. So significant had great corporations become, that one tenth of 1 percent of the corporations of the country owned more than half of the nation's corporate assets. T h e tendency toward the creation of great consolidations—which had largely ceased in the United States by 1904—was resumed with new vigor in the twenties. In part this movement reappeared because of the opening up of new fields of enterprise to welcome capital investment: the automobile, electrical goods, the telephone, electric light and power, the radio, synthetics. There were other reasons as well. New consolidations were effected to permit of the exploitation of the national market; to bring about important economies through the use of common sales agencies or management; to achieve integration. Government was also less vigorous in its enforcement of the antitrust laws. There was, too, the pressure of accumulated savings which encouraged promoters—some of them unscrupulous rascals—to float new companies. Holding companies, particularly in the field of electric light and power, sprang up like weeds, heavily overcapitalized the properties on which they were based, and obtained large sums from the unwary by bond rather than equity issues. Holding companies and mergers resulted in a greater concentration and control of America's industrial enterprise than ever before in its history. A t the end of 1929, 3 companies in the telephone and telegraph fields had securities outstanding with a market value of 4.4 billions of dollars; 11 companies in the electrical equipment field had securities outstanding valued at 2.3 billions; 23 companies

INTRODUCTION in the automobile field had securities valued at 2.6 billions; 25 companies in iron and steel had securities outstanding valued at 2.1 billions. Against these trends government never raised its voice. Its hands-off policy—nay, its

benevolent approval—encouraged Americans to greater recklessness in company flotations and securities speculations. T h e Republican administrations of the 1920s sought to forget the lessons that the N e w Freedom had tried to bring to America.

2. POLITICS IN THE Election of 1920. W h e n the Republicans assembled in convention at Chicago in June, 1920, it was apparent to the whole nation that this was to be a Republican year. As a consequence, there was bitter rivalry among the contenders f o r the nomination; but on the ninth ballot Senator Warren Gamaliel Harding of Ohio pulled ahead of the other aspirants and on the next ballot he was nominated. A s his running mate, the Republicans chose Governor Calvin Coolidge of Massachusetts. Harding had been a routine Republican politician and he had served in the Senate without any distinction. Coolidge had climbed up the slow ladder of political preferment until, in 1919, he had been elected governor of the commonwealth of Massachusetts. He had suddenly become a familiar name through the length and breadth of the land, when in September, 1919, he intervened in the Boston police strike. It is true that b y the morning of September 1 1 , order had been restored; but in the afternoon, Coolidge had appeared on the scene, assumed control, and poured into Boston militia units from all over the state. His telegram to President Gompers of the A . F . of L. that "There is no right to strike against the public safety by anybody, anywhere, at any time" had been widely applauded. He was reelected governor and was an obvious choice by the Republicans to balance their ticket. T h e Democrats met at San Francisco later in June, and nominated Governor James M. Cox of Ohio and the youthful Franklin D. Roosevelt of N e w York as their standard bearers. T h e canvass of 1920 was a spiritless

1023

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affair. T h e Democrats sought to rekindle old fires b y proclaiming the election a "solemn referendum" on the question of American entrance into the League of Nations; but the Republicans refused to participate seriously in the debate. Harding was elected b y an overwhelming majority, receiving 404 votes in the electoral college to Cox's 127. T h e R e publican victory in the Congressional elections was equally impressive. There can be no question that the American voters seemed to welcome the return to "normalcy" which the President-elect had promised. The Harding Administration. President Harding surrounded himself b y a Cabinet that puzzled the country. T h e State Department went to Charles E. Hughes; the Treasury Department to Andrew W . Mellon, a wealthy banker of Pittsburgh; the Commerce Department to Herbert Hoover, who had been in charge of American relief work in Europe at the end of the war. But the rest of the offices were filled by undistinguished men some of whom were also venal. Before very long, it became apparent that the Cabinet and the executive offices were to be dominated b y H a r r y M . Daugherty of Ohio, who was placed in charge of the Department of Justice. Daugherty spoke for the so-called Ohio gang, who were hard-drinking, card-playing spoilsmen and thieves. From the beginning, the same kind of scandals that had plagued the earlier Grant administrations were to be Harding's lot. Corrupt practices immediately appeared in the Veterans' Bureau, the Department of Justice, and the Office of Alien Property Custodian.

I024

T H E GOLDEN NINETEEN TWENTIES

Even more serious was the reckless squandering of the nation's oil reserves, which were turned over to private individuals by Secretary of Interior Albeit B. Fall. Fall leased the famous Teapot Dome Reserve of Wyoming to his friend Harry F. Sinclair; and the equally important Elk Hills Reserve of California to another friend, Ε. M. Doheny. The secrecy attending the leases and the sudden wealth of Fall, who was known to have been in financial straits, led to a Senate committee investigation under the able direction of Senator Thomas J . Walsh of Montana. The result was the establishment of the guilt of many of those involved. The Secretary of the Navy and the Secretary of the Interior were compelled to resign their Cabinet offices; government civil suits to recapture the oil reserves were finally successful in 1927; and Fall was found guilty of accepting a bribe and was sentenced to jail. Harding, undoubtedly, was not party to these crimes. But the appointments to places of public trust had been his; and morally it was just that he should assume a large part of the responsibility. Harding sank under the weight of these scandals, and died on August 2, 1923; Calvin Coolidge was now President of the United States. Coolidge in Office. Coolidge's administration was undistinguished; but the country was not demanding bold leadership and creative statesmanship. Coolidge was willing to turn policy-making over to Hughes, Mellon, and Hoover in their respective domains. He gave the bull market his blessing. And he spent his time on unimportant concerns. But because the years of his administrations marked a golden age in American annals, his fellow citizens were prepared to regard the quiet little man in the White House with affection. It was inevitable that Coolidge should be renominated by the Republicans; and when they held their convention at Cleveland in June, 1924, he was named on the first ballot. For the vice presidency, General Charles G . Dawes was selected. The Democrats met later in the same month at N e w York and sat al-

most continuously until July 10. The leading contenders for the Democratic nomination were McAdoo of California and Governor Alfred E. Smith of N e w York. Smith was not named because of the great power of the Ku Klux Klan in the councils of the party. The Democrats therefore turned to a compromise candidate and, after balloting more than one hundred times, finally nominated John W . Davis of N e w York for the presidency; with him was picked Governor Charles W . Bryan of Nebraska, the Commoner's brother. An important third-party movement once more made its appearance as a result of the growing dissatisfaction of insurgent Republicans with the conservatism of the Harding-Coolidge administrations. This Farmer-Labor party nominated Senator La Follette for the presidency and Senator Burton K. Wheeler of Montana (who was a Democrat) for the vice presidency. T h e Farmer-Labor ticket received the endorsement of the Socialist party, the executive council of the American Federation of Labor, and the railroad brotherhoods. Actually, however, La Follette's platform was directed largely at monopoly—that same monopoly which had been troubling the American West for the last half century. In other words, it was an agrarian program rather than a socialist one. In the elections, Coolidge's majority over his two rivals was an impressive one; and he was easily elected. In the electoral college he received 382 votes to Davis's 136 and La Follette's 13. In the Congressional elections, the Republican triumph was so great that the insurgent Republicans were shorn of their power. President Coolidge's good fortune did not desert him during the full term of his second administration. The country's phenomenal prosperity continued; industrial conflicts were few and unimportant; and peace and plenty reigned over the land. The result was that Coolidge was able to dictate the presidential ticket of his party in the election of 1928.

INTRODUCTION Election of 192S. The Republicans assembled at Kansas City in June and named Herbert Hoover for the presidency and Senator Charles Curtis of Kansas for the vicepresidency, both on the first ballots. T h e Democrats met at Houston, Texas, also in June, and now could not deny Smith. (The Klan by this time had become discredited.) Smith was nominated on the first ballot and Senator Joseph T . Robinson of Arkansas was selected to make the contest with him. Governor Smith made a gallant fight, but his cause was doomed to failure. ( 1 ) He had no economic program of dissent: he had nothing to offer labor and agriculture. (2) He was a "wet" as far as Prohibition was concerned, a position exceedingly distasteful to the old Bryan country of the South and the West. (3) He was a loyal member of N e w York City's powerful and frequently corrupt Tammany Hall. (4) He was a Roman Catholic. (5) And, of course, the golden era of prosperity stood in the way of a Republican upset, no matter how great the personal charm of the Democratic nominee. The upshot was that the Democracy suffered its most humiliating defeat since the Civil War. Smith lost his own State of New York as well as the Southern states of Virginia, North Carolina, Tennessee, Florida, and Texas. He did not carry a single Border state. The Far West, which had voted for Bryan and Wilson, deserted him. His total

electoral vote was 87 to Hoover's 444. T h e next Congress was also to be overwhelmingly Republican. The Administration of Herbert Hoover. Herbert Hoover had become a wealthy man as a result of his successes in the promotion of mining companies. It was inevitable, therefore, that he should be an old-fashioned individualist. He was confident of the destiny of America; regarded with horror the idea of government intervention; and looked upon the federal offices largely as agencies for the promotion of business. It was not his lot to serve out his term quietly. For the stock-market boom collapsed in October, 1929; and from then on through the rest of his administration depression gripped the land. Hoover also failed to resolve the knotty problems of Prohibition, farm relief, and water-power control. Into the bargain, from December, 1931, to March, 1933, the President was confronted by a hostile Congress. Once more Republican insurgency raised its head; and the insurgent bloc, led in the Senate by Norris of Nebraska, opposed Hoover on his own bills and united with Democrats to override his vetoes. In one area he was to meet with successes; for his Secretary of State, Henry L. Stimson, continued the good work begun by his predecessor and further strengthened America's growing bonds of friendship with the Latin American nations.

3. SOME QUESTIONS Tariffs. During the twenties, public policy was largely concerned with the writing of tariff legislation, the debate about the Prohibition amendment, and the restriction of immigration. With the Republican party again in control of the presidency and Congress in 1921, it was inevitable that businessmen should demand and legislators should grant an immediate revision of the Democratic tariff of

1025

OF THE

HOUR

1913. In May, 1921, Congress wrote the Emergency Tariff Act, which raised duties on agricultural goods, wool, and sugar, and devoted particular attention to the new chemical industry. Meanwhile, the House Ways and Means Committee and the Senate Finance Committee were redevising the whole tariff structure, schedule by schedule. T h e result of these labors was the Fordney-McCumber

I02Ó

T H E GOLDEN NINETEEN TWENTIES

Tariff Act of 1922 which contained the highest rates in American tariff history up to that time. B y 1928, the clamor against the act of 1922 was fairly general. American agriculture had been going through hard times in the twenties and was less sure of the efficacy of protectionism; on the other hand, protected interests felt they had not received enough. Congress therefore sat down once again to tariff tinkering and in May, 1929, the Hawley bill was reported out of committee to the lower House. It was not until May, 1930, that Senate and House could reconcile their differences, and the result of their agreement was the Smoot-Hawley Tariff Act. It turned out to have an even higher general average of rates than its predecessor; for the general average of ad valorem rates in the tariff law of 1922 was 33 percent, and in that of 1930, 40 percent. One of the most impressive expressions of disapproval of the action of Congress came from one thousand trained economists, who signed a manifesto addressed to President Hoover, urging him to veto the bill. President Hoover refused to agree with these dissidents, insisting that the new tariff act would stay the course of the depression. But Americans in the years that followed were frequently to turn back to this statement of the economists and to ponder over its wisdom. The points the economists stressed were the following: ( 1 ) An increase in duties was calculated to raise prices for the consuming public; for high tariff duties encouraged wasteful concerns and unnecessary industries to continue in operation. (2) A high tariff limited the export of both agricultural and manufactured goods by the restrictions it placed on foreign trade. (3) Protectionism was incapable of helping agricultural producers because their surpluses flowed into the world market and helped to fix the world price. (4) A high tariff was bound to affect adversely American investments abroad and prevent the payment by debtor nations of

interest and principal on loans made by Americans. ( j ) Reprisals by foreign nations were inevitable. (This last turned out to be no idle prophecy. Before 1931 was over, at least twenty-five countries had made extensive tariff revisions or had increased specific duties, or were threatening to do one or the other. In almost every important case, such acts were justified by the fact that the United States itself had led the way in the adoption of an economic-nationalist program when it closed its doors to the entry of foreign goods.) Prohibition. Demand for the outlawing of the manufacture and the dispensing of alcoholic beverages had been an old staple of American reformism. This agitation was finally crowned with success when, in 1917, a new amendment to the Constitution—the Eighteenth—was drawn up by Congress. It aimed at the establishment of national Prohibition under the aegis of the Federal government. In little more than a year, the legislators of three fourths of the states had adopted the amendment and its proclamation followed on January 29, 1919. Congress wrote the Volstead Act for its enforcement; and on January 16, 1920, Prohibition went into effect without any compensation for the economic interests involved. Prohibition, under the Eighteenth Amendment, had been designed to eradicate two evils—the saloon and intemperance. It is true that the saloon was eliminated by law. But in its place a set of vicious institutions arose —the speakeasies, beer flats, and blind pigs— which, being illegal, could flourish only because they were founded on an open contempt for the law and because thev had the protection of a corrupt local officialdom. Also, they sold bad and sometimes poisonous liquor. As for universal temperance, not only was that ideal never attained but it soon appeared that America was drinking almost as much as it had been before 1914. After a decade of the open flouting of the Amendment, most intelligent Americans had

INTRODUCTION come to the conclusion that Prohibition could not be enforced; that, indeed, it was producing a new crop of evils as serious as those it had sought to eradicate. It was leading to the demoralization of public officials, gang warfare, and a disrespect for law and lawenforcement agencies. Too, many states and local governments refused to cooperate with Washington. In 1932, the Democrats finally took the bull by the horns and demanded the repeal of the Eighteenth Amendment, the legalization of beer, and the return of control to the states. Mr. Roosevelt's election seemed to constitute a popular mandate. Congress, therefore, in March, 1933, legalized the manufacture and sale of beer, and passed a joint resolution calling for repeal. The Twenty-first Amendment was ratified before the year was over. T h e new amendment, in addition to repealing the Eighteenth, promised, to such states as wished to remain dry, federal protection against the transportation and importation of intoxicating liquors into their areas. Before long, most of the states had legalized manufacture and sale, with one form or another of restriction on dispensing. In all not more than four or five states remained bone dry. And thus ended a rather curious effort to intrude upon the private lives of the American people. Intemperance undoubtedly was an evil; but the consequences of control had been equally disturbing. It was doubtful if Americans would tolerate the return of the "noble experiment." Immigration Restriction. The movement inaugurated in the 1890s for the barring of undesirable immigrants and for the restriction of immigration on a selective basis continued with unflagging zeal into the new century. During the first decade, Congress constantly tinkered with the country's immigration code; added long lists of undesirables to those already banned; imposed a head tax and then raised it; compelled steamship companies to assume responsibility for the return of foreignborn in the excluded classes; and finally forced the passage of a bill requiring a literacy test.

1027

over repeated presidential vetoes. Cleveland had vetoed a literacy test in 1897; a n d so had T a f t in 1913, and Wilson once in 1915 and again in 1917. This was the last stand on the part of the executive; for in May, 1917, a new immigration bill, incorporating the literacy-test provision, was passed over Wilson's veto. In addition, more groups were placed on the excluded list and the head tax was again raised, this time to eight dollars. But the 1917 law, stringent as it was, failed of its purpose, for the fiscal year ending June 30, 1921, saw 800,000 new immigrants entering America. T h e demand for drastic restriction on a selective basis now once more appeared. Congress yielded; and spent a good deal of time during the twenties trying to perfect legislation that would not do too much violence to traditional American notions. The so-called quota system was adopted as the basis for restriction. The first quota law was that of 1921, and was to remain on the statute books for a year. It provided that a system of quotas was to be set up for newly admitted foreign born, under which the total of any particular nationality to be granted admission was not to exceed 3 percent of the number of persons of that same nationality living in the United States in 1910. T h e basis of the system was to be land of birth, not the land of last residence, and it was to apply to all countries except those in the Western Hemisphere. In May, 1922, this Emergency Quota Law was reenacted for another two years. After a good deal of debate, most of it obscure and all of it really unsatisfactory, Congress passed and President Coolidge signed the new Immigration Quota Law of 1924. Here the principle of selection was based upon racial stock. The quota base from July ι, 1924, to June ι, 1927, was to be 2 percent of the foreign born of each nationality resident in the country at the time of the 1890 census. After July 1, 1927, the quota base was to be "that proportion of 150,000 which the number of persons of a given national origin

joï8

T H E GOLDEN NINETEEN TWENTIES

residing in the United States in 1920 bears to the country's total population in 1910." The minimum quota from any one country was to be 100. T h e quota system was to apply to all countries with the exception of Canada, Mexico, and the independent nations of Central and South America. Again there was confusion because of the inability to determine what was the so-called national-origins base of the American population. Hoover asked to be released from the Congressional mandate; Congress refused; with the result that in March, 1929, a set of quotas—admittedly based on guesses—was announced. T h e new system limited the number of quota immigrants to iyo,ooo annually; it was particularly partial to prospective im-

4. DARK

CORNERS

migrants from Great Britain and Northern Ireland; it did not seriously affect the comparative status of arrivals from southern and eastern Europe; but it did lower sharply the quotas for Germany, the Irish Free State, and Scandinavia. By the end of the twenties, therefore, selective immigration had become a reality and the new additions to our population were coming from lands whose racial stocks, or national origins, had been prominent in the settling of America up to the last quarter of the nineteenth century. Thus was ended another epoch in American history: the doors of the United States, as the historic haven of the oppressed in all lands, were swinging shut.

IN THE

UNITED

STATES

It would be false to draw the conclusion cents. Put simply, during the whole decade that Americans lived in smug content as thev farm prices had been sharply deflated; while surveyed their world of the 1920s. There farm costs—necessaries for home and field, were many dark corners in it, end the mortgage debt, taxes—were still high. As a thoughtful were not averse to looking into result, farms were being sold for tax delinthese and calling to the attention of the rest quencies and mortgage defaults; and tenancy the disconcerting and in fact dangerous things was sharply on the increase. In 1880, 25.6 percent of all the farms in the country were they found there. being operated by tenants; in 1930 the proAgriculture. T h e agricultural community portion was 42.4 percent. in the population was in a bad way; indeed, Largely at the basis of the agricultural deit was apparent that, unless government was prepared to subsidize, agriculture had fallen pression lay this simple fact: T h e foreign on permanent hard times. During the whole market for American agricultural wares was of the 1920s, it was depressed: land values contracting and the domestic market did not plunged downward, crop prices dropped, expand. As a result of the war and because and the burden of debt and taxation became so many European countries had become unbearable. In 1919, the total farm income debtor nations, it had become increasingly was 15 billions of dollars; by 1929, it was 12 necessary that they grow their own foodbillions; and by 1932, j billions. In 1919 (with stuffs. In addition, new areas of production, the average for 1909-14 as 100), the prices particularly in connection with wheat, meat paid by farmers for the commodities they products, and cotton, had appeared; and needed stood at 206; the prices they received American agriculture was being compelled, were at 205; making a ratio of prices received therefore, to meet increasingly the growing to prices paid of 99. In other words, the farm competition of the new lands of Canada, dollar was worth 99 cents. But in 1929, it Argentina, Australia, and the Far East. was worth only 89 cents; and in 1932, only 47 Further, the possibilities of increasing do-

INTRODUCTION mestic consumption of agricultural goods, in order to take in the slack, were remote. The following factors may be noted: ( 1 ) Population growth was slowing down. ( 2 ) Profound changes in dietary habits were taking place. (3) Improved methods of heating homes and the growing elimination of the need for hard, physical toil made it possible for men as well as women to dispense with foods with high caloric contents. (4) Cotton was being replaced by rayons and other chemically produced fabrics. (5) Agriculture itself had become more mechanized and efficient—there were, in short, too many farmers. The depressed state of agriculture made the position of the sharecropper in cotton and tobacco in the South pitiable indeed. Here existed a vast rural slum, where living conditions were at a primitive level; low incomes, inadequate sanitation, and poor diets produced a heavy crop of illness and mortality. The sharecroppers were white as well as black; indeed, by the twenties, the whites, driven off their own subsistence farms, were outnumbering the blacks. Said a Congressional committee report about the plight of these poor people: "We find the unwholesome spectacle of men, women and children . . . moving from farm to farm each year. This social erosion not only wears down the fibers of the families themselves; it saps the resources of the entire social order." The Negro. The problem of the Negro continued to trouble the waters. The Negro had begun to move out of the rural South in the 1880s. He had been brought into the cities of the South as an industrial worker, frequently as a strikebreaker, and he continued to exist on the periphery of heavy industry as an unskilled laborer, the last to be hired and the first to be fired. The skilled crafts affiliated with the American Federation of Labor shut their doors to him. His lot was segregation, and his living was a povertystricken one. In 1915-20, the second great Negro migration had taken place, this time into the Northern cities. The Negro came to

1029

work in the new war industries; and again he sometimes appeared as a strikebreaker. The Negro communities of New York, Chicago, Philadelphia, Cleveland, and Detroit expanded greatly and dangerously—dangerously because housing and recreational facilities were inadequate and, because after the war was over, the competition for jobs pitted white worker against black workers. Here, too, segregation appeared, and race tensions now and then reached the breaking point. It was not until the appearance of the CIO that ban to the entrance of Negro labor into unions began to be let down; and it was not until World War II that pressures were beginning to be brought to bear on employers, by federal and state action, to compel creation of equal opportunities for Negro labor in industry. The Ku Klux Kirn. There Were also Ignorance and prejudice to sully the record. The Ku Klux Klan, after sixty years of silence, raised its head once more in the early twenties and under the cloak of secrecy sought to foment racial and religious hatreds by its attacks on Negroes, Catholics, and Jews. The Ku Klux Klan became a great political power in many Southern states and in some Middle Western ones; and it was strong enough to prevent the nomination of Alfred E. Smith for the presidency by the Democratic party in 1924, as we have seen. Fortunately, the leadership was stupid and grasping; and when some of its members assumed public office they engaged in unlawful acts. This made it possible for the law officers to move in, with the result that public exposures shamed many fair-minded persons into leaving the order. By 1925 the Ku Klux Klan was declining. Although there were also other areas in which intolerance appeared, such attitudes were still those of a minority and affected the American way of life— which was uniformly generous and fairminded—only occasionally. The Laissez-Fah e State. Finally, one might mention the passivity of the state. America

1030

T H E GOLDEN N I N E T E E N T W E N T I E S

was wedded to the theory and practice of laissez-faire, more so, in fact, than any other nation. Federal responsibility for distress, unemployment, insecurity, the fluctuations of the business cycle—this was considered outside the proper function of government. Consequently the Federal government lagged far behind the enlightened countries of Europe in social achievement. Nor was government disposed to interfere in the conduct of business as long as employment continued and there was adequate consumption power. How

entrepreneurs deported themselves, as regards their workers and consumers, and what measures investment bankers took to promote securities and maintain markets for them, presumably lay outside of the governmental concern. There was no understanding yet that runaway booms could be as harmful in their effects on the economy and on the morale of the American people as were the ensuing depressions. These were lessons to be learned; and America was to learn them the hard way.

j. THE COURSE OF The Recession of 1921-1922. With the end of World War I, the course of American business climbed to even higher levels than it had reached during the war years themselves. A heavy domestic demand for consumer goods, the revival of commercial and residential construction, the great expansion of foreign trade—these led to a postwar boom. Prices moved up sharply—increasing almost 20 percent in the year and a half from November, 1918, to May, 1920. And profits mounted, corporation net incomes for 1920 exceeding 8.4 billions of dollars. Then recession took place in May, 1920, and it continued for almost a year. In part this was due to the overstocking of inventories by businessmen, and the consequent overexpansion of bank credit. When credit no longer became available and banks began to call in their loans, businessmen sought to liquidate their stocks of goods and material. Foreign purchasing also declined sharply. As prices dropped and corporation profits melted away, commercial failures and unemployment filled the land. When the deflation spent itself— after more than a year of hard times—wholesale prices had fallen almost 40 percent. Prosperity. In the spring of 1922, revival once more was appearing and, except for brief setbacks in 1924 and 1927, it continued and reached impressive proportions up to 1929.

BUSINESS

Unemployment disappeared; real wages went up; corporate profits once more became very large; and the purchasing power of the American people became the wonder of the whole world. The national income by 1929, exceeded more than 83 billions of dollars. The outstanding forces responsible for this unparalleled prosperity may be noted: ( 1 ) Residential, commercial, and industrial construction requirements led to a great building boom which reached its peak in 1925-26. This provided jobs for nearly three millions of construction workers; and also another one and one-half million jobs in the buildingmaterials industries. (2) The great expansion of the automobile industry—in car manufacture and in the allied industries associated with it—had constantly widening effects on employment and profits. (3) New private investment took place in these fields; equally impressive was public investment. New highways, schools, and hospitals were built. (4) There was a vast expansion of the utility industries, particularly in connection with the production of electrical light and power. During the twenties, America's electric power capacity was doubled. (5) Foreign trade revived, thanks to the willingness of the American investor to finance it. That is to say, American tariff laws made it impossible for other peoples to balance imports from the

INTRODUCTION United States with their own exports. But the constant flow of American capital overseas—-invested in foreign securities and properties—paid for European purchases of our automobiles, petroleum, copper products, office appliances, agricultural machinery, and vast quantities of cotton and tobacco. During the five years, 1921-25, American exports every year on an average exceeded imports by 947 millions of dollars; and during the five years 1926-30, by 744 million dollars every year. When the depression set in and foreigners began defaulting on their American dollar bonds, our export trade collapsed. B y limiting imports and exporting capital, we had tried to have our cake and eat it, too; and we had failed. Prices. From 1922 to 1929, wholesale prices remained stationary. Usually, in periods of boom, prices rise; and because they did not do so during the twenties, it was assumed that we were experiencing a "profitless economy." This was obviously an inadequate reading of the situation. ( 1 ) Corporate profits continued great—the greatest in our history. (2) T h e over-all average of wholesale prices concealed sharp price drops in agriculture, cotton textiles, and bituminous coal—none of which enjoyed prosperity. (3) Because productivity was increasing on so great a scale during the decade—and because costs were dropping, therefore—prices should have declined. That they did not do so was evidence of the existence of inflation, instead of the reverse. Indeed, it may be said that from 1927 to the summer of 1929 a profit inflation was occurring. A good deal of the fruits of this last moved into securities speculation, and here prices soared. One may obtain some notion of the inflated value of securities from the downward course they pursued during the depression. On October 1, 1929, the market value of the listed stocks on the N e w York Stock Exchange was 87 billions of dollars; on N o vember ι, 1930, this had shrunk to 55 billions; and on March 1, 1933, to 19 billions.

Credit Expansion. All this fed a constant and extraordinary expansion of credit. Individuals—through installment buying—had no trouble in financing purchases of durable consumer goods—automobiles, furniture, radios, washing machines, vacuum cleaners, refrigerators. A t any given time, the installment debt outstanding was as high as two and one half billions of dollars. N o r was it hard for individuals to acquire equities, bonds, real estate; for all they had to do was pledge such properties to acquire the funds to purchase them. N o r did businessmen and corporations find the processes of going into debt any harder. Companies were refinanced—frequently by the issuance of bonds and preferred stocks— and, with fresh capital, expanded plant and inventories. N e w holding companies and mergers were created, again accompanied by a pyramiding of capital values. Foreign dollar bonds were floated, with great profit to their promoters. This credit inflation in turn encouraged overexpansion of business enterprise and a further inflation of credit took place. Thus the round continued until the balloon had been blown up to dangerous proportions. When it was pricked, the boom collapsed and the prosperity of the twenties vanished. Rather than interfere, the Federal government encouraged the credit inflation. In the summer of 1927, with recession threatening to continue, the Federal Reserve Board stepped in and forced down the money rate. It was committed to a regime of "cheap money." From then on, speculation and company promotions could not be checked— and the cycle continued upward until the crash. The Depression. For those who were prepared to read, danger signals were already appearing early in 1929. T h e great building boom had ended by the fall of 1928; automobile and steel production began dropping off in August, 1929; American oil wells were producing in excess of the market demand

T H E GOLDEN NINETEEN by the same time. The raising of the English money rate to 6% percent and the outward flow of European capital, in October, 1929, were the first indications that the house of cards was sagging. Actual collapse came in the two weeks following October 24, when stock prices tumbled as much as 80 percent below their highs for September, and almost 25 billions of dollars in market values were wiped out. Panic led to recession and recession was prolonged into deepening depression during 1930, 1931, and 1932. Between 1929 and 1932,

6. FOREIGN

RELATIONS

Imperialism. Despite the political isolationism of the period and the adoption of high tariff laws, the American economy was extending its influence more and more into regions beyond its borders. This was due to the fact that the United States had become a great creditor nation; and the investments of its citizens were to be found not only in the Western Hemisphere but increasingly in Europe and Asia as well. In a sense, this tendency might be characterized as imperialistic. A n d yet, on the one hand, it was unlike the older mercantilism of the seventeenth and eighteenth centuries; and, on the other, it differed sharply from the expansive and exploitative programs of European empirebuilding. T h e imperialism of the modern world— the imperialism of colonies, spheres of influence, and protectorates—had these politicaleconomic characteristics: Outposts were necessary in which to establish coaling and naval repair stations and from which to guard vital sea lanes (Gibraltar, Suez, Singapore, and so oil). Overseas establishments were important because of the existence of economic and limited raw materials (as vegetable oils in West Africa, tin in Malaya, rubber in the Netherlands Indies). Into the new colonies, spheres of influence, and protectorates could

TWENTIES

the total physical output of goods was reduced 37 percent; and total labor income 40 percent. In March, 1933 (with the monthly average of 1923-25 as 100), the index of industrial production stood at 60; that of construction at 14; that of factory employment at 61; that of factory payrolls at 38; that of wholesale prices at 60. T h e farmers' purchasing power was reduced 50 percent. There were at least 15,000,000 unemployed persons; and with the unprecedented collapse in prices, the burden of debt had become intolerable.

OF THE

TWENTIES

move

the surplus savings for investment for which opportunities in the mother countries were beginning to dwindle. Into them also could move, not so much surplus populations, but those members of the middle class whose training and skills were not completely absorbed at home—the engineers, business executives, civil servants, and army officers. The modern-day imperialism, unlike the mercantilism of the seventeenth and eighteenth centuries, was not based on a closed system. American capital had just as much chance in Canada as did English capital; and American and English capital were not barred from an independent and sovereign state like Argentina. But in another way the new system was not unlike mercantilism: the colonial establishments were maintained for the benefit of the mother country. That is, standards of living, notably in these regions where there were large native populations (Africa, Asia) were kept at low levels, while the profits of exploitation flowed overseas to the mother country. But this last distinction, however, characterized more particularly the policies of European Powers rather than those of the United States. In fact it was hard to call the United States an imperialist nation in such terms. True, America had expanded south into the Carib-

INTRODUCTION bean and westward into the Pacific Ocean. But its interest in the lands around the Panama Canal was founded largely on military necessity; for penetration into this region by any European Power hostile to the United States threatened American existence. And the same was true of the expansion of the United States into the Pacific. The United States faced on two oceans and needed a powerful fleet to patrol both. Such a fleet in the Pacific required coaling and repair stations, as well as outposts from which hostile movements might be detected. If the United States may be said to have adhered consistently to a single policy in its international relations, certainly since the 1890s, it was this doublebarreled one that called for a defense of the Caribbean and the western Pacific for military rather than for economic reasons. Our Creditor Position. Indeed, while we were becoming a creditor nation during the 1920s, we found less need for exporting capital overseas for profitable investment than was true of the European countries. It has already been pointed out how, in the twenties, new capital formation was taking place in the United States not only as a result of public investment but also because of the great expansion of America's steel, hydroelectric, automobile, and chemical industries. This was not true of the European nations; they had limited natural resources at home, and with built-up plants in the heavy industries they had to export capital or decline. The contrast may be put sharply and simply in these terms: During the 1920s, roughly from one fourth to one third of English savings went out of that country every year for foreign investment. During the same decade, only about one twentieth of American savings every year had to seek foreign outlets. Again, only a small part of American overseas investments went into the backward regions of the world. T o this extent American capital was not exploitative of native populations. Of the 16 billions of dollars of American private investments abroad at the end of

the 1920s, 4 billions were in Canada and y billions were in Europe. W e had only 176 millions invested in China; 166 millions in the Philippine Islands; 87 millions in the Dominican Republic; 28 millions in Haiti; and 13 millions in Nicaragua. Further, American portfolio investments were greater than direct investments. (The term "portfolio investments" means American ownership, without control over policies, of foreign securities of both a public and a private character. The term "direct investments" means American ownership or control over the business policies of foreign factories, mines, branch banks, sales agencies, and the like.) A t the end of the 1920s, of the total of 16 billions of dollars of American private holdings abroad, 7.9 billions were in direct investments and 8.2 billions were in portfolio securities. This was the reverse of the experiences of the European imperialist Powers. The fact is, our large portfolio investments, because most of them were in public securities, helped the national, provincial, and local governments of other lands to raise living standards, rather than the reverse. Foreign health, education, and public-works authorities were able to make use of American funds to maintain their activities. An interesting case in point was that of Germany. At the end of 1930, we had 1.4 billions invested there, of which ι.? billions were in portfolio investments. And finally, there was a touch of adventurism about much of our investing, notably in the years 1923-30. Because of the bull market at home, and a lack of responsibility on the part of some of America's investment banks, unsound foreign loans were floated in the American money market, which the too gullible American investment public took up without careful scrutiny. Americans were persuaded to buy—and they bought willingly —the dollar bonds of Poland, Bolivia, and Italian cities, and the securities of European manipulators and cheats like Krueger, without responsibility or investigation. The serv-

T H E GOLDEN N I N E T E E N T W E N T I E S icing of such securities terminated as soon as the depression set in; and because of such defaults, dollar bonds were bought back at heavy discounts during the early 1930s. Americans therefore lost heavily as a result of these operations. It has already been said that the United States emerged a creditor nation as a result of World War I. How significantly we advanced along these lines may be noted from the following summary figures: On December 31, 1919, American investments overseas totaled 7 billions of dollars; on the other hand, European investments in the United States came to 4 billions; and this left a net balance in our favor of 3 billions. On December 31, 1929, American investments overseas came to 17 billions of dollars; European investments in the United States totaled 9 billions; and this left a net balance in favor of the United States of 8 billions. America as a World Economic Power. These facts are of the utmost significance to an understanding of America's world position: such great capital operations overseas were not an ephemeral phenomenon which grew out of the unprecedented prosperity of the twenties. This had become a permanent characteristic of the American economy; the United States was one of the great creditor nations of the world. The depression beginning in 1930 affected our position only in detail. And at the end of World War II, virtually all nations of the earth looked to the United States for succor, turning to our savings for credits so that they could restore and advance their industrial processes. If we used our financial strength wisely—demanding that in exchange the channels of world trade be kept open freely and raw materials made accessible to all; if we insisted that such credits be used constructively for new transportation facilities, hydroelectric developments, and heavy industry installations, then our capital would be one of the most beneficent forces in the world. For standards of living every-

where would be raised, and the universal fears of want and insecurity would be routed. Naval Limitation. All this was occurring in the twenties without significant public guidance. Where, however, public policy intervened in international relations, it blundered seriously. There was an air of unreality about the maneuvers of the 1920s. Of the League of Nations, the United States had formally washed its hands; certainly the problems of Europe—outside of the reparations question—Americans would not touch with a ten-foot pole. The question of European security, the danger of a rearmed and once again powerful Germany—these problems we would not face, and therefore they were banished from our consciousness. On the other hand, we were ready to take the lead in pushing a world program of naval disarmament. For us to disarm under an international authority, with police power—an authority, incidentally, in which we were participating—would have been one thing; for us to disarm in a world where fierce national ambitions and imperialist rivalries once more were raising their heads was another thing and nothing less than quixotic. These were the horns of the unfortunate dilemma upon which the United States was plunged as a result of the policies of the 1920s. In a sense, our predicament grew out of the fiscal policies of the Secretary of the Treasury, Andrew Mellon. The unbalanced war budgets, the mounting public debt, and the heavy taxes on personal and corporate incomes were regarded with distaste by the Republican administrations. To return to a peacetime basis completely and at once, notably to reduce the cost of government (even if this meant the sacrifice of our naval establishment!) was presumably the most important requirement of a sound national economy. Retrenchment became almost an obsession in Washington—and in the processes we gave up voluntarily that weapon which, had it existed, might have led aggressor and

INTRODUCTION would-be aggressor nations to take second thought. Ironically enough, too, had the Treasury been less willing to eliminate so quickly the surtaxes on incomes, this fiscal policy might have served as a brake on the runaway securities inflation that took place in the second half of the decade. The Washington Conference. Twice, at the Washington Conference of 1921-22 and at the London Conference of 1930, we took the lead and cut our naval forces—in the interests of world peace. There was to be no peace, as it turned out; the only real result was that Japan lost all fear of an American threat in the Pacific and went about laying plans for the establishment of a Japanese hegemony over the South Seas. B y the naval agreements that emerged from the Washington Conference, the United States reduced its capital-ships establishment so sharply that we were incapable of maintaining a two-ocean navy and, therefore, no longer had the strength to exercise an effective and offensive striking power in the Pacific. Also, the United States pledged itself to the maintenance of the status quo as far as fortifications and naval bases in the Pacific were concerned. In other words, the long line of American outposts from the Aleutians to the Philippines was to lie undefended. So of course—or presumably —were those islands, once the possession of Germany, which Japan now held as the mandatory power under the League of Nations. Subsequent events were to reveal that the Japanese had not the slightest intention of carrying out their pledge in good faith. Chinese Sovereignty. Gestures were also made in the direction of securing the maintenance of the balance of power in the Pacific and the sovereignty of China. At the Washington Conference, a so-called Four-Power Treaty (the participants being the United States, Great Britain, Japan, and France) was signed whose purpose it was to respect mutually the rights of the signatories in relation to their insular possessions and dominions in

1035

the Pacific. T h e Nine-Power Treaty (in which the Great Powers were joined by other nations having interests in the Far East) guaranteed the territorial integrity of China with the continued recognition of the Open Door principle. Another agreement among the nine Powers called for the establishment of the principle of China's control over her own tariff and the surrender of extraterritoriality. W e made this surrender in 1942 and thus recognized the sovereignty of China without reservation. Japan was the only gainer. Despite its inadequate resources, it now no longer had to fear the threat of an American capital-ship race, particularly for the control of the Pacific. Japanese naval bases and stations were safe too from American inquisitive eyes; for we were not participating in the mandate machinery. Japan was assured against American fortifications of the Aleutians and Guam. And because destroyers and submarines were not affected by the treaty limitations, Japan could go ahead and build these warships to her heart's content. She did so; while we made no effort to match her new construction. And as for China, Japanese designs were already hatched to overawe that nation. The London Conference. In 1930, at the London Conference, the same road of naval disarmament was followed. America permitted the Japanese to build up to our power in submarines; we gave them greater light cruiser strength, establishing their supremacy in the western Pacific; we renewed our pledges about our Pacific naval bases. W e then turned around and yielded before the pressure of England. W e limited heavy cruiser construction and consented to build smaller cruisers armed with lower-calibered guns. And we included a so-called Escalator Clause in the treaty which reserved to Great Britain the right to increase its cruiser fleet to two-power standing. Finally, the capital-ship construction holiday, which had been agreed upon at Washington, was to be continued until the

T H E GOLDEN NINETEEN TWENTIES end of 1936. In other words, our State Department had not only surrendered any chance of achieving supremacy in the Pacific, but it had also given up any hope of maintaining it In the Atlantic. Thus the comedy of disarmament was played out to its ironic conclusion; and we had to wait a long time after Japanese aggression had broken out before we were in a position to challenge her pretentions. The Postwar Debt Settlement. Operating outside of the framework of the League, the United States sought to effect another set of agreements—those having to do with the interallied debts. During the pre-armistice and post-armistice periods, the United States had extended, in cash and supplies, credits totaling 10.4 billions of dollars to her allies in World War I. On the other hand, in 1921, the Reparations Commission under the Treaty of Versailles had fixed German indebtedness to the allied nations at 33 billions of dollars. Neither of these accounts, it became quickly apparent, could be settled in full; and it was also more and more obvious that debts and reparations had to be linked together. If the Germans paid reparations, our interallied debtors would pay us. Thus, we had to become broker and banker at one and the same time without having any power over the economic policy of the vanquished Germany. It came down to this: T o collect on the interallied debts, we had to help Germany pay on the reparations account, since her creditors balked at accepting goods. We, therefore, as private bankers, extended loans to Germany. With part of these loans, Germany paid to England, France, Belgium, and Italy; and they paid to us. With another part, Germany maintained a spurious peacetime army and built up her civil aviation industry. T o get some of our wartime loans back, we ended by permitting Germany to rearm and to menace once more the European peace settlement. It was along these strange paths that the isolationist policy and the economic program of the Harding-Coolidge-

Hoover administrations took the United States during the 1920s. Twice—the first time in 1924, as a result of the Dawes Plan; and the second time in 1929, as a result of the Young Plan—the United States helped in the redevising and the cutting down of the reparations bill. But the depression had already set in when the Young Plan was put into effect; and in 1931, President Hoover was compelled to reexamine the problem in all its aspects. The result was the announcement of the so-called Hoover Moratorium, under which neither reparation payments nor interallied debts were to be paid for a whole year. Now and for the first time, Washington had taken official cognizance of what everyone knew had existed: that the two were sides of the same shield. In any case, the Hoover Moratorium continued and neither of the two sets of payments to any measurable extent was ever resumed. What did we get for our pains? Nothing; except perhaps the ill will of the European peoples, who were resentful of our withdrawal into isolationism end of our effort to collect the bill on what had been considered a common war effort. The Kellogg-Briand Pact. The United States refused to assume any responsibility for the maintenance of peace through an international economic and military machinery. This did not prevent us from engaging in harmless gestures. Along with France, the United States initiated a program for outlawing war—without making any provision for checking or punishing aggression. This was the so-called Kellogg-Briand Pact of 1928. All this pact did was to make a number of solemn declarations. Article I outlawed war "as an instrument of national policy." Article II pledged the signatories to the settlement of all disputes, of whatever nature, by pacific means. And that was all. Under the pact, no nation sought to reduce armaments; and in three years, in 1931, the pact was openly flouted when Japan invaded Manchuria, All these earnest labors on the part of Washing-

INTRODUCTION ton simply ended by destroying American effectiveness when aggression appeared. The United States and Latin America. In the Western Hemisphere, American achievement was more real. W e came to a fair understanding with Mexico; we repudiated the Roosevelt Corollary of the Monroe Doctrine; we indicated our willingness to surrender the dubious right of intervention; and we began that Good Neighbor policy which the 1930s were to see so happily extended. Mexico. T h e Mexican government had gone ahead to implement the mandates of the Constitution of 1917 by passing petroleum and land laws in 1925. These seemed to threaten seriously American property rights; and Secretary of State Kellogg protested against the laws. However, the oil and land statutes were put into effect by Mexico. The time had now come for a clarification of all the disagreements and misunderstandings with Mexico. In October, 1927, Dwight W. Morrow, partner in J . P. Morgan and Company and personal friend of President Coolidge, was sent as the American ambassador to Mexico City. Morrow was tactful and genuinely friendly, and he carefully cultivated the good will of the Mexican people. The Mexican government was appreciative and at once began to make sweeping concessions. The oil statute was liberalized and assurances were given that the Mexican courts were ready to protect American property rights. In 1929, the Mexican government, which for the preceding three years had been carrying on a heated controversy with the Catholic Church and threatening to seize all church properties and secularize education, adjusted this difficulty, too, on the basis of a compromise. And in 1930, the Mexican churches were once again opened to worshipers. By this step, American Catholics were conciliated and no longer demanded intervention on the part of the United States. Caribbean Policy. In the twenties as well, the United States was clearing out all those

dark corners in the Caribbean which thè interventionist policies of Theodore Roosevelt, William Howard T a f t , and Woodrow Wilson had permitted to appear, Our marines were withdrawn from the Dominican Republic in 1924, and from Haiti in 1930; and our control over the internal affairs of Nicaragua terminated in 1933. Also, American commissioners committed the United States to a policy of nonintervention in the "internal or external affairs of other American states." Following this assurance, we recognized the Argentine, Brazilian, Bolivian, and Peruvian revolutionary governments of 1930. Only one exception was made and that was in the case of the Central American countries; and here we were agreeing with these nations themselves, on the basis of a convention drawn up in 1923, when they had pledged themselves mutually not to recognize any government in the region which had seized political control by a coup d'état. Repudiation of the Roosevelt Corollary. It has been said that our Caribbean policy had been based largely upon the need for safeguarding the seaway approaches to the Panama Canal. But, from the middle twenties on, even this policy was in process of liquidation: partly because Washington accepted the idea that European Powers no longer were threatening American security in the region, partly, because of the need for continuing to gain the good will of Latin American peoples. T h e most important step taken in this connection was the repudiation of the Roosevelt Corollary of the Monroe Doctrine. That statement had made the United States stand in the role of guarantor for the nations of the Western Hemisphere—that they would preserve the peace, pay their debts, and meet their financial obligations to European countries. In March, 1930, the State Department made public a memorandum on the Monroe Doctrine, written in 1928 by J . Reuben Clark, át that time Undersecretary of State. In this document the Monroe Doctrine was rede-

1038

T H E GOLDEN NINETEEN TWENTIES

fined, this time without those aggressive overtones which had been read into it by Theodore Roosevelt and his successors. The Clark memorandum declared that the Doctrine did not concern itself with purely inter-American relations; it stated a case of the United States versus Europe, and not of the United States versus Latin America. Indeed, Clark went on to say: "So far as Latin America is concerned, the Doctrine is now, and always has been, not an instrument of violence and oppression, but an unbought, freely bestowed and a wholly effective guaranty of their freedom, inde-

pendence, and territorial integrity against the imperialistic designs of Europe." These developments were positive tokens of good will and were a harbinger of the time when Latin American suspicions of "Yankee imperialism" would largely be dissipated. The policy inaugurated by Secretaries Kellogg and Stimson was continued by Secretary Cordell Hull with the active support of President Franklin D. Roosevelt. At least, the beginnings of the Good Neighbor policy emerged out of the ineptitudes and blunderings of American international relations in the 1920s.

j

T H E AMERICAN

MIND

il..

WESLEY

C.

MITCHELL

P R I C E S SOARED after the removal of wartime controls in 1919, and the United States presumably was ready to return to "normalcy." W h a t actually occurred was a sharp inflation and then a sudden collapse: prices dropped badly in 1 9 2 1 ; the bottom fell out of the grain market; the bubble of high farm-land values burst and brought many farmers to ruin. Urban values sagged in the same fashion: peace ended the w a r demand f o r labor and munitions; wages fell; and the returning veterans added to the labor supply. Unemployment swelled so fast the estimates of j,000,000 jobless went unchallenged.

President Harding, or rather his Secretary of Commerce, Herbert Hoover, called a Conference on Unemployment. The conference met, appointed a committee of experts to collect statistics, and authorized the printing of a long report considering many phases of the issue, among them the nature and effects of the business cycle. T h a t study was conducted by one of the country's foremost academic authorities on the problem, Wesley Clair Mitchell ( 1 8 7 4 ), professor of economics at Columbia Univer-

sity, and it is his description of the business cycle and its human consequences which opens the economic history of a decade that was to close with the crash of 1939. Professor Mitchell had published his first classic statement on the four phases of the business c y c l e in 1 9 1 3 ; here he reformulates his theory in general terms. T h e conference report was published in 1923, when the depression was already over. Agricultural prices remained distressingly l o w ; but expansion in automobiles and the development of a new industry, radio broadcasting, helped blunt the edge of unemployment. T h e great boom of the later nineteen twenties was in the making, and f e w heeded the warnings of the experts that unless government and business took proper measures, revival and prosperity would inevitably be followed b y crisis and depression. The selection reprinted here is from The Report of a Committee of the President's Conference on Unemployment: Business Cycles and Unemployment (2 vols., N e w Y o r k , 1 9 2 3 ) , and is published b y permission of M c G r a w Hill Book Co., Inc.

Business Cycles BY

WESLEY

GRF.AT M A S S of the unemployed in periods like that which led President Harding to call the Conference on Unemployment are workers who have been "laid off" because of business depression. The reason why millions of men lose their jobs at such times is that employers are losing money. Hence it is best to begin a study of methods of stabilizing employment by looking into the processes which every few years throw business into confusion. THE

C.

MITCHELL

I . T H E N A T U R E OF B U S I N E S S

CYCLES

Fifteen times within the past one hundred and ten years, American business has passed through a "crisis." The list of crisis years (1812, 1818, 1825, 1837, 1847, i8j7, 1873, 1884, 1890, 1893, 1903, 1907, 1910, 1913, 1920) shows that the periods between successive crises have varied considerably in length. Further, no two crises have been precisely alike and the differences between some crises have

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T H E GOLDEN NINETEEN

TWENTIES

been more conspicuous than the similarities. It is not surprising, therefore, that business men long thought of crises as "abnormal" events brought on b y some foolish blunder made by the public or the government. On this view each crisis has a special cause which is often summed up by the newspapers in a picturesque phrase "the J a y Cooke panic" of 1873, "the radroad panic" of 1884, "the Cleveland panic" of 1893, "the rich man's panic" of 1903, "the Roosevelt panic" of 1907.

politics, changes in monetary and banking systems, international relations, the making of war or of peace, the discovery of new industrial methods or resources, and a thousand other matters all affect the prospects of profits favorably or adversely and therefore tend to quicken or to slacken the pace of business. T h e fact that the rhythm of business activity can be traced in the net resultants produced b y these many factors argues that it is one of the most constantly acting, and probably one of the most powerful, factors among thefn. . . .

Longer experience, wider knowledge of business in other countries, and better statistical data have gradually discredited the view that crises are "abnormal" events, each due to a special cause. T h e modern view is that crises are but one feature of recurrent "business cycles." Instead of a "normal" state of business interrupted by occasional crises, men look for a continually changing state of business—continually changing in a fairly regular way. A crisis is expected to be followed by a depression, the depression by a revival, the revival b y prosperity, and prosperity by a new crisis. Cycles of this sort can be traced for at least one century in America, perhaps for two centuries in the Netherlands, England, and France, and for shorter periods in Austria, Germany, Italy, Spain, and the Scandinavian countries. Within a generation of two similar cycles have begun to run theii courses in Canada and Australia, South America, Russia, British India, and Japan.

Even when the problem is simplified in this way, it remains exceedingly complex. T o keep from getting lost in a maze of complications, it is necessary to follow constantly the chief clue to business transactions. E v e r y business establishment is supposed to aim primarily at making money. When the prospects of profits improve, business becomes more active. W h e n these prospects grow darker, business becomes dull. Everything from rainfall to politics which affects business exerts its influence by affecting this crucial factor—the prospects of profits. T h e profits clue will not only prevent one from going astray, but will also enable one to thread the business maze slowly, if he chooses, taking time to examine all details, or to traverse the maze rapidly with an eye only for the conspicuous features. Needless to say, in this chapter we shall have to move rapidly.

A t present it is less likely that the existence of business cycles will be denied than that their regularity will be exaggerated. In fact, successive cycles d i f f e r not only in length, but also in violence, and in the relative prominence of their various manifestations. Sometimes the crisis is a mild recession of business activity as in 191 o and 1 9 1 3 ; sometimes it degenerates into a panic as in 1873, 1893, and 1907. Sometimes the depression is interrupted b y an abortive revival as in 1895, sometimes it is intensified b y financial pressure as in 1896 and 1914. Sometimes the depression is brief and severe as in 1908, sometimes it is brief and mild as in 1 9 1 1 , sometimes it is both long and severe as in 1 8 7 4 - 1 8 7 8 . R e v i v a l s usually develop into fullfledged prosperity, but there are exceptions like that of 1895. Prosperity may reach a high pitch as In 1906-1907 and 1 9 1 6 - 1 9 1 7 , or may remain moderate until overtaken b y a mild crisis as in 1 9 1 3 , or b y a severe panic as in 1893.

Since business cycles run an unceasing round, eacli cycle growing out of its predecessor and merging into its successor, our analysis can start with any phase of the c y c l e we choose. W i t h whatever phase of the c y c l e we start, w e shall have to plunge into the middle of things, taking the business situation as it then stands f o r granted. But once this start has been made, the course of the subsequent discussion is fixed b y the succession of phases through which the c y c l e passes. B y following these phases around the full c y c l e w e shall come back to the starting point and end the discussion by accounting f o r the situation of business which we took f o r granted at the beginning. W i t h full liberty of choice, it is well to start with the phase of the c y c l e through which A m e r ican business is passing at present—the phase of revival after a depression. T h e first task will be to see how such a revival gathers momentum and produces prosperity. T h e n in order will come a discussion of how prosperity produces conditions which lead to crises, h o w crises run out into depressions, and finally h o w depressions after a time produce conditions which lead to new revivals. T h i s whole analysis will be a brief account of

T h e s e differences among business cycles arise f r o m the f a c t that the business situation at any given moment is the net resultant of a complex of f o r c e s among w h i c h the rhythm of business activity is o n l y one. H a r v e s t conditions, domestic

II. PLAN OF DISCUSSION

THE AMERICAN MIND the cycle in general business. But it is important to note that different industries are affected by business cycles in different ways. Some industries, for example, are hit early and hit hard by a decline in business activity, while other industries are affected but slightly. This aspect of the subject has received scant attention from investigators so far, and it cannot be adequately treated until the various industries have collected far more systematic records of their changing fortunes than are now available outside a narrow field. But with the cooperation of trade associations and certain business men we have collected some data that show how important and how promising is further work along similar lines. This material concerning the effect of business cycles upon particular industries will be presented in the next chapter after the cycle in general business has been traced. III. REVIVALS AND THE C U M U L A T I O N OF PROSPERITY

A period of depression produces after a time certain conditions which favor an increase of business activity. Among these conditions are a level of prices low in comparison with the prices of prosperous times, drastic reductions in the cost of doing business, narrow margins of profit, ample bank reserves, and a conservative policy in capitalizing business enterprises and in granting credits. These conditions are accompanied sooner or later by an increase in the physical volume of purchases. When a depression begins, business enterprises of most sorts have in stock or on order liberal supplies of merchandise. During the earlier months of dullness they fill such orders as they can get mainly from these supplies already on hand, and in turn they buy or manufacture new supplies but sparingly. Similarly, families and business concerns at the end of a period of prosperity usually have a liberal stock of clothing, household furnishings, and equipment. For a while they buy little except the perishable goods which must be continuously consumed, like food and transportation. But after depression has lasted for months, the semi-durable goods wear out and must be replaced or repaired. As that time comes there is a gradual increase of buying, and as the seller's stocks are gradually reduced, there is also a slow increase of manufacturing. Experience indicates that, once begun, a recovery of this sort tends to grow cumulatively. An increase in the amount of business that a merchant gets will make him a little readier to renew his shabby equipment and order merchandise in advance of immediate needs. An increase in the number of men employed by factories will lead to larger family purchases and so to mòre manu-

facturing. T h e improving state of trade will produce a more cheerful state of mind among business men, and the more cheerful state of mind will give fresh impetus to the improvement in trade. It is only a question of time when such an increase in the volume of business will turn dullness into activity. Sometimes the change is accelerated by some propitious event arising from other than business sources, for example, good harvests, or is retarded by some influence, such as political uncertainties. Left to itself, the transformation proceeds slowly but surely. While the price level is often sagging slowly when a revival begins, the cumulative expansion in the physical volume of trade presently stops the fall and starts a rise. For, when enterprises have in sight as much business as they can handle with their existing facilities of standard efficiency, they stand out for higher pfices on additional orders. This policy prevails even in the most keenly competitive trades, because additional orders can be executed only by breaking in new hinds, starting old machinery, buying new equipment, or making some other change which involves increased expense. The expectation of its coming hastens the advance. Buyers are anxious to secure or to contract for large supplies while the low level of quotations continues, and the first definite signs of an upward trend of quotations brings out a sudden rush of orders. Like the increase in the physical volume óf business, the rise of prices spreads rapidly; for every advance of quotations puts pressure upon someone to recoup himself by making a compensatory advance in the prices of what he has to sell. The resulting changes in prices are far from even, not only as between different commodities, but also as between different parts of the system of prices. In most but not all cases, retail prices lag behind wholesale, the prices of staple consumers' behind the prices of staple producers' goods, and the prices of finished products behind the prices of raw materials. Among raw materials, the prices of mineral products reflect the changed business conditions more regularly than do the prices of raw animal, farm, or fórest products. Wages rise sometimes more promptly, but nearly always in less degree than wholesale prices; discount rates rise sometimes more slowly than commodities and sometimes more rapidly; interest rates on long loans move sluggishly in the early stages of revival, while the prices of stocks—particularly of common stocks—generally precede and exceed commodity prices on the rise. T h e causes of these differences in the promptness and the energy With which various classes of prices respond to the stim-

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T H E GOLDEN NINETEEN

alus of business activity are found partly in differences of organization among the markets for commodities, labor, loans, and securities; partly in the technical circumstances affecting the relative demand for and supply of these several classes of goods; and partly in the adjusting of selling prices to changes in the aggregate of buying prices which a business enterprise pays, rather than to changes in the prices of the particular goods bought for resale. In the great majority of enterprises, larger profits result from these divergent price fluctuations couplcd with the greater physical volume of sales. For, while the prices of raw materials and of wares bought for resale usually, and the prices of bank loans often, rise faster than selling prices, the prices of labor lag far behind, and the prices which make up overhead costs are mainly stereotyped for a time by old agreements regarding salaries, leases, and bonds. This increase of profits, combined with the prevalence of business optimism, leads to a marked expansion of investments. Of course the heavy orders for machinery, the large contracts for new construction, etc., which result, swell still further the physical volume of business and render yet stronger the forces which are driving prices upward. Indeed, the salient characteristic of this phase of the business cycle is the cumulative working of the various processes which are converting a revival of trade into intense prosperity. Not only does every increase in the physical volume of trade cause other increases, every convert to optimism make new converts, and every advance of prices furnish an incentive for fresh advances, but the growth of trade helps to spread optimism and to raise prices, while optimism and rising prices both support each other and stimulate the growth of trade. Finally, as has just been said, the changes going forward in these three factors swell profits and encourage investments, while high profits and heavy investments react by augmenting trade justifying optimism, and raising prices. I V . How PROSPERITY BREEDS A CRISIS While the processes just sketched work cumulatively for a time to enhance prosperity, they also cause a slow accumulation of stresses within the balanced system of business—stresses which ultimately undermine the conditions upon which prosperity rests. Among these stresses is the gradual increase in the costs of doing business. T h e decline in overhead costs per unit of output ceases when enterprises have once secured all the business they can

TWENTIES

handle with their standard equipment, and a slow increase of these costs begins when the expiration of old contracts makes necessary renewals at the high rates of interest, rent, and salaries which prevail in prosperity. Meanwhile the operating costs rise at a relatively rapid rate. Equipment which is antiquated and plants which are ill located or otherwise work at some disadvantage are brought again into operation. The price of labor rises, not only because the standard rates of wages go up, but also because of the prevalence of higher pay for overtime. More serious still is the fact that the efficiency of labor declines, because overtime brings weariness, because of the employment of "undesirables," and because crews cannot be driven at top speed when jobs are more numerous than men to fill them. The prices of raw materials continue to rise faster on the average than the selling prices of products. Finally, the numerous small wastes, incident to the conduct of business enterprises, creep up when managers are hurried by a press of orders demanding prompt delivery. A second stress is the accumulating tension of the investment and money markets. T h e supply of funds available at the old rates of interest for the purchase of bonds, for lending on mortgages, and the like, fails to keep pace with the rapidly swelling demand. It becomes difficult to negotiate new issues of securities except on onerous terms, and men of affairs complain of the "scarcity of capital." Nor does the supply of bank loans grow fast enough to keep up with the demand. For the supply is limited by the reserves which bankers hold against their expanding liabilities. Full employment and active retail trade cause such a large amount of money to remain suspended in active circulation that the cash left in the banks increases rather slowly, even when the gold supply is rising most rapidly. On the other hand, the demand for bank loans grows not only with the physical volume of trade, but also with the rise of prices, and with the desire of men of affairs to use their own funds for controlling as many business ventures as possible. Moreover, this demand is relatively inelastic, since many borrowers think they can pay high rates of discount for a few months and still make profits on their turnover, and since the corporations which are unwilling to sell long-time bonds at the hard terms which have come to prevail try to raise part of the funds they require by discounting notes running only a few years. Tension in the bond and money markets is unfavorable to the continuance of prosperity, not only because high rates of interest reduce the prospective margins of profit, but also because they check the expansion in the volume of trade

T H E AMERICAN MIND

1043

out of which prosperity developed. Many pro- even though the demand for the finished product jected ventures are relinquished or postponed, JS still growing. The total demand for [equipment] either because borrowers conclude that the in- tends to vary more sharply than the demand for terest would absorb too much of their profits, or finished products. . . . The maximum and minibecause lenders refuse to extend their commit- mum points in the demand for [equipment] tend to precede the maximum and minimum points in ments farther. The credit expansion, which is one of the most the demand for the finished products, the effect regular concomitants of an intense boom, gives an being that the change may appear to precede its appearance of enhanced prosperity to business. own cause. But this appearance is delusive. For when the industrial army is already working its equipment at When we add to the check in the orders for full capacity, further borrowings by men who new equipment arising from any slackening in wish to increase their own businesses cannot in- the increase of demand for products, the further crease appreciably the total output of goods. The check which arises from stringency in the bond borrowers bid up still higher the prices of com- market and the high cost of construction, we have modities and services, and so cause a further ex- no difficulty in understanding why contracts for pansion in the pecuniary volume of trade. But this kind of work become less numerous as the they produce no corresponding increase in the climax of prosperity approaches. Then the steel physical volume of things men can consume. On mills, foundries, machine factories, copper smeltthe contrary, their borrowings augment that mass ers, quarries, lumber mills, cement plants, conof debts, many protected by insufficient margins, struction companies, general contractors, and the which at the first breath of suspicion leads to the like find their orders for future delivery falling demands for liquidation presently to be discussed. off. While for the present they may be working The difficulty of financing new projects inten- at high pressure to complete old contracts within sifies the check which one important group of in- the stipulated time, they face a serious restriction dustries has already begun to suffer from an earlier- of trade in the near future. acting cause. The industries in question are those The imposing fabric of prosperity is built with which produce industrial equipment—tools, ma- a liberal factor of safety; but the larger grows chines, plant—and the materials of which this the structure, the more severe become these inequipment is made, from lumber and cement to ternal stresses. The only effective means of preventing disaster while continuing to build is to copper and steel. The demand for industrial equipment is partly a raise selling prices time after time high enough replacement demand and partly a demand for bet- to offset the encroachments of costs upon profits, terments and extensions. The replacement demand to cancel the advancing rates of interests, and to for equipment doubtless varies with the physical keep producers willing to contract for fresh inquantity of demand for products; since, as a rule, dustrial equipment. the more rapidly machines and rolling stock are But it is impossible to keep selling prices rising run, the more rapidly they wear out. The demand for an indefinite time. In default of other checks for betterments and extensions, on the other hand, the inadequacy of cash reserves would ultimately varies not with the physical quantity of the prod- compel the banks to refuse a further expansion of ucts demanded, but with the fluctuations in this loans upon any terms. But before this stage has been reached, the rise of prices may be stopped by quantity. . . . . . . During depression and early revival the the consequences of its own inevitable inequalities. equipment-building trades get little business except These inequalities become more glaring the higher what is provided by the replacement demand. the general level is forced; after a time they When the demand for products has reached the threaten serious reduction of profits to certain stage where it promises soon to exceed the capacity business enterprises, and the troubles of these vicof existing facilities, however, the equipment tims dissolve that confidence in the security of trades experience a sudden and intense boom. But credits with which the whole towering structure their business falls off again before prosperity has of prosperity has been cemented. reached its maximum, provided the increase in the What, then, are the lines of business in which physical quantity of products slackens before it selling prices cannot be raised sufficiently to prestops. Hence the seeming anomalies pointed out by vent a reduction of profits. There are certain lines J. Maurice Clark: in which selling prices are stereotyped by law, by The demand for equipment may decrease . . . public commissions, by contracts of long terms,

T H E GOLDEN NINETEEN by custom, or by busiitess policy, and in which ilo advance, or but meager advances can be made. There are other lines in which prices are always subject to the incalculable chances of the harvests, and in which the market value of all accumulated stocks of materials and finished goods wavers with the crop reports. There are always some lines in which the recent construction of new equipment has increased the capacity for production faster than the demand for their wares has expanded under the repressing influence of the high prices which must be charged to prevent a reduction of profits. The unwillingness of producers to let fresh contracts threatens loss not only to contracting firms of all sorts, but also to all the enterprises from whom they buy materials and supplies. The high rates of interest not only check the current demand for wares of various kinds, but also clog the effort to maintain prices by keeping large stocks of goods off the market until they can be sold to better advantage! Finally, the very success of other enterprises in raising selling prices fast enough to defend their profits aggravates the difficulties of the men who are in trouble; for to the latter every further rise of prices for products which they buy means a further strain upon their already stretched resources. As prosperity approaches its height, then, a sharp contrast develops between the business prospects of different enterprises. Many, probably the ma j jority, are making more money than at any previous stage of the business cycle. But an important minority, at least, face the prospect of declining profits. The more intense prosperity becomes, the larger grows this threatened group. It is only a question of time when these conditions, bred by prosperity, will force some radical readjustment. Now such a decline of profits threatens worse consequences than the failure to realize expected dividends, for it arouses doubt concerning the security of outstanding credits. Business credit is based primarily upon the capitalized value of present and prospective profits, and the volume of credits outstanding at the zenith of prosperity is adjusted to the great expectations which prevail when the volume of trade is enormous, when prices are high, and when men of affairs are optN mistic. The rise of interest rates has already narrowed the margins of security behind credits by reducing the capitalized value of given profits· When profits themselves begin to waver, the case becomes worse. Cautious creditors fear lest the shrinkage in the market rating of the business en* terprises which owe them money will leave no adequate security for repayment; hence they be 1 gin to refuse renewals of old loans to the enter-

TWENTIES

prises which cannot stave off a decline of profits, and to press for a settlement of outstanding accounts. Thus prosperity ultimately brings on conditions which start a liquidation of the huge credits which it has piled up. And in the course of this liquidation, prosperity merges into crisis. V . CRISES Once begun, the process of liquidation extends very rapidly, partly because most enterprises which are called upon to settle their maturing obligations in turn put similar pressure upon their own debtors, and partly because, despite all efforts to keep secret what is going forward, news presently leaks out and other creditors take alarm. While this financial readjustment is under way, the problem of making profits on current transactions is subordinated to the more vital problem of maintaining solvency. Business managers concentrate their energies upon providing for their outstanding liabilities and upon nursing their financial resources, instead of upon pushing their sales. In consequence, the volume of new orders falls off rapidly; that is, the factors which were already dimming the prospects of profits in certain lines of business are reinforced and extended. Even when the overwhelming majority of enterprises meet the demand for payment with success, the tenor of business developments undergoes a change. Expansion gives place to contraction, though without a violent wrench. Discount rates rise higher than usual, securities and commodities fall in price, and as old orders are completed, working forces are reduced; but there is no epidemic of bankruptcies, no run upon banks, and no spasmodic interruption of the ordinary business processes. At the opposite extreme from crises of this mild order stand the crises which degenerate into panics. When the process of liquidation reaches a weak link in the chain of interlocking credits and the bankruptcy of some conspicuous enterprise spreads unreasoning alarm amortg the business public, then the banks are suddenly forced to meet a double strain—a sharp increase in the demand for loans, and a sharp increase in the demand for repayment of deposits. If the banks prove able to honor both demands without flinching, the alarm quickly subsides. But if, as in 1873, 1893, and 1907, many solvent business men are refused accommodation at any price, and if depositors are refused payment in full, the alarm turns into panic. A restriction of payments by the banks gives rise to a premium upon currency, to the hoarding of

T H E AMERICAN cash, and to the use of various unlawful substitutes f o r money. A refusal bv the banks to expand their loans, still more a policy of contraction, sends interest rates up to three or four times their usual figures, and causes forced suspensions and bankruptcies. Collections fall into arrears, domestic exchange rates are dislocated, workmen are discharged because employers cannot get money for pay-rolls or fear lest they cannot collect pay for goods when delivered, stocks fall to extremely low levels, even the best bonds decline somewhat in price, commodity markets are disorganized by sacrifice sales, and the volume of business is violently contracted. VI. DEPRESSIONS T h e period of severe financial pressure is often followed by the reopening of numerous enterprises whicii had been shut for a time. But this prompt revival of activity is partial and shortlived. It is based chiefly upon the finishing of orders received but not completely executed in the preceding period of prosperity, or upon the effort to work up and market large stocks of materials already on hand or contracted for. It comes to an end as this work is gradually finished, because new orders are not forthcoming in sufficient volume to keep the mills and factories busy. T h e r e follows a period during which depression spreads over the whole field of business and grows more severe. Consumers' demand declines in consequence of wholesale discharges of wage-earners, the gradual exhaustion of past savings, and the reduction of other classes of family incomes. W i t h consumers' demand falls the business demand for raw materials, current supplies, and equipment used in making consumers' goods. Still more severe is the shrinkage of producers' demand for construction work of all kinds, since few individuals or enterprises care to sink money in new business ventures so long as trade remains depressed and the price level is declining. T h e contraction in the physical volume of business which results from these several shrinkages in demand is cumulative, since every reduction of employment causes a reduction of consumers' demand, and every decline in consumers' demand depresses current business demand and discourages investment, thereby causing further discharges of employees and reducing consumers' demand once more. W i t h the contraction in the physical volume of trade goes a fall of prices; for, when current orders are insufficient to employ the existing industrial equipment, competition for what business is to be had becomes keener. This decline spreads through

MIND

the regular commercial channels which connect one enterprise with another, and is cumulative, since every reduction in price facilitates, if it does not force, reductions in other prices, and the latter reductions react in their turn to cause fresh reductions at the starting point. As the rise of prices which accompanies revival, so the fall which accompanies depression is characterized by market differences in degree. W h o l e sale prices usually fall faster than retail, the prices of producers' goods faster than those of consumer's goods, and the prices of raw materials faster than those of manufactured products. T h e prices of raw mineral products follow a more regular course than those of raw forest, farm, or animal products. As compared with the general index numbers of commodity prices at wholesale, index numbers of wages and interest on long-time loans decline in less degree, while index numbers of discount rates and of stocks decline in greater degree. T h e only important group o f prices to rise in the face of depression is that o f high-grade bonds. O f course, the contraction in the physical volume of trade and the fall of prices reduce the margin of present and prospective profits, spread discouragement among business men, and check enterprise. But they also set in motion certain processes of readjustment by which depression is gradually overcome. T h e operating costs of doing business are reduced by the rapid fall in the prices of raw materials and of bank loans, by the increase in the efficiency of labor which comes when employment is scarce and men are anxious to hold their jobs, by closer economy on the part of managers, and by the adoption of improved methods. Overhead costs, also, are reduced by reorganizing enterprises which have actually become or which threaten to become insolvent, by the sale of other enterprises at low figures, by reduction of rentals and refunding of loans, by charging off bad debts and writing down depreciated properties, and by admitting that a recapitalization of business enterprises—corresponding to the lower prices of stocks—has been effected on the basis of lower profits. While these reductions in costs are still being made, the demand for goods ceases to shrink and begins slowly to expand—a change which usually comes after one or two years of depression. A c cumulated stocks left over from prosperity are gradually exhausted, and current consumption requires current production. Clothing, furniture, machinery, and other moderately durable articles which have been used as long as possible are finally discarded and replaced. Population continues to

1046

THE GOLDEN NINETEEN TWENTIES

increase at a fairly uniform rate; the new mouths must be fed and new backs clothed. New tastes appear among consumers and new methods among producers, giving rise to demand for novel products. Most important of all, the investment demand for industrial equipment revives; for, though saving slackens it does not cease, with the cessation of foreclosure sales and corporate reorganizations the opportunities to buy into old enterprises at bargain prices become fewer, capitalists become less timid as the crisis recedes into the past, the low rates of interest on long-term bonds encourage borrowing, the accumulated technical improvements of several years may be utilized, and contracts can be let on most favorable conditions as to cost and prompt execution. Once these various forces have set the physical volume of trade to expanding again, the increase proves cumulative, though for a time the pace of

growth is kept slow by the continued sagging of prices. But while the latter maintains the pressure upon business men and prevents the increased volume of orders from producing a rapid rise of profits, still business prospects become gradually brighter. Old debts have been paid, accumulated stocks of commodities have been absorbed, weak enterprises have been reorganized, the banks are strong—all the clouds upon the financial horizon have disappeared. Everything is ready for a revival of activity, which will begin whenever some fortunate circumstance gives a sudden fillip to demand, or, in the absence of such an event, when the slow growth of the volume of business has filled order books and paved the way for a new rise of prices. Such is the stage of the business cycle with which the analysis began, and, having accounted for its own beginning, the analysis ends.

THE AMERICAN SCENE EDWIN F. GAY called by the President in 1921 when the country was assailed by a sharp postwar depression, gave rise to three national surveys which afford considerable information about the economic conditions out of which grew the great depression of the nineteen thirties. Mention has already been made of the fate of the study of unemployment and the business cycle that was made by the committee appointed by the Conference. The committee's survey of seasonal operations in the construction industry was limited in scope. The third survey, Recent Economic Changes (1929), described in elaborate detail the economic institutions of the America of the Golden Age. T H E C O N F E R E N C E ON U N E M P L O Y M E N T ,

With the information of the experts to guide it, the committee (headed by Herbert Hoover, then Secretary of Commerce, and numbering representatives of industry and labor among its members) proceeded to interpretation. It is the scale and above all the tempo of change that makes the new era distinctive. But the period 1922-29 has been marked not only by unexampled activity but also by lags in certain areas, such as cotton and woolen textiles, coal and staple agriculture. Prices have been stable on the whole, so that the cost of living rose less than wages, thereby assuring the United States of progressively increasing standards of living. At the same time, productivity in both industry and agriculture achieved new heights. With the advance in productivity and real wages, consumption has leaped ahead, justifying the ancient prediction that man's wants and, by implication, the economic machine that existed to satisfy them were capable of indefinite expansion. Food, clothing and shelter have taken a relatively small part of that in-

crease, however; the American people spend a decreasing part of their income on fundamental necessities. Their expenditures have turned to relative luxuries, more attractive clothes, more palatable food, durable consumer goods like radios and automobiles and, finally, to an increasing degree of leisure. As the trends of consumption have altered, the service trades have expanded, absorbing some of the employment slack left by technological advance. Yet, despite great natural resources and the vast opportunities latent in the development of existing industries and the growth of harmonious cooperation among all groups in the nation, the United States must accept and apply the principle of equilibrium. Consequently, the President's Committee warns of the danger in wasted natural resources, the disregard of the common interest by management and labor, selfish pricing policies, and the transfer of money from production to speculation. In the years between 1922 and 1927-28, equilibrium has been well maintained: industrial peace has saved our energies; savings have not, until recently, been diverted to speculation; while study and advertising have helped produce a better balance between production and consumption. Even in the optimistic conclusions of the committee, some misgivings may be seen. The growth of unemployment in time of prosperity is admitted, with the assurance, however, that leisure and the service trades will absorb it in time. The plight of agriculture is described. There are inadequacies in the banking mechanism. But the Committee posted no warnings and flew no danger signals. For Edwin F. Gay (1867-1946), professor of economic history at Harvard and director of

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T H E GOLDEN N I N E T E E N T W E N T I E S

the research staff which made the studies that constitute Recent Economic Changes, the prosperity of the nineteen twenties was not an entirely new phenomenon, however startling it might appear to European observers of the American scene. These observers do not agree about what they see or the reasons for it, but they do not differ about the factors controlling recent American experience: the United States is in possession of the natural resources most needed for industrial development, while her labor supply is still relatively small. Hence, a mobility which promotes optimism, high wages, and a great expansion of mechanization to economize labor and lower the cost of payrolls. Resources, labor, and machinery must be used to supply a large market. The market which the United States offers is huge in area and free of local barriers. High wages, complex machinery, and a broad market have offered a challenge to management. That challenge has been met by the development of business as a profession on the one hand and "welfare capitalism" on the other. And, on all levels of American life, there prevails an energetic hopefulness rather startling to Europeans conditioned to a society whose hierarchical patterns have not yet been completely shattered. None of these factors is novel to the student of American history, Gay observes. Labor has always been scarce, management has long been ingenious, and Americans have been optimistic, energetic, adaptable, and inventive since the first European traveler discovered them. Nor is the present period of advance a novelty.

Gay points to the flourishing decade between 1825 and the crisis of 1837; the years following the discovery of gold in California; the recovery after the depression of 1873-1879, when prosperity reigned from 1879 to 1893, broken only by the minor crises of 1883 and 1886; the years between the Spanish-American War and the crisis of 1907; and even the long economic calm between that date and the first World War. Each of those periods was marked by technological advance, the rise of real wages, and changes in the organization of business as well as in the technical methods of industry. It is not in those respects that the prosperity of the nineteen twenties differs from that of previous periods. There has been a shift toward stability, Gay finds; an increasing reluctance to accept the "rough dislocations" of change; a rising social responsibility; a diffusion of investment into groups which had never before owned securities. Novel, too, are the lack of popular resentment of corporate growth and an "open-mindedness of the public" which has not troubled this period with anything like Jacksonian democracy, Populism, or the "reform" movements of the years preceding the first World War. Recent Economic Changes was ready for the printer early in 1929; the boom ended in October, 1929. The selection here reprinted is from Recent Economic Changes in the United States: Report of the Committee on Recent Economic Changes of the President's Conference on Unemployment (2 vols., New York, 1929), and is published by permission of the McGraw-Hill Book Co., Inc.

Recent Economic Changes BY

EDWIN

INTRODUCTION

a measure of truth in the statement that the perspective of distance is analogous to that of time. T h e foreign observer imports his own preconceptions, and from the nature of his situation is likely to be inaccurate as to details, but he sees things in the mass. H e generalizes on inadequate T H E R E IS

F.

GAY

data, as must the historian, but it is often instructive to see through his eyes. W h a t to the native is negligible matter of daily use and wont is lifted by the intelligent foreigner to the plane of a national characteristic or an important trend of social development. There have been many such travelers in the United States since the beginning of its history, and diverse have been their observa-

THE AMERICAN SCENE tions, but never has the flow of visitors ahd comment been so great as in recent years. Inquirers and writers from many countries, official and unofficial, literary folk and technicians, business men and representatives of labor, have come singly and in groups. During the last six or seven years, books, reports and articles, in many languages, describing, explaining or criticizing the economic and social situation in the United States, have appeared in unparalleled quantity. This has been heralded as the new Discovery of America. Foreign Opinions.—Despite much divergence of opinion among these contemporaneous observers as to causes and conditions, there is marked unanimity as to the fact which is chiefly responsible f o r this extraordinary interest. T h e y agree that óf late there has been an "immense advance in A m e r i c a . " 1 Our visitors are "impressed, everywhere and every day, by the evidences of an ebullient prosperity and a confidence in the f u t u r e . " ! Even a skeptical Australian journalist who begins by doubting the very fact for which all other visitors are seeking the cause, namely the existence of high wages in trie United States, ends by saying that "America has been experiencing a period of unusual industrial prosperity. Millions of people have found their earnings increasing at a more rapid rate than their standard of living." 3 T h e critical German trade-unionists, in their careful report, believe that American' prosperity has within it thè seeds of its later undoing, but they bear witness to the high earnings and effectiveness of the American worker, his mobility and freedom from class antagonism, and above all to the prevalent well-being and optimism of Americans in general. 4 A German industrialist declares that» with an economic supremacy characterized by high wages and machine progress, the United States has become "the first power of the world " 5 T h e consensus of foreign opinion concerning the present great American prosperity is evident to any student of this recent literature. But, though it might be interesting, it would certainly be a difficult and a time-consuming task to trace all the divergences of point of view and the differing degrees of emphasis as to the causes of that prosperity. Some of the travelers have returned home 1 Sir Josiah Stamp, Some Economic Factors in Modern Life, 1929, p. 121. ì Ramsay Muir, American the Qolden, 1927, p. 1. » H. G. Adam, An Australian Looks at America, 1928, pp. 35, 116. 4 Amerikareise deutscher Gewerkschaftsführer, 1926, pp. 29, λ8, 95, 193, i9 8 · 5 Carl Köttgen, Das Wirtschaftliche Amerika, 3rd edition, 1926, p. iii.

1049

to spread the gospel of mass production, of automatic machinery and conveyers. But Fordismus and Rationalisierung, the slogans of these evangelists, have also been acrimoniously criticised. Ramsay Muir asserts, indeed, that "the methods of mass-production have not been introduced, and cannot be introduced, in the greater part even of American industry," but he elsewhere lays stress upon the factors of great natural resources and a great domestic free-trade market which have made mass production possible f o r the United States. England, b y contrast, lives " b y supplying the needs of world-wide markets, infinitely variegated," and must therefore make quality, not quantity, its aim.0 Dr. Heinrich Ludwig complains that his German compatriots have, since the war, studied American industry too superficially. Ford, he declares, is not typical of the new management methods in the United States, and scientific management (Rationalisierung) has been misconceived in Europe as concerned primarily with mechanical equipment. It is not American technique but American psychology which should be studied. Its chief characteristics, he asserts, are optimism tempered b y statistics and experiment; its aim is stabilization; the secret of American success is its study of the market.' America has become the arsenal whence weapons are drawn f o r both sides of embittered argument. It is, f o r instance, to some European protectionists a demonstration of the benefits of a high protective tariff; to other writers it is a proof in its free-trade continental market of the correctness of the commercial principles urged by the laissez-faire economists; 8 and it is also a reinforcing support to the advocates of a European Zoll· Verein. Its high wages are both the cause and the result of its prosperity. 9 T h e labor situation of the United States, 60 puzzling to the foreign workers who are surprised at the friendly working spirit in American labor-relations, 10 furnishes grounds both for attack and defense in respect to trade-union policy. Some observers emphasize American individualism, 11 others our spirit of co-operation, β

Ramsay Muir, op. cit., pp. 73-76, 137. Heinrich Ludwig, Systematische Wirtschaft, Amerikanische Methoden, Deutsche Verhältnisse, 1928, passim. 8 Yves-Guyot, "Les États-Unis d'aujourd'hui," Journal des Economistes, Vol. 87 (1927), p. 15. 8 Exponents, illustrating these contrasting views in the German pamphlet-war, are Tarnovv, President of the German Woodworkers' Union, and the Vereinigung der deutschen Arbeitgeberverbände. 10 See the Daily Mail Trade Union Mission to the United States, 1927. 11 British Official Report, 1927, p. 15. 7

1050

THE GOLDEN NINETEEN TWENTIES

our "unconscious socialism," 1 1 while one economist shrewdly remarks that the pioneer's struggle with the wilderness simultaneously developed both of these apparently incompatible traits. 13 W e are assured that America is a land of contrasts, with great diversity of regions and races, and also that it is the home of a nation remarkable for its uniformity of tastes and its passion for standardization. Its people are massed increasingly in monotonous repetitive machine-labor; yet they show high intelligence and mobility in a free field for ambition. T h e condition of the farmer in the United States is called b y Ramsay Muir one of the "spots on the sun" of the American heaven, and he thinks that in American agriculture, "there seems to be an arrest of development." 1 4 But a German writer, not less observant, works out a coefficient of welfare higher for the United States than f o r Germany on the basis of the fact that while in Germany 43.3 per cent of the gainfully employed are required to feed its population, in the United States 29 per cent suffices to perform the same service. T h e agricultural production per man in the United States, he states, is 2.46 times greater than in Germany. N o t counting tractors and other agricultural machinery which have brought such an accession of power and wealthproduction to the American farmer, in the item of horses alone he finds the number per agriculturist in the United States to be 3.7 times that of G e r many. T o him, agricultural America seems "a blessed country." 1 5 It is needless to enlarge on the numerous clashes in the testimony of the foreign observers. It is more to the point to indicate that, despite their varying origins and predilections, there is a considerable degree of concurrence, although with differing emphasis, regarding certain main factors in the recent economic and social experience of this country. These factors may here be briefly summarized. ι. T h e natural resources of the United States are unrivaled, especially those which are fundamental to modern large-scale industrialism. There is not only a continental width of fertile land, but there exist also marvelous deposits of coal, petroleum, iron and other essential minerals. T h e more critical of the foreign visitors are inclined to stress these bountiful gifts of nature, others weight more 12 Julius Hirsch, Das Amerikanische wunder, 1926, p. 129. 13 Carl Röttgen, op. cit., p. $6. 14 Ramsay Muir, op. cit., pp. 16-19. 15 Carl Röttgen, op. cit., pp. 9-1 j.

Wirtschafts-

heavily the energy and organization which has utilized them. 1 ® 2. In this vast expanse of territory, historically so recently opened to European migration and settlement, labor is relatively scarce and wages are relatively high. T h e situation may be tersely stated, that "because American resources are abundant, they are wasted; because American labor is dear, it is economized." 1 7 In the present undeveloped state of international wage statistics, it is natural that estimates of the higher range of American wages should vary. André Siegfried, in his somewhat impressionistic manner, says they are "often ten times as much as those of even a European," 1 S while the more conservative German trade-unionists put the American wage level at about three times that of Germany and real wages t w o and a half times as high. But the European writers agree that there is in the United States a markedly higher standard of living and that this profoundly influences the American outlook. 1 " 3. In consequence of the juxtaposition of rich resources and an inadequate labor supply, there has resulted a progressive development of laborsupplementing machine equipment, in agriculture, transportation and industry, and also a remarkable utilization of power. T o some, this seems to be the chief explanation of the greater productivity of the American wage earner and hence of his higher standard of living. 20 4. Many observers hold that of even greater importance than the technical progress is the great domestic market, untrammeled by barriers of tariffs, language, or tradition of local or national jealousies. T h e resulting "mass consumption" makes mass production possible and profitable. " I quote once more from Ramsav Muir (op. cit., p. 1 ) : Once these resources were developed " b y means of man-power drawn from Europe and capital largely drawn from England, nothing could prevent America from becoming the most prosperous country in the world . . . This is the main, and the abiding, cause of American prosperity. It cannot be imitated." Julius Hirsch (op. cit., p. 27), does not hesitate to make a numerical ratio between the factors of nature and organization. He ascribes about two-fifths of the greater American productivity to natural resources and threefifths to higher efficicncy. 17 L. Chiozza Money, L'Europe Nouvelle, 1926, V o l . 9, p. 1528. 18 Andre Siegfried, America Comes of Age, 1927, p. 160. 19 Ibid., p. 154. Siegfried asserts that the "enormously higher" standard of living in the United States is "now the chief contrast between the old and new continents." 10 C f . The Economist (London), Vol. 106, p. $22.

THE AMERICAN SCENE The nation-wide market necessitates expanding agencies of distribution which are highly remunerative to their originators and which absorb a growing proportion of the gainfully employed. 2 1 The character of the unified American market frequently leads to foreign comment on its surprising uniformity of demand. T h e American business man, according to a French point of view, "has standardized the individual in order to be better able to standardize manufacture." 2 2 j . T h e problem of correlating abundant resources, expensive labor, and unsurpassed machine equipment, to serve the greatest of markets, has put a high premium on management and organizing capacity. Scientific management in industry and commerce, apparently the resultant of emerging pressures, is thought by many of the foreigners writing on recent economic changes in the United States to be the chief contribution which this country is making to economic welfare and to be the key to its success. It is seen that the American effort is aimed at the "optimum" result, the proper balance of all the many factors in a business enterprise. 23 T h e preoccupation of the old-time manager with wages has given w a y to a concern f o r the manifold elements entering into unit costs. Such far-sighted management is becoming highly specialized; a new profession is entering into the structure of American industry. 6. In order to obtain the effective utilization of the worker's effort and to lower costs, American management has begun more systematically to improve industrial relations. It seeks to reduce the turnover of labor and the friction of labor troubles which disturb the smooth-running mechanism of industry. In a number of the larger concerns departments have been established to study and to deal with this problem, and this new specialization of personnel management has attracted favorable foreign attention. Some observers regard "the achievement of industrial peace between labor, 21

The German trade-unionists remark that advertising, the appropriate tool for modern salesmanship in a wide market, is everywhere, in England, France, Germany and the United States, from 2 per cent to 5 per cent of the total cost of production. The larger absolute amount thus expended in the United States is due nterely to the greater size of the market. But the size a uniformity of this market has led in the United States to more highly developed sales policies. (Amerikareise, p. 66.) 22 Pichot and Fournier, "Communication sur le voyage aux États-Unis," Bulletin de la Chambre de Commerce de Paris, July 7, 1928. 23 See especially the remarks of the German trade unionists, Amerikareise, p. 49.

capital and management" 24 as among the leading causes of American prosperity. But even those who speak in cooler tone agree that a great improvement in industrial relations has been effected. It is generally recognized that there has been a voluntary assumption by employers of heavy social charges in the establishment of benefits of various kinds, and there has continued since the war a considerable interest in plans f o r workers' representation. 25 A corresponding shift in the labor-union attitude has also taken place which differentiates the American labor movement f r o m that found in any other country. T h e new laborunion policy recognizes not the identity but the mutuality of interest between the two parties to the labor contract. This approach to better understanding on both sides is itself a sign of general change in the temper of the industrial community. T h e human aspects of the relationships of management not only with labor, but also with customers, competitors, and the public, are more stressed in word and in practice. T h e r e is a growing sense of social responsibility. 7. A related factor in American economic efficiency is the openmindedness of American management. Many visitors note with appreciation the freedom of access and information which they have found. 2 6 " W h a t is raising the whole standard of management in the United States is the habit among employers of discussing their problems openly among themselves, of comparing the methods of one industry with those of another, and of founding associations f o r research and conference . . . T h e y are not afraid to teach each other or too proud to learn from each other." 27 T h e y are giving increasing support to scientific research and looking with respect upon university training. 8. Emphasis is unanimously laid upon the dominant national trait of optimistic energy, as an underlying element in these various phenomena of American economic activity. T h e individual in America is mobile as to place and calling; he is moving upward. 2 8 H e sometimes appears docile, 24

P. A. Molteno, "The Causes and Extent of American Prosperity," Contemporary Review, August, 1927. 25 One of the best studies of the subject is H. B. Butler's report on industrial Relations in thè United States, International Labor Office, 1927. 26 See, for instance, A. Detoeuf, "Les conditions de production américaine," Revue politique et parlementaire, Vol. 128; Carl Köttgen, op. cit., p. iv. 27 "American Industry and its Significance," Round Table (London), 1926, Vol. 17, pp. 264. 28 On this point, note especially the testimony of the German trade-union report, which was based upon contact with American workers. Amerikareise, p. 9jff.

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THE GOLDEN NINETEEN TWENTIES

but it is because he is tolerant of social inconveniences which his experience tells him are only incidental and temporary. T h e w a y to education and to promotion is wide open; indeed many ladders to advancement are available and their rungs are all intact, so that he may climb who will. W e are told that this is the inheritance of the frontier; in spite of the fact that the agricultural frontier has disappeared, our visitors find still strongly persistent the same characteristic spirit of indomitable hopefulness. . . . A n d so, when w e look back over a century of our own economic history for analogous periods of fairly continuous advance, without too minute regard for the fluctuations of the business cycles, w e find certain groups of years which have points of likeness, and also of unlikeness, to the experience of the United States since 191z. There have been four previous periods of efflorescence. These correspond approximately to increases in contemporaneous economic activity in Western E u rope. T h e first of the four periods of marked acceleration set in about i 8 i j , with the recovery from the great fall of prices which followed the end of the Napoleonic wars, and, although there was one sharp break in 1834, this period of activity culminated in the boom of 1836. Then came the prostrating panic of 1837, the western crisis of 1839, and years of depression. Again, from about 1849 to the panic of 1857, broken b y a mild recession in i 8 j 4 , there were successive years of unprecedented prosperity. Immediately after the Civil W a r there was a time of hectic prosperity and great speculative activity, but with too many disturbing factors to rank the stretch from 1865 to 1879 among the notable periods. But from 1879, through the " f a t eighties," though with recessions, to 1893, w e may find a third remarkable forward movement. From 1898 to the crisis of 1907 there was a fourth long run of prosperity. In this case, the period of severe depression following the crisis was remarkably brief, and the country had several years of undramatic fluctuations before the curtain rose for the tragedy of the Great W a r . T w o of these f o u r m a j o r periods, the second and f o u r t h , w e r e a c c o m p a n i e d b y new gold discoveries and rising price trends; during the first p e r i o d , f r o m 1825 to 1837, prices w e r e gradually falling, and the third, f r o m 1879 to 1893, experienced a m a r k e d and steady d r o p in prices. A l l of them s h o w r e m a r k a b l e advances in the exploitation of the national resources, notably land occupation in the first three periods; in the last three, coal, iron and p e t r o l e u m production at an accelerating rate in a w o r l d comparison, gold and silver

production at a diminishing rate; in the lost two periods the other mineral resources, copper leading, come into greater prominence. W i t h each forward surge the demand f o r labor has grown and immigration has responded. Despite a migration of colossal proportions, such as the world had never known, the demand for labor was nevertheless maintained. Each period saw an increase in real wages, though more lagging and less pronounced than that which w e have recently witnessed. A l l four periods contributed notable inventions and methods for economizing and supplementing human labor. W i t h developing pressure there was a difference in the main direction of technological advance, earlier toward transportation and horse-driven agricultural machinery, later toward industrial equipment and a great extension in the mastery and use of power. T h e Steady growth of the vast domestic market led in each period to inevitable changes in marketing and credit organization; the "orthodox" system of distribution, with its wholesaler, local jobber, and retailer, was clearly under strain in the second period and beginning to break in the third, while new forms and relationships were being established. Each phase of activity is marked b y development of the banking system to meet the demands of rapidly growing industry and commerce; and each concluding phase of crisis, 1 8 3 7 1839, 1857-1860, 1893-1896, 1907, gave the impulse to banking and monetary reforms. T h e pressure of expanding markets and of technological opportunity was necessitating even more conspicuous transformations in factory organization and in magnitude of enterprise. These changes, with the exploitation of natural resources on an everenlarging scale, called into being successive groups of business leaders, oftfen, at each first break into new fields of opportunity, sharp and unscrupulous, ruthless and daring. Beside the great merchants of the earlier period there s w a r m e d the new g r o w t h w h i c h Charles D i c k e n s pilloried, but out of their ranks came the outstanding personalities, organizers of industry and finance, the railroad and lumber " b a r o n s , " the steel " k i n g s , " the meatp a c k i n g and oil magnates of the third p e r i o d , and the leadership, more sobered b y p o w e r and responsibility, of the fourth. Finally, t h r o u g h o u t all the four great waves of advance, and even in the troughs b e t w e e n , there has a l w a y s been felt that u p w a r d movement of f o r c e f u l e n e r g y , of optimistic ambition, w h i c h o u r f o r e i g n observers h a v e so constantly noted. S o rapid a sketch does but faint justice to the m a n y and complicated aspects of o u r e c o n o m i c development, and it can o n l y indicate the a n s w e r ,

THE AMERICAN SCENE if answer be at all possible, to the question of similarity between our present phase and those preceding it. Fuller studies, both qualitative and quantitative not only of business cycles but of longer trends, are required, and there is reason to believe that the interest which these studies are exciting will result in more exact knowledge even of earlier periods where the source material is relatively scanty. But it will serve our present purpose to point out that most of the eight significant features of the existing economic conditions in the United States upon which we have found our foreign visitors in substantial agreement are also characteristic of former major periods of prosperity in our history. T h e fundamental conditions of our existence on this continent have thus far remained substantially unchanged, and the responses have therefore been similar, not so much in external form as in their essential character. Even the successive maladjustments of economic growth show, behind their external dissimilarities, an underlying likeness. W i t h superabundant natural resources, for example, we have always been open to the charge of wastefulness, and this is easily explicable, but with insufficient man power it seems, at first thought, curious that we are now and have ever been wasteful of human life. That we should permit the rate of accident and crime to remain so much higher than in other civilized nations may spring from the reckless forçefulness with which we have attacked the difficulties of expansion. But there was a sign of change in the fundamental conditions of our national life when there emerged the conservation movement for the natural resources, and the slogan "safety first" for human life. Another serious maladjustment has been constantly observable in the extreme to which we have carried the swings of prosperity and business depression, the fierce bursts of speculative activity and the sharp reactions. Again, our environment and its needs may help to explain this feverish pulse-beat; yet here also another slogan, "stability," may be symptomatic of coming fundamental change. It is, furthermore, highly characteristic of all our periods of expansion that the rapidity and vigor of growth of some elements is so great as seriously to unbalance the whole organism. Each previous phase of prosperity has had its flourishing "new" industries, a different group each time, and each period has seen, or failed to see, other suffering members seeking readjustment or reduced to atrophy. W i t h each successive advance, for instance, there has remained a farm problem and agrarian discontent somewhere in the rear. These rough dislocations in

IO53

the past have made us exceptionally prone to scrap machinery and men. But quick adaptation and rapid mutation, perhaps biologically useful, our industrial society is now commencing to regard with more social concern. T h e shiftings of psychological attitude, here indicated, seems to suggest that something distinctly different from our former experience is taking place. T h e chief characteristics of the present economic phase, agreed upon by our numerous visitors from abroad, are, it is true, evolved logically from what has preceded, and we are still finding answers along similar lines to a similarly constructed problem. But there seem now to be differences of degree which approach differences in kind, In this sense we may say that the unprecedented utilization of power and its wide dispersion by automobile and tractor, in which this country leads the way, is a new addition of enormous potentiality to our resources. W i t h the general Increase of wealth, the growth in the number of millionaires has been accompanied by a remarkable rise in the real wages of industrial workers, and a wide diffusion of investments. T h e profession of management is clearly emerging, and there is visible an increasing professional spirit in business, which springs from and entails recognized social responsibilities. T h e "self-policing" of business, with its codes of ethics, has been assisted by the recent development of trade-associations and the increasing influence of research and professional education. T h e strength and stability of our financial structure, both governmental and commercial, is of modern growth. T h e great corporate development of business enterprise, well marked in the fourth period of expansion, has gone on to new heights. It may be creating, as some think, a new type of social organization, but in any case the open-mindedness of the public, and of the state which is its instrument, toward this growing power of business corporations appears to be novel in American history. Here are the beginnings of new answers to the old problem. But more than this. Some of the basic elements of the problem are evidently in process of change. T h e resources of the country, still enormous, are no longer regarded as limitless; the labor of the world is no longer invited freely to exploit them. T h e capital flow has turned outward; private and public interests and responsibilities have a new world-wide scope. These changes must have far-reaching consequences and entail further and more perplexing adjustments. . . .

T H E GOLDEN NINETEEN T W E N T I E S

ROBERT S. LYND AND HELEN A s THE DETACHED OBSERVER o f his o w n t i m e , t h e

"Persian" or "Chinese traveler" of the eighteenth century has been succeeded by the cultural anthropologist. One of the great examples of this form of analysis is Middletown, the work of Robert S. Lynd (1892) of Columbia University and his wife, Helen M. Lynd ( 1896), of Sarah Lawrence College. TTie Lynds proceed by regarding an American city as they might a primitive community. H o w do these people get their living? mate and rear their young? spend their leisure? conduct their religious and associational life? Since an American city is being studied, change is of the essence. Therefore, all these factors must be considered in relation to the city's behavior a generation earlier. A city in the 25-50,000 population range, with 95 percent of its inhabitants of American origin, was chosen by the Lynds for their inquiry. T h e city lay in Midwestern America, was the seat of glass and metal works, and depended on outside areas for both raw materials and markets. In 1895, industry had first appeared significantly in Middletown, a community long settled as a country town. Since then, Middletown has become completely subject to the money economy. Social position and social aim are both conditioned by money, which has come to be an impersonal measure of personal worth. This "extraneous" factor dictates the amount of room a family shall have for living, the education of its children, the recreations it enjoys, the beliefs it maintains and even its awareness of belonging to or being alien from the world in which it lives. T h e Lynds find that people marry earlier than they did in the nineties, for the relative disappearance of the skilled mechanic makes a youth's earnings equal to a man's. On the other hand, the demands of the machine diminish the demand for workers over forty. Mating remains a matter of "romance," guided by parental conviction that it is as easy to fall in love

M.

LYND

with the boss's daughter as with his stenographer; and sex separation in society after marriage is almost as rigid in Middletown as in Polynesia. Child-rearing is a female occupation whether in the home or in institutionalized school life: the father provides money and discipline, mother and teacher everything else. Education is a Middletown fetish, not for its content but because it focuses the hope of one group and the sentiment of the other. T h e Middletown high-school basketball team is regarded with complete seriousness b y Middletown's business-class elders; the high school is the center of social life to the young and, to parents of the working class, it represents the gateway of opportunity. Middletown's adults spend their leisure passively for the most part: they listen to speakers, whom they don't heckle; they read—that is, the women do; they go to the movies or are spectators at sports events. More actively, Middletown adults drive cars and tinker with them; build radios—the radio was still an outlet for craftsmanship in the middle nineteen twenties; play cards, and dance. Casual social contact has all but disappeared. From childhood, social life proceeds on a pair basis; the group friendships of the nineties are gone. Indeed, friendship in general is on the decline. Businessmen have Rotary and similar organizations to give them a sense of "belonging," but the virtual disappearance of the trade unions has closed that satisfaction to the workingman. In religion, Middletown proves the truth of Tocqueville's misgivings about the power of public opinion in a democracy. All demonstration of loss of faith has disappeared before an indifferent conformity molded, particularly among the business class, by concern f o r "what people will say." Middletown churches are divided not by doctrine but by economic and social factors. Middletown ministers are so harried by their duties that the old concept of a "learned ministry" no longer exists. In public

T H E A M E R I C A N SCENE esteem, ministers rank with others who train the young and so are not considered fit company for adult men in their hours of leisure. Yet Middletown believes in the mission of Christianity, the literal truth of the Bible, the divinity of Christ, and the reality of Christian eschatology. The hope of Heaven has genuine emotional value for working-class women; women of the business group are more conforming but less fervent. T o the man of the business class, Middletown is a vital entity, though he allows it to be corruptly governed. As a community, Middletown is marked by deep social cleavages; its Negroes are segregated; Jews and foreigners are unwelcome; and the business and working classes are hostile to each other. The Lynds draw no general conclusions from their accumulation of data, except to point out, in every connection, on what a be-

wildering variety of levels the community contrives to live. From the five hundred odd pages of Middletown, emerges the picture of an energetic community, almost wholly inactive on the personal, artistic, and intellectual levels, technically competent and unaware of the social implications of its competence. It moves in an aura of pressures; reads newspapers and magazines owned outside the community; is won by movements like the Klan; and votes Republican because it knows on which side its bread is buttered. The movies swell the demand for luxury; the high school shows the adolescent how money makes the mare go; the automobile divides the family on one hand and unites it on the other. Thus the middleclass America of the nineteen twenties. The selection here reprinted is from Middletown (New York, 1927) and is published by permission of Harcourt, Brace and Company.

Middletown BY CHAPTER V I I I :

WHY

ROBERT

S.

D o THEY WORK so

LYND HARD?

ONE EMERGES from the offices, stores, and f a c tories of Middletown asking in some bewilderment w h y all the able-bodied men and many of the women devote their best energies for long hours day after day to this driving activity seemingly so foreign to many of the most powerful impulses of human beings. Is all this expenditure of energy necessary to secure food, clothing, shelter, and other things essential to existence? If not, precisely what over and beyond these subsistence necessaries is Middletown getting out of its work? F o r v e r y many of those who get the living f o r Middletown the amount of robust satisfaction they derive from the actual performance of their specific jobs seems, at best, to be slight. Among the business men the kudos accruing to the eminent in getting a living and to some of their minor associates yields a kind of incidental satisfaction; the successful manufacturer even tends today to supplant in local prestige and authority the judge, preacher, and "professor" of thirty-five to f o r t y years ago. But for the working class both any satisfactions inherent in the actual daily doing of the job and the prestige and kudos of the able

AND

HELEN

M.

LYND

worker among his associates would appear to be declining. The demand of the iron man f o r swiftness and endurance rather than training and skill have led to the gradual abandonment of the apprenticemaster craftsman system; one of the cnief characteristics of Middletown life in the nineties, this system is now virtually a thing of the past. T h e master mechanic was the aristocrat among w o r k men of 1890—"one of the noblest of God's creatures," as one of them put it. But even in the nineties machinery was beginning to undermine the monopolistic status of his skill; he was beginning to feel the ground shifting under his feet. T h e State Statistician recorded uneasy protests of men from all over the State. T o d a y all that is left of the four-year apprentice system among 9,000 workers in the manufacturing and mechanical industries is three or f o u r score apprentices scattered through the building and molding trades. "It's 'high speed steel' and specialization and Ford cars that's hit the machinist's union," according to a skilled Middletown worker. " Y o u had to know how to use the old carbon steel to keep it from gettin' hot and spoilin' the edge. But this high speed steel' and this new 'stellte' don't absorb the heat and are harder than carbon steel. Y o u can take a

1056

THE GOLDEN NINETEEN TWENTIES

b o y fresh f r o m the f a r m and in three days he can manage a machine as well as I can, and I've been at it twenty-seven years." W i t h the passing of apprenticeship the line between skilled and unskilled worker has become so blurred as to be in some shops almost nonexistent. T h e superintendent of a leading Middletown machine shop says, "Seventy-five per cent, of our force of 800 men can be taken f r o m farm or high school and trained in a week's time." In the glass plant whose shift in processes is noted in Chapter V I . 84 per cent, of the tool-using personnel, exclusive of foremen, require one month or less of training, another 4 per cent, not more than six months, 6 per cent, a year, and the remaining 6 ier cent, three years. Foundry workers have not ost to the iron man as heavily as machinists, but even here the trend is marked. In Middletown's leading f o u n d r y in the early nineties, 47 per cent, of the workers (including foremen) had three to six years' training. T h i s trained group today is half as great (24 per cent.) and 60 per cent, of all the castings produced are made by a group of newcomers w h o cast with the help of machines and require only a fortnight or so of training. . . . T h e shift f r o m a system in which length of service, craftsmanship, and authority in the shop and social prestige among one's peers tended to go together to one which, in the main, demands little of a worker's personality save rapid, habitual reactions and an ability to submerge himself in the performance of a f e w routinized easily learned movements seems to have wiped out many of the satisfactions that f o r m e r l y accompanied the job. Middletown's shops are full of men of whom it may be said that "there isn't 2 y per cent, of them paying attention to the job." And as they leave the shop in the evening, " T h e work of a modern machine-tender leaves nothing tangible at the end of the day's work to which he can point with pride and say, Ί did that—it is the result of my own skill and m y own effort.' " T h e intangible income accruing to many of the business group derives in part from such new devices as membership in Rotary and other civic clubs, the Chamber of Commerce, Business and Professional W o m e n ' s Club, and the various professional clubs. But among the working class not only have no such new groups arisen to reward and bolster their w o r k , but the once powerful trade unions have f o r the most part either disappeared or persist in attenuated form. B y the early nineties Middletown had become "one of the best organized cities in the United States." B y 1897, thirty "locals" totaling 3,766 members were affiliated with the A . F. of L . and

f

the city vied with Detroit and other cities as a labor convention city. In 1899 £ h e first chapter of a national women's organization, the W o m e n ' s Union Labor League, was launched in Middletown. A t this time organized labor formed one of the most active coordinating centers in the lives of some thousands of Middletown working class families, touching their getting-a-living, educational, leisure-time, and even in a f e w cases religious activities. On the getting-a-living sector the unions brought tangible pressure f o r a weekly pay law, standardized wage scales, f a c t o r y inspection, safety devices and other things regarded as improvements, and helped in sickness or death, while crowded mass meetings held in the opera house collected large sums f o r the striking w o r k ers in Homestead and elsewhere. A special W o r k ingmen's Library and Reading R o o m , with a paid librarian and a wide assortment of books, was much frequented. Undoubtedly the religious element in the labor movement of this day was missed b y many, but a Middletown old-timer still refers enthusiastically to the Knights of Labor as a "grand organization" with a "fine ritual," and a member of both iron and glass unions during the nineties is emphatic regarding the greater importance of the ceremonial aspects of the unions in those days, particularly when new members were received, as compared with the bald meetings of today. As centers of leisure time the unions ranked among the important social factors in the lives of a large number of workers. . , . Labor Day, a great day in the nineties, is today barely noticed. From the end of the nineties such laconic reports as "Strike defeated b y use of machinery" mark increasingly the failing status of organized labor in Middletown. According to the secretary of one national union, "the organized labor movement in [Middletown] does not compare with that of 1890 as one to one hundred." T h e city's civic clubs boast of its being an "open shop town." T h e social function of the union has disappeared in this day of movies and automobile, save f o r sparsely attended dances at Labor Hall. T h e strong molders' union, e.g., has to compel attendance at its meetings b y making attendance at one or the other of the two monthly meetings compulsory under a penalty of a dollar fine. T h e r e is no longer a Workingmen's Library or any other educational activity. Multiple lodge memberships, occasional factory "mutual welfare associations," the diffusion of the habit of carrying life insurance, socialized provision of workmen's compensation, and the beginning of the practice in at least three factories of carrying group life-insurance

THE AMERICAN SCENE for all workers, are slowly taking over the insurance function performed b y the trade unions. Of the ioo working class families f o r whom income distribution was secured, only eleven contributed anything to the support of labor unions; amounts contributed ranged from $18.00 to $60.00. Likewise, public opinion is no longer with organized labor. In the earlier period a prominent Middletown lawyer and the superintendent of schools addressed an open meeting of the Knights of Labor, and the local press commended the "success of the meeting of this flourishing order." When Samuel Gompers came to town in ninetyseven he was dined in the mayor's home before addressing the great crowd at the opera house. The press carried daily items agitating f o r stricter local enforcement of the weekly pay law, or urging public support of union solicitations f o r funds for union purposes, or calling speeches at labor mass-meetings " v e r y able and enjoyable addresses." T h e proceedings of the Glass Workers' Convention in Baltimore in 1890 were reported in full on the first page. Such a note as this was common: "During the last f e w months there have been organized in this city several trade organizations and labor unions . . . and much good has resulted therefrom." A t a grand Farmers and Knights of Labor picnic in 1890, "a perfect jam, notwithstanding the rain," the speaker "ably denounced trusts, Standard Oil, etc.," according to the leading paper. T h e largest men's clothing firm presented a union with a silk parade-banner costing nearly $100. T o d a y the Middletown press has little that is good to say of organized labor. T h e pulpit avoids such subjects, particularly in the churches of the business class, and when it speaks it is apt to do so in guarded, equivocal terms. A prevalent attitude among the business class appears in the statement of one of the city's leaders, "Working men don't need unions nowadays. There are no great evils or problems now as there were fifty years ago. W e are much more in danger of coddling the working men than abusing them. Working people are just as well off now as they can possibly be except f o r things which are in the nature of industry and cannot be helped." . . . For both working and business class no other accompaniment of getting a living approaches in importance the money received f o r their work. It is more this future, instrumental aspect of work, rather than the intrinsic satisfactions involved, that keeps Middletown working so hard as more and more of the activities of living are coming to be strained through the bars of the dollar sign. Among the business group, such things as one's circle of friends, the kind of car one drives, play-

ing golf, joining Rotary, the church to which one belongs, one's political principles, the social position of one's wife apparently tend to be scrutinized somewhat more than formerly in Middletown f o r their instrumental bearing upon the main business of getting a living, while, conversely, one's status in these various other activities tends to be much influenced b y one's financial position. As vicinage has decreased in its influence upon the ordinary social contacts of this group, there appears to be a constantly closer relation between the solitary factor of financial status and one's social status. A leading citizen presented this matter in a nutshell to a member of the research staff in discussing the almost universal local custom of "placing" new-comers in terms of where they live, how they live, the kind of car they drive, and similar externals: "It's perfectly natural. You see, they know money, and they don't know you." This dominance of the dollar appears in the apparently growing tendency among younger working class men to swap a problematic future f o r immediate "big money." Foremen complain that Middletown boys entering the shops today are increasingly less interested in being moved from job to job until they have become all-round skilled workers, but want to stay on one machine and run up their production so that they may quickly reach a maximum wage scale. 1 T h e rise of large-scale advertising, popular magazines, movies, radio, and other channels of increased cultural diffusion from without are rapidly changing habits of thought as to what things are essential to living and multiplying optional occasions f o r spending money. 2 Installment buy1

According to one veteran foundry foreman: "In the old days of the nineties a boy was shaped and trained by his foreman. When he started his apprenticeship for the molder's trade he was lucky to make $3 or $4 a week. At the end of the first year he was making, maybe, a dollar or $1.25 a day; at the end of the second year perhaps $1.50 or $2.00; the third year, $2.2j; and then at the end of the fourth year he received his card and $2.75 a day. Meanwhile his foreman had shifted him about from job to job until, when he became a molder and went on a piece-work basis, he knew his job from every angle and could make big money. But the trouble nowadays is that within a year a machine molder may be making as much as a man who has been there fifteen or twenty years. He has his eyes on the money—$40 to $jo a week—and resists the foreman's efforts to put him on bench molding where he would learn the fine points of the molder's trade." 2 It is perhaps impossible to overestimate the rôle of motion pictures, advertising, and other forms of publicity in this rise in subjective standards. Week after week at the movies people in all walks of life enter,

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THE GOLDEN NINETEEN TWENTIES

ing, which turns wishes into horses overnight, and the heavy increase in the number of children receiving higher education, with its occasions for breaking with home traditions, are facilitating this rise to new standards of living. In 1890 Middletown appears to have lived on a series of plateaus as regards standard of living; old citizens say there was more contentment with relative arrival; it was a common thing to hear a remark that so and so "is prettv good for people in our circumstances." Today the edges of the plateaus have been shaved off, and every one lives on a slope from any point of which desirable things belonging to people all the way to the top are in view. This diffusion of new urgent occasions for spending money in every sector of living is exhibited by such new tools and services commonly used in Middletown today, but either unknown or little used in the nineties, as the following: In the home—furnace, running hot and cold water, modern sanitation, electric appliances ranging from toasters to washing machines, telephone, refrigeration, green vegetables and fresh fruit all the year round, greater variety of clothing, silk hose and underwear, commercial pressing and cleaning of clothes,3 commercial laundering or use of expensive electrical equipment in the home,4 cosoften with an intensity of emotion that is apparently one of the most potent means of reconditioning habits, into the intimacies of Fifth Avenue drawing rooms and English country houses, watching the habitual activities of a different cultural level. T h e growth of popular magazines and national advertising involves the utilization through the printed page of the most powerful stimuli to action. In place of the relatively mild, scattered, something-for-nothing, sample-free, I-tell-you-this-is-a-good-article copv seen in Middletown a generation ago, advertising is concentrating increasingly upon a type of copy aiming to make the reader emotionally uneasy, to bludgeon him with the fact that decent people don't live the w a v be does: decent people ride on balloon tires, have a second bathroom, and so on. This copy points an accusing finger at the stenographer as she reads her Motion Picture Magazine and makes her acutely conscious of her unpolished finger nails, or of the worn place in the living room rug, and sends the housewife peering anxiously into the mirror to see if ber wrinkles look like those that made Mrs. X in the ad. "old at thirtyfive" because she did not have a Leisure Hour electric washer. . . . 8 In the Middletown city directory for 1889 there were no dry cleaners and only one dve house. T o d a y a city less than four times the size has twelve dry cleaners and four dye houses. T h e habit of pressing trousers is said not to have "come in" until about 1895. 4 T h e hand-washers of 1890 sold for $7.50-$ 10.00, while the modern machines cost $60.00 to $200.00.

metics, manicuring, and commercial hair-dressing. in spending leisure time—movies (attendance far more frequent than at earlier occasional "shows"), automobile (gas, tires, depreciation, cost of trips), phonograph, radio, more elaborate children's playthings, more club dues for more members of the family, Y.M.C.A. and Y . W . C A . , more formal dances and banquets, including a highly competitive series of "smartly appointed affairs" by high school clubs; 5 cigarette smoking and expensive cigars. In education—high school and college (involving longer dependence of children), many new incidental costs such as entrance to constant school athletic contests. In the face of these rapidly multiplying accessories to living, the "social problem" of "the high cost of living" is apparently envisaged by most people in Middletown as soluble if they can only inch themselves up a notch higher in the amount of money received for their work. Under these circumstances, why shouldn't money be important to people in Middletown? . . . Money being, then, so crucial, how much money do Middletown people actually receive? T h e minimum cost of living for a "standard family of five" in Middletown in 1924 was $1,920.87. A complete distribution of the earnings of Middletown is not available. Twelve to i j per cent, of those getting the city's living reported a large enough income for 1923 to make the filing of a Federal income tax return necessary. Of the 16,000-17,000 people gainfully employed in 1923—including, however, somewhere in the neighborhood of a thousand married women, some of whom undoubtedly made joint returns with their husbands—210 reported net incomes (i.e., minus interest, contributions, etc.) of $j,000 or over, 999 more net incomes less than $5,000 but large enough to be taxable after subtracting allowed exemptions ($1,000 if single, $2,500 if married, and $400 per dependent), while 1,036 more filed returns but were not taxable after subtracting allowed deductions and exemptions. The other 85-88 per cent, of those earning the city's living presumably received either less than $1,000 if single or less than $2,000 if married, or failed to make income tax returns. . . . 8 A dance no longer costs $0.50, as in the nineties, but the members of clubs are assessed about $4.00 for their Christmas dances today. Music used to be a two- or three-piece affair, but now it is an imported orchestra costing from $150 to $300. A boy has to take a girl in a taxi if he does not have the use of the family car. One does not go home after a dance but spends a dollar or so on "eats" afterwards. Expensive favors are given at annual sorority banquets.

THE AMERICAN A detailed calculation of a cost of living index for Middletown in 1924 on the basis of the cost of living in 1891 reveals an increase of 1 1 7 per cent. A comparison of the average yearly earnings of the 100 heads of families in 1924 with available figures f o r 439 glass, wood, and iron and steel workers in Middletown in 1891 reveals an average of $1,469.61 in the former case and $505.65 in the latter, or an increase of 191 per cent, today." O r if we take the earnings of school teachers as an index, probably conservative, of the trend in earnings, as against this rise of 1 1 7 per cent, in the cost of living, it appears that the minimum salary paid to grade school teachers has risen 143 per cent, and the maximum 159 per cent., and the minimum salary paid to high school teachers 134 per cent, and the maximum 250 per cent. T h e median salary f o r grade school teachers in 1924 was $1,331.25, with the first and third quartiles at $983.66 and $1,368.00 respectively. T h e median salary f o r high school teachers was $1,575.00, with the first and third quartiles at $1,449.43 and $1,705.50 respectively. Substantial increases in the incomes of persons in certain other representative occupations are suggested by the fact that the salary of a bank teller has mounted from $50.00 or $65.00 a month in 1890 to $166.67 a month in 1924, that of an average β T h e 1891 earnings are taken f r o m the Fourth Biennial Report for the state in which Middletown is located, dated 1 8 9 1 - 2 , pp. 57, 130, and 3 1 7 . T h i s Report gives the average income of 225 Middletown adult male glass workers as $519.49, of sixty-nine w o o d workers as S432.32, and of 145 iron and steel workers as $519.06— or an average f o r the entire 439 of $505.65. T o o much weight obviously cannot be put upon these 1891 figures, as nothing is known either as to the method of their collection or as to their accuracy.

ANDRÉ N o r QUITE a f u l l c e n t u r y a f t e r T o c q u e v i l l e had made his appraisal of A m e r i c a n d e m o c r a c y in its y o u t h , another F r e n c h m a n u n d e r t o o k to s u r v e y a U n i t e d States g r o w n mature. L i k e Tocqueville, André Siegfried ( 1 8 7 5 ) is amazed, and like him he is afraid f o r E u r o p e ' s future. A g a i n , the U n i t e d States has b r o u g h t something n e w into the w o r l d and once m o r e Europeans stand in w o r r i e d fascination b e f o r e it. T h i s later portent is not f u n d a m e n t a l l y n e w , h o w e v e r , but rather an o u t g r o w t h of f o r c e s latent even in A n d r e w J a c k s o n ' s A m e r i c a .

SCENE

male clerk in a leading men's clothing store f r o m $12.00 a week in 1890 to $35.00 today; a doctor's fee f o r a normal delivery with the same amount of accompanying care in both periods has risen from $10.00 to $35.00, and f o r a house call f r o m $1.00 to $3.00. Thus this crucial activity of spending one's best energies year in and year out in doing things remote from the immediate concerns of living eventuates apparently in the ability to buy somewhat more than formerly, but both business men and working men seem to be running f o r dear life in this business of making the money they earn keep pace with the even more rapid growth of their subjective wants. A Rip V a n Winkle w h o fell asleep in the Middletown of 1885 to awake today would marvel at the change as did the Frenen economist Say when he revisited England at the close of the Napoleonic W a r s ; every one seemed to run intent upon his own business as though fearing to stop lest those behind trample him down. In the quiet county-seat of the middle eighties men lived relatively close to the earth and its products. In less than four decades, business class and working class, bosses and bossed, have been caught up b y Industry, this new trait in the city's culture that is shaping the pattern of the whole of living. According to its needs, large numbers of people anxious to get their living are periodically stopped by the recurrent phenomenon of "bad times" when the machines stop running, workers are "laid o f f " b y the hundreds, salesmen sell less, bankers call in loans, "credit freezes," and many Middletown families may take their children f r o m school, move into cheaper homes, cut down on food, and do without many of the countless things they desire.

SIEGFRIED S i e g f r i e d o f f e r s an interesting f o o t n o t e to m a n y of T o c q u e v i l l e ' s observations, particularly as those c o n c e r n the prospects f o r l i b e r t y in the U n i t e d States. B u t w h e r e T o c q u e v i l l e w o n d e r s w h e t h e r liberty can survive d e m o c r a c y , S i e g f r i e d w o n d e r s w h e t h e r l i b e r t y can endure mass p r o d u c t i o n ; f o r him the threat to f r e e d o m lies on the c o n v e y o r belt, not in the ballot b o x . S i e g f r i e d , Alsatian b y birth and an economist b y profession, had visited the U n i t e d States f r e q u e n t l y b e f o r e he w r o t e America Comes of Age. H e spent the six months b e f o r e d r a f t i n g

IOÔO

THE GOLDEN NINETEEN

the book in traveling through the country, not lecturing but listening to Americans. Out of those conversations and excursions, he drew some rather superficial economic and political observations: mass production requires a continental market and so cannot be practiced in France; the Republican party enlists the rich, the rural, and the aggressively respectable, save in South; while the Democrats are dependent on the uncertain turn of events f o r their votes. W h e n Siegfried turns to the cultural scene, he is more illuminating, f o r he speaks as a cultivated continental European. H e is aware of the cross-currents of religion and the national tradition which he chooses to label "race." T h e old Anglo-Saxon Protestant America is feeling the pressure of the polyglot Catholics in her cities. T h e K u Klux Klan and Prohibition both may be taken as responses to that stimulus. It has also produced immigration restriction and the odd phenomenon of a democracy in which large numbers have the vote and yet are, in effect, second-class citizens.

America BY

Standardized mass production stifles personal development in America; the United States produces things, not people. It is nonsense to assert that the worker, w h o is subject to the discipline of the machine during w o r k ing hours, can be creative in his leisure. Profits overshadow liberty of action, as the machine's requirements overshadow those of its servants, and so Americans conform not only to the patterns of economic behavior but also to the resultant patterns of social behavior. Thus, the individualist Latin—who can be bound by no social unit but the family—confronted by the enormous molding force of the American w a y of life. It is an ironical fact that within a decade and a half much of the peculiarly independent Latin soul, as exemplified in the political leadership of the Latin nations of Europe, had demonstrated its freedom by embracing fascism or succumbing to it. T h e selection here reprinted is from America Comes of Age ( N e w Y o r k , 1927) and is published by permission of Harcourt, Brace and Company.

Comes of

ANDRE

CHAPTER I X : T H E K U KLUX KLAN

THE KU Klux Klan is one of those manifestations which rage for a while and then die down and disappear. N o one takes them seriously when the crisis is over, but thev seem very tragic at the time. Nevertheless they reveal a latent source of trouble which may remain long after the outbreak has passed. The Ku Klux Klan is an extreme form of Protestant nationalism; in fact, we must almost consider it a fever, as otherwise we are apt to exaggerate it during the crisis and to belittle it when the temperature has fallen again. It is more than a secret society; it is a state of mind. It is more than a whim; it is the revival of a whole series of earlier revolts against immigrants, negroes, Catholics, and "outsiders" generally. This nationalistic chauvinism dates back many years without even a change in its vocabulary. At the end of the eighteçnth century we find the public on guard against "un-American" ideas. About 1830, when the Irish immigration began to be im-

TWENTIES

Age

SIEGFRIED

portant, "native American tickets" grew up spontaneously at the elections, the idea being to keep foreigners out of elective or honorary positions. The "Know Nothing" secret society reached its climax in 1858 during the peaceful German-Irish invasion. By means of pass-words, secret ceremonies, etc., it endeavoured to combat the growing influence of Catholicism, which was making itself felt in the "ignorant foreign vote," as it was called. It is estimated that at its maximum the "Know Nothings" had some 1,250,000 members. A generation passed, and in 1887 we see the antiCatholic American Protective Association struggling against the Latin-Slav invasion. A false encyclical was produced to prove that the Pope was claiming the entire American continent on the ground that Christopher Columbus was a Catholic. Protestant America was threatened! The Middle West and the West responded to the appeal of the A.P.A., and many recruits were obtained in Michigan, Ohio, Illinois, Iowa, Missouri, Kansas, and Nebraska. The "Know Nothings" and the A.P.A.

THE AMERICAN SCENE are the forerunners of the present Klan in so far as the latter is directed against Catholics, Jews, and foreigners. The negro, however, has been the principal objective ever since the Klan was first founded by the Southerners in 1866 at Pulaski, Tenn. The aim of the original Klan, to "maintain the supremacy of the white race in the old slave States," its methods, its hierarchy, and its picturesque language, have all been handed down intact to the present society. When the "carpet-baggers" united with the negroes after the Civil War, the Southerners were able to resist only by outlaw methods. They fought the "impious domination" of the negroes in the name of their own racial superiority, and, as Klansmen, undertook to carry out an unwritten code which they considered to be the only just one. Realizing that anything solemn and mysterious has an immense effect on the ignorant and superstitious negro, they chose as their weapon a secret society, which in any case has a great attraction for the American mind. . . . Fifty years later, in 1915, it needed only the fear of another crisis for the Klan to be revived at Atlanta, Georgia. It did not attain any importance until 1917 or 1918, when the war-time mob psychology asserted itself in the reappearance of nationalism and xenophobia. This time the movement was founded by William Joseph Simmons —"Colonel" Simmons, rather, as he had been a volunteer in the Spanish-American War. The Colonel is one of the many Protestant lay preachers who were impregnated with a sort of imperialistic mysticism by the War. The secret society which he founded with the time-honoured title of the Ku Klux Klan was "consecrated as Protestant to the teaching of the Christian religion, and pledged as white men to the eternal maintenance of white supremacy." In the South, circumstances had aroused old fears anew; for many negroes who had joined the army in 1917 had been sent to Europe, where they had often been treated as equals, and even gone about with white women. It was essential to keep them in their place when they returned; so the Klan was to be there just as it had been in the reconstruction days after the Civil War. Also, if alongside the negro, the Catholic foreigner should get out of hand, or the Bolshevik should preach his odious doctrines, the good Protestant citizens would have the Klan with which to keep them in order. In 1919 and 1920, the Klan probably numbered some tens of thousands, and as was the case half a century earlier, its influence took the form of spontaneous interference in the maintenance of order. There were warnings sent to bad citi-

1061

zens, sensational examples calculated to excite the imagination, and threatening notices, not to mention solemn processions. The Klan's greatest period of expansion was not so much during the War, as while the peace treaties were being drawn up, for it was then that America awoke to the danger of invasion by the lowest element of the Old World. The army had come back rather anti-European in sentiment, and those who had stayed at home were bubbling over with unexpended energy. Furthermore, many demobilized soldiers found their places taken either by a negro or by some uncouth alien, and that alone was enough to excite a feeling of group animosity. "All these foreigners are banded together and organizing, with the Catholic Church in the lead," they grumbled; "we must organize too." It was at this moment that the K u Klux Klan, which had been suffering somewhat from the blundering administration of Colonel Simmons, was reconstructed according to approved American methods, and the new directorate, in best "booster" style, made a very good thing out of it financially. Under their impulse the character of the Klan changed entirely. It was no longer simply a local southern reaction, but became the chief expression of the national instinct of defence; and accordingly its centre shifted from the South to the West and Southwest. . . . In the South the K . K . K , reaped the harvest of a soil that had been tilled for two generations. In the Southwest and beyond the Mississippi it touched a different clientele in the small-town Americans, the descendants of the Puritan pioneers who colonized the West in the middle of the nineteenth century. Their orthodox Protestantism and old-fashioned type of Americanism has persisted unchanged beneath an impenetrable veneer of boredom. Nothing can exceed the mediocrity of these small communities, where local public opinion aggressively spies on any one suspected of being different. T h e Klan was never entirely successful in the big cities with their mixture of races and groups, nor yet in the isolation of the open country, but it absolutely controlled the small towns. A n intellectual aristocracy scarcely exists in these shut-in communities, where even the school teacher is held on a tight leash. Society is run by a narrow-minded middle class and inspired by a Protestant clergy to whom the Invisible Empire is not without its attractions. The Baptist minister is usually in sympathy with the Klan and is often appointed Kleagle or local publicity agent. When a hooded band marches mysteriously out to offer a well-filled purse to some worthy preacher, the choice never falls on a Cath-

T H E GOLDEN NINETEEN olic priest or an Anglican clergyman, but always on a Baptist or a Methodist. It is largely due to the Protestant minister, whose influence has been growing since the W a r , that the well-meaning but timorous middle class has been awakened to certain fears—the fear of Catholicism, atheism, and evolution; of wine and European immorality; of radicals, Bolshevists, and revolutionaries; of invasion by blacks, yellows, and Latin-Slavs; and of the mongrelizing of the race. . . . Therefore, when the K . K . K , came forward as the champion of national morality in partnership with the Fundamentalists, the Prohibitionists, and the anti-evolutionists ( w h o are really the same people), its authority was very great. W i t h the help of the ministers, whom the Anti-Saloon League has c r a f t i l y appointed electoral agents, and the "Babbitts," those typical honest business men, the Klan is saving society. N e w Y o r k may laugh, but the local politicians know what they are dealing with; and they are careful to watch their step where the Klar» is concerned. This accounts quite naturally for certain manifestations, such as the anti-evolutionist law in Tennessee and the prohibition amendment, not to mention various other laws intended to p u r i f y both customs and souls. It is simply a case of threatened Americanism taking refuge in the stronghold of conformity. It is quite evident where K . K . K , propaganda has succeedcd. Sooner or later it was bound to attract the dregs of humanity, f o r they are always in f a v o u r of illegal direct action; and the South in particular seems to have suffered from this abuse. T h e program of the Klan, however, was able io attract honest men; and the greater part of its personnel was recruited from the middle class. It also thrived exceptionally well wherever the old-time groups remained distinct and strong, as the g e o g r a p h y of the Klan shows. It is difficult to map it out accurately, partly because no statistics are possible and also because it changes from month to month. T h e Invisible Empire has no fixed boundaries but moves like a storm across the country, with the centre of depression changing e v e r y moment. U p to 1920 the South was the chief zone affected, but after that the depression moved to the Southwest and West, and extended to Southern California on the one hand, and on the other to the N o r t h w e s t as far as Oregon. A t the same time it spread up the Mississippi Valley and installed itself in full force in the old American districts of Indiana and Ohio. Finally it penetrated to the East, principally to the small non-industrial towns of N e w Y o r k State, Massachusetts, and the northeastern part of L o n g Island. T h i s t o p o g r a p h y shows that the K u Klux Klan

TWENTIES

is strong w h e r e v e r foreigners are not too numerous. It has never been a p o w e r in the conglomerate cities of N e w Y o r k and Boston, although in certain places which are reacting violently against foreign infiltration, it has gained great strength. All that is needed to p r o v o k e a sudden outbreak is a trivial incident, a scandal over some corrupt party machine run b y Irish politicians, excessive zeal on the part of the Catholics, o r the arrival of a band of negroes or J e w s . In Indiana, f o r example, the outburst took the f o r m of A m e r i c a n ization b y intimidation; and pressure was brought to bear on business, o n elected officials, and in fact on people generally. T h i s d i f f e r e n c e in attitude between the old-fashioned small towns on the one hand and the industrialized city districts with their masses of foreigners on the other is of first importance, and explains much in post-war A m e r ican politics. In the South the defence of the white race was the attraction; in the W e s t the bitterness of the Anglo-Saxon Protestants against R o m e and E u r o pean demoralization; and in the N o r t h w e s t it was hostility toward foreigners, J e w or Catholic, R u s sian, Irish, o r Mediterranean. In e v e r y case, h o w ever, they aimed chiefly at the Catholic Church. A n anti-clerical Frenchman can understand their prejudices, f o r he realizes that they are less against religion than against the Church as a political institution led b y an Italian. A stubborn o r ignorant American will never admit that a Catholic can conform entirely to the spirit of the Constitution and at the same time serve the Church, f o r at any minute he may receive orders f r o m the latter. E x perience shows that such instructions have been given, if not b y the P o p e , at any rate b y the priests during elections. T h i s classic objection is specially strong in the United States, because the R o m a n Catholic Church is suspected of c a r r y i n g on religious colonization there. W h a t was in F r a n c e simply a quarrel o v e r doctrines is a r i v a l r y of race in America. T h e critical sense is not the most highly developed in America, and this possibly explains the quite improbable rumours that are continually circulating. The American Standard, the f o r t n i g h t l y organ of the K u K l u x K l a n , provides a choice collection of pearls. H e r e are a f e w quotations picked out at random. In the issue of August, 192J, w e read: " D o you know that R o m e looks upon W a s h i n g ton as the future centre of her p o w e r and is filling our government departments with Papists? T h a t the hierarchy f o r m a n y years has been b u y i n g strategic sites in our capital? T h a t in our D e p a r t ment of State at W a s h i n g t o n , 61 per cent, of the

T H E

A M E R I C A N

employés are Roman Catholics? That in our Treasury Department, in which the duty of enforcing prohibition is vested, 70 per cent, of the employés are Roman Catholics?" Or again, stronger still, in the issue of October ι, 1925: " W e again take the occasion to attack the sinister purposes and persistent efforts of the Roman Catholic hierarchy, to foist upon us the belief that Christopher Columbus was the discoverer of America, and through this fraudulent representation to lay claim to inherent rights which belong solely to Nordic Christian peoples, through the discovery of this continent by Leif Ericson in the year 1000." A Catholic might reply that there were no Protestants in the year 1000, and therefore Leif Ericson must have been a Catholic himself. But this does not disconcert the American Standard, for under date of October i j we read: "The servile subject peoples of the Mediterranean have been willing subjects of the Vatican, but the spiritually-minded, chivalrous, and freedom-loving Nordic peoples have always been hostile to Rome." The American Standard allows itself to be carried awaj^ by such exalted idealism; so it winds up by enunciating a program which may be coherent but would certainly be impossible in actual practice: ( 1 ) Laws to require the reading of the Holy Bible in every American public school. (2) Recognition of the fact that the doctrines taught by monarchical Romanism, and the principles embodied in free republican Americanism, are opposed. (7) Recognition of the fact that since Roman Catholics give first allegiance to an alien political potentate, their claim to citizenship in this Protestant country is illegitimate. (4) Revision of our citizenship laws, to wipe out the "alien vote." (5) A law to destroy the alien influence of the foreign language press by requiring that the English language be used exclusively. (6) The exclusion from America of the Jews who work against Christianity. (7) The return of the negroes to their homeland of Africa. (8) The voting privilege to be restricted to citizens who have spent at least four years in the American public schools. (9) Strict adherence to the Constitution of the United States, including the prohibition amendment. (10) The teaching of Christ Jesus, as given in

S C E N E

1063

the Holy Bible, the Word of God, as the standard of American conduct in public and private life. Imperial Wizard Evans, the supreme head of the Klan, boasts that he is "the most average man" in America. In spite of their ridiculous and aggressive form, these ideas are very widespread among the more ignorant Protestants, and will likely survive the secret society which is now expressing them so vigorously. T h e y are an inspiration to the 100 per cent. American, for they represent a tendency in which the Klan is but a picturesque and passing episode. Even the number of members, if it were published, would not tell us much, for the organization is less important than the atmosphere it expresses. The organization, as such, has declined rapidly since 1923. In 1921, the New York World estimated its membership at half a million; in 1922 a Congressional committee of inquiry could not find more than 100,000; in 1923 The World's Work suggested the figure of 2,yoo,ooo; in 1924 Mecklin, in his excellent book on the Klan, speaks of "millions." Decadence had, however, set in, first in the South and then in the Southwest. In September, 1925, the Klan was still able to fill the streets of Washington with an immense procession; but in February, 1926, an inquiry made by the New York Tintes reveals an absolute rout. The weakness of the movement lay in the fact that when asked to carry out constructive work, it had always proved incapable. It did succeed in conquering whole States politically, such as Oklahoma and Georgia; but nothing came of it, for as soon as it came out into the open, the secret society lost its force by losing its mystery. The power of the Klan is at its best when pulling wires in the local legislatures or even in Federal politics. In 1924 it controlled at least half the Democrats at the national convention to nominate the presidential candidate, and the Republicans on their side did not dare oppose it. Now, however, the period of intimidation seems to be past, and in a few years the Klan will probably count for very little, although the prejudices it represents will survive. After all, it was a typical post-war movement. Stripped of its violence—the legacy of the South—and of its childish and grandiloquent ritual—the legacy of American Free Masonry—it still stands for a national reaction or the resentment of the old-time Americans against the alien masses. CHAPTER X :

N A T I V E A M E R I C A VS. A L I E N

IDEALS

In conclusion let us briefly review the various aspects of the present situation in the United States: the anti-evolutionist campaign, educational

1064

THE GOLDEN NINETEEN TWENTIES

intolerance, prohibition, the restriction of immigration, and the fear of Catholic Europe as expressed in the Ku Klux Klan. T h e y all spring from the same origin and can be summed up in the formula, "America for Regular Americans." At the moment American nationalism is taking the form of a cult of the native-born, but will this last? In the nineteenth century the new continent gladly threw open its doors to the oppressed of the world. In the United States any one could find a new fatherland and the right to call himself an American. This is now giving way to a contrary conception, according to which the country must mould its future from the one race with which its religion, moral code, and exclusive traditions are associated. T h e purists, who guard all the avenues of approach, contend that the country must no longer be considered as common property; for it really belongs only to those who were born into the original family. It is now a question of birth rather than adaptation. This is the latest theory, but in practice the way had long been prepared for it by the people themselves. As always in the past, the Protestant of Anglo-Saxon stock considers himself a member of an aristocracy endowed with special privileges. In spite of the Constitution there has never been complete moral and social equality between those who were and those who were not born in the country —we might almost say between the first- and second-class citizens. Naturally this depended on the time required for assimilation and the inferiority of the newcomer in comparison with the original inhabitant. The immigrant who stammers broken English, or possibly does not speak it at all, and is unable to break away from his own peculiar habits, naturally thinks and feels different. He is bound to be regarded with suspicion by the "100 percenter" who is certain of his heredity and proud of his standard of living—so sure, indeed, of his moral superiority that he dares, according to Imperial Wizard Evans, "look God straight in the face." As assimilation gradually takes place, the distance between the two types is reduced, but any peculiarity on the part of the newcomer is unconsciously judged by the American as a sign of inferiority. This is not to be wondered at, if we recollect that Europe has not been sending the best of her citizens across the Atlantic, during the past century at any rate. T o an American child an Italian is a pedlar, a Greek, a bootblack or cheap restaurant-keeper, and a Frenchman a low-class barber. It never occurs to him that other Italians and Frenchmen exist in France and Italy who are gentlemen and much more cultured than he is

himself. Wise parents send their children to Europe to learn these things, but the contempt of those who have never travelled is almost unfathomable. They regard the people of the Old World as immoral and degenerate, ignorant of the most elementary rules of hygiene, dominated by a fanatic priesthood, perpetually menaced by anarchy and revolution, likely to die of hunger—this sounds like an exaggeration, but it is perfectly true! The result of this attitude is distinctive treatment for the immigrant, and in point of fact, justice for the alien is not the same as for the real American. In all honesty a judge will believe an American witness rather than a foreigner; a doubtful case would probably go against an Italian, a Russian, or a Greek; and of course a coloured man takes even greater chances. If some new system of capital punishment were introduced, it would be tried out first on a Chinaman, who had already been found guilty, of course. Such a case actually occurred in Nevada. In every-day private relations the difference between the races is even more marked. In order to prevent foreigners from filtering into the clubs, hotels, and homes of the old residents, a regular system of defence is erected against them. Certain communities of pure British origin, though they are little known to the public, have great social and political authority, simply on account of their unalloyed traditions. This self-satisfied and ingenuous belief in the inferiority of the rest of the world does not arise from any ill will. The Americans are a kindly people, but they cannot understand why others do not adopt their way of thinking and acting, with enthusiasm and gratitude. The superiority of their civilization seems so obvious to them that to question it seems as futile as denying the existence of the sun. . . . Their idea of Americanization is to adopt Anglo-Saxon moral, social, and religious principles. In the nineteenth century they thought that the Italian, Russian, and German immigrants would turn out to be men like themselves. It was not so much a matter of fusion, or of mixing several elements to produce a new compound, but rather the digestion by one race of all the others, until none of their individuality survived. However, when the assimilators began to see that the character of the American people was changing and that the pretended assimilation often meant only fusion or a juxtaposition, their attitude of welcome turned into hostility and exclusiveness. They had, however, already allowed sufficient foreigners to penetrate to evolve a new American spirit in opposition to their own. As the aliens ar-

THE AMERICAN SCENE rived in greater numbers some of them gradually began to reject the verdict that they were inferior on account of their origin, though they were just as eager to become Americans as the rest. Naturally the temperament of the Anglo-Saxon was bound to succeed better in a society based on cooperation, but the unqualified statement that the Nordic races are superior contradicts every experience. Without generalizing, one may say that when you notice a sparkling eye or a nimble mind it is often in an Italian, a Jew, or a Russian. Like uncut jewels, they had come from Europe with their traditions of brilliant civilizations, which they were asked to abandon at one fell swoop. Many, especially among the intellectuals, deliberately refused. The American-Italian who writes English with a Mediterranean flourish, the American Jew with his centuries of accumulated knowledge, and even the negro, whose music and dancing have added to the artistic patrimony of the whole human race, have all contributed to American civilization; and when they enroll themselves in the movement they insist that they should be received just as they are and with all the honours of war. Obviously this Americanization is entirely different from what was planned by the assimilato«. It is the kind of Americanization that Israel Zangwill, the Jewish writer who popularized the metaphor of the melting pot, deals with in semireligious vein: "America is God's crucible, the great melting pot where all the races of Europe are melting and re-forming. . . . The real American has not yet arrived. He is only in the crucible. I tell you—he will be the fusion of all races, perhaps the coming superman." The Catholics cherish this idea when they maintain in all sincerity that there

1065

is no need for them to sacrifice their religion in order to become Americans. Waldo Frank makes a magnificent defence of this conception in Our America, when he demands the right for all to collaborate in building the America of the future. We must not underestimate the prestige and strength of this ideal, for like other types of Americanization, it attracts both firm believers and mystics. Countless immigrants have left the Old World, inspired by the liberty that they were to find in the New; and in their passionate desire for regeneration they have gladly transformed themselves, in the belief that they were contributing to the formation of a new nation. They were filled with admiration and gratitude for their adopted country, and this very faith in a land which could revive the weary by the breath of its independence was the strongest cement of the Union. Now when the "100 percenters" maintain that the true American is not of the future but of the past, and that he alone is of the privileged few who can claim founders' rights, then the newcomer no longer recognizes the ideals of which he had dreamed. Is it possible to contemplate a United States that is neither Protestant nor Anglo-Saxon? This is the aim of an opposition which, however, is not constructive and resists only by instinct. And yet they persist. If their policy were to become constructive and they obtained control, we might have a new America resembling in many ways the New York of today; but to the old Puritan element it would seem a shocking perversion. The final destiny of the country is still in suspense, and it is unable to foretell what tomorrow will be its very soul.

THE

WORKERS

OF

AMERICA

ROBERT W. DUNN shared in the prosperity of the nineteen twenties, it was only in limited degree the result of pressure from labor organizations. The first years of the postwar decade saw a vigorous and successful drive against unionism. The steel workers who rebelled against the twelve-hour day in 1919 were completely defeated; injunctions sent the railway shopmen back to work and broke the coal miners' strike in 1910; by the middle nineteen twenties, labor was weaker than it had been before the war. It lost the entire brewery industry when prohibition ended legal brewing. Unionism declined in the metal trades; disappeared in textiles; and made no incursions into automobiles, food, or steel. The new industrial force represented by women and Negroes remained untouched. Labor had suffered from internal divisions over socialism and communism. It had been unable to check the determined antiunion drive of organized industry. Significantly enough, the A. F. of L. had failed to reckon with the nature of modern industry. The measure of its leadership may be taken from the fact that though Samuel Gompers was a cigarmaker by trade and had helped make his union effective in its own field, the tobacco industry remained unorganized and the cigarmakers themselves were unable to meet the challenge of the introI F A M E R I C A N WORKERS

The

Industrial BY

Welfare

ROBERT

Ι . T Y P E S OF W E L F A R E P R A C T I C E S AND T H E I R

PUR-

POSE

EMPLOYERS in the United States have learned a g o o d deal during and since the W o r l d W a r . A

duction of machinery into their own craft. The A. F. of L. endorsed Gompers's hard-bitten refusal to adopt any consistent attitude toward industry as a whole. It confined itself to its own task, securing more wages for the craftsmen who were protected in their skills by the failure of employers to introduce machinery. More and more, the Federation tended to be guided by a self-perpetuating leadership whose utterances—and practices—were not much above the level of the business and political worlds of the nineteen twenties. Hand in hand with the A. F. of L.'s complete misreading of the trends of American industry, went the skilful so-called welfare offensive of the great American corporations. These established employee-representation plans; set up company unions; provided pensions; and engaged in other types of welfare activities. So successful were they that the great masses of the American workers remained unorganized; and, in fact, company unionism was not terminated until the Wagner National Labor Relations Act of 1935 discouraged it by law. Robert W . Dunn (1895) describes the welfare programs of corporations in the selection here reprinted. It appeared in J. B. S. Hardman, ed., American Labor Dynamics (New York, 1928) and is published by permission of Harcourt, Brace and Company.

W.

Ofje?isive DUNN

number of them, f r o m among the largest, have come to the realization that pre-war " r o u g h stuff" does not always pay under the new dispensation. T h e y have been converted to the v i e w that the open shop can be preserved and its blessings real-

A M E R I C A N

ized more effectively in the long run by cultivating the workers as individuals than by frontal attacks upon their unions. Whatever the outward claims made by the advocates and promoters of the personnel policies in establishing their various plans, often at not insignificant expense to the corporations, at final count they really are out to fortify the morale and loyalty of the worker to the business enterprise which employs him, to make him stay content with things as they are. Definite benefits, such as reduced labor turnover, long service records, devotion to the job, the avoidance of labor troubles, lesser labor costs, as well as a reputation for being an up-to-date and liberal corporation, are the objectives at which the welfare practitioners aim. The expenditures incurred by this kind of labor management are considered a profitable investment, if and when the ends sought are achieved. On the other hand, these "plans" are readily scrapped if they don't deliver the goods. Often the whole practice is discarded in connection with a change of management in the enterprise, as was the case with the American Woolen Company a few years ago. 2. T H F . S C O P E OF T H E E M P L O Y E R S '

OFFENSIVE

There are no definite and thoroughly reliable available data as to the extent to which the major devices in the welfare offensive have been applied and developed. More is known about the company union variety of welfare offensive often described as the works council, the shop committee, and the industrial council. T h e number of workers employed in corporations practicing employee representation of one kind or another is probably close to one and a half million. In 1922 the number was below 700,000; in 1919 it was less than 400,000. It is stated that the company unions have gained since 1919 almost as many members as the A . F. of L. unions have lost, which coincidence, however, proves no point, since the two facts are not of necessity correlated. The gains to the company associations, in some cases, have been in industries where the trade unions had displayed rapid mushroom growth during the war. Altogether somewhere between 800 and 1000 firms now operate one kind or another of employee-representation plan in their plants. The spread of the independent association and the committee system was very pronounced on the railroads particularly after the defeat of the shopmen's strike in 1922. More than 60 railroad administrations now cultivate company unions in one or more branches of the service. The four train service brotherhoods are, of course, without exception

P R O B L E M S

1067

recognized and have suffered no inroads at the hands of the company associations or bodies of company-trained or -minded workers divorced from the regular bona fide labor unions. Other industries which have been well punctured by the company union are the printing trades, metal trades, electrical industry and various public utilities. In certain sections of the country large groups of workers employed by a number of companies are sometimes lined up in a system of works committees negotiating with the employers' association. The Loyal Legion of Loggers and Lumbermen in the Northwest and the system of committees covering the waterside workers of Seattle are examples of this type. Next in extent of spread of the devices or weapons in the arsenal of welfare is employee ownership of corporation securities. The number of firms which have offered stock for sale to their workers has been only roughly estimated by students of the subject. In the course of recent investigations into this subject some 400 firms have been mentioned as offering stock subscription plans to their employees. There are tables showing the growth in investments by employees for a number of selected companies. T h e increase in the number of employee stockholders of 1925 over 1918 is reported as follows by R. S. Binkerd, Vice Chairman, Committee on Public Relations of the Eastern Railroads (Proceedings of the Academy of Political Science, Vol. XI, No. 3, April, 192j): railroads 70,262, street railways 15,000, gas, electric light and power companies 75,000, telephone and telegraph 62,649, packers 7,000, ten oil companies 21,153, five iron and steel companies 87,696; or a total increase in seven years in these selected companies of some 340,000 worker stockholders. Group insurance is another rapidly developing device for fixing the worker's loyalty to a specific plant or company. Its growth may be measured by taking the total amount of the policies outstanding for the seven leading life insurance companies engaged in the business of writing these group policies for industrial concerns. In 1912 the amount of employee group insurance in force through these insurance agencies amounted to a little over $13,000,000. During the next five years this amount grew to over $346,000,000. In 1922 it had reached $1,852,593, 553, a gain of nearly 600% in five years. B y 1923 it had grown to $2,396,758,418 and the next year the companies registered $3,099,019,607 worth of this type of insurance on their books. In one company alone there were 540,000 workers' lives insured, with an average protection of $1300 per life.

ιο68

T H E

GOLDEN

NINETEEN

T h e r e has been a similar steady rise in the number of companies using industrial pensions and in the amounts paid out to workers. A recent study by the National Industrial Conference Board estimates that more than (30,000,000 was spent during the year 1925 by American industry f o r employee pensions. This study covered pension plans conducted by some 245 different companies embracing 2,815,512 workers in practically every industry but notably in railroading, public utilities and metals. Of the companies covered in this survey 164 reported a total of approximately 36,000 pensioners already on their rolls. Other welfare devices most in practice are mutual benefit associations, company magazines, profit sharing, thrift plans, building and loan groups, sanitation committees, committees on recreation, housing, athletics, country clubs, hospitals, social work, cafeterias, Y . M . C . A . services, service-pin associations, and probably another hundred varieties of uplift activity. 3. WHAT EMPLOYERS W A N T THE WELFARE O F FENSIVE FOR

W h a t specifically does a company hope to gain from the introduction of an employee-representation plan or a company union? T h e utterances of the employers themselves reveal their objective in establishing the company union. A few sample sentiments are worth quoting. In 1925 an employer's journal, Factory, conducted a symposium among business executives on the effectiveness of employee representation from the employers' point of view. One company president in reviewing the progress of the works council in his plants, said: Grievances of the personal type such as those having to do with wages, hours of w o r k , working conditions, and so on, have practically ceased. Those that the council now discusses are more likely to do with the tools and machinery of production. . . . That of course suits us perfectly f o r it means greater production and lower costs.

Another executive, the head of a great steel corporation, answered the questionnaire: Grievances, in importance, are rapidly being replaced by constructive operation problems, covering such subjects as increased production, economy, better quality and service.

Still another, the labor manager of an important rubber concern, pointed out the stabilizing effects such a plan has upon the more discontented workers: Men w h o were radicals have been elected to the G o o d y e a r senate or house of representatives and have

TWENTIES

found out the company's side of their problems with the result that they have become much more reasonable to deal with.

Companies that have tried out the companyunion approach to the labor problem express the hope that they will be educational and school the worker in "sound business economics." Others consider the company union the one wav of discovering what's on the worker's mind without the use of spies and undercover men. Others, again, talk vaguely of cooperation, mutual understanding, harmony and good will. Quite a number frankly admit that the scheme is nothing but an effective labor-union antidote. . . . 4. METHODS AND DEVICES OF WELFARE PRACTICES

It is impossible to do more than mention in this section a few of the provisions of the various welfare expedients whereby employers secure the objectives above stated. T h e benefits to be obtained from the plans are all graduated with respect to the length of service with the company. T h e longer the worker stays, the more he gets out of the plan. Turnover is the major problem to be solved, and all of these devices drive straight in that direction. Then, too, the management naturally reserves the right to withdraw a pension, an insurance, a stock-ownership or a company-union plan whenever it wishes. No legal contractual relation is involved even in the case of the pension schemes. Another corporation taking over the plant, for instance, as Armour and Company, absorbing Morris and Company, leaves the pensioners without any pensions in spite of their long service for the latter company. T h e courts tell them they have no legal claim upon either company. T h e workers of the Steelton Steel Company fared the same way when the Bethlehem Steel Company absorbed their plant some years ago. Finally managements keep a tight hold on the control of their employee-representation plans. On the councils and committees, the representative of the management—often the plant superintendent himself—is, by the constitution, appointed to act as chairman and general director of the "legislative" operations. Holding this strategic position he can always put over what the company considers good business policy. T h e worker delegate may be ever so zealous in the interest of his constituents but the management holds the gavel and wields it softly but firmly. Under many of the plans the final appellate authority in the settlement of disputes arising in the councils is the President of the company, or as in the case of the

AMERICAN PROBLEMS Standard Oil Company of N e w Jersey, the Board of Directors. Occasionally outside arbitration will be permitted or a reference of the dispute will be made to some official in the national government, say the Secretary of Labor J. W H A T T Y P E S OF EMPLOYERS U S E W E L F A R E ?

Our church societies and Christian socialists seem to be impressed with the good men w h o have applied the welfare treatment to industry. Such men as Dennison, Filene, Hatch, Hapgood, are reputed to be substantial Christian gentlemen. But for one of these modern saints disguised temporarily as entrepreneurs, w e find, in running our finger down the list, a dozen corporate names which connote anything but peace, good will, and conciliation in industry. Consider, for example, some of the companies that have embraced employee stock ownership, understanding as they do the psychological effects of a wider distribution of the feeling of ownership among the workers. Foremost among these corporations stands the United States Steel Corporation, whose president considers the Golden Rule to be the "panacea for the ills that sometimes appear to the moral, political, social, or economic life." T h e Interchurch Report on the Steel Strike will illustrate the late Mr. Gary's text. T h e G o o d year T i r e and Rubber Company comes second in the number of employees included under this type of scheme. Its fight on the rubber-workers' unions is continuous and altogether effective. T h e r e is also the American Telephone and Telegraph Company, whose kindness towards its workers can be measured b y the resolutions to investigate its anti-labor technique introduced at the 1925 convention of the A . F. of L. T h e Youngstown Sheet and T u b e Company, which has made it a policy to fire union men from its premises, has a stock-ownership plan as effective as that of the United States Steel Corporation. T h e Union Pacific Railroad, one of the hardest of the hardboiled western roads, which in 1922 broke a strike of shop-craft workers and made all new employees in that department sign yellow-dog contracts, granting check-off privileges to a company union, can be added to the list. T h e Standard Oil Company and its subsidiaries as well as the Colorado Fuel and Iron Company need no introduction to those who remember the savage attacks they have made on union workers from Bayonne to Pueblo. W h e r e is the company in the list of employee stock distributors, company-union practitioners, pension providers, and insurance underwriters that will admit a real labor union to its plants, recognize that union, and deal with it through the

1069

normal processes of collective bargaining? T h a t question is the touchstone to labor policy, and no person interested in the advance of the American labor movement should fail to apply it when confronted with the salesmanship of welfarism. T h e Eastman Kodak Company is another employee stock-ownership company that does not tolerate disturbers and union enthusiasts in its own provincial heaven. Others are the Great Atlantic and Pacific T e a Company, which discharges any man suspected of affiliation with the clerks' union; the American W o o l e n Company whose labor policy is known to those who followed the textile strikes of 1913 and 1919; the American Sugar Refining Company, client of the Sherman Corporation, industrial spy agents; the Brooklyn Manhattan Transit Company with its yellow-dog contracts and company association; Armour and Company and Swift and Company with their "jungle" full of stool pigeons and strike-breakers; the Pennsylvania Railroad, dean of companyunion roads; the Bethlehem Steel Corporation, Mr. Schwab's own principality, the company whose admitted policy it was to sell structural steel only to non-union erectors, and whose president, Mr. Grace, declared he "would not deal with unions, even though they embraced 95% of his employees"; the National City Bank of N e w Y o r k , a leader among the banking fraternity of labor deflators; the Lehigh Valley, another companyunion road that introduced employee ownership and company unions partly to offset what it termed "the strong-arm method advocated b y the Plumb Plan propagandists"; the Illinois Central, hostile to unions and the leader of many a drive against them; Henry Ford, w h o is the very soul of welfare as a business proposition; the Pacific Gas and Electric Company, heavy contributor to openshop slush funds on the west coast; numerous public utility companies presided over by Mr. Samuel Insull of Chicago; the General Electric Company, where they fire men w h o agitate for the recognition of the electrical workers' union; the Westinghouse Electric and Manufacturing Company, notorious for its employment of thugs and deputies in past strikes; the Republic Iron and Steel Company, and the National Biscuit Company. . . . 7. T H E TRADE UNION

UNION

FACING

THE

COMPANY

T h e trade-union official, faced with a dwindling membership resulting from the employers' schemes, is naturally driven to denounce the whole business of company unionism and welfare. Especially if the introduction of a "plan" leads to a declaration of non-recognition b y the company

1070

THE GOLDEN NINETEEN TWENTIES

does the union leader resort to every device of argument. His contentions against the employeerepresentation plans are well known and often stated. He shows that the company union has no economic strength and no treasury, that individual representatives are responsible to no one unless it be to the company which pays their salary and their expenses, that the representatives may be intimidated or bribed, that the plan is almost always used to discredit and wipe out the real union, that company unions are often propaganda agencies for the employers' reactionary political and social ideals. Particularly convincing is the contention of the unionist that the management is recognizing "outside" forces, "outside agitators," when he consents to accept instructions, pressure or force from the directors and stockholders of the company. Certainly, most of the directors, and the few controlling stockholders, are not insiders in any true sense of the word. Contrasted with this, the worker is investing his life in the factory. He must be there eight to ten hours a day. Every factor of technique and management affects him immediately and directly. Yet when he asks that his vital interest be represented by a trade-union official of his own choosing who gives his full time to the work, he is told that no outsiders will be admitted. Furthermore, the manager will call in to assist him in such negotiations as he condescends to carry on with his men an expensive staff of talent —lawyers, statisticians, investigators, industrial counsellors, service bureaus, with undercover operatives to spy on the workers, personnel managers. He will hire them with one end in view— to obtain the best possible terms out of such wage bargaining as he may conduct with his companyunionized workers. These are the arguments of trade unionists and they are sound ones. What then can the union do about it? Can it control the company union? The phrase was used by the President of the A. F. of L. at the last convention: "If representatives of the union control any employee-representation plan offered by employers, it ceases to be a menace." And in the Federationist of October, 1925: "Wage-earners will do themselves and industries a great service when they capture company unions and convert them into real trade unions. The machinery of the company union offers a strategic advantage for such tactics. Use that machinery as a basis of a real organization." William Z. Foster of the Trade Union Educational League points out some of the appropriate tactics for capturing company unions by exposing their "hypocritical

pretenses" and by "penetrating these organizations by putting up candidates in the shop elections against the recognized company candidates." Implicit in the statements of both these leaders is the major purpose of complete destruction of the company union once the boring from within has been successful. Some idealistic personnel managers have spoken of the compatibility of trade and company unions and the possibility of their functioning in the same plant. But Green and Foster know, as every realistic labor unionist knows, that the two are diametrically opposed in principle and practice and that they represent distinct and conflicting systems of labor relations. T h e y can not grow in the same garden. In the half dozen or so plants where they have succeeded in doing so it has been at the expense of the vitality of the trade union. . . . But no matter how effective may be the work of trade unions in occasionally capturing a company association, the question may be posed quite frankly: What are the unions doing within their own house to withstand the attacks of the company-made councils? Do they realize how much the employer is stressing factory solidarity as against craft solidarity? Do thev realize that this argument sounds persuasive to unskilled workers, with no trade or craft, who work in the increasingly mechanized industry? The manager who is introducing a representation plan—or in fact any other sort of welfare device—talks to the workers in terms of the plant. The trade-union organizer talks to them in terms of craft, using the hoary symbols of a generation ago, about molders and patternmakers and machinists and the dozens of other crafts that are rapidly diminishing in importance, for example, in the automobile industry. Which is likely to catch the workers' ear? T h e answer is clear in the experience of the unions during the last few years, and in their failure to launch anv drives against the big steel, rubber, electric and automobile companies. They are trying to use a wooden plow to cultivate a modern 5000-acre farm. The steel strike of 1919, the railroad strike of 1922, and other great industrial conflicts have demonstrated what antiquated tools the craft unions have become in the business of organizing the big manufacturing and transportation industries. The confusion and disillusion bred by craft-union failure in the worker's mind has made him easy prey for the personnel expert offering salvation in the form of the company union. That confusion and dismay will not be lifted till the unions move toward real amalgamation rather

A M E R I C A N PROBLEMS than general, generous, but meaningless expressions of goodwill toward one another in time of strike. N o t only would a driving program of amalgamation hearten the workers w h o have been caught temporarily in the net of company-constructed unions. It would also strike at the roots of the whole practice of welfarism as a technique of chloroforming the group consciousness of the

workers. It would reveal the true nature of profitconscious uplift. W h e n the trade-union leaders begin to talk seriously of amalgamation they may be taken seriously when they lay plans f o r boring within the company unions. Until then the employing interests can continue their welfarism at top speed. T h e r e is no force to challenge their professions and to arrest their processional.

STERLING D. SPERO AND ABRAM L. HARRIS World War shut off most foreign immigration and so eliminated the chief supply of cheap labor for industry. Factories and mills turned to the country's great labor reserve, then, and the Southern Negro was brought North, frequently as a strikebreaker. As a result, the Negro problem became nationalized, and a new element was added to the many influencing the formation of slums and the movement of population. Southern agricultural interests attempted to retain their Negro labor force—sometimes by violent measures against the labor agents who came South to recruit. Northern towns, crowded and tense with the impact of war, saw race riots and lynchings. In the same period, the Negro's contribution to the arts received new recognition as the "Jazz Age" dawned and white novelists thronged to Harlem for material. In The Black Worker, Sterling D. Spero (1896) and Abram L. Harris (1899) are less concerned with the cultural incidence of the Negro's migration than with his economic condition. Their study considers the economic motives prompting migration, the work which followed, and the Negro's economic position after war demand for labor eased off. On the whole, the Negro had taken

T H E FIRST

the place of the newest immigrants: he did the more laborious sorts of work, received the least pay, and suffered the usual disabilities of the marginal laborer. These were increased by the fact of his color and were not mitigated by labor organization. Since the Negro was often an unskilled worker in mass production industries, craft unionism did not touch him. Skilled Negroes were often excluded from unions or thrust into special categories that prevented their working at the more desirable jobs. As a result, Negro organizations had small regard for labor unionism. Their largest concern was with philanthropic activities or the fight for civil rights. Thus, industry's antiunion drive received support from the presence of the large Negro labor reserve—and labor weakened itself by its intolerance toward or, at best, indifference concerning the Negro worker. Only in the nineteen thirties, as a result of C.I.O. activities, were Negroes being welcomed into many trade unions. But civil rights still continued unrealized. The selection here reprinted is from The Black Worker (New York, 1931) and is published by permission of the Columbia University Press.

THE GOLDEN NINETEEN TWENTIES The Black B Y CHAPTER

VIII:

STERLING

TAPPING

THE N E G R O

D.

SPERO

INDUSTRIAL

RESERVE

UNTIL THE W o r l d W a r , industry outside of the South was manned almost entirely by white workers. A steady flow of immigrants from abroad had furnished employers with a constant supply of cheap labor to meet the needs of industrial expansion. N e g r o labor, engaged chiefly in agriculture and personal service, was largely disregarded as a source of industrial man power except in such emergencies as acute labor shortages or strikes. Even in the South where the Negro slave had competed successfully with the white man in almost every branch of industry, the tradition of the separation of the races operated after emancipation to check the full and free use of N e g r o labor in industry. T h e industrial backwardness of the section made the more extensive use of black labor unnecessary and left the traditional relation between the races undisturbed. Northern employers drew upon the reserve of Negro farmers and servants to help them break their strikes as long ago as the middle fifties, but it was not until the eighties, when Negro farmers began to find it too difficult to eke a living out of the soil, that the black man went to the cities in large numbers and offered serious competition to white labor. These migrants first settled in the cities of the South. Their further movement northward was determined by opportunity for employment. This opportunity came as a sudden windfall at the opening of the World W a r . In 1 9 1 5 - 1 9 1 6 , when large numbers of recent immigrants returned to their former homes in response to the call to arms, huge waves of southern Negro labor began pouring into northern industries. Still more of this labor drifted northward under the impetus of the war-time industrial expansion created by the entrance of this country into the conflict. W h e n the war ended foreign immigration was restricted, and the northward trek of N e g r o labor continued on into 1924. This mass movement, which reached its height during the war and early post-war years, was but a greatly accelerated phase of the general drift of the Negro population from the country to the cities which had been going on for half a century in increasing volume. T h e following figures, showing the percentages of Negroes living in rural and urban areas at each census since 1890, indicate the pace of the drift:

Worker AND

A B R A M

Year 1890 1900 1910 1920

L.

HARRIS

Rural 80.6 77.3 72.6 66.0

Urban 19-4 Ì1.J

27.4 34.0

During the period from 1870 to 1910 the number of southern born Negroes in the North increased at an average or about 67,000 in each ten-year period. Between 1910 and 1920 the net increase was 321,890, more than the aggregate number for the preceding forty years and about five times the average for the preceding ten years. T h e migration responsible for this increase began about 1910 and rose to great heights between 1916 and 1919. This wave was followed by a movement of equal, if not greater, proportions, beginning late in 1921 and ending in 1924. A n estimate of the United States Department of Labor based on data gathered before this second movement had run its course placed its extent at 478,700. There are no census figures to indicate the net increase in the N e g r o population of the North and West resulting from these two waves of migration, but an estimate of one million would probably not be far out of the way. Nearly all the Negroes who left the South found their way to the industrial centers of the North and Middle West. T h e following table shows the increase in the Negro population of the most important industrial cities of the two sections: INCREASE

IN

NEGRO POPULATION

INDUSTRIAL CENTERS,

City New York Chicago Philadelphia Detroit Cleveland St. Louis Pittsburgh Cincinnati Indianapolis Kansas City

if 10

IN

TEN

LEADING

Ι9ΙΟ-2Ο

1920

Per Cent Increase

91,709

152,467

66.3

44.' 03 8 4-459 5.74'

109,458

148.2

'34< 2 2 9

43,690

34-45'

611.3 307.8

69,850

58.9

25,623

37.7*5

47.2

8,448

19,639 21,816 23,566

40,838

30,079

34.678 3°'7'9

58.9

53·*

59.0 30.4

There are no reliable figures to show the increases in these cities since 1920. There is no doubt that thev have been considerable, in some cases greater than the increase for the preceding decade.

AMERICAN PROBLEMS A school census taken in Detroit in 1925, after the second migration had ended, placed the Negro population at 81,831, or double the 1920 figure. The great bulk of these Negroes have found their way into industry. The census records 886,810 Negroes employed in manufacturing and mechanical industries in 1920 as against 631,280 in 1910, an increase of 40 per cent. At the same time the number of Negroes in industries concerned with transportation increased 22 per cent, and the number employed in the extraction of minerals increased 20 per cent, while the number in the Negro's traditional occupation, domestic and personal service, declined 5.5 per cent. It must not be forgotten, however, that despite the 24.7 per cent decline in the number of Negroes engaged in agriculture and the 5.5 per cent decline in the number in personal and domestic service, these two occupations at the last census still engaged the great bulk of the gainfully employed Negroes—3,301,150 out of 4,824,151, or 68.75 per cent of the total. Manufacturing, mining, and transportation claimed a total of 1,272,460. Most of the Negroes who came North went into lower paid work requiring little or no skill or experience. The bulk of them became unskilled or semi-skilled operatives in the steel mills, automobile plants, foundries, and packing houses. Many went to work at road building and other construction jobs. Others, and this includes many women, went into the commercial laundries, food industries, and the less skilled branches of the needle trades. In some cities certain of the specialized sewing trades, for example, the making of lamp shades in Chicago, have come to depend very heavily upon the labor of Negro women. Between 1910 and 1920 the number of Negro women in manufacturing and mechanical industries increased from 67,937 t o 104,983, while the number engaged in domestic and personal service declined from 853,387 to 793,631. . . . Although a large number of these Negroes were employed at semi-skilled labor, the overwhelming majority of them were unskilled. Only a handful were doing really skilled work. The Ford Highland Park plant had only two skilled Negroes out of an estimated 4,000. At the Dodge plant 75 per cent of the Negroes were unskilled, while similar or greater proportions held for the Packard and Hudson plants. It was stated in 1926 that 65 per cent of all the Negroes employed in the city of Detroit were engaged in unskilled work. The remaining 35 per cent included all those engaged in work above the grade of rough manual labor. This is generally true throughout all industry. In the building trades Negroes constitute but a

small percentage of the skilled mechanics. In 1920 they were 3.8 per cent of the carpenters, 8 per cent of the masons, 2.9 per cent of the painters, 5 per cent of the paper hangers, 15.2 per cent of the plasterers, 1.7 per cent of the plumbers, whereas their proportion of the laborers was 21.6 per cent. In the chemical industries in 1920, 23.4 per cent of the unskilled workers were Negroes, while the semi-skilled were only 4.6 per cent Negro. In the cigar and tobacco factories 66.8 per cent of the laborers and only 12.9 per cent of the semi-skilled workers were Negroes. The jobs into which the Negroes went were usually those which native Americans or Americanized foreign-born white labor did not want. Race prejudice naturally put difficulties in the way of the Negroes' entrance into industry. White employers sometimes refused to hire them and white employees sometimes refused to work with them. This was particularly true of smaller plants, although some large works like the Wisconsin Steel Company in Chicago, a subsidiary of the International Harvester Company, boast of their all-white character. The reason for this company's refusal to use Negroes when the other plants of the Harvester Company in the Chicago district employ over 2,000 of them is simply that the superintendent does not like them. Often an employer is doubtful of the Negro's ability to do his work or is fearful that his white employees may object to the black worker's presence. There have been instances of white workers objecting so strongly to the use of blacks that they have left their jobs. Between 1880 and 1900 there were thirty strikes reported against the employment of Negro workers, eight in the decade 1880-1890 and twentytwo in the decade 1890-1900. There are no available figures for subsequent years though it is well known that strikes against the Negro have occurred. The East St. Louis riots in 1917 and the Chicago riots two years later, though springing from complicated circumstances, were not without their labor angles. The intensity of this race feeling was caused largely by heavy importations of Negro labor. Not all of the Negroes who poured into the northern cities between 1916 and 1924 came of their own initiative and found their way into industry by themselves. Thousands were brought up by the labor agents of large employers. An officer of the Illinois Central Railroad told how Negro labor was used to carry out its huge construction program after the war. " W e took Negro labor out of the South," he said, "until it hurt." . . . T h e chief obstacle to the continued, not to speak of increased, employment of Negro labor

I074

THE GOLDEN NINETEEN TWENTIES

after the employer's initial doubts and fears had been overcome b y sheer necessity were difficulties in adjusting the newcomer to his strange industrial environment. T h e N e g r o migrant, who was for the most part a southern farm hand, unaccustomed to the discipline of industry, had his difficulties in adjusting himself to his new situation. Even those Negroes w h o came from southern cities and had had experience in the factories and mills had to make adjustments to the greater exactions and faster pace of northern industry. Employers complained that the N e g r o was unsteady; that he would lay off after pay day and spend his wages; that he would only stay on a job long enough to get some ready money and would then lay off until the money was spent, after which he would return to w o r k and repeat the performance. Complaints over wage garnishments were frequent, but not more so than in the case of foreign immigrants. Both lacked resources and it is hardly strange that they ran into debt.

in all sorts of clerical and administrative posts. Between 1917 and 1929 the number of Negroes in the public service of the city of N e w Y o r k increased from 247 to 2,275. W h i l e this latter figure included 894 laborers and a great many messengers and office boys, it also included police, attendance officers, engineers, clerks, and school teachers. Many N e g r o teachers in N e w Y o r k and other northern cities teach white children. Between 1910 and 1928 the number of Negroes employed in the federal civil service increased from 22,540 to 51,882, making the United States government b y far the largest employer of colored labor in the land. T h e colored workers on the government'» pay roll include in addition to thousands of clerks all sorts of professional, technical, and administrative employees. T h i s growing recognition in the public service is due to the colored citizen's increased political power, a by-product of the northward migration which may in time become a factor of first rate social importance.

A l l these criticisms diminished as time went on and the N e g r o workers became accustomed to the discipline of northern industry. . . . T h e most distinctive characteristic of the Negro's position in the world of labor is his relegation to occupations in which he does not compete with white workers—in short, the perpetuation of the tradition of black men's and white men's jobs. T h i s tradition is not confined to the South, but extends throughout the country. Pullman porters and dining car waiters are almost invariably black, while railroad conductors, locomotive engineers, subway guards, motormen, sales persons in stores, clerks and white-collar employees of every sort are almost without exception white. Certain of the skilled crafts which Negroes have followed in the South f o r years are practically barred to the N e g r o in the North b y union regulations or craft tradition where there is no union.

All of this shows that the obstacles to N e g r o employment break down and that the rationalizations which support them go by the board when circumstances make such employment necessary or expedient. W h e r e it is still possible to take advantage of the N e g r o and pay him less than a white man f o r the same w o r k or to use him as a tool to keep d o w n labor standards, the practice is followed. But where circumstances make this impossible or inexpedient the N e g r o receives the same treatment as the white man. Whether the N e g r o will hold the position in industry which he has won since 1916, whether he will become the victim of new inventions and new methods of production, whether he will withstand or give w a y under competition of white farmers who move to the towns, or of Mexican, South American, or other immigrants who come into this country, the future alone can tell. All that can be said at present is that the N e g r o has become an integral part of the labor force in nearly all of the country's basic industries.

A complicated and inconsistent set of rationalizations has grown up to justify the system. T h e N e g r o cannot be a locomotive engineer because he is unfit to be entrusted with lives or property to such an extent. Yet as a slave he ran locomotives in the South and even carried Confederate troops to the front to fight f o r his enslavement. T h e N e gro cannot be a mechanic because he is naturally incapable of doing skilled work although he followed skilled trades when they required a much higher degree of artisanship and skill than they do in this mechanical age. T h e Negro cannot be a clerk or white collar worker because these are positions of social dignity which members of an inferior race should not hold. Yet a number of cities and the federal government employ Negroes

CHAPTER X X I : LABOR

THE

NEGRO COMMUNITY

AND T H E

MOVEMENT

T h e change in the Negro's relation to industry during the last decade and a half has been so sudden that neither the black nor the white working world has been able to grasp its significance and adjust itself to its circumstances. T h e essence of this change has been the shifting of the Negro's position f r o m that of a labor reserve to a regular element in the labor force of nearly every basic industry. It has brought the N e g r o face to face with problems of working conditions, which,

AMERICAN though thev may contain special elements, are essentially the same as the problems of other workers. They are consequently problems with which the Negro cannot cope successfully without the cooperation of his white fellow workers. Yet ever since the rise to power of the American Federation of Labor both sides have raised obstacles to the consummation of such cooperation. O f all these obstacles none probably has been greater than the narrow and exclusive craft structure and opportunist philosophy of American trade unionism. . . . Although the Negro is but one of the victims of American craft unionism, he is a victim upon whom the burden falls with special weight, for his peculiar situation in American society makes it particularly difficult for him to cross craft barriers. T o the white trade unionist the Negro is not merely an outsider trying to get into the union, but a social and racial inferior trying to force the white man to associate with him as an equal. And the Negro knows that the white worker wants to keep him out of the union not merely as a potential competitor but as a member of a race which must not be permitted to rise to the white man's level. For three hundred years the Negro has been kept in a position of social and economic inferiority, and white organized labor, dominated by the hierarchy of the skilled crafts, has no desire to see him emerge from that condition. T h e educated leaders of the Negro community see only the racial aspect of this situation. T h e y see that many employers use Negro labor, thereby giving the black man an opportunity to cam a living which the policy of most white trade unionists would deny him. T h e y see white philanthropists and sentimental friends of the black man trying to help him by giving him schools and social-welfare agencies. They are impressed with the stories of the poor folks who become wealthy through thrift and hard work, and with the history of great institutions which sprang from small beginnings. Here, they say, are friends of the Negro who have proved their friendship, and here are ways of success which have been tried and found effective. So the race leaders counsel their people to beware of the white working man and to put their trust in the white upper classes. Labor solidarity to which the white unionist appeals when he needs the black man to serve his selfish ends, or which the radical preaches to increase his tiny following from any possible source is, they say, a very dangerous doctrine. It is far safer to give loyal service to the white man who wants it, and by hard work and saving to amass enough wealth to bring comfort and security.

PROBLEMS Negro leadership for the past generation has put its stress on the element of race. Their people's plight, they feel, is the plight of a race. T h e y turn a deaf ear to those who say that the Negro's plight is the plight of the working class in general merely aggravated by certain special features. All of the various schools of Negro thought which have had real influence upon Negro life have had one end in view, the elimination of racial discrimination. The most intelligent of all this racial leadership, that of the National Association for the Advancement of Colored People, is in this regard fundamentally little different from the rest. It is interested, not mildly but militantly, in civil liberties. It wants to stop lynching and Jim Crow ism in all its forms. It demands that the Negro receive decent and equal treatment in all public places and that he be accorded all those constitutional rights, including full suffrage, which certain communities have denied him. If all these disabilities were removed, the N.A.A.C.P., with the exception of a few leaders like Du Bois, would apparently be satisfied with the world as it is. The problems of the Negro worker which are the same as those of the white man are beyond its concern. . . . Negro administrators of white philanthropy, such as the leaders of the Urban League and the various committees on interracial cooperation scattered throughout the country, have also tried to lift trade-union barriers. They are interested in greater economic opportunity for the colored worker, and they believe that if he can get into the unions he will be able to follow trades which it is almost impossible for him to follow at present. T h e lifting or trade-union barriers is but one of the methods by which the Urban League and the interracial bodies seek their ends. Their aim is to foster kindly attitudes toward the Negro. Their principal appeal is to employers and the members of the professions. Their efforts to get the Negro into the labor unions have been confined to seeking the cooperation of prominent trade-union officials. Their appeal is an appeal by Negro leaders to the white upper class. It makes no attempt to reach the white or black rank and file. Historically the most potent influence in the black community has been the evangelical church. However, the absorption of the Negro into northern industry is gradually shaking the church's hold and a new philosophy, more in keeping with the dominant thought of the white world is rising in its place. Like the philosophy of the militant National Association for the Advancement of Colored People and that of the conciliatory interracial movement, this philosophy is decidedly in-

1076

T H E GOLDEN NINETEEN

dividualistic and middle class in outlook. It has its roots in the doctrines of Booker T. Washington and the Hampton and Tuskegee schools, which preach the gospel of salvation through thrift, enterprise, and industrial efficiency. Its flower is the National Negro Business League whose purpose is the encouragement and promotion of business within the race so that eventually an independent petty black capitalism will rise within the limits of white society. . . . But granted that all seemingly insurmountable difficulties could be overcome it is still hard to see what good this independent economy would do the great majority of Negro workers. The experiences of immigrants working for employers of their own race or nationality would hardly encourage one to believe that Negro workers would receive any more consideration at the hands of Negro employers than at the hands of white. Negro capital at best would offer an escape only to a handful of the abler, shrewder, more enterprising, more unscrupulous, and luckier members of the race. The majority doubtless would still till the soil or work for white employers as they do now. White capitalists like Rosenwald, Rockefeller, and others, who are the chief supporters of Negro philanthropy, are being implored by the National Negro Business League to underwrite a system of Negro chain stores. The supporters of an independent black economy evidently believe that Negro business enterprise should now take its place alongside of schools, churches, hospitals, day nurseries, Urban Leagues, interracial committees, and Y.M.C.A.'s as a worthy Negro charity. Like the rest, it will strengthen the hold of race separatism and postpone the day of a more thorough understanding between white and black labor. Such an understanding, in view of both the middle-class and race-conscious attitudes of the Negro leadership and the exclusive craft separatism and job consciousness of the officiai labor movement, seems remote indeed. The oversanguine radicals see in the Negro's special racial grievances and his new position in industry the

THE OF TUF. SOFT SPOTS in the American economy of the nineteen twenties, none gave intelligent observers more concern than the condition of American agriculture. As a result of European crop failures, price rises, and new markets— particularly the domestic one with the extraordinary increases in immigration and urban-

TWENTIES

nucleus of a discontented mass movement. But they overlook the fact that the unique social position of the Negro plus the white worker's absence of class consciousness lends force to the separatist preachings of the Negro leaders. It should not be forgotten that the Negro has won his place in industry in the branches in which labor organization has little or no hold and where the white worker's opposition to his employment has consequently carried least weight. Race leaders have not failed to point this out and to drive home the moral that after all the employer is the black man's best friend. And the white trade unionist, using the same facts points out his moral, that the Negro is an irredeemable scab who breaks the white man's strikes and tears down his hard won standards, and that the unions must exclude him lest he play the traitor in their midst. A labor movement built upon the principle of working class unity would of course take the Negro into its ranks and fight to raise the general standard. Self-protection alone should dictate such a course. But the white worker, sharing the prejudices of the rest of the white world, balks at the bugaboo of "social equality" and persists in relegating the black laborer to a place of permanent inferiority. But side by side with all these forces are tendencies in other directions which in time may destroy their potency. Most important is the machine, which is rapidly changing the meaning of skill and obliterating old craft lines. The machine, rather than any concept of working-class unity or industrial brotherhood, will compel the official labor movement to change its structure and policy if it is not to generate into a mere social relic. Ultimately this will probably redound to the Negro's benefit, but during transitional stages technical changes which reduce the personnel will hurt him along with other workers. And where, as on the railroads, the white men are organized and the Negro is not, the unions will seek to protect their members by compelling the employers to save their jobs at the expense of the Negro's, . . .

FARMER ization—American agriculture had recovered from the depression of 1893-1896 and for the next two decades climbed to new heights of prosperity. T h e fact is, by 1909-1914 (the five years later used as the so-called parity price and income period by the Agricultural A d justment Administration), farmers were doing

A M E R I C A N PROBLEMS as well as, or better than, other sectors in the American economy. There were boom times for farming in 1915-1920 because of the great increases demanded by wartime requirements. Agriculturists proceeded to mechanize, improve livestock, and open up at least an additional 50,000,000 acres of hitherto uncultivated land to cereal production. All this was accompanied by an unexampled increase not only in prices but in real estate values. The bubble was pricked in 1920—and while the greater part of the American economy recovered by 1922 and was enjoying the unprecedented prosperity of the golden nineteen twenties, agriculture remained depressed. By 1929, the farmer was worse off than he had been not only ten years earlier but indeed twenty years earlier. Land values dropped sharply, pushing many farmers into bankruptcy. A single statistical fact illustrates the collapse of agriculture: in terms of the ratio between prices received and prices paid the farm dollar in 1932 was worth only 47 cents. As Louis M. Hacker in his American Problems of Today (New York, 1938) tells the story: The efficiency of American agriculture was being hampered not only because of declines in gross and relative income. What was more serious was the fact that fixed charges were eating up a larger and larger share of the farmer's earnings so that he was compelled to divert the use of income from the improvement of his techniques to the payment of taxes and interests on mortgages. Total fixed charges absorbed 6 per cent of gross farm income in 1910 and 12 per cent in 1930: this was indeed a heavy price to pay for land ownership. The inevitable concomitants were foreclosures, sales for tax delinquencies, and a great

rise in tenancy. The reasons for agricultural depression were largely to be found in the decline of world and domestic markets and the opening up of new regions of supply. Europe, now occupying a debtor position, was seeking selfsufficiency. Between 1913 and 1932, Europe, Canada, Argentina, and Australia increased their acreage in major food crops more than 16 percent. The domestic situation was even unhappier. T o continue quoting from American Problems of Today: The possibilities of increasing domestic consumption of agricultural goods, in order to take in die slack, were remote. The following factors may be noted: 1. Our population growth was slowing down because of immigration restrictions and birth control. 2. The two decades 1910-1930 witnessed a profound change in dietary habits as Americans shifted from a reliance on nains and beef to a greater use of pork, vegetables, fruits, milk and sugar. . . . 3. Women were dieting and thus eating less calories. 4. Improved methods of heating homes and the growing elimination of the need for hard and back-breaking toil also made it possible for men as well as women to dispense with foods with high caloric contents. 5. Cotton was being replaced by rayons and other chemically produced fabrics. 6. Finally, agriculture itself haa become more mechanized and efficient, making it possible to produce more goods and fibers for each dollar of labor and capital expended. In fact, between 1919 and 1929, on a stationary cultivated acreage, the output of American farmers increased more than 20 per cent! There was, therefore, a surplus of farmers in the United States. Stuard Chase (1888), using in considerable part the agricultural sections of Recent Economic Changes, tells of other aspects of the farmer's plight in his Prosperity, Fact or Myth (New York, 1929). This is the selection reprinted here and it is published by permission of Bonibooks.

Prosperity, Fact or

Myth

BY STUART CHASE operate in masses; geographically it is impossible, temperamentally he hates the thought of it. There . . . BUT TO USE the simplification for the Ameri- is no such thing as the American farmer or any can farmer is too utterly incongruous. He does not semblance of such a thing. There are about 6 milCHAPTER V I I :

T H E SHARE OF THE FARMER

THE GOLDEN NINETEEN TWENTIES

1078

lion individuals1 sprawled across the country from the potato fields of Aroostook county in Maine to the corner where the icicle of Lower California begins to drop off the continent. With their families they comprise nearly 30 million persons. They range from a happy shiftless negro tenant hoeing an acre of poor corn field in Mississippi to Mr. Campbell with his 80,000 acre, 100 per cent mechanized wheat farm, in Montana. Both are "Mr. American Farmer," but the mind balks at treating them as a unit. . . . The W a r encouraged huge exports of American food-stuffs. W e fed millions of European peasants who had left their fields for the trenches. Prices went up, acreage increased, the tractor became popular, efficiency was widely introduced. At the close of hostilities, American agriculture was in an exceedingly prosperous condition, relatively speaking. The hill billies of Kentucky were still cultivating their rocks, but farmers on negotiable land were doing well the country over. Prices had been pegged for them, land values were soaring, credit was readily obtainable. The whole economic structure of agriculture had been given a glorious kick upstairs. Exports as we have seen held up well in 1919, and fairly well in 1920. In 1921, Europe suddenly stopped buying. Farm products shipped abroad tumbled $1,300,000,000 in the year. Wholesale rices collapsed. Land values exploded like pricked alloons. Unnumbered farmers who had been thinking of Florida, California and a new sedan, found their thoughts concentrated on mortgage interest. Their prosperity fell like a meteor into the sea. . . . And after 9 long years, the hiss of its extinguishment is still in their ears. The following figures from Recent Econoynic Changes tell the sad story more effectively than any prose, however purple.

E

INDEX

I9I4 1918 I9I9 1920 1921 1922

Prices Received for F a r m Products

100 200 209 205 116 124

NUMBERS

Prices Paid by Farmers for their Supplies

100 .78 205 206 156 '5*

Wages Taxes of Hired Farm on Farm Labor Property

100 176 206

100 118 130

*39

>55

150 146

1 Farmers by tenure, 1925: Full owners, 3,313,000; part owners, 555,000; managers, 41,000; cash tenants, 393,000; other tenants, 2,069,000. T o t a l , 6,371,000. In addition there w e r t , in 1925, 3,085,000 farm laborers.

1923 1924 1925 1926 1927

>35 '34 147 .36 «3'

»53 '54 '59 .56 '54

166 166 168 '7' 170

246 149 250 *53 258

The chapter might well end here. There is really very little more to say. Where farmers were getting a dollar for their corn or wheat or cotton in 1914, they were getting more than $2 in 1919 and 1920. Then the whole structure collapsed to $1.16 in 1921—cut almost in half. It has climbed up a little since, but in 1927 it was only $1.31. This is bad enough in itself. But worse is to come. Regard the other three columns. The prices which farmers paid for their clothing, hardware and other supplies had also doubled by 1920, and also tobogganéd in 1921. But instead of going down to 116, they only went to 156—where they have more or less remained, far above the level of prices for farm products. American agriculture has thus been caught in the famous "scissors" which the Russians talk about. It must pay relatively more for what it buys than it receives for what it sells. The wider the jaws, the more it squirms. In 1927 the jaws were 23 painful points apart. In the last two years they have narrowed a little, but they are still wide enough to make the pain sufficiently intense. The same thing happened in respect to the wages of the hired man, except that the scissors are even wider—39 points in 1927, and still widening. This has helped hired men a little but not the farmers who hire them. In taxes the situation is even more deplorable. Instead of dropping in 1921, taxes continued to climb. By 1927 they were no less than 127 points above farm product prices! Again the motor car makes its bow on the prosperity stage, but this time upside down. The chief reason for higher farm taxes lies in highway construction in rural areas. This has made contractors and automobile manufacturers prosperous but farmers have paid the freight. . . . Figures for several counties in Michigan show that in the last 7 years taxes have absorbed go per ce?it of the net return to farm owners. Other studies indicate that an absorption of one-third to rwo-thirds the net return is common. This woeful burden operates to depress land values. For the last century the value of farm lands had been marching steadily upward. Farmers came to believe that a mounting curve was inevitable— something as dependable as a mounting thermometer in the spring. They cannot adjust themselves to a sagging curve. But according to Mr. Edwin G. Nourse in Recent Economic Changes the end

AMERICAN PROBLEMS has come—1920 in his opinion registered the peak, nationally speaking. . . . That it certainly registered a steep temporary peak his figures make only too piain. INDEX NUMBER OF FARM LAND VALUES

Illinois Iowa North Dakota Kansas South Carolina Texas California Connecticut

1913 100 100 100 100 100 100 100 100

If 20 160 »"J «45 »5* 230 «74 167 1 37

1928 96 117 99 "3 no «39 161 '39

. . . Mr. Copeland has prepared a profit and loss account for all American farms for the year ending June 30, 1917. It is a pity to kick a man when he is down, and to continue reciting the woes of agriculture may seem unnecessarily cruel. As an accountant, however, I cannot forebear to append hie beautiful table. It must hâve taken months of arduous computation. Gross value of agricultural production » $12,117,000,000 Payments to other industrial groups 3,697,000,000 $8,430,000,000 Wages paid hired labor $1,191,000,000 Rents paid—net 1,167,000,000 Interest paid 260,000,000 Loss due to fall in land values 2,160,000,000 4,978,000,000 Net return to owners $3,452,000,000 Interest on market value of equity $1,759,000,000 Charge for owner's labor @ $540 per year 3,410,000,000 "Normal profit" 5,169,000,000 Deficit of actual profit

$1,717,000,000

' Including estimare for food grown and consumed on farm.

One final blow and 1 am done. Mr. Mitchell believes that the best single index of the lowly position of agriculture is in the percentage of farm per capita income, to the per capita income of the total population. In 1919, the average farm dweller was receiving 57 per cent as much income as the average American. In 1921, the ratio dropped to 34 per cent. Now it has climbed to about 40 per cent—and so still far short of 1919. Relative to the rest of us, farmers have lost 17 points in the last 10 years. In the face of this depressing testimony it is pertinent to inquire how farmers continue to exist

1079

at all. As a matter of fact, many of them have ceased to exist—as farmers. Nearly a million (net) left their homesteads for the city between 1920 and 1927. But 6 million still remain. Why? Well, for two reasons. In the first place, . . . we have been talking mainly about agriculture as a whole, which is to say the average farmer. He is non-existent. Hundreds of thousands of individual farmers, the country over, have made ends meet, and thousands have prospered. Soil, crop demand, export opportunities, mechanization, local conditions, differ widely. Individual abilities differ widely. Here and there agriculture continues to pay well. Secondly, and far more important, for agriculture to show a profit and loss account in red figures may be sad, even tragic, but it is not evidence of extermination. Farming is not a busmen —or, more properly, not yet a business. A corporation consistently in the red closes its doors and goes into the hands of a receiver. Without the lifegiving margin of credits over debits, it shortly ceases to exist. It is a child of the money and credit system, and the penalty of breaking the rules of that system is death. Not so the farmer. . . . He is carrying on a job far older than the money and credit system. He is handicapped seriously by its rules, but in a pinch he can still defy them. N o penalty of sudden extermination hangs over him. If his books do not balance, if his debits exceed his credits, he can throw his books out of the window and go out and pick a mess of peas, or milk the cow. He has a roof over his head, food in his fields, fuel in the wood lot. He can stand a financial siege if he must. The banker holding his mortgage may evict him and a few of his neighbors if interest is not paid, but he cannot evict a whole country-side. If times are generally bad, the banker may whistle for his money—and in the end go bankrupt himself. . . . American farmers as a class have had no share in American prosperity. They have bought some of the outward symbols, but their basic condition has improved but slightly since the crash of 1921. For the poor land farmers, it has not improved at all. The share of agriculture has been perhaps sufficiently established, but curiosity drives us on to inquire why the farmers are worse off than in 1920, while the rest of us are in terms of money income, at least, better off. W h y did our curve go up, and theirs go down? What made the scissors open wider? For one thing, as the scissors figure suggests, our changing standards have tended to depress the farmers. The nation is eating lighter foods, wear-

ιο8ο

THE GOLDEN NINETEEN TWENTIES

ing lighter clothing. Fruit and vegetable farmers have benefited somewhat (the trouble is the new demand has been frequently overestimated, resulting in excessive acreage) but cotton, grain, sheep and cattle raisers have suffered. Clothing demand has shifted to silk and rayon—good for Chinamen and wood pulp manufacturers, not f o r farmers. N o r is much in the w a y of agricultural raw materials to be found in automobiles, gasoline, radios, sporting goods, moving pictures, travel, college education and tabloids—all great items in the new standard of living. H i g h e r wages in industry have forced farmers to compete with the factory f o r labor, and thus raised somewhat the wages of the hired men—as w e have already noted. Also, as we have seen, the taxes inspired b y the motor car have been a tremendous burden. T h e collapse of the European market in 1921—a market which has never really come back—was the inciting cause of the whole agricultural toboggan slide. Meanwhile Canada, the Argentine, and Australasia have been putting an ever greater volume of agricultural products on the world market to the detriment of America. Canadian wheat has jumped f r o m 52 million bushels in 1900 to 550 millions in 1928; Argentine from 78 millions to 239 in the same period; Australasian from 49 to 1 1 9 million bushels. Argentine beef exports have increased f r o m 54 million pounds in 1900 to 2 billion pounds to-day. Finally, and perhaps most important of all from any long-range view, the machine has enormously distressed most fanners. It has made a f e w rich, but thrown agriculture as a whole completely out of step, and disrupted its time-honored rhythms. Tractors have eliminated 6 million horses and mules f r o m farms in the last 13 years. A tractor eats gasoline; horses eat oats and hay. Some 18 million acres of hay and grain lands are no longer needed, to the increasing dismay of hav and grain farmers. W o r s e , the old crop rotation of corn one year, oats the next, meadow land the third, goes into the discard, breaking up an old and admirable economy. Agriculture has always suffered from overproduction. Machines increase the agony. T h e y get more of a crop out of a given acre. Unless acres decline, the market inevitably will be saturated. Acres, alas, have not declined appreciably. T h e 19 principal crops covered 351 million acres in 1919 and 349 million acres in 1927. While a million farms were being abandoned during this period the "mass" of crop production, taken as 100 in 1919, grew to 106 in 1927. Workers are fewer,

farms are larger, production is greater. As in the factory, output per man on the farm is increasing, though at a far more leisurely pace. T h e large output tends to keep prices low. T h u s the gain in efficiency has not benefited most farmers. . . . Let us look a little more carefully into the fundamental incompatibility of the farm and business. T o begin with farmers are less mobile than industrial workers; they do not respond readily to shifts in demand, or to technical improvements. In the second place, the installation of a new machine requires first the approval or vote of the individual farmer, and second the individual financing thereof. H o w far would the machine age have progressed if factory workers had voted on each new loom or lathe, and then purchased it on their own credit? Somewhere higher up a boss decided on the new machine, and his board of directors found him the money. T h e worker either took it or took himself off the premises. Technological progress over the whole field of agriculture must be not only a slow process, but at some points— such as maximum efficient acreage per machine— an impossible one. Only a brand-new kind of centralized, coordinated control can really domesticate the machine on the farm. T h e half-way measures—a mechanized farm here and there—which are now in process, have no discernible end except more muddle. T h e Texas cotton growers have a temporary advantage, but I predict that it will not last. T w o cultures, fundamentally at odds, are trying to live in the same house. T h e business farmer, with large acreage and complete mechanization, brings down costs and makes a fair return on his investment. G o o d . T h e n what happens? T h e little farmers, hearing of the profits, sow their fields with the same crop. Squatters take up land and sow the same crop. Prices drop. Both big and little men are soon in the red. But the big man is likely to suffer more in the end. He has heavy fixed charges to meet on a large, depreciating investment. Under individual ownership and operation, crop surpluses have been and always will be unpredictable. N o b o d y has yet found a w a y to control rain, frost, hail and wind. This is a sufficiently risky situation f o r a centrally planned production system; it is altogether too risky for large blocks of private capital to flirt with indefinitely. A report of the United States Chamber of Commerce made in the summer of 1929, finds that 74 large farms averaging 12,000 acres, in 28 states, are neither more nor less successful than neighboring small family farms. It concludes that a revolutionary change in agriculture in the direction of quantity production—

A M E R I C A N PROBLEMS

1081

with its inevitable by-product of a disastrous effect from fulfillment. I submit that it never can be fulon the social life of the rural population—is far filled. The farmer is not a business man. . . .

THE BOOM DEPRESSED INDUSTRIES and the plight of agriculture were only two evidences of the fact that the boom of the later nineteen twenties was not soundly based. There were others for those willing and clear-sighted enough to read them: but most Americans went on their way unheeding. Certainly, no public officials in high places sought to issue warnings. Notably in the fields of financing and foreign economic policy—we can see now—were gross errors of judgment committed. T h e vast expansion of installment selling, particularly as regards the acquisition of durable consumer goods (automobiles, radios, furniture, electrical appliances), involved Americans in a mountain of debt. N e w devices for corporate financing and manipulation—holding companies, investment trusts, bank securities affiliates—were permitted to appear not only to inflate values but to increase further the debt structure of the nation. The credit inflation finally got out of control as a result of the orgy of stockmarket speculation in the second half of the nineteen twenties. Besides, we poured vast sums abroad, frequently into unsound investments. And as we became a creditor nation, at the same time we raised even higher the barriers against foreign imports—in the Emergency Tariff of 1921, the Fordney-McCumber Tariff of 1922, and the Hawley-Smoot Tariff of 1930. The rest of the world might buy from us and we were prepared to finance such purchases; but w e were unwilling to buy from the rest of the world. Certainly this could not go on forever; by the end of 1929, we were ready to see why. THE

In the selections that follow, some of the financial aspects of the boom are presented. During the nineteen twenties, Edwin R. A . Seligman ( 1 8 6 1 - 1 9 3 9 ) , professor of economics at Columbia University, undertook to super-

vise a study of installment selling (principally in relation to the automobile industry) which resulted in two large volumes. The Economics of Installment Selling (New York, 1927). Seligman regards the growth of installment selling as a new departure in economics, a revolution hardly inferior to the Industrial Revolution itself. Though earlier phases of consumption credit may have been marked by abuses, modern installment selling falls into another category because it is concerned with durable goods. After considering the process of installment selling as it affects manufacturer, dealer, and financial intermediary—the finance company—the study ends on a note of approval. Installment credit is the latest in history's many methods of financing consumption beyond the consumer's immediate ability to pay. Though it has some dangers, installment credit does not carry with it the threat of inflation. The "inveterate prejudice" against consumption credit is a relic of an earlier time when "luxuries" were only for a small, high-income group. After the event—that is, in 1933—1934—the Senate Banking and Finance Committee investigated some of the more unsavory aspects of financial promotion and manipulation. It hired Ferdinand Pecora (1882- ), Italianborn N e w York lawyer and Wilsonian Democrat, to act as its counsel; his keen probing exposed many weaknesses and led to the formulation of a sound regulatory policy. T h e Securities and Exchange Commission was one of the results of this inquiry. Later, Pecora summarized some of his findings in his Wall Street under Oath ( N e w York, 1939). Pecora looked into the operations of holding companies, investment trusts, bank securities affiliates, personal corporations and the like; he paid particular attention to the promotion of foreign

THE

ιο8ι

GOLDEN

NINETEEN

TWENTIES

bond and stock issues in the United States.

Yesterday

A n d , in all eases, he found a lack of responsi-

rative—as far as the student of economics and

bility on the part of the issuing bankers and

public affairs is c o n c e r n e d — i s the

houses and a betrayal of the trust of the b u y -

helplessness of the Federal Reserve Board to

ing public.

check the o r g y of speculation and to control

Frederick Harper's,

L.

Allen

(1890-

),

editor

of

( 1 9 3 1 ). W h a t emerges f r o m his narcomplete

the financial mechanism of the nation.

tells the story of the amazing Big

T h e selections are reprinted b y

permission

Bull Market in his lively description of the

of Harper and Brothers (Seligman and A l l e n )

golden nineteen twenties w h i c h he called

and Simon and Schuster ( P e c o r a ) .

Economics

Only

of Installment Selling

BY E D W I N

R. A.

CHAPTER II. MODERN INSTALLMENT SELLING

. . . THE PRODIGIOUS INCREASE in production and the lowering of prices led to continually newer classes of users. W i t h this change came the need of some alteration in the methods of sales and the disposition of the product. In the older days, when the automobile was an article of luxury and bought only by the v e r y wealthy, cash was virtually the only method available or desirable. But when the would-be purchasers came to be predominantly of the middle and lower middle class, and when it became more and more customary f o r the f a r m e r and even the more prosperous wageearner to desire a motor car, an opportunity arose to introduce some method to enable purchase on the part of those w h o had no great stock of accumulated savings or w h o , at all events, would find it inconvenient to pay in cash. T h e ordinary man of modest means w h o had learned how to construct his home through the building and loan associations, and w h o had had a more or less fortunate experience in buying the necessary furniture f o r his home through the instalment method, regarded with f a v o r this w a y of adding to his possessions what he n o w considered only next in importance to his house and his furniture. T h e r e was, however, another reason f o r the development of the new sales method—a reason connected with the dealer rather than with the consumer. T h e automobile business was at the outset a highly seasonal business. Especially in the early days before the advent of the great popularity of the closed car, the automobile sales w e r e massed in the early spring and summer. W i t h the gradual development of the volume of sales, the manufacturers began to realize what has long been a commonplace in economic theory and what has been the lesson of experience in business practice, that the advantages of mass production, which would

SELIGMAN

render possible a l o w e r i n g of the price and a capture of the market, w e r e more or less dependent upon an even and continuous output. It is obvious that w h e r e seasonal production of any commodity is marked, the non-utilization of the plant and the laying-off of w o r k m e n conspire to increase costs and to interpose difficulties in the successful prosecution of the enterprise. If now the distributors or wholesale dealers in the automobiles f o u n d , as w a s increasingly true, that the retail dealers w e r e able to dispose of their cars only in certain months of the y e a r , the problem of what to do with the accumulated stock became a serious one. If the demand on the part of the dealers was essentially seasonal, the demand of the distributors would become correspondingly seasonal, and the manufacturers w o u l d be confronted bv the problem of securing an even flow of their output. F o r the individual dealers to purchase cars and to store them in anticipation of the demand was out of the question; their capital was inadequate. F o r the distributors to step into the breach and to pay cash f o r large quantities of automobiles which they w o u l d have had to put in storage would have meant useless expenditures f o r storage facilities. A continuance of the old system, therefore, implied a rather rigid limitation on the possibilities of output. W h a t was more natural, then, than that there should occur to some ingenious minds the thought that if a method could be devised f o r replacing the system of cash sales, the problem would be solved? If the distributors could be permitted to pav f o r the accumulating stock of automobiles onlv as thev periodically disposed of them, the difficulties of the situation would be largely overcome. In this w a y , the t w o c o n v e r g i n g streams of influence, namely, the desire of the automobile user to be provided with a somewhat easier method of payment, and the interests of the automobile man-

AMERICAN PROBLEMS ufacturer to secure a larger as well as an even, uninterrupted flow of output, conspircd to bring about the introduction of the instalment method. Since the origin of instalment sales in automobiles is due to these two reasons, it becomes necessary to explain somewhat more in detail the influence of each. So far as the consumer is concerned, cash was the well-nigh universal rule up to 1910. Of course, here and there isolated instances were to be found, as in the sale of everything else, where the dealer made, largely for personal reasons, some credit concession to purchasers. But these instances were sporadic. With the growth in the number of automobiles, and in the desires of a continually growing group of more or less modest purchasers to secure automobiles, the custom arose of buying used instead of new cars—a custom strengthened by certain factors on the supply side as well. With the increase in the used-car business, the pressure upon the dealers to make some concessions to the buyer became stronger. From the year 1910 on, we find such concessions growing, especially on the Pacific Coast, where the climate rendered possible the utilization of automobiles for a considerably more protracted period than in the rest of the country, and where the good roads first made their appearance. Within the next two or three years, the system of making concessions in the way of time payments became quite common, and it had in the meantime been applied to new cars as well. Although the methods differed considerably from dealer to dealer, and although the terms were even more heterogeneous, the purchasing public was gradually accustoming itself to pay for the cars, whether new or used, in successive instalments, chiefly in monthly payments. T h e problem now arose as to how the dealer could contrive to pay cash to the manufacturer for the cars which he was now beginning to sell on instalments. He might indeed, and did in fact at first, turn to his local bank and endeavor to discount some of the notes turned over to him by the purchasers. But difficulties soon disclosed themselves. The dealer might not have been of unimpeachable credit or in possession of a credit rating such as that to which the local bank had been accustomed; and even where the dealer's own credit was good, he had in most cases no organization adequate to guarantee the solvency of the customer and therefore the standing of the notes turned in. Moreover, as many of these purchasers' notes ran for a considerable number of months, this paper was essentially lacking in the element of liquidity which the banks were accustomed to demand. Above all, there emerged the problem of

1083

collecting the unpaid instalments; and the local bank was often both unable and unwilling to institute a new and expensive department to oversee the delinquent purchasers. The relations between the dealer and the purchaser, therefore, inevitably called for some form of credit mechanism, adequate to this new method of instalment selling. More important, naturally, was the pressure brought to bear by the arrangements between the distributor and the manufacturer. Here, also, up to this period, it had been customary to sell automobiles strictly for cash, with the exception of isolated cases, as in all similar businesses, where the manufacturer made concessions to particular dealers and carried part of the stock on an open account during the slack months of the year. Such examples were, however, uncommon. But now, with the increasing pressure exerted upon the distributors by the manufacturers, the former realized that their capital was not sufficient. In an industry where so long a time elapses between the beginning and the end of the productive process, that is, between the purchase of the raw material ar d the final disposition of the finished product, the question of delay in payment becomes of prime importance. Even in an industry with a fairly large capital, it becomes embarrassing to have a large part of the funds tied up. If thousands of cars are to be manufactured and then indefinitely stored until called for by the seasonal demand, a decided limit is set to the output. Neither the distributor nor the manufacturer could secure much help from the local bank, partly for reasons explained above and partly because of the fact that, jf the banks were to be adequately remunerated for this new service, they would have to make charges which would probably bring them into conflict with the usury laws in the various states. Furthermore, laws restricting the amount of loans to be made to any one individual frequently resulted in a situation where the dealer could not obtain adequate financing accommodations. T h e manufacturer not only needed his money at once, but desired a larger, as well as an even and continuous, market for his product; the distributor, unless he was to dissipate his gross earnings in storage expenses and other payments, was under pressure to find buyers for the surplus cars. Something else was needed not only to render liquid the frozen credits which were thus being engendered on all sides, but also to impart a degree of reasonable safety to the new sales method. Thus from all the parties to the transaction, manufacturer, distributor, dealer and consumer, there now came a demand for machinery which would render possible a greater volume of trans-

1084

T H E GOLDEN NINETEEN

actions. The solution was found in the creation of the so-called credit companies or finance corporations. CHAPTER X V . CONCLUSIONS W e have come to the end of a long discussion. W e have seen that while not a little light can be thrown upon some of the problems of instalment selling b y an examination of the facts, there remain not a f e w points where a judgment rests for the present upon general economic reasoning. Let us attempt to restate here some of our principal conclusions. Instalment selling in the sense of making a final liquidation through the method of successive fractional payments, is both old and new. It is old in that it has been used in both public and private transactions from the beginning of recorded history. It is new only in the sense that it has been applied on a large scale in recent years to certain more durable consumption goods. T o all intents and purposes, it has become a problem of the automobile inasmuch as so large a part of all instalment selling is concerned with the automobile. W e have traced the origin and history of modem instalment credit, and have described in some detail the methods employed in so far as they affect the purchaser, the dealer, the manufacturer, the finance company and the investing public. W e have also sought to give more reliable estimates as to the extent of instalment selling and of outstanding instalment paper. Our conclusions were that many of the existing estimates are grossly exaggerated, and that instalment sales, in the case of the durable consumption goods to which the system is primarily applied, amounted at the end of 1916 to about four and a half billions of dollars out of total retail sales of about thirty-eight billions; and that the total of outstanding instalment paper was about two billions. W e proceeded next to point out that most of the prevalent opinions on instalment credit are the more or less unconscious reflections of prejudice or prepossessions as explained by the self-interest of the individual; and that scarcely a single one of the judgments rested upon either a satisfactory factual basis or an adequate economic analysis. In our analysis of the situation it was necessary first to note that, inasmuch as instalment credit is a part of consumption credit, the alleged contrast between production and consumption needed a more careful study. This study brought us to the conclusion that the utilization of wealth might be either productive, neutral, wasteful or destructive. Instalment credit, therefore, in the first place would have to be envisaged from the point of view

TWENTIES

as to whether articles to which it is applied represent a productive or even a neutral utilization. T h e ordinary charge brought against instalment credit on the ground that there is something illegitimate in the idea of granting credit on consumption goods was seen to be destitute of economic foundation. Employing the term "consumption credit" in the common acceptation, we traced the development of credit in general and showed how each great change in economic conditions brought with it the evolution of a new form of credit. Each successive form was at first deprecated, then coldly welcomed, and in the end cordially accepted. Instalment credit represents the latest stage of credit. Inasmuch as instalment credit is a part of consumption credit, we undertook in the next place to ascertain the general modern tendencies of consumption credit, irrespective of whether or not it is liquidated in lump-sum payments. W e found that the growth of consumption credit was affected by conditions which differed not only according to the section of the country, but according to the population of the town and the size of the establishment; and that consumption credit was far more successful under certain of these conditions than under others. While we found it difficult to secure an exact verification of the statement, we came to the conclusion that instalment selling denoted a substantial addition to the total amount of credit rather than a change in the proportions in the various forms assumed by consumption credit. In our endeavor to ascertain the exact points in which instalment credit differed from the other forms of consumption credit, we saw that there were certain differences ascribable to the commodities themselves, but still more significant differences in the conditions under which the credit is granted. T h e essential point here we found to consist in the character of the terms on which instalment credit is offered, and in the nature of the security for the grant of credit. In other words, we learned that perhaps the most serious problems of instalment credit clustered around the facts of delinquencies and defaults, with the consequent necessity of repossession. It was therefore to a study of repossessions that we devoted special attention. In addition to the common criticism that instalment credit is illegitimate because it applies to consumers' goods, we noted the almost equally common objection against instalment credit on the ground that it is granted for the use of luxuries. This led us to a study of the contrast between luxuries and necessities. A s a result of our analysis,

AMERICAN PROBLEMS we were led to emphasize the connection between the so-called luxuries and the rising standard of life in the mass of the community. W e came to the conclusion that while the force of the old objections against certain forms of senseless and extravagant luxury on ethical grounds remained unimpaired, attention ought primarily to be directed to the validity of the economic argument which explains the transition f r o m luxuries to necessaries. Making a particular application of the above analysis, we pointed out that the automobile must be regarded neither as a luxury nor as a type of foolish and wasteful consumption; but that, on the contrary, the advent of the automobile has marked a revolution in economic and social life which is comparable to that produced b y the introduction of the railway; and that, in the one case as in the other, we must weigh up certain resultant evils with the acknowledged benefits; with the conclusion that it is open to little doubt as to where the balance of advantages lies. In the final part of our discussion, w e took up some of the problems connected with the special effects of instalment selling. So far as concerns the consumer, we pointed out that the real problem consists in the contrast between present and future satisfactions, and that a more significant distinction than the one ordinarily drawn between consumers' goods and producers' goods is the distinction that ought to be made between goods that are paid f o r before or after utilization. T h e essential service of instalment selling was found to be the putting of durable goods on a par with ephemeral goods, and the rendering it possible immediately to place in the hands of the consumer worth-while commodities which it would otherwise be impossible f o r him to acquire. W e discussed in the next place the question as to whether consumers' judgments are irrational, and found that we must here distinguish not only as among various commodities, but also as among various income classes. T h e lower we descend in the scale both of income and of durability of goods, the greater we found to be the chance of irrationality and abuse. On the contrary, the higher we ascend in the scale of the class and in the nature of the productive utilization offered b y the services of the commodity, the smaller is the likelihood of irrational judgment on the part of the consumer. In such cases we found that instalment selling has a distinct tendency to correct in the process of time any possible distortion of judgment. Finally, with reference to the effect of instalment credit on savings, our analysis led us to the conclusion that instalment credit not only tends on the whole to strengthen the motives

1085

which induce an individual to save, but also tends to increase his capacity to do so. Instalment credit, in short, if applied to the proper articles and under the proper conditions, may promote not slavery but liberation. T a k i n g up next the effects of instalment credit on business conditions, we attempted to analyze its influence on demand. Here we came to the conclusion that instalment selling, instead of simply advancing the time when demand becomes effective, really leads to an increase of purchasing power. This is due not so much to the consideration that there is a correlation between output and demand, as to the undoubted fact that instalment credit puts goods of potential productive utilization at the disposal of the consumer at an earlier period than would otherwise be practicable. As over against this conclusion, w e studied next the problem of costs or finance charges; and while w e learned that there were still many abuses to be noted, we saw that the general tendency of the movement is in the direction of eliminating abuses. W e thus arrived at the conclusion that while instalment selling undoubtedly increases the cost of the product, this disadvantage is probably on the whole outweighed b y the corresponding advantages. Coming next to the influence of instalment credit upon production, the result of our analysis was that instalment selling tends in part at least to a stabilization and regularity of output but, above all, because of the device of fractional payments, to an actual increase and acceleration of production. W e took up finally the effects of instalment selling on the credit structure. H e r e we found indeed that there are special risks connected with instalment credit, and that these center about repossessions and used-car problems. This led us to a comparison between the recourse and the nonrecourse systems in the automobile business, with the conclusion that the weight of argument is distinctly in f a v o r of the recourse system. W e studied next the connection between instalment credit and business depressions; and, as a result of a detailed investigation into the conditions produced by the anthracite coal strike, we concluded that the dangerous effects of instalment selling on the credit structure have been exaggerated, and that, although the facts are as yet inadequate to furnish a foundation f o r definite statement, instalment credit under proper conditions is probably not open to the charges so often preferred against it in this respect. Summing up the entire matter, we should say that instalment selling, like every new institution,

to8ó

THE GOLDEN NINETEEN

is subject to the perils of novelty. It his engendered new devices and has created a new technique, but it has undoubtedly come to stay. Some abuses and perils which it were short-sighted to deny have crept in. What is needed is to apply to each particular case some of the results of the analysis which we have attempted to present. As the years roll by, experience will teach us to what classes of commodities and to what strata of society instalment selling is economically applicable. In the course of time outworn methods will be discarded and new abuses will undoubtedly appear. Is it not the part of wisdom to separate the chaff from the grain, to be on our guard against

the obvious dangers, and to eliminate one by one the improper practices until, precisely as in the case of our banking structure, we may be able to establish fairly definite and generally accepted standards for distinguishing the sound from the unsound, the real from the specious? When instalment selling comes to be measured by these criteria, we may expect to learn that the innocuous and the salutary must not be confounded with the inappropriate and the regrettable, and that, in its ultimate and refined forms, instalment credit will be recognized as constituting a significant and valuable contribution to the modem economy.

Wall Street under BY

FERDINAND

V . THE PATH OF ERROR . . . T o REACH a point where it more than rivalled J. P. Morgan and Company and Kuhn, Loeb and Company in the origination of securities, and, in addition, to build up a world-wide sales organization that sold many millions of shares annually directly to the public, might have seemed enough to satisfy anyone's lust for expansion. But the National City did not stop in its course even at this point. Finally, it must have dawned on Mr. Mitchell and his associates that after all the true purpose of the Company was neither to make bonds, nor to make sales of bonds, but to make money. And here, ready to hand, was the N e w York Stock Exchange, the very best place in the world to serve such an ambition. What if it were rather an unprecedented and forbidden thing for a national bank to be "in the market," to gamble, and to manipulate, like any fevered Wall Street speculator? It was not, in legal technicality, the " B a n k " that was speculating, it was the "Company." T h e development of the National City was, in this respect, a logical progression. Step by step, the affiliate had led the Bank into stranger and stranger pastures. Originally, when organized in 1911, it was to be used merely to hold certain investments that the Bank legally could not. From this, it expanded into an investment banking "house of issue," manufacturing bonds in imitation of the great private bankers. Under Mr. Mitchell's dynamic rule, it developed its immense machinery f o r selling those bonds to the general public. When it went still further, and used this machinery to distribute millions of securities not originated by itself, millions of the same stocks that

TWENTIES

Oath

PECORA

were being traded in upon the floor of the E x change, it already had one foot deep in the market; and its success and profits had become inextricably interwoven with the daily plus and minus signs of the stock quotations on the financial pages. It was only a short step from this, to complete and unrestricted speculation directly on the Exchange. Thus it came about that in the four months, December, 1928, to March, 1929—a time when Federal Reserve authorities were doing everything in their power to restrain the further growth of the wild speculative excesses of the market—the National City Company was a principal participant in and financed three separate "pools" trading in copper stocks on the Exchange. All three were subsidiaries of Anaconda. One was in Andes Copper, one in Chile copper, and the third in Greene Cananea. In some cases, the National City itself "ran the account"; in others, other members of the group did so. Almost 500,000 shares of these various companies were accumulated in these pool operations. About n j , o o o shares were retained as profit. T h e rest were sold to the public by trading on the Exchange in the usual manner. The National City's share of the profits was $167,000 in cash, plus about 66,000 shares of Anaconda stock, which, at the quotations then prevailing, were worth approximately $9,000,000. The National City, to be sure, ran little risk in taking these "flyers" and making these huge profits. Greene Cananea, for example, was a famous "mystery stock" at the time; its price was rising sensationally—but did this represent real value, or merelvr manipulation? The National City did not have to guess, for its fellow pool members were none other than John D. Ryan, Chairman of the Board of Anaconda, which controlled Greene

A M E R I C A N

Cananea, and Cornelius Kelley, the President of Anaconda. The fact that this whole operation depended on the use by directors and insiders of their confidential knowledge of their corporation's business for their own personal profit, did not deter them in the least. . . . One might think that the National City had now finally reached the limit, but there is more to come. Perhaps the most extraordinary of its activities during those frenzied years was the orgy of trading by the Company in the stock of the Bank itself. It is, of course, strictly against the law for a national bank to purchase its own stock. It cannot even lend money on its own stock. Legal technicalities aside, it is obvious that wild advances and recessions in the price at which a bank stock is quoted, cannot fail to affect gravely the stability and reputation o£ the institution. Of all stocks, bank stocks ought least to be the football of speculation. Solemnly the National City gave lip service to this doctrine. Its officers went so far in 1928 as to have the stock of the Bank stricken from the N e w York Stock Exchange, where it had been listed for many years, because they professed to be able to detect microscopic signs of manipulation in its price. This they considered to be "distinctly disadvantageous, and probably at times might even be dangerous." Yet mark what follows: in the next two years, National City Bank stock, which had a par value of $100, was pushed up and up until it reached dizzy heights. In January, 1918, when it was taken off the Exchange, it sold at $785. In June, 1928, it stood at $940; in January, 19J9, it climbed to $1,450; a few months later, it reached the fantastic price of $2,925 (actually, $ J 8 J per share, after a j for 1 split-up). The highest book value ever ascribed to it was only $70. And the National City, which had removed the stock from the Exchange "to prevent manipulation," was itself the principal trader! Altogether, in the three-and-a-half-year period ending December 31, 1930, the National City Company sold almost 2,000,000 shares of the stock of its Bank, and even then it had about 100,000 shares left over. In the single year 1919 it sold more than 1,300,000 shares. For the proud privilege of owning these shares, worth $140,000,000 at their highest book value, the public paid the stupendous sum of $650,000,000. Most of this inflated value was, of course, wiped out during the years of depression, when National City fell from 585 to 2 1 . Mr. Mitchell himself was a heavy loser —according to his own statement, the heaviest individual loser of all.

1087

PROBLEMS

The campaign to sell National City Bank stock was carried on by every means available. It was sold at these exorbitant prices by the hundreds of thousands of shares by National City salesmen, stimulated by special premiums. It was sold "over the counter" through regular brokerage houses, with fifteen or twenty of whom the Company maintained direct wires. The Company was by far the largest customer of the "specialist" in this stock, and kept in telephonic touch with him, on busy days, "maybe every three or four minutes." The Company not only accumulated and sold for its own account—at times as many as 30,000 or 40,000 shares in a single day—but it encouraged others to fan the flame, giving, free of charge, an option on 30,000 shares as the basis of operations for a syndicate headed by the well-known brokerage firm of Dominick and Dominick. It was making so much money selling the Bank's stock that it even sold more shares than it owned—i.e., it "went short"—and had to borrow 30,000 shares from Mr. Mitchell's private holdings to cover its sales. Greed and irresponsible banking could go no further. . . . X.

" W E COULD PERCENT! "

HAVE

TAKEN

ONE

HUNDRED

In your hands or in the writer's hands, a dollar is only a dollar. It can buy a dollar's worth of bread, or a dollar's worth of merchandise, or a dollar's worth of corporate stock. The skilled financier, however, would not go very far in his profession if he could not do better than that. In his hands, a dollar goes a long way: it frequently buys control of ten, or twenty, or even one hundred times as much money as the financier himself invests. In this chapter, we shall tell the story of one of the most outstanding and spectacular examples of this process encountered during the Senate Investigation: the investment trusts of Dillon, Read and Company . . . Like J. P. Morgan and Company and Kuhn, Loeb and Company, Dillon, Read and Company were private bankers. They did not, however, take deposits to any considerable extent, but concentrated on the creation and sale of new securities. Here they did a huge quantity of business, issuing nearly four billion dollars of government, municipal and corporate bonds and stocks for the fifteen years following the war. This was more than Kuhn, Loeb and Company, but less than J. P. Morgan and Company. Since they took no large amount of deposits, Dillon, Read and Company did not have in their control, from this source, any great fund of "other

ιο88

THE GOLDEN NINETEEN TWENTIES

people's money," as did the Morgans and Kuhn, Loeb. Bat they contrived a scheme which from their point of view was superior to the bankers' traditional technique. They were able to get control of the public's money, yet simultaneously they avoided the inconvenient necessity of keeping that money payable on demand, as is the way with ordinary deposits. This new superior technique was an amazingly simple combination of two devices: the "investment trust" and "nonvoting stock," together with some added features of Dillon, Read and Company's own invention. The first step, taken in 1924, was the organization of a corporation known as the United States and Foreign Securities Corporation. This was to be an investment trust, i.e., a company which invests in securities, just like any private person, but with the asserted advantage of trained management and great capital resources. There were three classes of stock in the new corporation— first preferred, second preferred, and common. There were 1 ¡0,000 shares of the first-named class, jo,000 shares of the second, and 1,000,000 shares of the common. The "first preferred" stock was so called because it was entitled to receive dividends of six per cent before the other classes of stock received anything, but in the matter of voting rights and control, it was anything but preferred. So long as dividends were regularly paid it could not vote at all, it had not the slightest voice in the management. It was, in short, what is known as "nonvoting stock," one of the devices which Mr. Otto Kahn had picturesquely denounced as "inventions of the devil." Under all ordinary conditions, only the common stock could vote, and therefore whoever controlled the common stock controlled the corporation. The entire 250,000 shares of "first preferred stock" were sold to the public for $25,000,000. As an added attraction, the public was also given 250,000 shares of the common stock—one share of common with each share of first preferred. That left unsold the 50,000 shares of second preferred stock, and 750,000 shares of common stock. All of this Dillon, Read and Company bought for $5,100,000. Thus, although it invested only one fifth as much as the public, Dillon, Read and Company, owning three fourths of the common stock, the only stock that could vote, completely controlled the corporation. The United States and Foreign Securities Corporation, ably managed and operated during an era of rising stock prices, prospered greatly. By 1928 there was a cash surplus of $10,000,000. What had the public, who contributed $25,000,000 of the

corporation's $30,000,000, gotten out of this prosperity? They had gotten their six per cent dividends on their first preferred stock—and that is all. True, they also owned 250,000 shares of common stock, but in spite of the $10,000,000 cash surplus, there had never been any dividend declared on the common stock. T o anticipate a little, there never was any dividend on this stock. What had Dillon, Read and Company realized? In the first place, it had, like the public, been regularly receiving by way of dividends on its second preferred stock, six per cent on the money it had invested. In the second place, it had made about $340,000 as its share of the bankers' "spread" in the sale of the corporation securities to the public. In the third place, it now had complete control, unhampered by any possibility of withdrawal, not only of the original $25,000,000 public contribution, but also of the $10,000,000 cash surplus which had been earned by the use of that money. T h e Dillon, Read and Company investment, which had originally controlled an additional $25,000,000, now controlled $35,000,000. T h e best part of the whole transaction, moreover, was that Dillon, Read and Company and individual members of that firm still retained practically all their 750,000 shares of common stock; and this common stock, which at the time of its original acquisition had been assigned a nominal value of 20 cents per share and according to Mr. Dillon, "was worth less," with a book value of "a million dollars less than nothing," had risen greatly, eventually going as high as $72 a share. Hence, an investment of, at the most, a few hundred thousand dollars, had brought in potential profits of thirty to forty million dollars for the bankers. . . . Even these astonishingly fortunate developments did not satisfy Dillon, Read and Company. There was still that $10,000,000 cash surplus fairly asking to be put to work. How employ it better than bv repeating on a larger scale the same operation that had already worked out so well? So a second corporation, a second investment trust, was formed. This one was called the United States and International Securities Corporation. Like the United States and Foreign Securities Corporation, it had three classes of stock, first preferred, second preferred and common. As in the first corporation, all voting power under ordinary circumstances was exercised by the common stock. As in the first case, too, the public was allowed to buy—this time for $50,000,000—only the "nonvoting" preferred stock with only a minority of the common stock added in. But there was one salient difference: this time, Dillon, Read and

AMERICAN Company did not have to invest a single dollar of its own. Instead, it was the United States and Foreign Securities Corporation, which, with its $10,000,000 cash surplus, now put up the money to secure complete control. There were now two investment corporations— the second with a $60,000,000 capital, controlled by the first with a $30,000,000 capital; and the whole $90,000,000 controlled b y Dillon, Read and Company, which had f o u r years before invested $J,I 00,000. Did we say that the organization of this new corporation, bringing with it control of an additional $50,000,000 of the public's money did not cost Dillon, Read and Company a dollar? It was a gross understatement: Dillon, Read and Company not only did not pay, they were themselves paid— over a million dollars—for their share in the arduous labor of organizing the company and floating its securities. T h e following year, 1929, prices went still higher, and some of the members of Dillon, Read and Company thought it an opportune time to let the public share a little of their good fortune. T h e y therefore consented to sell about 75,000 shares of their United States and Foreign common stock, at $47.50 or better per share, to certain pools organized b y Dominick and Dominick, who disposed of it after their own fashion. T h e y also sold another 45,000 shares through Dillon, Read and Company, to the firm's own customers at around $56 per share. Altogether, f o r these approximately 120,000 shares (not enough of the original 750,000 to disturb Dillon, Read's control), they received over $6,800,000. This in itself was over $1,500,000 more than the whole firm's entire original investment, and it was realized f r o m only

Only B Y CHAPTER X I I . T H E BIG B U L L

PROBLEMS

a petty fraction of their total common-stock holdings. A f t e r the stock-market crash in 1929, things did not go so well. T h e United States and International Securities in particular, sustained large losses amounting at one time to about $26,000,000. T h e stock in which Dillon, Read and Company had seen fit to invest the $10,000,000 cash surplus of the first corporation in 1928 was completely wiped out. T o Senator Couzens, the taking of this $10,000,000 "out of an investment trust you own, or which you control, rather, its ownership being in the public hands," and putting it "in another investment trust to further augment y o u r own profits," seemed "rotten ethics," and "reprehensible." T o Mr. Clarence Dillon this and all the rest of the story seemed perfectly proper even in retrospect. . . . M r . Dillon thought in terms of W a l l Street usage and legality, and from that point of view he even considered that the public had been treated with rare generosity and fairness. T r u e , the public had contributed five times as much as Dillon, Read and Company to the United States and Foreign Securities Corporation, and had received only one third as much of its common stock in return, but Mr. Dillon pointed out—and who can deny it—there was nothing to stop Dillon, Read and Company from having taken, not only 750,000 shares of this common stock, but the whole 1,000,000. Giving the public any interest at all in these shares, even a minority interest, was a sheer act of grace. In his own words: W e could have taken 100 per cent. W e could have taken all that profit. W e could have bought all the common stock f o r $5,000,000. . . .

Yesterday

F R E D E R I C K

MARKET

ONE DAY in February, 1928, an investor asked an astute banker about the wisdom of buying common stocks. T h e banker shook his head. "Stocks look dangerously high to me," he said. " T h i s bull market has been going on f o r a long time, and although prices have slipped a bit recently, they might easily slip a good deal more. Business is none too good. Of course if you buy the right stock you'll probably be all right in the long run and you may even make a profit. But if I were you I'd wait awhile and see what happens." B y all the canons of conservative finance the

1089

L.

A L L E N

banker was right. T h a t enormous confidence in Coolidge Prosperity which had lifted the business man to a new preëminence in American life and had persuaded innumerable men and women to gamble their savings away in Florida real estate had also carried the prices of common stocks f a r upward since 1924, until they had reached what many hard-headed financiers considered alarming levels. Throughout 1927 speculation had been increasing. T h e amount of money loaned to brokers to carry margin accounts f o r traders had risen during the year f r o m $2,818,561,000 to $3,558,355,000 —a huge increase. During the week of December 3, 1927, more shares of stock had changed hands

1090

THE GOLDEN NINETEEN TWENTIES

than in any previous week in the whole history of the New York Stock Exchange. . . . T h e speculative fever had been intensified by the action of the Federal Reserve System in lowering the rediscount rate from 4 per cent to 3 ^ per cent in August, 1927, and purchasing Government securities in the open market. This action had been taken from the most laudable motives: several of the European nations were having difficulty in stabilizing their currencies, European exchanges were weak, and it seemed to the Reserve authorities that the easing of American money rates might prevent the further accumulation of gold in the United States and thus aid in the recovery of Europe and benefit foreign trade. Furthermore, American business was beginning to lose headway; the lowering of money rates might stimulate it. But the lowering of money rates also stimulated the stock market. T h e bull party in Wall Street had been still further encouraged by the remarkable solicitude of President Coolidge and Secretary Mellon, who whenever confidence showed signs of waning came out with opportunely reassuring statements which at once sent prices upward again. In January, 1928, the President had actually taken the altogether unprecedented step of publicly stating that he did not consider brokers' loans roo high, thus apparently giving White House sponsorship to the very inflation which was worrying the sober minds of the financial community. While stock prices had been climbing, business activity had been undeniably subsiding. There had been such a marked recession during the latter part of 1927 that by February, 1928, the director of the Charity Organization Society in New York reported that unemployment was more serious than at any time since immediately after the war. During January and February the stock market turned ragged and unsettled, and no wonder—for with prices still near record levels and the future trend of business highly dubious, it was altogether too easy to foresee a time of reckoning ahead. Anybody who had chosen this moment to predict that the bull market was on the verge of a wild advance which would make all that had gone before seem trifling would have been quite mad— or else inspired with a genius for mass psychology. The banker who advised caution was quite right about financial conditions, and so were the forecasters. But they had not taken account of the boundless commercial romanticism of the American people, inflamed by year after plentiful year of Coolidge Prosperity. For on March 3, 1928 the stock market entered upon its sensational phase.

2

Let us glance for a moment at the next morning's paper, that arm-breaking load of readingmatter which bore the date of Sunday, March 4, 1928. . . . General Motors stock, opening at 139% on the Erevious morning, had skyrocketed in two short ours to 144 Vi, with a gain of more than five points since the Friday closing. The trading f o r tht day had amounted to not much more than 1,200,000 shares, but nearly a third of it had been in Motors. The speculative spring fever of 1928 had set in. . . . On Monday General Motors gained IVA points more, on Tuesday 3 Mí; there was great excitement as the stock "crossed 150." Other stocks were beginning to be affected by the contagion ai dav after day the market "made the front page": Steel and Radio and Montgomery Ward were climbing, too. After a pause on Wednesday and Thursday, General Motors astounded everybody on Friday by pushing ahead a cool 9VÌ points as the annoancement was made that its Managers Securities Company had bought 200,000 shares in the open market for its executives at around 1 jo. And then on Saturday the common stock of the Radio Corporation of America threw General Motors completely into the shade by leaping upward for a net gain of 12% points, closing at 12otó. What on earth was happening? Wasn't business bad, and credit inflated, and the stock-price level dangerously high? Was the market going crazy? Suppose all these madmen who insisted on baying stocks at advancing prices tried to sell at the same moment! Canny investors, reading of the wild advance in Radio, felt much as did the forecasters of Moody's Investors Service a few days later the practical question, they said, was "how long the opportunity to sell at the top will remain." What was actually happening was that a group of powerful speculators with fortunes made in the automobile business and in the grain markets and in the earlier days of the bull market in stocks— men like W. C. Durant and Arthur Cutten and the Fisher Brothers and John J. Raskob—were buying in unparalleled volume. They though: that business was due to come out of its doldrums. They knew that with Ford production deUyed, the General Motors Corporation was likay to have a big year. They knew that the Radio Corporation had been consolidating its position and was now ready to make more money than ic had ever made before, and that as scientific discovery followed discovery, the future possibilities cf the

AMERICAN PROBLEMS biggest radio company were exciting. Automobiles and radios—these were the two most characteristic products of the decade of confident mass production, the brightest flowers of Coolidge Prosperity: they held a ready-made appeal to the speculative imagination. T h e big bull operators knew, too, that thousands of speculators had been selling stocks short in the expectation of a collapse in the market, would continue to sell short, and could be forced to repurchase if prices were driven relentlessly up. A n d finally, they knew their American public. It could not resist the appeal of a surging market. It had an altogether normal desire to get rich quick, and it was ready to believe anything about the golden future of American business. If stocks started upward the public would buy, no matter what the forecasters said, no matter how obscure was the business prospect. T h e y were right. T h e public bought. . . . And so it went on, day after day and week after week. On March i6th the ticker was thirty-three minutes late and one began to hear people saying that some day there might occur a five-million share day—which seemed almost incredible. On the 20th, Radio jumped 18 points and General Motors 5. On March 26th the record f o r total volume of trading was smashed again. T h e new mark lasted just twenty-four hours, f o r on the 27th—a terrifying day when a storm of unexplained selling struck the market and General Motors dropped abruptly, only to recover on enormous buying—there were 4,790,000 shares traded. T h e speculative fever was infecting the whole country. Stories of fortunes made overnight were on everybody's lips. One financial commentator reported that his doctor found patients talking about the market to the exclusion of everything else and that his barber was punctuating with the hot towel more than one account of the prospects of Montgomery W a r d . Wives were asking their husbands w h y they were so slow, why they weren't getting in on all this, only to hear that their husbands had bought a hundred shares of American Linseed that very morning. Broker's branch offices were jammed with crowds of men and women watching the shining transparency on which the moving message of the ticker tape was written; whether or not one held so much as a share of stock, there was a thrill in seeing the news of that abrupt break and recovery in General Motors on March 27th run across the field of vision in a long string of quotations: G M 50.85 (meaning 5,000 shares at 185) 20.80. 50.82. 14.83. 30.85. 20.86. 25.87. 40.88. 30.87. . . . T h e Reserve authorities were disturbed. T h e y

had raised the rediscount rate in February from 3% to 4 per cent, hoping that if a lowering of the rate in 1927 had encouraged speculation, a corresponding increase would discourage it—and instead they had witnessed a common-stock mania which ran counter to all logic and all economic theory. T h e y raised the rate again in M a y to 4Vi per cent, but after a brief shudder the market went boiling on. T h e y sold the Government bonds they had accumulated during 1927, and the principal result of their efforts was that the Governmentbond market became demoralized. W h o would ever have thought the situation would thus get out of hand? In the latter part of M a y , 1928, the pace of the bull market slackened. Prices fell off, gained, fell off again. T h e reckoning, so long expected, appeared at last to be at hand. It came in June, after several days of declining prices. T h e Giannini stocks, the speculative favorites of the Pacific coast, suddenly toppled f o r gigantic losses. On the San Francisco Stock E x change the shares of the Bank of Italy fell 100 points in a single day (June n t h ) , Bancitaly fell 86 points, Bank of America 120, and Union Security 80. That same day, on the N e w York Curb Exchange, Bancitaly dove perpendicularly from 200 to n o , dragging with it to ruin a horde of small speculators who, despite urgent warnings from A . P. Giannini himself that the stock was overvalued, had naively believed that it was "going to a thousand." . . . But had the bull market collapsed? On June 13th it appeared to have regained its balance. On June 14th, the day of Hoover's nomination, it extended its recovery. T h e promised reckoning had been only partial. Prices still stood well above their February levels. A f e w thousand traders had been shaken out, a f e w big fortunes had been lost, a great many pretty paper profits had vanished; but the Big Bull Market was still young. . . . 4 During that " H o o v e r bull market" of N o v e m ber, 1928, the records made earlier in the year were smashed to flinders. Had brokers once spoken with awe of the possibility of five-millionshare days? Five-mill ion-share days were now occurring with monotonous regularity; on November 23rd the volume of trading almost reached seven millions. Had they been amazed at the rising prices of seats on the Stock Exchange? In N o v e m ber a new mark of $580,000 was set. Had they been disturbed that Radio should sell at such an exorbitant price as 150? Late in November it was

THE GOLDEN NINETEEN TWENTIES bringing 400. T e n - p o i n t gains and new highs f o r all time w e r e commonplaces now. Montgomery W a r d , which the previous spring had been climbing toward 100, touched 439% on N o v e m b e r 30. T h e copper stocks w e r e skyrocketing; Packard climbed to 145; W r i g h t Aeronautical flew as high as 263. Brokers' loans? O f course they were higher than e v e r ; but this, one was confidently told, was merely a sign of prosperity—a sign that the A m e r ican people w e r e buying on the part-payment plan a partnership in the f u t u r e progress of the count r y . Call money rates? T h e y ranged around 8 and 9 p e r cent; a little high, perhaps, admitted the bulls, but what w a s the harm if people chose to p a y them? Business was not suffering f r o m high m o n e y rates; business was doing better than ever. T h e new era had arrived, and the abolition of p o v e r t y was just around the corner. . . . T h e Federal R e s e r v e authorities found themselves in an unhappy predicament. Speculation was clearly absorbing more and more of the surplus f u n d s of the country. T h e inflation of credit was becoming more and more dangerous. T h e normal course f o r the R e s e r v e banks at such a juncture w o u l d have been to raise the rediscount rate, thus f o r c i n g up the price of money f o r speculative purposes, rendering speculation less attractive, liquidating speculative loans, and reducing the volume of credit outstanding. But the Reserve banks had already raised the rate (in J u l y ) to 5 p e r cent, and speculation had been affected only momentarily. A p p a r e n t l y speculators were ready to p a y any amount f o r money if only prices kept on climbing. T h e R e s e r v e authorities had waited patiently f o r the speculative f e v e r to cure itself and it had only become more violent. T h i n g s had now come to such a pass that if they raised the rate still f u r t h e r , they not only ran the risk of bringing about a terrific smash in the market—and of appearing to do so deliberately and wantonly—but also of seriously handicapping business b y forcing it to p a y a high rate f o r funds. Furthermore, they feared the further accumulation of gold in the United States and the effect which this might have upon w o r l d trade. A n d the T r e a s u r y had a final special concern about interest rates—it had its own financing to do, and Secretary Mellon was naturally not enthusiastic about f o r c i n g the G o v e r n ment to pay a f a n c y rate f o r money f o r its own current use. It almost seemed as if there were no w a y to deflation except through disaster. T h e Reserve Board finally met the dilemma by thinking up a new and ingenious scheme. T h e y tried to prevent the reloaning of Reserve funds to brokers without raising the rediscount rate. O n F e b r u a r y 2, 1929, they issued a statement in

which they said: " T h e Federal Reserve A c t does not, in the opinion of the Federal R e s e r v e Board, contemplate the use of the resources of the Federal Reserve Banks f o r the creation or extension of speculative credit. A member bank is not within its reasonable claims f o r rediscount facilities at its Federal Reserve Bank when it borrows either f o r the purpose of making speculative loans or f o r the purpose of maintaining speculative loans." A little less than a fortnight later the B o a r d wrote to the various Reserve Banks asking them to " p r e vent as f a r as possible the diversion of Federal Reserve funds f o r the purpose of c a r r y i n g loans based on securities." Meanwhile the R e s e r v e Banks drastically reduced their holdings of securities purchased in the open market. But no increases in rediscount rates were permitted. Again and again, from February on, the directors of the N e w Y o r k Reserve Bank asked Washington f o r permission to lift the N e w Y o r k rate, and each time the permission was denied. T h e Board preferred to rely on their new policy. . . . During the next month or two stocks rose and fell uncertainly, sinking dismally f o r a time in M a y , and the level of brokers' loans dipped a little, but no general liquidation took place. G r a d u a l l y money began to find its w a y more plentifully into speculative use despite the barriers raised b y the Federal Reserve Board. A corporation could easily find plenty of w a y s to put its surplus cash out on call at 8 or 9 per cent without doing it through a member bank of the Federal Reserve System; corporations were eager to put their funds to such remunerative use, as the increase in loans " f o r others" showed; and the member banks themselves, realizing this, were showing signs of restiveness. W h e n June came, the advance in prices began once more, almost as if nothing had happened. T h e Reserve authorities were beaten. . . .

In September the market reachcd its ultimate glittering peak. . . . Stop f o r a moment to glance at a f e w of the prices recorded on the overworked ticker on September 3, 1929, the day when the D o w - J o n e s averages reached their high point for the year; and compare them with the opening prices of M a r c h 3, 1928, when, as y o u may recall, it had seemed as if the bull market had already climbed to a perilous altitude. H e r e they are, side by side— first the figures f o r March, 1928; then the figures f o r September, 1929; and finallv the latter figures translated into 1928 terms—or in other words revised to make allowance f o r intervening split-ups and issues of rights. (Only thus can y o u p r o p e r l y

AMERICAN PROBLEMS judge the extent of the advance eighteen confident months.)

American Can American Telephone & Telegraph Anaconda Copper General Electric General Motors Montgomery W a r d . . . . N e w York Central Radio Union Carbide & Carbon United States Steel Westinghouse E. & M. Woolworth Electric Bond & Share . .

during

those

Opening High Adjusted price price high price March 3 Sept. 3 Sept. 3 1929 1929 1928 181% 181% 77 179 V> 54 % 128% 139% 132% 160% 94^ '45 138% 91% 180% 89%

304 13''i 396V4 72% 137% 256% ΙΟΙ »37% 2ÓI% 2897R 100% 186%

335% 162 396I/4 181% 4 6ό% 256% 5°5 413% 279% 313 25» 203%

O n e thing more: as y o u look at the high prices recorded on September 3, 1929, remember that on that day f e w people imagined that the peak had actually been reached. T h e enormous majority f u l l y expected the B i g Bull M a r k e t to g o on and on. F o r the blood of the pioneers still ran in A m e r ican veins; and if there was no longer something lost behind the ranges, still the habit of seeing visions persisted. W h a t if bright hopes had been

w r e c k e d b y the sordid disappointments of 1 9 1 9 , the collapse of W i l s o n i a n idealism, the spread of political cynicism, the slow decay of religious c e r tainty, and the debunking of love? In the B i g Bull M a r k e t there was compensation. Still the A m e r ican could spin w o n d e r f u l dreams—of a romantic d a y w h e n he w o u l d sell his W e s t i n g h o u s e c o m mon at a fabulous price and live in a great house and have a fleet of shining cars and loll at ease on the sands of Palm Beach. A n d w h e n he looked t o w a r d the f u t u r e of his c o u n t r y , he could vision an A m e r i c a set f r e e — n o t f r o m g r a f t , nor f r o m crime, nor f r o m w a r , nor f r o m control b y W a l l Street, nor f r o m irreligion, nor f r o m lust, f o r the Utopias of an earlier day left him f o r the most part skeptical o r indifferent; he visioned an A m e r ica set f r e e f r o m p o v e r t y and toil. H e saw a magical order built on the n e w science and the n e w prosperity: roads swarming with millions upon millions of automobiles, airplanes darkening the skies, lines of high-tension w i r e c a r r y i n g f r o m hilltop to hilltop the p o w e r to give life to a thousand labor-saving machines, skyscrapers thrusting above one-time villages, vast cities rising in great geometrical masses of stone and concrete and roaring with p e r f e c t l y mechanized traffic—and smartly dressed men and w o m e n spending, spending, spending with the m o n e y they had w o n b y being far-sighted enough to foresee, w a y back in 1929, what was going to happen.

I i

T H E UNITED STATES AND THE WORLD

ι

INTERNATIONAL

ECONOMIC

BEGINNING about 1 9 1 5 , the United States bec a m e a c r e d i t o r nation—private A m e r i c a n investments abroad e x c e e d e d the holdings of f o r eigners in the U n i t e d States—and the o u t f l o w of A m e r i c a n capital continued as one of the p r i m e characteristics of the golden twenties. J u l i u s K l e i n ( 1 8 8 6 the

U.S.

Bureau

of

nineteen

), director of

F o r e i g n and

Domestic

C o m m e r c e d u r i n g the H o o v e r administration, tells this s t o r y in his Frontiers

of Trade

(New

Y o r k , 1 9 2 9 ) . W r i t i n g during the boom and as an official of a g o v e r n m e n t committed to high p r o t e c t i o n i s m , K l e i n remains unperturbed in the f a c e of the d u b i o u s character of some of this

financing—particularly

of f o r e i g n g o v e r n -

m e n t b o n d s — a n d of the inability, even through their invisible services, of foreigners to meet the s e r v i c e c h a r g e s o n those debts. A m e r i c a n h i g h t a r i f f s c h e c k e d imports; the result was, interest overseas

and

dividends

investments

owed

were

Americans

not

paid

for

on in

g o o d s . T h o s e obligations, therefore, w e r e simply

a d d e d to the long-term

credits—in

se-

curities and in direct holdings—that A m e r i c a n s w e r e a c c u m u l a t i n g all o v e r the w o r l d . W h e n A m e r i c a n bankers and investors w e r e no longer w i l l i n g or able to

finance,

or subsidize, our

f o r e i g n trade in this fashion, A m e r i c a n exports d r o p p e d sharply and the depression deepened. I n 1 9 2 8 , K l e i n put such A m e r i c a n claims on f o r e i g n e r s at ten or eleven billions. B y the end of

1 9 3 0 , an official g o v e r n m e n t estimate put

them at fifteen billions. Paul D . Dickens, of the Bureau of F o r e i g n and D o m e s t i c C o m m e r c e , w r i t i n g in 1 9 3 1 A

New

Abroad,

Estiviate

of

American

in

Investments

makes a detailed analysis of A m e r i c a n

holdings b y regions and b y " d i r e c t " and " p o r t -

RELATIONS

f o l i o " investments. D i c k e n s defines " d i r e c t " investments to include c o r p o r a t e holdings in ( 1 ) A m e r i c a n - c o n t r o l l e d m a n u f a c t u r i n g and selling organizations, ( 2 ) stocks and bonds of f o r e i g n - c o n t r o l l e d m a n u f a c t u r i n g and selling corporations, ( 3 ) purchasing agencies, ( 4 ) petroleum lands and petroleum refining and distribution facilities, ( 5 ) mining and smelting properties, ( 6 ) public utilities, ( 7 ) plantations. " P o r t f o l i o " investments are defined to include ( 1 ) f o r e i g n bonds publicly and privately o f fered in the United States, ( 2 ) the shares of f o r e i g n corporations that are o w n e d in the United States, ( 3 ) bonds of A m e r i c a n subsidiaries of f o r e i g n corporations, and of A m e r i can corporations that lend abroad directly. Dickens says: " P o r t f o l i o investments are held primarily b y individual investors residing in the United States and b y insurance companies, investment trusts, and other financial institutions. T h e f o r e i g n security holdings of industrial and c o m m e r c i a l c o r p o r a t i o n s are c o n sidered as direct investments." And further: P r i v a t e l o n g - t e r m A m e r i c a n i n v e s t m e n t s in f o r e i g n c o u n t r i e s at the e n d of 1 9 3 0 a m o u n t e d to b e t w e e n $14,900,000,000 and $15,400,000,000 (exp r e s s e d in r a n g e f i g u r e s b e c a u s e e r r o r s in s u c h e s t i m a t e s are u n a v o i d a b l e ) . T h e i r r a p i d g r o w t h is b r o u g h t o u t c l e a r l y w h e n the p r e s e n t total is c o m p a r e d w i t h the e s t i m a t e s of i n v e s t m e n t s in 1 9 0 0 of $500,000,000 a n d in 1 9 1 2 $ 1 , 9 0 2 , 5 0 0 , 0 0 0 . In the last >8 y e a r s this c o u n t r y has i n c r e a s e d its h o l d i n g s abroad bv about $13,268,000,000, or by about $ 7 3 7 , 0 0 0 , 0 0 0 , a y e a r , e x c l u d i n g , of c o u r s e , the w a r debts to the U n i t e d States T r e a s u r y a n d s h o r t term investments. T h e d i s t r i b u t i o n of p r i v a t e l o n g - t e r m A m e r i c a n i n v e s t m e n t s a b r o a d at the e n d o f 1 9 3 0 , d i v i d e d g e o g r a p h i c a l l y a n d b y m a j o r t y p e s , is e s t i m a t e d as f o l l o w s :

T H E UNITED STATES AND THE WORLD PRIVATE

LONG-TERM

AMERICAN

INVESTMENTS

ABROAD, B Y T Y P E S AND GEOGRAPHIC AREAS, AT END OF

I93O

[In thousands of dollars] Area Canada Europe Mexico and Central America South America West Indies Africa Asia Oceania Total Deduct for international securities movement

Direct

Portfolio

1,048,787 1468,648 930,843 1,631,105 1,072,000

1,892,906 3,460,629

264,700

7,840,810

7,834,218

i S,6η Sfili

7,840,810

7,204,218

15,045,028 125,000

"5.329

419,504

'54.594

CHAPTER

VIII:

AMERICAN

INVESTMENTS

of our private loans in foreign countries is at present about thirteen or fourteen billion dollars. In other words, every man, woman and child in the country has a stake of $120 in these

T H E TOTAL

1,410,821 161,484 2.JOO

603445

630,000

630,000

satisfactory condition of America's balance of international payments, a Republican Congress, not content with the high duties of the Fordney-McCumber Tariff Act, in 1928 sat down to further tariff revision. In 1930, after a year and a half of discussion and with depression already upon us, there was enacted the Hawley-Smoot Tariff Act, incorporating the highest rates in American history. Foreign protests immediately were followed by retaliation from every quarter of the globe: and American goods and services were now confronted not only by heavy import duties but also b y import licenses and quotas, exchange controls and closed trading blocs. Lawrence B. Mann, staff member of the Foreign Policy Association, describes the early reactions to the Tariff Act of 1930 in the selection here reprinted. It appeared as Vol. V I , No. 15 (October 1, 1930) of the Information Service Reports of the Foreign Policy Association and is published by permission.

JULIUS

ABROAD

37.7Î3

15,170,028

Frontiers of BY

4,929.277

968,576 3,041,926 1,233,484 117,829 1,022,949 419,294

Add for insurance company and bank capital Estimated foreign investment at the end of 1930 T h e selection from Julius Klein's Frontiers of Trade ( N e w York, 1929) is reprinted by permission of D. Appleton Century Co., Inc. Though Protection did not become a political issue during the nineteen twenties, three tariff acts were passed, each raising duties to new heights and each evoking widespread protest both from American economists and from foreign countries about to lose their markets. Both groups were ignored by Congress and by administrations which were almost prepared to assume, along with an earlier and more naïve politician, that the tariff was only a local issue. There can be no question, now, that as a result of tariff barriers the hindrances to normal world trade made the economic lot of Europe during the twenties difficult, and deepened and prolonged the depression of the thirties as the whole world—led by the United States— took the road of economic nationalism. In the face of almost general disapproval on the part of economists and despite the un-

Total

3,941,693

Trade KLEIN

oversea interests, which is about six times the per capita amount in 1914. This, of course, is exclusive of the eleven billions of war debts owed to our Government. W e have heard much in recent years of the transformation of the United States from a debtor to a creditor country, but the ex-

1096

THE GOLDEN NINETEEN

pression of that change in cold figures makes a truly astonishing picture. Just before the war broke out, our investments overseas totaled about two billions, and foreign investments in this country were estimated at about five billions. These foreign holdings here are now about three and a half billions and are gradually climbing as European savings increase and conditions become more stable. In other words, our international financial balance has undergone a transformation since 1913 from the minus three billions into a plus ten or eleven billions. But behind those figures there has developed a truly dramatic and immensely significant situation in our international trade balance, one that affects not simply bankers and economists but every industry and trade, indeed every individual in the land. . . . These private investments of ours now yield annually about 1740,000,000 in interest, which is one of the largest of that important group of invisible items which I discussed in the preceding chapter, and which are so vital in the balancing of our international bills. Incidentally, that figure collected by our bankers, without any audible indications of cancellation on their part, is more than three and a half times the $209,000,000 paid to our Government by European exchequers as interest on the much-discussed war debts. . . . In the first place, it is obvious that the fourteen billions now invested abroad have been accumulating there for some years. Furthermore, a foreign loan is a credit, not actual currency shipped abroad. It finds its way overseas either in the form of merchandise shipped directly from our shores or in the shape of credit readjustments with other countries. As for governmental control, it may be said that our Government does not exercise any such regulation nor does it presume to pass on the general soundness and economic merits of such loans. Any intrusion of governmental machinery upon such a problem would involve the injection of politics into one of the most highly dangerous fields. It would subject our Government to accusations from abroad on the score of "economic imperialism" to a degree hitherto undreamed of. The only relationship of our Government to this particular phase of the problem is that exerted through the State Department, which, as a result of conferences between the bankers and President Harding's administration in 1921, has taken the stand that the Government cannot look with favor on three types of loans: ι. Those for unproductive purposes, such as

TWENTIES

military expenditure or mere budget balancing. Advances of the latter type would be nothing but subsidies to inefficiency and slack fiscal methods. 2. Those to foreign raw-material monopolies which might exploit our consumers. Under this heading the administration has on various occasions expressed its disapproval of loans to the Franco-German potash cartel and to the Brazilian coffee monopoly. The bankers have alleged that this position did not prevent the potash and coffee interests securing adequate funds in Europe in which it was reported, indeed, that some American participation was actually arranged. Thus, they allege, the intentions of our Government were completely frustrated, and only ill will toward us was engendered in Brazil, Germany and France. Regardless of whether this was or was not the case, or whether enterprises operated with such loans would encounter our anti-trust laws (as happened in the Sielcken coffee case shortly before the war), it has been clearly demonstrated during the debates in Congress, and in the discussions in trade circles and among large consumer groups, that any direct American financing of such oversea monopolies would immediately arouse the bitterest resentment here and would be certain to stimulate legislation which might become most regrettably extreme in its reactions upon εΐΐ of our oversea financing. 3. T h e administration disapproves of loans to nations that have not yet funded their war debts to the United States. This has, however, been rather broadly interpreted in the case of France and Greece. In certain chronically anti-American circles abroad there has been a good deal of agitation and alarm as to the danger involved in the accumulation of overwhelming financial power in the hands of any one nation. This vast predominance of ours, it is felt, may be dangerous to the highly sensitive economic organisms of the world. The hysteria of such criticisms may be brushed aside as more or less obvious propaganda. It emanates largely from what Roosevelt called the "lunatic fringe," which is universal and infinitely more voluble than the great mass of sober-minded citizenry. The specter of this "menace of the American Moloch" disappears immediately when it is recalled that British investments before the war exceeded our present total by nearly 50 per cent, and yet there was no world-wide alarm over that situation. Even to-day British holdings in foreign countries exceed eighteen billion dollars, but one cannot discern any widespread denunciation of England as a "swollen, callous colossus of moneybags" or any of the other vituperative epithets

THE UNITED STATES AND THE WORLD now being hurled at the United States. N o r is any alarm expressed as to the impossibility of the world's being able to meet the charges upon these British investments; nor was any embarrassment encountered in pre-war days when the purchasing power of money was far greater than we find it now. Instead of being a peril in any degree whatsoever, the lending ability of our people has been and is to-day one of the most potent factors in the restoration and advance of the post-war world. As Mr. Hoover once said: " B y contributing to peace and economic stability, by the loan of our surplus savings abroad for productive purposes, we can contribute to the elevation of the standards of living in foreign countries and the demand for all goods." In 1920, with reference to the economic demoralization of Europe, he pointed out that "there is only one remedy and that is by systematic permanent investment of our surplus in reproductive works abroad." . . . Nearly $170,000,000 of American capital has been invested in Poland in the last ten years, These millions have gone into public utilities, which have not only profited American construction companies and equipment organizations very materially, but have also made profound changes in the well-being of the Polish people. The contributions thus effected toward better living and higher consumer demand—through improvements in streetcar systems, municipal markets, gas plants, etc.— have all stimulated new purchasing activities and created markets for literally scores of American specialties—motion-picture films, household equipment, kitchen utensils, cheap automobiles— quite apart from the machinery and other heavier installations directly involved in the operations of American construction concerns. The Germans have been, next to the Canadians, the largest borrowers in the American market, having secured about $900,000,000 here since the war. Much of this investment has been in industries frankly in competition with our own, but, as in the case of Poland, large sums have also gone into public utilities, which have directly stimulated consumer demand incident to better living conditions. Our exports to Colombia and Venezuela averaged about twelve million dollars a year just before the war. In 1927 the total was almost eightyfive millions. It is true that much of this sevenfold increase (one of the largest recorded in any of our oversea markets) was accounted for largely oy heavy shipments of oil-well machinery, piping and railway equipment. But there were also most significant increases in our sales of numerous

1097

minor specialties—cheap phonographs, antiquated radio sets, films, bicycles, motorcycles, etc.—which were directly due to the general expansion of prosperity and purchasing power resulting from the increasing wages paid by the large American oil companies and fruit plantations. Here is a further illustration of this relation between loans and exports as applied to one specific undertaking, which is a type of evidence rather difficult to obtain: A large American organization, which has some eighty million dollars invested in its operations in a certain foreign country, has been importing into that country from the United States every year since the war an average of $3,700,000 worth of machinery, material, equipment, etc. This does not take into account the food, clothing and other articles imported for consumption by the concern's employees, whose purchases have, of course, been greatly stimulated by steady advances in wages. Another similar concern in the same field has imported from the United States in the course of nine years nearly fourteen million dollars' worth of merchandise. In southern Norway there is a factory in which $15,715,500 dollars of American capital has been invested and which is turning out cheap fertilizer for the world's farmers. A typical example of American investments in Canada, which have reacted powerfully upon our sales to our northern neighbor, is the ten million dollars put into one enterprise by our capitalists last year which has produced a whole new town and provided wages for hundreds of workers. This is just one of the reasons why Canada has for the first time become our be$t foreign market, passing her mother country in that respect, with a total purchase of our goods that exceeded $8jo,000,000 in the fiscal year 1927-28, or fifty million more than the United Kingdom is taking. Of course, it would be absurd to allege that we have been impelled solely by altruistic ideas in these dealings. The private loans by American investors have been straight business transactions. Our people have put money into enterprises abroad because of the especially inviting yields or the terms of these loans. . . . A n important phase of this whole question is the problem involved in our increasing investments in branch factories in foreign countries. Considerable apprehension has been expressed of late in industrial and labor circles as to the sinister consequences of this development. In some isolated instances this alarm is perhaps justifiable, If we turn to England's experience, there can be no doubt that the establishment of textile mills in Brazil and jute factories in India have done ma-

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THE GOLDEN NINETEEN TWENTIES

terial damage to Lancashire and Dundee. There is a question, however, as to whether this oversea industrialization could have been avoided. In each case upon analysis it is revealed that special circumstances were responsible: high tariffs against finished goods in the case of Brazil, or the proximity of cheap labor and raw material in the case of India. British capital in both of these instances, therefore, took the only available course of attempting at least to control the oversea development rather than have it drift into competitive hands. In this manner the production has in some cases been confined to lines or markets in which competition with British products would not be so embarrassing. In the case of our own industries, there have been numerous developments of this type. Our exports of shoes to several Latin-American markets have been considerably reduced through the development of native factories, but these in many instances have been under American control, and in several cases the American exporters affected are now doing a larger business with those markets in findings, supplies, etc., then they were previously in the finished product. This was also the experience with a well-known rubber company in its trade in raincoats and allied lines; the company is now making greater sales in rubberized cloth and other supplies for native industries in various South American countries than it enjoyed previously in the finished garments. There is an American branch factory in Japan which recently secured a large order for South America. This raised the cry of "cheap Oriental labor competing with American workmen." But on closer investigation it was evident that the American home plant could not have secured the order in any case as against European competition, and the success of the branch in Japan, therefore, was indirectly a distinct gain, in that it meant more demands from the branch for American supplies and equipment, to say nothing of the profits accruing to the parent house. The industrialization of China has been causing some alarm in recent years because of abundant cheap labor. It has been feared that this would curtail our fabricated exports to that market. This, however, has by no means been the case. Our sales there have risen from $35,000,000 in 1913 to $102,000,000 in 1927—and that in spite of all the turmoil and civil war during the past decade. Chinese textile factories have made no appreciable headway against our Far Eastern cloth trade. For the most part their products are not in competition with ours but rather with lower grades produced by Japan and England.

One of the paramount issues in connection with the growth of our oversea investments has been the development of a policy of control by our bankers or industrialists to prevent unfavorable reactions on our own welfare. Such controls are known as "ear-marking"—namely, the stipulation that a part, perhaps all, of the proceeds of the loan shall be expended by the borrower in the lending country. This practice, though common in Europe, has made little headway here as yet. On one point, however, our manufacturers have insisted with some effect—namely, that when the proceeds of the loan are to be expended the specifications of the bids involved must be non-discriminatory. W e have a right at least to an "even break," and our official agencies abroad have been especially vigilant to see that this is assured. Ear-marking definitely restricts the buying freedom of the borrower and therefore discourages his recourse to such markets where it is actually imposed. Indeed, it has been the experience of some European bankers that the practice develops a definite feeling of resentment on the part of the borrower, which finds expression at times in very embarrassing fashion. Compulsory trading of this or any other sort never makes for that mutual satisfaction for both parties which is indispensable in successful modern business. Our American investment bankers have been warned that unless they proceed warily in this field, with every precaution against the stimulation of undue foreign competition through such loans, they may destroy the American industries which, so to speak, are producing the very funds that are being used in the given loan or investment. Governmental control over such loans is obviously out of the question, as I have indicated above; the perils of such bureaucratic paternalism are too evident to require discussion. There are, however, other devices which are being suggested. In various European countries considerable use is being made of interlocking directorates; that is, the same executives sit both on the investment bank board and on that of the given industrial enterprise; consequently, the bank will be careful not to finance a foreign enterprise competing with the native industry controlled by the bank's officials. This was a conspicuous feature of Germany's oversea activities just before the war, and there are occasional evidences of the practice in our own recent experience in one or two South American countries. The anxiety of American labor over this stimulation of oversea industry through American loans is beginning to find expression through the increasing ownership of shares among employees in

T H E UNITED STATES AND THE large enterprises with branches abroad, or with such prestige in financial circles as to command some respect among investment bankers. Then there is the vital problem as to the payment by foreigners to us of the vast amounts of interest due on these ever-increasing loans. This sum totaled $740,000,000 in 1927, and the query has arisen as to whether we are hampering such payments through our tariff policy in defense of our own industries which compete with those whose products our foreign debtors wish to export to us. This apprehension has been expressed for years, but it ignores the fundamental fact that such international obligations are by no means necessarily settled through the direct interchanges of goods between debtor and creditor. As I have indicated, the amount owed to us as interest on our investments is more than balanced by one item alone—namely, our tourists' bill abroad. So when some blue-spectacled prognosticator asks with alarm, " H o w are thç poor foreigners ever going to pay such an enormous sum in annual interest to our American bankers?" we can truthfully reply that we are paying it for them when we take our pleasure jaunts or business trips abroad. Every dollar spent by the 500,000 American travelers who swarm in foteign countries each year, whether it be for opera tickets in Vienna or Cook's tours to Stratford, is a contribution toward the adjustment of amounts owed to us by foreigners. This tourist item played a vital part in the recent discussions with France regarding the French war debt and her tariff policy on American merchandise. It was revealed that whereas the interchange of merchandise between the two countries was

WORLD

"unfavorable" to the French, since we sold them about $225,000,000 worth a year and bought from them less than $150,000,000 worth, nevertheless the largest single item on the Franco-American balance sheet was an invisible one very much in favor of France—namely, the $225,000,000 debt which we owed her for taking care of our tourists. The position of the United States as the greatest investing nation in the world to-day is one of responsibility no less than of opportunity. It affords no basis for flamboyant jingoism or economic rantings. The great financial resources of our people are something to be utilized carefully, discreetly, without ostentation or undue aggression —with a just regard for the general welfare and for our own proper interests at home and in foreign lands. There should be no shortage of capital for domestic purposes, and it may be said with confidence that no such shortage impends or is in sight. This vast fund of capital, which we are pouring into the pool of the world's business at the rate of four or five million dollars a day is an invaluable contribution to prosperity in general. And prosperity anywhere is "all to the good." It is something that no one nation can or should hope to monopolize. W e do not gain from the presence of adversity or depression elsewhere. It is greatly to our interest in cold dollars and cents to have business booming in all parts of the world, to find ourselves surrounded by contented, busy neighbors. That is one of the surest guarantees of international order and goodwill. Political disturbances spring from economic unrest, from depression and misery. . . .

Foreign Reactions to the American Tariff BY

LAWRENCE

INTRODUCTION THE TARIFF ACT of 1930, popularly known as the Hawley-Smoot tariff, became law on June 17, 1930, after a year and a half of lengthy hearings, protracted discussion in both houses of Congress, and protests by governments, chambers of commerce and agricultural associations of leading foreign countries. Widely conflicting statements have been made concerning the comparative height of this tariff, its cost to the American people, its effects on import and export trade, and the possibilities that it may result in retaliation on the part of foreign countries. The world-wide interest in a piece of legislation

B.

Act

MANN

which its supporters assert is purely domestic is explained very largely by the outstanding position of the United States in international trade and finance. The total value of commodities exchanged by the various nations has in recent years averaged about 35 billion dollars annually, of which the United States has supplied exports valued at about 5 billion dollars and taken imports valued at about 4V4 billion dollars. In other words, the United States furnishes about 15 per cent of the world's exports and takes more than 12 per cent of the total imports. It ranks first among the nations as an exporter of goods, and is second only to the United Kingdom as an import market. Furthermore, the government and citizens of the United

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T H E GOLDEN NINETEEN

States have made foreign loans of a public and private nature during the past decade and a half which aggregate well in excess of zo billion dollars. It is possible that a substantial increase in the American tariff will make more difficult the payment of the interest and principal of these loans. T h e fact that only about 8 per cent of domestic production is exported and that imports form an even smaller proportion of consumption give the impression that foreign trade is of relatively small importance to the United States. Actually, however, the foreign demand f o r that proportion of agricultural and mineral production which is exported often determines the value of the entire output of the United States. This is particularly true in the case of cotton, wheat, and copper. Furthermore, exports have become of everincreasing importance in the case of many types of finished manufactures, such as automobiles, moving pictures, electrical machinery, agricultural implements, and typewriters. On the other hand, imports of crude materials are a vital necessity for many of the largest industries. T h e United States is entirely dependent on foreign countries for rubber, silk, tin, coffee, cocoa, and many textile fibres, and is compelled to import a substantial proportion of the copper, petroleum, wood pulp, wool, sugar, furs, and hides and skins used by its industries. Foreign trade is even more vital in the case of many foreign countries which do not have as large an area or as varied resources as the United States. It is necessary f o r them to import, and the purchasing power f o r these imports must be partly irovided by exports. On account of its large popuation and high standard of living, the United States is the most important market f o r many types of commodities produced by these countries. It takes more than two-thirds of the exports of Mexico, Cuba, Colombia, and certain Central American countries, and from one-quarter to onehalf of the imports of Brazil, British Malaya, Japan, Canada, Chile, Peru, and Venezuela. It is not surprising that a radical revision of the American tariff has caused grave concern in many foreign lands.

f

During the discussion of the Hawley-Smoot tariff, protests were received from more than 30 foreign nations in regard to changes in over 200 commodity classifications. These protests were usually inaugurated by foreign commercial or agricultural organizations, but in a number of cases were also reinforced by an official note from the government of the foreign country concerned. T h e tariff act of 1930, in addition to encouraging upward tariff revisions in Canada, Cuba,

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Mexico, France, Italy, Spain, Australia and N e w Zealand and creating general irritation against the United States and American goods, has had a number of interesting by-products: ( ι ) It has resulted in several attempts to curtail imports of a number of important American products, such as automobiles, copper and moving pictures. It is impossible to estimate at the present time how far this movement will go, but it seems more likely to be successful in the case of consumers' goods, such as automobiles and moving pictures, than in the case of producers' goods, such as copper, cotton, and petroleum, which are usually not identifiable in their final f o r m and are consequently less susceptible to boycott. ( j ) T h e American tariff has been mentioned in a number of statements advocating the movement f o r a general European customs union as it is claimed that such a union would be in a better strategic position than individual countries in bargaining with the United States concerning rate concessions. (3) T h e 1930 tariff act has also been cited in the United Kingdom and various British Dominions and possessions as an added reason f o r a system of British Empire preference. A United Empire party has been created in Great Britain; and Canada, Australia, N e w Zealand, Bermuda and other possessions have revised their tariffs in such a w a y as to encourage trade with the United Kingdom and discourage trade with foreign nations. . . . This report will outline briefly some of the more important features of the new tariff act, the commodities and countries most affected by changes in duties, and the specific reactions of foreign countries to the passage of the act.

ANALYSIS OF THE 1930 TARIFF ACT T h e United States has f o r many years had a protective tariff—that is, tariff rates are fixed at levels sufficiently high to protect American producers from the competition of lower-cost foreign producers. This is in contrast with systems of tariff for revenue only, which make no attempt to equalize foreign and domestic costs of production. T h e United States tariff has a single column of rates which applies to imports from all foreign countries except Cuba, whereas practically all foreign nations have at least two columns of rates, the lower of which applies to countries with which they have "most-favored-nation" treaties and the higher to all other countries. Certain nations also have provisions in their tariff law f o r countervailing duties to be applied to imports from countries

T H E UNITED STATES AND T H E WORLD which have raised a particularly high tariff barrier against their exports. The tariff act of 1930 encompassed a somewhat less sweeping revision of duties than did the tariff act of 1922. This was not particularly significant in view of the fact that it was enacted by the same political party as the previous act, that there had been no drastic change in price levels between the passage of the two acts, and that the President, in his message of April 16, 1929 calling a special session of Congress, had specifically recommended that the revision of schedules other than that dealing with agricultural products should be "limited." According to a tabulation by the Tariff Commission, there were 3,221 dutiable items in the act of 1930 as compared with 2,840 in the act of 1922. Of 1,125 changes in rates, 890 were increases and 235 were decreases. Fifty items which had been on the free list became dutiable, while 75 items which had been dutiable were made free. Calculations of the Tariff Commission indicate that the average ad valorem rates under the new law, based on statistics for 1928, are 41.57 per cent on dutiable articles and 16.01 per cent on free and dutiable articles combined. These average rates are somewhat higher than under either of the two immediately preceding acts, about the same as under the Payne-Aldrich and Wilson acts, and lower than under the McKinley and Dingley tariffs. The significance of these comparisons is very questionable, however, as there have been radical changes in the nature of American import trade during the past forty years; crude materials and iemi-manufactured articles, most of which enter free of duty, have increased greatly in relative importance, while imports of foodstuffs and finished manufactures show a corresponding decline. Furthermore, shifts of items between the free and dutiable lists make comparisons of average rates under different tariff laws misleading. The most drastic changes in rates under the ict of 1930 were recorded in the agricultural schedule, which was raised to the highest average level in the history of the United States. But substantial increases were also shown in the average ad valorem rates in many manufactured articles in the following schedules—wool and manufactures, sugar, chemicals, cotton manufactures, and earthenware and glass. The administrative features of the new tariff act ire in the main similar to those of the previous act, although the powers of the Tariff Commission in regard to rate adjustments (the flexible clause) have been considerably broadened. . . . Under the flexible clause of the act of 1922 the Tariff Commission in the course of seven years

IIOI

received Ó03 applications for investigations covering 375 commodities; it instituted 83 investigations covering 91 commodities, and completed 47 investigations covering 56 commodities. Rates were changed by Presidential proclamation in the case of 38 commodities (33 increases and 5 decreases), while no action was taken in the case of 18 commodities. As a rule, investigations in the past required about two years for completion, as it Was necessary to hold hearings and conduct extensive inquiries into both the domestic and foreign costs of production. E F F E C T S OF THE N E W

AMERICAN

TARIFF

POLICY

ABROAD

In order to determine what justification there is for foreign protests against the United States tariff it is desirable to have some idea of the comparative height of the tariff walls which surround the leading countries. Any entirely accurate comparison of the average height of different tariffs is of course impossible, owing to the differences in the commodities imported, in the classifications, and in the basis or rates. However, the Preparatory Committee for the World Economic Conference, in conjunction with the Secretariat of the League of Nations, made a careful study of this problem in 1926. For purposes of its study the Preparatory Committee of the League defined the height of a tariff as "equal to die average of the percentages which the duties imposed by any given country constitute of the values of the commodities which go to compose the whole catena of goods normally entering into international trade." Such averages or indices were computed by four different methods for 20 different countries for the years 1913 and 1925. The results obtained for 1925 by the most refined of these methods are indicated below. COUNTRY

Spain United States Argentina Hungary Poland Jugoslavia Czechoslovakia . . . Australia Italy Canada

INDEX

41 31 22 22 11 20 19 18 16 15

COUNTRY

Germany India Austria ., France Sweden Switzerland Belgium Denmark United Kingdom . Netherlands

INDEX

13 13 12 12 11 10 9 6 5 4

According to these indices the United States tariff was higher in 1925 than that of any of the other countries studied, except Spain; its relative position, moreover, was the same in the results obtained under each of the other three methods used by the League of Nations. Russia and the

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T H E GOLDEN NINETEEN

TWENTIES

would result in discrimination against the protesting countries. It is questionable whether these formal protests of foreign governments had any appreciable effect on many of the rates specifically named. However, it is possible that the large number of these protests had some effect on the attitude of American financial interests and export industries toward the bill and tended to restrict the average increase in rates. T w o of the most severe foreign protests against proposed changes in the tariff schedules were made by the French lace-workers and the Swiss watchmakers. A sharp advance in lace duties was inFORMAL PROTESTS corporated in the proposed tariff bill early in 1929 and this resulted in a parade of protest by During the period of a year and a half that Con20,000 lace-workers at Calais and direct appeals gress spent in revising the tariff there was widespread agitation in foreign countries concerning by them to the American Ambassador. A s a rethe effects of the proposed legislation. In part, this sult, the schedule was reconsidered and the rates agitation took the form of memoranda of foreign, restored to their former level of 90 per cent. In the case of the watches and watch movegovernments, transmitted through the Department of States, but there was also much unofficial pro- ments changes were incorporated in the proposed test voiced in foreign newspapers and periodicals; tariff which would have increased duties between likewise there were threats of retaliatory tariffs 400 and joo per cent. These proposals led to the and the boycott of American goods by commer- drawing up of resolutions of protest at a mass cial and agricultural associations in foreign coun- meeting of 15,000 clock and watch-workers at Bienne, while smaller meetings of popular protest tries. Altogether, official notes of protest were re- were held in other Swiss towns. In this case also ceived from more than 30 foreign governments the result was a downward revision in the proand covering over 200 commodity classifications. posed rates. Numerous less dramatic protests have been made These communications varied from mere notes of transmittal to solemn warnings of reprisal on the against various rates in the new tariff by foreign chambers of commerce, manufacturers' associapart of the government or people concerned. T h e longest communications in regard to com- tions, and agricultural associations. These have in many cases been accompanied by threats of remodities affected by proposed changes in the tariff were received from the British pnipire, and the prisal in the form of cancellation of most-favoredduties protested affected the cotton and woolen nation treaties, retaliatory tariffs, and boycotts of textiles of England, the cashew nuts of India, the American goods. . . . onions, celery, kale, beets, parsley and other vegeFOREIGN RETALIATION tables of Bermuda, the sponges of the Bahamas, the The extent of actual retaliation which will rewool, hides and skins, sausage casings, and pearl shells of Australia, and commodities raised in sult from the increase of American tariff rates prescribed by the act of 1930 is difficult to gauge, many other separate possessions. Almost all of the other commercial nations pro- bccause most foreign governments deny that any tested duties which would affect their more im- action which they may take is intended as a reportant industries. In most of the memoranda an prisal, because there may be a number of motives involved in changes of foreign tariff rates, and beattempt was made to point out that the new duty cause some of the most effective retaliation may was excessive in view of statistics of production costs in the protesting countries and the relative result from intangible factors, such as increased unimportance of the competition to United States sales resistance to American goods on the part of industries. In a f e w cases it was pointed out that foreign consumers. Nevertheless, the new tariff the industry protected was practically non- has resulted already in several very obvious acts of retaliation as well as much irritation and antiexistent in the United States and that, conseAmerican feeling in many foreign countries. quently, the tariff would impose an unnecessary Canada, Cuba, Spain, Australia, and N e w Zeaburden on American consumers. There was little, if any, attempt to prove that the proposed duties land have already made sweeping tariff revisions

Baltic States also have very high tariff barriers, but these countries were not included in the League's studies and consequently cannot be ranked on a comparable basis. Since 1925 there have been increases in the tariff schedules of a number of the countries studied, but these were in most cases less drastic than the reccnt advance in the American tariff. A f t e r making allowances f o r recent changes in rates, Spain continues to have the highest tariff level of the countries included in the survey of the League of Nations, while the United States ranks second in this respect.

THE UNITED STATES AND T H E in 1930 which are of such a nature as to discourage imports from the United States, and Argentina and Mexico are considering substantial rate revisions. Furthermore, France, Italy and Mexico each have increased sharply their duties on one of their leading imports from the United States and there have been a number of minor rate revisions in other countries which seem to have been inspired by irritation against or emulation of the United States tariff. . . . CANADA The mutual importance of friendly trade relations between the United States and Canada is indicated by the fact that in recent years Canada has been the leading foreign market for United States merchandise, and, conversely, the United States has been the most important market for Canadian goods. In 1929 American exports to Canada totaled about $950,000,000, while American imports from that country exceeded $500,000,000. American imports from Canada consist largely of raw materials and semi-manufactured articles, while leading American exports are finished manufactures and fuel. Wheat appears both as an export and an import, but most of this grain is eventually shipped to Europe. Agriculture is the principal industry of Canada and the drastic upward revision in rates on farm products in the new United States tariff has raised a storm of protest and ill-feeling. Although cattle is the only large item in the trade which is affected by the new rates, there are a multitude of advances on smaller items, such as halibut and potatoes from the Maritime Provinces, dairy products from Quebec, maple sugar and grain from the prairie provinces, and logs from British Columbia, the increased duties on which have caused antiAmerican feeling in all parts of the Dominion. The Canadian Minister of Finance in a budget speech on May 1 announced the most drastic revision of the Canadian tariff which has occurred since 1907. This revision, which was enacted into law by the Canadian Parliament on May 28, provided for decreases on 270 items and increases on 11 items under the British preferential tariff; decreases on 98 items and increases on 35 items under the intermediate tariff, which applies to countries having most-favored-nation treaties with Canada; and decreases on 82 items and increases on 87 items under the general tariff, which applies to the United States and other countries having no commercial treaties with Canada. The most outstanding feature of this new tariff schedule was the introduction of countervailing duties on potatoes, soups,

WORLD

live stock, fresh meats, cured and pickled meats, butter, eggs, wheat, flour, oats, oatmeal, rye, cut flowers and cast-iron pipes. The effect of these countervailing duties is automatically to increase the Canadian duty to the rate any country of origin imposes on imports from Canada, providing that rate is higher than the Canadian rate. Premier King of Canada stated on June 16 that these countervailing duties were imposed in order to show the United States that Canada desires to trade on equal terms, and that the purpose of the general revision of rates by Canada was to divert to the United Kingdom purchases of many types of goods previously bought in the United States. As a result of the provision for countervailing duties, rates on a large number of agricultural commodities imported into Canada from the United States were raised on June 18, when the new United States tariff became effective. Potatoes, f o r example, had previously been free and now took a duty of 75 cents per hundredweight. Tariff policies were much discussed during the election campaign in Canada in July 1930. This resulted in a decisive victory for the Conservatives, who opposed countervailing duties, but advocated higher tariff barriers against all other countries, including Great Britain and the other Dominions. The Conservatives obtained 138 seats in the House of Commons and have a majority of 33 over all other parties combined. It is generally anticipated that the Conservative party will make a further upward revision of the tariff, but there is some dispute as to whether the revision will aim to exclude all imports or will foster trade with other parts of the British Empire at the expense of foreign countries. . . . ARGENTINA Argentina has long been the leading customer of the United States in South America, although much less important than Brazil as a source of American imports. During 1929 exports to Argentina totaled $210,300,000, while imports aggregated $117,600,000. Practically all of the leading imports from A r gentina are either agricultural or animal products; consequently the rare advances intended to aid the American farmer adversely affected much of this trade. Duties were raised on two-thirds of the items shown in the table and the proportion of the total trade affected was even greater. The large increases in duties on flaxseed, corn, and casein, three of the most important commodities in the trade, have particularly aroused the Argentine farmers. The rate on flaxseed was especially irritating, as it was fixed at a much higher

T H E GOLDEN NINETEEN level than the Tariff Commission had indicated was necessary to place the American product on a competitive basis. The increased duty on corn was also considered entirely unnecessary, as practically no corn was imported into the United States under the previous rate. As a result, the Union of Agrarian Producers sent President Irigoyen a long note, pointin? out that the duty on casein is more than the local price and that the duties on flaxseed and corn are nearly half the Argentine price; it urged that a new interpretation be given to the most-favored-nation clause of commercial treaties so that tariff concessions would be extended only to nations which grant similar advantages to Argentina. The Argentine customs law empowers the President to increase existing duties upon products from countries which do not grant most-favorednation treatment to or which discriminate against Argentine products; it also empowers him to grant reductions of duties upon articles which offer equivalent advantages to Argentine exports. The Argentine Minister of Finance on May j appointed a committee of customs appraisers to draw up a new tariff, which is generally expected

TWENTIES

to embrace various duties affecting leading importers from the United States. Already regulations concerning imports of apples from the United States have been stiffened by the refusal to accept certificates of American state authorities in regard to their quality. Distinct efforts have been made by various groups in Argentina to boycott United States goods. In this connection the Anglo-Argentine trade agreement of September 1929 is of special interest. This reciprocal agreement resulted from the visit to Argentina of an economic mission headed by Lord D'Abernon, and possibly represents an effort to divert trade from the United States. It provides that Argentina shall purchase from Great Britain materials to the value of 100,000,000 pesos to be used in modernizing and extending the state railroads, while Great Britain is to purchase from Argentina commodities of an equivalent value, principally grain, meat, and wool. The Argentine Rural Society in June sent a circular to all members, outlining the damage done to Argentine interests by the new American tariff and urging that they refrain from purchasing American products of any description. . . .

TWO FAILURES IN FOREIGN THOUGH THE SENATE h a d r e f u s e d t o p u t t h e

United States into the League of Nations and repeatedly rejected efforts to bring America into the W o r l d Court, the United States did not abandon the cause of world peace during the nineteen twenties. Instead of making itself party to the covenant of a general organization, with commitments that might be construed as "entangling alliances," America undertook to deal with specific questions. A t least three times during the decade, the United States participated in conferences assembled to meet the dangers latent in competitive naval building and the Pacific problems so closely connected with it. T h a t Pacific problem had t w o aspects: the rise of Japan as a possible rival of the Pacific colonial powers, and the effort of China to establish a free national life despite the pressure of disorganization within and aggression without. Under the Imperial façade, the Chinese Empire had been crumbling since the Taiping Rebellion. A f t e r the Boxer uprising and the

POLICY

joint intervention of the Powers at the turn of the century, the Chinese E m p i r e w e n t through another uneasy decade. It was then replaced by Sun Y a t Sen's republic, which stood confronted with the problem of reducing local feudal chiefs and of protecting China f r o m the encroachments of foreign powers, particularly Japan. A s a reward f o r joining the Allies in W o r l d W a r I, Japan claimed the f o r m e r German concessions of Shantung and K i a o chow and a whole array of special privileges in China. Chinese protests, and the Western Powers' reluctance to see Japan become the major factor in Chinese economic life, finally forced Japan to drop her T w e n t y - O n e Demands, though dominance in China continued an implicit part of Japanese policy until the overt act of the invasion of Manchuria in 1 9 3 1 . It was the spectacle of competitive armaments in a w o r l d at peace rather than Pacific questions alone that led to the calling of the Washington Conference of 1 9 2 1 - 1 9 2 2 ; but Pacific problems remained one of the major

T H E UNITED STATES AND T H E WORLD topics on its agenda. In the fall of 1921, representatives of the United States, Great Britain, France, Italy, Japan, and China—and of the Netherlands, Belgium, and Portugal, because of their Pacific possessions—met to discuss disarmament and the preservation of peace. Since France insisted that land armaments be excluded from discussion, the conference concentrated on navies and Pacific issues. The United States proposed a naval holiday for capital ship construction, the scrapping of certain quantities of naval tonnage, and the establishment of a fixed ratio for naval building in the future. Secretary of State Hughes went further, suggesting a reduction of submarine and cruiser tonnage, but this met with no favor among the other powers. The conference did succeed in drafting a Five Power treaty fixing the ratio of capital ship strength at 5:5:3 for Great Britain, the United States, and Japan, and 1.67:1.67 for France and Italy. On Pacific questions, the conference divided the former German possessions among Japan, Great Britain, Australia, and New Zealand; secured a Sino-Japanese treaty returning Shantung to Chinese jurisdiction; and allocated the German cables to the victors. More important, so far as China was concerned, were the Nine Power and the Four Power treaties. In the first, all the members of the conference pledged themselves to respect the territorial integrity of China and to maintain the Open Door not only for commerce but also for industry and capital investment. By the second, the United States, Great Britain, Japan, and France pledged themselves to respect each other's rights in their respective Pacific possessions and to submit points of difference beyond ordinary diplomatic adjustment to joint conference of the parties to the Four Power pact. This, incidentally, not only abrogated the Anglo-Japanese alliance in fact, if not in name, but also committed the United States to compulsory conciliation in Pacific disputes. T o Yamato Ichihashi, secretary to a leading member of the Japanese delegation to the disarmament conference, the results seemed to

promise future peace. Ichihashi, in a review of the conference's work written as late as 1929, expressed the belief that even the problem of China might be solved without conflict among the major powers. Three years later, Japanese aggression had been renewed. So far as naval armaments were concerned, hopes for reduction proved unwarranted: if capital ship construction was limited, the building of smaller units proceeded unchecked despite conferences at Rome in 1924 and at Geneva in 1927. Late in 1929, Great Britain invited the nations that had signed the Five Power Naval Treaty to meet at London for another discussion of naval armaments limitation. At London, the Mediterranean rather than the Pacific was the focus of trouble, the source of which lay in the clash of ambitions between France and Fascist Italy. At the outset the conference came close to failure when the French refused to admit Italy's claim for equality of tonnage in the lighter categories. The diplomacy of Dwight W . Morrow succeeded in preventing an actual break-up, and, again, the United States took the lead in attempting to relieve the nations of the burdens of competitive naval building. The treaty which it drafted provided for parity between Great Britain and the United States; the continuation of the capital-ship holiday until 1936; and new specific ratios for auxiliary vessels. By 1936, when the capital-ship holiday was ended, new construction by nonsigners Germany and Italy afforded the signatories the opportunity to inaugurate a fresh building race. Japan, also, had probably been going ahead secretly. In any case her fortification of the mandated Pacific islands, her attack on China in 1937, and the rearming of Germany on the European Continent alarmed America. The United States began to modernize and strengthen her navy. And thus failed the foreign policy of the nineteen twenties which assumed that world peace was possible by negotiation and without the acceptance of responsibility. The selection here reprinted is from Ichihashi's The Washington Conference and After

THE GOLDEN NINETEEN

ι ιο6

(Stanford, Calif., 1928), and is published by permission of the Stanford University Press. T h e limitation of naval armaments might spare the taxpayer the cost of competitive naval building, but, in itself, it was no guarantee against war. So long as war seemed a natural recourse to nations, some of them would be bound to turn to it to settle disputes. In 1926, Premier Briand of France had remarked that keeping the peace was a matter of psychology rather than the devising of international organizations: war had its roots in the fact that nations considered it a legitimate means of advancing their interests. Briand's comment caught the imagination of newspapermen, first, and then of many political figures. Among these was Frank B. Kellogg (1856-1937), the American Secretary of State in the Coolidge administration. Briand had originally proposed that the United States and France enter into a bilateral pact to re-

The

XXII:THE

PACIFIC

nounce war as an instrument of national policy. Kellogg was interested, but in December, 1927, he went further and suggested that such a treaty be made multilateral. Kellogg pushed the matter energetically, the Pact of Paris was drawn up in 1928, and before long fourteen countries, including all the Powers except Russia, had signed it. On January 15, 1929, the United States Senate ratified the pact and on July 29, it was proclaimed to be in force. On November 1 1 , 1928, Kellogg made the public address reprinted here. America was surrendering no part of its sovereignty, joining no world organization to assure international peace; it was depending upon the moral force present in all people to guarantee comity among nations and security against aggression. A brief decade later, World War II had begun. Again, American foreign policy had failed. Kellogg's address is reprinted from a pamphlet issued by the U.S. Government Printing Office (Washington, 1928).

Washington Conference BY

CHAPTER

TWENTIES

YAMATO

CONFERENCE

AND

AFTER—CONCLUSIONS

THE SURVEY in the preceding pages makes it clear now, it is hoped, that the Far Eastern and Pacific Conference concerned itself primarily with the problems of China, involving international interests and therefore calling f o r their solution by international agreements. W e have traced the causes internal and external which brought these problems into existence; we have sketched briefly the history of Chinese foreign relations, which is divided b y Dr. Morse into three periods: H e calls the first period, embracing the years between 1834 and 1858, the "Period of Conflict"; the second, between 1858 and 1895, the "Period of Submission"; and the last, between 189J and 1 9 1 1 , the "Period of Subjection." T h e writer added that the years following the downfall of the Manchu Dynasty constituted a continuation of the last period. W e saw in the beginning of this third period the rise of a new power; Japan became a factor to be reckoned with in Far Eastern international affairs. This fact tended to complicate the al-

and, After

ICHIHASHI ready complicated inter-relations of the Western nations interested in China. These circumstances produced a situation in which international rivalries, jealousies, distrust, and antagonism ran rampant. These dangerous tendencies were rendered more so by Chinese officials, many of whom were willing to sacrifice their national interests f o r their personal profit. What happened during the SinoJapanese war of 1894-95 a n d immediately after will elucidate this fact f o r anyone who is not very familiar with the history of Chinese diplomacy. China tried to win the war by involving the Western nations interested in her. A triple intervention resulted, which forced Japan to retrocede some of the fruits secured by the Bakan Treaty. But China did not escape paying the price of this diplomatic victory over the Japanese; in fact, she was subjected to aggression upon aggression by the Western powers, and even her very existence was threatened. These Western aggrandizements are in no w a y to be justified, but f o r them the Chinese officials must be held, in part, responsible. Japan watched these developments with a keen interest, and she soon decided to imitate the con-

THE UNITED STATES AND THE WORLD duct of Western powers in her relations with China. She joined the international expedition against the Boxers; she formed an alliance with Great Britain; she fought and defeated Russia; she was now a full-fledged Great Power. But the West began to apprehend this aggressive Asiatic nation, and, when she proved herself so successful in her economic enterprises in South Manchuria, Europe and America became hostile to her. Japan was severely criticized by her Western colleagues for doing what they were doing; she was vehemently charged with violating the sacred open-door principle. In short, she was made the scape-goat for all the ills of the Sick Man of the Far East. Her blunder in 1915 proved conclusively to the West that she was the devil incarnate. Be that as it may, when the Washington Conference was convoked "there existed with regard to the Far East causes of misunderstandings and sources of controversy which constituted a serious potential danger." These difficulties centered about China. At the conference the interested powers faced China's problems sympathetically with a view to helping her, but the delegates were forced to realize that their Chinese colleagues often became too eloquent over their "Bill of Rights." T h e foreign delegations preferred to see China seeking and not demanding; nevertheless, they granted many and unparalleled concessions to her. T h e most important of these concessions related to the tariff. The treaty signed at Washington by the nine powers became operative two months later without ratification. It provided for revision of the tariff into an effective 5 per cent, which would enable China to secure an extra revenue of $17,000,000 silver on the basis of the 1920 customs revenue. It also provided for a surtax of JÎ4 per cent ad valorem, which would enable her to collect about $27,000,000 silver extra. Furthermore, it provided for a special surtax on luxuries at 5 per cent ad valorem, which would enable her to gain $2,000,000 more, or a total additional revenue of about $46,000,000 silver; on this basis, the new tariff would yield about $110,000,000 silver, or an increase by 70 per cent. T h e treaty further provided for future revisions of the tariff in order that China might enjoy the fruit of effective rates. According to a stipulation of the treaty, the Revision Commission met at Shanghai in March 1922 and put the revised tariff in force on January 17, 1923. T h e proposed conference on likin and surtax, however, was delayed by France because of her Boxer indemnity controversy with China. When this difficulty was settled, she and Italy ratified the treaty on April 2, 1925, and the conference was summoned on October 26, but it failed

because of the Chinese attitude. Despite this fact, the various factions in China levied and collected the surtax, causing some diplomatic complications. Nevertheless, the powers affected by these highhanded acts seem to have taken rather a tolerant attitude, and it is hoped that a proper solution can be found when a stable government is established in that chaotic country. Equally important was the open-door treaty. By it the famous open-door principle was redefined and given a legal sanction. It guaranteed the maintenance of the principle in future international dealings in China because under it the signatory powers pledge themselves to abide by that principle. It further provided against the future creation of spheres of influence. It also provided against the violation of China's rights as a neutral nation. But China was made responsible to abide by the open-door principle also; she was not to make unfair discrimination as regards her railroad charges. Finally, the treaty created an international board "with special reference to their [signatory powers'] general policy, designed to stabilize conditions in the Far East, to safeguard the rights and interests of China, and to promote intercourse between China and other Powers upon the basis of equality of opportunity." These stipulations constitute a contribution toward emancipation of China from further foreign encroachments; the treaty undoubtedly marks a great progressive step toward improving Far Eastern diplomacy. The question of Shantung and the Twenty-one Demands involved Japan and China alone, but were not without interest to the conference. The Shantung issue was settled by a treaty signed at Washington, though not as a part of the conference. Under it Japan restored all the rights and privileges formerly held by the German G o v ernment and later transferred to Japan by the Treaty of Versailles. On the other hand, China acknowledged the validity of the Sino-Japanese treaty of 1915, the Sino-Japanese agreement of 1918, and the Treaty of Versailles. In other words, the technicality with which China had been fighting Japan since the Peace Conference at Paris was thrown into the junk-pile once for all by the Washington Treaty. On the Twenty-one Demands Japan offered several modifications, but China wanted a complete renouncement. The conference, the majority of whose participants were signatories of the Treaty of Versailles, could not do more than accept the offers of Japan. China was defeated once more as she had been in Paris. But when the original Russian lease of the Liaotung Peninsula expired in 1923, the Chinese Govern-

ι io8

THE GOLDEN NINETEEN TWENTIES

ment undertook to notify Japan of that fact, but the latter paid no attention to it. Japan is likely to remain in that region for many years to come. Aside from these treaties, several resolutions were adopted by the conference whereby the powers pledged themselves to discontinue to exercise rights and privileges which they had assumed to enjoy. The United States, Great Britain, France, and Japan maintained their post offices in China, but these were completely withdrawn by January i, 1923. T h e powers agreed to withdraw their armed forces stationed in China "without the authority of any treaty or agreement whenever China snail assure the protection of the lives and roperty of foreigners in China." Accordingly apan withdrew her troops of this category from China. T h e powers acceded to China her request that the use of their radio stations authorized in China would be confined to official messages, while their unauthorized ones would be transferred to her. T h e y pledged themselves to make public their treaties, conventions, exchange of notes, or other international instruments, made in the past concerning China. T h e y further agreed to notify each other of their future treaties, conventions, and so forth, with China. In this connection, it should be mentioned that China demanded that "the Powers agree not to conclude between themselves any treaty or agreement directly affecting China or the general peace in the Pacific and the Far East without previously notifying China and giving her an opportunity to participate." The British delegate reminded the Chinese that their demand "went a good deal beyond any existing practice of international law. T h e Japanese delegate recalled that "the sovereign nations had the right of concluding any treaty or agreement between themselves." But a resolution was adopted whereby the powers would refrain from concluding treaties that would infringe the open-door principle.

?

T h e settlement of the Chinese Eastern Railway Was left to diplomatic channels; meanwhile the powers reserved "the right to insist hereafter upon the responsibilities of China for performance or non-performance of the obligations toward the foreign stockholders, bondholders, and creditors of the Chinese Eastern Railway." For the future of China's railways, the powers expressed their hope for the ultimate "unification of railways into a railway system under Chinese control with foreign financial and technical co-operation." Such were the altruistic contributions of the conference toward helping China, but the conference reminded China of her own responsibilities. For instance, it gave China concrete advice that she should reduce her army because it had been caus-

ing severe drain upon her notoriously bankrupt treasury. This advice was given when the powers agreed to raise China's tariff, and was later put in the form of a resolution, but this was not to be interpreted as an interference with Chinese domestic affairs. Of course, China demanded that the powers relinquish their extraterritorial rights in China "at the end of a definite period." In response, the conference created an international commission to look into the actual state of affairs, to advise the powers what they might do with regard to their extraterritorial rights. Obviously one could not draw an optimistic conclusion as to their abrogation; the actual conditions in China did not warrant such a conclusion. At any rate, China was obliged to ask the powers to postpone the proposed investigation into the actual sute of administration of justice. T h e Commission was finally convened on January 12, 1926; it continued its session until May j , when the Commissioners started 1 tour of inspection through several provinces. Its report was far from encouraging; it recommended certain modifications to minimize difficulties arising from the system of extraterritoriality; it advised the Chinese Government to effect certain reforms in its laws and legal institutions, and it did not favor the relinquishment of the system. Finally, the Chinese demanded that the leased areas and spheres of influence in their country be abrogated, and that arms and ammunition be not imported into their territory. The conference was unable to agree on any of these demands. Thus, aside from the leasehold of Kiaochow, all the leased areas remain intact. The powers agreed not to create new spheres of influence, but the existing ones remain untouched. Italy prevented any' agreement on arms embargo. So much then for what the conference succeeded or failed to achieve on behalf of China. The Siberian question loomed large at Washington, but its main issue was whether Japan would withdraw her troops from Siberia. T h e Japanese delegate declared that Japan would withdraw as soon as she could, and this pledge the Japanese Government fulfilled. Likewise the question of Yap was settled by a treaty between the United States and Japan. We have traced the circumstances leading up to the summoning of the Washington Conference; we have examined the matters discussed by the gathering; and we have analyzed the achievements made by the participating nations. W e are now ready for a critical estimate of this international conference, and will begin by presenting the offi-

THE UNITED STATES AND THE WORLD cial estimates of its accomplishments. President Harding in closing the gathering said, among other things: " T h i s Conference has wrought a truly great achievement. It is hazardous sometimes to speak in superlatives, and I will be restrained. But I will say, with every confidence, that the faith plighted here today, kept in national honor, will mark the beginning of a new and better epoch in human progress." Similar sentiments were expressed b y the various representatives of the other participating nations. Later the American delegation made its report to the President in which we find the following estimate: " T h e sum total of the action taken b y the Conference regarding China, together with the return of Shantung b y direct agreement between China and Japan, the withdrawal of the most unsatisfactory of the so-called ' T w e n t y - O n e Demands,' and the explicit declaration of Japan regarding the closely connected territory of Eastern Siberia, justify the relation of confidence and good will expressed in the Four-Power T r e a t y and upon which the reduction of armament provided in the Naval T r e a t y may be contemplated with a sense of security." . . . Nearly eight years have elapsed since the memorable November 12, 1921, and we have an opportunity to evaluate the conference in a better perspective, especially in view of the crowded events which have followed its close. On the Washington arms treaties we have already presented our view that, in spite of the general lamentation of naval experts of the various signatory powers, these agreements have already contributed toward a betterment of the world. On the post-conference armament development, and, in particular, the failure of the three-power naval conference at Geneva, we have stated that our position is one of optimism. T h e nations are being educated as to the fallacy of upholding their dignity b y arming themselves to the teeth. But in China chaos has continued to prevail, and the powers have been forced to face difficulties just as before the conference. Patient, watchful waiting seems to be the only w a y out of the situation. It has been perhaps fortunate f o r China that the powers have no longer approached her with a united front as in the past; she has had and has an

1109

opportunity to deal with each nation separately. If she proceeds patiently and wisely, there is no reason w h y she should not be able to free herself f r o m the disabilities imposed on her by foreign powers, but, in order to do so successfully, she must develop and maintain a unified, stable government. Opinion is divided on the recently established Nationalist Government; it may hold its own or it may collapse; nobody can prophesy its outcome one w a y or the other. Nevertheless, this Government secured the recognition of the American Government and a number of others, and if China succeeds in this respect with all the other nations vitally interested in her, we may justly hope f o r the better. Yet optimism is not warranted, and pessimism seems prejudicial to Chinese interests; it is f o r China to prove her case. Aside from the very gloomy state of affairs in China, the general situation in Pacific international affairs shows a considerable improvement. Consider Japan's relations with America, the British Empire, France, and Russia. T h e only sore spot still left unhealed in friendly relations between America and Japan is the discriminatory exclusion of Japanese from the United States. T h e deep resentment of the Japanese against this treatment is not fully appreciated in this country; it is a question which has to be tackled sooner or later. T h e British and the Japanese have been getting along with no deterioration in their international relationship despite the termination of the AngloJapanese Alliance; Australia, once very suspicious of Japan, is now friendly. Likewise Japan enjoys amicable relationships with France and Russia. Of late much has been said on Anglo-American antagonism, and on European hostility against America, but when their relationships are surveyed f r o m the Pacific standpoint, there is no substantial ground for any real danger. Perhaps the recent Pact of Paris will facilitate in the maintaining of general peace in the Pacific region. T h e Washington Conference ushered in an era of peace; it is f o r the nations to continue it. T h e peoples of all the nations bordering the Pacific are anxious to maintain peace, as is clearly attested by their organized international efforts to learn to cooperate in solving their problems, the most conspicuous example being the Institute of Pacific Relations.

T H E GOLDEN NINETEEN

TWENTIES

The Settlement of International Controversies by Pacific Means BY

FRANK

IN THIS PERIOD of great progress in cordial understanding between nations, I am pleased to accept your invitation to discuss the steps taken by the United States, in collaboration with other nations, to advance amicable relations, to remove the causes of war, and to pledge the nations solemnly to renounce war as an instrument of their national policy and adopt instead the principle of the settlement of all disputes by pacific means. N o more fitting time could be chosen for this peace movement than the tenth anniversary of the signing of the Armistice which brought to a close the greatest war, the most appalling catastrophe of all the ages. T h e best way to abolish war as a means of settling international disputes, is to extend the field of arbitration to cover all juridical questions, to negotiate treaties applying the principles of conciliation to all questions which do not come within the scope of arbitration, and to pledge all the nations of the world to condemn recourse to war, renounce it as an instrument of international policy, and declare themselves in favor of the settlement of all controversies by pacific means. Thus may the illegality of war be established in the world as a principle of international law. There is one other means, which can be taken by governmental authorities and also bv private organizations like yours throughout the world, and that is to inculcate into the minds of the people a peaceful attitude, teaching them that war is not only a barbarous means of settling disputes but one which has brought upon the world the greatest affliction, suffering, and disaster. If the people are minded that there shall be no war, there will not be. Arbitration is the machinery by which peace may be maintained. It can not function effectively unless there is back of it a popular will for peace. I can not go into detail concerning all the steps which have been taken to extend the principles of arbitration and conciliation as a part of the machinery for the maintenance of peace. In a general way, I can say that when I came into office I found that on account of the war many of our arbitration treaties and treaties of amity and commerce had lapsed and that many of the boards of conciliation under the Bryan treaties had become incomplete or vacant through death or resignation. These boards have been filled and there are now in force 19 of the original Bryan treaties, among

B.

KELLOGG

the signatories being included many of the principal nations of the world. W e have already negotiated five new treaties and are negotiating many more. W e have negotiated with many countries a new arbitration treaty for the settlement of all juridical questions which is an advance over the old form of treaty. In Central and South America practically all of the countries have signed and ratified a general conciliation treaty, to which the United States is a party. Under this treaty, in the event of failure to settle a dispute by diplomatic means or arbitration, the signatory nations agree to submit it to boards of conciliation for examination and report and not to go to war for a reasonable time pending such examination. . . . Arbitration and conciliation are appealing more and more to the imagination of the peoples of all nations. I deem this movement of surpassing importance in the advancement of world peace. When all nations come to the conclusion that their disputes can best be settled by diplomatic means and, when these fail, by arbitration or commissions of conciliation, the world will have made a great step forward. I realize that treaties of arbitration and conciliation have existed for many years and that in spite of them there occurred the greatest war of all history. But this should not be a cause of discouragement, because to-day world sentiment is stronger for such means of settling international disputes than ever before. I realize also that there are many political questions which can not be arbitrated, although they may be settled by conciliation. I know that national jealousies and ambitions and racial animosities often are the causes of war. These causes of conflict can be eliminated through education, through the development of tolerance, and through the creation of an effective desire for peace. In addition to these means of insuring universal peace, I know of but one other step, and that is a treaty solemnly pledging all the nations of the earth to condemn recourse to war, to renounce it as an instrument of their national policy toward each other, and solemnly to declare that the settlement of international disputes, of whatever nature or of whatever origin they may be, shall never be sought except by pacific means. This leads me to the discussion of the multilateral antiwar treaty lately signed in Paris.

THE UNITED STATES AND THE WORLD As you know, the original suggestion of this movement came from Monsieur Briand, Minister of Foreign Affairs of France, in a proposition to the United States to enter into a bilateral treaty with France to abjure war as a means of settling disputes between them. The American Government believed that this grand conception should be extended to all the nations of the world so that its declaration might become a part of international law and the foundation stone for a temple of everlasting peace. I need not discuss the details of this negotiation, which lasted more than a year. All notes exchanged between the nations upon this subject were published from time to time as they were sent by the various powers. It seemed clear that no treaty of such world-wide importance, so affecting the peoples of all nations, marking so great a forward step, could be taken without the support not only of the statesmen but of the press and the people of the world themselves, and, as you know, the multilateral antiwar treaty was negotiated in the blazing light of full publicity. . . . In the negotiation of this treaty I had the hearty cooperation of the statesmen of other countries, of President Coolidge, of statesmen of all parties, and of publicists throughout the United States. It was not a political move. I consulted with Senators and Representatives and public men, the sanest and wisest of our time, and I can say without the slightest doubt that the treaty meets the matured judgment of the people of the United States. It was an impressive sight when representatives of 15 nations gathered around the historic table in the French Foreign Office and solemnly pledged their governments before the world to renounce war as an instrumentality of their countries, agreeing to settle all international disputes by pacific means. The treaty is a simple and plain declaration and agreement. It is not cumbered with reservations and conditions stipulating when a nation might be justified in going to war. Such a treaty, if attempted, would fail because of the complexity of national aspirations and the wide difference of conditions. It contains but two articles, as follows: " A R T I C L E I. The High Contracting Parties solemnly declare in the names of their respective peoples that they condemn recourse to war for the solution of international controversies, and renounce it as an instrument of national policy in their relations with one another. "ARTICLE 2 . The High Contracting Parties agree that the settlement or solution of all disputes or conflicts of whatever nature or of whatever origin they may be, which may arise among them, shall never be sought except by pacific means."

II1I

In the course of the discussion, France raised the question of whether the proposed treaty would in any way conflict with the obligations of the Locarno treaties, the League of Nations, or other treaties guaranteeing neutrality. My reply was that I did not understand the League of Nations to impose any obligation to go to war; that the question must ultimately be decided by each country for itself; that if there was any similar obligation in the Locamo treaties, the United States would agree that all of the powers parties to the Locamo treaties should become original signatories of the present treaty. Belgium, Poland, and Czechoslovakia therefore were brought in as original parties because they were the only signatories to the Locamo treaties outside of the nations included in the negotiations of the antiwar treaty. The following countries were parties to the Locamo treaties: Great Britain, France, Belfium, Germany, Italy, Czechoslovakia, and Poind. The treaty contained a clause undertaking not to go to war, and if there was a flagrant violation by one of the high contracting parties, each of the other parties undertook immediately to come to the help of the party against whom such violation or breach was directed. It, therefore, was simply a matter of law that if any of the parties to the Locamo treaties went to war in violation of that treaty and were at the same time parties to the multilateral treaty, they would violate this treaty also; and that it was a general principle of law that if one of the parties to a treaty should violate it, the others would be released, and would be entirely free and under no obligation to take any action unless they saw fit. For these reasons the Locamo powers became original signatories, and all of the nations agreed that under these circumstances no modification of the present treaty was needed. It was my expectation that if the treaty was signed, it would be readily adhered to by many, if not all, of the other nations. My expectations have been more than fulfilled. Up to the present time 58 nations have either signed the treaty as original parties, or have adhered to it or have notified the Department of their intention to adhere to it. It is my belief that all the nations of the world will adhere to this treaty and make it one of the principles of their national policy. I believe that this is the first time in history when any treaty has received the approval of so many nations of the world. There are no collateral reservations or amendments made to the treaty as finally agreed upon. During the negotiation of this treaty, as in the case of other treaties, questions were raised by

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THE GOLDEN NINETEEN TWENTIES

•arious governments and discussed, and in many of my notes I explained the legal effect or construction of the treaty. There is nothing in any of these notes, or in my speeches sent to the signatory powers during the negotiations, which is inconsistent with, or changes the meaning of, the treaty as finally signed. Finally the countries were satisfied that no modification of the treaty was necessary to meet their views. . . . What were the benefits to be furnished? An unconditional agreement not to go to war. This is the recognition of a general principle that if one nation violates the treaty, it is deprived of the benefits of this agreement and the other parties are therefore necessarily released from their obligations as to the belligerent state. I have seen from time to time claims, on the one hand, that this treatv is weak because it does not provide the means for enforcing it either by military or other sanctions against the treatybreaking state and, on the other hand, that through it the United States has become entangled in European affairs and, while under no express obligation, is under moral obligation to join other nations and enforce the treaty by military or other assistance. Neither of these positions is correct. I know that men will differ on the question of whether it is better to provide sanctions or military agreements to punish a violator of the treaty or military alliances to enforce it. But whatever the merits of this controversy may be, as I have already said, I do not believe the United States or many nations in the world would be willing to submit to any tribunal to decide the question of whether a nation had violated this treaty or irrevocably pledge themselves to military or other action to enforce it. My personal opinion is that such alliances have been futile in the past and will be in the future; that the carrying out of this treaty must rest on the solemn pledges and the honor of nations; that if by this treaty all the nations solemnly pronounce against war as an institution for settling international disputes, the world will have taken a forward step, created a public opinion, marshaled the great moral forces of the world for its observance, and entered into a sacred obligation which will make it far more difficult to plunge the world into another great conflict. In any event, it is not at all practical for the United States to enter into such an obligation. It has also been said that the treaty entangles us in the affairs of Europe. I can not understand why such an argument should be made. It no more entangles us in the political affairs of foreign countries than any other treaties which we have made and if, through any such fear, the United States

can not take any step toward the maintenance of world peace, it would be a sad commentary on our intelligence and patriotism. But, it is said, we are under moral obligations, though not under binding written obligations, to apply sanctions to punish a treaty-breaking state or to enforce its obligations. No one of the governments in any of the notes leading up to the signing of this treaty made any such claim, and there is not a word in the treaty or in the correspondence that intimates that there is such an obligation. I made it perfectly plain, whatever the other countries might think, that the United States could not join in any such undertaking. In the first speech I made on the subject, which was afterwards circulated to the nations, I said: "I can not state too emphatically that it (the United States) will not become a party to any agreement which directly or indirectly, expressly or by implication, is a military alliance. The United States can not obligate itself in advance to use its armed forces against any other nation of the world. It does not believe that the peace of the world or of Europe depends upon or can be assured by treaties of military alliance, the futility of which as guarantors is repeatedly demonstrated in the pages of history." I believe that for this same reason Great Britain and some of the other nations of Europe rejected the treaty of mutual assistance. Whether the Locarno treaties will be construed as agreements to apply sanctions, I can not say; but, whether they are or not, I do not believe that it is possible to enforce such a treaty. I know of no moral obligation to agree to apply sanctions or to punish a treaty-breaking state unless there is some promise to do so, and no one can claim that there is such a promise in this treaty. . . . I, for one, believe the United States has always had a deep interest in the maintenance of peace all over the world. W h y should not our Government and our people feel a deep interest in this question? In modern times no great war can occur without seriously affecting every nation. Of course the United States is anxious for the peace, prosperity, and happiness of the people of Europe as well as of the rest of the world. Because we did not approve of the Treaty of Versailles and the League of Nations in all respects, it has been assumed by some that we no longer take any interest in Europe and world affairs. I, for one, do not accept this as a just estimate of our national character and vision. By some this grand conception of a world pledge for peace is considered visionary and idealistic. I do not think that all the statesmen of Europe and of the world who have solemnly pledged their nations against the institution of war can be

T H E UNITED STATES AND T H E WORLD called visionary idealists. Idealists they are, of course. Idealists have led the world in all great accomplishments for the advancement of government, for the dissemination of learning, and for the development of the arts and sciences which have marked the progress of this great growing age. To-day probably more than at any time in recorded history, there is a longing for peace— that we may not again go through the horrors and devastation of a world war. I am sure that the

people of this country are willing to try this last and greatest step, the solemn pledge of peoples and of nations. I can not believe that such a declaration, entered into, not in the frenzy of public excitement but in the cool deliberation of peoples, can fail to have a world-wide moral effect. I believe that this treaty is approved by almost unanimous sentiment in the United States and in the world. Such approval means advancement in the ideals of government and of civilization. . . .

TWO SUCCESSES IN FOREIGN in Latín America that Theodore Roosevelt had started by his rewriting of the Monroe Doctrine was continued by William Howard T a f t and not terminated by Woodrow Wilson. Wilson's ambiguities about nonrecognition only succeeded in arousing ill will, particularly in Mexico, where he had landed troops and whose revolutionary government he refused to recognize. The upheavals which racked Mexico during this period were part of the revolt against the domination of foreign interests in Mexico's economic life and the concentration of land ownership at the expense of the Indian villages. That revolt found institutional expression in Article 27 of the Mexican Constitution of 1917. By its terms, subsoil deposits, including oil, were claimed by the government; the foreign acquisition of Mexican resources was restricted; and Mexican church properties were nationalized. When the constitution was implemented by the oil law of 1925 (requiring all concessionaires to accept fifty-year leases in lieu of their perpetual grants; to agree to abide by Mexican law; and to refrain from asking protection by their home governments) Americans demanded that the United States intervene. Formal diplomatic relations were maintained, but both parties stood on their rights under international law while Mexican credit declined and American investors suffered.

T H E INTERVENTION

The Coolidge administration resisted the demands for armed intervention. Instead, in 1927, soon after the Mexican government had begun to enforce the anticlerical as well as the eco-

POLICY

nomic clauses of Article 27, President Coolidge appointed his Amherst classmate, Morgan partner Dwight W . Morrow (1873-1931), ambassador to Mexico. Morrow's unconventional diplomacy and his willingness to assume the goodwill and sincerity of the Mexican government bore fruit. Here were to be found the beginnings of the later spectacularly successful "Good Neighbor Policy." For his predecessor's barrage of disquisitions on international law. Morrow substituted the attitude which shows so clearly in this, his first report to his Secretary of State. Formal diplomacy had done no more than stiffen Mexican intransigence. Morrow ceased dispatching notes. Instead, he dealt with Mexican officials as men willing to be as reasonable as he. In the case of the oil law of 1925, he suggested the legal approach: rather than propose legislative repeal of the act, an outward and visible sign of submission to foreign protest, he urged the early adjudication of test cases then before the Mexican Supreme Court. President Calles's assurance that the Court would reject retroactive decrees marked a significant victory for Morrow's type of negotiation. In like fashion, Morrow proceeded to deal with Calles directly on the agrarian issue and on the problem of reconciling the Mexican government and the Vatican. In this way, Morrow laid a firm foundation, for he indicated that a policy of confidence and mutual accommodation was the only practical alternative to force. In June, 1930, in an address before a group representing businessmen from

T H E GOLDEN NINETEEN TWENTIES

1 I 14

many nations, he summed up his attitude—and his achievement—in these words: Our relations with foreign nations are not very different from our relations with each other in family, church or state. T h e y must be based on understanding. W h a t a difficult thing it is to see that the other man may be honest as well as yourself! If we can live in our respective homes loyal to our cities, States and nations, yet ready to attribute to other men an honest purpose, it is more important than the most solemn treaties we may sign on parchment.

The selections here reprinted are from U.S. Department of State, Foreign Relations: 1927, Vol. Ill (Washington, 1928). T h e address of Secretary of State Henry L. Stimson (1867- ) before the Council on Foreign Affairs in February, 1931, presents officially the Latin American policy of the United States, particularly in the Central American area abutting on the Panama Canal. The United States had intervened in Nicaragua, occupying Nicaraguan territory and supervising elections in 1929 and 1930. As the depression intensified after 1929, even the most firmly seated governments in Latin America were overthrown. The United States stood confronted by the necessity for a choice: Was it to act contrary to the precedents of the immediate past, or should it revert to former policy? The Hoover administration decided to take the latter course and, in this address, Stimson enlarges

not only on that question, but also on the State Department's definition of the Monroe Doctrine. That principle, Stimson explains, continues to be a cornerstone of American foreign policy but it sets the United States over against Europe, not the nations of Latin America. Thus, the Roosevelt Corollary of the Monroe Doctrine was repudiated. During the Wilson administration, the United States had abandoned a long-established policy of recognizing de facto governments when it denied recognition to a Mexican government established by "force and violence." The present administration now returns to earlier and sounder practice, in this way restoring political stability. So far as the Central American states are concerned, however, the policy of recognition for de facto governments is tempered by treaty: the five republics have agreed not to accept regimes established by coup d'état even if that should later be regularized by constitutional process. This pledge has diminished the number of revolutions in middle America and helped establish free elections. A final step in improving inter-American relations has been the United States practice of embargoing arms shipments to rebels against a recognized government. Stimson also indicates how the word of the United States has been kept in difficult situations. The selection here reprinted is from a pamphlet issued by the U.S. Department of State as Publications: Latin American Series, No. 1 j 6 (Washington, 1932).

On Mexico B Y DWIGHT THE

AMBASSADOR

S E C R E T A R Y OF

IN

MEXICO

(MORROW)

TO T H E

STATE

[ M e x i c o , ] N o v e m b e r 8, 1917 I have now been in M e x i c o a little o v e r t w o weeks. A great deal of time, as y o u so well k n o w , has been taken up in necessary formalities. I have had an opportunity, h o w e v e r , to talk with several business men of M e x i c o , including M r . Legorreta, Director of the

MY

DEAR

MR.

SECRETARY:

MORROW Banco Nacional de Mexico; Mr. W o o d u l l , the Mexican Manager of the American Smelting and R e f i n i n g Co.; Mr. H u g h Rose, the M a n a g i n g D i rector of Santa Gertrudis Mines; M r . H . W e l d o n , local Manager of the Bank of Montreal; M r . G . R . G . C o n w a y , Managing Director of the M e x i c a n L i g h t & P o w e r Co.; M r . Matton, of the British A m e r i c a n T o b a c c o Co.; M r . H i l a r y N . B r a n c h , local representative of Huasteca Petroleum C o m -

THE

UNITED

STATES

pany; and Messrs. Hogan and Basham, prominent American lawyers here. . . . W h e n I made my first call upon the ActingMinister of Foreign Affairs, as referred to in despatch N o . I, of October 31st, Mr. Estrada, after courteously expressing his pleasure that I had come to Mexico, took occasion to say to me that it was the desire of President Calles that I should take matters up personally with him. H e further stated that in Mexico the system of administration was a "Presidential system" and that as the President alone had the authority to make decisions on behalf of the Government he hoped that I would at all times discuss with President Calles matters of difference between the Governments. Mr. E s trada's manner of expressing this opinion made quite an impression upon Mr. Schoenfeld, who accompanied me upon this formal call and acted as interpreter. O n Saturday, October 29th, I presented my letter of credence to the President. W h a t formally took place on that occasion is also referred to in despatch N o . I, of October 31st. After I had read m y brief remarks and the President had replied, he signified that he desired to have a conversation with me. I sat down beside him and we had four or five minutes' conversation. Mr. Martinez de A l v a acted as interpreter. In this conversation the President expressed the hope that I would feel free at all times to come directly to him, stating that he was not a diplomat, and that he thought many of the matters as to which there were differences of opinion between the two governments could be readily adjusted in personal meetings, but that diplomatic notes tended to separate further the Governments. I expressed my appreciation of the cordiality of my reception by his Government and the people of Mexico, and stated that I would be very glad to avail of the courtesy extended to me of talking things over with him personally from time to time. H e then repeated to me that he did not want me to consider this invitation to take things up with him personally as merely a formal invitation, that he did earnestly desire that the matters in difference between the Governments be settled amicably, and he thought this could best be accomplished by taking questions up personally. . . . Accordingly, I went to the President's home this morning at 11 o'clock. Again I went alone, reaching this decision after consultation with the Embassy staff. I felt that he might talk more frankly and I might get a clearer picture of his mind if I showed m y confidence in him. I think the result fully justified this position. M y talk with the President this morning lasted

AND

THE

WORLD

perhaps an hour and a half. Mr. Robinson and Mr. Smithers were present, Mr. Smithers acting as interpreter. Mr. J . Reuben Clark and myself had made a very careful study of the record with reference to oil, going back particularly to the Carranza decrces, to the decision in the T e x a s Oil Company case and to the W a r r e n - P a y n e record in which so much emphasis was laid upon respecting and enforcing the principles of the decisions in the Texas case to the effect that Paragraph 4 of Article 27 of the Constitution was not retroactive. Mr. Clark and I had both felt that it would be very difficult to find a compromise that would really maintain the principle of the W a r ren-Payne meetings and of the State Department correspondence unless there could be an affirmance of the Texas Oil Company case. It also seemed to us both that an affirmance of the T e x a s Oil Company case was more or less a natural thing for the courts to do because substantially the same principle was involved in the so-called Carranza decrees and in the legislation of 1925. T h e President opened the conversation this morning by asking me directly what solution I thought could be found for the oil controversy. I told him that I thought an almost necessary preliminary to any solution would be a clear decision of the Supreme Court following the T e x a s Oil Company cases. I told him that I had been a lawyer, and it was not easy to get out of the habit of talking as a lawyer, and asked him to bear with me while I explained to him the Texas Oil C o m pany case as I understood it. I then quite slowly, with the interpreter translating to him sentence by sentence, explained to him that the Carranza decrees had attempted to hold Paragraph 4 of Article 27 of the Constitution of 1917 to be retroactive as to the subsoil of oil lands, that those w h o had brought the amparos had asserted, first, that President Carranza had no official power to act b y decree in the way he had acted, and, second, that even if he had been given such official p o w e r it would be violative of article 14 of the Constitution, which provides that no law shall be given a retroactive effect. I explained to him further that the Supreme Court of Mexico in the Texas case had clearly held that the question of Carranza's official power to act by decree did not arise because the decrees issued him and called in question had been officially ratified b y the legislative body, and that, therefore, his decrees had the full effect of laws. T h e Court then went on to hold that these laws (made by Carranza decree and legislative ratification) could not constitutionally be given retroactive effect. In the Texas case, therefore, as in the pending cases, it was not a decree of the

Ulti

THE GOLDEN NINETEEN TWENTIES

executive but a law of Congress, and executive acts thereunder, which were held to be violative of Article 14 of the Constitution. I further said to the President that I had been expecting that the courts would hand down a decision sustaining the Texas cases and that if such a decision came down I thought the ground would be cleared for a satisfactory adjustment of the oil matter. He then gave me quite a full description of his troubles with the oil companies. He said that the Government of Mexico had never wanted to confiscate any property. Least of all did they want to confiscate tne oil properties; that they needed the revenues, and obviously "they did not want to commit suicide"; that the act of 192J was a most necessary piece of legislation at the time because the country was in considerable disorder and there was an extreme radical wing whose wishes had to be met in that legislation; that he had thought the grant of the 50-year right as good as a perpetual right to take out the oil, and that such a grant would satisfy every practical purpose, but that the oil companies had not co-opcrated with him at all, but in fact their representatives had boasted all over Mexico that they did not need to obey the laws of Mexico. T o this 1 responded that, without defending the attitude of the oil companies toward Mexico or toward the Mexican courts, there was a very real principle which they had asserted and which the American Government had felt it necessary to assert on their behalf: that a jo-year right to take oil out of a piece of ground might be fully as good as a perpetual right, but it was certainly arguable that if one. administration could cut the right down from a perpetual right to a jo-year right, a later administration might cut it down from a jo-year right to a 40year right, or a 30, or a 10 or a i-year right, and that it seemed to me in the interests of Mexico as well as in the interests of the United States that that question should be cleared up. The President then asked me if I thought a decision of the court following the Texas case would settle the main controversy in the oil dispute. I told him I thought such a decision would remove the main difficulty. He then rather startled me by saying that such a decision could be expected in two months. I said to the President that it was important that during the time the cases are pending before the court no overt act which could be called confiscation should take place; that if difficulties were not to increase, pending a decision by the courts, there should be no change in the status quo. I think it proper to say that there was nothing in the President's conversation to indicate that he

intended to direct the courts to make a decision. In fact, he would doubtless assert that he had no such power. His words were entirely consistent with the fact that he had knowledge of what the courts already had in mind. At the same rime it must be remembered that it is generally believed in this country that the courts are not independent of the Executive. While this may seem quite shocking to those trained in American jurisprudence and English jurisprudence, it is not an essentially different situation than has existed in all early governments and is substantially the same situation that existed in England two or three hundred years ago. The King's Bench was originally more than the name of the court; it was the bench that belonged to the King, and administered justice for him. After the talk about the oil, the President then took up the question of the railroad. He told me that he was determined to see a better railroad administration, that he had asked Sir Henry Thornton, of the Canadian Government Railroad, to come down and make a report to him, and that even though it meant sweeping out a lot of holders of jobs who were intrenched in the railroad he was prepared to do so. He also spoke of his desire to expedite the claims settlements. He spoke of his earnest desire to improve agricultural conditions in Mexico and in this connection stated that Mexico was not readv yet for industrial development, that he hoped that a betterment of agriculture here would lead [tend?] to create trade with the United States, that industrial products should come into Mexico from the United States during the next generation, and that Mexico would not be ready for industrial development until long after his time. I returned from the President's Castle to the Embassy. A half hour later Mr. Robinson called upon me and told me that the President was very anxious that none of the oil people should know at all about our conference, that his greatest difficulty in dealing with the oil question in a proper way had been the oil people themselves, and that if they knew that a Supreme Court decision was likely to come down within a short time they would again begin to intrigue. Despite the informality of this whole conversation I am setting it out somewhat fully to you. I think it is of extreme importance that the oil people shall, if possible, be kept-from complicating the situation until the courts have had an opportunity to act. I have nothing to add about the general political situation down here to what has been sent you in despatches. I think it is true that President Calles

THE UNITED STATES AND THE WORLD has been greatly strengthened by the rigorous method in which he has handled the recent revolutions. There are some people who feel that the revolts were not real revolts. I think, however, the best opinion is that it was a question of who struck first; it was a case of "thy head or m y head," which again was pretty much the rule in English history until well past the T u d o r days. There is difference of opinion as to whether President Calles and General Obregon will remain together, but I think there are no real indications at present that they have quarreled. A year, however, in Mexico is a long time. I must say that my personal impression, for whatever it is worth, is that President Calles seemed to me to be a man who wanted to do as much as he could during this last year of his term and then get out. T h e pressure, however, upon him by those who share the advantages of office will certainly be very great, and much may happen as a result thereof. In both of m y talks with the President 1 have been impressed by his strength, his earnestness, and his apparent sincerity. I think he is a strong man, sincerely devoted to his country and capable of going a long w a y in either the right or the wrong direction. . . . With kindest regards [etc.] Dwight W . Morrow THE

U N D E R S E C R E T A R Y OF S T A T E ( O L D S ) TO THE

AMBASSADOR IN M E X I C O

(MORROW)

to the Secretary arrived in due course. A f t e r reading it we took it across the street, where it now is. W e expect to follow this course with all important communications which may come from you. Naturally the report of your preliminary conversations is exceedingly interesting. I can not help feeling that you are on the right track and have already made real progress. A t any rate it delights us all to see the old method of long-armed dealing scrapped, and the contrary method of direct personal contact tried. I am sure that the lines along which you are working are absolutely sound. T h e intimation about the Supreme Court decision is, of course, important. W e have had intimations on this subject before, but this one seems more reliable than the others. A n y h o w , I agree that the oil companies ought not to get off the reservation f o r the time being. T h e y have been very quiet lately. I told them when you left that there would not be anything doing until you found your way about in Mexico, and that it might be several weeks before anything affecting their interests happened. Meanwhile they would have to be patient. T h e y have, as you know, called attention to one or two moves made b y the Mexican Government, which seemed to them rather disturbing, but they have not asked f o r any conferences here. W e shall bear in mind your suggestion that nothing be said to them concerning the Supreme Court decision. . . . With warm regards [etc.]

Washington, November 16, 1927 DEAR MR. MORROW: Y o u r long letter addressed

The

Robert E. Olds

United States and the Other American Republics BY H E N R Y L.

D U R I N G THE PAST TWO YEARS w i d e s p r e a d

economic

depression and consequent unemployment have brought instability and unrest to many of the countries of the Western Hemisphere. Since March, 1929, there have been revolutions in no less than seven Latin American republics, resulting in the forcible overthrow in six of them of the existing governments. These changes, and the armed contests b y which some of them have been accompanied, have presented to the State Department of this country a rapid succession of critical problems f o r decision. It was inevitable in such a situation that criticism of our decisions should be excited, and it has been. Therefore, this evening, I shall place before you from the standpoint of the State Department a

STIMSON

brief statement of the facts as well as of the underlying principles and reasons upon which some of these recent decisions have been based. In particular, I shall discuss the principles by which we have been guided in the recognition of the new governments which have arisen and also the principles which have underlain our action in the regulation of the sale and transportation of arms and munitions to the countries which have been involved in strife. As a background f o r this discussion a brief review of the general policy of the United States towards the other republics of this hemisphere during the past century is pertinent. T h a t policy, in its general conception, has been a noble one. From the beginning we have made the preserva-

III8

T H E GOLDEN NINETEEN

tion o f individual independence of these nations correspond with our o w n interest. T h i s was announced in the M o n r o e D o c t r i n e and has been maintained ever since. T h a t doctrine, far from being an assertion o f suzerainty over our sister republics, was an assertion o f their individual rights as independent nations. It declared t o the world that this independence was so vital to our own safety that we would be willing t o fight f o r it against an aggressive E u r o p e . T h e M o n r o e D o c trine was a declaration o f the U n i t e d States versus E u r o p e — n o t o f the United States versus Latin America. . . . People are sometimes prone to forget our long and honorable fulfillment o f this policy towards our younger sister nations. It was our action which obtained the withdrawal of F r e n c h imperialism f r o m M e x i c o . It was our influence which provided f o r the return f r o m G r e a t Britain o f the B a y Islands to Honduras, and the M o s q u i t o Coast, including G r e y t o w n , to Nicaragua. It was our pressure which securcd the arbitration of the boundary dispute between G r e a t Britain and Venezuela and which later secured by arbitration the solution of serious disputes between Venezuela, G e r m a n y , and Italy. Between the republics themselves, our influence has constantly been exerted f o r a friendly solution of controversies which might otherwise mar their independent and peaceful intercourse. T o speak only of recent matters, I may refer to the long-standing T a c n a - A r i c a dispute between Chile and Peru, and the open clash between Bolivia and Paraguay. D u r i n g the past seven years our good offices have resulted in the settlement of eight boundary disputes between eleven countries o f this hemisphere. In our successive Pan A m e r i c a n conferences, as well as in the Pan A m e r i c a n U n i o n , the fundamental rule of equality, which is the mainstay o f independence, has been unbroken. Action is taken only b y unanimous consent. N o majority o f states can conclude a minority, even of the smallest and weakest. T h i s is in sharp contrast to the practice which prevailed in the former C o n cert of Europe, where only the great powers were admitted on a basis of equality. It was also at variance with the original organization of the Covenant of the League of Nations, where it was proposed that a majority of the seats in the Council should be permanently occupied by the G r e a t Powers. W h i l e such recognition o f their equal rights and national independence has alwavs been the basic foundation upon which our policy towards these republics has rested, there is another side of the picture which must be b o r n e in mind. T h i s

TWENTIES

basic principle o f equality in international law is an ideal resting upon postulates which are not always and consistently accurate. F o r independence imposes duties as well as rights. It presupposes ability in the independent nation t o fulfill the obligations towards other nations and their nationals which are prescribed and expected to exist in the family o f nations. T h e hundred years which have ensued since the announcement o f our policy towards these republics have contained recurring evidence o f how slow is the progress of mankind along that difficult highway which leads to national maturity and how difficult is the art o f popular self-government. Years and decades o f alternations between arbitrary power at one time and outbreaks o f violence at another have pointed out again and again how different a matter it is in human affairs to have the vision and to achieve the reality. F u r t h e r m o r e , the difficulties which have beser the foreign policy of the United States in carrying out these principles cannot be understood without the comprehension o f a geographical fact. T h e very locality where the progress of these republics has been most slow; where the difficulties o f race and climate have been greatest; where the recurrence o f domestic violence has most frequently resulted in the failure of duty on the part o f the republics themselves and the violation o f the rights of life and property accorded by international law to foreigners within their territory, has been in Central America, the narrow isthmus which joins the t w o Americas, and among the islands which inrersperse the Caribbean Sea adjacent to that isthmus. T h a t locality has been the one spot external to our shores which nature has decreed to be most vital to our national safety, not to mention our prosperity. It commands the line o f the great trade route which joins our eastern and western coasts. Even b e f o r e human hands had pierced the isthmus with a seagoing canal, that route was vital to our national interest. Since the Panama Canal has b c c o m e an accomplished fact, it has been not only the vital artery of our coastwise c o m m e r c e but, as well, the link in our national defense which protects the defensive power of our fleet. O n e cannot fairly appraise American policy towards Latin America or fullv appreciate the standard which it has maintained without taking into consideration all o f the elements o f which it is the resultant

RECOGNITION T h e recognition of a new state has been described as the assurance given to it that it will be permitted to hold :ts place and rank in the c h a r -

THE UNITED STATES AND THE WORLD acter of an independent political organism in the society of nations. T h e recognition of a new government within a state arises in practice only when a government has been changed or established by revolution or by a coup d'état. N o question of recognition normally arises, for example, when a king dies and his heir succeeds to the throne, or where as the result of an election in a republic a new chief executive constitutionally assumes office. The practice of this country as to the recognition of new governments has been substantially uniform from the days of the administration of Secretary of State Jefferson in 1792 to the days of Secretary of State Bryan in 1913. There were certain slight departures from this policy during the Civil War, but they were manifestly due to the exigencies of warfare and were abandoned immediately afterwards. This general policy, as thus observed, was to base the act of recognition not upon the question of the constitutional legitimacy of the new government but upon its de facto capacity to fulfill its obligations as a member of the family of nations. This country recognized the right of other nations to regulate their own internal affairs of government and disclaimed any attempt to base its recognition upon the correctness of their constitutional action. Said Mr. Jefferson in 1792: " W e certainly cannot deny to other nations that principle whereon our own Government is founded, that every nation has a right to govern itself internally under what forms it pleases, and to change these forms at its own will; and externally to transact business with other nations through whatever organ it chooses whether that be a king, convention, assembly, committee, president, or whatever it be. ( J e f f e r s o n to Pinckney, Works, Vol. Ill, p. foo.)" . . . With the advent of President Wilson's administration this policy of over a century was radically departed from in respect to the Republic of Mexico, and, by a public declaration on March 1 1 , 1913, it was announced that— "Cooperation (with our sister republics of Central and South America) is possible only when supported at every turn by the orderly processes of just government based upon law, not upon arbitrary or irregular force. W e hold, as I am sure that all thoughtful leaders of republican government everywhere hold, that just government rests always upon the consent of the governed, and that there can be no freedom without order based upon law and upon the public conscience and approval. We shall look to make these principles the basis of mutual intercourse, respect, and helpfulness be-

1119

tween our sister republics and ourselves. (Foreign Relations of the United States, 1913, p. 7 . ) " Mr. Wilson's government sought to put this new policy into effect in respect to the recognition of the then Government of Mexico held by President Victoriano Huerta. Although Huerta's government was in de facto possession, Mr. Wilson refused to recognize it, and he sought through the influence and pressure of his great office to force it from power. Armed conflict followed with the forces of Mexico, and disturbed relations between us and that republic lasted until a comparatively few years ago. In his sympathy for the development of free constitutional institutions among the people of our Latin American neighbors, Mr. Wilson did not differ from the feelings of the great mass of his countrymen in the United States, including Mr. Jefferson and Mr. Adams, whose statements I have quoted; but he differed from the practice of his predecessors in seeking actively to propagate these institutions in a foreign country by the direct influence of this Government and to do this against the desire of the authorities and people of Mexico. The present administration has refused to follow the policy of Mr. Wilson and has followed consistently the former practice of this Government since the days of Jefferson. As soon as it was reported to us, through our diplomatic representatives, that the new governments in Bolivia, Peru, Argentina, Brazil, and Panama were in control of the administrative machinery of the state, with the apparent general acquiescence of their people, and that they were willing and apparently able to discharge their international and conventional obligations, they were recognized by our Government. And, in view of the economic depression, with the consequent need for prompt measures of financial stabilization, we did this with as little delay as possible in order to give those sorely pressed countries the quickest possible opportunities for recovering their economic poise. Such has been our policy in all cases where international practice was not affected or controlled by preexisting treaty. In the five republics of Central America, Guatemala, Honduras, Salvador, Nicaragua, and Costa Rica, however, we have found an entirely different situation existing from that normally presented under international law and practice. As I have already pointed out, those countries geographically have for a century been the focus of the greatest difficulties and the most frequent disturbances in their earnest course towards competent maturity in the discharge of their international obligations. Until some two

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THE GOLDEN NINETEEN TWENTIES

decades ago, war within and without was their almost yearly portion. N o administration of their government was long safe from revolutionary attack instigated either by factions of its own citizens or by the machinations of another one of the five republics. Free elections, the cornerstone upon which our own democracy rests, had been practically unknown during the entire period. In 1907 a period of strife, involving four of the five republics, had lasted almost without interruption for several years. In that year, on the joint suggestion and mediation of the Governments of the United States and Mexico, the five republics met for the purpose of considering methods intended to mitigate and, if possible, terminate the intolerable situation. By one of the conventions which they then adopted, the five republics agreed with one another as follows: "The Governments of the high contracting parties shall not recognize any other government which may come into power in any of the five republics as a consequence of a coup d'état, or of a revolution against the recognized government, so long as the freely elected representatives of the people thereof, have not constitutionally reorganized the country." Sixteen years later, in 1923, the same five republics, evidently satisfied with the principle they had thus adopted and desiring to reinforce it and prevent any future evasions of that principle, met again, reenactcd the same covenant, and further promised each other that even after a revolutionary government had been constitutionally reorganized by the representatives of the people, they would not recognize it if its president should have been a leader in the preceding revolution or related to such a leader by blood or marriage, or if he should have been a cabinet officer or held some high military command during the accomplishment of the revolution. Some four months thereafter, our own Government, on the invitation of these republics, who had conducted their meeting in Washington, announced, through Secretary Hughes, that the United States would in its future dealings with those republics follow out the same principle which they had thus established in their treaty. Since that time we have consistently adhered to this policy in respect to those five republics. . . . Since the adoption by Secretary Hughes, in 1923, of the policy of recognition agreed upon by the five republics in their convention, not one single revolutionary government has been able to maintain itself in those five republics. Twice, once in Nicaragua and once in the case of Guatemala, a revolutionary leader has succeeded in grasping

the reins of government for a brief period. But in each case the failure to obtain recognition has resulted in his prompt resignation, on account of his inability to borrow money in the international markets. Several times within the same period a contemplated revolution has been abandoned by its conspirators on the simple reminder by a minister from this country or one of the other republics that, even if they were successful, their government would not be recognized; and undoubtedly in many more cases has the knowledge of the existence of the policy prevented even the preparation for a revolution or coup d'état. In every one of these cases the other four republics have made common cause in the efforts of the United States to carry out their policy and maintain stability. When one compares this record with the bloodstained history of Central America before the adoption of the treaty of 191}, I think that no impartial student can avoid the conclusion that the treaty and the policy which it has established in that locality has been productive of very great good. . . . Furthermore, it may be noted that one of the dangers which might be apprehended from this policy of recognition adopted by the five Central American republics under the treaty of 1913 has not materialized. One of the most serious evils in Central America has been the fact that throughout the history of those republics, until recently, it has been the habitual practice of the president who held the machinery of government to influence and control the election of his successor. This has tended to stimulate revolution as the only means by which a change of government could be accomplished. T h e danger was therefore manifest that this treaty of 1923 might result in perpetuating the autocratic power of the governments which were for the time in possession. As a matter of fact this has not happened. On the contrary, significant improvement has taken place in election practice. The Government of Nicaragua of its own motion has sought and obtained the assistance of the United States in securing free and uncontrolled elections in 1928 and 1930. The G o v ernment of Honduras, in 1928, without any such assistance, conducted an election which was so free that the party in power was dispossessed by the opposition party; and a similar free election has apparently occurred in 1930. For nearly one hundred years before 1923 free elections have been so rare in Central America as to be almost unique. Of course, it is too early to make safe generalizations, but it would seem that the stability created by the treaty of 1923 apparently has not tended to perpetuate existing autocracies but, on

T H E UNITED STATES AND T H E the contrary, to stimulate a greater sense of responsibility in elections. TRAFFIC IN ARMS I will now pass to the subject of the policy of this Government in respect to the export of arms and munitions to countries which are engaged in civil strife. Twice during the present Administration we have had to make important decisions and take important action in respect to this subject. The first of these occasions was in March, 1929, when a military insurrection broke out in the Republic of Mexico. This insurrection was of serious nature and extent. It involved disturbances in many of the Mexican provinces and much fighting and bloodshed. Acting under a joint resolution of'our Congress, adopted in 1922, this Government maintained an embargo upon the exportation of all arms and munitions which might reach the rebels. At the same time, it permitted the sale and itself sold arms and ammunition to the established government of Mexico, with which we were then and had been for a number of years in diplomatic relations. In about three months the insurrection was suppressed, and I think it can be fairly said that it is due in no slight degree to our action in this matter that the feelings of hostility on the part of Mexico to the United States which had existed ever since the intervention of President Wilson against Huerta in 1913 were finally ended and the relations of the two countries became friendly and cordial. The second occasion was in October, 1930, when armed insurrection had broken out against the Government of Brazil. In the same way in which we had acted towards Mexico, we permitted that government to purchase arms both from our Government and from our nationals in this country; and, when the Ambassador of Brazil brought to our attention the fact that arms were being purchased in this country for export to the rebel forces fighting against the recognized government, we placed an embargo against the exportation of such arms. T w o days later the Government of Brazil suddenly fell, the immediate cause being the revolt of its own garrison in Rio de Janeiro. In placing the embargo upon the exportation of arms to the Brazilian rebel forces, our Government acted under the same joint resolution of our Congrèss of 1922 and with the same purpose and upon the same policy as had guided our action in the case of Mexico and in other cases where action has been taken under that resolution. That purpose was "to prevent arms and munitions procured from the United States being used to pro-

WORLD

112 I

mote conditions of domestic violence" in countries whose governments we had recognized and with which we were in friendly intercourse. This was the purpose and policy as stated by our Congress in the language of the resolution itself. . . . Under the law of nations the duty of neutrality does not arise until the insurgents have assumed the status of á belligerent power between whom and the mother country other governments must maintain impartiality. This occurs when a condition of belligerency is recognized either by the parent state itself or by the governments of other nations. Such a situation arose in our Civil W a r when the Confederate States, having occupied exclusively a portion of the territory of the United States and having set up their own capital at Richmond, were recognized as belligerents by the nations of Europe. It has not arisen in any of the recent revolutions of Latin America, whether successful or unsuccessful. The revolutionists in Brazil had not been recognized as belligerents either by the Brazilian Government, by the United States, or by any other nation. Until that happens, under the law and practice of nations, no duty of impartiality arises either on the part of our Government or our citizens. Until that time there is only one side towards which, under international law, other nations owe any duty. This is so well established as to be elementary. It was recognized in the clause of the treaty of 1928 which I have just quoted. . . . The domestic legislation of the United States prescribing the duties of its citizens towards nations suffering from civil strife is following the line of these predispositions and is blazing the way for the subsequent growth of the law of nations. I am not one who regards this development of American domestic legislation, exemplified by the joint resolution of 1912, as a departure from the principles of international law or as a reactionary or backward step. The reverse is true. Although I have had little occasion to deal with the subject of international law from an academic viewpoint, it has happened that at different times during my life I have occupied public offices where I came in official contact with international conditions before they were remedied by the beneficent effect of the joint resolution of 1922 and its predecessor, the joint resolution of 1912. . . . I am glad that 1 had a share in the drafting of the joint resolution of 1912, and I have studied closely the progress of its remedial effect upon the conditions which it was designed to cure. I am glad to find that that effect has been beneficial. By our own Government it has been found so beneficent that in 1922 its scope was extended from civil

tilt

THE GOLDEN NINETEEN TWENTIES

strife in America to civil strife in certain other portions of the world. By 19x8 its beneficent influence was so generally recognized that at the preat Pan American Conference which was held in Habana in that year, all of the nations of this hemisphere embodied in the treaty of 19x8 as a definite and compulsory legal obligation the same policy which we had been able in 1911 to initiate u a discretionary power of the American Presi-

dent. I believe that this marks the line which the law of nations will eventually follow throughout the world. When it does so, I believe that international law and practice will have achieved another step forward towards the ultimate peace of mankind. It is my hope that the decisions of the State Department during the past two years will be found to have assisted in this beneficent progress.

Part Eleven THE THIRD AMERICAN REVOLUTION

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INTRODUCTION .....

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ι. THE ELECTION OF FRANKLIN DELANO ROOSEVELT FOR A M E R I C A N S who took pride in the possession of their own homes and automobiles, who sent their children to high schools and colleges, who moved in a complex and satisfying social round of fraternal meetings, church suppers, and outdoor games, to see —as was happening so widely during 1930-33 —their security shaken, their possessions and small savings melting away, their lives becoming more secret and lonely, their children leaving home before educations had been completed—these were profound traumatic experiences. The great majority of Americans were the humble, the hard-working, the thrifty—the workers, the small farmers, the little retailers, professional and technical men, the smaller manufacturers. It is small wonder that they flocked to the support of the new President and his policies. Franklin D. Roosevelt and the New Deal restored the confidence of the typical American in himself and in his country's destiny. This was achievement, even if many of the programs failed or fell short of their purpose and even if the end-results seemed to threaten unknown perils. Americans had at least learned that their political institutions and Constitutional processes could bend without breaking, and that what a people needed was courage—and that they had.

The Campaign of 1932. The depression was in its third year when the presidential contest of 1932 took place. The Republicans renamed President Hoover and Vice President Curtis as their standard-bearers. The Democrats nominated Governor Franklin D. Roosevelt of New York for the presidency and Speaker John N. Garner of Texas for the vice presi-

dency. Roosevelt's campaign captured the country's imagination. Beginning in the spring of 1932, he tiraveled more than 25,000 miles and visited almost every state in the Union; and he talked openly and freely of fundamental economic problems. One clearcut distinction between the positions of the two candidates quickly began to emerge. Hoover attributed the depression to international factors; Roosevelt tended to stress the difficulties and faults in our own economy. It was hard to assume—and none but the most partisan did so—that Roosevelt was hostile to the American capitalist system. But he did look forward to a capitalist system severely modified and limited, hedged around closely in the interests of the security of the workingman, farmer, small homeowner, and small investor. And its activities were to be directed so completely to the attainment of social rather than individual ends that to many who had been brought up on the concepts of a laissez-faire society and an automatically self-adjusting economy a real revolution threatened. The Third American Revolution. These, as it turned out, were not false prophets. A revolution was started by the New Deal— not a revolution in the violent, turbulent sense, but a revolution nevertheless. The whole concept of the state, or national government, underwent a metamorphosis. The state had previously been a passive or impartial force, seeking to stand aloof from the contests in the market place, or at best offering only its mediation to see that principles of justice and equity were preserved; and it had refused to interfere significantly in the

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interests of the security and the welfare of its laboring peoples. N o w it became the interventionist state. It imposed on the free business enterpriser all sorts of controls and regulations; it entered openly into business itself, often as competitor with private corporations; it used its great fiscal and financial powers to redistribute wealth and to create income; it committed itself to an elaborate program of social security that offered protection, in time, to the whole population against the mischances of unemployment, invalidity, and sudden death, and from the cradle to the grave. The laissez-faire state with only a skeletal apparatus of offices and agencies had become the social-service state with a vast and intricately contrived and permanent machinery of officials and bureaucrats. And political power, too, had shifted. Previously political power had been in the hands of the middle class—the industrialists, the bankers, the larger farmers. Now political power was concentrating more and more in the hands of the lower middle class and the workers. Those who voted for Franklin D. Roosevelt in 1932, 1936, 1940, and 1944 came from the smaller farmers throughout the country; from the urban dwellers who toiled as workers and salaried employees; from small distributors, small manufacturers, and those on the W P A rolls. Interestingly enough, this took place without a break-up and redistribution in national party formations and without the appearance of a workingmen's political party. From a Nationalist to an Internationalist

2. THEORY

Orientation. Furthermore, the revolution took place despite the fact that the pivot of its operations changed. The New Deal started out by being essentially nationalist in its outlook and interests, and continued so until 1937. From 1937 on, it became increasingly internationalist. And yet the fundamental political and social philosophy remained the same. The American state was to be used for security and welfare; this could be done by re-ordering our domestic economy without any real concern over what was happening outside our shores—so ran the thinking and planning of the New Deal up to 1937. The American state was to be used for security and welfare; but we could not be free to handle the problems of high employment and of improving standards of living until the whole world was made safe from aggression; and freedom from want and fear could not be assured Americans unless all peoples were similarly guaranteed these rights—thus ran the philosophy of the New Deal from 1937 on. The same groups, by and large, who had supported the New Deal in its first stage followed its leadership in the second. As the presidential campaign of 1932 drew out its term, it became apparent that Roosevelt was to be elected by an overwhelming majority. And so it turned out. He received 22,800,000 popular votes to Hoover's 15,800,000, and 472 electoral votes to Hoover's 59. The Republican ticket carried only the six states of Maine, New Hampshire, Vermont, Connecticut, Pennsylvania, and Delaware. The Democrats also elected heavy majorities to both houses of Congress.

AND TACTICS OF THE NEW

Theory of the New Deal. Some of the New Deal policies were understood and acted upon at once; some were adopted only to be abandoned later; some were originally primary and then were pushed into the background. Some were improvisations devised on the spot;

DEAL

and some went as far back as Populism and the New Freedom for their inspiration. Always, however, there existed the thought that the responsibility of public authority for the welfare of the people was clear and that the intervention of the state was justifiable.

INTRODUCTION The theoretical bases of New Deal policy may be put down in this fashion: ι. Capital plant at home had presumably over-expanded as far as the normal requirements for agricultural and industrial goods were concerned; investment therefore was no longer to be the exclusive concern of private banking. This theory was pushed most energetically in the field of agriculture, where limitation of production became the basis of policy. That it also was extended to industry was evident from the codes of "fair competition" written during 1933-35 under the National Industrial Recovery Act. Under these, many industries, in the process of policing themselves, were permitted to provide for rigorous controls over the use of existing machinery and over new-plant expansion. The idea also colored trade-union policy, for unions were allowed to impose limitations upon production through so-called featherbed jobs, full-crew requirements, and similar devices. From this conception of overexpansion there followed the New Deal theory of social investment as complementary and sometimes in opposition to private investment. 2. Prices were being "managed," or they were "sticky" in significant areas of business operations. The New Deal held that this was due to monopolistic practices and to imperfect competition, that is to say, to conscious interference with the free movement of prices on the part of corporations. A bold attack on monopoly practices was therefore in order. 3. Labor had an inadequate share of the national income on the one hand, and unequal bargaining powers in industrial relations on the other. Both conditions could be remedied by compelling the legal recognition of trade unions and by legislation fixing minimum wages and maximum hours of work. 4. Business enterprises in many fields had become "overcapitalized," in the sense that their fixed charges due to capital costs were higher than would permit the concerns affected to operate profitably. Since such costs

1127

did not adjust easily and quickly to changed market conditions, the difficulties of total market adjustment were intensified. Debt revisions were therefore in order. 5. The public-utilities industry, furnishing electric power and light, which was notably under corporate control, was not favorably disposed to a vast expansion program to reach potential users and isolated communities. At this point was introduced a bold piece of social engineering—the Tennessee Valley Authority. 6. The toll taken by unemployment, cyclical as well as technological (although on the latter point there was much debate), was very great. There were other insecurities which philanthropy and private savings were inadequate to cope with: old age, invalidity, child dependency, sudden death. Security to the American population against these perils was a prime concern of government. 7. There were dark spots in our economy: inadequate housing for low-income earners, the plight of sharecroppers and agricultural laborers, unemployed youth. Here too was a field for state intervention. 8. The financial mechanism of banking and credit was too powerful an agency to be left entirely in private hands. Banking had to be made at least a semipublic function, so that banking policy could lead positively in controlling the ups and downs of business fluctuations. 9. The world market was no longer functioning properly; high tariff walls, import quota systems, foreign governmental controls, and the manipulations of foreign exchange prevented the usual absorption of American surpluses in foreign trade. Our cotton, cereals, tobacco, oil, copper were piling up in warehouses to derange markets at home. T w o lines of attack were indicated: controlled production, and the elimination of those blocks that were hindering the orderly processes of world trade. Tactics of the New Deal. So ran the New Deal analysis. From this there followed cer-

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tain programs, of w h i c h the following were the outstanding: ι. T h e restoration and maintenance of prices. M a n y attacks on the problem were launched: the dollar was devaluated; gold was purchased from abroad; limitations were imposed on the production of agricultural products, petroleum, and coal; codes of fair competition in industry were written to eliminate cutthroat methods. T h e greatest success was met with in the case of agriculture, although here crop loans and subsidies w e r e also required f o r the purpose of making production control effective. 2. T h e reduction of debt. Private debts had become unduly burdensome, notably within the context of a deflationary price situation. T h e N e w Deal sought to come to grips with this problem in t w o w a y s : b y raising prices, and b y writing d o w n the face value of debt in places where price change itself could not be entirely and immediately effective. For agriculture it created a new fiscal agency (the Federal Farm M o r t g a g e Corporation) which was to make possible the exchange of privately held agricultural long-term paper for semipublic (or public-guaranteed) paper. For homeowners it created a new fiscal agency (the H o m e Owners' Loan Corporation) for a similar purpose. F o r businessmen, corporations, and municipalities, it radically changed the bankruptcy law to permit those who were insolvent to come to an understanding with their creditors quickly and at small legal cost. 3. T h e revival and expansion of credit. T o pump short-term and long-term funds into enterprise, state intervention was imperative. T h e commercial banks, because of their nonliquidity, were not in a position to extend loans for working capital. T h e agencies of long-term credit—savings banks, insurance companies, trust companies, title and mortgage companies—seeing their earlier investments unproductive, feared to assume further risks. T h e N e w Deal jumped into the breach. It expanded the powers and operations of the Reconstruction Finance Corporation (created

REVOLUTION

in 1932 to open commercial banks and help them achieve liquidity quickly). It established virtual public control over the Federal R e serve System, so that the system could be induced b y government policy to expand (and contract) credit. It obtained for the Board of Governors of the Federal Reserve System the power to lower (and raise) the minimum legal reserves required of member banks. It got f o r the same agency the right to raise (or lower) the margin requirements f o r security purchases, thus controlling to an extent the amount of credit flowing into brokers' loans. It used the Reconstruction Finance Corporation to make direct loans to private business and to municipalities and other public corporations for housing, electric power plants, and the like. 4. T h e raising of the purchasing power of labor. Labor, confronted b y shrinking opportunities of employment, was forced to sell its services cheaply. Sweated industries had reappeared and child labor had increased. T h e key to the rehabilitation of labor was to be chiefly its own united strength. T h e National Labor Relations A c t therefore ordered employers to bargain with the workers' o w n trade unions and to give up practices that prevented labor organization. Closed shops became more and more common; and also industrial practices and standards were modified and improved through labor-management cooperation. T o defend those incapable of effective organization—children, women, the unskilled—minimum-wage and maximumhour legislation and the abolition of child labor were aimed at. A f t e r several failures these objectives were achieved in the Fair Labor Standards A c t of 1938. 5. T h e relief of the needy, the protection of dependents, and social security. Wholesale unemployment, illness and invalidity, and the unrest of youth were the results of the depression. T h e relief of distress was an imminent public duty, and the N e w Deil experimented with this problem in many ways. It lent generously to the states for straight

INTRODUCTION outdoor relief. It created a federal agency (the Public Works Administration) to extend credit to public and quasi-public authorities to finance long-term public construction projects. It wrote Social Security legislation under which direct federal appropriations and federal matching grants-in-aid were made to the states to provide for the unemployables and the permanently needy (the aged, the blind, dependent and crippled children). It devised a significant code under which, as a result of contributions by employers, unemployment funds were built up in the states; and also, from equal contributions by employers and workers, an insurance fund from which were to be paid annuities to workers upon retirement. It created work for the temporary needy and unemployed in short-term projects financed by the Federal government (under the Works Progress Administration). 6. The construction of homes. The New Deal recognized that the building of decent homes for low-income earners was an outstanding social need; it therefore established an agency (the United States Housing Authority) which, with government financing and subsidie, was to assist quasi-public authorities to create low-cost housing. 7. The protection of the investor and the saver. T o defend the property rights of the American investor the New Deal set up the Securities and Exchange Commission and gave it wide powers to supervise the issuance of new securities by corporations, to obtain for investors adequate information about the financial practices of corporations and their directors and officers, and to regulate the functioning of brokers and the security exchanges, or markets, themselves. Similarly, the Federal Deposit Insurance Corporation was devised to guarantee deposits in savings banks accounts up to $5,000. 8. The rehabilitation of the electric power industry. Believing that an outlet for savings and a work of social reconstruction could be achieved in an expanded electric light and

power industry, the N e w Deal created the Tennessee Valley Authority. The stated purposes were the rehabilitation of the population of the Tennessee Valley and the establishment of an experiment in the public operation of electric light and power. Focusing its attention on this industry as an example of banking domination, the N e w Deal also provided for the elimination of unnecessary holding companies. 9. The revival of foreign trade. The decline of foreign trade was a characteristic of our unbalanced economy. The N e w Deal sought to revive American overseas commerce; and for this purpose it created the Export-Import Bank to finance the flow of goods and even to extend credits to foreign governments. But the New Deal was equally interested in the restoration of world trade generally. Congress was therefore prevailed upon to permit the writing of reciprocal trading agreements with foreign nations as an executive function. Through the agency of the State Department (and without Senate participation) a large number of such commercial treaties was drawn up, the net effect of which was the measurable lowering of tariff barriers. These agreements also contained most-favorednation clauses. 10. Pump priming. When private enterprise failed to respond immediately or when business activity became sluggish, the New Deal proceeded to lend and spend. This it called "priming the pump"; in other words, the Federal government boldly engaged in deficit financing in an effort to raise national income. It lent to distressed banks, railroads, insurance companies, mortgage corporations, and industrial concerns; and to farmers, homeowners, the states, municipalities, and newly created public authorities. It spent—by subsidies, grants-in-aid, outright appropriations— in order to rehabilitate marginal farmers, to finance the building of ships, to tear down slums and put up low-rent housing, to furnish old-age pensions, to construct public buildings, and to provide flood control, roads, and

T H E THIRD AMERICAN REVOLUTION reforestation. It not only gave people work, but at the same time added to the social wealth of the nation. This meant a steady increase in the national debt, a situation which the New Deal faced with equanimity because its theory of deficit financing was based on the premises that governmental spending made for an in· 3.

crease in national income and that an increase in national income made greater taxation possible. The nation was going into debt, it was true; but the debt was largely held at home, and, as a result of the debt, the country's assets had been increased. (So argued, at any rate, these new economics doctors.)

THE NEW DEAL

Such were the general New Deal policies and tactics designed to restore the American economy and make possible its smooth functioning, this time with more equity as far as the great masses of the country's population were concerned. A fuller description of some of the legislative enactments and the agencies set up is now in order. Agriculture. Because its condition was critical, agriculture received the immediate, and the continuing, attention of the New Deal. The goals for recovery and reform were the following: ( ι ) The establishment of parity prices, that is, the restoration of the farmer's purchasing power to the position it had held in the immediate prewar years. The period of August, 1909, to July, 1914, was fixed on as the base period, the assumption being that at that time the prices farmers paid were in balance with the prices they received. (2) The establishment of parity income. This concept later on replaced the concept of parity prices. It was the intention of the Department of Agriculture to obtain for agriculture the relative income, as compared with total national income, which it had been receiving in the prewar years. (3) The adjustment of farm production to meet market requirements. This meant chiefly adjustment to domestic consumption. Production was therefore curtailed and where surpluses appeared, they were to be held off the market by means of government loans. Justification for this attitude was subsequently found in the concept of the "ever-normal granary." (4) Soil conservation and improvement of land use. (5) Debt

AGENCIES

reduction and security against foreclosure at the hands of mortgagees. (6) Rural relief and rehabilitation for submarginal farmers and tenants. The first legislative enactment to carry out the major intention of this program was the Agricultural Adjustment Act, which was passed in May, 1933, and continued on the statute books until January, 1936. It must be repeated that the underlying conception was that agricultural distress was due to overproduction, not to underconsumption; therefore the growers of the basic staples were to be induced to restrict plantings, ultimately on the basis of a quota system. As compensation they were to receive subsidies ("benefit payments") and crop loans, the government holding the surpluses off the market. This was for the purpose of raising the prices of agricultural goods; and they were raised. The original A A A tied together the subsidies with a processing tax on millers, meat packers, cotton ginners, and so on, and, principally for this reason, was found unconstitutional by the Supreme Court. T o get around the objections of the Court there were passed the temporary Soil Conservation and Domestic Allotment A c t of 1936 and the Agricultural Adjustment A c t of 1938. In both these measures the justification for governmental action was found in the necessity for protecting the land resources of the nation and for encouraging the utilization of improved methods of cultivation. Again subsidies—this time directly—and crop loans were to be the basic instruments for obtaining

INTRODUCTION compliance. The purpose of the commodity loans was to lay a floor below which farm prices could not fall. Other major agricultural programs have already been noticed. The Emergency Farm Mortgage Act of 1933 was followed by the Farm Mortgage Refinancing Act of 1934, which created the Federal Farm Mortgage Corporation, under the direction of the Farm Credit Administration. The F F M C was given a revolving fund of two billion dollars in bonds, guaranteed as to principal and interest, which it could exchange for the bonds held by federal land banks and which it also could invest directly in farm mortgage loans. The FFMC succeeded in obtaining interest reductions and in scaling down the principal of farm obligations. After a series of unsuccessful experiments with resettlement projects, the Farm Security Administration was finally set up in 1937 to devise ways and means of bringing relief to distressed small farmers and agricultural laborers; the chief method employed was rehabilitation through socialservice activities. This, too, worked out well. Industry. The revival of industry was to be pushed chiefly through price-raising expedients; but industry was to police itself, in order to eliminate unfair methods of competition. Despite the fact that a major commitment of American industrial policy was the Sherman Anti-Trust Act, the New Deal was prepared to welcome the cartelization of American business. For this purpose, the National Industrial Recovery Act was passed in June, 1933. It set up a National Recovery Administration, under whose aegis every branch of American business was to form code authorities, and these code authorities were to draw up principles and practices guaranteeing "fair competition." Most of these codes, when completed, incorporated methods for establishing minimum prices and restricting production. In May, 1935, the Supreme Court—incidentally, to everyone's relief—found the N I R A unconstitutional on three grounds: that Congress could not dele-

UJI

gate its legislative powers to private individuals, that is, the code authorities; that the Federal government could not legislate about industrial practices if these practices did not directly affect interstate commerce; and that a national emergency did not exist. The administration then returned to a vigorous enforcement of the antitrust laws. Labor. The N I R A had incorporated and had made possible the establishment of certain fundamental rights of labor. Section 7(a) of the law had given workers the right to establish collective-bargaining agencies of their own choosing and had promised them minimum rates of pay, maximum hours of work, and other safeguards. The forty-hour week was generally established; minimum wages in most industries were put at between $12 and $15 a week; and the labor of children under sixteen years was banned. The outlawing of the N I R A by the Supreme Court compelled the writing of new labor enactments. These took the form of the National Labor Relations Act in 1935 and the Fair Labor Standards Act (Wages and Hours Act) in 1938. The first was a great triumph for the country's workers and, indeed, was one of the outstanding achievements of the New Deal. It was frankly labor-oriented in that it was concerned only with industry's duties toward the workers: employers were obliged to bargain collectively with their employees and to give up all those industrial practices which might prevent the employees from properly realizing the objective of free trade-unionism. A specified number of unfair practices on the part of employers was accordingly rendered illegal. Also, when the workers were ready, they could call for an election to determine which trade union was to represent them in their negotiations with the employers. And finally, the National Labor Relations Board was set up, with wide powers. The board could decide which was to.be the appropriate unit for the purposes of collective bargaining, that is, whether the unit was to be an employer unit, a craft unit, a plant

II3i

T H E THIRD AMERICAN REVOLUTION

unit, or even a regional unit. The board was to conduct elections. It was to certify the trade unions duly chosen by the majority of workers involved as exclusive bargaining agencies. And it was to prevent unfair labor practices by the use of quasi-judicial powers similar to those exercised by the Federal Trade Commission in its own field. The N L R B quickly received the cooperation of most employers. In a group of notable decisions in 1937, the Supreme Court validated the law. Indeed, the Court stretched the Constitutional concept of "intersute commerce" to such a degree that the NLRB's intervention in all labor disputes was made possible. Labor itself rose to its opportunity, and whereas in 1929 there were only 4,330,000 trade unionists in the country, at the end of the 1930s their numbers exceeded 11,000,000. Improvements in wage rates followed; and so did improvements in industrial relations, the outstanding new development being labormanagement cooperation. The Fair Labor Standards Act of 1938 was one of the country's most important pieces of welfare legislation. It established the fortyhour week, with time and a half for overtime, for all the country's industries. It provided for the creation of boards in all trades and businesses, which from time to time were to draw up minimum wage scales in order to "reach . . . the objective of a universal minimum wage of 40 cents an hour for each industry." And it virtually made possible the abolition of child labor by departmental order (in this case, the order of the Department of Labor). Social Security. The Social Security Act of 1935 (amended in 1939) permitted the United States to catch up with those European countries that had pioneered in the field of social security some twenty-five years earlier. The act made provisions for the following: ( 1 ) An Old-Age and Survivors' insurance program, administered by the Federal government. Many categories of workers, in establishments employing eight or more persons, were

to be assured retirement allowances at sixtyfive years of age and after. The fund was to be built up by matching contributions from the workers and employers; and this contribution was initially put at 1 percent, for each, of wages and earnings up to $3,000 a year. Benefit payments were to be based on marital status, length of coverage, and the size of the over-all contributions. Dependent survivors were also to be provided for. (2) A program of unemployment compensation, to be administered in every case by the states themselves. Through the agency of a federal payroll tax of 3 percent on payrolls, as a compulsory device, states were to be encouraged to set up unemployment-insurance schemes. It is enough to say that all did so; that in most cases the contributions to the maintenance of these funds were coming from the employers alone; and that benefit payments ran from fourteen to sixteen weeks, with an initial maximum weekly benefit of about $15 and a minimum weekly benefit of $5. (3) Federal grants to states, more or less on a matching basis, to take care of outstanding problems of dependency. These included assistance to the needy aged, the needy blind, and to children under sixteen deprived of parental support; and also grants for the establishment of maternal and child-health services, medical and other services for crippled children, and welfare services for the care of homeless, dependent, and neglected children. A Social Security Board was provided to administer most of the provisions of the law. In May, 1937, in three important decisions, the Supreme Court gave its stamp of approval to the Act. Currency and Credit. Currency expansion and bank-credit inflation were major preoccupations of the New Deal. In April, 1933, the United States formally went off the gold standard when an executive order stopped the free movement of gold both within and without the country. Congress gave its authorization through the passage of the Gold Repeal Joint Resolution of June, 1933, which

INTRODUCTION canceled the gold clause in all federal and private obligations. A step in the direction of increasing the amount of money in circulation was taken with the passage of the Thomas Amendment to the A A A in May, 1933. This permitted the President to issue up to $3,000,000,000 worth of United States notes; to reduce the gold content of the dollar as much as 50 percent; and to accept silver from foreign governments on the account of the intergovernmental debts, as well as to buy American-mined silver. In January, 1934, Congress enacted the Gold Reserve Act, and under it the President fixed the value of the dollar at 59.06 cents in terms of its old parity; in other words, the government was permitted to buy gold anywhere at $35 an ounce. The hopes here were two: to push prices up by devaluation and to give the United States an advantage in foreign trade. Bank-credit expansion was linked with banking reform. The Banking Act of 1933 and the Banking Act of 1935 provided for the following changes in the country's banking policy: ( 1 ) A Federal Deposit Insurance Corporation, already referred to, was set up. (2) Banks belonging to the Federal Reserve System were to cut themselves off from their securities affiliates. (3) The government's hold on the Federal Reserve System was greatly extended through the creation of the Board of Governors of the System, all of whom were to be appointed by the President. (4) The Open-Market Committee was to be dominated by the Board of Governors and was to have control over the powers of expanding and contracting credit. (5) The Board of Governors was also given the right to raise (or lower) reserve requirements of member banks and to raise (or lower) margin requirements on security purchases. Credit expansion was pushed also through government loans, notably by the use of the RFC. Power and Housing. The Tennessee Valley Authority was established in May, 1933; its powers have been alluded to above. In the

domain of power control, extensive reforms were launched. The Public Utility Act of 1935 had two functions: to expand the authority of the Federal Power Commission over all utilities transmitting electricity across state lines; and to give the SEC the right to put an end to holding companies in the utility field. Many acts were passed in the field of housing. The Home Owners' Loan Act of April, 1934, came to the relief of existing and would-be small homeowners, by permitting the refinancing of outstanding mortgage debt and by creating facilities for the financing of new home construction. The National Housing Act of June, 1934, set up the Federal Housing Administration to standardize methods of construction and financing for multiple dwellings. The United States Housing Authority (under an act of 1937, amended in 1938) was to make loans to local public bodies, created by state law, to provide low-rent housing and slum clearance. Public Works and Relief. The New Deal sought to stimulate recovery by embarking on elaborate public-works projects. For this it received authority in the National Industrial Recovery Act, and the Public Works Administration was accordingly set' up and given $3,000,000,000. But the programs moved tardily, with the result that in 1935 the administration began to put its reliance increasingly on the less expensive "made-work" projects of the Works Progress Administration. It was a considerable length of time before a proper program was devised to handle the case of the temporarily unemployed. In May, 1933, the Federal Emergency Relief Administration was set up; in October, 1933, there appeared the Civil Works Administration; and finally, in July, 1935, the Works Progress Administration. The W P A functioned well, not only making possible considerable additions to public plants but also providing employment as a substitute for outdoor relief. As for the unemployables, they were being handled by local home-relief agencies.

"34

T H E THIRD AMERICAN REVOLUTION

Financing the New Deal. The New Deal sought to charm back recovery by lending and spending on a vast scale. Up to 1935, the government made no serious effort to finance its spending program through taxation; and

though after 1935 there was a good deal of tinkering with revenue acts, no nev tax avenues were really explored. Deficit financing meant chiefly federal borrowings; as a result, the national debt steadily mounted.

THE PROGRESS OF The Course of Business. The New Deal's spending and easy-money programs and its own confidence in the essential soundness of America's institutions slowly spread the processes of revival. Agriculture was the first to respond, but the country's industry was not slow to follow; so that up to the midsummer of 1937 (except for a brief recession in 1934) the course of business activity moved upward. By 1937, the general level of production reached the average normal of the 1920s. This is not to assume that recovery was complete, for it was not. In fact, recovery was slower in the United States than in any other industrial country. Thus industrial production was almost as high as it had been in 1929; but on the basis of past performances it should have been higher, for the population of the country was greater and the rate of productivity in industry was perhaps 25 percent higher. The upshot was that the spring of 1937, according to the American Federation of Labor's estimates, still saw 9,700,000 persons out of work. W h y was this? A number of reasons may be adduced. (1) The government's spending and lending policy frightened off new business investment. To this degree the popular charge that there was a strike of capital was true. (2) Whereas labor had before been receiving an inadequate share of the national income, under the New Deal its share probably was too great. This increased the costs of production. (3) There was no real revival in our foreign trade, largely because of the national-economic policies pursued by most of the countries of Europe. In agriculture, thanks to the subsidy, loan,

RECOVERY

and controlled-production measures of the New Deal, definite improvement had occurred. In 1932 the cash income from the sale of farm products had been $4,300,000,000; in 1937, the income from sales and government payments was $8,500,000,000 (government payments, or subsidies, were in the neighborhood of $500,000,000 yearly). The ratio of prices received to prices paid—the index of agricultural well-being—had moved up hearteningly. In 1932 the ratio stood at 61; that is, the farmer's dollar, in terms of the goods and services he could get for it, was worth 61 cents. In 1937, the ratio stood at 93. Farm real-estate values also mounted. The

National Income. Also, b y 1937 and

again by 1939, the country had recovered much of the position lost as a result of the depression in terms of its national income. From the low of 40 billions of dollars reached in 1932, national income went up to 71.2 billions in 1937; and after the recession of that year, national income was restored to 69.4 billions in 1939. But this did not bring the country back to where it had been before the depression had set in; the reasons were that the population had increased by ten millions in the decade since 1929 and that the productivity of the nation's industrial plants had also improved. That is to say, if the recovery had been complete and full use of the nation's manpower and resources had been made, the real income should have been in the neighborhood of at least 100 billions of dollars. Effects

of Deficit

Financing.

In

another

area the success of the New Deal's policy was only of mixed character. It has already been

INTRODUCTION pointed out that the New Deal was spending large sums of money. Government bonds, bills, and notes for these sums flowed into the banks. The Board of Governors of the Federal Reserve System then followed a cheap money policy. They bought government bills and notes, and this led to an increase in the reserves of the member banks. Member bank reserves also grew through the inflow of gold from abroad. By these processes, the base of the credit pyramid was expanded. It was hoped that increased reserves would lead to increased bank deposits (as a result of commercial loans made by banks); and that increased deposits would lead to an expansion of employment and therefore greater spending. But it did not work out that way. Deposits did grow because of government deficit financing. The banks, however, showed their increasing deposits in their investment portfolios rather than their loan portfolios. They were in other words, maintaining themselves in an amazingly liquid form; and the first hint of contraction of business encouraged them to liquidate their loans and discounts. Also, government's unbalanced budget and its taxation of corporate profits, without making due

allowances for losses, led to a growing conservatism on the part of businessmen as far as the inception of risk-taking enterprise was concerned. It may be said, very properly, that there was a strike of capital—but this was not due so much to political hostility as it was to the uncertainties and the fears possessing business. The New Deal, in other words, appeared to be incapable, by its fiscal policy, of restoring that confidence in the business community that was really the basis of a real revival. The key to the New Deal successes was therefore this: it was to be found not nearly so much in new capital borrowings by business or in any real expansion in bank credit. It was due largely to deficit financing; and when New Deal spending slowed down·—as happened from midsummer 1937 to late spring 1938—then a real business recession sec in. Only the resumption of a spending policy on the part of the New Deal made possible the revival of the summer of 1938. And the great war expenditures that began to appear with 1940 accounted for the impressive increases in industrial production and national income and for the elimination of unemployment.

f. THE COST OF THE NEW The Debt. What did all this cost? From 1930 on, the road of deficit financing had been pursued—the New Deal notably stepping up the tempo after 1933—so that in the 1930s the federal debt was increased from about 16 billions of dollars to more than 40 billions. During the first years of the decade, the deficits which the Federal government encountered resulted from a decline in receipts from tax sources, whereas, under the New Deal, they had resulted rather from an increase in expenditures. During the years 19311933 federal expenditures were in the neighborhood of 4 billions of dollars annually; in 1934 they were 6 billions, and in 1937, 8.4

"35

DEAL

billions. The New Deal insisted that the deficit was not entirely incurred because of "made-work" activities. Thus for the years 1931-38 the total deficit was 20 billions. But against this amount were to be balanced assets arising from recoverable loans and expenditures on public-works construction; these came to 12 billions of dollars. Taxes. At the same time that deficits increased, so did taxes. Federal taxes in 1931 came to 2.7 billions of dollars; in 1938 they stood at 5.9 billions. In 1931, federal taxes represented 4.5 percent of national income, whereas in 1938 the percentage was 9.5. Income-tax rates were pushed up; and in

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T H E THIRD AMERICAN REVOLUTION

1936, as a further tax on corporations, an undistributed-profits tax was levied. Because of the great hostility engendered, this device was abandoned in the Revenue A c t of 1938. In 1930 at least 95 percent of all federal tax revenues were produced by income taxes, tobacco taxes, and customs duties; in 1938, these sources contributed 58 percent. The N e w Deal developed new tax sources, notably

6. LABOR

manufacturers' excise taxes, liquor taxes (because of repeal), and payroll taxes. A t the same time, it is important to note that the Federal government was not called upon to pay as much, proportionately, for its borrowings. The yield on United States government bonds was 3.65 percent in the second quarter of 1929 and only 2.7 percent in the last quarter of 1937.

UNDER THE NEW

DEAL

In one sector there were real gains: organ- many of his own members were more and ized labor grew, its rights were being safe- more entering the class of semiskilled. In any event, Mr. Lewis challenged the guarded, and it was being paid better than ever before in its history. T o o well, in fact, top leadership of the A.F. of L. at its 1935 some authorities were prepared to argue. In- convention when he forced a vote on a resoterestingly enough, one of the important lution demanding that organizational work be reasons for the extraordinary increase in pushed on industrial lines in the basic industrade-union membership (the other was the tries instead of on craft lines. This meant that National Labor Relations A c t ) was the break- all men in the automobile industry, for examing out of a bitter internecine, schismatic ple, were to be organized into an automobile union, instead of being unionized as machindispute within the American Federation of ists, teamsters, stationary engineers, and the Labor. The CIO. T h e leader of the schismatics was like. Mr. Lewis was defeated, but he found John L. Lewis, the ambitious and dynamic enough support at the convention to encourhead of the United Mine Workers. The 1920s age him to form the Committee for Industrial Organization within the A.F. of L. T h e CIO had seen a slackening of effort on the part of trade-union leaders. T h e y had become in- went ahead and, before 1936 was over, it had volved in business investments, had frowned the backing of ten national and international on social-security programs, and were in- unions, some of which had begun on their capable of coping with or indifferent to the own account to do missionary work among great horde of the unorganized in the mass- the unorganized. production industries. One of the important This led to open warfare. In 1936 the execureasons for this was that most union leaders tive committee of the A.F. of L . suspended were spokesmen f o r highly skilled crafts- the ten unions that had joined the CIO; the men who were fearful of the inroads being next year the A.F. of L. convention authormade into their own special interests by the ized the expulsion of those unions which reassembly-line technique. John L. Lewis did fused "to return to the ranks of our movenot belong in the company of these less alert ment." Nine of the unions were so expelled leaders. He had taken advantage of Section in 1938, and the gage of battle was down. 7(a) of the N I R A to press unionization in Lewis accepted it when he and his followers the coal industry. He was more sympathetic formally met in convention late in 1938 and, to the problems of the workers in the mass- in November, set up the rival body of the production industries (steel, automobiles, Congress of Industrial Organizations. T o a rubber, oil refining, aluminum) because so great extent the A.F. of L . clung to its basic

INTRODUCTION role of organizing the skilled workers in craft unions, disregarding industrial groupings; while the CIO devoted itself to industrial unionism without paying attention to craft differences. But this did not prevent both bodies from cutting across the lines, so that a certain amount of dual unionism developed. What was profoundly significant was that the A.F. of L. became a fighting organization and explored the new opportunities for unionization as energetically as did the CIO. As a result, great gains were won by both, and when Pearl Harbor struck, each could claim at least 4,000,000 dues-paying members. CIO Successes. The CIO's initial successes were unprecedented. It went into automobiles, revitalized the United Automobile Workers of America (which had been established in 1935), and challenged at once one of the greatest citadels of industrial power in the country, the General Motors Corporation. In December, 1936, strikes were called, and the sit-down (subsequently declared illegal) was used with telling effect. After forty days of bitter struggle, General Motors gave in and signed an agreement recognizing the union as the bargaining agency for its members in all the company's plants. The other automobile companies except Ford fell into line; even Ford capitulated in time. Next came steel, where a Steel Workers' Organizing Committee was formed, initially largely financed by the coal miners. Steel had been the hardest nut for trade unionism to crack as far back as 1892, when the disastrous Homestead Strike had destroyed the workers' organization. So completely did the SWOC do its work in the case of so-called Big Steel that in March, 1937, without a strike, the United States Steel Corporation signed an agreement much like that of the automobile industry. But the newer steel companies— they were called Little Steel and included the Republic Steel Corporation and the Bethlehem Steel Corporation—refused to yield, and bitter strikes swept the steel regions during May-July, 1937. Violence on both sides was

common, with a good deal of vigilantism present. The stubborn resistance of the Little Steel leaders led to the failure of the strike in July. Other industrial areas where the CIO unions were successful were the Eastern maritime workers, the Western longshoremen, the rubber workers, and the aluminum workers. A.F. of L. and CIO Rivalry. Meanwhile, the rivalry between the A.F. of L. and CIO grew in intensity. Both engaged in mutual recriminations, the A.F. of L. being charged with giving haven to racketeers, and the CIO being charged with permitting communists to infiltrate its ranks. Both charges were true. The driving ambitions of John L. Lewis attracted general attention, and his interests and pretensions were frequently associated with the purposes of trade unionism in general. In the second Roosevelt administration his ardor toward the New Deal cooled and he openly broke with the President, supporting Wendell L. Willkie in 1940. His tactics estranged one of his best supporters, the International Ladies Garment Workers, and this union left the CIO and rejoined the A.F. of L. in 1940. Mr. Lewis found increasingly less support among CIO unions, and the personal bitterness that developed led to a strange move on his part. He withdrew from the CIO in 1942, and in 1943 made application for readmission to the A.F. of L.! In 1946, the miners were back in the fold again. The A.F. of L. continued under the leadership of William Green, and the CIO was now led by Philip Murray, who had been one of Lewis's vice presidents in the coal miners' union. The possibility of fusion was remote, although it is important to note that the rivalry between the two bodies occupied relatively little of the energies of trade-union leaders. Trade unionism in the country went ahead on seven-league boots, in many industries obtaining virtually 100 percent membership and writing closed-shop agreements with increasing frequency. This, then, was »one of the outstanding—if not the most ironical—

T H E THIRD AMERICAN REVOLUTION achievements of the New Deal: it had made the American workers completely trade-union conscious and had converted them (except, perhaps, for the Australasians) into the most militant body of organized workers in the world. The trade unionists of the United States were not radical politically, only a small minority supporting a program of even mild state socialism; they were not entering politics as workers in their own parties; but they did fight constantly for improvement in working conditions. This was particularly true in connection with wage rates. Wages and Productivity. Trade-union successes may have been too great as far as the effects on the total economy were concerned. Professor Sumner H. Slichter, for example, was able to argue that wage rates went up much more sharply than did productivity, the result being excessive additions to cost.

7. THE NEW

This was likely to make the business enterpriser embarking on new ventures more cautious than he would ordinarily be. Professor Slichter pointed out that in the period 192126 physical productivity per man-hour in manufacturing increased 4.3 percent a year; in the period 1933-37 the increase was only 1.7 percent a year. Also, between 1921 and 1926, hourly earnings in manufacturing rose 8.4 percent; between 1933 and 1937, they rose 40 percent. Said Professor Slichter: "Physical productivity per man-hour grew twice as fast after 1921 as after 1933 or 1934, but wage rates went up twice as rapidly in the second period as in the first. These differences were not entirely compensated by price movements." And he came to this position: "For the time being, however, one must conclude that the spread of unionization tends to reduce the marginal return of capital."

DEAL CONTINUES

The Campaign of 1936. The hostility to the New Deal, particularly as recovery continued on its uneven way, became more outspoken; but to organize this opposition was not easy. Nothing proved this more surely than the outcome of the presidential election of 1936. The Republicans had met first in June, 1936, and had come out flatly against the New Deal and all its works. Their platform opened with the words, "America is in peril," and in this spirit they submitted the principles and the achievements of the New Deal to a bitter arraignment. While there had been a good deal of preconvention scrambling for votes, there was no real opposition to the candidacy of Governor Alfred M. Landon of Kansas. He was named on the first ballot, and with him was nominated Frank Knox of Illinois for the vice presidency. Mr. Roosevelt dominated the proceedings at the Democratic convention, although he did not appear in person. The New Deal was in a defiant mood because of Supreme Court

IN

POWER

hostility (the Court had found unconstitutional the N I R A and the A A A , among other measures) and the growing disapproval of the business community. It challenged both and pledged the administration to a continuing fight on "the activities of malefactors of great wealth who defraud and exploit the people." President Roosevelt and Vice President Garner were renominated by acclamation. Victory at the polls was achieved as easily. Labor flocked to the defense of the Democratic ticket, while the Republican cause was not aided by the support of those unreconstructed conservatives who refused to see that trade unionism and social security had come to stay. Landon, who was personally a liberal and sympathetic to many of the New Deal achievements, was put in an equivocal position and he never recovered. The President's reelection was one of the most impressive demonstrations of the popular will in American politics. He received a popular vote of 27,751,000 to Mr. Landon's 16,680,-

INTRODUCTION ooo, and he carried every state but Maine and Vermont. The Supreme Court Fight. Not only was Roosevelt's reelection a vote of confidence in the New Deal; it also put the stamp of approval on the President's fight against the Supreme Court. Or so he assumed. In any event, in February, 1937, there were sent to Congress a presidential message and a bill which called, in effect, for the packing of the bench. Justices might retire at the age of seventy; if they did not do so, the President had the right to appoint up to six additional members to supplement the nonretiring members. The storm that arose took the President by surprise. Party ranks were broken, old friends deserted ancient loyalties, and a bitter controversy raged in Congress and in the press for months. The President lost the support of his personal friend Governor Lehman of New York, and of Senator Wheeler of Montana, who had been one of the New Deal's most loyal defenders. The backers of the President insisted that Congress was closer to the will of the people than the Court was. As Charles A. Beard put it: "Congress has the same right as the Supreme Court to be courageous and independent. If Congress . . . agrees with four of the Supreme Court Justices that five of the Justices have misread, misinterpreted, and in substance violated the Constitution, then Congress has the civic and moral obligation to bring the Court back within the Constitution." The President's opponents, on the other hand, feared the destruction of the country's Constitutional liberties if the Supreme Court was compelled to become the rubber stamp of the Executive. The President entered the lists in person and made two public addresses in which he declared frankly that there was "no definite assurance that the three-horse team of the American system of government will pull together" and that he wanted "to appoint Justices who will not undertake to override Congress or legislative policy."

1139

The President was unsuccessful because of the hostility of the Senate. His bill was reported out adversely by the Senate Judiciary Committee; a long debate ensued, and when his chief whip, Senator Robinson of Arkansas died suddenly, the administration support collapsed. A substitute proposal was introduced and, because it pleased nobody, the Senate voted to recommit it on July 22. Thus the drama ended. For a short time, curiously enough, victory was with the President; for the withdrawal of three of his most persistent foes on the bench made it possible for him to appoint men who were more favorably disposed toward administration policies. Justice Van Devanter was succeeded by Senator Hugo Black of Alabama in 1937; Justice Sutherland was succeeded by Solicitor General Stanley Reed in 1938; and Justice Butler was succeeded by Attorney General Murphy in 1940. Now the Court began to talk with the tongue of the New Deal, and the President could say—as he did in one of his "fireside chats" in July, 1938—that while he had lost a battle he had really won the war. But victory—especially in the long run—was with the Court too; for its independence and integrity had been preserved, and it survived as an independent agency to fight again another day if American liberties should be threatened. Slowing Down of the New Deal. From this time on, the New Deal as domestic policy became less and less aggressive. For one thing, the President was meeting with more resistance in Congress, notably among those Southern legislators who were beginning to find their alliance with labor spokesmen an uneasy one. But more important, the President, after his "quarantine" speech at Chicago of October, 1937, was turning his attention almost completely to foreign affairs. He saw, as did Churchill in England, that Nazism was not a European program but a plan for world conquest, and he sought to awaken Americans to their peril. New Dealism was increasingly preoccupied with recovery questions; and

T H E THIRD AMERICAN REVOLUTION here the chief weapons were the deficit financing of the Treasury and the control over banking policy of the Board of Governors of the Federal Reserve System. When the President, for example, sought to chastise those Congressmen and Senators who had failed to rally to him in the Supreme Court fight, by calling for their defeat in the elections of 1938, he was rebuffed by the elec-

torate. The Republicans were beginning to creep up on the New Deal. In 1938 they elected governors in a number of states that had gone Democratic previously; and they won 80 seats in the House and 8 in the Senate. Cooperating with some 60 conservatives in the ranks of the Democracy, the Republicans were able to hold the more aggressive representatives of the New Deal in leash.

8. THE THIRD-TERM Whether Roosevelt entertained thoughts of a third term before World War II broke out is hard to say. But one may note that by 1940, particularly after the collapse of France in May, it was apparent to him that our involvement was a matter of time alone. In fact, were Britain to fall, a victory for the Axis was clearly on the cards. The continuance, unbroken, of a foreign policy which stood for defiance to the Axis and aid to Britain preceded all other considerations. The Axis had to be defeated; and if this meant the shattering of the third-term tradition, that could not be helped. So, apparently, ran the President's thoughts and the thoughts of his consistent followers, notably those in the ranks of labor. The Republicans. The Republican delegates to the presidential nominating convention met at Philadelphia in June, 1940, in one of the most critical periods in American affairs. Division among Americans was quite as profound as it had been in the 1850s. Isolationists made light of the talk of our dangers at the hands of the Axis and were ready to accept the word of the Germans and the Japanese that the New Order was designed only for Europe, and the Co-Prosperity Sphere only for Eastern Asia. Interventionists were fearful, and they pointed not only to Hitler's military successes but also to the great victories gained by the Nazi ideology in our own midst and among the Latin American peoples. The Republicans were called upon

ELECTION

to make a fateful choice. Interestingly enough, the choice was made not by the delegates but by the rank and file, who forced upon the convention the nomination of Wendell L. Willkie of Indiana and New York City. Willkie was named on the sixth ballot, and with him was nominated Senator McNary of Oregon. Willkie was no standpatter; with much of the achievement of the New Deal he sympathized. He was opposed, however, to the New Deal's inefficiency and irresponsibility, to its hostility to business, and its willingness to build up a towering bureaucracy. On foreign policy he saw eye to eye with the President: Britain had to be aided, the Axis meant to fight us. Outcome of the Election of 1940. Mr. Roosevelt said nothing about his successor to the Democratic convention at Chicago in July. While there was considerable opposition among party leaders to his being named, none came out into the open, and he was renominated on the first ballot. At his request, Secretary of Agriculture Henry A. Wallace was chosen as his running mate. The most important defection from the Democratic ranks was that of James A. Farley, who had nursed the President's political career throughout the long period of New York politics, and who had helped to elect him in 1932 and to reelect him in 1936. The charge of dictatorship had some effect on the voting; so did the issues of the European conflict as far

INTRODUCTION as European-born peoples in our midst were concerned. T h e larger farmers of the Middle West returned to the Republican fold, and some of the professional and white-collar supporters of the earlier elections also dropped out of the Democratic ranks. But the Presi9.

THE NEW

dent was triumphantly reelected, although b y a reduced majority. Roosevelt's popular vote was 27,000,000 against Willkie's 22,000,000; his electoral vote 449 against Willkie's 82. T h e Republicans carried ten N e w England and Midwestern states—and that was all.

DEAL AND THE PROBLEM OF BUREAUCRACY

There was no doubt that the N e w Deal had come to grips with a series of important and pressing problems. From the social point of view, its accomplishment had been significant: it had sought to end insecurity and it had helped the American labor movement to mature. From the economic point of view, its programs had resulted in the raising of quite as many questions as it had sought to answer. It was in the political sector, however, that N e w Deal planning had stepped out boldly into the unknown; with what consequences to the traditional American way of life it was hard to measure. Character of State Interventionism. For the N e w Deal had parted completely with the nineteenth century conception of the laissezfaire, or passive, state; Americans were fully launched on the experiment of state capitalism. T h e depression of 1930 and after had persuaded N e w Deal theoreticians that capitalism's progress in the United States had slowed down, if it had not ceased altogether. N o w the state had to assume positive functions. Accordingly, its role as umpire was magnified and extended into other regions— as in the case of the establishment of the National Labor Relations Board and the Securities and Exchange Commission. Its socialservice functions were expanded, particularly in the handling of the problems of the unemployed, the unemployables, and other dependents. N o r was this all. Under the N e w Deal the state began to initiate projects and undertakings of a distinctly economic character. T h e

national state, in short, was beginning to take on, in many domains, the essential color of private enterprise. It borrowed money, not alone for the maintenance of the traditional civil and military establishments of government, but also f o r the purposes of buying and selling commodities, processing goods, creating electric power and light, dealing in real estate, engaging in warehousing, the banking business, and the shipping and railroading businesses. It set up corporations and corporate agencies which possessed charters, directors, assets, thousands of employees, and industrial and mercantile policies. As in big business, there were interlocking directorates and the shifting of funds. Problems Raised by Statism. This was a startling transformation; and it raised for many Americans disquieting problems. There were—even before our entry into World W a r II—at least fifty such N e w Deal corporations and corporate agencies which were in or could go into business. Some were created by Congress, some by presidential order, some by departmental decision alone. Often they were run by Cabinet officers who, in the nature of things, were compelled to delegate power to anonymous lesser officials. T h e pattern was too complex and too obscure for popular control. T o whom, in the final analysis, were these executive agencies to be responsible? T o Congress? But Congress did not possess any longer a machinery sensitive enough for their surveillance. Its committee system had been laid out for a simpler day; and to keep track of all

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the executive agencies would require a functionary group quite as complex as that already managing the new authorities and offices. By what tests was the worth of these new public bodies to be measured? B y those of private business? But the N e w Deal authorities and offices did not have to enter the money market f o r fresh funds; they did not have to conserve assets; they were not called upon to present favorable profit-and-loss statements. Wage policies were fixed by statute and not by the competition of the market place. How—most important of all—were the functionaries to be prevented from extending their authority? For here lay the real danger of a bureaucracy: that it tended to associate

REVOLUTION

its own well-being with the general welfare. This was one of the vexing problems the N e w Deal had created. It was not possible to dismiss it lightly or to seek to disguise its perils by referring to the new state as the "socialservice state." Even as the war progressed, the question of this new American bureaucracy could not be downed, and it was one of the important reasons for the increasingly critical tone that Congress took toward the President. During the later years of the Roosevelt administration, however, these critical questions were latent, if not far below the surface. T h e country's response to unrest abroad was absorbing more and more the attention of all parties.

10. INTERNATIONAL RELATIONS THE NEW DEAL Up to October, 1937—always excepting the Good Neighbor policy and Secretary of State Hull's reciprocal trading program—the New Deal's foreign policy had a definitely nationalistic orientation. Economic revival in the rest of the world apparently was not to be a direct concern of the United States; if America could reestablish high levels of employment and increase its national income, then our prosperity would flow out beyond our shores and in time cover the whole earth. That we had become fully integrated into world affairs politically and economically— and that we could not pull ourselves up by our own bootstraps—were ideas only dimly felt in Washington. An American delegation was sent to London in June, 1933, to attend the World Economic Conference, which was to concern itself with the stabilization of currencies, the freeing of the flow of world trade, and international prices. And then suddenly by Roosevelt's order—and to the dismay of Europeans generally—the Americans refused to tie their currency to that of the British or promise to

UNDER

defend the- gold standard. The conference ended in failure. Congress showed no greater wisdom. In April, 1934, it passed the Johnson Act. Under this, those nations which had received loans from the American ü government duringo World

War I and which after 1930 had defaulted on interest payments were denied the right to float public securities in the American money market. Thus American capital resources were not to be made available to the European powers for the purposes of assisting them in coming to grips with their own economic difficulties; or indeed in helping them obtain funds here for rearmament purposes after 1936, when the menace of Hitler had become very real. The Good Neighbor Policy. In our relations with the countries of the Western Hemisphere we were more far-sighted. As has been pointed out, a good beginning had been made by Secretaries of State Kellogg and Stimson during 1927-33. Roosevelt, with the assistance of Secretary of State Cordell Hull, happily continued along these paths. In his

INTRODUCTION

In January, 1936, Roosevelt appeared in person at the Pan American conference being held at Buenos Aires—he was the first President of the United States ever to have visited South America while in office—and gave further pledges of his devotion to the idea of the Good Neighbor. A consultative pact was signed under which the signatories pledged to consult together in the event of war or intervention in the Western Hemisphere. T h e United States was moving toward converting the Good Neighbor policy into a multilateral understanding.

of a non-American State against the integrity or inviolability of the territory, the sovereignty, or the political independence of an American State." It is true that the Monroe Doctrine continued to be stated as an American unilateral declaration; but the A c t of Havana reaffirmed it in multilateral terms. T o this degree, therefore, the Latin American nations were prepared to accept the pledge of the United States that the Monroe Doctrine was directed against non-American Powers entirely. Reciprocal Trade Agreements. The Reciprocal Trade Agreements A c t of 1934 gave the President power to conclude with other countries conventions under which tariff rates could be reduced as much as 50 percent—ell this without the need f o r calling upon Congress to approve. There was only one safeguard included in the act: no item was to be added to or taken from the free list. Under the law, the State Department was to draw up the agreements, being assisted in these activities by a series of interdepartmental committees headed by experts. Public hearings were to be held, in order to afford proper protection for the interests of American business groups. The most-favored nation idea was also provided for, so that concessions granted to one country would apply to all countries that did not discriminate against us. Thus the benefits of revision downward would spread out in widening circles, including not only those nations which signed agreements with us but also those nations with whom signatories of the American acts were writing new agreements.

This, in fact, was achieved in 1940 at the Havana Conference when the so-called A c t of Havana was drawn up. T h e Act of Havana was prefaced by the statement that "the status of regions in this continent belonging to European Powers is a subject of deep concern to all the governments of the American Republics." And then the Act went on to pledge all the signatories to regard as an aggressive measure against all of them "any attempt on the part

By 1937, when the act was renewed f o r another three years, agreements had already been written with fourteen countries. These covered more than a third of our total foreign trade, and they had the effect of increasing foreign trade with the signatory nations more than 40 percent. America's tariff wall was still high; but, ait least, w e were showing good faith in our desire to break down barriers to free exchanges the world over. Congress con-

First Inaugural, Roosevelt had defined the Good Neighbor as one who "resolutely respects himself, and because he does so, respects the rights of others—the neighbor who respects his obligations and respects the sanctity of his agreements in and with a world of neighbors." When revolution broke out in Cuba, Roosevelt not only refused to intervene, but he also offered and sent American economic assistance to the distressed republic. In 1934, the new government of Cuba was recognized; and a f e w months later, our protectorate was terminated by the repeal of the Piatt Amendment. T h e same summer saw the recall of American marines from Haiti; and in 1935, the United States relinquished its financial control over the Haitian government, Also in 1935, cooperating with Latin American governments, the United States succeeded in terminating the war between Chile and Paraguay; and in 1936 our treaty rights in Panama were given up and that little republic was now truly independent for the first time.

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tinued to renew the Trade Agreements Act in the 1930s and 1940s. The Neutrality Acts. Despite these manifestations of an interest in the world outside our shores, the prevailing American temper was isolationist. Nothing demonstrated this better than the Neutrality Acts of 1935, 1936, and 1937. As a result of the investigations of the Senate Munitions Committee, headed by Gerald P. Nye of North Dakota, Congress and a good part of the American people had become convinced that the munition makers had in very considerable measure been responsible for the entrance of the United States into World War I. T o prevent our involvement in new international conflicts, therefore, Congress passed the first of its Neutrality Laws in August, 1935. This provided that upon the outbreak of war, an embargo was to be imposed by the President upon the export of implements of war; also, at his discretion, he might prohibit Americans from traveling on the ships of belligerent nations except at their own risk. The act was to be in force until February, 1936. The second Neutrality Act—the joint resolution of February, 1936, which was to apply until May, 1937—further cut down the area of presidential discretionary action. In 1935, Italy had invaded Ethiopia, and Americans saw the League of Nations struggling ineffectively against this act of aggression. They were sure, therefore, they were on the right course; we must not be drawn into the troubles of Europe at any price. The second act, therefore, preserved the mandatory embargo on implements of war and permitted the President to extend it to other exports. Belligerent powers were to be denied the right to raise funds in American money markets. Between the second and the third neutrality acts, civil war broke out in Spain; Italy, Germany, and Russia intervened; and the BerlinRome Axis was established. There was no doubt that an international conflict was impending. In such a climate, with the isola-

tionists still in the saddle, the third Neutrality Act—the joint resolution of May 1, 1937— was drawn up. Unlike its predecessors, this was to be a permanent commitment. It continued the mandatory embargo on arms, munitions, and implements of war and the prohibition on credits to belligerents. It denied Americans the right to travel on ships of belligerents under any circumstances. It refused to allow American merchant ships to arm. And, for two years, all goods destined for nations at war were to come under the "cash and carry" provision: they were to be carried away in non-American ships and they were to be paid for before they left the country. The Quarantine Address. Up to this time, Roosevelt's own attitude toward the disorders beginning to appear throughout the world remained unclear. So, in January, 1936, he was prepared to accept all the terms of the first Neutrality Act. Again, to the chagrin of many American liberals, it was the President himself who asked Congress in January, 1937, to impose an arms embargo .on Spain—and this despite the fact that the duly constituted Loyalist government was being fought by insurgents openly supported by Italy and Germany. Further, in order to apply the arms embargo to the Italo-Ethiopian conflict, the President had declared a state of war in existence before diplomatic relations between the two countries had even been suspended. And on the other hand, he had refused to recognize a state of war in China, even after Japanese aggression had become unmasked, as early as 1931. By 1936, it was apparent that Japan was ready to cut herself free from all international commitments. In January of that year, the Japanese delegation quit the naval conference in London because the other Powers would not grant Japan parity; this meant the denunciation of the London Naval Treaty of 1930 and the resumption of capital ship construction. And in November, Japan signed the Anti-Comintern Pact: it had taken its stand

INTRODUCTION beside the other two aggressors, Germany and Italy. In July, 1937, the Japanese launched their full-scale offensive against the Chinese, when the Marco Polo Bridge incident opened hostilities. Before the year was over, without the formal declaration of war, Japan had extended its military operations over a good part of northern and central China. The Japanese poured armies into that unhappy country and engaged in atrocities against civilian populations. One such was the general aerial bombing of the populous city of Nanking. It was after this attack that President Roosevelt came to understand that America no longer could remain an onlooker as the flames of war crept over the world. In Chicago on October 5, he delivered his famous Quarantine Address in which he called the attention of the American people to the fact that Japanese, German, and Italian aggression was imperilling our safety. And he issued this portentous warning to his fellow countrymen: Let no one imagine that America will escape, that America may expect mercy, that this Western Hemisphere will not be attacked and that it will continue tranquilly and peacefully to carry on the ethics and the arts of civilization. . . . If we are to have a world in which we can breathe freely and live in amity without fear, the peace-loving nations must make a concerted effort to uphold laws and principles on which peace can rest secure. . . .

President Roosevelt declared boldly, therefore, that he would quarantine aggressors. From that day to the attack on Pearl Harbor, the administration left no stone unturned to prepare the United States against future eventualities. Preparedness. In January, 1938, the President called Congress' attention to the fact that other nations were rearming; and he asked for new naval construction. Congress quickly complied and passed the administration measure much as the naval experts had drawn it up. The Naval Act of 1938 author-

1145

ized the expenditure of more than a billion dollars on new capital ships, airplane carriers, and cruisers; the United States was beginning to move toward the development of that twoocean navy which alone could defend the two seas on which it faced. Meanwhile, relations with Japan were steadily deteriorating. In December, 1937, Japanese aircraft bombed and destroyed the American gunboat Panay on the Yangtsze River. It is true that the Japanese made immediate apologies and offered indemnification; but the State Department refused to assume that this was to be the last of the unfriendly acts of the Japanese toward the United States. Checking Japanese aggression was not an easy matter, however. And America's position was becoming increasingly difficult as the European Powers themselves found no formulas to preserve peace. In September, 1938, England and France abandoned Czechoslovakia to its fate when they surrendered the Sudetenland to Hitler at Munich. In March, 1939, Hitler marched into Czechoslovakia with none to gainsay him; in the same month he took Memel. In April, Mussolini seized Albania. France and England knew that Poland was to be the next victim, and they declared unequivocally that they would fight if Hitler moved eastward. But Hitler was wiser than they assumed; he was not ready—yet— to wage a two-front war. He proceeded to assure his safety on the east by the GermanSoviet Pact of August 22, 1939. On September ι, the German armies were in Poland and World War II had commenced. Poland quickly fell while the French army sat behind the safety—so it believed—of the Maginot Line. And then, after they had exploited fully the psychological effects of the so-called "phony war" in the west, the German armies swung across the Rhine into the Low Countries and France. France, unprepared and badly led, fell in June, 1940. Only England stood out against the successful German Wehrmacht. And in September, 1940,

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Japan, G e r m a n y , and Italy signed the T r i partite Pact, w h i c h bound them together in a military alliance. O n l y n o w did America begin to put its house in order. T h e navy was granted further appropriations; the President was given the right to call out the National Guard; in September, the Selective Service A c t was passed. T o protect us f r o m surprise attacks—and to help England—in the same month w e released fifty over-age destroyers to the British navy in exchange f o r long-term leases in British possessions in the Western Hemisphere where w e could build air and naval bases. Our vigilance t o w a r d the Japanese also was commendable. In J u l y , 1940—to check the flow of vital w a r materials eastward—the Export Control A c t gave the President power to curtail or prohibit the movement of such goods. Licenses were refused f o r the export of aviation gasoline and most types of machine tools. In October, the export of iron and steel scrap to Japan was embargoed. T h e n , w e committed ourselves. For, in March, 1 9 4 1 , Congress passed the Lend-Lease A c t — a n d w e w e r e launched, as Roosevelt said, upon a " p o l i c y of unqualified, immediate, all-out aid f o r Britain, Greece, China, and f o r all the governments in exile whose homelands are temporarily occupied by the aggressors." A n undeclared naval war broke out in the Atlantic; but Japan and not Hitler struck first. Pearl Harbor. On June 22, 1941, without warning, G e r m a n y attacked Russia; and at the same time Japanese pretensions toward the whole of southeastern Asia were revealed. It was evident to America that Japan was preparing f o r a large-scale offensive that threatened not only French Indo-China (which indeed it had already occupied), but also Malaya, Burma, and the Netherlands In-

REVOLUTION

dies. W e warned the Japanese against such moves; and for a time they temporized. T h e y sent a new ambassador, Admiral N o m u r a , to Washington and he and Secretary Hull carried on discussions during the greater part of 1941. In November, Nomura was joined b y a special emissary, Saburo Kurusu; there were further conversations, with Roosevelt and Hull both participating in them—but no agreements were reached. Meanwhile General T o j o , an open warmonger, had become the Japanese prime minister; and it was plain to American Ambassador G r e w at T o k y o that Japan meant to fight. Washington was warned accordingly, and members of the administration, in public addresses, began to prepare the American people f o r hostilities. T h e attack came from an unexpected quarter. Early Sunday morning, December 7, the Japanese struck at Pearl Harbor f r o m the air. T h e next day, President Roosevelt appeared before Congress and asked for the declaration of a state of war. Congress complied at once, there being but one dissenting vote. T h r e e days later, Germany and Italy declared w a r on the United States. T h e United States was in W o r l d W a r II. It was committed to the destruction of the Axis Powers and to the termination of the threat of aggression everywhere. A f t e r more than twenty years, America had returned to take its place in that "one w o r l d " which it had mistakenly assumed it could disregard.

•

O

American prosperity and security were linked with welfare and peace everywhere on the face of the earth. T o this point the T h i r d American Revolution had brought the A m e r ican people, some three and one-half centuries after Elizabethan England had begun to dream of establishing settlements on the North A m e r ican mainland.

FRANKLIN

D. ROOSEVELT

IN THE MIDST of depression the presidential campaign of 1932 was waged, with Herbert Hoover the Republican candidate and Franklin D. Roosevelt the Democratic candidate. Roosevelt ( 1 8 8 2 - 1 9 4 5 ) had returned f r o m defeat and illness to political life, w o n the N e w York Governor's chair in 1929, and had made himself the leading contender f o r the Democratic nomination. His platform pledged reform, relief, and economy. From his initial step, a flight to Chicago to accept the nomination, through the long course of his tour, the Democratic candidate's campaign broke precedents. N o w h e r e does Roosevelt's view of the American purpose appear more clearly than in his Commonwealth Club Address of September 23, 1932. T o these Californians, Roosevelt spoke of principles, returning in a sense to the old conception of "political econo m y " as opposed to the more limited fields of "economics" on the one side and "politics" on the other. W h a t is the purpose of government, Roosevelt asked, and to what end does it exist? He uses history to elucidate that question: the government of the United States was born during the long fight of the people against the excesses of centralized government controlled by a privileged class. T h a t fight was reflected in the struggle between Jefferson and Hamilton. W i t h Jefferson's triumph began the day of individualism, a political individualism soundly based on the opportunities of the f r o n tier and the potentialities of the machine. In that setting, no checks were placed on means, so long as the great end of economic development proceeded unhampered. A s the nineteenth century ended, this concept of political economy showed itself at variance with fact. Theodore Roosevelt and

W o o d r o w Wilson both tried to meet the problem, one b y attacking " b a d " trusts, at least; the other b y attempting to stop the centralization of financial power. W a r put an end to the W i l son program. W h e n the war was over, the Republican "return to normalcy" furthered all the tendencies which progressives of the preW a r decades had fought to control. N o w the United States sees its frontier gone, its foreign markets shrinking, and its opportunities to establish new enterprises curtailed. T h e United States must reconsider its values, Roosevelt argued: it must turn its attention f r o m mere competitive promotion of development to the problems of unbalanced consumption and of foreign trade. Secular trends toward consolidation cannot be reversed. But responsibility can be enforced upon the possessors of economic power. Achieving such responsibility is the business of industry and finance; government should intervene only to protect the body of socially-minded businessmen against the "Ishmael or Insull whose hand is against every man," or in order to safeguard the interest of the public. In this fashion, Roosevelt clearly outlined the philosophy of the N e w Deal. T h e November elections gave Franklin D. Roosevelt a great electoral majority. In the interregnum between the counting of the votes and March 4, Inauguration D a y , the economic downturn that had extinguished the faint revival of the late summer became an avalanche. Unemployment swelled; financial institutions collapsed in spite of R F C loans; armed farmers resisted foreclosures in some areas; depression became deeper as the country's foundations seemed threatened. In this atmosphere, Roosevelt delivered his

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first Inaugural Address, a speech in which he addressed the nation b y radio, as well as the people gathered to see the actual administration of the oath of office. H e spoke confidently, outlining plans and giving assurances as he foreshadowed the legislative program of the N e w Deal: I am certain that m y fellow Americans expect that on my induction into the Presidency I will address them with a candor and a decision which the. present situation of our Nation impels. This is preeminently the time to speak the truth, the whole truth, frankly and boldly. N o r need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that y o u will again give that support to leadership in these critical days. In such a spirit on my part and on yours we face our common difficulties. They concern, thank G o d , only material things. Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone. More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment. Yet our distress comes from no failure of substance. . . . Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because rulers of the exchange of mankind's goods have failed through their own stubbornness and their own incompetence, have admitted their failure, and have abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected b y the hearts and minds of men. . . . T h e money changers have fled from their high

REVOLUTION

seats in the temple of our civilization. W e may now restore that temple to the ancient truths. T h e measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit. . . . Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. . . . Restoration calls, however, not f o r changes in ethics alone. This Nation asks for action, and action now. Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously. It can be accomplished in part by direct recruiting by the Government itself, treating the task as we would treat the emergency of a war. . . . . . . T h e task can be helped by definite efforts to raise the values of agricultural products and with this the power to purchase the output of our cities. It can be helped by insistence that the Federal, State and local governments act forthwith on the demand that their cost be drastically reduced. It can be helped by the unifying of relief activities which today are often scattered, uneconomical, and unequal. . . . W e must act and act quickly. Finally, in our progress toward a resumption of work we require two safeguards against a return of the evils of the old order: there must be a strict supervision of all banking and credits and investments, so that there will be an end to speculation with other people's money; and there must be provision for an adequate but sound currency. . . . Through this program of action we address ourselves to putting our own national house in order and making income balance outgo. Our international trade relations, though vastly important, are in point of time and necessity secondary to the establishment of a sound national economy. I shall spare no effort to restore world trade by international economic readjustment, but the emergency at home cannot wait on that accomplishment. . . . In the field of world policy I would dedicate this Nation to the policy of the good neighbor— the neighbor who resolutely respects himself and, because he does so, respects the rights of others— the neighbor who respects his obligations and re-

T H E AMERICAN MIND spects the sanctity of his agreements in and with a world of neighbors. If I read the temper of our people correctly, we now realize as we have never realized before our interdependence on each other; that we cannot merely take but we must give as well; that if we are to go forward, we must move as a trained and loyal army willing to sacrifice for the good of a common discipline, because without such discipline no progress is made, no leadership becomes effective. W e are, I know, ready and willing to submit our lives and property to such discipline, because it makes possible a leadership which aims at a larger good. This I propose to offer, pledging that the larger purposes will bind upon us all as a sacred obligation with a unity of duty hitherto evoked only in time of armed strife. . . . Action in this image and to this end is feasible under the form of government which we have inherited from our ancestors. Our Constitution is so simple and practical that it is possible always to meet extraordinary needs by changes in emphasis and arrangement without loss of essential form. . . . It is to be hoped that the normal balance of Executive and legislative authority may be wholly adequate to meet the unprecedented task before us. . . . I am prepared under my constitutional duty to recommend the measures that a stricken Nation

"49

in the midst of a stricken world may require. These measures, or such other measures as the Congress may build out of its experience and wisdom, I shall seek, within my constitutional authority, to bring to speedy adoption. But in the event that the Congress shall fail to take one of these two courses, and in the event that the national emergency is still critical, I shall not evade the clear course of duty that will then confront me. I shall ask the Congress for the one remaining instrument to meet the crisis—broad Executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe. . . . W e face the arduous days that lie before us in the warm courage of national unity; with the clear consciousness of seeking old and precious moral values; with the clean satisfaction that comes from the stern performance of duty by old and young alike. W e aim at the assurance of a rounded and permanent national life. W e do not distrust the future of essential democracy. T h e people of the United States have not failed. . . .

The Commonwealth Club Address is reprinted from Franklin D. Roosevelt, Public Papers and Addresses (New York, 1939-44) and is published by permission of Random House, Inc.

Commonwealth Club Address BY

F R A N K L I N D.

. . . I want το speak not of politics but of Gov-

ernment. I want to speak not of parties, but of universal principles. T h e y are not political, except in that larger sense in which a great American once expressed a definition of politics, that nothing in all of human life is foreign to the science of politics. . . . T h e issue of Government has always been whether individual men and women will have to serve some system of Government or economics, or whether a system of Government and economics exists to serve individual men and women. This question has persistently dominated the discussion of Government for many generations. On questions relating to these things men have differed, and for time immemorial it is probable that honest men will continue to differ. . . . When we look about us, we are likely to forget how hard people have worked to win the privilege

ROOSEVELT

of Government. T h e growth of the national Governments of Europe was a struggle for the development of a centralized force in the Nation, strong enough to impose peace upon ruling barons. In many instances the victory of the central Government, the creation of a strong central Government, was a haven of refuge to the individual. T h e people preferred the master far away to the exploitation and cruelty of the smaller master near at hand. But the creators of national Government were perforce ruthless men. T h e y were often cruel in their methods, but they did strive steadily toward something that society needed and very much wanted, a strong central State able to keep the peace, to stamp out civil war, to put the unruly nobleman in his place, and to permit the bulk of individuals to live safely. T h e man of ruthless force had his place in developing a pioneer coun-

THE THIRD AMERICAN REVOLUTION t r y , just as he did in fixing the p o w e r of the central G o v e r n m e n t in the development of Nations. S o c i e t y paid him well, f o r his services and its development. W h e n the development a m o n g the N a t i o n s of E u r o p e , however, had been completed, ambition and ruthlessness, having served their term, tended to overstep their mark. T h e r e came a g r o w i n g feeling that G o v e r n m e n t w a s conducted f o r the benefit of a f e w w h o thrived u n d u l y at the expense of all. T h e people sought a balancing—a limiting force. T h e r e came g r a d u a l l y , through t o w n councils, trade guilds, national parliaments, b y constitution and b y popular participation and control, limitations on arbitrary p o w e r . A n o t h e r factor that tended to limit the p o w e r of those w h o ruled, w a s the rise of the ethical conception that a ruler bore a responsibility f o r the w e l f a r e of his subjects. T h e A m e r i c a n colonies w e r e born in this struggle. T h e A m e r i c a n Revolution was a turning point in it. A f t e r the Revolution the struggle continued and shaped itself in the public life of the c o u n t r y . T h e r e w e r e those w h o because they had seen the confusion w h i c h attended the years of w a r f o r A m e r i c a n independence surrendered to the belief that popular G o v e r n m e n t w a s essentially dangerous and essentially unworkable. T h e y w e r e honest people, m y friends, and w e cannot d e n y that their experience had warranted some measure of fear. T h e most brilliant, honest and able exponent of this point of v i e w was Hamilton. H e w a s too impatient of s l o w - m o v i n g methods. F u n d a m e n t a l l y he believed that the safety of the republic lay in the autocratic strength of its G o v ernment, that the destiny of individuals was to serve that G o v e r n m e n t , and that fundamentally a great and strong g r o u p of central institutions, guided b y a small g r o u p of able and public spirited citizens, could best direct all G o v e r n m e n t . B u t M r . J e f f e r s o n , in the summer of 1 7 7 6 , after drafting the Declaration of Independence turned his mind to the same problem and t o o k a different v i e w . H e did not deceive himself with outw a r d f o r m s . G o v e r n m e n t to him was a means to an end, not an end in itself; it might be either a r e f u g e and a help or a threat and a danger, depending on the circumstances. W e find him caref u l l y analyzing the society f o r which he was to organize a G o v e r n m e n t . " W e have no paupers. T h e great mass of our population is of laborers, our rich w h o cannot live without labor, either manual or professional, being f e w and of moderate wealth. M o s t of the laboring class possess property, cultivate their o w n lands, have families and f r o m the demand f o r their labor, are enabled to

exact f r o m the rich and the competent such prices as enable them to feed abundantly, clothe above mere decency, to labor moderately and raise their families." T h e s e people, he considered, had t w o sets of rights, those of "personal c o m p e t e n c y " and those involved in acquiring and possessing p r o p e r t y . B y "personal c o m p e t e n c y " he meant the right of free thinking, f r e e d o m of forming and expressing opinions, and f r e e d o m of personal living, each man according to his o w n lights. T o insure the first set of rights, a G o v e r n m e n t must so order its f u n c tions as not to interfere with the individual. But even Jefferson realized that the exercise of the property rights might so interfere with the rights of the individual that the G o v e r n m e n t , without whose assistance the property rights could not exist, must intervene, not to destroy individualism, but to protect it. Y o u are familiar with the great political duel w h i c h f o l l o w e d ; and h o w Hamilton, and his friends, building t o w a r d a dominant centralized p o w e r were at length defeated in the great election of 1800, b y M r . Jefferson's party. O u t of that duel came the t w o parties, Republican and D e m o cratic, as w e k n o w them today. S o began, in A m e r i c a n political life, the n e w day, the day of the individual against the system, the day in w h i c h individualism was made the great w a t c h w o r d of A m e r i c a n life. T h e happiest of economic conditions made that d a y long and splendid. O n the W e s t e r n frontier, land w a s substantially free. N o one, w h o did not shirk the task of earning a living, was entirely without o p p o r tunity to do so. Depressions could, and did, c o m e and go; but they could not alter the fundamental f a c t that most of the people lived partly b y selling their labor and partly b y extracting their livelihood f r o m the soil, so that starvation and dislocation were practically impossible. A t the v e r y w o r s t there was a l w a y s the possibility of climbing into a covered w a g o n and moving west where the u n filled prairies afforded a haven f o r men to w h o m the East did not provide a place. S o great w e r e our natural resources that w e could offer this r e lief not only to our o w n people, but tó the distressed of all the w o r l d ; w e could invite immigration f r o m E u r o p e , and welcome it with open arms. Traditionally, w h e n a depression c a m e a n e w section of land was opened in the W e s t ; and even our temporary misfortune served our m a n ifest destiny. It w a s in the m i d d l e of the nineteenth c e n t u r y that a n e w f o r c e w a s released and a new dream crcated. T h e f o r c e was w h a t is called the industrial revolution, the advance of steam and m a -

THE AMERICAN MIND chinery and the rise of the forerunners of the modern industrial plant. T h e dream was the dream of an economic machine, able to raise the standard of living for everyone; to bring luxury within the reach of the humblest; to annihilate distance by steam power and later by electricity, and to release everyone from the drudgery of the heaviest manual toil. It was to be expected that this would necessarily affect Government. Heretofore, Government had merely been called upon to produce conditions within which people could live happily, labor peacefully, and rest secure. Now it was called upon to aid in the consummation of this new dream. T h e r e was, however, a shadow over the dream. T o be made real, it required use of the talents of men of tremendous will and tremendous ambition, since by no other force could the problems of financing and engineering and new developments be brought to a consummation. So manifest were the advantages of the machine age, however, that the United States fearlessly, cheerfully, and, I think, rightly, accepted the bitter with the sweet. It was thought that no price was too high to pay for the advantages which we could draw from a finished industrial system. T h e history of the last half century is accordingly in large measure a history of a group of financial Titans, whose methods were not scrutinized with too much care, and who were honored in proportion as they produced the results, irrespective of the means they used. T h e financiers who pushed the railroads to the Pacific were always ruthless, often wasteful, and frequently corrupt; but they did build railroads, and we have them today. It has been estimated that the American investor paid for the American railway system more than three times over in the process; but despite this fact the net advantage was to the United States. As long as we had free land; as long as population was growing by leaps and bounds; as long as our industrial plants were insufficient to supply our own needs, society chose to give the ambitious man free play and unlimited reward provided only that he produced the economic plant so much desired. During this period of expansion, there was equal opportunity for all and the business of Government was not to interfere but to assist in the development of industry. This was done at the request of business men themselves. T h e tariff was originally imposed for the purpose of "fostering our infant industry," a phrase I think the older among you will remember as a political issue not so long ago. T h e railroads were subsidized, sometimes by grants of money, oftener by grants of land; some of the most valuable oil lands in the

United States were granted to assist the financing of the railroad which pushed through the Southwest. A nascent merchant marine was assisted by grants of money, or by mail subsidies, so that our steam shipping might ply the seven seas. Some of my friends tell me that they do not want the Government in business. W i t h this I agree; but I wonder whether they realize the implications of the past. F o r while it has been American doctrine that the Government must not go into business in competition with private enterprises, still it has been traditional, particularly in Republican administrations, for business urgently to ask the Government to put at private disposal all kinds of Government assistance. T h e same man who tells you that he does not want to see the Government interfere in business—and he means it, and has plenty of good reasons for saying so—is the first to go to Washington and ask the Government for a prohibitory tariff on his product. W h e n things get just bad enough, as they did two years ago, he will go with equal speed to the United States Government and ask for a loan; and the Reconstruction Finance Corporation is the outcome of it. Each group has sought protection from the Government for its own special interests, without realizing that the function of Government must be to favor no small group at the expense of its duty to protect the rights of personal freedom and of private property of all its citizens. In retrospect we can now see that the turn of the tide came with the turn of the century. W e were reaching our last frontier; there was no more free land and our industrial combinations had become great uncontrolled and irresponsible units of power within the State. Clear-sighted men saw with fear the danger that opportunity would no longer be equal; that the growing corporation, like the feudal baron of old, might threaten the economic freedom of individuals to earn a living. In that hour, our anti-trust laws were born. T h e cry was raised against the great corporations. T h e o dore Roosevelt, the first great Republican Progressive, fought a Presidential campaign on the issue of "trust busting" and talked freely about malefactors of great wealth. If the Government had a policy it was rather to turn the clock back, to destroy the large combinations and to return to the time when every man owned his individual small business. This was impossible; Theodore Roosevelt, abandoning the idea of "trust busting," was forced to work out a difference between "good" trusts and "bad" trusts. T h e Supreme Court set forth the famous "rule of reason" by which it seems to have meant that a concentration of industrial power

THE THIRD AMERICAN REVOLUTION was permissible if the method by which it got its power, and the use it made of that power, were reasonable. Woodrow Wilson, elected in 1912, saw the situation more clearly. Where Jefferson had feared the encroachment of political power on the lives of individuals, Wilson knew that the new power was financial. He saw, in the highly centralized economic system, the despot of the twentieth century, on whom great masses of individuals relied f o r their safety and their livelihood, and whose irresponsibility and greed (if they were not controlled) would reduce them to starvation and penury. The concentration of financial power had not proceeded so far in 1912 as it has today; but it had grown far enough for Mr. Wilson to realize fully its implications. . . . The problem he saw so clearly is left with us as á legacy; and no one of us on either side of the political controversy can deny that it is a matter of grave concern to the Government.

even in the fields which still have no great concerns, the small man starts under a handicap. The unfeeling statistics of the past three decades show that the independent business man is running a losing race. Perhaps he is forced to the wall; perhaps he cannot command credit; perhaps he is "squeezed out," in Mr. Wilson's words, by highly organized corporate competitors, as your corner grocery man can tell you. Recently a careful study was made of the concentration of business in the United States. It showed that our economic life was dominated by some six hundred odd corporations who controlled two-thirds of American industry. Ten million small business men divided the other third. More striking still, it appeared that if the process of concentration goes on at the same rate, at the end of another century we shall have all American industry controlled by a dozen corporations, and run by perhaps a hundred men. Put plainly, we are steering a steady course toward economic oligarchy, if we are not there already.

A glance at the situation today only too clearly indicates that equality of opportunity as we have known it no longer exists. Our industrial plant is built; the problem just now is whether under existing conditions it is not overbuilt. Our last frontier has long since been reached, and there is practically no more free land. More than half of our people do not live on the farms or on lands and cannot derive a living by cultivating their own property. There is no safety valve in the form of a Western prairie to which those thrown out of work by the Eastern economic machines can go for a new start. W e are not able to invite the immigration from Europe to share our endless plenty. W e are now providing a drab living for our own people.

Clearly, all this calls for a re-appraisal of values. A mere builder of more industrial plants, a creator of more railroad systems, an organizer of more corporations, is as likely to be a danger as a help. The day of the great promoter or the financial Titan, to whom we granted anything if only he would build, or develop, is over. Our task now is not discovery or exploitation of natural resources, or necessarily producing more goods. It is the soberer, less dramatic business of administering resources and plants already in hand, of seeking to reestablish foreign markets for our surplus production, of meeting the problem of underconsumption, of adjusting production to consumption, of distributing wealth and products more equitably, of adapting existing economic organizations to the service of the people. The day of enlightened administration has come.

Our system of constantly rising tariffs has at last reacted against us to the point of closing our Canadian frontier on the north, our European markets on the east, many of our Latin-American markets to the south, and a goodly proportion of our Pacific markets on the west, through the retaliatory tariffs of those countries. It has forced many of our great industrial institutions which exported their surplus production to such countries, to establish plants in such countries, within the tariff walls. This has resulted in the reduction of the operation of their American plants, and opportunity for employment. Just as freedom to farm has ceased, so also the opportunity in business has narrowed. It still is true that men can start small enterprises, trusting to native shrewdness and ability to keep abreast of competitors; but area after area has been preempted altogether by the great corporations, and

Just as in older times the central Government was first a haven of refuge, and then a threat, so now in a closer economic system the central and ambitious financial unit is no longer a servant of national desire, but a danger. I would draw the parallel one step farther. W e did not think because national Government had become a threat in the 18th century that therefore we should abandon the principle of national Government. N o r today should we abandon the principle of strong economic units called corporations, merely because their power is susceptible of easy abuse. In other times we dealt with the problem of an unduly ambitious central Government by modifying it gradually into a constitutional democratic G o v ernment. So today we are modifying and controlling our economic units.

THE AMERICAN MIND As I see it, the task of Government in its relation to business is to assist the development of an economic declaration of rights, an economic constitutional order. This is the common task of statesman and business man. It is the minimum requirement of a more permanently safe order of things. Happily, the times indicate that to create such an order not only is the proper policy of G o v e r n ment, but it is the only line of safety f o r our economic structures as well. W e know, now, that these economic units cannot exist unless prosperity is uniform, that is, unless purchasing power is well distributed throughout every group in the Nation. T h a t is w h y even the most selfish of corporations f o r its own interest would be glad to sec wages restored and unemployment ended and to bring the Western farmer back to his accustomed level of prosperity and to assure a permanent safety to both groups. That is w h y some enlightened industries themselves endeavor to limit the freedom of action of each man and business group within the industry in the common interest of all; w h y business men everywhere are asking a form of organization which will bring the scheme of things into balance, even though it may in some measure qualify the freedom of action of individual units within the business. . . . 1 feel that we are coming to a view through the drift of our legislation and our public thinking in the past quarter century that private economic power is, to enlarge an old phrase, a public trust as well. I hold that continued enjoyment of that power b y any individual or group must depend upon the fulfillment of that trust. T h e men who have reached the summit of American business life know this best; happily, many of these urge the binding quality of this greater social contract. T h e terms of that contract are as old as the R e public, and as new as the new economic order. E v e r y man has a right to life; and this means that he has also a right to make a comfortable living. H e may b y sloth or crime decline to exercise that right; but it may not be denied him. W e have no actual famine or dearth; our industrial and agricultural mechanism can produce enough and to spare. Our Government formal and informal, political and economic, owes to everyone an avenue to possess himself of a portion of that plenty sufficient f o r his needs, through his own work. E v e r y man has a right to his own property; which means a right to be assured, to the fullest

extent attainable, in the safety of his savings. B y no other means can men carry the burdens of those parts of life which, in the nature of things, afford no chance of labor; childhood, sickness, old age. In all thought of property, this right is paramount; all other property rights must yield to it. If, in accord with this principle, we must restrict the operations of the speculator, the manipulator, even the financier, I believe we must accept the restriction as needful, not to hamper individualism but to protect it. These two requirements must be satisfied, in the main, b y the individuals who claim and hold control of the great industrial and financial combinations which dominate so large a part of our industrial life. T h e y have undertaken to be, not business men, but princes of property. I am not prepared to say that the system which produces them is wrong. I am v e r y clear that they must fearlessly and competently assume the responsibility which goes with the power. . . . T h e final term of the high contract was f o r liberty and the pursuit of happiness. W e have learned a great deal of both in the past century. W e know that individual liberty and individual happiness mean nothing unless both are ordered in the sense that one man's meat is not another man's poison. W e know that the old "rights of personal competency," the right to read, to think, to speak, to choose and live a mode of life, must be respected at all hazards. W e know that liberty to do anything which deprives others of those elemental rights is outside the protection of any compact; and that Government in this regard is the maintenance of a balance, within which every individual may have a place if he will take it; in which every individual may find safety if he wishes it; in which every individual may attain such power as his ability permits, consistent with his assuming the accompanying responsibility. . . . Faith in America, faith in our tradition of personal responsibility, faith in our institutions, faith in ourselves demand that we recognize the new terms of the old social contract. W e shall fulfill them, as we fulfilled the obligation of the apparent Utopia which Jefferson imagined f o r us in 1776, and which Jefferson, Roosevelt and Wilson sought to bring to realization. W e must do so, lest a rising tide of misery, engendered b y our common failure, engulf us all. But failure is not an American habit; and in the strength of great hope we must all shoulder our common load.

T H E THIRD AMERICAN

ALVIN

H.

L A T E IN THE NINETEEN THIRTIES, a n e c o n o m i c

theory made its appearance in America that captured the imaginations of many academicians and won strong support among New Deal functionaries. Indeed, this analysis of the state of the industrial arts and economic progress in America underwrote the whole governmental program of intervention, for it was based upon the assumption that we had become a "mature" nation. T h e theory was formulated by Alvin H . Hansen (1887- ), professor of economics at Harvard University, and in large measure was derived from J . Maynard Keynes's General Theory of Employment, Interest and Money, published in 1956. T h e position taken by Hansen was the following. T h e vitality of American capitalism is spent; ours is a mature economy and the only fate in store for us is secular, or long-term, stagnation. What we may continue to look forward to, like the poor wretches in limbo, is neither hope nor release; our future is a sequence—in the words of one of Hansen's disciples—of "long and severe depressions and brief, anemic recoveries." This analysis is based on the following assumptions. ( 1 ) Our frontier is gone. (2) T h e rate of American population increase is tapering off; soon we shall have only a stationary population for which to provide. (3) N e w and revolutionary innovation in the field of industry is no longer possible. (4)

REVOLUTION

HANSEN Savings pile up; opportunities for private investment diminish; the onlv large employment for saved funds is in the replacement of used-up capital plant. (5) But great corporations also have sizable accruals—in depreciation reserves and undistributed profits; they are therefore capable of self-financing without the need for resorting to the money market. The result is, idle funds set in the inevitable train of lower production and incomes; and we move from crisis to crisis with secular stagnation as the leading characteristic of our economy. T h e state must step in—largely through fiscal policy—to maintain income and employment. The fiscal policies advocated by Hansen and his supporters—and these were at the basis of much of New Deal interventionism—are largely two in nature: the first calls for the checking of "excessive" savings, particularly those of corporations and of individuals in the high and middle incomc brackets; and the second for a "compensatory" fiscal program— spending by government through the device of deficit financing. The reader is referred to John H. Williams's article Deficit Spending, also reprinted in this part, for a critical examination of this theory and policy. The selection here reprinted is from Hansen's Fiscal Policy and Business Cycles (New York, 1941) and is published by permission of W . W . Norton and Company.

Fiscal Policy and Business Cycles BY THE

THIRTIES

OF E A R L I E R

VIEWED

AGAINST T H E

ALVIN

BACKGROUND

CYCLES

T H E G R E A T DEPRESSION, b e g i n n i n g i n 1 9 2 9 ,

which

h a d o n l y p a r t i a l l y been o v e r c o m e , at a n y rate in the U n i t e d States, b y the end of the thirties, has been c h a r a c t e r i z e d as something quite unique in the l o n g h i s t o r y of business cycles. T o be sure, in a sense e v e r y c y c l e is unique and has special c h a r -

H.

HANSEN

acteristics of its o w n . W h e n , h o w e v e r , it is said that the G r e a t Depression was a unique p h e n o m enon, something else is meant than the o r d i n a r y d e g r e e of variation in duration and depth w h i c h w e find f r o m c y c l e to c y c l e . . . . T h e upward together make believed to be in the v o l u m e

and d o w n w a r d movements, w h i c h business cycles, are n o w c o m m o n l y mainly associated with fluctuations of real investment. W e distinguish

THE AMERICAN between real investment and financial investment. When one purchases a share in a corporate enterprise or a bond or a mortgage, one is making a financial investment. When one, however, builds a house or a factory or a machine, one is making a real investment. Real investment may, of course, be measured either in value terms or in quantitative terms. T h e fluctuations of cyclical movements may be characterized in terms of either money income, real income (the output of material goods and services), or employment. These three categories, to be sure, are not identical. Money income is a function both of real income and of price movements, while real income or output differs from employment bv reason of changes in productivity. Cyclically, however, the three move more or less in consonance, though the trend movement is likely to differ considerably under varying circumstances. For certain problems it is extremely important to differentiate sharply between them. But frequently in discussing economic fluctuations or cyclical movements all three may be regarded without serious error as moving together, whether in the upswing or in the downswing. This is particularly true for the short-run movements but less true for the longer-run developments. . . .

MIND

"55

and equipment, housing and public construction. When an upsurge in real investment occurs, it is not unusual for the spurt in inventory accumulation to run ahead of the normal requirements indicated by the rising trend. When this is the case, sooner or later a temporary saturation in inventory accumulation develops, leading to an inventory recession. Not infrequently the minor setbacks experienced in the major upswings may be characterized as inventory recessions. But sometimes other situations may initiate or aggravate these minor recessions. Thus, for example, in the beginning of the major upswing it may be that large investment in improved machinery occurs and that after a time a temporary saturation is reached in this type of investment leading to a recession. T h e general buoyancy of the upswing, however, soon starts the economy upward again with a further burst of real investment after the temporary setback thus sustained. Sometimes special situations are partly responsible for minor recessions, such as critical international developments, labor disturbances, or even special factors having to do with major industries, such as the Ford shutdown in 1927. Regularly, however, inventory movements play an important role. . . .

Major and Minor Cycles. Quite commonly, particularly in America, the term "business cycle" is applied with reference both to what is called the minor cycle and to the major cycle. And with respect to the term "depression," equally the term is applied both to minor recessions and to major depressions. In Europe, when the business or trade cycle is spoken of, reference is usually made to what we call the major cycle. On the whole it is, we think, preferable to concentrate attention upon the major cycle in business cycle analysis. But it is not possible in doing so to overlook the fact that, particularly in the upswing phase of the major cycle, there regularly occurs, especially in American experience, one or sometimes two interruptions to the upswing movement. In seven of the fifteen major cycles in the period from 1807 to 1937 there were two minor recessions, and in eight of the major upswings there was one minor recession. Since 1883, out of six major cycles two were interrupted by two minor recessions and four by one minor recession.

The major cycles vary in length from « minimum of six years to a maximum of twelve years, though with rare exceptions they fall within the range of seven to ten years, the average being slightly over eight years. The minor cycles have a range of from a minimum of two years to a maximum of six years, though they usually fall within the range of three to four years, with the average slightly over three and one-third years. . . . The So-called "Long Waves." But there are still other factors of a long-run character which influence the major business cycle and which help to explain the depressed thirties. Many writers, including Kondratieff, Spiethoff, Mitchell, Thorp, Schumpeter, Woytinsky, Ciriacy Wantrup, and others, have noted the important fact that the past experience of the Western world indicates prolonged periods of relatively good times, extending far beyond the boundaries of the major business cycle and even of the building cycle; and similarly prolonged periods of more or less chronic depression, within which, however, the swings or the business cycle occur. . . .

The major upswing, as we have already noted, can be characterized essentially as an expansion in the rate of real investment. For the purpose currently at hand, it is most useful to classify real investment into the two categories suggested above: (a) inventories of commodity stocks and (b) real investment in fixed capital, including plant

Within these long periods of good times, on the one side, and bad times, on the other, there occur, modified however as indicated above, the more or less regular swings of the major business cycle, the temporary recessions of the minor cycles, and also the more or less regular swings of the eighteenyear building cycle. But since the long periods of

THE THIRD AMERICAN REVOLUTION

1156

buoyant prosperity or chronic depression extend beyond any of these phenomena, there is reason to suppose that there are other factors which have not been fully taken account of in the discussion either of the major and minor business cycles or of the building cycles. . . . T h e dates usually assigned to these periods of preponderantly good times and bad times—or "long waves," if this term is preferred—are approximately as follows: Good Times 1787-1815 1843-1873 1897-1920

Bad Times 1815-1843 1873-1897 1910- ?

It is interesting to note that in each of the long periods of good times there developed four major recoveries and three major depressions, while in each downswing there occurred two major recoveries and three major depressions. The turning point both at the top and at the bottom of the "long waves" coincides with the turning point of a major business boom or depression. . . . Just as the major business cycle has not always been completely synchronous in the various industrial countries, so also it is not always possible to fit all countries neatly into the intervals designated as long periods of buoyant expansion or prolonged bad times. For the most part, however, the experience of different countries conforms with the periods outlined above. With respect to the current phase, the thesis is perhaps defensible that for the western European countries the economic development from 1920 on justifies characterizing it as the beginning of a prolonged period of hard times. With respect to the United States, however, in view of the high prosperity of the twenties, it is difficult to justify placing the United States in such a category. T h e r e is, however, the undoubted fact, of which cognizance must be taken, that the decade of the twenties was preponderantly a period of hard times f o r agriculture. From the standpoint of employment in urban industry as a whole, the twenties must clearly be characterized as a decade of preponderantly buoyant prosperity. It is possible that the most reasonable classification is to make 1920 the turning point for the European countries and 1929 the turning point for the United States. . . . Three major explanations have been offered for these long periods of good and bad times. One runs in terms of technological developments, innovations, exploitation of new resources, and the opening of new territory. This explanation has been advanced notably by Spiethoff, Wicksell, and Schumpeter. A second explanation runs in terms

of war. This explanation has been advanced prominently by Ciriacy Wantrup and has also been noted by Kondratieff and Wicksell. A third, running in terms of gold and price movements, has been advanced by Cassel, Warren and Pearson, Woytinsky, and others. According to the first theory, the periods of prolonged good times are periods in which there is a favorable underlying basis for the growth of real investment in the development of technology, innovations, and the discovery of new resources. In such periods, it is said, the pace of technological progress is accelerated far beyond what may be expected from the usual run of multitudinous inventions, each of relatively small significance. In the long periods of good times quite revolutionary new techniques are introduced which profoundly change the character of the whole economy. In the periods of the prolonged hard times these exceptional technological developments are damped down or run out. T h e great investment opportunities exploited in the preceding period of good times are now largely exhausted. General technological improvements of a less profound character are, to be sure, going on, gradually raising the productivity of labor and increasing the real income. Indeed, the great technological advance and the vast real investments completed by the end of the long period of good times become the foundation upon which an advancing real income is projected into the succeeding period of preponderantly hard times. The rise in income experienced in this period is a function of the higher productivity of the factors of production achieved by the technical advance of the preceding period, but the preponderance of hard times reveals itself in a marked degree of unemployment and in the failure of the upswings of the major business cycles to reach a condition of full economic activity. Professor Schumpeter, with his emphasis on the role of innovations, explains the prolonged good times of the first long wave by the emergence of the Industrial Revolution and the first long period of hard times by the readjustments and adaptations necessary once this new structure had become more or less firmly incorporated into the economic system. The second period of buoyant good times he explains by the admittedly new revolutionary technique which perhaps more than anything else has profoundly altered the character of modern industrial civilization, namely, the railroad. There can be no question that the development of the railroad opened up vast real investment outlets throughout the Western world, and that this gave a continuous upward push to the economy, making every burst of investment associated with the

THE AMERICAN MIND major business cycle a pronounced and strong one and tending to weaken the forces making f o r depression. In the last quarter of the nineteenth century, however, came a sharp decline in the rate of growth of the railroad industry. T h e third period of prolonged good times Professor Schumpeter explains by the emergence of the electrical, chemical, and automotive industries. Wicksell, in his famous Chapter X I in Interest and Prices, published in 1898, emphasized fundamentally the same technological factors which are heavily relied upon in Professor Schumpeter's explanation. Spiethoff similarly stresses technological developments in his analysis. . . . . . . Thus, off balance, we conclude that gold and monetary factors play a subsidiary role and that the main causes of the long periods of good times and of chronic depression must be sought in technological and innovational factors, and at times in greater or less degree in the fiscal policies of governments hitherto related mainly to the conduct of war. According to the technological and innovational thesis, the electrification and motorization of the American economy dominated the period from the late nineties to 1929. From this standpoint this epoch may be compared with the period of rapid expansion in railroadization f r o m the middle forties to the decade of the seventies. Both of these innovations caused a profound structural change in economic life and institutions. Both relate mainly to speed of communication and transportation. Both opened up enormous opportunities f o r real investment, not only directly in the railroads, in automobile factories, and in roads, but also in a vast network of underlying and supplementary industries, including for the last period, glass, rubber, steel, cement, electrical appliances, petroleum, and the like. These epochs are clear illustrations of the profound impact of the rise of quite new techniques giving birth to a range of new industries and expanding and developing old ones into new lines. Both epochs represent a period of rapid growth and expansion. But all new developments finally reach the stage of maturity. Thus, new railroad mileage experienced a rapidly rising trend from the middle forties to the decade of the seventies, and thereafter flattened out with, however, a major spurt in the middle eighties, and eventually in the nineties sharply declined. Similarly, the production of automobiles and the construction of roads experienced a rapid growth into the decade of the twenties. But this rate of growth could obviously not be continued indefinitely. Automobile production gradually reached an asymptotic level after 1923, and the curve of the

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construction of roads similarly flattened out toward the end of the twenties and thereafter declined. In the long sweep of technological and innovational developments the decade of the thirties is, therefore, in many respects not unlike the fourth quarter of the nineteenth century, with its deep depressions of the seventies and the nineties. Thus, against the background of earlier experience the decade of the thirties is more understandable. T h e early expansion of the railroad served to· promote vigorous booms and to cut short temporary lapses into depression. But progressively the railroad reached maturity and eventually ceased to grow. T h e mere slowing down in the rate of growth caused an absolute decline in the volume of new investment required in the plant and equipment of subsidiary industries, such as iron and steel, which manufactured the materials that went into railroad construction. Those who point to the high level of new railroad construction which continued on into the eighties miss the point. It is not enough that new railroad construction should continue at the high level reached. N e w construction must continue to rise at a constant rate if new investment in the underlying, subsidiary industries is to be maintained at the pace set. Thus, the mere slowing down in the rate of increase in new railroad construction was already beginning to have a damping effect on the economy long before there was an actual decline in the volume of new construction. This is the important lesson which we learn f r o m the acceleration principle. T h e sharp decline in railroad construction in the decade of the nineties was a significant factor in that depressed decade. But now a new era of buoyancy superseded the railroad era—the era of electricity and motorcars. T h e three decades 1900-29 witnessed the rise of four new giant industries. Street cars led the w a y in the nineties and reached its investment peak ($2.5) in the decade 1900-09. Capital outlays on telephones increased rapidly after 1900 and doubled in each of the two succeeding decades, rising to $2.5 billions in the twenties. Electric power investment first assumed large proportions in the decade 1900-09 ($1.7 billions), increased 50 per cent in the following decade, and leaped f o r ward with a capital expenditure of $8.1 billions in the twenties. Automobile production, from only 4,000 units in 1900, rose to 187,000 units in 1910, 1,000,000 in 1915, 2,200,000 in 1920, 4,400,000 in 1925, and 5,600,000 in 1929. Garages, repair shops, and service stations multiplied throughout the country. Thus, the automobile industry not only fostered gigantic production plants, largely con-

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centrateci in a single industrial area, but also opened opportunities for thousands of small business units located in all sections of the country roughly in proportion to the consuming population. Major subsidiary industries were created or expanded on the tide of the vast purchasing power of the automobile industry, including such giants as Petroleum, Rubber, Glass Plate, and Steel. Finally, outlays on public roads, largely induced by the rise of the automobile, reached the figure of $9.9 billions in the decade 1920-29. Thus, an era of buoyant prosperity was generated by the growth of four great industries: street railways, telephone, electric power, and automobile industries (including Petroleum, Rubber, and Glass Plate, largely accessory to the Automobile). Also important, but nevertheless dwarfed by the four giants, were the movie, chemical, and electrical equipment industries. Just as the railroad expansion came to an end, so also the buoyant era of 1900-29. Street railway development was largely completed in the first decade, telephone and automobile expansion in the third decade. Electric power alone remains with large prospects for further growth. The great era of expansion was over by 1930. Thus, the decade of the thirties resembles the conditions in the nineties. Technological developments making for expansion had temporarily spent their force. This does not mean, however, that eras of buoyant expansion are permanently a thing of the past. The progress of technology, we can be reasonably certain, will sooner or later open outlets for enlarged streams of investment in great new industries. Structural Changes in American Economy. Thus far we have seen that the decade of the thirties is largely understandable in terms of past experience. But our analysis would remain incomplete if we neglected to consider one important structural change in our economy for which we have no precedent in the past. Alwavs, in the past century, expansion has rested not merely on intensive investment arising from technological progress, but also on extensive growth—the occupation of new territory and the growth of population. The nineteenth ccntury was a unique era of extensive growth. Approximately in the period of 1915-30, the rate of extensive growth rapidly slowed down. The decennial increment of population growth in northern and western Europe, including the three great powers, the United Kingdom, Germany, France, and the smaller northern and western countries—Scandinavia,' Finland,* Belgium, Hoi1 Ο land, Switzerland, and the Irish Free State—continued to rise, or at any rate did not decline ma-

terially until the first World War. The following table (calculated from Kuczynski's The Balance of Births and Deaths, p. 9) gives the approximate increases for the eleven countries of northern and western Europe referred to above. The period 1913 to 1926 is omitted, since the war abnormally reduced the rate of population growth. The decade 1926-36 may be regarded as representative of postwar normal rate of growth. Decade 1883-93 1893-03 1903-13 1926-36

Increase 10,290,000 i4,9$o,ooo 14,510,000 9,468,000

In the United States the decline came later, as shown in the table which follows: Decade 1900-10 1910-20 1920-30 1930-40

Increase 16,138,000 14,923,000 15,901,000 9,218,000

In northern and western Europe the turning point came with the first World War. In the United States it came in 1924. The expansion of Europe into new territory (in terms of both migration and foreign investments) came to an abrupt halt in the first World W a r and, while resumed in the twenties, did not again attain its former level. In the United States the expansion into the great West was followed by several decades of urbanization; and then we turned (via capital export) on a large scale to less developed countries. This movement ended in the Great Depression. Doubtless, under more favorable political conditions, there is still room for considerable foreign investment in the less industrialized parts of the world, and it may be expected again sooner or later to be resumed on a fairly large scale. But no one is likelv to challenge the statement that the era of development and settlement of new territory is largely over. The role of territorial expansion is likely to be much less in the next half centurv than was the case in the nineteenth century relative to national income. The rapid decline in population growth and the exhaustion of the world frontier may well have a causal interconnection. Certainly it is true that, so long as there were great new territories to be opened and developed, rapid population growth was a healthy economic development. With an increasing exhaustion of opportunities for settlement and exploitation of new territory, the continuation of the nineteenth-century rate of popu-

THE AMERICAN MIND lation growth would rapidly have given rise to insoluble economic problems. It is true that the sudden and drastic decline in the rate of population growth so far has affected mainly western Europe, and highly developed industrial countries, such as the United States. It is also true that there are still areas which have a long way to go in the process of industrialization. But just as the rate of population growth in the highly industrialized countries has rapidly declined and in some is approaching zero, so also the possibilities of large outlets for foreign investment by these countries appear meager, in terms of national income and wealth, in comparison with those of the nineteenth century. While it is not possible statistically to measure the rate of decline in investment opportunities with the precision that is possible with respect to population growth, in general the two movements appear to exhibit a somewhat parallel development. . . . Population growth and territorial expansion opened vast outlets for extensive investment of capital. But, it is argued, may not equally favorable opportunities for intensive investment take their place? The answer appears to be that in the past we have enjoyed opportunities for both extensive and intensive investment. Now extensive expansion is largely over, and there remains only the possibility of intensive developments. But intensive investment is not something new. Intensive and extensive developments have proceeded together, each reinforcing the other. New technological developments underlie the nineteenth century of expansion. But population growth and the penetration into new territory, in turn, played an important role in the widening of the market and the development of mass production techniques. Extensive expansion minimized the risks of technological innovations and encouraged bold experimentation. Thus extensive expansion stimluated intensive expansion. On the other side, the pressure to find investment opportunities, in view of the slowing down of extensive growth, will be greater in the future. Industrial research is now far more systematic and more generously financed than ever before. The era of buoyant prosperity (1844-73), based largely on the railroad, was intimately linked up with extensive growth and expansion. The next buoyant era (1900-29), based on electricity and the automobile, had less to do with mere extensive growth and expansion into new territory, and involved a much more radical transformation in consumption habits and ways of living. This sort of transformation, involving vast investment of capital, can take place without extensive growth,

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and under the progress of technology we shall doubtless experience again far-reaching revolutionary innovations of this sort. There is, perhaps, inherent in the process of innovation a cumulative tendency which may be described in terms of a geometric progression. That this was true, even of the past century, is at least in part supported by the fact that the percentage rate of increase in per capita real income was approximately a constant. It is, of course, always possible that the rate of technological development may in the future exceed the geometric rate of the past, but here obviously one enters a field of speculation which can be settled only by the actual course of future historical events. It is, at any rate, a question whether intensive investment can attain the buoyancy and tempo of earlier periods when technological developments were stimulated by population growth and territorial expansion. The decline in the rate of extensive expansion may partly account for the structural change which we are witnessing in economic institutions. The economic order is undergoing progressively changes in its internal organization which affect its functioning and operation—defense mechanisms, they may be, which seek more or less blindly and experimentally to adjust the economy to an era of less rapid extensive growth. These changes are commonly described in terms of a shift from a free market economy to a planned economy. In the nineteenth century an automatic price mechanism functioned with relatively little intervention or control from organizational influences, whether governmental or private. Each individual unit in the process of production constituted, so to speak, only a small atom, unable to control but instead controlled by the general forces inherent in the price mechanism. And while, particularly from 1870 on, institutional interferences with the automatic functioning of the price system were gradually developing, it is, broadly speaking, true that these played a relatively minor role until the first World War. Just as wars have frequently acted as a profound stimulus upon technological development, so also the first World W a r enormously accelerated the development of institutional interferences with the price mechanism. An increasing degree of regimentation by both public and private organization developed with startling rapidity. Instruments of control that had gradually been taking shape were perfected and utilized on a wide scale. This revealed itself in monetary and fiscal policy and also in corporate, labor, and other private control mechanisms. In a free market economy no single unit was

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sufficiently powerful to exert any appreciable control over the price mechanism. In a controlled economy the government, the corporation, and organized groups all exercise a direct influence over the market mechanism. Many contend that it is just this imperfect functioning of the price system which explains the failure to achieve reasonably full employment in the decade of the thirties. Some place the blame on corporate price policies, some on trade-union practiccs, and some on the restrictions imposed by government. There can be no doubt that these profound

JOHN JOHN DEWEY is known the world over as one o f the most thorough-going philosophers of democracy. As he understands democracy, it is a phase of human experience that brings with it a "reconstruction" not only of society, but of the interpretation of man's relation to the world in general. H e sees in the emergence of "a common faith," in the more general participation of people in the arts and sciences, in the gradual breaking down of barriers of class, custom, and prejudice by the inventions that have facilitated communication and publicity, a general transformation of the range and quality of human experience. "Communication" is for him, the "most wonderful of all affairs"; for out of the arts of communication grow science, education, arts, markets, governments—all the institutions which make it possible for men to share with each other on a significant scale. Education is learning to participate in these common outlooks and enterprises. Faith in the common man, in the potentialities of human nature, is for Dewey a hallmark of democratic culture, and its moral meaning "is found in resolving that the supreme test of all political institutions and industrial arrangements shall be the contribution they make to the all-around growth of every member of society." Dewey's philosophy of democracy is different from that of most of his predecessors o f the nineteenth century by virtue of the greater importance he attaches to experimental thinking as an integral factor in making

REVOLUTION

changes in institutional arrangements are significant. It is not possible to go back to the atomistic order. Corporations, trade-unions, and government intervention we shall continue to have. Modern democracy does not mean individualism. It means a system in which private, voluntary organization functions under general, and mostly indirect, governmental control. Dictatorship means direct and specific control. W e do not have a choice between "plan and no plan." W e have a choice only between democratic planning and totalitarian regimentation.

DEWEY democracy work. Liberty and equality are not for Dewey separable from fraternity, for by fraternity (in the sense of cooperative, shared inquiry) liberty and equality can be gradually achieved. T h e y are not the endowments of individuals, but the fruits of democratic society. T h e democratic process of spreading public responsibility over progressively wider areas demands the extensive fostering of the powers of free thought and independent judgment. T h e democratic process is for Dewey the more generous communication of experience and sharing of services; from such a progressive extension of participation comes increased responsibility, and interests thus become genuinely public. Dewey's repeated emphasis is that democracy needs to be more than a form of government, that it must be a way of life dependent on the degree to which individuals are themselves democratic, that is to say, in proportion to their commitment to methods of voluntary association and agreement and to mutual consultation. In the final analysis, the justification of democracy "as the truly human way of living" is in the similarity it bears to the experimental method, and its effectiveness rests upon the ability to assimilate that method to everyday problems. "It is of the nature of science not so much to tolerate as to welcome diversity of opinion, while it insists that inquiry brings the evidence of observed facts to bear to effect a consensus of conclusions—and even then to

THE AMERICAN hold the conclusion subject to w h a t is ascertained and made public in f u r t h e r n e w inquiries. I w o u l d not claim that a n y existing d e m o c r a c y has ever made complete or adequate use of scientific method in deciding u p o n its policies. B u t f r e e d o m of i n q u i r y , toleration of diverse views, f r e e d o m of communication, the distribution of w h a t is f o u n d out to e v e r y individual as the ultimate intellectual consumer, are involved in the democratic as in the scientific m e t h o d . " {Freedom and Culture, N.Y., 1939·) F o r the realization of his ideals D e w e y relies less on g o v e r n m e n t than on " v o l u n t a r y associations." Schools, laboratories, unions, lobbies, any cooperative attempt at achieving some common g o o d — n o t to be possessed as an exclusive p r o p e r t y , b u t to be shared w i t h still wider groups—these are the institutions of de-

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m o c r a c y . G o v e r n m e n t is democratic insofar as it is the servant of these m a n y groups w i t h their diversified interests, regulating them in the sense of preventing reciprocal frustration of interests. T h u s D e w e y arrives at a pluralistic socialism, a c o m m u n i t y of associated interests and goods, held together less b y state control and ownership than b y publicity of interests and sharing of responsibilities. D e w e y ' s conception of d e m o c r a c y has come at least in part f r o m his experience w i t h educational practice and administration and has in turn contributed tremendously to the reshapi n g of educational aims and methods. T h e f o l l o w i n g selection is taken f r o m his speech b e f o r e the National E d u c a t i o n Association, 1937, and w a s published in School and Society, A p r i l , 1937, under the title Democ-

racy and Educational Administration.

Democracy BY

JOHN

. . . DEMOCRACY is much broader than a special political form, a method of conducting government, of making laws and carrying on governmental administration by means of popular suffrage and elected officers. It is that, of course. But it is something broader and deeper than that. T h e political and governmental phase of democracy is a means, the best means so far found, f o r realizing ends that lie in the wide domain of human relationships and the development of human personality. It is, as we often say, though perhaps without appreciating all that is involved in the saying, a way of life, social and individual. T h e key-note of democracy as a w a y of life may be expressed, it seems to me, as the necessity f o r the participation of every mature human being in formation of the values that regulate the living of men together: which is necessary from the standpoint of both the general social welfare and the full development of human beings as individuals. Universal suffrage, recurring elections, responsibility of those who are in political power to the voters, and the other factors of democratic government are means that have been found expedient for realizing democracy as the truly human way of living. T h e y are not a final end and a final value. T h e y are to be judged on the basis of their contribution to end. It is a form of idolatry to

DEWEY erect means into the end which they serve. Democratic political forms are simply the best means that human wit has devised up to a special time in history. But they rest back upon the idea that no man or limited set of men is wise enough or good enough to rule others without their consent; the positive meaning of this statement is that all those who are affected by social institutions must have a share in producing and managing them. T h e two facts that each one is influenced in what he does and enjoys and in what he becomes by the institutions under which he lives, and that therefore he shall have, in a democracy, a voice in shaping them, are the passive and active sides of the same fact. T h e development of political democracy came about through substitution of the method of mutual consultation and voluntary agreement f o r the method of subordination of the many to the f e w enforced from above. Social arrangements which involve fixed subordination are maintained b y coercion. T h e coercion need not be physical. There have existed, f o r short periods, benevolent despotisms. But coercion of some sort there has been; perhaps economic, certainly psychological and moral. T h e very fact of exclusion f r o m participation is a subtle form of suppression. It gives individuals no opportunity to reflect and decide upon

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what is good for them. Others who are supposed to be wiser and who in any case have more power decide the question for them and also decide the methods and means by which subjects may arrive at the enjoyment of what is good for them. This form of coercion and suppression is more subtle and more effective than is overt intimidation and restraint. When it is habitual and embodied in social institutions, it seems the normal and natural state of affairs. T h e mass usually become unaware that they have a claim to a development of their own powers. Their experience is so restricted that they are not conscious of restriction. It is part of the democratic conception that they as individuals are not the only sufferers, but that the whole social body is deprived of the potential resources that should be at its service. The individuals of the submerged mass may not be very wise. But there is one thing they are wiser about than anybody else can be, and that is where the shoe pinches, the troubles they suffer from. The foundation of democracy is faith in the capacities of human nature; faith in human intelligence and in the power of pooled and cooperative experience. It is not belief that these things are complete but that if given a show they will grow and be able to generate progressively the knowledge and wisdom needed to guide collective action. Every autocratic and authoritarian scheme of social action rests on a belief that the needed intelligence is confined to a superior few, who because of inherent natural gifts are endowed with the ability and the right to control the conduct of others; laying down principles and rules and directing the ways in which they are carried out. It would be foolish to deny that much can be said for this point of view. It is that which controlled human relations in social groups for much the greater part of human history. The democratic faith has emerged very, very recently in the history of mankind. Even where democracies now exist, men's minds and feelings are stiH permeated with ideac about leadership imposed from above, ideas that developed in the long early history of mankind. After democratic political institutions were nominally established, beliefs and ways of looking at life and of acting that originated when men and women were externally controlled and subjected to arbitrary power, persisted in the family, the church, business and the school, and experience shows that as long as they persist there, political democracy is not secure. Belief in equality is an element of the democratic credo. It is not, however, belief in equality of natural endowments. Those who proclaimed the idea of equality did not suppose they were enunciating

a psychological doctrine, but a legal and political one. All individuals are entitled to equality of treatment by law and in its administration. Each one is affected equally in quality if not in quantity by the institutions under which he lives and has an equal right to express his judgment, although the weight of his judgment may not be equal in amount when it enters into the pooled result to that of others. In short, each one is equally an individual and entitled to equal opportunity of development of his own capacities, be they large or small in range. Moreover, each has needs of his own, as significant to him as those of others are to them. The very fact of natural and psychological inequality is all the more reason for establishment by law of equality of opportunity, since otherwise the former becomes a means of oppression of the less gifted. While what we call intelligence be distributed in unequal amounts, it is the democratic faith that it is sufficiently general so that each individual has something to contribute, whose value can be assessed only as enters into the final pooled intelligence constituted by the contributions of all. Every authoritarian scheme, on the contrary, assumes th'at its value may be assessed by some prior principle, if not of family and birth or race and color or possession of material wealth, then by the position and rank a person occupies in the existing social scheme. The democratic faith in equality is the faith that each individual shall have the chance and opportunity to contribute whatever he is capable of contributing and that the value of his contribution be decided by its place and function in the organized total of similar contributions, not on the basis of prior status of any kind whatever. 1 have emphasized in what precedes the importance of the effective release of intelligence in connection with personal experience in the democratic way of living. 1 have done so purposely because democracy is so often and so naturally associated in our minds with freedom of action, forgetting the importance of freed intelligence which is necessary to direct and to warrant freedom of action. Unless freedom of individual action has intelligence and informed conviction back of it, its manifestation is almost sure to result in confusion and disorder. The democratic idea of freedom is not the right of each individual to do as he pleases, even if it be qualified bv adding "provided he does not interfere with the same freedom on the part of others." While the idea is not always, not often enough, expressed in words, the basic freedom is that of freedom of mind and of whatever degree of freedom of action and experience is

T H E AMERICAN MIND necessary to produce freedom of intelligence. T h e modes of f r e e d o m guaranteed in the Bill of Rights are all of this nature; F r e e d o m of belief and conscience, of expression of opinion, of assembly f o r discussion and conference, of the press as an organ of communication. T h e y are guaranteed because without them individuals are not free to develop and society is deprived of what they might contribute. . . . T h e r e is some kind of government, of control, wherever affairs that concern a number of persons w h o act together are engaged in. It is a superficial view that holds government is located in Washington and Albany. T h e r e is government in the family, in business, in the church, in every social group. T h e r e are regulations, due to custom if not to enactment, that settle how individuals in a group act in connection with one another. It is a disputed question of theory and practice just how far a democratic political government should g o in control of the conditions of action within special groups. At the present time, for example, there are those who think the federal and state governments leave too much f r e e d o m of independent action to industrial and financial groups, and there are others w h o think the government is going altogether too far at the present time. I do not need to discuss this phase of the problem, much less to try to settle it. But it must be pointed out that if the methods of regulation and administration in vogue in the conduct of secondary social groups are non-democratic, whether directly or indirectly or both, there is bound to be an unfavorable reaction back into the habits of feeling, thought and action of citizenship in the broadest sense of that word. T h e way in which any organized social interest is controlled necessarily plays an important part in forming the dispositions and tastes, the attitudes, interests, purposes and desires, of those engaged in carrying on the activities of the group. F o r illustration, I do not need to do more than point to the moral, emotional and intellectual effect upon both employers and laborers of the existing industrial system. Just what the effects specifically are is a matter about which we know very little. But I suppose that every one who reflects upon the subject admits that it is impossible that the ways in which activities are carried on for the greater part of the waking hours of the day; and the way in which the share of individuals are involved in the management of affairs in such a matter as gaining a livelihood and attaining material and social security, can not but be a highly important factor in shaping personal dispositions; in short, forming character and intelligence.

In the broad and final sense all institutions are educational in the sense that they operate to f o r m the attitudes, dispositions, abilities and disabilities that constitute a concrete personality. T h e principle applies with special f o r c e to the school. F o r it is the main business of the family and the school to influence directly the formation and growth of attitudes and dispositions, emotional, intellectual and moral. W h e t h e r this educative process is carried on in a predominantly democratic or nondemocratic w a y becomes, therefore, a question of transcendent importance not only f o r education itself but f o r its final effect upon all the interests and activities of a society that is committed to the democratic w a y of life. . . . T h e r e are certain corollaries which clarify the meaning of the issue. Absence of participation tends to produce lack of interest and concern on the part of those shut out. T h e result is a corresponding lack of effective responsibility. Automatically and unconsciously, if not consciously, the feeling develops, " T h i s is none of our affair; it is the business of those at the top; let that particular set of G e o r g e s do what needs to be done." T h e countries in which autocratic government prevails are just those in which there is least public spirit and the greatest indifference to matters of general as distinct f r o m personal concern. Can we expect a different kind of psychology to actuate teachers? W h e r e there is little power, there is correspondingly little sense of positive responsibility. It is enough to do what one is told to do sufficiently well to escape flagrant unfavorable notice. A b o u t larger matters, a spirit of passivity is engendered. In some cases, indifference passes into evasion of duties when not directly under the eye of a supervisor; in other cases, a carping, rebellious spirit is engendered. . . . It still is also true that incapacity to assume the responsibilities involved in having a voice in shaping policies is bred and increased by conditions in which that responsibility is denied. I suppose there has never been an autocrat, big or little, who did not justify his conduct on the ground of the unfitness of his subjects to take part in government. . . . W h a t the argument f o r d e m o c r a c y implies is that the best way to produce initiative and constructive power is to exercise it. Power, as well as interest, comes by use and practice. Moreover, the argument f r o m incapacity proves too much. If it is so great as to be a permanent bar, then teachers can not be expected to have the intelligence and skill that are necessary to execute the directions given them. T h e delicate and difficult task of developing character and g o o d judgment in the

T H E T H I R D AMERICAN R E V O L U T I O N young needs every stimulus and inspiration possible. It is impossible that the work should not be better done when teachers have that understanding of what they are doing that comes from having shared in forming its guiding ideas. . . . The fundamental beliefs and practices of democracy are now challenged as they never have been before. In some nations they are more than challenged. They are ruthlessly and systematically destroyed. Everywhere there are waves of criticism and doubt as to whether democracy can meet pressing problems of order and security. The causes for the destruction of political democracy in countries where it was nominally established are complex. But of one thing I think we may be

sure. Wherever it has fallen it was too exclusively political in nature. It had not become part of the bone and blood of the people in daily conduct of its life. Democratic forms were limited to Parliament, elections and combats between parties. What is happening proves conclusively, I think, that unless democratic habits of thought and action are part of the fiber of a people, political democracy is insecure. It can not stand in isolation. It must be buttressed by the presence of democratic methods in all social relationships. The relations that exist in educational institutions are second only in importance in this respect to those which exist in industry and business, perhaps not even to them. . . .

THE BONUS As FAR AS official Washington during the years of the depression was concerned, there was no more disturbing element in the domestic scene than the appearance of an organized veterans' pressure group. Unemployment played no favorites; and veterans, like millions of other workers, found themselves without homes, jobs, and financial resources. But veterans had a claim on the government: they were the holders of so-called "adjusted compensation certificates." These had been voted as a Soldiers' Bonus to all those who had served in World War I, but they did not carry immediate maturities. It was this desire to urge the cashing of the certificates at once that prompted a spontaneous movement on the part of veterans all over the country to converge on Washington. In the spring of 1932, the march of the "Bonus Army" began, and be-

ARMY

fore long thousands of veterans were living in a mean little shantytown—the epitome of all the "Hoovervilles" throughout the country—on Anacostia Flats outside of Washington. It is this "Bonus Army" that Gardner Jackson describes in his article, Unknown Soldiers, here reprinted from The Survey of August 1, 1932. The veterans maintained order and waited quietly while Congress discussed the Bonus bill—and rejected it. On July 28, orders were given by the War Department to break up the camp and disperse the soldiers. Paul Y . Anderson presents an eyewitness account of the resulting "Battle of Anacostia Flats" in his Washington report to The Nation in its issue of August, 17, 1932. After the events recorded here, Herbert Hoover could not possibly win the election of 1932.

Unknown Soldiers BY

GARDNER

THE ARMY of bonus-seeking veterans now laying siege to the Nation's Capitol fits into no precise category formulated by sociologists or mass psychologists. The abstractions phrased by academic students of the faltering American system do not encompass the swift-moving and vital forces which sent thousands of men in their prime of life to dig in like rats along Pennsylvania Avenue and on the Anacostia mud flats bordering the Potomac River, with a defiant yet passive determination which still held when this article was written, July 1. They are a conglomerate and colorful mass, these men of thirty-five to forty-five years old, who have been thrown out of jobs and homes by the collapse of the post-war boom. Like their more learned brothers, the economists, they are quite bewildered. They know neither the cause of the depression nor the way out. But they have found something to do immediately. They have dis-

JACKSON

covered that the mass technique which they learned as recruits or drafted men preparing to fight for the American scheme of life, liberty and the pursuit of happiness is serviceable to them in times of peace when that scheme has failed them. And they fall back into that technique as easily as if it had been just yesterday that they first stumbled into squads, platoons and companies under the bullying of a tough top-sergeant. Without second thought they called themselves "The Bonus Expeditionary Force." One may not agree intellectually or even sympathize emotionally with the stated object of these bonus marchers on their spontaneous trek from all corners of the country to Washington. But one cannot mingle much with them and escape the positive impression that a large proportion of them are moved by more than a mere urge to collect a few hundred dollars apiece. Blindly, if you

1166

T H E THIRD AMERICAN

will, they are searching for security, and many of them realize that a few hundred dollars will not give them that. It is true (as this is written) that nothing in the statements of the army's leaders has outlined a program f o r security. T h e y have harped almost solely upon the bonus. But in conversations with W . W . Waters, thirty-four-year-old ex-canning factory superintendent of Portland, Oregon, who led the first contingent here and who has three times been elected leader, it was clear, early in the siege, that he and his associates thought of their enterprise as one destined to be the vanguard of a march of the general unemployed to demand of Congress the enactment of a complete program that would insure jobs and relief for all. The bonus was just a strategic device they were using. Waters, an ex-Socialist, has an attitude typical of the average run of men in the army, though he is superior to the mass in training and personality. H e was driven to the adventure by sheer desperation. H e had been out of a job for more than a year—which is true of 95 per cent of the bonus marchers. His wife and two small children were getting along as best they could on relief by friends and the regular agencies. W h y not try to collect the fifteen hundred dollars still owing him on his adjusted service certificate? If he left home there would be one less mouth to feed. Over and over this story, with slight variations, has been repeated to me by members of the army. "What's the good of going back home, if we haven't got jobs or money?" they ask. "The wife and kids are better off without us. T h e y get their relief whether we're there or not. And they don't have to worry about us hanging around and about feeding us." That note of sharp discomfort over being in the home without a job is in the tones of many of them—a sense of deep uneasiness as their wives perform their housekeeping and mothering tasks under distressing circumstances or even perhaps work at odd jobs as charwomen or waitresses while they, the supposed breadwinners, are idle. N o accurate estimate of the number of married men among the fifteen thousand to twenty thousand bonus marchers is possible, but it is safe to place the proportion at 60 per cent. More than half of that number, to be conservative in my figures, have children. When the camps were fairly well established an increasing number of veterans began to arrive with their families. T h e wailing of ill-nourished youngsters became common. Milk was scarce. These men did not appear to be starving as they hiked or rode into Washington in rattletrap old cars and trucks. This is contrary to the picture of

REVOLUTION

the men drawn by bonus-thumping politicians in Congress and by some newspaper correspondents. But consider for a moment the manner in which these marchers dug in and organized themselves on the Anacostia mud flats without help from anyone. Consider the appalling living conditions which they underwent there and elsewhere in the city for five weeks before a sign of serious sickness appeared among them. This, it seems to me, is fair evidence that they were not worn down by starvation. That first contingent of veterans from Oregon, and those from other states which followed in rapid succession, who were lodged across the Potomac by Brig.-Gen. Pelham D. Glassford, superintendent of the District police, swept up over a hill beyond the Anacostia flats, scavenged the city dump heap on top of it and literally, within the space of several days, built their camp out of that refuse plunder. Such an accomplishment hardly seems the work of men languid from under-nourishment. Egg-crates, paper-boxes, rusty bed-springs; fenders, bodies and seats from junked autos; pieces of corrugated iron roofing, rusty fence-wire, filthy old bed-ticking, chicken-coops, moth-eaten blankets, parts of baby carriages—these and scores of other articles composing the dump-heap of a large city went to make the dog hovels under which the veterans sought protection. Burdock leaves and long grasses from the mud flats, woven into the chicken wire, were prized roofing material. There the veterans slept, under primitive shelters barely high enough to allow their bodies to turn, and there many of them still sleep, rain or shine, under conditions reminiscent of war. This Anacostia camp is the main camp, housing, or perhaps more accurately, sheltering ten thousand members of the army. Through the good offices of General Glassford, the only official of either the District of Columbia or the federal government willing to assume responsibility for the care of the veterans, a small amount of lumber was secured to build sheds. He also was instrumental in borrowing some tents from a neighboring National Guard outfit, while other tents were set up bv the "Sallies" and other religious organizations. One of the tents had a large sign on it proclaiming, "Christian Services— morning—afternoon—evening—Jesus Saves." T h e ex-soldiers outside the Anacostia camp— those in the vacant buildings and in the two camps where barracks and tents were ready, fared somewhat better. But even they, lacking anything approaching an adequate supply of cots, beds or mattresses, have been living a decidedly uncomfort-

THE AMERICAN SCENE able life. Yet they all have shown a surprising resilience under it—hardly the resilience of starving men. Though not actually starving, these men—the 60 per cent of them who are not mere floaters or out for a lark—are at the end of their ropes. They are close enough to starvation to know what it means for themselves and their families. The depression began to get its talons in them over a year ago. The stark realization of what they are up against came gradually. They lost their regular jobs as sheet-metal workers, lumberjacks and sewer builders. They were able to piece out for a while with odd jobs—jobs mowing lawns, helping in truck gardens, washing automobiles, digging ditches, doing anything to get a few dollars for home. Then these odd jobs got scarcer and were no longer to be had. That's the average story of the army. . . . Comment has been general on the excellent discipline evidenced by the polyglot army in which Negroes and whites mingled without restriction and in which the relatively few white-collar workers—the lawyers, doctors, newspaper men and office men—are taking the scanty pot-luck with coal miners, truck drivers and plumbers. The men up to the time these words are set down have, indeed, practised the first large scale attempt to mimic Mahatma Gandhi's passive resistance (I might be thrown out as a red if I told them that in

person). Gathered in large numbers around the Capitol the night the Senate voted down the bonus bill, they were in an uncertain mood when they heard the news. There was great tension and considerable growling. A brief word from young Waters on the Capitol steps sent them home. Nor did their resentment flare into active demonstration when the police raised the drawbridge over the Potomac to keep back a large body of them headed for the Capitol. Among the factors contributing to this passivity, three seem to me prominent. First is the understanding and intelligent handling of their problems by General Glassford and the police under his direction. Second is the habit of routine and acquiescence established in them by their service in the War—a habit which is not easily lost once it is firmly implanted. Third is realization by the veterans that, although they have far from universal support for their bonus demand, they have strong sympathy of large sections of public opinion for their general predicament. They have the hunch that violence of any kind might alienaré that support. . . . But there has been no genuine leadership. That is one of the tragedies of this army, this microcosm of American life under conditions of a deep depression. Which way are the forces to turn? . . .

Τ ear-Gas, Bayonets, and Votes BY

PAUL

Y.

HOOVER'S CAMPAIGN f o r r e e l e c t i o n w a s l a u n c h e d

Thursday, July 28, at Pennsylvania Avenue and Third Street, with four troops of cavalry, four companies of infantry, a mounted machine-gun squadron, six whippet tanks, 300 city policemen and a squad of Secret Service men and Treasury agents. Among the results immediately achieved were the following: T w o veterans of the World W a r shot to death; one eleven-weeks-old baby in a grave condition from gas, shock, and exposure; one eight-year-old boy partially blinded by gas; two policemen's skulls fractured; one bystander shot through the shoulder; one veteran's ear severed with a cavalry saber; one veteran stabbed in the hip with a bayonet; more than a dozen veterans, policemen, and soldiers injured by bricks and clubs; upward of 1,000 men, women, and children gassed, including policemen, reporters, ambulance drivers, and residents of Washington; and approximately $10,000 worth of property destroyed by fire, including clothing, food, and temporary shelters of the

ANDERSON

veterans and a large amount of building material owned by a government contractor. . . . Save for the feeble gestures of the isolated Communist group there was no trouble until that fatal Thursday, due in part to the remarkable tact and common sense of General Glassford, the chief of police, in part to the discipline enforced by the leaders of the camps, and in part to the essentially law-abiding instincts of the men themselves. The worthy Hurley mouths indignant phrases about "panhandling" and "forced tribute from citizens," but in all my visits to the camps I was never asked for anything more valuable than a cigarette—and I am a fairly prosperous looking citizen. As soon as Congress adjourned there was a steady exodus of the campers, as attested by the daily statements of the Veterans' Bureau, dutifully reported by the Associated Press and Administration newspapers. Responsible officials repeatedly declared it was only a matter of days until all would be gone. But suddenly someone high in authority decided the government must have immediate possession

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THE THIRD AMERICAN REVOLUTION

of the partially razed block bounded b y T h i r d and F o u r t h Streets and Pennsylvania and Missouri A v e n u e s , w h e r e about ι ,500 w e r e existing in abandoned buildings and makeshift huts. Most of these people w e r e f r o m T e x a s , California, the Carolinas, N e b r a s k a , W e s t V i r g i n i a , and Florida, w h i c h are not exactly hotbeds of "radicalism." Instructions w e n t f r o m the T r e a s u r y to the District commissioners to have the police evict the squatters. O n t w o occasions G l a s s f o r d convinced the commissioners that the police had no authority to conduct such evictions, and pointed out that the procedure f o r eviction is definitely prescribed b y law. O n W e d n e s d a y there w a s a conference at the W h i t e H o u s e attended b y H u r l e y , A t t o r n e y - G e n e r a l Mitchell, and G e n e r a l Douglas M a c A r t h u r , chief of staff of the a r m y . O n T h u r s d a y morning Glassf o r d was informed that T r e a s u r y agents would begin evacuation of a part of the block, and that if anyone resisted eviction he was to be arrested f o r disorderly conduct. T h i s meant that the actual eviction w o u l d be done b y the police, and so it w o r k e d out. Someone had devised a technicality f o r getting around the law. Glassford's protests w e r e unavailing. It w a s obvious that irresistible pressure had been applied to the commissioners. O n e building w a s emptied with little difficulty of all but one occupant—a legless veteran w h o m G l a s s f o r d permitted to remain until the Veterans' Bureau could take care of him. A n hour later, at noon, three men, one c a r r y i n g a large A m e r i c a n flag, started a march across the block, followed b y several hundred. W h e n the leaders encountered a policeman he grabbed the flag. T h e r e was a scuffle, and one of the marchers was hit on the head with a nightstick. H e wrested it f r o m the officer and struck back. O t h e r policemen rushed toward the spot, and there w a s a shower of bricks from the marchers in the rear. I was standing about f o r t y feet a w a y , and it looked like an ugly mess, but the cops kept their heads and no shots were fired. G l a s s f o r d dashed into the heart of the m e l e e , smiled w h e n a brickbat hit him in the chest, and stopped the fighting in a f e w seconds. W i t h i n t w o minutes the veterans were cheering h i m lustily. T w o policemen had been badly hurt b y thrown bricks, and several veterans w e r e bleeding f r o m the clubbing they had received and f r o m accidental hits f r o m within their o w n ranks. T h e trouble was resumed with more serious consequences t w o hours later when a policeman attempted to bar several veterans from a building w h i c h , in fact, had not been prohibited to thein. T h e y rushed him and he shot. A fellow officer c o m i n g to his assistance was hit with a missile and likewise opened fire. Still others joined in. Glass-

f o r d , on the second floor of the same building, commanded his men to stop shooting, and the policeman w h o had fired the first shot and w h o apparently was hysterical, whirled and aimed his revolver at the chief. In this encounter t w o veterans w e r e fatally wounded, another received a flesh wound, and a bystander g o t a policeman's bullet in the shoulder. It was soon afterward that G l a s s f o r d made an illuminating statement to reporters. H e said: " T h e trouble began when I w a s compelled to e n f o r c e an order which I considered unnecessary. In a f e w m o r e hours this area could have been evacuated peacefully." T h e truth of this statement seemed evident. T h e men had been advised b y their leaders to m o v e , better quarters had been promised, and plainly they were ready to follow G l a s s f o r d ' s counsel. T h e trouble was that someone in authority had determined to force the issue. T w o District c o m missioners reported to President H o o v e r that the civil authorities were "unable to maintain o r d e r , " and within a f e w minutes infantry, c a v a l r y , machine-gunners, and tanks w e r e on their w a y f r o m F o r t M y e r and F o r t W a s h i n g t o n — a l t h o u g h they were delayed an hour in the rear of the W h i t e House while an orderly dashed back to F o r t M y e r f o r the tunic, service stripes, and English w h i p c o r d breeches of General M a c A r t h u r , the valiant chief of staff having steeled himself to lead the offensive in person. A g a i n w e have a significant disclosure f r o m General Glassford, the one official w h o s e judgment, courage, and k n o w l e d g e of conditions had been conspicuous. H e did not tell the commissioners that the police were unable to handle the situation—on the c o n trary, he told them the police could handle it " u n less the field of operations w a s to be e x p a n d e d " ; he did not ask f o r troops, was not consulted about calling them out, was not i n f o r m e d they w e r e coming, and was not consulted b y their officers when they arrived. In short, the whole affair had been taken out of his hands b y someone higher in authority, someone resolved on an actual clash between the regular a r m y and the encamped v e t erans. . . . Before me is a statement b y S e c r e t a r y H u r l e y which contains the f o l l o w i n g w o r d s : N o one was injured after the coming of the troops. N o property was destroyed after the c o m ing of the troops except that w h i c h was destroyed b y the marchers themselves. T h e d u t y of restoring law and order was performed with directness, with effectiveness, and with unparalleled humanity and kindliness. L e t us see. W h e n the troops arrived they actually w e r e cheered b y the veterans on the south

T H E AMERICAN SCENE sidewalk of Pennsylvania Avenue. A cavalry officer spurred up to the curb and shouted: " G e t the hell out of here." Infantrymen with fixed bayonets and trench helmets deployed along the south curb, forcing the veterans back into the contested block. Cavalry deployed along the north side, riding their horses up on the sidewalk and compelling policemen, reporters, and photographers to climb on automobiles to escape being trampled. A crowd of three or four thousand spectators had congregated in the vacant lot on the north side of the avenue. A command was given and the cavalry charged the crowd with drawn sabers. Men, women, and children fled shrieking across the broken ground, falling into excavations as they strove to avoid the rearing hoofs and saber points. Meantime, the infantry on the south side had adjusted gas masks and were hurling tear bombs into the block into which they had just driven the veterans. Secretary Hurley states that "the building occupied by the women and children was protected, and no one was permitted to molest them." W h a t he means by "the building" I do not know, because scores of shanties and tents in the block were occupied by women and children. I know that 1 saw dozens of women grab their children and stagger out of the area with streaming, blinded eyes while the bombs fizzed and popped all around them. I saw a women stand on the Missouri Avenue side and plead with a non-commissioned officer to let her rescue a suitcase which, she told him, contained all the spare clothing of herself and her child, and I heard him reply: " G e t

out of here, lady, before you get hurt," as he calmly set fire to her shanty. . . . Secretary Hurley defiantly announced that "statements made to the effect that the billets of the marchers were fired by troops is a falsehood." On the day when he first made this declaration it appeared in dozens of newspapers which also published a graphic Underwood and Underwood photograph of an infantryman applying a torch to a veteran's shanty. I am only one of numerous reporters who stood by while the soldiers set fire to many such shelters. In the official apologia, the Secretary asserts that "the shacks and tents at Anacostia were set on fire by the bonus marchers before the troops crossed the Anacostia Bridge." I was there when the troops crossed. T h e y celebrated their arrival at the Anacostia terminus of the bridge by tossing gas bombs into a throng of spectators who booed and refused to "get back" as soon as ordered. About fifteen minutes after their arrival in the camp the troops set fire to two improvised barracks. These were the first fires. Prior to this General MacArthur had summoned all available reporters and told them that "operations are completely suspended," that "our objective has been accomplished," that "the camp is virtually abandoned," and that it would "not be burned." Soon after making that statement he departed for the White House. W h e n the two barracks ignited by the soldiers had been burning fiercely for at least thirty minutes, the veterans began firing their own shelters as they abandoned them. . . .

THREE DEMAGOGUES IN Fantastic Interim—which covers the period from Versailles to Pearl Harbor—Henry M. Robinson exposes some of the sillier aspects of an America, which, during the nineteen twenties and thirties, was running away from its responsibilities. Our entry into World War II was both atonement and opportunity: the world could not be at peace or economically prosperous unless we were ready to take our legitimate place in it. Robinson does not concern himself with fatuities alone. He calls attention to a sinister aspect of the nineteen thirties: the flourishing of a large company of demagogues—many with great followings— who turned back to older nativistic ideas for

the purpose of preaching hatred, division and isolationism. Because unemployment continued and security, politically and economically, was still remote, millions of Americans listened to such rabble-rousers and not infrequently talked the language of fascism. This fault in our cultural pattern—the same one already noted here as existing in the eighteen thirties and nineties and the nineteen twenties—continues to trouble and divide Americans. The selection here reprinted is from Fantastic Interim (New York, 1943) and is published by permission of Harcourt, Brace and Company.

T H E

T H I R D

A M E R I C A N

R E V O L U T I O N

Fantastic Interim BY

HENRY

T H R E E ECONOMIC CORN DOCTORS THESE

W E R E THE YEARS w h e n

mountebanks

ca-

vorted publicly and pushed to vicious lengths their medicine-tent panaceas. Demagoguery and pied-piperism had their innings; the unwashed multitude threw its nightcaps in the air while promises of "ham-and-egg" pensions and various share-thc-wealth programs fell from the lips of dangerous men. Loudest and most persuasive was Huey Long, the Louisiana Kingfish, a historically unmatched clown, who but f o r his timely death might have poured disaster over the American people as he had already loosed it on his native state. T h e Kingfish had used Louisiana as a provingground f o r his political methods and as a springboard f o r his manic ambition. Starting as a salesman of a cure f o r "women's sicknesses," Huey early learned the acts of greasy eloquence and political blandishment. On a borrowed (400 he put himself through a three-year law course in eight months, and at the age of twenty-one became a candidate f o r the Louisiana Railroad Commission. In screaming linen and a flashy secondhand automobile H u e y penetrated remote sections never before visited b y office-seekers. H e handed out recipes for clabber, raised up hearts with denunciations of W a l l Street and city slickers—and kept at it eighteen hours a day until he was elected. T e n years later, when he had completed his conquest of Louisiana, he was an unopposed dictator, bellowing self-made statutes at the legislature, crushing rivals as a chimpanzee cracks peanuts, or buying them up with venal cash. Of one Louisiana senator, H u e y said: " I got that guy so cheap I thought I stole him." Of another: "I bought him like a sack of potatoes." With Louisiana sewed up lock, stock, and cash register, Huey turned his attention to wider fields, and forthwith had himself elected to the Senate of the United States. F o r the first f e w months of the N e w Deal, the Kingfish swung his support to the Roosevelt A d ministration, but he became disgruntled when the W h i t e House refused to accept his bullying lead in matters of patronage and Federal funds. During a visit to the President at the White House, the boorish Long kept a brightly beribboned straw hat on his head, removing it only to tap the President on knee and elbow to emphasize a point of Kingfish doctrine. Roosevelt., coolly amused,

M.

ROBINSON

punished the Louisiana lout by holding up Federal cash and appointments till Huey's neck cords swelled in anger. Soon it was open war between the Kingfish and the White House, and the country got a taste of Huey's vituperative quality as he spat insults and charges from the floor of the Senate. His particular target was Jim Farley, whom he accused (utterly without basis) of diverting Post Office contracts for personal gain. " J i m can take the corns off your feet without removing your shoes," he told the Senate. Sartorially resplendent in a tan poplin suit and a necktie of mottled green and red, he pilloried Administration leaders while the galleries roared. D o w n the list he went, naming the White House hierarchy. He called the President "a liar and a faker." Farley was termed "Prime Minister James Aloysius, the Nabob of N e w Y o r k . " Ickes got the title of " H i g h Lord Chamberlain the Chinch Bug of Chicago." Secretary of Agriculture Wallace was dubbed the "Honorable Lord Destroyer of Crops, the Ignoramus of Iowa." And General Johnson, the N R A Chief, was ticketed as "the expired and lamented Royal Block, Hugh Sitting Bull." " O n e sure w a y to avoid Huey P. Long f o r President," the Kingfish warned Roosevelt, "is to adopt God's laws. . . . D o as G o d commanded and I will be as little as one of the sands of the sea." (Aquinas via Baton Rouge.) And then again: "I'm as big as Roosevelt right now. W h y he's copying my share-the-wealth speeches now, the ones I was writing when I was fourteen years old." W h e n asked " W i l l we ever have Fascism in the United States," Long replied: "Sure we'll have Fascism, but we'll call it anti-Fascism." In 1934 Huey turned his share-the-wealth slogan into a nation-wide club with no dues, and soon was claiming 3,000,000 members. His Utopian plan promised that "every family would be furnished by the government with a homestead allowance of not less than one-third the average family wealth of the country, which means that every family shall have the comforts of life up to a value of from $5,000 to $6,000." But when the Kingfish tried to explain just how this was to be accomplished, he was something less than lucid. Apparently, holders of various possessions—cash, houses, automobiles, and stock certificates—would simply turn them over to the Government, whereupon members of Huey's Every-Man-a-King Club would file petitions setting forth their needs and

THE AMERICAN SCENE would promptly be furnished with whatever they required. Carleton Beals called the whole scheme "the weird dream of a plantation d a r k y . " Long's popularity with the underprivileged elements of American society is understandable: he simply promised them something f o r nothing, and thus fitted in perfectly with the prevailing E l Dorado concept of American life. T h e fact that he planned to dispense with the two-party system, then supplant it with his own political party, a Fascist setup with the Kingfish as dictator, alarmed his followers not at all. It did, however, greatly alarm the more thoughtful members of society, who saw in Long's program merely an extension of his ruthless megalomania. Such persons were not altogether unhappy when, on September 8, 1935, H u e y Long was fatally wounded by a young physician, Carl A . Weiss, Jr., whose father had been deeply wronged by the Long machine. T h e body of the tyrannicide Weiss was immediately riddled b y sixty-one bullets from the guns of Huey's henchmen. Long expired a f e w days later, widely unmourned. Another defector from the N e w Deal ranks was the Reverend Charles E . Coughlin, the " R a d i o Priest" whose inflammatory exhortations over the air waves were a strange perversion of the papal encyclicals of Leo XIII, plus a Fascism of Coughlin's own brand. This ecclesiastical demagogue was antilabor, antidemocratic, anti-Semitic, and antirational. Coughlin came to the diocese of St. Agnes Church in Detroit in 1923. T h r e e years later Bishop Gallager of Detroit selected the young priest to expand the Royal Oak parish. A t first he broadcast sermons over W J R ; later he gave afternoon talks to children. F o r four years his homilies roused no undue attention; then about 1930 he realized that through the H o l y Ghost, or otherwise, the gift of tongues was upon him. In response to a new leavening of politics and economics in his sermons, letters started to pour in. A t once he spread himself, formed the Radio League of the Little Flower, grew to national stature overnight. His tone now became inflammatory as he poured forth an indiscriminate stream of abuse against bankers, mass production, Morgan, Jews, Russia, and gold. Money came in f r o m millions of listeners, enabling him to create his own radio network, which eventually included twentysix stations stretching f r o m Maine to Colorado. Soon he became a power in Washington and an accredited spokesman of the N e w Deal. But by the end of 1933 Coughlin had left the N e w Deal far behind. W i t h impassioned vehemence, he claimed that the N e w Deal was not

1171

moving fast enough in its program of taxation, nationalization of banks, abolition of tax-free bonds, and the protection of the little man. T o hasten the millennium, Coughlin formed the N a tional League f o r Social Justice, describing it as "a lobby of citizens on a national scale." It turned out to be a new political party, organized in detail b y local cells and Congressional districts. Soon Coughlin was predicting the end of the two major parties in America and the arrival of a Fascist state based on the Coughlin model. Meanwhile, the Radio Priest's financial manipulations were becoming a matter of public interest. A n audit of his operations revealed some embarrassing facts. These included: ( 1 ) the creation of a corporation called the Social Justice Poor Society, designed to help the indigent, but actually used as a holding company f o r a private publishing firm. ( 2 ) W h e n the Government published the list of holders of silver, the largest in Michigan proved to be the young woman w h o was secretary of Father Coughlin's organization. She held 500,000 ounces, at the very time when Father Coughlin was crying over the radio: " T h e restoration of silver to its proper value is of Christian concern. I send to y o u a call f o r the mobilization of all Christianity against the god of gold." T o many it seemed that the Radio Priest was using his microphone pulpit to boost the price of silver, f r o m which profit would accrue to his undertakings. Prominent Catholics opposed Coughlin. A l Smith called him a "crackpot" and Cardinal O'Connell denounced him as a false representative of the views of the Catholic Church. But Coughlin flourished, carrying on business from his old stand at the Shrine of the Little Flower. This magnificent edifice was constructed with dramatic theatricism. A t night great spotlights, arranged with the skill of a Nazi party organizer, played over the huge relief of the crucified Christ, who looked down from His cross upon the gasoline station called "Shrine Super Service" and the hot-dog stand, the "Shrine Inn." Of all juvenile plans proposing to make men equal before Mammon, none was so infantile as the scheme brought f o r w a r d by Dr. Francis E . T o w n send. So fair was the illusion created b y his project that 25,000,000 people signed their names to the petition begging Congress to enact the Townsend Plan into durable law. In mid-1934, six months after Townsend appeared on the political scene, 3,000 Townsend Clubs were formed. A Townsend national weekly was circulating, and Townsend buttons, stickers, and automobile plates were

T H E THIRD AMERICAN sported by 8,000,000 people old enough to know better. Townsend, a retired physician of Long Beach, California, was undoubtedly honest, unselfish, and motivated by the highest principles. Righteous indignation started him on his crusade. One day in 1933, gazing from the window of his home, he saw three old women foraging for their dinner in a garbage can. For a moment his body was twisted with physical revulsion, then, straightening his tall frame, he burst into a torrent of profanity so vehement that his wife rushed into the room to see what was wrong. He emptied himself of anger, then in an after-period of quiet thought the Townsend Old Age Revolving Pension Plan ( O A R P ) was born. The Townsend Plan proposed to end destitute old age and at the same stroke lift the country out of economic stagnation. How? By the simple process of giving everyone over sixty (8,000,000 people in all) $200 a month—the only stipulation being that the money be spent within thirty days. The plan was a shining turret of the

INCOME,

WAGES,

great American cloud castle, and old folks crowded forward clamoring for immediate and permanent possession. Townsend first proposed raising the money by a 15 per cent sales tax, but later calmly changed this to a 2 per cent tax on all business transactions. His simple belief was that if $2,000,000,000 were forced into the American economy every thirty days, the consuming power thus created would start the wheels of production turning, put the unemployed back to work. This process, he averred, could be kept up forever. Kathleen Norris, after diligent study, hailed O A R P as "audacious, original, inspired," but cooler-blooded John T . Flynn pointed out that the purchaser of an ordinary overcoat might have to pay $150 for his garment, to absorb the accumulated taxes beginning with the sheep-raiser and ending in the clothing store. The O À R P flared up vigorously in the 1936 campaign, then joined the corpses strewing the board depression highway, already littered with the debris of a thousand economic panaceas. . . .

AND

A s THE KNOWLEDGE and use of statistics became more scientific, Americans in the 1930s came to learn much more about the economy they were living in and something of the road along which real progress in the future had to move. Notably, studies of income, wages, and productivity were being made; and some of the results of these investigations are presented here. T h e y should be compared with analyses that have been reprinted in earlier sections of this book. S.S. Kuznets ( 1 9 0 1 - ) in his National Income and Its Composition ( N e w York, 1941) presented the course of the American economy from 1919 to 1938 and there showed the great development in the "net value of the services individuals and their property contribute to the production of economic goods" up to 1929 and the losses suffered during the nineteen thirties. A brief statistical summary of his results will help explain Kuznets's conclusions.

REVOLUTION

Years 1919 1929 1932 1938

PRODUCTIVITY National Income (Billions of current dollars) 64.2 87.2 42.9 65.5

National income (Billions of 1929 dollars) 57.0 87.1 55-6 78.0

Kuznets then points out: " T h e decline from 1919-29 to 1929-38 in the totals in current prices is due exclusively to the downward tilt of the price levels. W h e n adjusted f o r price changes, the income totals rise from the first to the second decade." H o w ever: "Population, the number of persons gainfully occupied and of consuming units grew from the first to the second decade at a rate appreciably greater than national income (in 1929 prices); the number of equivalent full-time units employed declined slightly. A s a result, national income per consuming unit declined over the period; national income per unit employed grew."

T H E AMER Thanks to the work of Paul H. Douglas (1892- ) in his Real Wages in the United States (Boston, 1930), Americans were learning to what extent real wages, notably in the nineteen twenties, had risen. Examining, first, average hourly earnings for all industry, Douglas showed: ι. That the increase was from $.211 in 1890 to $.712 in 1926; or three and a third times what they had been during the nineties. In 1926, the average was two and a quarter times the 1914 average. 2. The real earnings during 1900 to 1914 were above the level of the nineties, being approximately 6 percent more. (Thus, Douglas challenges King's earlier estimate.) In 1917, despite wartime inflation, the index still remained above the average of the nineties by 3 percent, in 1918, by 5 percent and in 1919 by 7 percent. By 1923, relative real earnings stood at 132 and in 1926 at 138. That is to say, in 1926 there was a gain over the nineties in the purchasing power of an hour's work of 38 percent, which was also equivalent to an advance of 30 percent over 1914. Douglas also sought to estimate average annual money earnings and real earnings for all industries excluding farm labor. Some selected years are here presented:

Year 1890 1897 1900 1914 1920 1921 1922 1923 1924 1925 1926

Average Earnings in Dollars 486

Real Earnings (1890-99 = 100) 98

474 503 673

99 99 ΙΟΙ 106 III 117

M59 1,320 1,291 1.379 1.375 1,409 M44

I2

3 122 122 5

Douglas examined the productivity of labor in manufacturing and came to conclusions later

:AN SCENE

i 173

confirmed by Spurgeon Bell in one of the selections reprinted in this section. Douglas showed that between 1899 and 1915, the output per man hour in manufacturing increased from 100 to 132, or at the rate of about 2 percent each year. There was no significant increase during the war years (unlike the extraordinary experiences of 1940-45); but in the nineteen twenties productivity once more rose steeply—from 132 in 1922 to 177 in 1925. However—and this is the point—the productivity of labor in the nineteen twenties increased more sharply than the real wages. When the whole period is examined, nevertheless, Douglas comes to the conclusion that labor's share of the value product of industry increased from 1899 to 1921, and while it decreased from 1922 to 1925, it was in 1925 still above the average of 1899. This was very real progress since the nineties —but there were still many zones to be conquered in the economic fight against inequality and scarcity. T h e three selections here reprinted throw further light, in statistical terms, on the problems confronting the American economy during the depression and in the future. The first is reprinted from Consumer Incomes, 1935-1936, a study made by the National Resources Committee, a government agency. Using W P A workers, Washington bureaus surveyed the income and spending habits of over 300,000 families in the United States and by this sampling device came to important conclusions. The study found that there were 29.4 million families in the country of whom 65 percent received less than $1,500 annually, while 1 percent received $10,000 or more. There was concentration, too. Three percent of the families received annual incomes of $5,000 or more, but they also got 23 percent of the nation's total income distributed by families. Thus, a large part of the country's families did not receive an income capable of satisfying modest standards of living.

T H E THIRD AMERICAN

1174

Spurgeon Bell ( 1 8 8 0 - ) in his Productivity, Wages, and National Income (Washington, 1940) throws further light on the shares capital and labor received from the creation of the national product. A n d he indicates that during the nineteen thirties the productivity of labor did not advance as rapidly as it had during the preceding decade, while real wages rose. T h e third selection is from The Conditions of Economic Progress (London, 1940) b y Colin Clark ( 1 9 0 5 - ), the Australian statistician. Clark compares the well-being of the American worker with the state of other workers throughout the world in terms of the purchasing power of the American dollar during

REVOLUTION

the period 1 9 2 5 - 3 4 . T h e position of the A m e r ican worker was vastly superior to those of the others, although, historically, as all countries moved from primary production to higher forms there took place economic progress and improvements in real wages. Nevertheless, the world is still a poor place; " f o r the greater part of the world, and indeed ultimately for the wealthier countries, too, the most important problem remains the problem of increasing productive capacity." T h e Bell selection is reprinted by permission of T h e Brookings Institution; the Clark selection by permission of T h e Macmillan C o m pany.

Consumer Incomes in the United States BY

THE

NATIONAL

RESOURCES

THE GREAT MAJORITY of the Nation's consumers are members of families of two or more persons, sharing a common income and living under a common roof. T h e 29400,300 families in the population during 1935-36 were by far the most important group of income-spending units, including nearly 91 percent of the total body of consumers. T h e distribution of these 29 million families by income level indicates that 14 percent of all families received less than $500 during the year studied; 42 percent received less than $1,000, 65 percent less than $i,joo, and 87 percent less than $2,500. Above the $2,500 level, there were about 10 percent with incomes up to $5,000, about 2 percent receiving between $5,000 and $10,000, and only 1 percent with incomes of $10,000 or more. When the incomes of all families are added together the aggregate is approximately $48 billion. W e find that the 42 percent of families with incomes under $1,000 received less than 16 percent of the aggregate, while the 3 percent with incomes of $5,000 and over received 21 percent of the total. T h e incomes of the top 1 percent accounted for a little over 13 percent of the aggregate. Incomes of Single Individuals. In addition to the 1 1 6 million consumers living in family groups in 1935-36, there were 10 million men and women lodging in rooming houses and hotels, living as lodgers or servants in private homes, or maintaining independent living quarters as one-person families. These single individuals constituted nearly 8 percent of the total population, and—as

COMMITTEE

indicated in table 1—received 19 percent of the total consumer income. The distribution of income among these individual consumer units resembles very closely that for families, except that there was considerably greater concentration in the lower brackets. Sixtyone percent received incomes of less than $1,000 and accounted for 29 percent of the total income of the group. Ninerv-five percent received less than $2,500 and a little over 1 percent received $5,000 or more. Incomes of All Consumers. For a comprehensive picture of the distribution of consumer income in the United States, families and single individuals can be considered together. Such treatment is justified by the lack of a sharp distinction between the two groups from the standpoint of the receipt and use of income. T h e diversity among the consumer units that make up the 29 million families is fully as great as that between families as a group and single individuals. An incomc of $1,000 a year means, to be sure, one thing to a single man or woman and another to an average family of four. But it also has quite different meanings to the family of two persons and to the family of eight. These two major groups of consumer units can therefore be combined, at each income level, to show the curve of income distribution f o r the Nation as a whole. . . . The income distribution of all families and single individuals combined is presented in detail in table. T h e figures show both the number of consumer units at each level of income and the

THE AMERICAN SCENE (69 percent) received less than $1,500. At the other end of the income scale, about 2 percent had incomes of $5,000 and over, and less than 1 percent incomes of $10,00 and over. . . . The Three Thirds of the Nation. This summary of the distribution of national income has revealed that almost one third of all families and single in-

share of the aggregate income they received. T h e results tell a story very similar to that already described for each group of consumer units separately. Nearly one third (32 percent) of the total number of families and single individuals had incomes under $750, nearly one half (47 percent) received less than $1,000, and more than two thirds

TABLE DISTRIBUTION

OF

FAMILIES

AND

SINGLE

ι

INDIVIDUALS AND

LEVEL,

OF AGGREGATE

Families and single individuals PerCumucent at lative each perNumber level cent

Income level

2,123,534

U n d e r $250 $250-8500 $500-8750 $750-$1,000 $1,000-$ ι,2 50

4.587.377 5.77 '.960 5,876,078 4,990,995

$1,500-$ ι, 750 $1,750-82,000 $2,000—$2,250 $2,250-82,500

2,296,022

5.38 17.01 31.64 46.54 59.19

5,129,506 5,589,111

9-49 7-32

68.68 76.00 81.82 86.14 89.32

5,109,112 4,660,793 4,214,203 3,602,861 2,968,932 4,004,774

5.82

286,053

•72

178.138

•45

93.06 95.22 96.49 97.21 97.66

.96

98.62

•55 •39 •17

99.17

$I5,000-$20,000

380,266 215,642 152,682 67,923

$2 0,000-$ 2 5,000

39.825

.10

$2 5,000-$ 3 0,000 $30,000-$40,000 $40,000-850,000

25,583

«7.959

ι.475.474 5°2,'59

$5,000-$7,500 $7,500-$ 10,000 $10,000-$ 15,000

$100,000-8250,000 $250,000-$500,000 $500,000-$ 1,000,000 $1,000,000 and o v e r

All levels 1

Less than o.ooj percent.

3-74

2.I6 1.27

$294,138 6

INCOME

ι,7