V. Capitalism and the law of concentration

• • Prefaces
  • I. Introduction
  • II. Robert Owen and the Utopian Spirit
  • III. The "Communist manifesto" and the scientific spirit
  • IV. The materialistic conception of history
  • V. Capitalism and the law of concentration
  • VI. The class struggle theory
  • VII. Karl marx and the economics of socialism
  • VIII. Outlines of socialist economic theory
  • IX. Outlines of the socialist state
  • X. The means of realization

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I

Such was the mode of the development of capitalistic production in its first stage. In this stage a permanent wage-working class was formed, new markets were developed, many of them by colonial expansion and territorial conquest, and production for sale and profit became the rule, instead of the exception as formerly when men produced primarily for use and sold only their surplus products. A new form of class division thus arose out of this economic soil. Instead of being bound to the land as the serfs had been under feudalism, the wage-workers were bound to their tools. They were not bound to a single master, they were not branded on the cheek, but they were, nevertheless, dependent upon the industrial lords. Economic mastery gradually shifted from the land-owning class to the class of manufacturers. The political and social history of the Middle Ages is largely the record of the struggle for supremacy which was waged between these two classes. That struggle is the central fact of the Protestant Reformation and the Cromwellian Commonwealth.

The second stage of capitalism begins with the birth of the machine age; the introduction of the great mechanical inventions of the latter half of the seventeenth century, and the resulting industrial revolution, the salient features of which we have already traced. That revolution centered in England, whose proud but, from all other points of view than the commercial, foolish boast for a full century it was to be "the workshop of the world." The new methods of production, and the development of trade with India, and the colonies and the United States of America, providing a vast and apparently almost unlimited market, a tremendous rivalry was created among the people of England, tauntingly, but with less originality than bitterness, designated "a nation of shopkeepers" by Napoleon the First. Competition flourished and commerce grew under its mighty urge. Quite naturally, therefore, competition came to be regarded as "the life of trade," and the one supreme law of progress by British economists and statesmen. The economic conditions of the time fostered a sturdy individualism on the one hand, expressing itself in a policy of laissez faire, which, paradoxically, they as surely destroyed. The result was the paradox of a nation of theoretic individualists becoming, through its poor laws, and more especially through the vast body of industrial legislation which developed in spite of theories of laissez faire, a nation of practical collectivists.

The third and last stage of capitalism is characterized by new forms of industrial ownership, administration, and control. Concentration of industry and the elimination of competition are the distinguishing features of this stage. When, more than half a century ago, the Socialists predicted an era of industrial concentration and monopoly as the outcome of the competitive struggles of the time, their prophecies were mocked and derided. Yet, at this distance of time, it is easy to see what they were foresighted enough to envisage in the future; easy enough to see that competition carries in its bosom the germs of its own inevitable destruction. In words which, as Professor Ely says, seem to many, even non-Socialists, like a prophecy, Karl Marx argued that the business units in production would continuously increase in magnitude, until at last monopoly emerged from the competitive struggle. This monopoly becoming a shackle upon the system under which it has grown up, and thus becoming incompatible with capitalist conditions, socialization must, according to Marx, naturally and necessarily follow. In this as in all the utterances of Marx upon the subject we are reminded of the distinction which must be made between Socialism as he conceived it and the Socialism of the Utopians. We never get away from the law of economic interpretation. Socialism, according to Marx, will develop out of capitalist society, and follow capitalism necessarily and inevitably. It is not a plan to be adopted, but a stage of social development to be reached.

II

For the moment, we are not concerned with the prediction that Socialism must follow the full development of capitalism. The important point for our present study is the predicted growth of monopoly out of competition, and the manner in which that prediction has been realized. Concerning the manner and extent of the fulfillment of this prediction, there have been many keen controversies, both within and without the ranks of the followers of Marx. While Marx and Engels are properly regarded as the first scientific Socialists, having been the first to postulate Socialism as the outcome of evolution, and to explore the laws of that evolution, they were not wholly free from the failings of the Utopists. It would be unreasonable to expect them to be absolutely free from the spirit of their age and their associates. There is, doubtless, something Utopian in the very mechanical conception of capitalist concentration which Marx held; the process is too simple and sweeping, the revolution too imminent. Still, by followers and critics alike, it is generally conceded that the control of the means of production is being concentrated into the hands of small and ever smaller groups of capitalists. In recent years the increase in the number of industrial establishments has not kept pace with the increase in the number of workers employed, the increase of capital, or the value of the products manufactured. Not only do we find small groups of men controlling certain industries, but a selective process is clearly observable, giving to the same groups of men control of various industries otherwise utterly unrelated. In the early stages of the movement toward concentration and trustification, it was possible to classify the leading capitalists according to the industries with which they were identified. One set of capitalists, "Oil Kings," controlled the oil industry; another set, "Steel Kings," controlled the iron and steel industry; another set, "Coal Barons," controlled the coal industry, and so on throughout the industrial and commercial life of the nation. To-day all this has been changed. An examination of the "Directory of Directors" shows that the same men control varied enterprises. The Oil King is at the same time a Steel King, a Coal Baron, a Railway Magnate, and so on. The men who comprise the Standard Oil group, for instance, are found to control hundreds of other companies. They include in the scope of their directorate, banking, insurance, milling, real estate, railroad and steamship lines, gas companies, sugar, coffee, cotton, and tobacco companies, and a heterogeneous host of other concerns. Not only so, but these same men are large holders of investments in all the great European countries, as well as India, Australia, Africa, Asia, and the South American countries, while foreign capitalists similarly, but to a less extent, hold large investments in American companies. Thus, the concentration of industrial control, through its finance, has become interindustrial and is rapidly becoming international. The predictions of Marx are being fulfilled, even though not in the precise manner anticipated by him.

III

During recent years there have been many criticisms of the Marxian theory, aiming to show that this concentration has been, and is, much more apparent than real. Some of the most important of these criticisms have come from within the ranks of the Socialist movement itself, and have been widely exploited as portending the disintegration of the Socialist movement. Inter alia, it may be remarked here that a certain fretfulness of temper characterizes most of the critics of Socialism. Strict adherence to the letter of Marx is pronounced as a sign of intellectual bondage of the movement and its leaders to the "Marxian fetish," and, on the other hand, every recognition of the human fallibility of Marx by a Socialist thinker is hailed as a sure portent of a split in the movement. Yet the most serious criticisms of Marx have come from the ranks of his followers—perhaps only another sign of the intellectual bankruptcy of the academic opposition to Socialism.

Of course, Marx was human and fallible. If "Capital" had never been written, there would still have been a Socialist movement, and if it could be destroyed by criticism, the Socialist movement would remain. Socialism is the product of economic conditions, not of a theory or a book. "Capital" is the intellectual explanation of the genesis of Socialism, and neither its cause nor an argument for it by which it must be judged. Hence the futility of such missions as that undertaken by Mr. W. H. Mallock, for example, based upon the assumption that attacks upon the text of Marx will serve to destroy or seriously hinder the living movement. Like a prophet's rebuke to these critics, as well as to those within the ranks of the Socialist movement who would make of the words of Marx and Engels fetters to bind the movement to a dogma, come the words of Engels, published recently, letters in which he writes about, utterly mistake the character of the movement. In its abandonment of the errors of Marx it is most truly Marxian—because it is expressing life instead of repeating dogma.

Doubtless Marx anticipated a much more complete concentration of capital and industry than has yet taken place; doubtless, too, he underrated the powers of endurance of some petty industries, and saw the breakdown of capitalism in a cataclysm, whereas modern Socialists see its merging into a form of socialization. But, when all this is admitted, it cannot be fairly said that the sum of criticism has seriously affected the general Marxian theory, as apart from its particular exposition by Marx himself. So far as the criticism has touched the subject of capitalist concentration, it has been pitifully weak, and the furore it has created seems almost pathetic. The main results of this criticism may be briefly summarized as follows: First, in industry, the persistence, and, in some cases, even increase, of petty industries; second, in agriculture, the failure of large-scale farming, and the decrease of the average farm acreage; third, in retail trade, the persistence of the small stores, despite the growth in size and number of the great department stores; fourth, the fact that concentration of industry does not imply a like concentration of wealth, the number of shareholders in a great industrial combination being frequently greater than the number of owners in the units of industry prior to the combination. At first sight, and stated in this manner, it would seem as if these conclusions, if justified by the facts, involved a serious and far-reaching criticism of the Socialist theory of a universal tendency toward the concentration of industry and commerce into units of ever increasing magnitude.

But upon closer examination, these conclusions, their accuracy admitted, are seen to involve no very damaging criticism of the theory. To the superficial observer, the mere increase in the number of industrial establishments seems a much more important matter than to the careful student, who is not easily deceived by appearances. The student sees that while some petty industries undoubtedly do increase in number, the increase of large industries employing many more workers and much larger capitals is vastly greater. Furthermore, he sees what the superficial observer constantly overlooks, namely, that these petty industries are, for the most part, unstable and transient, being continually absorbed by the larger industrial combinations or crushed out of existence, as soon as they have obtained sufficient vitality and strength to make them worthy of notice, either as tributaries to be desired or potential competitors to be feared. Petty industries in a very large number of cases represent a stage in social descent, the wreckage of larger industries whose owners are economically as dependent as the ordinary wage-workers, or even poorer and more to be pitied. Where, on the contrary, it is a stage in social ascent, the petty industry is, paradoxical as the idea may appear, frequently part of the process of industrial concentration. By independent gleaning, it endeavors to find sufficient business to maintain its existence. If it fails in this, its owner falls back to the proletarian level from which, in most instances, he arose. If it succeeds only to a degree sufficient to maintain its owner at or near the average wage-earner's level of comfort, it may pass unnoticed and unmolested. If, on the other hand, it gleans sufficient business to make it desirable as a tributary, or potentially dangerous as a competitor, the petty business is pounced upon by its mightier rival and either absorbed or crushed, according to the temper or need of the latter. Critics of the Marxian theory have for the most part completely failed to recognize this significant aspect of the subject, and attached far too much importance to the continuance of petty industries.

IV

What is true of petty industry is true in even greater measure of retail trade. Nothing could well be further from the truth than the hasty generalization of some critics, that an increase in the number of retail business establishments invalidates the theory of a progressive concentration of capital. In the first place, many of these establishments have no independence whatsoever, but are merely agencies of larger enterprises. Mr. Macrosty has shown that in London the cheap restaurants are in the hands of four or five firms, and this is a branch of business which, because it calls for relatively small capital, shows in a marked manner the increase of establishments. Much the same conditions exist in connection with the trade in milk and bread. Similar conditions prevail in almost all the large cities of this country. Single companies are known to control hundreds of saloons, restaurants, cigar stores, shoe stores, bake shops, coal depots, and the like. A multitude of other businesses are subject to this rule, and it is doubtful whether, after all, there has been the real increase of individual ownership which Mr. Ghent concedes. However that may be, it is certain that a very large number of the business establishments which figure as statistical units in the argument against the Socialist theory of the concentration of capital might very properly be regarded as so many evidences in its favor.

A very large number of small businesses, moreover, are really manipulated by speculators, and serve only as a means of divesting prudent and thrifty artisans and others of their little savings. Whoever has lived in the poorer quarters of a great city, where small stores are most numerous, and has watched the changes constantly occurring in the stores of the neighborhood, will realize the significance of this observation. The writer has known stores on the upper East Side of New York, where for several years he resided, change hands as many as six or seven times in a single year. What happened was generally this: A workingman having been thrown out of employment, or forced to give up his work by reason of age, sickness, or accident, decided to attempt to make a living in "business." In a few weeks, or a few months at most, his small savings were swallowed up, and he had to leave the store, making place for the next victim. An acquaintance of the writer owns six tenement houses in different parts of New York City, the ground floors of which are occupied by small stores. These stores are rented by the month just as other portions of the buildings are, and the owner, on going over his books for a period of five years, found that the average duration of tenancy in them had been less than eight months.

During the past few years in the United States, as a result of the development of the many inventions for the production of "moving pictures," a new kind of cheap, popular theater has become common. Usually the charge of admission is five cents, whence the name "Nickelodeon"; the entertainment consists usually of a number of more or less dramatic incidents portrayed by means of the pictures, and a few songs, generally illustrated by pictures, and sung to the accompaniment of a mechanical piano. In almost every town in the United States these cheap pictorial theaters have appeared and their number will, doubtless, considerably swell the total of business establishments. In the small towns of the State of New York, the writer made an investigation and found that there were frequently several such places in the same town; that they were practically all built by the same persons, started by them, and then leased to others. These were generally people with small savings who, in the course of a few weeks, lost all their money and retired, their places being taken by other victims of the speculators. What seemed to the casual observer an admirable and conspicuous example of an increase in petty business, proved, upon closer study, to be a very striking example of concentration, disguised for purposes of speculation.

Thus reduced, the increase of small industries and retail establishments affects the contention that there is a general tendency to concentration very little. It does perhaps seriously weaken, or even destroy, some extreme statements of the theory, contending that the process of monopolization must be a direct, simple process of continuous absorption and elimination, leaving each year fewer small units than before. Small stores do exist; they have not been put out of existence by the big department stores as was at one time confidently predicted. They serve a real social need by supplying the minor commodities of everyday use in small quantities, just as the petty industries serve a real social need. Many of them are conducted by married women to supplement the earnings of their husbands, or by widows; others by men unable to work, whose income from them is less than the wages of artisans. Together, these probably constitute a majority of the small retail establishments which show any tendency to increase.

The effect of this increase is still further lessened when it is remembered that only the critics of Socialism interpret the Marxian theory to mean that all petty industry and business must disappear, that all must be concentrated into large industrial and commercial units, to make Socialism possible. If we are to judge Marxism as the basis of the Socialist movement, we must judge it by the interpretation given to it by the Socialists, and not otherwise. There is no Socialist of note to-day who does not realize that many small industrial and business enterprises will continue to exist for a very long time, even continuing to exist under a Socialist régime. Kautsky, perhaps the ablest living exponent of the Marxian theories, leader of the "Orthodox" Marxists, admits this. He has very ably argued that the ripeness of society for Socialism, for social production and control, depends, not upon the number of little industries that still remain, but upon the number of great industries which already exist. The ripeness of society for Socialism is not disproved by the number of ruins and relics abounding. "Without a developed great industry, Socialism is impossible," says this writer. "Where, however, a great industry exists to a considerable degree, it is easy for a Socialist society to concentrate production, and to quickly rid itself of the little industry." It is the increase of large industries, then, which Socialists regard as the essential preliminary condition of Socialism.

Far more important than the increase or decrease of the number of units is their relative significance in the total production, a phase of the subject which is rather disingenuously avoided by most critics of Marxism. Mr. Lucien Sanial, a Socialist statistician of repute, and one of the profoundest Marxian students in America, has shown this in a number of suggestive tables. For example, he takes twenty-seven typical manufacturing industries for the years 1880, 1900, and 1905, and compares the number of establishments in each year with the total amount of capital invested and workers employed. In 1880 the number of establishments was 63,233; in 1900 the number was 51,912, and in 1905 it was only 44,142. From 1880 to 1905 there had been a decrease in the number of establishments of 35.3 per cent, of which 15 per cent took place within the last five years. But within the same period there had been an increase in the amount of capital invested in these twenty-seven industries as follows: from $1,276,600,000 in 1880 to $3,324,500,000 in 1900 and to $4,628,800,000 in 1905—a total increase from 1880 to 1905 of 262.6 per cent. On the other hand, the number of wage-workers increased in the same period only 60.2 per cent, the number in 1905 being 1,731,500, as against 1,611,000 in 1900 and 1,080,200 in 1880.

In another table, forty-seven industries are taken. These forty-seven industries comprised 29,800 establishments in 1900; five years later there were but 26,182. In 1900 the total capital invested in these industries was $1,005,400,000, and in 1905 it had increased to $1,339,500,000. In the same five years the number of wage-workers increased only from 618,000 to 749,000. Thus, in the group of larger industries and the group of smaller ones we find the same evidences of concentration: less establishments, larger capitals, and an increase of wage-workers not equal to the increase in capitalization.

In connection with these figures, the following table may be profitably studied, as showing the relative insignificance of the small producer in the total volume of manufacture. It will be seen that the two largest classes of establishments have only 24,163 establishments, 11.2 per cent of the total number. But they have $10,333,000,000, or 81.5 per cent of the total manufacturing capital, and employ 71.6 per cent of all wage-workers in manufacturing industries. It may be added that they turn out 79.3 per cent of the total product. Of the petty industries proper, those having a capital of less than $5000, it will be observed that they number 32.9 per cent of the total number of establishments, but employ only 1.3 per cent of the capital invested, and only 1.9 per cent of the wage-workers. It is clear, therefore, that our manufacturing industry in very highly concentrated, and that the petty industries are, despite their number, a very insignificant factor.

Table of Manufacturing Establishments, 1905

Capitals	Number	Per Cent	Total Capital	Per Cent	No. of Wage-workers	Per Cent
Less than $5,000	71,162	32.9	$165,300,000	1.3	106,300	1.9
$5,000 to $20,000	72,806	33.7	531,100,000	4.2	419,600	7.7
$20,000 to $100,000	48,144	22.2	1,655,800,000	13.0	1,027,700	18.8
$100,000 to $1,000,000	22,281	10.0	5,551,700,000	43.8	2,537,550	46.4
Over $1,000,000	1,882	0.9	4,782,300,000	37.7	1,379,150	25.2

When we turn to agriculture, the criticisms of the Socialist theory appear more substantial and important. A few years ago we witnessed the rise and rapid growth of the great bonanza farms in this country. It was shown that the advantages of large capital and the consolidation of productive forces resulted, in farming as in manufacture, in greatly cheapened production. The end of the small farm was declared to be imminent, and it seemed for a while that concentration in agriculture would even outrun concentration in manufacture. This predicted absorption of the small farms by the larger, and the average increase of farm acreage, has not, however, been fulfilled to any great degree. An increase in the number of small farms, and a decrease in the average acreage, is shown in almost all the states. The increase of great estates shown by the census figures probably bears little or no relation to real farming, consisting mainly of great stock grazing ranches in the West, and unproductive gentlemen's estates in the East.

Apparently, then, the Socialist theory that "the big fish eat up the little ones, and are in turn eaten by still bigger ones," is not applicable to agriculture. On the contrary, it seems that the great farms cannot compete successfully with the smaller farms. It is therefore not surprising that writers so sympathetic to Socialism as Professor Werner Sombart and Professor Richard T. Ely should claim that the Marxian system breaks down when it reaches the sphere of agricultural industry, and that it seems to be applicable only to manufacture. This position has been taken by a not inconsiderable body of Socialists in recent years, and is one of the tenets of that critical movement within the Socialist ranks which has come to be known as "Revisionism." Nothing is more delusive than statistical argument of this kind, and while these conclusions should be given due weight, they should not be too hastily accepted. An examination of the statistical basis of the argument is necessary.

In the first place, small agricultural holdings do not necessarily imply economic independence, any more than do petty industries or businesses. When we examine the census figures carefully, the first important fact which challenges attention is that, whereas of the farms in the United States in 1880, 71.6 per cent were operated by their owners, in 1900 the proportion had declined to 64.7 per cent. In 1900, of the 5,739,657 farms in the United States, no less than 2,026,286 were operated by tenants. Concerning the ownership of these rented farms little investigation has been made, and it is likely that careful inquiry would elicit the fact that this is a not unimportant phase of agricultural concentration, though not revealed by the figures in the census reports. It remains to be said concerning these figures, however, that they do not lend support to the theory that the small farms are being swallowed up by the larger ones, for in the same period there was a very decided increase in the number of farms operated by their owners. Thus we have the same set of figures used to support both sides of the controversy—one side calling attention to the decreased proportion of farms operated by their owners, the other to the increased number.

A similar difficulty presents itself in connection with the subject of mortgaged farm holdings. In 1890, the mortgaged indebtedness of the farmers of the United States amounted to the immense sum of $1,085,995,960, a sum almost equal to the value of the entire wheat crop. Now, while a mortgage is certainly not suggestive of independence, it may be either a sign of decreasing or increasing independence. It may be a step toward the ultimate loss of one's farm or a step toward the ultimate ownership of one. Much that has been written by Populist and Socialist pamphleteers and editors upon this subject has been based upon the entirely erroneous assumption that a mortgaged farm meant loss of economic independence, whereas it often happens that it is a step toward it. The fact is that we know very little concerning the ownership of these mortgages, which is the crux of the question. It is known that many of the insurance, banking, and trust companies have invested largely in farm mortgages. This is another phase of concentration which the critics of the theory have overlooked almost entirely. One thing seems certain, namely, that farm ownership is not on the decline. It is not being supplanted by tenantry; the small farms are not being absorbed by larger ones. It seems a fair deduction from the facts, then, that the small farmer will continue to be an important factor—indeed, the most important factor—in American agriculture for a long time to come, perhaps permanently. If the Socialist movement is to succeed in America, it must recognize this fact in its propaganda.

V

Most of the criticism of the Marxian theory of concentration is based upon a very unsatisfactory definition of what is meant by concentration. The decrease of small units and their absorption or supercession by larger units is generally understood when concentration is spoken of. But concentration may take other, very different forms. There may be a concentration of control, for example, without concentration of actual ownership, or there may be concentration of actual ownership disguised by mortgages, as already suggested. The sweated trades are a familiar example of the former method of concentration. It has been shown over and over again that while small establishments remain a necessary condition of sweated industry, there is almost always effective concentration of control. To all appearances an independent manufacturer on a small scale, the sweater is generally nothing more than the agent of some big establishment, which finds it more economical to let the work be done in sweatshops than in its own factories. The same thing holds good of the retail trades, many of the apparently independent retail stores being simply agencies for big wholesale houses, controlled by them in every way. In an even larger measure, agriculture is subject to a control that is quite independent of actual or even nominal ownership of the farm. Manifestly, therefore, we need a more accurate and comprehensive definition of concentration than the one generally accepted. Mr. A. M. Simons, in an admirable study of the agricultural question from the Socialist viewpoint, defines concentration as "a movement tending to give a continually diminishing minority of the persons engaged in any industry, a constantly increasing control over the essentials, and a continually increasing share of the total value of the returns of the industry." It is no part of the purpose of this chapter to discuss this definition at length. It is sufficient to have thus emphasized that concentration may be quite as effective when it is limited to control as when it embraces ownership. There are, then, other forms of concentration than the physical one, the amalgamation of smaller units to form larger ones, and very often these forms of concentration go on unperceived and unsuspected. There can be no doubt that this is especially true of agricultural industry. Many branches of farming, as the industry was carried on by our fathers and their fathers before them, have been transferred from the farmhouse to the factory. Butter and cheese making, for example, have largely passed out of the farm kitchen into the factory. The writer recalls a visit to a large farm in the Middle West. The sound of a churn is never heard there, notwithstanding that it is a "dairy farm," and all the butter and cheese consumed in that household is bought at the village store. Doubtless this farm but presented an exaggerated form of a condition that is becoming more and more common. The invention of labor-saving machinery and its application to agriculture leads to a division of the industry and the absorption by the factory of the parts most influenced by the new processes. When we remember the tremendous rôle which complex agencies outside of the farm play in modern agricultural industry, we see the subject of concentration as it applies to that industry in a new light. The grain elevators, cold-storage houses, creameries, and even railroads, are part of the necessary equipment of production, but they are owned and operated independently of the farm. There is a good deal of concentration of production in agriculture which takes the form of the absorption of some of its processes by factories instead of by other farms.

VI

We must also distinguish between the concentration of industry and the concentration of wealth. While there is a natural relation between these two phenomena, they are by no means identical. The trustification of a given industry may bring together a score of industrial units in one gigantic concern, so concentrating capital and production, but it is conceivable that every one of the owners of the units which compose the trust may have a share in it equal to the capital value of his particular unit, but more profitable. In that case, there can obviously be no concentration of wealth. What occurs is that all are benefited by certain economies, in exact proportion to their holdings in the capital stock. It may even happen that a larger number of persons participate, as shareholders, in the amalgamation than were formerly concerned in the ownership of the units of which the amalgamation is composed. Assuming, for the purposes of our argument, that these persons are represented by new capital, that the former owners of independent units share upon an equitable basis, there will be increased diffusion of wealth instead of its concentration. As Professor Ely says, "If the stock of the United States Steel Corporation were owned by individuals holding one share each, the concentration in industry would be just as great as it is now, but there would be a wide diffusion in the ownership of the wealth of the corporation."

Obvious as this distinction may seem, it is very often lost sight of, and when recognized it presents difficulties which are almost insurmountable. It is well-nigh impossible to present statistically the relation of no successful movement based upon the interests of one class if the tendency of modern capitalism is to democratize the life of the world and diffuse its wealth over larger social areas than ever before.

The exponents of this theory have based their arguments upon statistical data chiefly relating to: (1) The number of taxable incomes in countries where incomes are taxed; (2) the number of investors in industrial and commercial countries; (3) the number of savings bank deposits. As often happens when reliance is placed upon the direct statistical method, the result of all the discussion and controversy upon this subject is extremely disappointing and confusing. The same figures are used to support both sides of the argument with equal plausibility. The difficulty lies in the fact that the available statistics do not include all the facts essential to a scientific and conclusive result.

It is not intended here to add to the Babel of voices in this discussion, but to present the conclusions of two or three of the most careful investigators in this field. Professor Ely quotes a table of incomes in the Grand Duchy of Baden, based upon the income tax returns of that country, which has formed the theme of much dispute. The table shows that in the two years, 1886 and 1896, less than one per cent of the incomes assessed were over 10,000 marks a year, and from this fact it has been argued that wealth in that country has not been concentrated to any very great extent. In like manner, the French economist, Leroy-Beaulieu, has argued that the fact that in 1896 only 2750 persons in Paris had incomes of over 100,000 francs a year betokens a wide diffusion of wealth and an absence of concentration. But the important point of the discussion, the proportion of the total wealth owned by these classes, is entirely lost sight of by those who argue in this manner. Further, it must always be borne in mind that there is a decided tendency in all income tax schedules to understate the amount of incomes above a certain size, the larger the income the more likelihood of its being understated in the returns. The psychology of this fact needs no elaborate demonstration. Taking the figures for the Grand Duchy of Baden as they are given, we have no particulars at all concerning the number of incomes under 500 marks, but of the persons assessed upon incomes of 500 marks and over, in 1886, the poorest two thirds had about one third of the total income, and the richest 0.69 per cent had 12.78 per cent of the total income. So far, the figures show a much greater concentration of wealth than appears from the simple fact that less than one per cent of the incomes assessed were over 10,000 marks a year.

Going further, we compare the two years, 1886 and 1896, and find that this concentration increased during the ten-year period as follows: In 1886, there were 2212 incomes of more than 10,000 marks assessed, being 0.69 per cent of the total number. In 1896, there were 3099 incomes of more than 10,000 marks assessed, being 0.78 per cent of the total number. In 1886, 0.69 per cent of the incomes assessed amounted to 51,403,000 marks, representing 12.77 per cent of the total assessed wealth; while in 1896, 0.78 per cent of the incomes assessed amounted to 81,986,000 marks, representing 15.02 per cent of the total wealth so assessed. In 1886 there were 18 incomes of over 200,000 marks a year, aggregating 6,864,000 marks, 1.70 per cent of the total value of all incomes assessed; in 1896, there were 28 such incomes, aggregating 12,481,000 marks, or 2.29 per cent of the total value of all incomes assessed. The increase of concentration shown by these figures is not disputable, it seems to the present writer, when they are thus carefully analyzed, notwithstanding the fact that the table from which they are drawn is sometimes used to support the opposite contention.

According to the late Professor Richmond Mayo-Smith, seventy per cent of the population of Prussia have incomes below the income tax standard, their total income representing only one third of the total income of the population. An additional one fourth of the population enjoys one third of the total income, while the remaining one third goes to about four per cent of the people. The significance of these figures is clearly shown by the following diagram:—

DIAGRAM

Showing the Distribution of Income by Classes in Prussia

In Saxony the statistics show that "two thirds of the population possess less than one third of the income, and that 3.5 per cent of the upper incomes receive more than 66 per cent at the lower end." From a table prepared by Sir Robert Giffen, a notoriously optimistic statistician, always the exponent of an ultra-roseate view of social conditions, Professor Mayo-Smith concludes that in England, "about ten per cent of the people receive nearly one half of the total income." These figures are rather out of date, it is true, but they err in understating the amount of concentration rather than otherwise, as the researches of Mr. Chiozza Money, M.P., and others show.

In this country, the absence of income tax figures makes it impossible to get direct statistical evidence as to the distribution of incomes. The most careful estimate of the distribution of wealth in the United States yet made is that by the late Dr. Charles B. Spahr. Written in 1895, Dr. Spahr's book cannot be regarded as an accurate presentation of conditions as they exist at the present moment, yet here again there is every reason to believe that the process of concentration has gone on unchecked since he wrote. It is not necessary for our present purpose, however, to accept the estimate of Dr. Spahr as authoritative and conclusive. The figures are quoted here simply as the result reached by the most patient, conscientious, and scientific examination of the distribution of wealth in this country yet made. Dr. Spahr's conclusion was that in 1895 less than one half of the families in the United States were property-less; but that, nevertheless, seven eighths of the families owned only one eighth of the national wealth, while one per cent of the families owned more than the remaining ninety-nine per cent.

Mr. Lucien Sanial, in a most careful analysis of the census for 1900, shows that, classified according to occupations, 250,251 persons possessed $67,000,000,000, out of a total of $95,000,000,000 given as the national wealth; that is to say, 0.9 per cent of the total number in all occupations owned 70.5 per cent of the total national wealth. The middle class, consisting of 8,429,845 persons, being 29.0 per cent of the total number in all occupations, owned $24,000,000,000, or 25.3 per cent of the total national wealth. The lowest class, the proletariat, consisting of 20,393,137 persons, being 70.1 per cent of the total number in all occupations, owned but $4,000,000,000, or 4.2 per cent of the total wealth. To recapitulate: Of the 29,073,233 persons ten years old and over engaged in occupations,

0.9 per cent own	70.5 per cent of total wealth.
29.0 per cent own	25.3 per cent of total wealth.
70.1 per cent own	4.2 per cent of total wealth.

Startling as these figures are, it will be evident upon reflection that they do not adequately represent the amount of wealth concentration. The occupational basis is not quite satisfactory as applied to the richest class. It serves for the proletarian class, of course, and for a very large part of the middle class. In these classes, as a rule, the occupied persons represent wealth ownership. But this is by no means true of the richest class. In this class we have a very considerable proportion of the wealth owned by unoccupied persons, such as the wives rich in their own right, children and other unoccupied members of families rich by inheritance. Mr. Henry Laurens Call, in a paper read before the American Association for the Advancement of Science, at Columbia University, at the end of 1906, made these figures the basis of the startling estimate that one per cent of our population own not less than ninety per cent of our total wealth.

There is a peculiarity of modern capitalism which enables the great capitalists to control vastly more wealth than they own. Take any group of large capitalists, and it will be found that they control a much greater volume of capital than they own. The invested capital of a multitude of small investors is in their keeping, and they can and do use it for purposes of their own. Thus we have a concentration of capitalist control which goes far beyond the concentration of ownership. And this concentration of the essential control of the capital of a country becomes more and more important each year. It is recognized to-day that the most important capitalist is not he who himself owns the greatest amount of capital, but he who controls the greatest amount, quite irrespective of its ownership.

The growth of immense private fortunes is an indisputable evidence of the concentration of wealth. In 1854 there were not more than twenty-five $36,250,000,000, or just fifty-six per cent of the entire wealth of the United States. Professor Ely accepts the logic of the statistical data gathered in Europe and the United States, and says "such statistics as we have ... all indicate a marked concentration of wealth, both in this country and Europe."

VII

Summing up, we may state the argument of this chapter very briefly as follows: The Socialist theory is that competition is self-destructive, and that the inevitable result of the competitive process is to produce monopoly, either through the crushing out of the weak by the strong, or the combination of units as a result of a conscious recognition of the wastes of competition and the advantages of coöperation. The law of capitalist development, therefore, is from competition and division to combination and concentration. As this concentration proceeds, a large class of proletarians is formed on the one hand, and a small class of capitalist lords on the other, an essential antagonism of interests existing between the two classes. Petty industries may continue to exist, though, upon the whole, the tendency is toward their extinction. In certain industries, their number may even increase, but their relative importance is constantly decreasing. While Socialism does not preclude the continued existence of small private industry or business, it does require and depend upon the development of a large body of concentrated industry, monopolies which can be transformed into social monopolies whenever the people may decide so to transform them. These conditions are being fulfilled in the evolution of our economic system.

The interindustrial and international trustification of industry shows a remarkable fulfillment of the law of capitalist concentration which the Socialists were the first to formulate; the existence of petty industries and businesses, or their numerical increase even, being a relatively insignificant matter compared with the enormous increase in large industries and businesses, and their share in the total volume of industry and commerce. In agriculture, concentration, while it does not proceed so rapidly or directly as in manufacture and commerce, and while it takes directions and forms unforeseen by the Socialists of a generation ago, proceeds surely nevertheless. Along with this concentration of capital and industry proceeds the concentration of wealth into proportionately fewer hands. While a certain diffusion of wealth takes place through the mechanism of capitalist concentration, by developing a new class of highly salaried officials, and enabling numerous small investors to own shares in great industrial and commercial corporations, it is not sufficient to balance the expropriation which goes on in the competitive struggle, and it is true that a larger proportion of the national wealth is owned by a minority of the population than ever before, that minority being proportionately less numerous than ever before. Further, the peculiar financial organization of modern capitalist society enables the ruling capitalists to control and use to their own advantage the wealth of others invested in industrial and commercial corporations. Thus to the concentration of ownership must be added the concentration of control, which plays an increasingly important part in capitalist economics.

Whatever defects there may be in the Marxian theory, as outlined by Marx himself, and whatever modifications of his statement of it may be rendered necessary by changed conditions, in its main and essential features it has successfully withstood all the criticisms which have been directed against it. Economic literature is full of prophecies, but in its whole range there is not an instance of prophecy more literally and abundantly fulfilled than that which Marx made concerning the trend of capitalist development. And Karl Marx was not a prophet—he but read clearly the meaning of certain facts which others had not learned to read, the law of social dynamics. That is not prophecy, but science.