What, then, are we to say of the condition known as over-production? Is it not a fact that some lines of industry are so overdone that the production is far in excess of the demand, and is not this an evil rather than a benefit? Do not periods of business depression occur when all industries stagnate for want of a market for their goods? The true answer to this question is: Over-production is not a fault of production, but of distribution. It is true that, in special industries, a surplus of production sometimes occurs, due to over-stimulation, or too rapid growth; but over-production as commonly spoken of, refers to a general state of trade, in which demand for all sorts of goods seems to fall far below the market supply. But this lack of demand is not due to lack of desire. The desires of men are always in excess of their abilities to supply them; it follows, therefore, that the condition known as over-production consists in a lack of ability to purchase goods rather than in a lack of desire to purchase them. This lack of ability has evidently to do with the distribution of wealth rather than its production.
While it is easy to formulate laws to govern the theoretically perfect production of wealth, to whose justice all men will consent, we cannot go far in the details of the ideal distribution of wealth without reaching points upon which the views of different parties are diametrically opposed. Some foundation principles, however, let us state, believing that in their truth the great majority of men will concur.
In the chapter on the theory of competition we saw that, if we conceived the results of the labor of the whole community to be placed in a common storehouse and gave to each man the right to draw from it an amount just equal to the benefit derived from the goods which he had placed within it, the ideal of a perfect system of distribution of wealth would be realized. No human judgment, however, is, or ever can be, competent to measure the exact industrial benefits which each person confers upon the community at large. We must inevitably permit men to measure the result of their own work by securing for it such an amount of the results of others' work as they can induce them to give in exchange. But while we cannot measure exactly the benefit which each person confers, we can see cases in which the reward received is manifestly out of all proportion to the benefit conferred. Consider the fortunes which have been accumulated by some of our Midases of the present decade. It is quite certain that the benefits which Cornelius Vanderbilt, for instance, conferred on the community by his enterprise and business sagacity, by his work in opening new fields of industry, forming new channels for commerce, etc., were so valuable that he honestly earned the right to enjoy a large fortune. It is equally certain that a great part of his gains had nothing whatever to do with any benefit conferred upon the community, and that the fortune of $100,000,000 or so which he accumulated was an example of inequitable distribution of the products of the world's industry. Stating this in the form of a general principle, we should say: The amount of wealth which any man receives should bear some approximate relation to the benefit which he confers upon the world.
We have already stated that, by the law of supply and demand, the rewards of each worker are regulated in theory even more perfectly in accordance with our ideas of liberty than they could be on the basis of actual benefit conferred. For it is inconceivable that people would submit to pay for what was beneficial to them instead of what they desired. A man who prefers to purchase wines instead of books with his surplus money would think it a great injustice if he were prevented from doing as he preferred with his own. But so long as every one is at liberty to use his income in buying whatever he desires most, demand—the willingness to pay money for the gratification of the desire—will exist, and so long as demand exists it will be met by a supply, furnished by those who are desirous of money and what it will bring. It is inconceivable, then, that any juster arrangement than this law of supply and demand can ever be practicable for regulating the compensation of each individual. The man who can drive a locomotive will receive larger wages than the man who shovels the earth to form its pathway, because the supply of men competent to drive an engine is small in proportion to the number of men who are wanted for that work, while almost any man can shovel dirt. Let us state, then, for our second principle: The amount of wealth which any man receives should depend on the ratio between the demand which exists for his services and the supply of those able to render like service. Farther than these statements of the ideal principles governing the economical production and equitable distribution of wealth we need not go at present.
Let us turn now to examine the result of a violation of these principles in some of the crying evils of the present day which are wholly or in part due to the growth of monopoly and the waste of competition.
Every candid man will acknowledge that the enormous congestion of wealth in a few hands which exists to-day is a danger to be feared. We have had it constantly dinned in our ears that in this free land the ups and downs of fortune were such that the rich man of to-day was apt to be the beggar to-morrow; also that almost invariably a rich man's sons were reckless spendthrifts. These things, aided by the abolition of primogeniture and entails, it was said, were to prevent the growth of a moneyed aristocracy in this country. The propounders of this amiable theory never explained how the community received reparation for the destruction of wealth which the spendthrift sons were to carry on; but so long as the theory has failed to work in practice, that does not matter so much.
A few years ago it was a favorite occupation of newspaper paragraphers to estimate the Gould and Vanderbilt fortunes; but lately they seem to have given them up as beyond the limits of even their robust guessing abilities. Some idea of the latter's fortune may be gained, however, by realizing the fact that the Vanderbilt railway system now has a total extent of nearly 12,000 miles, the total value of which can hardly be less than one thousand millions of dollars. Probably not less than half of the securities of these companies are owned by the Vanderbilt family, and it is well known that their investments are by no means confined to railways. The important fact is, that this fortune grows so fast now that it is sure to increase; and will double itself every fifteen or twenty years, because all that its owners can spend is but a drop in the bucket toward using up their income. But this fortune, while the largest which is still under one name, is but one of many enormous ones. The names of Gould, Flagler, Astor, Rockefeller, Stanford, Huntington, and a host of others follow close after the Vanderbilts. In the days of our grandfathers, millionaires were no more plentiful than hundred-millionaires are to-day.
We have next to show the present and prospective evils which result from this congestion of wealth. The first and most obvious one is its injury to the remainder of the people of the country, by the diversion from them of wealth which they have rightfully earned and which they would receive were it not for the tax of monopoly. It is obvious that a certain amount of wealth is annually produced by the industry of the country from which the whole wants of the country must be supplied. This amount may be greater, indeed, when a Gould or a Flagler or a Crocker directs the enterprise; but for the most part it is indisputable that the owners of these colossal fortunes have made them, not by any stimulus of the production of wealth by their owners, but by a diversion of the produced wealth in the general distribution from others' pockets to their own. In short, all other men are poorer that these many times millionaires may be richer. To show how these fortunes have in many cases been obtained, I cannot do better than to quote a writer not at all likely to err by undue severity to our millionaires, as he is himself the president of a railway system a thousand miles in extent:
The great majority of the phenomenal fortunes of the day are the result of what may be called lucky gambling.... Man is a gambling animal by nature, and modern methods have enormously developed both its facilities and its temptations and have opened large fields in which gambling is not held to be disreputable.
Under such stimulus is it wonderful that its growth has been phenomenal? Wall street is its head-quarters, and millions upon millions of dollars are accumulated there to meet the wants of the players. Railroad stocks are its favorite cards to bet upon, for their valuation is liable to constant fluctuation on account of weather, crops, new combinations, wars, strikes, deaths, and legislation. They can also be easily affected by personal manipulations.... Money makes money, and money in great masses has its attractive power increased. The aspect of phenomenal fortunes, therefore, is a social problem of some importance. Their manner of growth and their manner of use are to be observed, and what restrictions, if any, should be placed on their accumulation should be considered.[5]
The fact pointed out by General Alexander in the above quotation is one which is far too lightly appreciated. The evils of railway management by which the owners of the stocks and bonds of the company are victimized to enrich stock speculators are much too complex and numerous to be described here. The state of affairs can be briefly summed up, however, with the statement that our present system of conducting corporate enterprises results inevitably in the gravitation of their ownership into the hands of the holders of large fortunes. The railways of the country are an instance in point. Time was when the stocks and bonds of railways were owned by people of small means all over the country. But after many severe lessons in the shape of stocks wiped out, and bond interest scaled down, these small holders were taught the folly of investing their savings in business over which they had practically no control, and thus placing them at the mercy of irresponsible corporate officers. Broadly speaking, the railway property of the country is owned by men worth their millions; and the small holdings are being rapidly absorbed every day. But the case is not true of railways alone. Telegraph lines, telephone, and electric light plants, our mines, and to a large extent our factories, which were once held by private owners, are now controlled by corporations whose shares are quoted on the exchanges and are consequently subject to a forced variation, dictated according as "bull" or "bear" has the ascendancy. And when the ownership of a property is once brought into this channel, it is no longer a suitable investment for the man of small means. It is the prey of men who practically make bets as to what its future price will be, and manipulate the price, if possible, to win their bets. If it is ever again held for investment simply, it is when it is locked in the safe of some modern Crœsus.