The dominant factor that will determine these things is the public welfare. When private property in a particular thing is found injurious to public welfare, it will be taken over by the state for the purpose of being socialized, as will hereafter be explained. When it is deemed that private property in a public industry is injurious to public welfare, this industry will be socialized. When, on the contrary, it is found that by socializing an industry the advance of that industry tends to be paralyzed, private initiative will be encouraged to enter into that industry. Indeed, the economic structure of the commonwealth will be such that inefficiency in a socialized industry will automatically give rise to the competition of private initiative therein.
I have used the expression "socialized industry." It is above all things important that we should be clear as to what these words mean; for it is the socialization of industry which is the modern substitute for the Socialist state. We cannot understand this better than by taking a concrete example.
Let us assume that the public has become convinced that a few individuals have already too long grown inordinately rich out of the refining and distribution of oil, and that the time has come for this industry to be socialized. The old theory was that the state would expropriate this industry and become the employer of all engaged in it. It is argued in favor of such a system that if the state can be entrusted with the distribution of letters, it can also be entrusted with the distribution of oil; and this is undoubtedly true. But if this same argument is applied to all industries it will expose the state to two great dangers: the state will be overburdened by the multiplicity and vastness of these tasks; and the state will become despotic. And because this task is greater than any one set of men can properly perform; even though the intentions of the members of the government be the best possible, errors of judgment and errors of detail will involve the state in injustice and discontent.
This difficulty can be met by not putting all these functions upon the state, but by so providing that the men shown in the past best able to handle a particular industry should continue to handle it. The socialization of the Standard Oil industry would simply mean the elimination of capitalistic control and exploitation. In taking over the oil industry, the state would doubtless adopt the method already adopted in taking over railroads, etc. A board would be appointed to take expert testimony as to the valuation of the industry, to determine the real value of every share. It would be called upon to value every stockholding with a view to determining to what compensation each stockholder was entitled; because a distinction will have to be made between various classes of stockholders. Some stockholders have purchased their stock out of the economies of an industrious lifetime. They depend upon the dividends from such stock to support their old age. To cut down the income they derive from this stock might not only work an injustice, but work an injury to the commonwealth; for if these stockholders had not sufficient income to support themselves, they would become a burden on the state. Other stockholders would be found to have sufficient wealth to support a considerable reduction in the valuation of their stock without hardship. Others again would have such enormous wealth, that, having much more income than they can possibly spend, the reduction of their income would mean no hardship save that of depriving them of power for the most part exerted at the present time injuriously to the commonwealth.
Experts, therefore, appointed by the state to make estimates with a view to the transfer of an industry from private to social ownership will have two distinct functions to perform: the function that boards of experts in similar cases perform to-day, to estimate the actual value of the property; and to estimate the wealth of the respective stockholders and classify stockholders according to wealth with the view of effecting the transfer from private to social ownership without injustice to the individual or injury to the commonwealth. It is probable that compensation to stockholders will consist of annuities rather than lump sums. The advantage of compensation by annuity rather than by cash payment is considerable. As the state is taking over industries it will be more difficult for individuals to find investment for lump sums than to-day. As the state is looking forward to taking over industries to a sufficient extent to eliminate pure capitalism[158] altogether, it is to be hoped that future generations will not feel the need of capital of their own and will be all the more ready to enter into the coöperative scheme of industry if, having no capital, they have to work each in his own industry under the new and prosperous conditions which coöperative production ought by that time to have brought about.
Cases will undoubtedly be found where wealthy parents have worthless or defective children and grandchildren. Again, some parents have so contributed to the development of industry of the nation, as in the case of Mr. John D. Rockefeller and Mr. J. Pierpont Morgan, that it may seem proper that the compensation given in the shape of an annuity to them should not end abruptly at their death; but that a part of it should be continued to their offspring. This question is one of conscience as well as of social welfare; and in view of the enormous importance of it to the wealthy of to-day, it is a pity that they confine themselves to denouncing Socialism, and by so doing, leave the elaboration of the Socialist program to a party of discontented which is likely to deal with them when the day of expropriation arrives, not only without mercy, but without justice.
To judge of the difficulty of determining the questions likely to arise, let us consider for a moment the case of Mr. Rockefeller.
Mr. John D. Rockefeller has testified over and over again that for many years he has had nothing to do with the management of the Standard Oil, and yet he draws from the Standard Oil an income so enormous that, not being able to spend more than a fraction of it, he has invested the balance in railroad shares and thus become master of a large part of our railroad system. I myself believe after a careful study of the organization and development of the Standard Oil that Mr. Rockefeller has amassed his fortune strictly in conformity with law. He has, it is true, deliberately lied at certain critical periods. But lying is not a crime, and is not actionable except under specified conditions. Mr. Rockefeller then is not a criminal. He simply presents a case where, having rendered an immense service to the community, he has received as a remuneration for that service wealth that surpasses the dreams of avarice.
If Mr. Rockefeller's holdings in the Standard Oil were expropriated by the state without one dollar of remuneration, Mr. Rockefeller would still be in possession of a far larger income derived from his railroad holdings than he and all his family could possibly spend. It is probable, therefore, that in such cases as those of Mr. Rockefeller, J. Pierpont Morgan, and others of their class, the state would make a valuation of all their wealth, leave them what it is proper they should have, and expropriate the rest. Even though there were left to multi-millionaires more income than they could possibly spend, the surplus expropriated by the state out of each of their swollen fortunes would leave to every industry a large fund which could be applied to increasing wages, improving conditions, and reducing prices. If, for example, it turned out that the income Mr. Rockefeller derives from his railroad shares is more than he can spend and that, therefore, there were no reason why he should continue to own any shares in the Standard Oil whatever, the dividends accruing from the shares now held by Mr. Rockefeller in the Standard Oil would be applicable to improving the conditions of those who work for the Standard Oil. It is probable that Mr. Rockefeller owns about one-half of the shares in the Standard Oil. All the dividends now paid to Mr. Rockefeller would in such case be applicable to these things. Such a solution would permit of the division of the enormous dividends which are being paid to-day to Mr. Rockefeller amongst the working body of the Standard Oil.
As to compensation, there is considerable disagreement in the Socialist party, and many Socialists would not admit the principle of compensation at all. In France, it is probable that these last constitute, if not a majority, at any rate a very large minority of the party; but in America I think it can be said that the Socialist party stands for compensation. In support of this contention I cannot do better than quote a passage from the article of Mr. Steffens in Everybody's Magazine, Oct., 1908.[159]