Then again, consider the case of the artist and the inventor who are too often forced by poverty now to sell their early inventions for the barest immediate subsistence. Speculators secure these initial efforts—sometimes to find them worthless, sometimes to discover in them the sources of enormous wealth. In no matter is it more difficult to estimate value than in the case of creative work; few geniuses are immediately recognized, and the history of art, literature and invention is full of Chattertons and Savages who perished before recognition came, and of Dickenses who sold themselves unwisely. Consider the immense social benefit if the creator even now possessed an inalienable right to share in the appreciation of his work. Under Socialism it would for all his life be his—and the world’s, and controllable by him. He would be free to add, to modify, to repeat.
In all these respects modern Socialism tends to create and confirm property and rights, the property of the user, the rights of the creator. It is quite other property it tends to destroy; the property, the claim, of the creditor, the mortgagee, the landlord, and usurer, the forestaller, gambling speculator, monopolizer and absentee…. In very truth Socialism would destroy no property at all, but only that sham property that, like some wizard-cast illusion, robs us all.
§ 3.
And now we are discussing the Socialist attitude towards property, it may be well to consider a little group of objections that are often made in anti-Socialist tracts. I refer more particularly to a certain hard case, the hard case of the Savings of the Virtuous Small Man.
The reader, if he is at all familiar with this branch of controversial literature, probably knows how that distressing case is put. One is presented with a poor man of inconceivable industry, goodness and virtue; he has worked, he has saved; at last, for the security of his old age, he holds a few shares in a business, a “bit of land” or—perhaps through a building society—house property. Would we—the Anti-Socialist chokes with emotion—so alter the world as to rob him of that? … The Anti-Socialist gathers himself together with an effort and goes on to a still more touching thought … the widow![13]
Well, I think there are assurances in the previous section to disabuse the reader’s mind a little in this matter. This solicitude for the Saving Small Man and for the widow and orphan seems to me one of the least honest of all the anti-Socialist arguments. The man “who has saved a few pounds,” the poor widow woman and her children clinging to some scrap of freehold are thrust forward to defend the harvest of the landlord and the financier. Let us look at the facts of the case and see how this present economic system of ours really does treat the “stocking” of the poor.
In the first place it does not guarantee to the small investor any security for his little hoard at all. He comes into the world of investment ill-informed, credulous or only unintelligently suspicious—and he is as a class continually and systematically deprived of his little accumulations. One great financial operation after another in the modern world, as any well-informed person can witness, eats up the small investor. Some huge, vastly respectable-looking enterprise is floated with a capital of so many scores or hundreds of thousands, divided into so many thousands of ordinary shares, so many five or six per cent. preference, so much debentures. It begins its career with a flourish of prosperity, the ordinary shares for a few years pay seven, eight, ten per cent. The Virtuous Small Man provides for his widow and his old age by buying this estimable security. Its price clambers to a premium, and so it passes slowly and steadily from its first speculative holder into the hands of the investing public. Then comes a slow, quiet, downward movement, a check at the interim dividend, a rapid contraction. Consider such a case as that of the great British Electric Traction Company which began with ordinary shares at ten, which clambered above twenty-one (21⅞), which is now (October 1907) fluctuating about two. Its six per cent, preference shares have moved between fourteen and five and a half. Its ordinary shares represent a total capital of £1,333,010, and its preference £1,614,370; so that here in this one concern we have a phantom appearance and disappearance of over two million pounds’ worth of value and a real disappearance of perhaps half that amount. It requires only a very slight knowledge of the world to convince one that the bulk of that sum was contributed by the modest investments of mediocre and small people out of touch with the real conditions of the world of finance.
These little investors, it is said, are the bitter champions of private finance against the municipalities and Socialists. One wonders why.
One could find a score of parallels and worse instances representing in the end many scores of millions of pounds taken from the investing public in the last few years. I will, however, content myself with one sober quotation from the New York Journal of Commerce, which the reader will admit is not likely to be a willing witness for Socialism. Commenting on the testimony of the principal witness, Mr. Harriman, of the Illinois Central Railroad, before the Inter-State Commerce Commission (March 1907), it says:—
“On his own admission he was one of a ‘combine’ of four who got possession of the Chicago and Alton Railroad, and immediately issued bonds for $40,000,000, out of the proceeds of which they paid themselves a dividend of 30 per cent, on the stock they held, besides taking the bonds at 65 and subsequently selling them at 90 or more, some of them to life insurance companies with which Mr. Harriman had some kind of relation. There were no earnings or surplus out of which the dividend could be paid, but the books of the company were juggled by transferring some $12,000,000 expended for betterments to capital account as a sort of bookkeeping basis for the performance.
“Besides this, the Chicago and Alton Railroad was transformed into a ‘railway,’ and a capitalization of a little under $40,000,000 was swollen to nearly $123,000,000 to cover an actual expenditure in improvements of $22,500,000. In the process there was an injection of about $60,600,000 of ‘water’ into the stock held by the four, some of which was sold to the Union Pacific, of which Mr. Harriman was president, and more was ‘unloaded’ upon the Rock Island. Mr. Harriman refused to tell how much he made out of that operation.
“It shows how some of our enormous fortunes are made, as well as what motives and purposes sometimes prevail in the use of the power entrusted to the directors and officers of corporations. It is a simple and elementary principle that all values are created by the productive activity of capital, labour and ability in industrial operations of one kind and another. No wealth comes out of nothing, but all must be produced and distributed, and what one gets by indirection another loses or fails to get. The personal profit of these speculative operations in which the capital, credit and power of corporations are used by those entrusted with their direction come out of the general body of stockholders whose interests are sacrificed, or out of the public investors who are lured and deceived, or out of shippers who are overtaxed for the service for which railroads are chartered, or out of all these in varying proportions. In other words they are the fruits of robbery.”