Neither the premises nor the conclusion of this reasoning is valid. The doctrines of economic determinism, the class struggle, the concentration of capital, the disappearance of the middle classes, the progressive pauperisation of the working classes, and all the other tenets of the Socialist philosophy, have been thoroughly discredited by the facts of psychology, the experience of the last half century, and the present trend of industrial and social forces.[123] Even if the Socialist outcome were inevitable, it would not necessarily be an improvement on the present system. It might illustrate the principle of retrogression.
Since we cannot make an act of faith in either the inevitableness or the efficacy of the Socialist industrial scheme, we are compelled to submit it to the ordinary tests of examination and criticism. We must try to see what would be the essential structure, elements, and operation of a system in which the means of production were owned and managed collectively, and the product socially distributed. In attempting to describe the system, we shall be guided by what seems to be inherently necessary to it, and by the prevalent conception of it among present day Socialists. In this connection we have to observe that some of the criticisms of the Socialist order attribute to it elements that are not essential, nor any longer demanded by the authoritative spokesmen of the movement; for example, complete confiscation of capital, compulsory assignment of men to the different industrial tasks, equality of remuneration, the use of labour checks instead of money, the socialisation of all capital down to the smallest tool, and collective ownership of homes.
Expropriating the Capitalists
The first problem confronting a Socialist administration would be the method of getting possession of the instruments of production. In the early years of the Socialist movement, most of its adherents seemed to favour a policy of outright confiscation. Professor Nearing estimates the total property income now paid in the United States as, "well above the six-billion-dollar mark."[124] Were the Socialist State to seize all land and capital without compensation, it could conceivably transfer more than six billion dollars annually from landowners and capitalists to the community. Not all of it, however, would be available for diversion to the labourers. According to the computations of Professor King, about two billion dollars were in 1910 saved and converted into capital.[125] A progressive Socialist régime would want to appropriate at least that sum for the renewal and increase of the instruments of production. Consequently, it would have only four billion dollars to add to the present total income of labour. This would be equivalent to $43.50 for every person in the United States.
Desirable as would be such an addition to the remuneration of labour, it could never be realised through the process of confiscation. The owners of land and capital would be sufficiently powerful to defeat any such simple scheme of setting up the collectivist commonwealth. They constitute probably a majority of the adults of our population, and their economic advantages would make them much stronger relatively than their numbers.[126] Ethically the policy of confiscation would be, on the whole, sheer robbery. To be sure, not all owners of land and capital have a valid claim to all their possessions, but practically all of them hold the greater part of their wealth by some kind of just title. Much land and capital that was originally acquired by unjust means has become morally legitimatised by the title of prescription.
The majority of present day Socialists seem to advocate at least partial compensation.[127] But this plan does not seem to offer any considerable advantage over complete confiscation. As regards morality, it would differ only in the degree of its injustice; as regards expediency, it would be at best of doubtful efficacy. If the capitalists were given only a small fraction of the value of their holdings they would oppose the change with quite as much determination as though they were offered nothing; if they were paid almost the full value of their possessions there would be no substantial gain to the community from the transfer; if they were compensated at a figure somewhere between these two extremes their resistance would still be more costly to the State than the extra amount required to make full compensation.
Finally, if full compensation were offered it would have to take the form of government obligations, securities, or bonds. If these did not bear interest the great majority of capital owners would regard the scheme as partial and considerable confiscation, and would fight it with determination and effectiveness. If the State bound itself to pay interest on the bonds it would probably find itself giving the dispossessed capitalists as high a rate of return on their capital, as large a share of the national product, as they receive under the present system. Consequently, the expropriation of the capitalists would bring no direct and pecuniary gain to the labouring classes. Indeed, the latter would suffer positive loss by the change, owing to the fact that the State would be required to withdraw from the national product a considerable amount for the maintenance, renewal, and expansion of the instruments of production. At present the capitalist class performs the greater part of this function through the reinvestment of the incomes that it receives in the form of interest and rent. The average Socialist entirely ignores this capitalistic service, when he draws his pessimistic picture of the vast share of the national product which now goes to "idle capitalists." So far as the larger capitalist incomes are concerned; that is, those in excess of twenty-five thousand dollars annually, it is probable that the greater part is not consumed by the receivers, but is converted into socially necessary capital instruments. Since this would not be permitted in a Socialist order, the capitalists would strive to consume the whole of the incomes received from the public securities, and the State would be compelled to provide the required new capital out of the current national product. In a word, society would have to give the capitalists as much as it does at present, and to withhold from the labourers for new capital an immense sum which is now furnished by the capitalists.
It is undoubtedly true that the richest capitalists would be unable to expend the whole of their incomes upon themselves and their families. If they turned a considerable part of it over to the State, the surrendered sum would be available as capital, thereby reducing the amount that the State would need to take out of the national product for this purpose. Were all those possessing incomes in excess of fifty thousand dollars per family to give up all above that amount, the total thus accruing to the State would be a little more than one billion dollars.[128] But this would be only one-half the required new capital. A part of the additional one billion is now provided out of wages and salaries, but the greater part probably comes out of rent and interest. Under Socialism this latter portion would have to be deducted from that part of the national product which at present goes to the workers and is consumed by them. Hence they would undergo a loss of several hundred million dollars.
One reply to this difficulty is that the total product of industry would be much increased under Socialism. Undoubtedly an efficient organisation of industry on collectivist lines would be able to effect economies by combining manufacturing plants, distributive concerns, and transportation systems, and by reducing unemployment to a minimum; but it could not possibly make the enormous economies that are promised by the Socialists. The assertion that under Socialism men would be able to provide abundantly for all their wants on a basis of a working day of four, or even two, hours is seductive and interesting, but it has no support in the ascertainable facts of industrial resources. Even if the Socialist organisation were operating with a fair degree of efficiency, the gains that it could effect over the present system would probably not more than offset the social losses resulting from increased consumption by the compensated capitalists.
But the proposed industrial organisation would not operate with a fair degree of efficiency. According to present Socialist thought, industries that are national in scope, such as the manufacture of petroleum, steel, and tobacco, would be carried on under national direction, while those that supplied only a local market, such as laundries, bakeries, and retail stores, would be managed by the municipalities. This division of control would be undoubtedly wise and necessary. Moreover, the majority of Socialists no longer demand that all tools and all industries should be brought under collective or governmental direction. Very small concerns which employed no hired labour, or at most one or two persons, could remain under private ownership and operation, while even larger enterprises might be carried on by co-operative associations.[129] Nevertheless the attempt to organise and operate collectively the industries of the country, even with these limitations, would encounter certain insuperable obstacles. These will be considered under the general heads of inefficient industrial leadership, inefficient labour, and interference with individual liberty.