Problems in American Democracy

by Thames Williamson

The series of reforms referred to above must have three aims: first, to give every individual exactly what he earns; second, to make it possible for every individual to earn enough to support himself and his family at least decently; and third, to teach every individual to use wisely and economically the income which he receives.

A program embodying these three aims has the disadvantage of seeming commonplace and slow of fulfillment to those who prefer novel and sensational schemes, but it has the advantage of being both workable and safe.

168. THE NATURE OF JUSTICE.—Among the advocates of socialism the word "justice" is much used, but apparently little understood. Justice in industry implies that every individual shall receive precisely what he earns, no more, no less. If a monopolist secures unearned profits, there is injustice. If a laborer adds to the value of a product to the extent of five dollars, there is injustice if he receives less than five dollars in wages. Similarly, there is injustice if the laborer earns only four dollars, but receives five dollars. Wherever there is an unfair distribution of wealth, there is a double injustice: some individual gets a share of wealth which he did not earn and to which, therefore, he is not entitled; while the individual who did earn that wealth is deprived of it.

169. THE IMPORTANCE OF THIS.—All right-thinking reformers will agree with the socialist that much or all of the unearned wealth of the moneyed classes ought to be taken for the benefit of the community. But he who accepts the democratic program of industrial reform will not sanction the socialist's proposal to eliminate poverty primarily by decreeing higher wages.

In the first place, this proposal of the socialist is unjust. A man who earns three dollars a day may not be able to live on that amount, and it may be desirable for some agency to give him more than three dollars a day. But that would be charity, not justice. It would be, as we have just seen, a double injustice.

In the second place, such a practice would lead inevitably to national bankruptcy. Under the competitive system, wages tend to be determined by productivity. To attempt to eradicate poverty primarily by the raising of wages is futile, for employers cannot long pay out in wages more than the laborer adds to the product. Some employers might do so for a long time, and all employers might do so for a short time, but if the practice were nation-wide and long-continued, it would result in economic ruin. To put a premium upon propagation by guaranteeing every man a job, and to pay him, not according to productivity, but according to need, would be equivalent to building up a gigantic charitable institution. Charity is a necessary and laudable function, but the proper care of the dependent classes is possible only when the majority of the people are not only self-supporting, but actually produce a surplus out of which the unfortunate can be cared for. If applicants for charity too largely outnumber those producing a surplus, national bankruptcy results.

In the third place, an increase in wages might not benefit even those receiving higher wages unless they were able and willing to spend their income wisely and economically.

170. THE REDISTRIBUTION OF UNEARNED WEALTH.—The first step in our program is to apply the principle of justice to the problem of unearned wealth. The student should be careful at this point to distinguish between wealth which has been earned, however great, and wealth which has been acquired by unjust methods. American democracy will tolerate no interference with wealth which has been earned; on the other hand, it demands that unearned riches be redistributed in the form of services performed by the government for the people as a whole.

There are three chief methods of redistributing unearned wealth. The first is by means of increased taxes on land. As was pointed out in the chapter on single tax, that income from land which is due, not to the efforts of the owner, but either to natural fertility or to the growth of the community, may be considered as unearned. While the single tax is too drastic a reform, it is unquestioned that we need heavier taxes upon the unearned increment arising from land.

A second method of redistributing unearned wealth is through the application of inheritance taxes. Reserving the whole problem of taxation for later discussion, [Footnote: See Chapter XXXII.] it may be said here that in many cases large sums are willed to individuals who have done little or nothing to deserve them. In so far as this is true, and in so far as such a tax does not discourage the activities of fortune builders, the inheritance tax is a desirable means of redistributing unearned wealth.