In still other ways the capitalistic system allows of an uneconomical expenditure of labor and capital. There is no adequate method of directing labor and capital toward the production of durable and helpful commodities, and away from the production of luxuries and such harmful commodities as have not been made illegal. Under competitive conditions, too, a number of shops or stores may exist in a community that might easily be served by a single firm. This is wasteful duplication, just as advertising is a waste when it goes beyond the point of informing the public as to whereabouts and character of commodities. Still another source of waste is traceable to an excessive number of middlemen, each of whom adds to the price of the product as it passes through his hands.
101. THE INEQUALITY OF WEALTH.—In all of the great industrial countries of the world, including the United States, the existing distribution of wealth is roughly in the form of a pyramid, i.e., at the top or apex of the pyramid there is a relatively small number of persons who enjoy large incomes, while at the base there is a large number with relatively small incomes. This inequality is explained by Professor Taussig on two grounds: First, it is likely that some individuals originally secured an economic advantage over their fellows because of inborn superiority of some kind. Second, the economic advantage thus secured has been maintained from generation to generation by inheritance. Where, for example, wealth is invested so that the principal remains intact while a large annual income is thrown off as interest, the heirs may live in affluence, regardless of ability or desert. Thus we have a leisure class emerging as the result of inborn differences between men, supplemented by the accumulation of wealth and its transmission by inheritance.
102. THE QUESTION OF INDUSTRIAL REFORM.—It goes without saying that great inequalities in the distribution of wealth are undesirable. If any improvement is humanly possible, we ought not to rest content so long as millions of our citizens have too few of the good things of life, while others have much more than is necessary for comfort and happiness. The test of an economic system is whether or not it provides a good world to live in, and so long as large numbers of individuals have fewer necessities and comforts than it is possible to give them, our economic system must be considered defective. The people as a group are both the means and the end of progress. Democracy cannot rest upon any other basis than the greatest good to the greatest number.
103. APPROACHING THE PROBLEM.—In approaching the problem of industrial reform it is necessary to cultivate a fair and sane attitude. We must attack all of the problems of American democracy, certainly. But in so far as some of these problems involve the integrity of the capitalistic system, we should distinguish between ills which are clearly traceable to that system, and defects which obviously would exist under any industrial system. Capitalism cannot be discredited, for example, by pointing out that crime exists in all capitalistic countries. Though capitalism may accentuate some types of crime, our knowledge of human nature leads us to suspect that a considerable amount of crime would exist under any known system of industry. Again, criticism should be constructive; it is easy to point out the defects of an institution, but it is quite another thing to provide a good substitute for that institution.
The problem before us is a double one: First, can we remedy the defects of the capitalistic system? And, if so, by what method shall we proceed? Second, if the defects of capitalism cannot be remedied, what industrial system shall be substituted for capitalism? It is not a question of whether or not capitalism is faulty, but of whether it is more faulty than the system that would be substituted for it. The virtues of capitalism, most authorities believe, clearly outweigh its defects, and though some other system may eventually prove to have as great virtues with fewer defects, the burden of proof is upon those who advocate other systems than capitalism. Until the advantage is clearly shown to be on the side of a rival system, it will be wise to retain capitalism.
QUESTIONS ON THE TEXT
1. Is it correct to speak of a "capitalistic system"?
2. What is the chief economic function of government?
3. Name the four methods of getting a living. Which will be encouraged by a good government?
4. To what extent is the attitude of a good government toward industry a negative one?