At the close of the Civil War the total exports of the United States averaged approximately $300,000,000, and the total imports were about the same. In 1892 the exports first touched $1,000,000,000, while the imports were about nine-tenths of that sum. In the year 1913 the exports were nearly $2,500,000,000, while the imports were $600,000,000 less; and in the year 1920 our exports were over $8,000,000,000 and our imports a little over $5,000,000,000! So we have a "favorable balance" of almost $3,000,000,000 a year—and as a result we are on the verge of ruin!
This "iron ring" of overproduction and lack of market exercises upon our industrial body a steady pressure, a slow strangling. But because the body is in convulsions, struggling to break the ring, the pressure of the ring is worse at some times than at others. We have periods of what we call "prosperity," followed by periods of panic and hard times. You must understand that only a small part of our business is done by means of cash payments, whether in gold or silver or paper money. Close to 99% of our business is done by means of credit, and this introduces into the process a psychological factor. The business man expects certain profits, and he capitalizes these expectations. Business booms, because everybody believes everybody else's promises; credit expands like a huge balloon, with the breath of everybody's enthusiasm. But meantime real business, the real market, remains just what it was before; it cannot increase, because of the iron ring which restricts the buying power of the mass of the people by the competitive wage. So presently the time comes when somebody realizes that he has over-capitalized his hopes; he curtails his orders, he calls in his money, and the impulse thus started precipitates a crash in the whole business world. We had such a crash in 1907, and I remember a Wall Street man explaining it in a magazine article entitled, "Somebody Asked for a Dollar."
We learned one lesson by that panic; at least, the big financial men learned it, and had Congress pass what is called the "Federal Reserve Act," a provision whereby in time of need the government issues practically unlimited credit to banks. This, of course, is fine for the banks; it puts the credit of everybody else behind them, and all they have to do is to stop lending money—except to the big insiders—and sit back and wait, while the little men go to the wall, and the mass of us live on our savings or starve. We saw this happen in the year 1920, and for the first time we had "hard times" without having a financial panic. But instead we see prices staying high—because the banks have issued so much paper money and bank credits.
CHAPTER LX
CAPITALIST WAR
(Shows how the competition for foreign markets leads nations automatically into war.)
In a discussion of the world's economic situation, published in 1906, the writer portrayed the ruling class of Germany as sitting in front of a thermometer, watching the mercury rising, and knowing that when it reached the top, the thermometer would break. This thermometer was the German class system of government, and the mercury was the Socialist vote. In 1870 the vote was 30,000, in 1884 it was 549,000, in 1893 it was 1,876,000, in 1903 it was 3,008,000, in 1907 it was 3,250,000, in 1911 it was 4,250,000. Writing between 1906 and 1913, I again and again pointed out that this increase was the symptom of social discontent in Germany, caused by the overproduction of invested capital throughout the world, and the intensification of the competition for world markets. I pointed out that a slight increase in the vote would be sufficient to transfer to the working class of Germany the political power of the German state; and I said that the ruling class of Germany would never permit that to happen—when it was ready to happen Germany would go to war, to seize the trade privileges of some other nation.
There was a time when wars were caused by national and racial hatreds. There are still enough of these venerable prejudices left in the world, but no student of the subject would deny that the main source of modern wars is commercial rivalry. In 1917 we sent Eugene V. Debs to prison for declaring that the late world war was a war of capitalist greed. But two years later President Wilson, who had waged the war, declared in a public speech that everybody knew it had been a war of commercial rivalries.
The aims of modern war-makers are two. First, capitalism must have raw materials, including coal and oil, the sources of power, and gold and silver, the bases of credit. Parts of the world which are so unfortunate as to be rich in these substances become the bone of contention between rival financial groups, organized as nations. Some sarcastic writer has defined a "backward" nation as one which has gold mines and no navy. We are horrified to read of the wars of the French monarchs, caused by the jealous quarrels of mistresses; but in 1905 we saw Russia and Japan go to war and waste a million lives because certain Russian grand dukes had bribed certain Chinese mandarins and obtained concessions of timber on the Yalu River. We now observe France and Germany vowed to undying hate because of iron mines in Lorraine, and the efforts of France to take the coal mines of Silesia from Germany, and give them to Poland, which is another name for French capitalism.
The other end sought by the war-makers is markets for manufactured products, and control of trade routes, coaling stations and cables necessary to the building up of foreign trade. England has been "mistress of the seas" for some 300 years, which meant that her traders had obtained most of these advantages. But then came Germany, with her newly developed commercialism, shoving her rival out of the way. The Englishman was easy-going; he liked to play cricket, and stop and drink tea every afternoon. But the German worked all day and part of the night; he trained himself as a specialist, he studied the needs of his customers—all of which to the Englishman was "unfair" competition. But here were the populations of the crowded slums, dependent for their weekly wage and their daily bread upon the ability of the factories to go on turning out products! Here was the ever-blackening shadow of unemployment, the mutterings of social discontent, the agitators on the soap-boxes, the workers listening to them with more and more eager attention, and the journalists and politicians and bankers watching this phenomenon with a ghastly fear.
So came the great war. Social discontent was forgotten over night, and England and France plunged in to down their hated rival, once and for all time. Now they have succeeded: Germany's ships have been taken from her, and likewise her cables and coaling stations; the Berlin-Bagdad Railroad is a forgotten dream; the British sit in Constantinople, and the traffic goes by sea. American capitalism wakes up, and rubs its eyes after a debauch of Presbyterian idealism, and discovers that it has paid out some $20,000,000,000, in order to confer all these privileges and advantages upon its rivals!