“Examinations show that the concentration of control of these great New York City banks has gone so far that a comparatively small group of capitalists possesses the power to regulate the flow of credit in this country. In the last analysis it is found that there are actually only two main influences, and that these are centred in Mr. Morgan and Mr. Rockefeller. It is possible to express in approximate figures the extent of the Morgan influence”—which the writer shows in a table to figure up over six billion two hundred and sixty-eight million dollars. How very conservative is Mr. Pratt’s estimate is shown by the fact that he gives the number of holders of shares of the railroads of this country as nine hundred and fifty thousand persons; with which the reader may contrast the following editorial paragraph from a recent issue of the New York Times:
“It would appear from evidence collected by the Interstate Commerce Commission and communicated to the Senate, that the ownership of the railroad system of this country is not as widely diffused as has been supposed. On the 30th of June, 1904, the 1,220 railroads reporting to the Commission had only 327,851 stockholders of record. This total includes many duplications, as it was impossible to know in how many instances one capitalist was represented in the stockholding interest of several railroads. Assuming the population of the United States to be, in round figures, eighty millions, the entire mileage of the railroads doing an interstate business is owned by about four-tenths of 1 per cent. of the people of this country.”
Such is the situation. It completes our view of the process of Industrial Evolution, so far as it has progressed up to date. The condition is like that of an oak tree planted in a jar, or a chick developing within its shell; the indefinite continuance of the process is inconceivable. What form the collapse will assume, and when it may be expected to occur, is the problem next to be taken up.
CHAPTER VI
THE REVOLUTION
One is at a great disadvantage just at present in picturing an industrial crisis. We are at the very flood-tide of prosperity; the railroads are paralysed by the volume of the country’s business; the coal mines cannot furnish the coal, and the farmers are burning their grain because they cannot get it to market; the steel trust has orders for two years ahead—and so on without limit. I have to ask the reader to picture interest rates going down to zero, at a time when they are higher than they have been in a decade; I have to ask him to picture too much of everything in the country, at a time when there is not enough of anything. And yet all this excess of “prosperity” is an integral part of the phenomenon we are studying.
If the process of wealth-concentration and overproduction of capital went on unmodified by any other factor, we should witness a gradual rise in the price of commodities, a gradual increase in the number of unemployed, and a gradual fall in the rates of interest. As it happens, however, the movement proceeds in rhythmic pulses, like the swinging of a pendulum, or the ebbing and flowing of the tide. This is owing to the factor of credit-expansion, which we have still to interpret.
We have pictured Capital, ubiquitous, endlessly resourceful, incessantly alert—“clamouring for dividends.” Competition is a forcing-process by which every device that will increase profits is driven into general use, and subjected to its maximum strain. The most obvious of these devices is that of credit.
A business man has a certain amount of capital. If he makes his “turn over” once a year, he gains, say, ten per cent. profit; if he can make the “turn over” twice a year, he gains twenty per cent. He sees the business ahead, and so he goes into debt. And of course this step gives an impulse to the business of the man who manufactures his machinery, and to the man who raises his raw material, and to the railroads which handle both. The effect of that condition, prevailing throughout a whole community, is to accelerate enormously the industrial process; under it the capital of the community becomes, exactly as in the case of the railroads, not the actual definite cost of the instruments of production existing, but an altogether hypothetical thing, a function of anticipated earnings.
So it is that you have a “boom”—a period of furious and fevered activity, in which everyone sees fortunes springing up about him; and then comes some disturbing factor, which suggests to a number of men the advisability of realising on their expectations; and a chill settles upon the community, and there is a wild rush to collect, and the discovery is made that most of the anticipated profits are not in existence.
There is one more consideration which has to be touched upon before we are prepared to consider the concrete problem in America. The process which has been outlined is an industrial one; events have been pictured here as they would take place in a community given altogether to manufacturing, mining, and transportation. But as a matter of fact we have not only to reckon with thirteen billions a year of manufactured products, but also with four billions a year of farm products. The importance of this new element lies in the fact that the ownership of the farms is still largely in the hands of the masses; which means that once every year the process we have been picturing is stayed while the American people get rid of four billion dollars of spending money, which comes to them outside of and independent of the wage-fund. Thus, strange as it may seem, abundant crops tend to mitigate an “overproduction” crisis, while a failure of crops would do more than anything else in the world to precipitate one.