Perhaps the most interesting aspect of the Irrepressible Conflict is where it is not between two sides wanting the same dollars, but between the real and the ideal. Nearly all the schemes are ideal, eminently desirable, but utterly impossible in any state of human nature that we know or can clearly foresee. Yet they appeal to the sympathies of all, and therefore mislead the judgments of many. We wish we felt as certain as we do of sunrise that in the present stage of American evolution democratic government is not one of these ideals; but we cannot. The American people has just passed its first two measures of distinct and unqualified class legislation, and has been running wild after the two greatest demagogues in history. But fortunately as they both promise substantially the same things—"steal each other's clothes," they tend to neutralize each other.
The sources of the most pronounced conflict between facts and ideals are that ordinarily a man cannot have more than he creates and conserves; that the desire to will torture those who create and conserve little, as long as they have to look upon others who create and conserve much; and that, as long as the difference lasts, those who have little will want to get hold of what is held by those who have much. The things that all men want, but few men have. Those who have not, envy and often hate those who have. Of late this disposition has been greatly intensified by the multitude of rapid fortunes from the new control of Nature and from the trusts, and the parvenu ostentation accompanying them. It makes a difference whether princely state surrounds the king's son, or one's own pal of yesterday.
Worst of all, so many of these fortunes have been obtained wrongfully that they intensify the impression that all fortunes above the average have.
Now the fundamental question in this conflict is: to whom does that money rightfully belong? Among wise people who are not economists, the width and profundity of the ignorance on this point tends to dissipate the current skepticism regarding the miraculous.
The fortunes wrongfully acquired are exceptional and abnormal. Nearly all comfortable fortunes come from legitimate industry. Within a generation the economists have got the question of to whom they rightfully belong, into the qualitative stage of settlement. The quantitative stage is a much nicer and more complicated problem, and varies more with different cases. Possibly the first germ of the solution appeared a generation ago in a sentence in Marshall's "Economics of Industry."
It was: "The earnings of management of a manufacturer represent the value of the addition which his work makes to the total product of capital and industry." The same holds true of a farmer, miner, transporter, merchant or anybody else who directs industry. It is more easily recognized in the case of the inventor. Francis A. Walker took up this theme and gradually demonstrated that so far from the employer's profits being wrung out of the wage-earner, they are generally greatest where wages are highest, and proceed from devices and economies effected by the employer, and would not exist without them. This is being constantly illustrated by some employers succeeding where others have failed, and failing where others have succeeded. In support of the general thesis Walker says: "Discussions in Economics and Statistics," (Vol. I., pp. 367-75):
"Looking at the better employers of whatever grade ... we note that they pay wages, as a rule, equal to those paid by those employers who realize no profits, or even sustain a loss; and that, indeed, if regularity of employment be taken, as it should be, into account, the employers of the former class pay really higher wages than the latter class. We note, further, that the successful men of business pay as high prices for materials and as high rates of interest for the use of capital, if the scale of their transactions and the greater security of payment be taken, as it should be, into account.
"Whence, then, comes the surplus which is left in the hands of the higher grades of employers, after the payment of wages, the purchase of materials and supplies, the repair and renewal of machinery and plant? I answer, This surplus, in the case of any employer, represents that which he is able to produce over and above what an employer of the lowest industrial grade can produce with equal amounts of labor and capital. In other words, this surplus is of his own creation, produced wholly by that business ability which raises him above and distinguishes him from, the employers of what may be called the no-profits class.
"... The excess of produce which we are contemplating comes from directing force to its proper object by the simplest and shortest ways; from saving all unnecessary waste of materials and machinery; from boldly incurring the expense—the often large expense—of improved processes and appliances, while closely scrutinizing outgo and practicing a thousand petty economies in unessential matters; from meeting the demands of the market most aptly and instantly; and, lastly, from exercising a sound judgment as to the time of sale and the terms of payment. It is on account of the wide range among the employers of labor, in the matter of ability to meet these exacting conditions of business success, that we have the phenomenon, in every community and in every trade, in whatever state of the market, of some employers realizing no profits at all, while others are making fair profits; others, again, large profits; others, still, colossal profits. Side by side, in the same business, with equal command of capital, with equal opportunities, one man is gradually sinking a fortune, while another is doubling or trebling his accumulations....
"If this be correct, we see how mistaken is that opinion too often entertained by the wages class, which regards the successful employers of labor—men who realize large fortunes in manufactures or trade—as having in some way injured or robbed them....
"In this view, profits constitute no part of the price of goods, and are obtained through no deduction from the wages of labor. On the contrary, they are the creation of those who receive them, each employer's profits representing that which he has produced over and above what the employers of the lowest industrial grade have been able to produce with equal amounts of labor and capital."