Ethics of Democracy

Part 4, Economic Tendencies
Chap. 1, Department Stores

A great change is going on all over the civilized world similar to that infeudation which, in Europe, during the rise of the feudal system, converted free proprietors into vassals, and brought all society into subordination to a hierarchy of wealth and privilege. Whether the new aristocracy is hereditary or not makes little difference. Chance alone may determine who will get the few prizes of a lottery. But it is not the less certain that the vast majority of all who take part in it must draw blanks. The forces of the new era have not yet had time to make status hereditary, but we may clearly see that when the industrial organization compels a thousand workmen to take service under one master, the proportion of masters to men will be but as one to a thousand, though the one may come from the ranks of the thousand. "Master"! We don't like the word. It is not American! But what is the use of objecting to the word when we have the thing?

- HENRY GEORGE, in Social Problems Ch. V.

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The Ethics of Democracy

by Louis F. Post

Part 4,Economic Tendencies
Chapter 1, Department Stores

WHEN men specialize their work, each making only part of the things he needs, exchange is absolutely necessary. If one man, who wants food, clothing and shelter, devote himself wholly to food-making, depending upon others for his clothing and shelter, the only way in which he can obtain clothing and shelter is by offering his surplus food in exchange for them. Inasmuch, then, as in civilized countries all work is specialized, each man making only one - indeed, only a small part of one of the many things he wants - exchange is necessarily a universal phenomenon of civilized life. We all live through trading. But the natural conditions of trading do not permit each maker of one thing or part of one thing to trade his product directly with the makers of the products he desires. This is prevented by a great variety of obstructions. Not least effective among them is the impossibility of any one man's having a sufficiently extensive personal acquaintance. Various devices are therefore invented to facilitate trading, and chief among them is storekeeping.

The storekeeper makes a business of collecting at one point in a neighborhood all the different kinds of things, wherever in the world they may be made, that are ordinarily required by the people of that neighborhood. He collects these things at that point, in the quantities and at the seasons that best enable him to accommodate local wants; and he trades them upon demand for the limited variety of things which the people of that neighborhood make. He may take money instead of truck from his customers, leaving them to get the money by selling their truck elsewhere. This is the more usual method now, though truck stores still survive. But that makes no difference. The essence of the matter is this, that the world-wide system of storekeeping enables the makers of particular things or parts of particular things anywhere to trade them everywhere for the things they want. It is a system, that is to say, which binds the whole civilized world together in a commercial relationship.

In the evolution of storekeeping there have grown up two kinds of stores, the wholesale and the retail. Of each there are numerous grades, some of which assume distinctive names, but these two are the grand divisions. Wholesale storekeeping consists in collecting and storing for the accommodation of retailers, while retail storekeeping consists in collecting and storing for the accommodation of consumers.

The compensation of storekeepers is estimated in what are called "profits." When a storekeeper has collected goods in his store for the accommodation of those who buy of him, he charges for the goods a higher price than he has paid. The difference is his "profit." But out of that "profit" he must pay all the expenses of his business, including compensation or wages for his own work. "Profit," therefore, is not a distinctive term.

For the present purpose it is unnecessary to consider wholesale stores particularly, but we shall find it helpful to illustrate crudely the principle that determines the distribution of retail stores over a country.

If we imagine a small community at some distance from a trade center, a community without a store, we shall have no difficulty in understanding how the people there would do their trading. To some extent peddlers might serve them. But they would often be obliged to go to the distant trade center for the purpose of selling products and buying supplies; for the purpose, that is, of trading the few kinds of things which they make and others want, for the many kinds of things which the rest of the world makes and they want.

This journey, if infrequent, might be an excuse for a holiday. But if local needs made its frequent repetition necessary, it would become part of the regular duty of each family; and so, instead of being a welcome excuse for a holiday, would be work. And not only would it be work, and irksome work, but it would interfere with other work.

At that point, the natural desire for economy suggesting some improvement, it is easy to imagine that the different families might hire some one to make it his especial duty to "go to town" as a truckman for all the rest, delivering what they sent and buying what they ordered, they paying him wages. That has not been an unusual arrangement in such circumstances.

This arrangement could not continue long without the truckman's discovering, if he were bright, that by laying in a stock of staple articles, he might satisfy the requirements of his employers and yet economize his own labor; and he would consequently see the wisdom of proposing a modification of his arrangement. Instead of often driving back and forth to the distant town, carrying goods either way for wages as a hired man, he would offer to open a local store, where he would buy local products outright, and also keep on hand at all times a stock of goods from which his neighbors could satisfy their wants. If he did this, he would be serving his neighbors in his capacity of independent storekeeper, precisely as he had served them before in his capacity of hired truckman. But they would now be better served, and he would get his pay no longer in wages but through the "profits" of buying in a cheaper and selling in a dearer market.

It is to be understood that the foregoing example does not illustrate literally the origin of local stores, but that it is intended to concentrate attention upon the fact that the local storekeeper saves his neighbors the necessity of going or sending to a distant place to trade. Essentially he is their servant. They buy of him because it is more economical and satisfactory to allow him his "profit" than to do for themselves or through hired truckmen the work which he does for them.

It is for their accommodation, therefore, and not primarily for his own profit, that his store is patronized. Consequently, if another storekeeper undertakes to accommodate them just as well, and they buy of him, the first storekeeper can offer no reasonable objection. His neighbors are not under any obligation to allow him a better income for doing their storekeeping than some one else is willing to do it for.

The same principle applies when an enterprising store in the distant city offers to receive orders by mail and to deliver goods daily at lower prices than the local storekeeper demands. What objection can he urge to that, even if it drives him out of the storekeeping business? None. His store is a local convenience, nothing more; and when a greater local convenience supersedes it, it has no longer any reason for being.

With the understanding, then, that a storekeeper, in his capacity of storekeeper, is only a servant to his neighbors, and that when for any reason his service costs them more than equally good or better service can be had for, it is no longer a service but a burden - with that understanding clear, let us advance from a consideration of the principle of storekeeping in general to the business of storekeeping in and about the region of department stores, and from imaginary to actual conditions.

In American cities and their suburbs a vast number of retail stores have sprung up and flourished. The particular circumstances of their origin are immaterial. They came because their projectors believed that the people in their respective localities needed them, and they flourished because they enabled those people to satisfy their store wants economically - more economically than in any other way.

But now appear the department stores. These keep in stock or store all kinds of goods, from testaments to playing cards, from soda water to whisky, from a paper of pins to a bicycle, a piano or a set of furniture. Almost anything you want you can get here, in any quantity, and at prices which are not only lower than ordinary retail prices, but lower than ordinary retailers themselves can buy the same goods for from the manufacturers. Inevitably, therefore, the department store must be prejudicial to the business of all ordinary retailers, and destructive to the business of many.

So it is not remarkable, in times when business clamors for Congressional and other legislative protection, that small retailers should put forth pleas for protection by legislation from the encroachments of department stores. But is legislative protection really possible? Reflection should satisfy any one that it is not.

It is not department stores but retail buyers that close small stores. What the department stores do is to offer goods at low prices, and buyers do the rest. If department stores are really, all things considered, more economical and otherwise satisfactory than small retail stores, the people will keep on buying at them; and no law that either is or ought to be constitutional can stop it. If they are really economical it would be as futile to attempt to legislate against department stores in the interest of small stores, as to legislate against railroads in the interest of canal boats or stage lines, against electric cars in the interest of hack drivers, against steamships in the interest of sailing vessels, or against labor-saving machinery in the interest of trades unions. The economical instinct is too potent a force for any restrictive legislation long to resist.

On the other hand, if department stores are in fact not more economical than small stores, no legislation is necessary. They may last a little while as a fad; but unless they really do economical service for consumers, consumers will soon forsake them.

The question is wholly one of economy; wholly a question of saving labor. It is another form of the question of labor-saving machinery. What small storekeepers complain of is the same thing in essence that printers complained of when the type-setting machine displaced so many of their number. The cry of pain which the small storekeeper emits merely shows that the labor problem is pinching him for a solution, and that the problem is by no means so funny nor its solution so simple as he thought when it only pinched "workingmen." Being a question of economy, this department store question must be settled, like all other phases of the labor question, not by legislative restrictions upon the economical instinct of any men, but by giving to that instinct in general unobstructed play.

Not alone is it true that legislation cannot suppress department stores if they are a genuine advance in the direction of economy; it is also true that legislation ought not to be used for that purpose even if it would be effective. Such legislation would be in essence legislation against buyers, to prevent their economizing. That is a purpose for which legislation cannot be rightfully used. It would be legislation for the purpose of forcing the community to support men in a business which has ceased to be serviceable. That, also, is a purpose for which legislation cannot be rightfully used. No man, no class, has the moral right to invoke the law-making power to maintain a business which the people if left to themselves would refuse to support. The law-making power that responds to such a call prostitutes its functions.

Would we, then, see men thrown out of all employment by the encroachments of economizing improvements? By no means. We should labor and plead, on the contrary, for a complete emancipation of the natural opportunities for employment, so that no one could possibly be idle against his own will.

There is no limit to the work that men want done. No machinery can restrict it, no possible extension of the department store system can lower the demand. The cheaper we get things, the more things we want and the more work we therefore require. Natural demand for work is always in excess of the supply. But in existing industrial conditions natural demand is not free to express itself. Effective demand, therefore, is in those conditions always less than the supply.

If natural demand were free to express itself, new machines would mean more demand for workers instead of less, and department stores would put greater life into trade instead of stagnating it. But the demand for workers is held in check by monopoly of opportunities for work - monopoly created and maintained by statute law in hostility to natural law.

While this exists, every new labor-saving machine threatens the livelihood of great masses of workingmen; and every extension of economies in trade, by means of department stores or other forms of concentration, becomes a growing menace to the business of small storekeepers. But if legalized monopoly were abolished, all economizing processes would be blessings alike to consumers and producers, to buyers and sellers.

The department store problem, like the labor problem, is at bottom only a phase of the general problem of legalized monopoly. It is to be solved not by further protective legislation, but by legislation destructive of the legislation upon which monopoly in general rests. When that truth once takes possession of men who feel the pinch of industrial conditions, and of those who sympathize with them, a new light will dawn. Then competition will be recognized as cooperation, and be fostered until it is wholly free; then everything that saves labor will be welcomed by every one who lives by laboring.

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