Ethics of Democracy

Part 4, Economic Tendencies
Chap. 2, General Business Concentration

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 2, General Business Concentration

THE most significant tendency of modern business, not only in storekeeping but in nearly every other sphere of industry, is production on a large scale - business "concentration," or "organization" as it is commonly called. Opinions as to the beneficence of this tendency doubtless depend greatly upon the point of view. The head of a large and flourishing establishment would naturally look upon it very differently from the small producer whose field of industry has been invaded and his living possibly taken from him by large concerns. But there must be some test by which to determine, regardless of personal interests, whether or not concentration is socially injurious; and the rational test would seem to be one that makes the question hinge upon the character of the impulse back of the concentration.

When the object and effect of changes from production on a small scale to production on a large scale are economy, the new method requiring less labor than the old, then the tendency is normal and therefore calculated to be beneficial. Concentration for that reason and with that effect is but a form of labor-saving invention. It produces more or better things with no more labor than before, or the same things with less. What the steam car is to the ox cart, production on a large scale is to production on a small scale. The factory is an example. Advance in manufactures, from the production in little shops of half a century and more ago to the wholesale production in great modern establishments, has been because the latter method is cheaper - because, that is to say, it yields better results with less labor. The change is natural, and if in practice it has hardly been altogether beneficent, this is not due to the change from a small to a large scale of production, not to concentration so-called, but to industrial maladjustments which prevent the benefits of the improvement from being fairly shared.

But a very different impulse may cause business concentration. When it is adopted not as a cheapener of production, but as a method of killing competition, then the tendency it expresses is abnormal and unwholesome. Of concentration from this impulse, the trust is the great example. Trusts have for their object and effect, not the object and effect of labor-saving inventions - not the multiplication of products, not the lessening of the labor of production, not the cheapening of prices, - but the curtailing of production for the purpose of forcing prices up and wages down.

Prices of trust products have indeed been known to go down, but that has always been in spite of the trust and not because of the trust. It has been because the trust was too weak for its purpose. No trust has ever yet lowered prices except in response to competition or in fear of it, a force which it is the principal aim and object of trusts to destroy. Though trusts wear the garb of economical concentration, and so mislead both those who oppose and those who favor them into confusing them with natural concentration, as if the two were identical, trusts are no more the same as natural concentration than the wolf wearing Red Ridinghood's cloak was Red Ridinghood herself.

This distinction between natural concentration for increasing production, and trust concentration for diminishing it, should be borne in mind when industrial questions that relate to production on a large scale are considered. If the change from a comparatively small to a comparatively large scale of production be arbitrary, if it be a mere combination of individual establishments to stop competition between them and to prevent competition from other sources - if, in a word, it be a trust - then the change is unnatural and oppressive. But if the change be a genuine labor saver, something which instead of lessening production increases it, instead of weakening competition intensifies it, then the change is natural and the result will be beneficial.

Put to this test, such concentrated mercantile enterprizes as department stores would appear to be beneficial. Their object and effect is not to increase prices but to lower them, not to lessen production but to augment it, not to prevent competition but to intensify it, not to obstruct the consumer but to accommodate him. Like the great factory, therefore, they are an example of the normal and beneficent tendency toward production on a large scale - an instance of legitimate concentration. And as the factory has displaced the small shops or changed their character, so the department store will in great measure, if not wholly, as related improvements come in, displace or change the character of small stores. Should this seem hard upon the small storekeeper, it is not more so than the railroad was upon the stage driver, or the linotype machine upon the old compositor. Even if the change could be prevented, the prevention would be unjust. Though it might appear to benefit small storekeepers, it would actually injure consumers. But, being a natural development, the change cannot be prevented. It is a condition which, like rain and sunshine, must be taken as it comes. And but for industrial maladjustments which obstruct the diffusion of its benefits, no one, not even the displaced storekeepers themselves, would for one moment desire its prevention.

As to bonanza farming, there is reason to doubt that it is in fact a labor saver, though it is said to have driven out the farmers of New England, and to threaten small farming even in the West. The argument as to New England rests upon an asserted decline in farm values, but that does not support the argument. While it is true that some farms in New England have fallen greatly in value, it by no means follows that this has been caused by the competition of bonanza farms. It is more likely to have been caused by the shifting of the uses of land in New England, a view which is confirmed by the fact that while some land values in New England have fallen, land values there in general have enormously increased. The region has been going through a transformation, from farming to more advanced industrial uses. It may be that this change has been brought about by Western farming. If so, however, that is because the greater fertility of the West has been made available by railroads, and not because there are bonanza farms there.

If in the West small farming is in danger from the bonanza farm, the fact has yet to be shown. It may be in danger from discriminations by railroads; but farmers are not wanting who assert that in the absence of special railroad privileges, bonanza farming cannot compete with farming upon a small scale. Assuming, nevertheless, that production on a large scale is as normal in agriculture as in manufactures and merchandizing, the time must come, upon that assumption, when small farming will give way to bonanza farming, just as small shops have given way to large factories, and as small stores are giving way to department stores. If bonanza farming can produce the same results as small farming, with less labor, or better results with the same labor - if, that is, it is truly more economical - then bonanza farming is destined to be the farming of the future. And it will, in that case, be beneficent, even to the small farmers, unless industrial maladjustments interfere with the normal distribution of its benefits.

What makes the prospect of production on a large scale so ominous, and it is ominous indeed, is the thought, expressed or felt, that the change implies in its culmination a state of society in which the few will be masters and the many serfs. We think of large factories as being under the mastership of manufacturing "barons," whose employes are slaves without the ordinary slave guarantees of support. Department stores associate themselves in imagination with merchant "princes" attended by hosts of cringing clerks. And it would be difficult to conceive of bonanza farms without bonanza "farmers" and their gangs of dependent "hands." Such, too, will most assuredly be the outcome if we allow maladjustments to perpetuate themselves, and to extend into the era of production on the largest scale.

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