CAPITALISM. "Capital" may be most briefly described as wealth used in producing more wealth; and "capitalism" as the system directing that process. This latter term came into general use during the second half of the 19th century as a word chiefly signifying the world-wide modern system of organizing production and trade by private enterprise free to seek profit and fortune by employing for wages the mass of human labour. There is no satis factory definition of the term, though nothing is more evident than the thing. Arthur Young (1792) calls capitalists "moneyed men." Coleridge as early as 1823 distinguishes them as having "labour at command." This latter aspect, seized upon by Karl Marx, is emphasized by economists whether favourable or hostile to the individualist method. The expression "capitalism" is of Socialist origin and was used at first with an implication of reproach. It has been accepted by those whom it meant to stigma tize; and is now the name—as opposed to Socialism—of the pre vailing economic system. As the ruling alternative to Socialism it claims to be more modern in thought, more creative in result, surer of the future because more capable of raising the average level of material prosperity and happiness, while enhancing the vigour, variety and zest of life by a richer play of personal initiative. Its undeniable defects and the proposals for its improvement will be examined towards the end of this article.
The economics of capitalism are so deeply involved with politics and all sociology that it was regarded until lately as a subject unfitted for scientific treatment. While Socialist indictments were elaborate, the positive case for capitalism was hardly stated. Only in recent years has it found a separate heading in works of refer ence. It is still excluded from the latest re-issue of the English Dictionary of Political Economy. After some hesitation it has been rightly included and treated at length in the new post-war edition of that massive German compilation, Handworterbuch der Staatswissenscha f ten.
I. Capitalism in Action.—Strange to say the growth and working of capitalism have received not a tithe of the attention devoted in our time to Socialist theory. Science has been defined as accurate description of observed results. Modern capitalism offers to accurate description a subject to be studied like physi ology. It is more nearly a universal force than any other, spiritual or material, yet known. It operates and extends amidst all races, colours and sects. It is active more or less in all nations. Even Soviet Russia, it appears, has been compelled, in effect, to recognize private ownership of the land—including the superiority of richer peasants over poorer—and to restore private trade to a certain extent in towns. The only anti-capitalist Government craves loans from capitalist nations. In consequence of these les sons, the Socialist and Communist pleas for the overthrow of the existing system of private property and free enterprise are more decisively rejected by a large majority of the world. Capitalism prevails more strongly than ever, in at least six-sevenths of the world. In the remaining part—t he immense Eurasian territories of the Soviet republics, more truly called the Soviet empire—a gen eral reversion to private ownership and trade seems likely to take place in the long run, though the residue of State control may remain larger in the Russian system than in Western societies. Elsewhere private enterprise animates economic life in all the con tinents and impels their interlinking traffic. It is the strongest pervading influence in the daily affairs of all civilized peoples.
Everywhere the soil which feeds all other human activities is in the hands of private owners whose numbers have largely increased, especially in eastern Europe and Russia, since the World War. Mines everywhere—outside the Soviet territories—are worked by capitalist enterprise. Transport by land, sea, inland waterways and air is conducted generally by private direction utilizing the funds supplied by hosts of individual investors. The towns and cities with their factories and workshops; with their dense populations sustained by work for wages ; with their myriad agencies of dis tribution by middlemen ; with their conditions of housing, supply and conveyance—all these are creations of modern capitalism. It is the agency whereby the intellectual achievements of thought and invention enter into the practical service of human life in all its forms at all its moments. And this by means of an innumer able variety of mechanisms ranging from engines of giant mass and power to devices the most minute and delicate. The tall chimney appears as a symbol at Rome and Athens, at Jerusalem and Benares, and Peking and Tokyo. An enormous enhancement of the productivity of human hands has brought into being some hun dreds of millions of civilized populations who could not have existed and subsisted without it. As it has enlarged and altered the white societies out of recognition, capitalism reaches into the depths of the newer continents and is stirring anew the ancient Asiatic peoples; while in a single half-century it has penetrated the Dark Continent from end to end and transformed all African conditions.
Then in the latter half of the i 8th century came the industrial revolution. It has worked and spread with cumulative effect through five generations of invention and social change. Fixed and mobile machines, steam-power, oil-power and electric energy with its long-distance transmission of signs, sounds, light, heat and propulsion—these, purchased and directed by free enterprise in the economic sphere, are the present instruments of capitalist or ganization in the loth century as already very generally described. There is as much difference between the contemporary world and the world of a little more than a century ago as between the 18th century and the higher stone age of io,000 years before. The strong characteristics of the present phase are threefold: (r) the magnitude of capitalist operations far exceeds former example : the vigilance of their intelligence-departments must reach to the ends of the earth ; trade and investment are international ; every manufacturing nation, even the United States with all its self-sup plying resources, seeks to derive raw material or choice commod ities from every region of the globe and to find in every one of them a market for goods or money. (2) Larger aggregates of labour are directed by larger corporations and companies, amalga mated or federated. With its trusts and syndicates and other forms of consolidation, capitalist management is forming into fewer but more massive units. The relations between employers and employed depend more and more upon impersonal system, less and less upon individual attachments or dislikes. Yet excep tional personality, as in the case of Henry Ford, is more important than ever for progressive efficiency of production on the capitalist side while promoting wages, welfare-work and other encourage ments in the way most likely to induce labour to give its best ef fort. (3) Though capitalism concentrates the control while ex tending the scope of its operations, as Karl Marx foresaw, the company-system confounds his chief expectation by immensely increasing the number of participating investors—multiplying small shareholders and widening the social basis of the system.
During the last few decades and especially since the World War, the improvement in the character of the system has been in fact sweeping. When the Marxist creed was framed much of his ter rible indictment was true. This must be confessed by those who reject his constructive fantasies. Machine-industry, still in the crude beginnings of its evolution, was like Milton's animals emerg ing at creation, half in the earth and half out of it. Many of its aspects were deformed and its effects vile. Swarming populations were huddled into mazes of mean streets, alleys and courts, put up and linked on without civic plan and regardless of health and decency. Throughout Great Britain the foul slums already pre sented a scene of ugliness and squalor such as civilization had never beheld. The large majority of the adult workers, and more than half their children were totally uneducated. The Factory Acts were only just beginning to build up what became one of the finest codes of humanitarian legislation in the world. Before the first act was passed, parliamentary committees had exposed the horrors of child-slavery in the mills; women stood at the loom from morning to night sometimes for 15 and 16 hours.
As the common soldiers had been called "cannon-fodder". in war, the common people at this time were "factory-fodder" in peace. The defensive efforts of trades unionism were still scattered and feeble. The employer was in an absolute sense the "master." As profits rose and fell hands were thrown on the streets or taken on again. The hours of all labour were cruelly long and wages wretchedly low. Capitalism at that phase was in fact a wrongful exploitation of flesh and blood. We must not lay all the blame on the capitalists. Narrow lights usually were all they had. The pre vailing classical economists taught that unrestrained competition was the spring of effort and the key of progress; that the poor in the lump must always be cheap; that labour by fatalism would always breed fast enough to keep wages at the lowest level required for human subsistence. In the leading industrial nations these conditions and ideas have been swept away long since in a manner that Karl Heinrich Marx could not foresee ; but the memory of former wrongs and evils still prejudices the name of capitalism.
5. The Creativeness of Capitalism.—Now—though much re mains to be done—the working of the system as a whole is incom parably more satisfactory and enlightened. It maintains the indus trial masses of most white communities, but above all in America, at a higher level of prosperity than ever was reached before. Tem porary post-war conditions shadow the European picture ; but it is true even in Europe that the workers generally are somewhat better paid for shorter hours than in any previous period; that they are better fed and educated, housed and clothed ; that they are better secured against all the preventable ills of human life; and that their opportunities for advancement and enjoyment have largely increased. Take first the question of creative success. Capitalism claims that however great may be the rewards it acquires for itself, it results in higher earnings, cheaper consump tion and more various advantages than labour could have obtained otherwise. And how is this brought about? By ceaselessly seeking extension, improvement, novelty, by seizing on every idea likely to cheapen costs and enlarge turnover, by looking vigilantly for the ablest persons, free enterprise is dynamic and progressive through the rule of its nature.
More surely and quickly than ever before, the backward or stationary methods in business are eliminated by energetic and resourceful rivalry. Freedom of enterprise works in many ways as a creative force in economic life. It stimulates originality of ideas, ingenuity of method, boldness of attempt ; qualities that the rou tine of public administration tends to fetter or stifle. The capital ist in this way shares the spirit of the adventurer, to whom pursuit of the personal idea is the breath of his being, and of the artist for whom freedom of individual expression is the vital condition of creativeness. Capitalism swarms with imagination in action. Every day thousands of heads in business, relying on their own perception and courage, are taking decisions and risks from which any public official or committee would shrink. Fresh initiative and invention never can be the characteristics of Government depart ments, least of all under democratic conditions where the dread of hostile criticism is a continual deterrent from any attempt, how ever successful in the long run, which at first only appeals to a few —or to one. Again the swift use of time is part of the essence of success in private enterprise. Public officials and offices have to wait until "opinion is ripe"—until they can count upon the approval of the many, and that commonly takes a long while. For these reasons, capitalism gives to economic life a vigour of impulse and creative fertility which no other method yet suggested seems likely to supply in anything like the same degree. By comparison —argue the modern advocates of individual ownership and direc tion—Socialism would mean at least arrested development, and probably an actual decline in general prosperity and welfare. Many a great undertaking employing thousands of workers has sprung from the idea of a single mind or from the intrepid judg ment of a single character finding beforehand amongst other men little support or none.
6. Vital Elasticity of Capitalist Organization.—Capitalist enterprise large and small concentrates in millions of ways particu lar minds on particular The needs, desires of every day in a civilized society, the new wishes always being awakened by new things offered, these are as the sands for number and the sea for endless changes of shade and motion. Consider the numbers of capitalist persons who are engaged in making in gross and detail the countless adjustments between supply and demand in their infinite variety. Conceive all the different processes of specialized intelligence that are involved. It becomes impossible to imagine in the present state of science how this living maze of private activi ties, each bent upon some one part of supply and demand, could be replaced under any form of Socialism by officials and commit tees without the same scope for personal initiative and contrivance —thus lacking the acute attention and supple adaptability that the present system on the whole compels. This is a chief ground for the conviction of thoughtful interpreters of capitalism in every great industrialized nation that private enterprise is not only the most powerful force of economic creativeness, but also the most elastic means of economic organization for adjusting supply and demand.
Private capitalism makes overseas investments. In any country it may provide funds for developing the productiveness of other countries; of regions thousands of miles away; building railways, opening mines and oil-fields, financing plantations—as for rubber —founding banks. British investments, for instance, in North and South America, in Asia, Africa and Australia—above all in United States railways during the generation after the Civil War—have done more than anything else to provide British labour with an abundance of cheap and varied food on the one hand, and on the other with cheap raw material to the benefit of employment and wages. Once more, we find it not easy to see how any kind of Socialist State could make overseas investments in this way, or conduct inter-connected banking, or maintain the present complex and sensitive mechanism of credit—that most wonderful achieve ment of creative capitalism—or provide and allocate the fresh capital required for the advance of industry, employment and wages. Under the present system, this fresh capital is furnished by the private accumulations made possible by freedom of private action.
7. Progress of Labour-enhancing Equipment.—Turn to another aspect—progressiveness in equipment. Modern capitalism depends chiefly on steam-driven or electric mechanism energized by coal, oil or water-fall. The rapid increase in our own time of the part played by mechanism in comparison with hand-labour is not less marvellous than were the beginnings of industrial inven tion. It is stated, for example, that in the most modern engineer ing shops 8o% of the work is done by the machines and only 20% by the attendants. One attendant may now keep in play several machines doing the former work of scores of men. The eagerness of private capital to perfect equipment has given increasing stimu lus to invention. In any Socialist State political pressure arising from fear of unemployment would have prevented that State, were its democratic opinion genuinely free, from pushing technical progress to the utmost as capitalism largely does. By the astonish ing increase of miracles in metal, performing their intricate proc esses as though actuated by a mysterious intelligence of their own, the present productiveness of manual effort is enormously raised by contrast even with the latter part of the r 9th century. Supply is cheapened, demand widened, the conveniences of life made more numerous and accessible, while employment is steadily enlarged in civilization as a whole. Human well-being is vigorously advanced in all material respects.
Other characteristics of capitalism, especially in the United States, where it shows its highest powers of technical progressive ness, are the standardization of models and parts, the speeding-up of processes, and the elimination of waste whether of material or time. These things are now made the subject of close and even subtle study. Nothing human we know ever can be finally perfect ; ideas always are in advance of achievement. But when we look at such large effects of Capitalism as are unquestionably good, every dispassionate thinker must admit that the system is as prodigious in ingenuity as tremendous in power. The present writer holds it to be altogether unthinkable that production and exchange in the modern world could have been developed by any other means to anything like the present extent.
8. The Human Factor and the American Example.—We pass here to another and deeper part of the examination. We have studied the working of modern capitalism as a means of animating production and facilitating exchange, stimulating demand and adapting supply ; and we have seen reason to think that any exten sive attempt to replace it by public ownership and management would mean something far less plastic and fertile, incapable of the same degree of wealth-making power and distributed prosperity. But what is the effect of capitalism on the labour it employs—that is upon the large majority of human beings where the system pre vails? How far does it serve the greatest good of the greatest number? Again—though ideals must always move ahead however far practical improvement marches—we must note that since the time when Socialism formulated its charges and framed its dogmas, there has been a surprising change for the better in the principal matters of wages, hours and provisions, for personal health and physical security. A steady general movement has reduced work ing time and raised money-earnings ; and also real earnings as measured by purchasing-power. That any system of public owner ship and official control could enable a less amount of labour to enjoy an equal buying-power is an assertion out of the region of proof and any man is free to think it as far beyond credibility. This is, of course, a central point in the discussion.
It cannot be said any longer that capital habitually and neces sarily extracts from labour an undue effort for an unjust reward; that manual workers are, demonstrably and usually, paid less than that part of the value which they contribute to the selling-price of the common product ; or that average labour could hope to earn more or as much per hour if the creative aid of free enterprise were abolished. "Exploitation," in the sense of the old-fashioned Socialistic phrase, when the evil fact prevailed, is no longer a typi cal accompaniment of the economic system in the leading capital ist nations. No doubt, the success of labour in securing the utmost proportion of the selling price compatible with production at a profit differs much in different countries. On the European conti nent, as in Germany, wages on the whole bear a lower ratio to profit than in Great Britain where various convergent influences— trade unionist pressure reinforced by political power on the one hand, and on the other, a unique degree of freedom from indirect taxation coupled with large contributions by the minority of direct taxpayers to popular benefits—enable the working-classes to exact as full a payment in proportion to output as can be given without threatening the disappearance of profit and the debility of enterprise.
In America, however, where what we might call the new or re formed capitalism is in operation on the largest scale, high wages are accepted and welcomed as a vital principle of creative capacity in a way that Europe is only just beginning to comprehend. But what is the inference? Obviously that capitalism everywhere can follow where America leads—that capitalism as a system is by way of becoming a more willing and vigorous instrument for the great est good of the greatest number than original Socialism could imagine. In the United States over a hundred millions of people have reached common standards of comfort and enjoyment far above the best known in Europe and immeasurably above any social achievement in the world's history. As has been said this gigantic example in the United States of wealth-making, with a large-minded distribution of the proceeds, is the result of equip ping man-power with all the mightiest and nicest aids of machine power. Models and parts of the things to be made are standardized to cheapen repetition and replacement ; all unserviceable complica tions are cut out ; the processes of production are speeded up while more and more waste is eliminated. Far as that remarkable process has already gone, its further possibilities are seen to be very wide. Profits are sought not by making high prices an object in them selves but by reducing prices in order to enlarge demand and quicken turnover. In America individual abilities find the freest scope, the promptest recognition and the amplest reward.
The welfare of the workers is promoted by bringing into the factory system more safety and health, more lightness and bright ness. Expert research into the possibility of improving mechanism, processes and use of materials is more widely and liberally encouraged than anywhere else. The spectacle of hosts of Ameri can workmen with their own motor-cars is a thing that would have staggered Karl Marx. Most of his generalizations drawn from the temporary conditions of mid-Victorian England are con founded by 2oth-century America in general and particularly by the methods of Henry Ford. As an instance of the extent to which material progress may increase moral resources it may be noted that more money is spent in America on education than in all the other nations together. It need hardly be said that we must not conceive a perfect picture even of the United States. Not all the fields of American industry are Elysian fields. American thinkers assert that in some coal-areas in America relations between capi talism and labour are harsher than in western Europe ; and that in other industries the example of the most progressive employers is far from being sufficiently followed. Some European experts pro test that superabundance of wealth and material is still causing more wastefulness in certain directions than the scientific anti waste movement is removing in other ways. But on the whole the American scene is magnificent in economic achievement and full of human promise. As against the culmination of the success of private enterprise in the United States, the only example of thor ough Socialist attempt on a large scale is Russia as we see it.
9. The Widening Social Basis of Capitalism.—Modern facts refute the prediction that wealth would be concentrated in fewer and fewer hands until capitalism, more and more isolated, was either terminated by helpless surrender or overthrown by the in surgent violence of the exploited masses. Taking civilization as a whole the relative numbers of those personally interested in the maintenance of private enterprise grow every day. Under the company system we have seen continual and accelerating rein forcements of the ranks of small investors and owners of every kind. Hosts of people who work for salaries and fees prefer the private system and decisively reject the other, many of them no doubt as much desiring the further reform of capitalism as opposed to its abolition. This movement has begun to act on labour proper in a manner that is one of the more suggestive revelations of our time. The United States is far ahead on this line also but it only leads the progressive ideas of capitalism elsewhere. It is estimated that the number of small stockholders in the United States is (1928) over io,000,000. Large numbers of workers have holdings in the concerns which employ them. In some cases, thousands of workers contribute their savings to nourish capitalist enterprises and are members of the corporations they serve. In one large motor concern over 90% of the employees are buying stock on the instalment plan. In another business the investments of the work ers give controlling power. Yet another company's employees doubled in one year their holdings of its stock. It would seem difficult to overestimate the importance of several influences belonging to this novel development.
W itb bigger wages for bigger output there is incentive to thrift ; a spur to energy and aspiration; a discipline of character; an inter est in the business as a whole and in the wider fields which it serves; a stimulus of economic intelligence ; an added sense of responsibility ; and a gain to the spirit of life. It must be remem bered that the actual majority of the population in France are small capitalists whether as property owners or rentiers. In Great Britain, on the one hand, individual investors in company shares are a big aggregate ; while, on the other hand, many millions of the working-class population, probably a third of the whole, are inter ested in the public funds through the war certificates and savings banks deposits. Lively interest is aroused by plans for profit-shar ing and co-partnership. The familiar instalment system in the United States and building societies in Great Britain have induced some millions of persons in the last half-decade to become private owners by buying the houses they live in. In Great Britain as in Germany the schemes for associating labour by consultative com mittees with the management of industry are more or less officially encouraged. In the United States the voluntary action of capital has made a beginning with the same method. This movement as yet is rather an experiment than a power. Later, in connection with stockholding by labour and schemes of profit-sharing, the method of joint councils may well arrive at epoch-making results.
1o. Summary of the Present Position, l928.—We may now state the salient features of a full view. Capitalism generally in its world-wide undertakings has risen to this height and breadth of productive and distributive success. Where capitalism is most powerful, as in the United States, labour is more prosperous than at any previous phase of history and asserts a better individual status. On the other side of the Atlantic, Great Britain possesses most capital in proportion to population ; and there, accordingly, wages are much higher on the whole than in any country of the European continent. Where wealth thus created is most abun dant, the provision for education is more liberal, as in the United States ; or as in Britain the evils belonging, amongst the workers, to sickness, accident, disablement, widowhood, orphanage and old age are mitigated by State-aid maintained by increased taxation chiefly levied on the capitalist classes. While capitalism does in fact tend to concentrate into fewer and larger organiza tions the total number of investors has grown rapidly. The capital ist system is indeed built pyramidwise, but instead of coming to a last hopeless attempt to stand upon its apex, according to the Marxist vision, it broadens its basis more than it raises its altitude. The original Socialist predictions have been falsified, with the usual irony of human anticipation.
II. Capitalism and Unemployment.—None the less we must take account of revised Socialist criticism and enquire into its validity. Charges to some extent contradictory have been partly answered in passing. Capitalism is still accused of responsi bility for avoidable unemployment, arising from the periodic alter nations of climaxes and depressions in trade activity, of "booms" and "slumps," to use the coarse but telling jargon. It is certain, however, that though there must always be some tidal movement of rise and fall, the former violence of these rhythms is now much abated in times of peace owing to longer experience and fuller knowledge ; to swifter information in every part of the globe of what is happening in every other ; to quicker transport, the better calculated control exercised by the great trusts and syndicates as indirectly by the great banking combinations ; and to the better adjustment altogether of the world-forces of supply and demand. These improving tendencies, we must note, belong in their nature to a condition of peace. General war in the modern world is a catastrophe followed by an exceptional mass of unemployment in the countries where trade and finance have been most severely dis located by hostilities. Extreme Socialists ulame capitalism for war as for every evil. They are deluded. Racial passion, fears and claims are main causes of war far older than capitalism, which though in some of its forms sharing and even stimulating the bad or mad feelings existing without it, is on the whole amongst the more pacific influences, especially in its form of international finance. Before the World War chronic unemployment in a coun try like Germany had been reduced to about 2% of a volume of labour continually expanding. This shows that the higher figure in Great Britain was not due to any defect necessarily inherent in capitalism.
The United States at the same time was subject as it were to larger and looser forces which have since been restrained. Unem ployment is far from being only a question of economics. It is pro foundly affected by biology in the shape of a lower or higher birth rate and by policy in the shape of tariffs or of more or less restricted emigration. Psychology plays its part, as in the changes of taste and fashion, which throw out particular bodies of workers from time to time. As nothing suggests that official management of industry could have created the extent of employment now existing in the world, so there is no reason to believe that the most complete State control could make the movements of rise and fall in trade milder than they have become. No human system, let us repeat, can hope to be perfect. Before modern capitalism existed —for instance, in mediaeval times, often absurdly regarded as a golden age—the chronic unemployed abounded as beggars and vagabonds ; while every bad harvest diminished work in the towns ; and recurrent famine meant disaster for urban labour as well as rural.
12. The Questions of Speeding-up, Subdivision and Mo notony.—Frequently, still, capitalism is accused of lowering the physique of the worker by the modern intensity of speeding-up in machine production ; and of injuring the mind and moral being of the worker by a remorseless monotony. The first indictment generally seems untrue, and the second very exaggerated. As regards human health the statistics for many manufacturing cen tres are favourable beyond any known example in previous his tory. For instance, the industrialization of Germany after 1871 was followed by an increase of longevity. The average duration of individual life was raised from about 37 years in the decade 1871-80 to about 47 years in 1900-10. Though sanitation plays its part here, capitalism is evidently no obstacle to sanitation any more than to education or to any other good human purpose. The wealth it makes supports these things. But then it is re peated that machine-industry at least injures the mind and spirit of the worker by extreme subdivision of effort, involving an eternal repetition of work on small parts and thereby a soul-killing monotony. We come to a very interesting discussion where the worst conclusion of the argument would cut both ways. In fact this general injury to the cheerfulness of the workers is not to be observed. Their demeanour at football or baseball matches and at the cinema or on any of their holiday occasions does not confirm the theory of their psychic depression. On the one hand, those workers who execute with their own hands and repeat endlessly only one small part of a process of manufacture are in sight of the manifold and stirring organization of the whole. More and more, as in America, the miracles of the machine quicken their intelli gence, especially as their education advances. Again, millions of the more expert artisans work in teams, as it were, on mechanisms of colossal power and intricate cunning which are always dramatic. The linotype operator, yet again, repudiates the suggestion that he is a more soulless being than the old compositor who set type by hand, while no chauffeur will admit that he is less intelligent than the old coachman.
13. "Socialism No Solution"—Capitalism or "Erewhon." —In any case this particular argument against capitalism is a tool which turns its other edge against the user. So far as the modern subdivision of machine industry is disadvantageous, that is evi dently the result of the whole modern movement of technical sci ence and not of the capitalist application. Under Socialism a fac tory would be still a factory. Public ownership would have to take over the buildings and plant, and pursue the same methods of mechanical efficiency, with all such monotonies of minute repeti tion as are now denounced. Without destroying the basis of indus trial employment and of the manufacturing towns Socialism could not do otherwise; and therefore by no possibility could it make such large changes for the better in the average conditions of human life as it is accustomed to assume.
Some anti-capitalist thinkers say, indeed, that the whole system of industrial civilization is a mistake; that it has brought into being excessive masses of people who are only higher kinds of automatic machines; that man loses his true happiness and deepest faculties and strongest character when divorced from nature and the soil; that the country originates the abilities which the town devours; and that the true solution, as in that profound satire "Erewhon," is to destroy the machines, prohibit their revival, and to return to agriculture and handicraft. This is a fascinating vision of ideal romance, and it sounds a moving chord to the ear of imagination ; but as a practical argument it offers no escape. It comes too late. The industrial revolution is there, far advanced, and irreversible except by some catastrophe which would engulf all white civiliza tion. Labour on the soil means monotony and repetition of an other kind with a harder life. Variety and leisure are far from the traits of the French peasant's existence. No average town-worker afflicted by the evils imputed to capitalism is willing to go back to the spade and the plough. On the contrary, agricultural labour is more attracted by the towns ; while, further, the prosperity of farming and pasture depend on supplying the swarming popula tions called into being by capitalist industry. And yet, as Ameri can practice shows, the machine is becoming as indispensable to the farm as to the factory. It makes man's life on the soil less hard yet more fertile. These inter-relations of machine civiliza tion must be accepted. The real problem is to make the best of them.
In some countries, certainly in Great Britain, the chief com plaint against excessive profits comes rather from the consumers. They complain of middlemen even more than of "rings" ; and political action in Great Britain distinctly tends toward restrain ing prices thought unfair. The threat of interference is in itself some deterrent ; but the consumers have no belief that labour con trol would mean cheaper supply. Yet public opinion insists strongly that trusts and syndicates shall not exploit the consumer in the temper of the old monopolies. Capitalist concentration may safely result in any extent of profit to the promoters so long as, by lower not higher prices, and by more assiduous services, it conduces to the plain advantage of the general community. Other problems raised everywhere by progressive, non-Socialist programmes are inherited wealth, the "idle rich"; pretentious and wasteful osten tation or what is called "prurient luxury"; efforts to acquire by the influences of money oligarchical or even pro-consular power over the nominal forms of political democracy.
It seems tolerably certain that democracy in the end will pre vent or limit the enjoyment of the advantages of wealth by those not contributing to its creation by personal effort. Even on this question, which affords a facile means of appealing to popular indignation, we must discriminate. We must remember that as a rule the "idle rich" do not represent idle riches. Their money is for the most part invested.in productive enterprise, and their per sonal waste is by comparison an inconsiderable mischief. Never theless wealth without work, however its actual evil may be magni fied in popular imagination, is seriously obnoxious to democratic susceptibility. The case for active capitalism is fortified by every measure public and private tending to restrain the power of money in the hands of indolence. That excess of personal indulgence de scribed as "prurient luxury" has been known in all ages under all systems. It occurs in the present day under capitalism, Bolshe vism, Fascism, Kemalism, as an abuse not only of the corrupting possibilities of private wealth but of the equally corrupting possi bilities of every kind of political and social influence wherever those who possess it seek to gratify a vicious habit. This immemo rial disease has no moral relevance to modern capitalism as a system, and could not be cured by the abolition of private wealth. It is a problem of personal morals which has recurred under every social system, and can only be grappled with by methods not in spired by economic considerations.
Lastly, it must be recognized that a different kind of abuse is the broadest blot on the capitalist system. In cases no longer so common but still not infrequent, providers of capital, taking no part whatever in the active management of business, are content to receive big dividends without extending any kind of profit sharing or co-partnership to the salaried experts and workers for wages who in combination produce the dividends. The principle promising to spread in the future is that the interest on passive capital should be limited to some definite though not grudging figure; that the rewards of creative management should be in full proportion to the results achieved by ability or genius; that all workers in a business should have some definite personal induce ment to work for its increasing success.
16. The Future of Capitalism.—While prophecy is vain, "probability is the guide of life." We must frame our estimate of what is probable, as well as of what is attainable and ought to be attained. As Socialism inspires vivid dreams, capitalism for its moral vindication must have ideals as definite and more prac ticable. There is a rising supremacy of liberalizing public influ ence. Advanced social thinkers who are yet deeply opposed to Socialism, believe that private enterprise which they hold to be the best wealth-creating force is in gradual process of becoming also the best wealth-distributing system in a way that will raise the average of human prosperity to still higher levels. They antici pate, therefore, that the interest on "passive capital" will be lim ited by maximum rates never so low as to discourage saving and investment ; that the directing ability of active capital must re main entitled as now to large rewards in proportion to success in enterprise ; but that as the education of democracy progresses labour will not only receive wages steadily increasing relatively to profits, but will everywhere share in the division of profits, while becoming more and more associated in consultative councils with the management of industry, and enjoying every possible oppor tunity to rise from the ranks.
In this fashion, therefore, capitalism would realize in the end all that is really sound in the practical ideals of Socialism while preserving that crea tive play of free ambition and adventure which is most surely stimulated by the chances and prizes of personal success expressed in terms of high income and acquired fortune whether large or small. To consider private profit in itself as sor did or immoral is superficial. Artists as usually as capitalists dream of large gains and splendid habits. Poets, dramatists and novelists, painters and architects, musicians, actors, still seek, or at least readily receive, as in fact they always have done, the larg est personal gains that the demand for their achievements can bring. On the basis of more and more intimate partnership be tween capital and labour as here contemplated, methods of arbi tration and conciliation would prevail and the lingering barbarism of strikes and lock-outs would disappear. The total yield of in dustry would be so largely enhanced by the fullest energy and harmony of common effort, that the earnings of the average might be far higher than now but the rewards of exceptional success not less ample nor even less dazzling. That freedom which maintains inequality does in fact lift the general level of existence, which forced equality would depress. Nevertheless, there is an ardent tendency throughout civilization to insist that the privileges of society shall only be enjoyed by those who sufficiently participate in its activities and duties; that up to a reasonable age personal work must go with wealth.
Nor is this all. As capitalism for its own sake must be an instru ment for applying the results of science to the general advantage, its function in that respect is becoming ever more effectual and hopeful. From the dirt and crudity, the utilitarian ugliness and social miseries of the generations immediately following the begin ning of the machine-age, we are moving towards a smokeless civi lization commanding more sovereign and more subtle powers than we yet possess. The disappearing smoke is a physical symbol of the disappearance of moral evils in human relations and condi tions. The machine which in some industries already does four fifths of the work must come to perform nine-tenths of it in most industries. It is bound to eliminate the coarser kinds of heavy manual toil. We may reasonably expect that amongst the ad vanced industrial nations whom America is leading, every worker will become on the one hand a skilled man using fine touch with understanding, and on the other hand an associate of capital, taken into counsel on the general conduct of business, sharing profit and responsibility. Evolution in this manner seems more likely to be the general way of the world instead of revolution whether by leg islation or violence. While maintaining all the energy and nimble ness of free private enterprise, enlightened capitalism, consciously working everywhere towards the ideals here described, can bring about so large an improvement upon the best social conditions at present existing that Socialism, no longer able to promise a new heaven and a new earth by comparison, will cease to think it worth while to seek a change. Not conflict between capital and labour but their real partnership in counsel and profits is the sure path of social vision between theories leading into the unknown or violence that either plunges into a morass or heads for a precipice. One of the deep problems is not economic. Capitalism in the past has contributed too much to ugliness in the world. The capitalism of the future must seek to enter into the service of art and beauty.
classic work on economic freedom is Adam Smith's Wealth of Nations (1776). Much of his argument as to the value of private enterprise and initiative remains valid. Alfred Mar shall's Principles of Economics (8th ed., 1920) and Industry and Trade (2nd ed., 1919) , contain a masterly analysis of the principles underlying the existing economic system. In a brilliant essay on "The Social Possibilities of Economic Chivalry," published in Memorials of Alfred Marshall (1925), he contrasts the sterility and the deadening influence in the long run of governmental management of industry with the elasticity of private enterprise.
An excellent account of economic tendencies and their practical operation is given in a recent work by an American economist, Prof. F. W. Taussig—Principles of Economics (192I-22).
The above-mentioned books are all academic in outlook and treat ment. Very few of those who are or have been engaged in industrial or commercial enterprises have utilized their experience and practical knowledge to write in defence of capitalism against the onslaughts of its Socialistic critics. Amongst such works the following are of special importance: My Life and Work (1922), by Henry J. Ford and S. Crowther, gives a very valuable first-hand account of the methods by which one of the greatest and most successful modern businesses has been built up.
Both in Confessions of a Capitalist (1925), by Sir E. J. Benn, and in The Case for Capitalism, by Hartley Withers (1920) , a vigorous defence of capitalism is put forward from a practical point of view. A. Shadwell in The Socialist Movement, 2 vols. (1921), urges the superiority of private enterprise.
In his remarkable little book, Concerning Man's Origin (1927), Prof. Sir Arthur Keith includes a remarkable essay on "Capital as a Factor in Evolution," where he argues that an increasing power of providing for the future has been the key to biological, as well as to economic, development.
A number of important books dealing with the history and theory of capitalism have appeared in German, of which the following may be mentioned here: Fritz Gerlich, Geschichte and Theorie des Kapi talismus (Leipzig, 1913) ; J. Strieder, Studien zur Geschichte Kapital istischer Organisationsformen (Munich, 1914) ; Werner Sombart, Der Moderne Kapitalismus (2nd ed., Leipzig, 1916, completed in 1926) ; this is a very comprehensive work characterized by much originality of ideas and clearness of exposition, in which is set out the history of modern capitalism down to the end of the 18th century, together with a brilliant analysis of the chief psychological and other factors govern ing its origin and progress. In the recently published two concluding volumes, the capitalist system of the present day is described and dis cussed at length, with great impartiality ; an acute analysis is made of the nature, structure and functioning of the vast economic processes which constitute the material basis of western civilization. The Quin tessence of Capitalism (Eng. trans. 1915) by the same author, is a brightly written popular survey of the problem. Richard Passow, Kapitalismus (Jena, 1918) ; Karl Bucher, Die Entstehung der V olks wirthschaft (1918-19) ; Georg von Below, Probleme der Wirthschafts geschichte (1920) ; O. Spann, Der Wahre Staat (1921) ; L. Pohle, Kapitalismus and Sozialismus (3rd ed. Leipzig, 2923), a good defence by the Professor of Economics at Leipzig of capitalism on economic and general grounds, and a critical account of the theoretical, but especially of the practical errors of Socialism ; August Pieper, Kapital ismus and Sozialismus als seelisches Problem (5924) ; J. Walcher, Ford oder Marx (Berlin, 1925), a comparison of the consequences to the whole community, and above all to the working classes, that would result from the adoption on the one hand of the principles advocated and applied by Henry Ford, and on the other of the destructive and barren tenets of Karl Marx ; Richard Passow, Kapitalismus (1927).