Socialism As It Is

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Mr. Churchill's defense of the new policy of the British government is
as significant as the new laws it has enacted:--

"You may say that unearned increment of the land," he says, "is on
all-fours with the profit gathered by one of those American
speculators who engineer a corner in corn, or meat, or cotton, or
some other vital commodity, and that _the unearned increment in
land is reaped by the land monopolist in exact proportion, not to
the service but to the disservice done_. It is monopoly which is
the keynote; and where monopoly prevails, the greater the injury to
society the greater the reward of the monopolist will be....

"Every form of enterprise, every step in material progress, is only
undertaken after the land monopolist has skimmed the cream off for
himself, and every where to-day the man, or the public body, who
wishes to put land to its highest use is forced to pay a
preliminary fine in land values to the man who is putting it to an
inferior use, and in some cases to no use at all.... _If there is a
rise in wages, rents are able to move forward because the workers
can afford to pay a little more_. If the opening of a new railway
or a new tramway, or the institution of an improved service of
workmen's trains, or the lowering of fares, or a new invention, or
any other public convenience affords a benefit to the workers in
any particular district, it becomes easier for them to live, and
therefore the landlord and the ground landlord, one on top of the
other, are able to charge them more for the privilege of living
there." (Italics mine.)[15]

But we cannot believe that the government of Great Britain, which draws
so much of its support from the wealthy free trade merchants and
manufacturers has been persuaded to adopt this new principle so much by
the argument that a land rent weighs on the working classes, though it
is true that the manufacturer may have to pay for this in higher _money_
wages, as it has by that other argument of Mr. Churchill's that it
weighs directly on business.

"The manufacturer proposing to start a new industry," he says,
"proposing to erect a great factory offering employment to
thousands of hands, is made to pay such a price for his land that
the purchase price hangs around the neck of his whole business,
hampering his competitive power in every market, clogging far more
than any foreign tariff in his export competition; and the land
values strike down through the _profits of the manufacturer_ on to
the wages of the workman. The railway company wishing to build a
new line finds that the price of land which yesterday was only
rated at its agricultural value has risen to a prohibitive figure
the moment it was known that the new line was projected; and either
the railway is not built, or, if it is, it is built only on terms
which largely transfer to the landowner _the profits which are due
to shareholders_ and the privileges which should have accrued to
the traveling public." (My italics.)[16]

No doubt Mr. Churchill's failure to mention shippers was inadvertent.

It was a practical application of these business principles and chiefly
in the interest of the employers, manufacturers, investors, and
shippers, that the State decided, as a first step, to take 20 per cent
of all the increase in land values from the present date and to levy an
annual tax of one fifth of one per cent on all land held for
speculation, _i.e._ used neither for agricultural nor for industrial nor
building purposes.

The collectivist policy, that governments should undertake to reorganize
industry and to develop the industrial efficiency of the population, is
a relatively new one, however, and where non-Socialist Liberals and
Radicals are adopting it, they do so as a rule with apologies. For while
such reforms can be considered as investments which in the long run
repay not only the community as a whole, but also the business
interests, they involve a considerable initial cost, even beyond what
can be raised by the gradual expropriation of city land rents, and the
question at once arises as to who is to pay the rest of the bill. The
supporter of the new reforms answers that the business interests should
do so, since the development of industry, which is the object of this
expenditure, is more profitable to them than to other classes. While Mr.
Churchill declares that Liberalism attacks landlordism and monopoly
only, and not capital itself, as Socialism does, he is at great pains to
show that the cost of the elaborate program of social reform is borne
not by monopolist alone, but by that larger section of the business
interests vaguely known as those possessing "Special Privileges." In
distributing the new taxes in the House of Commons, the question to be
asked of each class of wealth is, he says, "By what process was it got?"
and a distinction is to be made, not between monopoly and competitive
business, but "between wealth which is the fruit of productive
enterprise and industry or of individual skill, and wealth which
represents the capture by individuals of socially created values."[17]

"A special burden," says Mr. Churchill, "is to be laid upon certain
forms of wealth which are clearly social in their origin and have not at
any point been derived from a useful or productive process on the part
of their possessors."[18] And since all income "derived from dividends,
rent, or interest," is, according to Mr. Churchill, unearned increment,
it is evident that nearly every business, all being beneficiaries, ought
to share the burden of the new reforms.[19] At the same time he hastens
to reassure his wealthy supporters, especially among merchants and
shippers, on grounds explained below by Mr. Lloyd George that the new
taxes will not rise faster than the new profits they will bring in, that
they "will not appreciably affect, have not appreciably affected, the
comfort, the status, or even the style of living of any class in the
United Kingdom."[20]

Mr. Lloyd George in proposing the so-called Socialistic Budget of 1910
reminded the representatives of the propertied interests [he might have
added "in proportion to their wealth"] that the State, in which they all
owned a share, should not be looked upon so narrowly as a capitalistic
enterprise. They could afford to allow the State to wait longer for its
returns.

"A State can and ought to take a longer and a wider view of its
investments," said Mr. Lloyd George, "than individuals. The
resettlement of deserted and impoverished parts of its own
territories may not bring to its coffers a direct return which
would reimburse it fully for its expenditure; but the indirect
enrichment of its resources more than compensate it for any
apparent and immediate loss. The individual can rarely afford to
wait; a State can; the individual must judge of the success of his
enterprise by the testimony given for it by his bank book; a State
keeps many ledgers, not all in ink, and when we wish to judge of
the advantage derived by a country from a costly experiment, we
must examine all those books before we venture to pronounce
judgment....

"We want to do more in the way of developing the resources of our
own country....

"The State can help by instruction, by experiment, by
organization, by direction, and even, in certain cases which are
outside the legitimate sphere of individual enterprise, by
incurring direct responsibility. I doubt whether there is a great
industrial country in the world which spends less money on work
directly connected with the development of its resources than we
do. Take, if you like, and purely as an illustration, one industry
alone,--agriculture,--of all industries the most important for the
permanent well-being of any land. Examine the budgets of foreign
lands,--we have the advantage in other directions,--but examine and
compare them with our own, and Honorable Members will be rather
ashamed at the contrasts between the wise and lavish generosity of
countries much poorer than ours and the short-sighted and niggardly
parsimony with which we dole out small sums of money for the
encouragement of agriculture in our country....

"We are not getting out of the land anything like what it is
capable of endowing us with. Of the enormous quantity of
agricultural and dairy produce, and fruit, and the timber imported
into this country, a considerable portion could be raised on our
own lands."[21]

The proposed industrial advance is to be secured largely at the expense
of capital, but for its ultimate profit. The capitalists are to pay the
initial cost. Mr. Lloyd George is very careful to remind them that even
if the present income tax were doubled, five years of the phenomenal yet
steady growth of the income of the rich and well-to-do who pay this tax,
would leave them as well off as they were before. He proposes to leave
the total capital in private hands intact on the pretext that it is
needed as "an available reserve for national emergencies." And as an
evidence of this he refused to increase the existing rate of inheritance
tax levied against the very largest estates (15 per cent on estates of
more than L3,000,000). Though up to this point he graduated this tax
more steeply than before, and nothing could be more widely popular than
a special attack on such colossal estates, Mr. Lloyd George draws the
line at 15 per cent, on the ground that a large part of the income from
such estates goes into investments, and more confiscatory legislation
might seriously affect the normal increase of the capital and "the
available reserves of taxation" of the country.[22]

Mr. Lloyd George does not fail to guarantee to capital as a whole,
"honest capital," that it will suffer no loss from his reforms. "I am
not one of those who advocate confiscation," he said several years ago,
"and at any rate as far as I am concerned _honest_ capital, capital put
in honest industries for the development of the industry, the trade,
the commerce, of this country will have nothing to fear from any
proposal I shall ever be responsible for submitting to the Parliament of
this realm." (My italics.)[23]

Mr. Lloyd George is well justified, then, in ridiculing the idea that he
is waging war against industry or property or trying to destroy riches.
He not only disproves this accusation by pointing to the capitalist
character of his collectivist program, but boasts that the richest men
in the House of Commons are on the Liberal side, together with hundreds
of thousands of the men who are building up trade and business.

And the attitude of the Radicals of the present British government is
the same as that of capitalist collectivists elsewhere. However certain
vested interests may suffer, there is nowhere any tendency to weaken
capitalism as a whole. Capitalism is to be the chief beneficiary of the
new movement.

There are many differences of opinion, however, as to the _ultimate_
effect of the collectivist program. In Great Britain, which gives us our
best illustration, there are Liberals who claim that it is Socialistic
and others who deny that it has anything to do with Socialism;
Conservatives who accept part of the program, and others who reject the
whole as being Socialistic; Socialists, who claim that their ideas have
been incorporated in the last two Budgets, and other Socialists who deny
that either had anything in common with their principles.

While it is certain that the present policy of the British government is
by no means directed against the power or interests of the capitalist
class as a whole, and in no way resembles that of the Socialists, were
not Socialist arguments used to support the government's position, and
may not these lead towards a Socialist policy?

Certainly some of the principles laid down seem at first sight to have
been Socialistic enough. For example, when Mr. Churchill said that
incomes from dividends, rent, and interest are unearned, or when Mr.
Lloyd George cried out: "Who is responsible for the scheme of things
whereby one man is engaged through life in grinding labor to win a bare
and precarious subsistence for himself, and when, at the end of his
days, he claims at the hands of the community he served, a poor pension
of eight pence a day, he can only get it through a revolution, and
another man who does not toil receives every hour of the day, every
hour of the night, whilst he slumbers, more than his poor neighbor
receives in a whole year of toil? Where did the table of that law come
from? Whose fingers inscribed it?"[24]

Lord Rosebery has pointed to the extremely radical nature of Mr. Lloyd
George's arguments. The representatives of the Government had urged, he
said, that the land should be taxed without mercy:--

"(1) because its existence is not due to the owner;

"(2) because it is limited in quantity;

"(3) because it owes nothing of its value to anything the owner
does or spends;

"(4) because it is absolutely necessary for existence and
production."[25]

Lord Rosebery says, justly, that all these propositions except the last
apply to many other forms of property than land, as, for instance, to
government bonds, and that it certainly would be Socialism to attempt to
confiscate these by taxation.

Lord Rosebery's task would have become even easier later, when Mr. Lloyd
George enlarged his attack on the landlords definitely into an attack
against the idle upper classes, who with their dependents he reckoned at
two million persons. He accused this class of constituting an
intolerable burden on the community, said that its existence was the
symptom of the disease of society, and that only bold remedies could
help. The whole class of inactive capitalists he viewed as a load both
on the non-capitalist, wage-earning, salaried and professional classes,
and on the active capitalists. Mr. Lloyd George argues with his
capitalist supporters that capitalism will be all the stronger when
freed from its parasites. But Lord Rosebery could answer that the active
could no more be distinguished from the passive capitalists than
landowners from bondholders.

An article in the world's leading Socialist newspaper, _Vorwaerts_, of
Berlin, shows that many Socialists even regarded these speeches as
revolutionary:--

"The Radical wing of the British Liberals," it said, "is leading
the attack with ideal recklessness and lust of battle. It is
conducting the agitation in language which in Germany is
customarily used only by a 'red revolutionist.' If the German
Junker (landlord conservative) were to read these speeches, he
would swear that they were delivered by the Social Democrats of the
reddest dye, so ferociously do they contrast between the rich and
the poor. They appeal to the passion of the people; they exploit
social distinctions in the manner best calculated to fire popular
anger against the Lords.

"In the heart of battle the Liberals are employing language which
at other times they would have considered twice. Their words will
some day be assuredly turned against them, when more than the mere
Budget or the existence of the Lords is at stake. When the
Liberals, allied with the conservative enemy of to-day, are
fighting the working classes, the Socialists will recall this
language as proof that the Liberals themselves recognize the
injustice of the existing order.

"Mr. Lloyd George made such a speech at Newcastle that the seeds he
is planting may first bring forth Liberal fruit, but there can be
no doubt that Socialism will eventually reap the harvest. His
arguments must arouse the workingmen, and when they have accustomed
themselves to look at things from this standpoint it is certain
that once standing before the safes of the industrial capitalists
they will never close their eyes."

It is perhaps true that the Socialists will at some future day reap the
harvest from Mr. Lloyd George's and Mr. Churchill's campaigns, though a
careful analysis of the expressions of these statesmen will show that
they have said nothing and done nothing in contradiction to their
State-capitalistic or "State Socialist" standpoint.

There is no doubt that the principle of the new taxes and the new
expenditure these statesmen are introducing is radical, and that it
marks a great stride towards a collectivist form of capitalism. Let us
assume that development continues along the lines of their present
policies. In a very few years the increased expenditure on social reform
will be greater than the increased expenditure on army and navy, and the
increase of direct and graduated taxes that fall on the upper classes
will be greater than that of the indirect taxes that fall on the masses.
We will assume even that military expenditure and indirect taxes on
articles the working people consume will begin some day to decrease,
while graduated taxes directed against the very wealthy and social
reform expenditures rise until they quite overshadow them. There is
every reason to believe that the social reformers of the British and
other governments hope for such an outcome and expect it. This would be
in no way inconsistent with their policy of subordinating everything, to
use one of their expressions, to "that trade and commerce which
constitutes the source of our wealth."

For the collectivist expenditures, intended to increase the national
product through governmental enterprises for the promotion of industry,
and for raising the industrial efficiency of the workers, would be
introduced gradually, and would soon be accompanied by results which
would show that they paid financially. And finally, even if railways and
monopolies were nationalized and their profits as well as _all_ the
future rise in land value went to the State to be used for these
purposes, as Mr. Churchill hopes, and even if a method could be found by
which a large part of the income of the idle rich would be confiscated
without touching the active capital of the merchant and manufacturer,
the position of the latter classes, through this policy, might become
still more superior relatively to that of the masses than it is at
present. The industrial capitalists might even control a larger share of
the national income and exercise a still more powerful influence over
the State than they do to-day.

The classes that the more or less collectivist budgets of 1910 and 1911
actually do favor, those whose economic and political power they
actually do increase, are the small and middle-sized capitalists and
even the larger capitalists other than landlords and monopolists. The
great mass of income taxpayers, business men, farmers, and the
professional classes with incomes from about L200 to L3000 ($1000 to
$15,000) are given every encouragement, while those with somewhat larger
incomes are only slightly discriminated against on the surface, in the
incidence of the taxes, and not at all when we inquire into the ways in
which the taxes are being expended. Certainly nothing is being done that
will "appreciably affect the status or style of living of any class in
the United Kingdom," or that will check materially the enormous rise of
this "upper middle" class both in wealth and numbers--for the income tax
payers have doubled their income in a little more than a decade, until
it has reached the total of more than a billion pounds a year. And
surely no tendency could be more diametrically opposed to a Socialism
whose purpose it is to improve the _relative_ position of the "lower
middle" and working classes.

While the new reform programs of the various parties are in general
agreement in all countries, in that they are all collectivist, and favor
as a rule the same social classes, there is much controversy as to
names, whether they shall be called Socialistic or merely radical or
progressive. The question is really immaterial.

"Capital, divested of its perversions, would be natural Socialism,"
says one of Henry George's most prominent disciples.[26] Whether the
proposed reforming is done with a purified and strengthened capitalism
in view, or in the name of "natural Socialism" or "State Socialism," the
program itself is in every practical aspect the same.

If a contrast formerly appeared to exist between "Individualist" and
"State Socialist" reformers, it was never more than a contrast in
theory, quickly dispelled when the time for action arrived. The
individualist radical would have the State do as little as possible, but
still is compelled to resort to an increase of its powers at every turn;
the "State Socialist" would have the State do as much as practicable,
but would still retain State action within the rigid limits imposed by
the need of gaining capitalist support and the desire for immediate
political success. In economic policy the Individualist is for checking
the excess of monopoly and special privilege in order to allow "equal
opportunity" or a free development to whatever competition or "natural
Capitalism" remains, while the "State Socialist" is more concerned with
protecting and promoting the natural checking of the excesses of
competitive capitalism and private property that comes with "natural
monopoly" and its regulation by government. The "State Socialist,"
however critical he is towards competition, recognizes that the first
practical possibility of putting an end to its excesses comes when
monopoly is already established, and when it is relatively easy for the
State to step in to nationalize or municipalize; the Individualist
reformer who wishes to preserve competition where practicable, at the
same time recognizes that it is impossible to do so where monopolies
have become firmly rooted in certain industries, and he also at this
point proposes nationalization, municipalization, or thoroughgoing
governmental control.

Henry George himself recognizes that "State Socialism," which he called
simply "Socialism," and the "natural Capitalism" he advocated, far from
being contradictory, were complementary and interdependent. Mr. Louis
Post says:--

"Even in the economic chapters of 'Progress and Poverty' its author
saw the possibility of society's approaching the 'ideal of
Jeffersonian Democracy, the promised land of Herbert Spencer, the
abolition of government. But of government only as a directing and
repressive power.' At the same time and in the same degree of
approach, he regarded it as possible for society also to realize
the dream of Socialism."[27]

The following passage leaves no doubt that Mr. Post is correct, and at
the same time shows in the clearest way how the two policies of reform
were interwoven in Henry George's mind:--

"Government could take up itself the transmission of messages by
telegraph, as well as by mail, of building and operating railroads,
as well as of the opening and maintaining common roads. With the
present functions so simplified and reduced, functions such as
these could be assumed without danger or strain, and would be under
the supervision of public attention, which is now distracted. There
would be a great and increasing surplus revenue from the taxation
of land values for material progress, which would go on with great
accelerated rapidity, would tend constantly to increase rent. This
revenue arising from the common property would be applied to the
common benefit, as were the revenues of Sparta. We might not
establish public tables--they would be unnecessary, but we could
establish public baths, museums, libraries, gardens, lecture rooms,
music and dancing halls, theaters, universities, technical schools,
shooting galleries, playgrounds, gymnasiums, etc. Heat, light, and
motive power, as well as water, might be conducted through our
streets at public expense; our roads be lined with fruit trees;
discoveries and inventors rewarded, scientific investigation
supported; in a thousand ways the public revenues made to foster
efforts for the public benefit. _We should reach the ideal of the
Socialist_, but not through government repression. _Government
would change its character, and would become the administration of
a great cooeperative society. It would become merely the agency by
which the common property was administered for the common
benefit_." (Italics mine.)[28]

But the "State Socialist" and the Individualist reformer, who are often
combined in one person, as in the case of Henry George, differ sharply
from Socialists of the Socialist movement in aiming at a society, which,
however widely government action is to be extended, is after all to
remain a society of small capitalists.