The ordinary editorial writer is a strong believer in what he calls the sanctity of private property. But as far as highly organized business is concerned he is a pilgrim to an empty shrine. The trust movement is doing what no conspirator or revolutionist could ever do: it is sucking the life out of private property.
For the purposes of modern industry the traditional notions have become meaningless: the name continues, but the fact is disappearing. You cannot conduct the great industries and preserve intact the principles of private property. And so the trusts are organizing private property out of existence, are altering its nature so radically that very little remains but the title and the ancient theory.
When a man buys stock in some large corporation he becomes in theory one of its owners. He is supposed to be exercising his instinct of private property. But how in fact does he exercise that instinct which we are told is the only real force in civilization? He may never see his property. He may not know where his property is situated. He is not consulted as to its management. He would be utterly incapable of advice if he were consulted. Contact with his property is limited to reading in the newspapers what it is worth each day, and hoping that dividends will be paid. The processes which make him rich in the morning and poor in the evening, increase his income or decrease it, ? are inscrutable mysteries. Compare him with the farmer who owns his land, the homesteader or the prospector, compare him with anyone who has a real sense of possession, and you will find, I think, that the modern shareholder is a very feeble representative of the institution of private property.
No one has ever had a more abstract relation to the thing he owned. The absentee landlord is one of the sinister figures of history. But the modern shareholder is not only an absentee, he is a transient too. The week ending January 10, 1914, was generally regarded as a dull one in Wall Street. Yet on the New York Stock Exchange alone the total sales amounted to 1,777,038 shares. About 340,000 shares of private property in Reading changed hands.
With a few thousand dollars I can be an owner in Massachusetts textile mills on Monday, in Union Pacific on Tuesday. I can flit like a butterfly from industry to industry. I don't even have to use my judgment as to where I shall alight. All I have to do is to choose some well-known stock broker and put myself into his hands. And when I read in books on political economy that any profit I make is a reward for my foresight, my courage in the face of risk, I laugh. I know that I can't have any foresight. I don't understand the inner workings of the business world. I'm not allowed to know. That is reserved for specialists like stock brokers and private bankers. In the modern world investing has become a highly skilled profession, altogether beyond the capacities of the ordinary shareholder. The great mass of people who have saved a little money can no more deal with their property on their own initiative than they can deal with disease or war on their own initiative. They have to act through representatives. Just as they need physicians and organized armies, so they have to have stock brokers, financial experts, public service commissions and the rest.
There has been in recent years a great outcry against the concentrated control of credit. It was found that the decision as to how money should be invested had passed away from the people who owned the money. The enormous power of Morgan consisted in his ability to direct the flow of capital. He was the head of a vast system which had taken out of the hands of investors the task of deciding how their money was to be used. It was no doubt a colossal autocracy. There has been a great effort to break it up, to decentralize the power that concentrated about Morgan. But no one proposes to put back into the hands of the investor the decision as to the financing of industry. The investors are a scattered mob incapable of such decisions. The question of where money is to be applied is a matter for experts to answer. And so reform of the credit system does not consist in abolishing the financial expert. It consists in making him a public servant. The Wilson Currency Bill seems to be an effort to make banking responsive to business needs all over the country. It gives business men a larger control over financial experts. How that control is to be extended to the citizens at large is one of the subtlest problems of democracy. I do not venture here to answer it. I wish rather to keep more closely to the fact that whatever system is devised, it will have to recognize that the investor no longer can decide in modern industry, that 'foresight’ has become an organized, technical profession, and is ceasing to be one of the duties of private property.
Not long ago the Interstate Commerce Commission gave a very neat recognition to this change. It issued a report on the bankruptcy of the Frisco railway which contained a condemnation of certain private bankers for offering bonds to the investing public when the bankers should have known that the road was insolvent. The Commission was saying that the investor couldn't know, that he was in the hands of experts, and that the experts have a trust to perform. You couldn't very well go to greater lengths in announcing the impotence of private property. For where in the name of sanity have all the courage, foresight, initiative gone to, what has happened to all the rugged virtues that are supposed to be inherent in the magic of property?
They have gone a-glimmering with the revolutionary change that the great industry has produced. Those personal virtues belong to an earlier age when men really had some personal contact with their property. But to-day the central condition of business is that capital shall be impersonal, 'liquid,’ 'mobile.’ The modern shareholder as a person is of no account whatever. It mattered very much what kind of people the old landlords were. But it matters not at all what kind of person the shareholder is. He may be ignorant or wise, he may be a child in arms or a greybeard in his dotage, he may live in Iceland or Patagonia: he has no genuine role in the conduct of industry. He cannot fulfill any responsibility to the property he owns. That is why it is so futile to attack clergymen and reformers who happen to own stock in some ruthless factory. They have no real power to alter the situation.
You often hear it said that the stockholders must be made to realize their duties. Not long ago, for example, when the wretched working conditions of the Steel Mills were exposed, a very well-meaning minority stockholder did protest and cause a slight flurry in the newspapers. But the notion that the 200,000 owners of the Steel Trust can ever be aroused to energetic, public-spirited control of 'their’ property? that is as fantastic as anything that ever issued from the brain of a lazy moralist. Scattered all over the globe, changing from day to day, the shareholders are the most incompetent constituency conceivable. Think how difficult it is to make the voters in one town exhibit any capacity for their task. Well, the voters in the government of the Steel Trust do not meet each other every day, do not read the same newspapers: the suffrage qualifications for the Steel Trust have nothing to do with age, sex, nationality, residence, literacy; the one qualification is the possession of some money and the desire for more. Shareholders are a heterogeneous collection with a single motive, and from that material some people pretend to expect a high sense of social responsibility.
I do not mean to imply, of course, that because a man owns stock he is necessarily ignorant or tyrannical. He may be as benevolent as you please. But the fact that he owns stock will not enable him to practice his benevolence. He will have to find other ways of expressing it. For shareholding in the modern world is not adapted to the exercise of any civilizing passion. It is too abstract, too scattered, too fluctuating.
All this is a natural result of the largescale corporation. In the partnership and firm, owners and managers are in general the same people, but the corporation has separated ownership from management. Ownership has been opened to a far larger number of people than it ever was before, and it means less than it used to. Each stockholder owns a smaller share in a far greater whole. The trusts have concentrated control and management, but ownership they have diffused and diluted till it means very little more than a claim to residual profits, after expenses are paid, after the bondholders are satisfied, and perhaps, after the insiders have decided which way they wish the stock market to fluctuate.
Let no stockholder come to the radical, then, and charge him with attacking the sanctity of private property. The evolution of business is doing that at a rate and with a dispatch which will make future historians gasp. If the reformers should, for example, arrive at the point of deciding to abolish private property in railroads, they would discover that most of the rights of property had already disappeared. Management has long ago passed out of the hands of the stockholders; the right to fix rates has been absorbed by the state; the right to fix wages is conditioned by very powerful unions. They would find stockholding in the last stages of decay, where not even the dividends were certain. And one of the most difficult problems reformers may have to face will be the eagerness of railroad owners to give up the few vestiges of private property which are left to them, if they can secure instead government bonds. They may feel far happier as creditors of the United States than as representatives of the institution of private property.
Government ownership will probably be a very good bargain for railroad stockholders. To-day they are a little less than creditors; they loan their money, and they are not sure of a return. Government ownership may make them real creditors? that is the highest hope which remains from the shattered glamour that came from the magic of property.
What has happened to the railroads is merely a demonstration of what is likely to happen to the other great industries? steel, oil, lumber, coal and all the others which are adapted to large scale production. Private property will melt away; its functions will be taken over by the salaried men who direct them, by government commissions, by developing labor unions. The stockholders deprived of their property rights are being transformed into money-lenders.
It is evident that the question of nationalizing industries is not a choice between the maintenance of private property and its abolition. In amateur socialist discussions this is always made the issue whenever someone proposes to substitute public operation for private. It betrays an unreal sense of the problem. There is no very essential difference between holding the securities of the Steel Trust and those of the U.S. Government. The government bonds are, if anything, a more certain investment. But there is some difference between public and private enterprise: what is it?
Opponents of collectivism argue that government work is inefficient. They seem to imply that the alleged superiority of private management is due to the institution of private property. That, it seems to me, is a striking example of what logicians call false cause. If the Steel Trust is efficient, it is not due to the existence of its 200,000 stockholders. It is due to the fact that the management is autocratic, that administrators are highly paid, and given power adequate to their responsibility. When governments are willing to pursue that course, they can be just as efficient as private management. The construction of the Panama Canal is a classic example of what government can do if it is ready to centralize power and let it work without democratic interruption.
The real problem of collectivism is the difficulty of combining popular control with administrative power. Private property is no part of the issue. For any industry which was ready for collectivism would have abolished private property before the question arose. What would remain for discussion would be the conflict between democracy and centralized authority. That is the line upon which the problems of collectivism will be fought out? how much power shall be given to the employees, how much to the ultimate consumer, how much to sectional interests, how much to national ones. Anyone who has watched the disillusionment of labor with the earlier socialism and has understood the meaning of the syndicalist trend will know how radically the real difficulties of public enterprise differ from those presented in theoretical debates.
I do not wish at this point to draw any conclusion as to the solution of the trust problem. I am trying to sketch very roughly the main elements in the actual situation. The incentive of the men who conduct modern industry was the first point of interest. It is obvious that the trusts have created a demand for a new type of business man? for a man whose motives resemble those of the applied scientist and whose responsibility is that of a public servant. Nothing would be easier than to shout for joy, and say that everything is about to be fine: the business men are undergoing a change of heart. That is just what an endless number of American reformers are shouting, and their prophet is Gerald Stanley Lee. The notion seems to be that workers, politicians, consumers and the rest are to have no real part in the glorious revolution which is to be consummated for their benefit. It is not hard to understand the habit of mind which leads men to these conclusions. The modern world is brain-splitting in its complexity, and if you succeed in disentangling from it some hopeful trend there is nothing more restful than to call it the solution of the problem. Those who have seen the change in business motives have, I believe, good ground for rejoicing, but they might in decency refrain from erecting upon it a mystic and rhetorical commercialism.
For the same reason, it is well not to take too literally the revolution in private property. This revolution has not happened to all property. It is most advanced in the railroads and what we call public service corporations. It is imminent in the big staple industries which are adapted to large scale production. But there remains a vast amount of genuine private property in agricultural land, in competitive business.
In the great industries themselves, however, it is important to notice that with the diminishing importance of ownership, the control has passed for the time being into the hands of investment experts, the banking interests. That control is challenged now, not by the decadent stockholders, but by those most interested in the methods of industry: the consumer, the worker, and the citizen at large.