The Unpopular Review, Volume II Number 3 by Various

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* * * * *

People who are comfortably off will reply to all this that we are getting
on pretty well, and seem to be on the whole doing better from year to
year. There is a well known passage in Macaulay's History which may be
thought to give support to optimism of this kind. "No ordinary
misfortune," he said, "no ordinary misgovernment, will do so much to make
a nation wretched as the constant progress of physical knowledge, and the
constant effort of every man to better his condition will do to make a
nation prosperous."

No one will deny that the history of England justifies this statement; but
let us remember the reason that Macaulay gave for this insuperable
prosperity. "Every man has felt entire confidence that the State would
protect him in the possession of what had been earned by his diligence and
hoarded by his self-denial."

It is impossible to maintain that every man now feels this entire
confidence. The income "earned by his diligence" is henceforth to be taxed
at a progressive rate, and the demagogues are already complaining that the
rate is not high enough. The inheritance of his family, "hoarded by his
self-denial," protected by the State until within a few years, now pays
taxes which amount to the interest on a billion of dollars. We are assured
by a railroad officer that three measures of legislation have increased
the expenses of his corporation alone by a sum equal to the interest on
$32,000,000, with no appreciable benefit to the public. The number of such
laws is incalculable, and the cost of complying with them has become an
almost intolerable burden. The income of the railroads declines, while
their taxes increase, in some cases two or three fold. Lawyers and office
holders thrive and are cheerful; investors suffer and tremble.

The people of New York seem just now to be in a way to find out how the
enormous taxes which their rulers have levied on them are expended; but
New York has no monopoly of corrupt rulers, and the cost of investigating
extravagance is itself extravagant. And yet people wonder at the increased
cost of living! Unfortunately the oppressions of government do worse than
discourage business enterprise; they tend to demoralize society. There are
too many men who hesitate to marry because they do not have confidence in
the future, too many married people who do not dare to have more than one
or two children, if they dare to have any, to make it possible to maintain
that there is now no dread of more than ordinary misgovernment.

* * * * *

It is difficult to ascertain the total wealth of the country. The census
bureau is notoriously dilatory. Its latest estimate was for 1904, when
this aggregate was computed to be $107,000,000,000, or about $1,300 _per
caput_. Assuming this ratio, the wealth of our people should now be over
$120,000,000,000; but the figures are largely conjectural. It happens,
however, that we possess some figures that are altogether trustworthy. In
the year 1909 the Federal Government imposed a tax of one per cent. on the
net income of every corporation, joint stock company, or association,
including insurance companies, organized for profit, whenever this net
income is over $5,000. There are some other exemptions, but they are not
sufficient to demand consideration, and may be disregarded. Now we may be
absolutely certain of one thing, and that is that the net income of those
concerns will not be overestimated. Their net income may be more than what
they report for the purposes of taxation, but it surely cannot be less.
For the past year it seems probable that this tax will produce nearly
thirty-five millions of dollars net income, after deducting all expenses,
losses, depreciation, interest on debts and on deposits paid by banks, and
dividends from other companies subject to the tax.

It may be more, but it cannot be less. Here our certainty ends. Guesses
will vary, but in view of what we know in a general way of the conditions
of business during the past year, we may perhaps venture to assume that
the net income of these concerns is six per cent. of their real wealth. If
this assumption is correct, their total wealth is 60 billions of dollars,
or one half of the total wealth of the nation.

This estimate may be confirmed to some extent by other statistics. Calling
the physical value of the railroads fourteen billions, their net earnings
at five per cent. would be 700 millions, which corresponds well enough
with the figures of the government, although some railroad men would make
their net earnings much less. We do not know the net income of the untaxed
corporations. Their returns would show its amount, but the government does
not supply the information. As there must be now nearly 250,000 such
corporations, if their average income is only $2,000 a year, the total
could be $500,000,000. If it is $4,000, their income would be almost a
billion dollars. On a 5 per cent. basis, the wealth of these corporations
would be nearly 20 billion dollars. It seems, on the whole, that the
wealth held by corporations is probably more than half our total wealth
rather than less.

* * * * *

The bearing of these figures on our subject is now apparent. All of this
property is disfranchised. It is, economically, to a very great extent
disfranchised; politically, it is altogether disfranchised. What I mean by
this is that the owners of this wealth, as owners, have very little to
say, and nothing to do, about its care and management. Probably more than
half of our people are directly or indirectly interested in it as owners.
They have been attracted by a desire to share, however humbly, in big and
famous enterprises, by the freedom from liability of the portion of their
estates outside the particular investments, and by the freedom at death or
withdrawal of associates from appraisals and accountings and probable
closing of the business, as is the inevitable practice in mere
partnerships. Two centuries ago people who saved money could hardly find
ways to invest it. The practice of incorporation has enormously increased
our wealth by putting a stop to hoarding without interest, stimulating
saving, and broadening industry. The number of individual owners of the
bonds and stocks of corporations is incalculable, and their holdings added
to those of savings banks, insurance companies, trust companies and other
fiduciary institutions, churches, hospitals, and colleges, make up a total
of almost fabulous extent. It is true that large sums are loaned to
persons, and on mortgages of real estate; but for most people such
investments are not desirable or convenient, and they are altogether
inadequate to absorb the vast sums that are available. In fact probably
most investments of this character are now made by corporations who gather
the savings of little depositors and premium payers; and it would cost
much more to make them in any other way.

* * * * *

Corporations, therefore, are necessary, but they necessarily separate the
ownership of wealth from its management. To invest is generally to entrust
your money to another, and those who invest in corporations, unless they
control them, are economically disfranchised, because the stockholders in
all large corporations almost never influence the management of their
property, and as a rule do not know anything about it. They don't because
they can't. A few years ago a very large number of people were much
worried by the exposure of some scandalous doings by the managers of
certain great life-insurance companies. They would have been very glad to
combine and choose better managers if they could; but they couldn't. Laws
were passed for the purpose of enabling the policy-holders to select their
trustees, but the only result has been a ridiculous and rather expensive
fiasco. As in politics, the rank and file select the managers selected for
them by a few men who understand the situation. When many thousands of
people own stock in a concern, they live all over this continent and in
foreign parts, and it is a physical impossibility to bring them together.
They do not know one another, and very few of them know much about the
affairs of the concern, and if they know anything of the candidates that
may be suggested, it is generally only by hearsay.

How many of the eighty-eight thousand stockholders in the Pennsylvania
Railroad, for instance, have ever attended a meeting? For that matter, how
many of them have ever studied the report of the railroad? Not one in ten
could spare the time to read it, perhaps not one in a hundred could master
it. The report may be read in a few hours; it would take as many months,
if not years to verify it. Very nearly half these stockholders are women;
the average holding is 120 shares, (par $50), and one-sixth of the
stockholders own less than 10 shares each. Ten thousand of them are
abroad. Much stock is held by trustees, whose beneficiaries are probably
very numerous, and totally incompetent to understand railroad management.
There are also more than twenty thousand holders of stock in subsidiary
corporations controlled by the Pennsylvania Railroad. No one can tell the
number of bondholders; perhaps there are as many as there are employees,
making an aggregate of almost half a million.

* * * * *

Sometimes trustees abuse their office; but on the whole they have done
pretty well, and whether they have or not, there is no other way in which
large capitals can be managed. All civilization rests on confidence. Such
a vast fabric could not be built on confidence unless confidence was
deserved. As a matter of fact, a man invests his money just as he invests
in a surgeon. He does not think of directing the surgeon how to operate.
If the operation does not succeed, he tries another surgeon next time--if
there is a next time.

Of course all this applies chiefly to the large corporations. There are
many thousands of small ones, having few stockholders, who reside where
the business is established. These stockholders know more or less of the
details of the business; they can judge to some extent how it is carried
on, they are often acquainted with the managers, or are the managers
themselves, and if not, they are able sometimes to combine and change the
management. And I will anticipate a little and say here that the property
of such a corporation located in a small town is often to some extent not
politically disfranchised, because the people of the town understand that
they are directly interested in the prosperity of the business. But it
seems almost impossible for the stockholders to change the management of a
large corporation. It has been done a few times. Mr. Harriman notoriously
did it by using the money of one concern to buy the stock of another, and
that is almost the only way in which it has been done. No doubt there has
been an immense deal of combination which has resulted in change of
management, but this has not been because the stockholders combined to
oust their trustees, but because they thought they saw a good chance to
sell their stock to those who would pay high for the control, or to
participate in these combinations. There have been a good many cases where
an enterprising speculator has managed to get hold of a majority of the
stock and change the control, and powerful bankers can sometimes get
proxies enough to put a stop to bad management; but spontaneous movements
of this kind on the part of the mass of the stockholders are extremely
rare.

Beyond dispute then, the great mass of wealth held by corporations is
almost wholly under the control of their managers, and not the mass of the
owners. Mr. Hill has recently testified that he never knew a stockholder
to attend a meeting except to make trouble; by which he perhaps meant that
when a single stockholder appeared, it was to get paid for not making
trouble.

* * * * *

It need hardly be said that no such thing as legitimate representation of
corporate wealth is known in our politics, and the representation of
individual wealth is very limited. The theory of government by manhood
suffrage, so far as there is any theory, is now entirely personal. In
early times the freemen of the town, or little commune, met and legislated
according to their needs. To be a freeman one had to own property; to
"have a stake in the country." Nowadays nearly all the men who have no
property can vote, and some that have property cannot. In England, they
are doing away with "plural voters." Heretofore it was thought just, when
a man owned land in more than one place, that he should have his say in
the government of all; but this is now forbidden. The right was never
recognized in this country, partly because formerly men seldom owned
property in two places, but as transportation improved the conditions
changed. The "commuters" are legion. Their business and their capital are
under one jurisdiction and their dwellings and families under another; but
they can vote in only one. Many thousands of men own houses in both city
and country. They could help in the government of both, but are
disfranchised in one or the other. Under our complicated systems of
registration, they are often disfranchised at both.

Of course when population increases, the town meeting becomes a physical
impossibility. There is no more direct legislation; it has to be
delegated. The power is transferred to the city councils, and to the state
and national legislatures. In other words, the interests of the owners of
wealth are put in charge of trustees. According to Hamilton, the theory of
our government is that the people will "naturally" choose the wisest of
their number to represent them. There is not much basis for this
assumption. Rousseau scouted it. According to him, the _volonte generale_
could be ascertained only in the town meeting, and he seriously maintained
that the ideal government for the Roman empire was by the gangs of rioters
that the politicians marshalled in the Forum at Rome under the name of
_comitia_. All that the theory of our government requires, is that our
rulers shall be such men as are designated by the majority of the voters.
That they should be wise and good men may accord with the theory of
aristocracy; it is no part of the theory of democracy, and is certainly a
very small part of the practice.

When I say that half of the property of this country is disfranchised, I
mean that the nature of this property is such that it is peculiarly
subject to the power of rulers, and that the owners of it have hardly any
legitimate way of defending it against the arbitrary exercise of this
power. The corporation is created by the legislature; men cannot combine
their capitals and avoid unlimited liability for the debts of the
combination, unless the law specifically authorizes the proceeding. Of
course, if the legislature has power to make such grants, it must have
power to alter them. In short, property held by a corporation is held at
the will of the legislature, and in a way and to an extent that property
held by an individual is not. It is not very easy for the legislature to
plunder or blackmail individuals, even when they are disfranchised,
because it has to be done by general laws, and direct methods arouse
direct opposition. But, as we have seen, stockholders as a class cannot
defend their rights, and as things are now, their trustees cannot have
much to say concerning the laws that affect their property. Managers of
large corporations are now commonly denounced as unfit to be legislators,
and are practically excluded from the halls of legislation. In some states
they are even specifically disfranchised, so far as holding office is
concerned, and, under the new despotism, ironically dubbed the new
freedom, every man whose wealth and ability make his aid important to many
enterprises, is to be forbidden to participate in more than one. Yet
property is almost entirely subject to the disposition of the legislature!
not entirely, for the courts afford some protection; but even this is now
threatened: we may "progress" so far as to make it unconstitutional for a
judge to declare any law unconstitutional.

It goes without saying that half the property of the country will not
submit to spoliation without a struggle. If it cannot have representation
legitimately, it will try to get it illegitimately or extra legitimately.
The managers of corporations have in the past found many ways to influence
legislation. Despite the prejudices against them, some of them have had
themselves chosen as legislators; even as judges. Some have brought about
the election of legislators who would act in their favor, and have even
bribed legislators. Until recently it was not even unlawful for these
managers to use the money of their stockholders in political
contributions; some managers acted on the "Good Lord! Good Devil!"
principle. Probably most of the politicians paid no railroad fares. Many
of them got passes for their families and their friends; and it was
certainly to be expected that they should listen to the requests of those
who granted these favors. The situation became grotesque when a great
ruler, seeking a nomination to office with the proclaimed purpose of
enforcing the laws against rebates and passes, required the railroad
managers to furnish him free transportation on his righteous mission.

There were obvious objections to these practices, and public opinion
finally compelled our rulers to pass laws prohibiting them. Theoretically
the managers of corporations are now effectually disfranchised. They dare
not offer themselves as candidates for office. They scarcely dare to
favor, even secretly, the choice of rulers who will listen to them.
Fortunately, however, they hardly longer dare to offer bribes. Anyone on
friendly terms with them is politically a suspicious character. Any lawyer
who has been employed by them becomes unavailable as a candidate for
office. Our legislators, as was to be expected, at once showed the effect
of release from restraint. It has been uncharitably said that in revenge
for the loss of their passes and other favors, they attacked the
railroads; but there has been considerable voting of more mileage, and our
congressmen at least voted themselves ample indemnity in larger salaries,
and they opened fire on corporations in general and railroads in
particular, with a broadside of statutes. Against this fire the property
of millions of small holders in the corporations has been almost
defenceless. Some of these statutes are so drawn that the plain business
man does not know whether he is a criminal or not; if he could afford to
consult the best of lawyers it would not help him much. The only safe
course to pursue is to agree with the adversary quickly; to plead guilty
to whatever charge is made, and beg for mercy. That one is innocent is
immaterial. The expense of litigation is nothing to the rulers of the
United States; but it may be ruinous to their subjects. The cost of the
commissions and investigations and prosecutions of the last few years has
been enormous. Only lawyers can contemplate it without consternation.

True, the managers of large corporations can make their protests heard.
They can publish their pleas in the newspapers, and issue pamphlets, and
they can appear before committees and commissions, and submit arguments.
The managers of small corporations cannot afford such measures. You might
as well refer a servant-girl who couldn't collect her wages, to the Hague
Tribunal, as to send a plain business man to Washington to plead his
cause.

The animus of these statutes is hostility to great corporations. But it is
impossible to legislate against great corporations without hitting the
small ones. Take the case of the recent corporation income tax; the
244,000 corporations exempt from the tax had to make out their inventories
and keep their books and report their proceedings precisely as if they
were liable to the tax. A fine of from $1,000 to $10,000 and a 50 per
cent. increased assessment were the penalties for failure. But the cost of
complying with all the requirements of the law, for a corporation having
an income of two or three thousand dollars, cannot be figured at much less
than the tax. Many corporations have no net income. The managers of these
concerns are not expert book-keepers, and their returns must be in many
cases so inaccurate as to expose them to prosecution if the game were
worth the candle. If we assume that the average cost of making out the
return is only ten dollars, we have a bill of $2,400,000, which the
stockholders, or the employees, or the customers, must pay for the
privilege of demonstrating that the small corporations are not liable to
pay anything at all.

The corporation income tax law was really an act of popular dislike of
corporations exercising great monopolies. Grouping all the little
corporations with them was an absurdity and a cruelty.

Corporations have no feelings. They are not wounded by the hostility of
legislatures. The managers of corporations of large capital have feelings,
and some of them are wounded in their pride by this hostility. But they
need not suffer in their pockets. They are abundantly able to protect
their own property; they know how to make money on the short side of the
market as well as the long side. But the managers of the concerns of small
capital are seldom able to do this. Oppressive laws cause suffering to
them, to the mere holders of stock in all corporations, to the creditors
of all, to the employees, and to the customers. Many of these laws profess
to be meant to favor small people as against big people--to restrain the
rich corporations so that the poor ones may have more liberty. There is no
evidence to show that this result is attained, or that the country would
be better off if it were attained. But there is plenty of evidence to show
that half the people of the country are suffering from these legislative
attacks on their property. The men who manage the great corporations,
whatever their faults, are men of enterprise and courage. They are the
true progressives; the prosperity that they diffuse among the whole people
is ordinarily more than can be destroyed by our progressive politicians.
They are now beginning to feel that their rulers are discriminating
against them as a class, and are uneasy and disheartened, and reluctant to
embark in new enterprises; and the progress of the country is halted by
their apprehension. It is not the rich who suffer most: it is "the
unemployed," and the millions of dumb, helpless, struggling thrifty men
and women whose hard earned savings constitute a large part of the capital
of the corporations; and who are already alarmed at the shrinking value of
these savings. It is, perhaps most of all, the mass of ignorant unthrifty
poor, whose chief wealth is the wages paid them by the corporations which
they are taught to look on as their oppressors.

RAILWAY JUNCTIONS

In his illuminating essay on _The Lantern-Bearers_, Stevenson complains of
the vacuity of that view of life which he finds expressed in the pages of
most realistic writers. "This harping on life's dulness and man's meanness
is a loud profession of incompetence; it is one of two things: the cry of
the blind eye, _I cannot see_, or the complaint of the dumb tongue, _I
cannot utter_." And then, with a fine flourish, he declares:--"If I had no
better hope than to continue to revolve among the dreary and petty
businesses, and to be moved by the paltry hopes and fears with which they
surround and animate their heroes, I declare I would die now. But there
has never an hour of mine gone quite so dully yet; if it were spent
waiting at a railway junction, I would have some scattering thoughts, I
could count some grains of memory, compared to which the whole of one of
these romances seems but dross."

"If it were spent waiting at a railway junction" ... Here, with his
instinct for the perfect phrase, Stevenson has pointed a finger at the one
experience which is commonly accepted as the acme of imaginable dulness.
This man, who could be happy at a railway junction, could not have found a
prouder way of boasting to posterity that he had never "faltered more or
less in his great task of happiness."

It is because railway junctions are the most unpopular places in the world
that they have been singled out for praise in THE UNPOPULAR REVIEW. Poor
places, lonely and forlorn, cursed by so many, celebrated by so
few,--surely they have waited over-long for an apologist.... But first of
all, in order to be fair, we must consider the customary view of these
points of punctuation in the text of travel.

Far up in Vermont, at a point vaguely to the east of Burlington, there is
a place called Essex Junction. It consists of a dismal shed of a station,
a bewildering wilderness of tracks, and an adjacent cemetery, thickly
populated (according to a local legend) with the bodies of people who have
died of old age while waiting for their trains. This elegiac locality was
visited, many years ago, by the Honorable E.J. Phelps, once ambassador of
the United States to the court of St. James's. He was allotted several
hours for the contemplation of the cemetery; and his consequent
meditations moved him to the composition of a poem, in four stanzas, which
is a little classic of its kind. Space is lacking for a quotation of more
than the initial stanza; but the taste of a poem, as of a pie, may
conveniently be judged from a quadrant of the whole.--

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