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where they become incompatible with their capitalist integument. This integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated."1

Criticism of the theory: This view has been generally accepted by Marx's followers. The disappearance of the middle class and the reduction of most of its members to the ranks of the proletariat have been regarded as self-evident truths of Socialism. But within recent years the theory has been subject to a good deal of criticism, both from within and without the Socialist movement. Many of the leading Socialists in Europe and America have participated in the discussion, and while the results of the discussion have been rather inconclusive thus far, it is now very generally admitted that the middle class is not disappearing in the manner and at the rate which Marx anticipated; that petty industries have not all been swept away; that small retail establishments still persist, and, in some cases, increase in number and that concentration in agriculture does not manifest itself in the form of immense bonanza farms swallowing up all the smaller farms.

Bernstein points out that the number of share-holders in industrial corporations is increasing, and that in England in 1898 there were more than a million share-holders. The share-holders in the Manchester Canal amount in round numbers to 40,000, and in Lipton's there are more than 74,000 share-holders. The number of taxable incomes is increasing, and the increase is most noticeable in the number of moderate incomes. A similar thing is seen in Germany. In Prussia the population doubled in the period 1854-1898, but the number of persons with incomes of more than $750.00 a year increased sevenfold. Similar figures are quoted from other countries to show that, judging by income standards, the number of persons in the middle class is on the increase.

Persistence of small industrial units: Critics of the theory also point to the persistence of petty industrial establishments and small retail stores in support of their position. That a great many such establishments and stores do exist is undeniable. There are many trades and branches of 1 Capital, Vol. I, p. 837.

trades which can be carried on just as cheaply on a small scale as on a large scale, or nearly so. This is the case with different branches of wood, leather, and metal work. A great deal of misunderstanding exists upon this point. It is not denied that there is an enormous development in the direction of larger industrial units, but that the small factories and workshops can and do continue to exist in large numbers. For example, if we take the figures given in the reports of the Prussian census for 1907,1 we shall see both these facts very clearly. The figures refer to mercantile and manufacturing establishments:

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The decrease in the number of establishments classified as "quite small" indicates nothing except the passing out of existence of a percentage of household industries. The increase in the "small" and "medium" establishments is quite as marked and as remarkable as the increase in the "very great" and "giant" establishments. The figures do indicate a very real tendency to concentration, however. While the number of establishments increased only 8.73 per cent the number of persons employed increased 41.81 per cent.

American statistics: Far more important than increase or decrease of the number of units is their relative significance 1The figures are taken from Bernstein's Evolutionary_Socialism, p. 57. They appeared originally in this form in Die Neue Zeit, XV. 2, p. 597.

in the total production. This phase of the subject has been very ably and comprehensively dealt with by Mr. Lucien Sanial, a well-known Socialist statistician. He takes twentyseven of the most typical manufacturing industries and compares the number of establishments, number of persons employed and amount of capital invested in the years 1880, 1890 and 1905. He shows that there was a decrease in the number of establishments from 1880 to 1905 of 35.3 per cent, accompanied by an increase in the number of persons employed of 60.2 per cent, while the capital invested in the smaller number of establishments was 262.6 per cent greater than the capital invested in the smaller number.

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In another table Mr. Sanial takes forty-seven industries. These forty-seven industries comprised 29,800 establishments in 1900. By 1905 the number had fallen to 26,182. Side by side with this decrease in the number of establishments there was a marked increase in the amount of capital invested, which was $1,005,400,000 in 1900, and $1,339,500,000 in 1905. In the same five years the number of workers increased only from 618,000 to 749,000. Here, again, in this group of the smaller industries we find the same evidences of concentration-fewer establishments, large increase of capitals and an increase in the number of wageearners which is not equal to the increase in capitalization.

But even more significant than any of these figures are those which show the relative portion of the total volume of manufacture for which the small establishments are responsible. Table No. IV shows that the two largest classes of establishments number only 24,163, 11.2 per cent of the total number. But they represent 81.5 per cent of the total capital, $10,334,000,000 and employ 71.6 per cent of all the wage-workers in manufacturing industries.

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These figures conclusively prove that industrial concentration is an indisputable fact, so far as the United States is concerned at least. Here, as in Europe, numerous petty industrial establishments continue to exist, but their influence is relatively insignificant. The above table shows that the establishments capitalized at less than $5,000.00 constitute 32.9 per cent of the whole number of establishments, but represent only 1.3 per cent of the total capital and 1.9 per cent of the total number of wage-workers employed. This process is not confined to the United States, but goes on in every industrial nation.

The persistence of petty industries is unimportant: From the Socialist point of view the persistence of small industrial enterprises is not only quite unimportant, but is, for a long time to come at least, inevitable. They may even continue to exist under a Socialist regime. The preparedness of society for Socialism, for social ownership and control, is not to be determined by the number of little industries and business establishments that still remain, but rather by the number of great ones which exist. Karl Kautsky argues this very ably. The ripeness of society for Socialism is not to be disproved by the number of wrecks and ruins which abound. "Without a developed great industry, Socialism is impossible," says Kautsky. "Where, however, a great industry exists to a considerable degree, it is easy for a Socialist society to concentrate production, and to quickly rid itself of the little industry."

While some petty industrial and business establishments 1The table is quoted from Socialism Inevitable, by Gaylord Wilshire, p. 326. Kautsky, The Social Revolution. p. 144.


undoubtedly do exist, and even increase in number, the increase of large industrial establishments employing many more workers and much larger capitals is much greater. The same thing is true of the retail trades. Furthermore, these petty industries are very transient and unstable, being absorbed or crushed out of existence as soon as they get big enough to be worthy of attention on the part of the powerful industrial corporations, either as competitors to be feared or as desirable tributaries. So long as they simply maintain their owners at or near the average wage-earner's standard of life they pass unnoticed, but once they manifest signs of becoming prosperous and potentially dangerous as competitors they are either absorbed or relentlessly crushed. The small corner drug store may exist as an individual enterprise, but generally it can only do so if its "proprietor" consents to become virtually an agent for some great corporation. If he refuses, he is very likely to find himself matched against a competitor who can ruin him. In all our large cities to-day there are drug stores, cigar stores, restaurants, saloons, grocery stores, and so on, which are owned by great corporations having branch establishments all over the country.

Concentration of control: We must be careful to recognize the fact that concentration of control may be just as important as concentration in industry. It may be true that 75,000 stock-holders own stock in the Pennsylvania Railroad, but the influence of the stock-holder is negligible, and the power is as effectively concentrated in the hands of a few men as though they owned every share of the stock. This concentration of control in the hands of a few is more important than is generally realized in the discussion of the subject of concentration. It enables the operation of industry to be carried on for the benefit of a class, and so adds stability to class rule.

Concentration in agriculture: The most damaging criticisms of the theory are those directed against its application to agriculture. Marx conceived the general process of industrial development, including the more or less rapid extinction of petty production, to be repeated in agricultural industry. He regarded the small farm as being incompatible with the development of a really rational agriculture, just as the small workshop was incompatible with really rational production,1 1Cf., Capital, Vol. III, pp. 724, 938-939, etc.

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