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1. Socialist criticism is essentially constructive and impersonal. 2. The invention of machinery and the rise of factories brought about the reconstruction of social classes, the capitalist owners of the means of production becoming the dominant class and the proletariat, composed of propertyless wage-workers, the subject class.

3. Between the capitalist class and the proletariat is a middle class, less definitely constituted than either, and with the interests and sympathies of its members divided.

4. The capitalist age has been one of great material progress, with a distinct gain in the absolute well-being of the majority.


5. The compensation of labor under capitalism takes the form of a competitive wage, and the typical wage is just sufficient to maintain the current standard of life of the laborer and his family.

6. The standard of life tends to rise from generation to generation, creating a continually strengthening demand for higher wages.

7. The capitalist domination of industry acts as a great repressive force tending to lower the standard of life of the proletariat.


1. Why do Socialists refuse to direct special attacks against the institutions of monarchy?

2. What are the dominant characteristics of the capitalist class? Of the proletariat?

3. What reasons are there for considering the position of the proletariat one of wage-slavery?

4. What are the advantages of the corporation as a form of business organization?

5. In what respects has the working class gained through capitalism? 6. Distinguish between absolute and relative well-being.

7. Criticise the "Iron Law of Wages."

8. What is meant by the "Standard of Life"?

9. How is the standard of life related to the wage system?


Ely, R. T., and Wicker, G. R., Elementary Principles of Economics, Part IV, Chap. III.

Marx, Karl, Capital, Vol. I, Parts II and VI.

Spargo, John, The Common Sense of the Milk Question, Chap. I; The Substance of Socialism, Part III.



The competitive system: America has grown up in the spirit of the laissez faire philosophy: we have been taught to believe that if the government and the monopolists would not interfere, individual self interest working in the spheres of production and exchange would bring about the highest possible social efficiency. America has been the paradise of this laissez faire individualism. With millions of acres of free land to which the dissatisfied could go, and a continent to develop; with the absence of traditional authority and the presence of the most adventurous spirits of all countries, it is no wonder that individualism and competition appeal to the typical American. Then, too, the idea of the "Survival of the Fittest" introduced by Darwin, gave to competition a new scientific basis, so that even in these days of huge combinations, when Judge Gary of the United States Steel Corporation testifies before a Committee of the House of Representatives that competition in the steel industry is dead,1 a large element in the American population still wishes to destroy the "Trust" and rely upon competition to bring about substantial social justice.

This idea of the effectiveness of competition was illustrated by an economist of a past generation by a description of the provisioning of London, holding it to be self-evident that no public or monopolistic agency could meet the complex and multiform needs so well as they were met by the blind working of competition. But the people of London were not all fed. Perhaps as many as thirty per cent had to go hungry part of the time, then as now. Competition falls far short of efficiency.

Lack of coördination: In the laissez faire philosophy it was forgotten that individual liberty must be limited 1 Vide reports in the daily press, July, 1911.

in order to bring about the maximum of social liberty. Darwin and his immediate followers failed to emphasize as Kropotkin has done the importance of coöperation as a factor in evolution. Competition is chaotic, it has no organization. It is simply the outgrowth of the ages before modern science was born. A scientific age demands scientific methods, and competition in industry is the reverse of scientific

Under competition there is no way of estimating the demand. Producers work blindly and hope to be able to dispose of their products at a profit. There is no apportionment of the work among the various producers, so that no producer knows how much of the supply it will pay him to produce. This is especially evident in agriculture within a limited market. If the price of potatoes has been high each farmer will plant a large acreage of potatoes, with the result that in the next season there will be an over-supply of a bulky and perishable product which cannot be profitably disposed of. Competition, therefore, results in great fluctuations in price, gambling in the necessities of life, numerous business failures, irregular production and consequent injury to the working class.

Unnecessary duplication: Anyone who has lived in a city which rejoiced in two or three different telephone systems can appreciate the disadvantages of competition. Every business man must have "both 'phones," and whenever one wishes to call a friend on his "Independent" telephone he discovers to his sorrow that the friend has a "Bell." Nothing is gained by this expensive duplication and inconvenience, for either extreme or "cut-throat" competition must go on until one company is financially ruined, or the companies must agree on a rate, thus giving no advantage over monopoly. Much money has been wasted in paralleling railroads. Capital diverted from industry for the purpose of building unnecessary roads is a social loss. Often a railroad is built as a huge blackmailing scheme, built with the preconceived plan of selling out to the competitor. Real competition in public service facilities is practically nonexistent and impossible for any considerable length of time.

In the process of exchange the wastes of competition are

obvious. Several grocery stores in a small town carry identical stocks of goods, duplicate floor space, stale goods, managers and clerks, while one large store with branches as the town became larger could supply the needs of the town much more cheaply and could afford to change stock more frequently. The distribution of the milk supply where a dozen milk wagons serve a single street needs only to be compared with the postal delivery system to illustrate the wastes of competition. In manufacture the wastes of competition are equally obvious. Even now that a considerable degree of monopoly has been attained, there are far more factories than would be necessary under an efficient and economical system of production.

Advertising: One of the greatest wastes in the marketing of commodities is in the matter of advertising. Advertising has, of course, a legitimate place in business life and would to some extent be necessary in a Socialist commonwealth. It is necessary to make a market for a new product, to call attention to the advantages of new methods over old. But it is not necessary to spend huge sums in persuading people to buy one brand of a standard article rather than another equally good. The excessive advertising of soaps and breakfast foods illustrates this waste.

Advertising also offers a means of influencing the press in a manner and to a degree that is socially dangerous and undesirable. Newspapers and magazines cannot live without advertising, and the judicious placing of advertising matter, or the threat of the withdrawal of such matter already placed has changed the editorial policy of many newspapers and magazines.

The wastes of duplication can also be seen in personal advertising by travelling salesmen. The "drummer" equally with the printed advertisement has a legitimate function to perform in keeping retail dealers in touch with the larger business world, persuading them to introduce novelties, and saving to the retailer the expense of going to the city to place an order. But it is clearly an economic waste when salesmen from several wholesale houses visit one small grocer within a single week, trying to persuade him to increase his stock of standard goods.

Useless vocations: The capitalist system makes necessary

many vocations which are not socially productive, and which draw large numbers of the ablest men and women from productive work. With the socialization of capital these vocations would largely disappear and a heavy tax upon the producing population be saved.

(1) Lawyers: There were 114,703 lawyers in the United States according to the census of 1900, the increase of lawyers between that and the previous census being much more rapid than that of the total population. It is safe to say that now (1911) there are more than 140,000 persons in the legal profession in this country. Probably nine-tenths of the litigation and an even larger part of legal business transacted out of court involves property rights and other issues directly resulting from capitalism. While the socialization of capital would probably not do away with the legal profession in its entirety, it is evident that the number of lawyers would be greatly reduced.

(2) Soldiers: Since the only function of the army and navy under capitalism is to extend foreign markets and coerce rebels against capitalist authority, militarism cannot survive the present industrial system. This will release for socially beneficial work not only the 100,000 men in the army and navy, but the greater army engaged in the manufacture of the munitions of war, in the provisioning and serving of the army and navy, and in the administrative bureaus. The cost of militarism to the country, exclusive of pensions, is $300,000,000 a year. The same amount spent in productive labor would add tremendously to the wealth and well-being of the nation. A simple, inexpensive and democratic system of national defense could easily be substituted for the present wasteful and undemocratic system.

(3) Bankers and brokers: The number of persons in the United States engaged in these occupations is constantly increasing. In 1870 the number was 10,631. By 1880 it had risen to 15,180, and by 1890 to 30,008. By 1900 the number was 73,277. Thus the number of bankers and brokers has been steadily increasing three times as fast as the total population. In addition to this army of men a very considerable part of the 1,000,000 clerks, copyists, bookkeepers, accountants and stenographers enumerated in the census of

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