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Introduction The only claim that I care to make for this book is that it is not academic. To some readers that will be a great drawback; to others, an advantage. Although taking no particular side in politics, I, like the Persian poet -- "... when young did eagerly frequent Doctor and Saint, and heard great argument." I soon observed that the supporter-of-things-as-they are, when pressed, would invariably reply to the contention that the community itself should administer a service or carry on an industry, that while it would be very nice if it could be done, it was not practicable; whereupon the advocate-of-things-as-they-ought-to-be would proceed volubly to explain how, in theory, the whole thing was as simple as losing money on the Stock Exchange. Unlearned in all these theories, but with some practical acquaintance of foreign business affairs, I would marvel how it was that neither party to the argument was aware that in some country or the other the precise thing regarding the possibility of which they were arguing was actually in existence. Theorists—even great theorists—are apt to ignore facts. I have heard Bernard Shaw, in a public debate, enlarge upon the iniquity of a social system which resulted in rulers, pens and other office appliances being locked away each night in the office safe, and G. K. Chesterton, in a voluminous reply, proving why this was just and equitable; whilst I and a few hundred other ordinary persons were bursting to explain that it was not the custom in any office to lock away such appliances. Being of a practical turn of mind, it seemed to me that both collectivists and their opponents would do better to study the success and failure of those numerous collectivist undertakings which were actually being carried on throughout the world. I resolved, therefore, to collect examples of those branches of industry and work which had already, in one country or the other, come to be carried out by the community in collectivist form, be it by the state, the province, the city or commune ; and the following pages are the result. Each man measures a thing by the standard with which he is most familiar; and the many examples given in this book have been appraised from the point of view, not of a professor of political economy, but of a man engaged in finance who has to estimate the value of things from the commercial or business side. On this account more attention has been paid to finance than would otherwise have been the case. It was my intention originally to indulge in no theories, but to content myself with a collection of facts. The work has, however, proved bigger and has occupied many more years than was anticipated, and it has been found impossible to refrain from making some generalizations ; and out of the mass of examples of collectivist activity that have been examined, the following broad currents appear to emerge. Through the invention of machinery, the small craftsman and manufacturer has become almost extinct, and has been superseded by the great factory. producing by and for the million; by the adoption of the limited liability company principle the small business is rapidly dying out and is being replaced by the great store, the multiple shop, and the amalgamation of a number of mercantile houses, all owned by a large number of shareholders. The units of industry and commerce are growing larger and larger; the big and financially strong concerns gradually destroy the weaker and absorb the tougher among their competitors, until in many cases the whole trade of the world in an article is controlled by a few giant undertakings, e.g. petroleum, sewing cotton, tobacco. So much for production or manufacture. In the realm of distribution, we have the growth of the huge department store, such as the Harrods, Whiteleys and Selfridges of London, a class of business which has developed even more abroad, e.g. the Bon Marche, the Magasins du Louvre, and the Printemps of Paris, the great Tietz stores which are to be found in all the great cities of Germany and Belgium, the Wanamakers of New York and Chicago, the Batons and the Robert Simpsons of Toronto and Montreal, the Gath and Chaves of Buenos Aires, and so on ; all of which are gradually rendering more and more precarious the existence of the small retailer with his insufficient capital, who retains customers only because he gives the credit which they cannot obtain from the department stores. Then, in countries of great distances, there is that great form of department store, as yet almost unknown in European cities, namely, the mail order business, like that of Montgomery Ward & Co. or Sears, Roebuck & Co., both of Chicago. The first- named business, for example, states that it has over three million customers throughout the United States and Canada. Yet another form of eliminating both middleman and retailer is that rapidly increasing method of great manufacturers opening their own shops throughout the country. In the United Kingdom in one trade alone, namely the boot and shoe trade, we have manufacturers like Freeman, Hardy & Willis, Ltd., supplying the public direct through their 475 shops, Stead & Simpson and Lennards of Bristol, each with about 200 shops, J. Sears & Co. (Trueform Boot Co., Ltd.), with about 100 shops. The Public Benefit Boot Co., Ltd., with about 115 shops, and numerous other manufacturers like R. & J. Dick, Ltd., who, in addition to their thirty shops in the United Kingdom have a score or so on the Continent; and many people who deal regularly at such well-known multiple shops as those of the Maypole Dairy Co., Ltd., which has no less than 822 retail establishments throughout the United Kingdom, would be surprised to learn that that company owns large margarine and cheese factories. Some of these multiple shops are so unobtrusive that the general public is almost unaware of the fact that in purchasing of them it is buying direct of the maker. In every English town of any importance is a "Scotch Wool and Hosiery Stores"; there are over 250 of these shops, which belong to a company owning large worsted mills in Greenock, which thus supplies the consumer direct. The Eastman Kodak Company and the Singer Sewing Machine Company cover the whole of the world with their retail establishments which are supplied direct from their factories ; and these are only a few of the examples which come to mind. It is estimated that there are already over seventy thousand of these multiple shops in the United Kingdom. As, gradually, competition narrows until there are only a few great organizations engaged in one particular industry, a series of working agreements are entered into, which are most frequently the precursors of closer alliances. As in private life, it is often found expedient not to publish these intimate relationships to the world, and the limited company principle lends itself admirably to concealment of a community of interests. By means of a series of companies, a small group of people may hold the majority of, or a controlling interest in, the shares of one company, which in turn holds a controlling interest in other companies, which in turn hold controlling interests in still other companies; by this method a group of people may direct to their own ends and profit a whole series of trading concerns, some of which, in the eyes of the public, are in competition with one another. This has been developed to a fine art in the United States, but it is by no means a novelty in London, Manchester, Bristol or Glasgow ; and as a result, there are many more trade monopolies or semi-monopolies in existence than are dreamed of by the man in the street. The growth of these large units, together with the adoption of the limited liability company principle, has brought into existence the superior brain required to direct such giant undertakings. By bringing about the divorce of business control and management from the possession of capital, it has rendered brains mobile. Previously, the small manufacturer or producer passed his business on to his son, whether the latter inherited any special aptitude for the task or not, control here accompanying ownership. As soon, however, as, by the adoption of the joint stock company principle together with that of limited liability, a business came to be owned collectively by a large number of share holders, it was found both desirable and possible to install in the management those who were qualified to be "captains of industry " by the possession of ability without regard to considerations of birth or wealth. The capitalist remains, but he no longer—or seldom beyond the first generation—manages. In other words, in business the hereditary principle has been practically abolished by the growth of the joint stock company, and the capitalist employer has been replaced, as regards actual management, by the salaried official, so that we now see vast organizations directed by men of comparatively small means. Thus, society presents itself as passing through a stage of commercial individualism, as expressed by the small producer and trader, into that of the larger concern, until by elimination, absorption, agreements and interchange of interests (often concealed), together with the coming of the multiple shop, it has already reached a stage of semi- collectivism so far as the wealthier portion of the community is concerned—a movement strangely paralleled by the extraordinary growth of co-operative societies, both distributive and productive, throughout the world. These organizations gradually attain, in more or less concealed fashion, the dimensions of a trust or monopoly; being in their form essentially selfish, that is to say, for the purpose of producing profits for one section of the community, viz. the shareholders, and "human nature being what it is," the pressure of this large body of people upon the management is such as to make it directed more and more towards increasing those profits, regardless of the well- being of the whole community, until public opinion becomes so aroused as to compel the government of the country to interfere. Such interference at first usually takes the form of attempted control, which, however, inevitably breaks down, as President Wilson will soon find in the United States, for you cannot make people compete if they have discovered that it is in their interest not to do so; and sooner or later the community, in some form or other, has to take over the industry or service and work it on its own account. The depletion of national resources, particularly timber, has caused Governments, like those of the United States and Canada, to institute Commissions regulating (or, as the private owner would put it, "interfering with ") the exploitation of these resources; and gradually, in connection with all these franchises and concessions, various Governments and municipal authorities have irresistibly been driven to the conclusion that regulation is not sufficient, and that it is more effective and much more economical for the community itself to carry out the various services with a sole regard to the public interest—a thing which no concern organized primarily for the purpose of profit could hope to do. And let it here be clearly understood that when, in this book, reference is made to the working or exploitation for profit by private industry, the term is not used as one of reproach. People must live, and if society is so organized that to get their means of subsistence, private capitalists, directors, managers and others must so arrange things as to leave the greatest possible margin for distribution to themselves and those they represent, no blame can attach to them if this consideration comes first, and the interests of the community second. It is doubtful whether the community could take over many of the services it eventually does if its task were not facilitated by the various stages enumerated above; for it is only by the process that has been here described, that collectivist ownership and direction become possible. By crushing out of existence the small and weak manufacturers and traders—the economically unfit—the great commercial and industrial concerns of to-day are paving the way to their own absorption by the community; and by rendering it possible for the man of small means, but of ability—the intellectual proletarian—to direct a vast undertaking, they have shown how it is possible to train officials to conduct vast organizations for a remuneration the merest fraction of that which went to the former " captain of industry." This process is, of course, not going on at the same rate all over the world ; nothing shows that better than the following examples, but a survey of the world from this point of view certainly justifies the belief that this is the irresistible tendency. The number of things which the community has found it necessary to regulate, or to rescue from the incontinence of the ordinary business person intent upon a profit, has steadily increased. When the roads became the property of the community, anything which involved a disturbance of them had to be the subject of special arrangement with the representatives of the community; and it appeared as though this were a natural line of demarcation, and that anything which was conveyed through an underground pipe must necessarily be given over to one person or company in the nature of a concession (or " franchise " as it is termed in the United States). Water is not, however, the only commodity of vital importance to the community which can be best served through a pipe system, for the same holds good of milk, oil, beer and other modern necessities; and gradually it was felt that other things vital to the public health also required to be the object of concessions. It is not open to any one to form a cemetery where he wishes. Different ideas as to what should constitute monopolies subject to concessions or franchises obtain in different countries, and many English people are astonished to learn that in the United States ice is regarded as a "public utility," which may not be manufactured or supplied in a city except by virtue of a franchise (concession) granted by the city. In other cities billposting comes in the same category, and the major portion of this book gives various instances of these and other strange services carried on under concessions. People talk sometimes of the failure of municipal undertakings, by which they mean that they fail if measured by the standard to which they have been accustomed, viz. measuring the success of a thing, not by the manner in which it meets the need for which it was destined, but by the surplus of revenue over expenditure available for distribution to themselves; but the world is strewn with the wrecks of private enterprises, which, having failed under that system, the community has found itself compelled to take over and to run solely to meet the needs they were originally intended to meet. One has merely to point to the Alexandra Palace and the Crystal Palace in London, and it is noticeable, too, that people who, by temperament and political opinion, are opposed to Collectivism, usually turn out to be Collectivists in the thing they understand best—for example, there are few more zealous advocates of a Municipal Theatre than Sir George Alexander, who was elected to the London County Council as a "Municipal Reformer " in opposition to the Collectivist tendencies of the Progressives. We are a long way, however, from the end of private enterprise; and as is shown in one of the following chapters, it is not at all unlikely that in some countries great industries and services will pass through a form of mixed control in which such advantages as have attended private ownership may be combined with those which render collective ownership inevitable. Nor is the path perfectly clear. Each development brings its own group of difhculties. The demands of labour are now more insistent than they were ever before, and while, to me, the theories of Syndicalism are hopelessly impossible, that movement has at least made some of us realize that the workers of the world are gradually coming to demand not merely better conditions, but a larger share in the control of industry. This is not so disconcerting to the collectivist as to the private employer; but that does not mean that the problem is easy of solution. I regard the labour position in all the industrial countries with considerable apprehension; those who keep in touch with the general body of workers are uncomfortably conscious of the fact that the fires of revolt which have been smouldering for many years past are dangerously near to explosion — more so, perhaps, in this country than in any other; and it is only in the growth of the collectivist principle, combined with recognition of the claim of the worker to a share in control, that I see any hope of averting a catastrophe. The growth of this movement among the workers themselves provides a safety valve, and t is most probable that the unrest among the railway workers and the coal miners of the United Kingdom, which is rapidly increasing in intensity, will compel early nationalization of these industries. The task of the last century has been the production of wealth; that of the present century is the distribution of wealth. In the early stages of the struggle between Labour and that section of the community which controls industry it is easy to take the side of Labour, for it is still a long way from receiving anything approaching its due share. It is in that stage that the world finds itself at present. As, however, organized Labour becomes stronger, it is not difficult to conceive a state of affairs when we might be confronted with the tyranny of Labour as compared with the past tyranny of Capitalism. We may yet be some distance from it, but the possibility exists, and it is only in the substitution of the community itself for a number of employers, or groups of employers in the shape of companies, working for the profit of a comparative few, that I can see any sure solution of this problem. Some people think (the view was freely expressed in connection with the strike of the municipal workers in Leeds) that the right to strike should be taken away from workers employed by the community on services vital to the life of the community; a few moments' reflection should show the poverty of such reasoning, so long at any rate as other services of vital importance to the community are in the hands of private or company-owned undertakings. For instance, if the gas workers of Leeds lose their right to throw up their work as they choose, because gas is essential to the citizens of Leeds, surely the same reasoning holds good of the raw material from which the gas is made, viz. coal, which is in the hands of private or company owners. The corollary of the removal of the right to strike is that the men, if they make any such attempt, shall be forced back to their work ; and the notion of a body of men being driven to work by bayonets seems out of keeping with modern ideas north of the equator. It may well occur that in course of time the community will find it necessary to protect these vital services from the disorganization that can be brought about by a strike; but if it can induce the workers to renounce their right to liberty of action, it will find it necessary to offer adequate compensation in the shape of much better conditions than obtain under private enterprise, and some important form of machinery for remedying grievances and misunderstandings will have to be devised. The attitude of collectivism to labour, the share of the workers in the control of their labour, as well as the question of the disfranchisement of state and municipal workers, are dealt with at some length in Chapter XXI. In this book I have endeavoured to trace out the trend of things as it presents itself to me, a practical explorer in the world of business. My conclusions may be wrong; but if collectivism is the failure that many people would have us believe, it is time some explanation was forthcoming to account for its extraordinary spread throughout the world as portrayed in the following pages. Emil Davies. May, 1914. Table of Contents INTRODUCTION Chapter I GENERAL CONSIDERATIONS Chapter II THE LIMITS OF COLLECTIVISM Chapter III THE STATE OR CITY AS OWNER OF LAND AND HOUSE PROPERTY AND MEANS OF COMMUNICATION Chapter IV THE STATE OR CITY AS OWNER OF FORESTS, PRODUCER OF RAW MATERIALS, MINERALS, FOOD, DRINK, TOBACCO Chapter V THE STATE OR CITY AS PRODUCER OF LIGHT AND POWER, OWNER OF WORKSHOPS, AND MANUFACTURER Chapter VI THE STATE OR CITY AS CONTRACTOR OF PUBLIC WORKS, OWNER OF WAREHOUSES, COLD STORAGE DEPOTS, GRAIN ELEVATORS, MARKETS, ABATTOIRS Chapter VII THE STATE OR CITY AS RETAILER Chapter VIII THE STATE OR CITY AS TOURIST AGENCY, OWNER OF BATHS AND SPAS, HOTEL AND BOARDING HOUSE KEEPER Chapter IX THE STATE OR CITY AS OWNER OF THEATRES, PICTURE GALLERIES, MUSEUMS, LIBRARIES, SPORT CATERER, BOOKMAKER AND LOTTERY OWNER Chapter X THE STATE OR CITY AS BANKER, PAWNBROKER, ETC Chapter XI THE STATE OR CITY AS EDUCATOR, RESEARCH STUDENT, DOCTOR, ETC Chapter XII THE STATE OR CITY AS SPECULATOR, COMMERCIAL TRAVELLER, ADVERTISING AGENT, PUBLISHER Chapter XIII THE STATE AS INSURANCE OFFICE Chapter XIV THE STATE OR CITY AS UNDERTAKER AND TRUSTEE. "FROM BIRTH TO DEATH." INTERNATIONAL COLLECTIVIST TRADING Chapter XV STATES AND CITIES WITH SURPLUS ASSETS OVER LIABILITIES Chapter XVI HIGHLY MUNICIPALIZED TOWNS Chapter XVII INTERMEDIATE FORMS OF COLLECTIVISM. THE STAIE OR CITY AS SHAREHOLDER OR PROFIT- SHARER. ENDOWMENT FUNDS Chapter XVIII METHODS OF EXPROPRIATION Chapter XIX THE GROWTH OF COLECTIVISM AND RATES OF INTEREST Chapter XX WHAT PROFITS SHOULD A COLLECTIVIST UNDERTAKING EARN? Chapter XXI COLLECTIVISM AND THE LABOUR PROBLEM Chapter XXII NEXT STEPS IN COLLECTIVISM APPENDIX INDEX
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