The same problem that was discussed in the previous extract was taken up by the Industrial Commission of 1898. The figures given as to the relative share of labor in the net product of industry show a further decline since 1880. In 1890 it was 44.9 per cent and in 1900 it had fallen to 41 per cent. The decade 18901900 had also witnessed a decrease in actual wages, so that the lot of labor was absolutely as well as relatively worse at the end than it had been at the beginning of this period. On the other hand the Commission points out that there has been a steady tendency for interest rates to fall during the previous thirty years. It may be said that in all points concerning labor and capital this report was very conservative.

PROFITS AND WAGES

The problem of profits and wages must be considered under two separate and wholly distinct aspects. The first question has to do with the share of the product of industry going to labor as compared with the share going to owners of capital, land, monopolies, etc. The second question an entirely different one is that which has to do with actual income and social well-being of the manual working classes. That the two problems are quite separate may be shown from

1 Final Report of the Industrial Commission. Volume XIX of the Commission's Reports (Washington, 1902), 724-729.

the fact that, on the one hand, the share of the social product going to labor might be continually increasing from year to year and at the same time the actual income of the working people might be growing less, provided the aggregate product of society itself were decreasing. On the other hand, the actual income and social well-being of the working population might be on a steady increase and yet the share going to labor might be growing smaller and smaller, provided the aggregate production were increasing in greater ratio than the increase in the actual income of the working people.

UNCERTAINTY OF STATISTICS

The solution of the first of these questions, that having to do with the share of the social product going to labor, is, perhaps, the most difficult and unsatisfactory of all statistical problems.

Equally misleading are the conclusions frequently drawn from the census of the United States respecting the proportion of the total product which goes to capital and labor respectively. The census of 1890, for example, estimated the value of manufactured products for the entire United States at $9,372,000,000, and the aggregate wages in the same industries at $2,283,000,000, according to which it would appear that labor received 24.36 per cent of the joint product. But this inference is manifestly wrong, since the cost of material used in manufactures was more than half the value of the product, viz., $5,162,000,000, or 55.08 per cent. Miscellaneous expenses also were 6.73 per cent of the total product. The proper method of inquiry into the proportion of the product going to labor is that which separates out the cost of material and endeavors to discover what proportion of the net product is assigned to labor. If this is done, it appears that in 1890 the net product of all manufacturing industries was $4,211,000,000, and of this net product the total wages paid would be 54 per cent instead of 24 per cent. The above figure for wages, however, includes salaried employees, officers, superintendents, firm members, and clerks. The payment to wage-earners, properly speaking (but including some overseers and foremen on salary), was $1,891,228,321, or 44.9 per cent of the value of the net product of manufacturing industry.

The complete figures for the census of manufactures of 1900 have been secured, a trifle in advance of their general publication, through the courtesy of the chief of the Division of Manufactures. The net product of manufacturing industry in the United States by the Census of 1900 was $5,669,335,584; while the wages paid (not including any

salaried officers) were $2,323,407,257, or 41 per cent of the net product. . . . There has been a decrease in the proportion of the total product going to wage-earners; while, as shown elsewhere, the absolute amount going to the wage-working class has slightly decreased per capita during the decade. Wages in 1899, the year actually covered by the census figures, had not reached a point as high as in 1900 and 1901. In a period of rising prosperity wages ordinarily advanced less rapidly than prices and profits.

EARNINGS OF CAPITAL

When we consider the entirely different problem of the increase or decrease of profits and wages over a period of years, we are met again not only by the defects of statistical inquiry, but by inherent difficulties of the problem. As regards the changes in the rates of interest and profits over a period of years, there are two entirely different questions to be considered. The first is the interest or profit received on disposable capital seeking investment in the open money markets. The second is the profits made by those enterprises which have an established existence. In the first case the rate of interest depends upon the opportunities for investment which have not yet been occupied and which may be much less profitable than those already in possession; while in the second case the rate of profit is determined for different investments by the different conditions surrounding each, especially the possession of good will, trade-marks, patent rights, and monopolies of various kinds. Monopoly privileges, for example, wherever they exist, become more and more valuable as population increases and the net returns are thereby augmented; but, at the same time, the rate of interest on disposable capital not protected by these privileges has continually declined.

As regards disposable capital, every statistical exhibit of value shows, during the past 30 or 40 years, this steady decline in the rate of interest. Here distinction should be made between call loans, loans on commercial paper, and loans on long-time securities. The interest on call loans is the interest on bankers' balances, and the rate depends largely on the temporary supply of legal tender and the condition of the Federal Treasury, whereas the interest on commercial paper and the interest received on long-time investments depends upon the general business prosperity. The following table and statistical chart exhibit in an impressive way the general decline of interest on these classes of investments. The rates on call loans and commercial paper are shown for New York City from the year 1866 to

1901, and indicate the rapid decline immediately thereafter following the year 1873, and the more gradual decline, with fluctuations dependent upon current conditions of business prosperity and depression. More stable than the rate on commercial paper is that received by insurance companies, which is shown for 30 years. Here it appears that the average rate of interest for the years from 1871 to 1875 was 6.88 per cent, whereas for the 7 years from 1891 to 1897 it was 4.98 per cent. . . .

The rates of interest quoted are, as already stated, those received on disposable capital which is open to competition and does not possess any special privileges or advantages protecting it from competitors. When it is attempted to discover the rate of profit received on capital invested in business, an insurmountable difficulty is presented in all industries except one, namely national banks.. While the banking business fluctuates with the general conditions of industry, it is, of course, impossible to draw conclusions from the history of this one business which shall apply to others respecting the rate of profits.

C. The Growth of Large Fortunes, 19151

A very different answer to the question as to the actual distribution of wealth was given in the report of the Commission on Industrial Relations in 1915. According to this report most of the wealth is going, not to the workers, but to a small group of rich men, in whose huge fortunes is concentrated an ever-increasing proportion of the national wealth. This report is in striking contrast with that of the earlier Industrial Commission of 1898, and is decidedly radical in its tone and recommendations.

What do the millions get for their toil, for their skill, for the risk of life and limb? That is the question to be faced in an industrial nation, for these millions are the backbone and sinew of the State, in peace or in war.

First, with regard to the adult workmen, the fathers and potential fathers, from whose earnings, according to the "American standard," the support of the family is supposed to be derived.

of

Between one-fourth and one-third of the male workers 18 years age and over, in factories and mines, earn less than $10 per week; from two-thirds to three-fourths earn less than $15, and only about one-tenth earn more than $20 a week. This does not take into consideration lost working time for any cause.

Next are the women, the most portentously growing factor in the

1 Final Report of the Commission on Industrial Relations (Washington, 1915),

labor force, whose wages are important, not only for their own support or as the supplement of the meager earnings of their fathers and husbands, but because, through the force of competition in a rapidly extending field, they threaten the whole basis of the wage scale. From two-thirds to three-fourths of the women workers in factories, stores and laundries, and in industrial occupations generally, work at wages of less than $8 a week. Approximately one-fifth earn less than $4 and nearly one-half earn less than $6 a week. . . .

Last of all are the children, for whose petty addition to the stream of production the Nation is paying a heavy toll in ignorance, deformity of body or mind, and premature old age. . . .

This is the condition at one end of the social scale. What is at the other?

Massed in millions, at the other end of the social scale, are fortunes of a size never before dreamed of, whose very owners do not know the extent nor, without the aid of an intelligent clerk, even the sources, of their incomes. Incapable of being spent in any legitimate manner, these fortunes are burdens, which can only be squandered, hoarded, put into so-called "benefactions" which for the most part constitute a menace to the State, or put back into the industrial machine to pile up ever-increasing mountains of gold.

In many cases, no doubt, these huge fortunes have come in whole or in part as the rich reward of exceptional service. None would deny or envy him who has performed such service the richest of rewards, although one may question the ideals of a nation which rewards exceptional service only by burdensome fortunes. But such reward can be claimed as a right only by those who have performed service, not by those who through relationship or mere parasitism chance to be designated as heirs. Legal right, of course, they have by virtue of the law of inheritance, which, however, runs counter to the whole theory of American society and which was adopted, with important variations, from the English law, without any conception of its ultimate results and apparently with the idea that it would prevent exactly the condition which has arisen. In effect the American law of inheritance is as efficient for the establishment and maintenance of families as is the English law, which has bulwarked the British. aristocracy through the centuries. Every year, indeed, sees this tendency increase, as the creation of "estates in trust" secures the ends which might be more simply reached if there were no prohibition of "entail." According to the income tax returns for ten months of 1914, there are in the United States 1598 fortunes yielding an income