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William G. Sumner
The Concentration of Wealth
Economic Aspects: Its Justification
By William G. Sumner, L.L.D.
Professor of Political and Social Science in Yale University
A SPECIAL EXHIBIT. "Are you exhibiting at the Horse Show this year?" "Yes, I am sending my daughter." Charles Dana Gibson, The Gibson Book (1907) | The concentration of wealth I understand to include the aggregation of wealth into large masses, and its concentration under the control of a few.
Stated in the concisest terms the phenomenon is that of a more perfect integration of all societal junctions. The concentration of power (wealth), more dominant control, intenser discipline, and stricter methods are but modes of securing more perfect integration. When we perceive this we see that the concentration of wealth is but one feature of and step in societal evolution. |
Some may admit that the concentration of wealth is indispensable, but may desire to distinguish between joint stock aggregations on the one side, and individual fortunes on the other. This distinction is a product of the current social prejudice and is not valid. The predominance of the individual and personal element in control is seen in the tendency of all joint stock enterprises to come under the control of very few persons. Every age is befooled by the notions which are in fashion in it. Our age is befooled by "democracy." We hear arguments about the industrial organization which are deductions from democratic dogmas, or which appeal to prejudice by using analogies drawn from democracy to affect sentiment about industrial relations. Industry may be republican; it never can be democratic, so long as men differ in productive power and in industrial virtue. In our time joint stock companies, which are in form, republican, are drifting over into oligarchies or monarchies, because one or a few get greater efficiency of control and greater vigor of administration. They direct the enterprise in a way which produces more, or more economically. This is the purpose for which the organization exists, and success in it outweighs everything else, We see the competent men refuse to join in the enterprise, unless they can control it, and we see the stockholders willingly put their property in the hands of those who are, as they think, competent to manage it successfully. The strongest and most effective organizations for industrial purposes which are formed nowadays are those of a few great capitalists, who have great personal confidence in each other, and who can bring together adequate means for whatever they desire to do. Some such nucleus of individuals controls all the great joint stock companies.
It is obvious that "concentration of wealth" can never be anything but a relative term. Between 1820 and 1830 Stephen Girard was a proverb for great wealth. A man equally rich would not to-day be noticed in New York for his wealth. In 1848 John Jacob Astor stood alone in point of wealth. To-day a great number surpass him. A fortune of $300,000 was then regarded as constituting wealth. It was taken as a minimum above which men were " rich." It is certain that before long some man will have a billion. It is impossible to criticise such a moving notion. The concentration of capital is also necessarily relative to the task to be performed. We wondered lately to see a corporation formed which has a capital of a billion. No one will wonder at such a corporation twenty-five years hence.
There seems to be a great readiness in the public mind to take alarm at these phenomena of growth. There might seem to be rather reason for public congratulation. We want to be provided with things abundantly and cheaply. That means that we want increased economic power. All these enterprises are efforts to satisfy that want. They promise to do it. Especially the public seems to turn to the politician to preserve them from the captain of industry. When has anybody ever seen a politician who was a match for a captain of industry? One of the latest phenomena is a competition of the legislatures of several States for the profit of granting acts of incorporation. Of course, this competition consists in granting greater and greater powers and exacting less and less responsibility.
It is not my duty in this symposium to make a judicial statement of the good and ill of the facts I mention. I leave to others to suggest the limitation and safeguards which are required. It is enough to say here that of course all power is liable to abuse. If anybody is dreaming about a millennial state of society in which all energy will be free, yet fully controlled by paradisaic virtue, argument with him is vain. If we want results we must get control of adequate power, and we must learn to use it with safeguards. If we want to make tunnels, and to make them rapidly, we have to concentrate supplies of dynamite. Danger results. We minimize it, but we never get rid of it. In late years our streets have been filled with electric cars and vehicles. The risk and danger of going on the streets has been very greatly increased. The danger is licensed by law. It is inseparable from the satisfaction of our desire to move about rapidly. It is in this light that we should view the evils (if there are any) from the concentration of wealth. I do not say that "he who desires the end desires the means," because I do not believe that that dictum is true, but he who will not forego the end must be patient with the incidental ills which attend the means. It is ridiculous to attempt to reach the end while making war on the means. In matters of societal policy the problem always is to use the means and reach the end as well as possible under the conditions. It is proper to propose checks and safeguards, but an onslaught on the concentration of wealth is absurd, and a recapitulation of its "dangers" is idle.
In fact, there is a true correlation between (a) the great productiveness of modern industry and the consequent rapid accumulation of capital from one period of production to another, and (b) the larger and larger aggregations of capital which are required by modern industry from one period of production to another. We see that the movement is constantly accelerated, that its scope is all the time widening, and that the masses of material with which it deals are greater and greater. The great cause of all this is the application of steam and electricity to transportation, and the communication of intelligence; things which we boast about as great triumphs of the nineteenth century. They have made it possible to extend efficient control, from a given central point, over operations which may be carried on at a great number of widely separated points, and to keep up a close, direct and intimate action and reaction between the central control and the distributed agents. That means that it has become possible for the organization to be extended in its scope and complexity, and at the same time intensified in its activity. Now whenever such a change in the societal organization becomes possible it also becomes inevitable, because there is economy in it. If we confine our attention to industrial undertakings (altho States, churches, universities and other associations and institutions are subject to the same force and sooner or later will have to obey it) we see that the highest degree of organization which is possible is the one which offers the maximum of profit. In it the economic advantage is greatest. There is therefore a gravitation toward this degree of organization. To make an artificial opposition to this tendency from political or alleged moral, or religious, or other motives would be irrational. The society would no longer have any real rule of action. It would have submitted itself to the control of warring motives without any real standards or tests.
It is a consequence of the principle just stated that at every point in the history of civilization it has always been necessary to concentrate capital in large amounts relatively to existing facts. In low civilization chiefs control what capital there is and direct industry. They may be the full owners of all the wealth or only the representatives of a collective theory of ownership. This organization of industry was, at the time, the most efficient, and the tribes which had it prospered better than others. In the classical States with slavery, and in the medieval States with serfdom, the great achievements which realized the utmost that the system was capable of were attained only where wealth was concentrated in productive enterprises in amounts, and under managarnent, which were at the maximum of what the system and the possibilities of the time called for. If we could get rid of some of our notions about liberty and equality, and could lay aside this eighteenth century philosophy, according to which human society is to be brought into a state of blessedness, we might get some insight into the might of the societal organization; what it does for us, and what it makes us do. Every day that passes brings us new phenomena of struggle and effort between parts of the societal organization. What do they all mean? They mean that all the individuals and groups are forced against each other in a ceaseless war of interests, by their selfish and mutual efforts to fulfill their career on earth, within the conditions set for them by the state of the arts, the facts of the societal organization and the current dogmas of world philosophy. As each must win his living, or his fortune, or keep his fortune, under these conditions it is difficult industrial or economic effort, by a "free hear man." It is no wonder that we so often hear angry outcries about being "a slave" from persons who have had a little experience of the contrast between the current notions and the actual facts.
In fact, what we all need to do is to be taught by the facts in regard to the notions which we ought to adopt, instead of looking at the facts only in order to pass judgement on them and make up our minds how we will judge them. If we are willing to be taught by the facts, then the phenomenon of the concentration of wealth which we see about us will convince us that they are just what the situation calls for. They ought to be because they are, and because nothing else would serve the interests of society.
I am quite well aware that, in what I have said, I have not met the thoughts and feelings of people who are most troubled about "the concentration of wealth." I have tried to set forth the economic necessity of the concentration of wealth. I maintain that this is the controlling consideration. What strikes them most is the fact that there are some rich men. I will, therefore, try to show that this fact also is only another economic justification of the concentration of wealth.
I often see statements published, in which the objectors lay stress upon the great inequalities of fortune, and, having set forth the contrast between rich and poor, they rest their case. What law of nature, religion, ethics, or the State is violated by inequalities of fortune? The inequalities prove nothing. Others argue that great fortunes are won by privileges created by law and not by legitimate enterprise and ability. This statement is true, but it is entirely irrelevant. We have to discuss the concentration of wealth within the facts of the institutions, laws, usages and customs which our ancestors have bequeathed to us and which we allow to stand. If it is proposed to change any of the societal order, that is a proper subject of discussion, but it is aside from the concentration of wealth. So long as tariffs, patents, etc., are part of the system in which we live, how can it be expected that people will not take advantage of them? What else are they for? As for franchises, a franchise is only an X until it has been developed. It never develops itself. It requires capital and skill to develop it. When the enterprise is in the full bloom of prosperity the objectors complain of it, as if the franchise, which never was anything but an empty place where something might be created, had been the completed enterprise. It is interesting to compare the exploitation of the telephone with that of the telegraph fifty years earlier. The latter was, in its day, a far more wonderful invention, but the time and labor required to render it generally available were far greater than what has been required for the telephone, and the fortunes which were won from the former were insignificant in comparison with those which have been won from the latter. Both the public and the promoters acted very differently in the two cases. In these later times promoters seize with avidity upon an enterprise which contains promise, and they push it with energy and ingenuity, while the public is receptive to "improvements." Hence the modern methods offer very great opportunities, and the rewards of those men who can "size up" a situation, and develop its controlling elements with sagacity and good judgment, are very great. It is well that they are so, because these rewards stimulate to the utmost all the ambitious and able men, and they make it certain that great and useful inventions will not long remain unexploited as they did formerly. Here comes, then, a new reaction on the economic system. New energy is infused into it, with hope and confidence. We could not spare this stimulus and keep up our work of production. I may add that we could not spare it and keep up the air of contentment and enthusiastic cheerfulness which characterizes our society. No man can acquire a million without helping a million men to increase their little fortunes all the way down through all the social grades. In some points of view it is an error that we fix our attention so much upon the very rich and overlook the prosperous mass, but the compensating advantage is that the great successes stimulate emulation the most powerfully.
What matters it then that some millionaires are idle, or silly, or vulgar, that their ideas are sometimes futile, and their plans grotesque, when they turn aside from money-making? How do they differ in this from any other class? The millionaires are a product of natural selection, acting on the whole body of men, to pick out those who can meet the requiment of certain work to be done. In this respect they are just like the great statesmen, or scientific men, or military men. It is because they are thus selected that wealth aggregates under their hands--both their own and that intrusted to them. Let one of them make a mistake and see how quickly the concentration gives way to dispersion. They may fairly be regarded as the naturally selected agents of society for certain work. They get high wages and live in luxury, but the bargain is a good one for society. There is the intensest competition for their place and occupation. This assures us that all who are competent for this function will be employed in it, that the cost of it will be reduced to the lowest terms, and furthermore that the, competitors will study the proper conduct to be observed in their occupation. This will bring discipline and the correction of arrogance and masterfulness.
NEW HAVEN, CONN.
Source: William G. Sumner, "Economic Aspects: Its Justification." The Independent 54 (May 1, 1902): 1036-1040.
LOVE AND DUTY. He: "Your father advises me to invest my fortune
in Wall Street. It would be politic, I suppose."
"No, don't do it! After he'd won all your money he'd never let us marry."
Charles Dana Gibson. From The Gibson Book (1907)
