Problems in American Democracy

ot systematically controlled or directed by a single agency. It is often said to be planless, since laborers, employers, and other in

al life is entirely a haphazard affair. It may, indeed, be said that we have an industrial system. Because of the great importance in it of capital, this system is commonly known as the "capitalistic system." The underlying pr

ory of the capitalistic system, that is "right" which renders the individual and the community stronger, happier, and more prosperous in useful pursuits, while that is "wrong" which weakens or demoralize

vernment will therefore seek to prevent people from advancing their individual interests by killing, robbing, or deceiving their fellows. This suppression of violence and fraud leaves open to individuals only the productive method of getting a living, so that they cannot benefit themselves without at the same time adding

suppresses violence and fraud. The lowest savages are undoubtedly self-centered, but so long as they must rely upon brute force to retain their possessions, there is little inducement to acquire wealth. It is only when law suppresses robbery and fraud, and otherwise protects the individual in his property rights, that the acquisitive instinct will cau

nd depending upon his fellows to supply him with goods and services which he cannot supply for himself. Now, such a condition of interdependence could never have arisen were it not for the fact that government fosters the spirit of confidence among individuals. Many persons can be trusted to fulfill the agreements or contracts which they make with their fel

ek their own well-being. But an earmark of economic goods is scarcity, that is, there are at a given time and place fewer of them than are desired. Men must therefore compete with one another for goods and ser

pay their laborers as high a wage as they feel is justified under the particular circumstances, lest their workmen abandon them for rival employers. Under similar conditions, laborers will generally endeavor to render the bes

rn cannot rise too far, for consumers will either buy those commodities of rival producers, or will use substitutes.

ake of private gain. Competition tends to harmonize the interests of the individual with the interests of the

ss it will satisfy his wants, i.e. unless it has utility. But even though a commodity has utility, no one will ordinarily pay for it unless it is so scarce that he cannot get as

nd are scarce; bread is cheap because while possessing great utility, it is relatively abundant. Skilled labor receives high wages because in addition to its utility it is relatively scarce; unskilled labor often r

er job, free to accept or to reject work offered him. He may abandon his job when he chooses, and remain idle as long as he chooses, or is able. He is repressed by no paternalistic government, embarrassed by no feudal system. He is part and parcel of the competitive system, guiding his own actions and accepting responsibility for them. To a larg

lopment of government which suppresses violence and fraud, which enforces contracts, and which makes possible the rise of the institution of private property. The inception of the Industrial Revolution, and its spread beyond England to Europe, America, and, later, to Asia, were possible only because these bases of capitalism were already laid. To a large extent, thus, the steam engine, the railroad, the steamsh

d as a unit. This was a temporary expedient, however, resorted to for the purpose of winning the war.] Entrepreneurs frequently produce without adequate knowledge of demand, and without knowledge of rival production. When business is booming and profits are high, it often happens that so many individuals g

ies and such harmful commodities as have not been made illegal. Under competitive conditions, too, a number of shops or stores may exist in a community that might easily be served by a single firm. This is wasteful duplication, just as advertising is a waste

vely small incomes. This inequality is explained by Professor Taussig on two grounds: First, it is likely that some individuals originally secured an economic advantage over their fellows because of inborn superiority of some kind. Second, the economic advantage thus secured has been maintained from generation to generation by inheritance. Where, for

of the good things of life, while others have much more than is necessary for comfort and happiness. The test of an economic system is whether or not it provides a good world to live in, and so long as large numbers of individuals have fewer necessitie

tinguish between ills which are clearly traceable to that system, and defects which obviously would exist under any industrial system. Capitalism cannot be discredited, for example, by pointing out that crime exists in all capitalistic countries. Though capitalism may accentuate some types of crime, our

ism? It is not a question of whether or not capitalism is faulty, but of whether it is more faulty than the system that would be substituted for it. The virtues of capitalism, most authorities believe, clearly outweigh its defects, and though some other sys

NS ON T

to speak of a "ca

ief economic func

tting a living. Which will be

itude of a good government t

f government to the insti

e of laws requiring the

there co

rmonize the interests of the indiv

high in price? Why i

ation of capitalism

id as to the benef

e chief defects

existing distrib

does Professor Taussig a

ne in mind in attacking the

RED R

ings in American De

f the fo

es of Economic

n Economic Probl

ion of Modern Cap

nciples of Econo

N THE REQUI

italism. (Hob

mines affected the growth of

f colonization to capital

apitalism to a large labor s

ate property.

s of private property.

t forms of private prope

on of animals upon the institution of pri

ons of private property?

e term "vested interest

" competition? (E

INVESTIGATI

ly secured possession of property belonging to y

e for highway robbery, embezzlement, theft,

ou could not sell the flowers at a profit if they arrived later than Decoration Day. Assume, also, that you have reason to suspect that the greenhouse keeper

given commodity from a single shop or store. Compare the price of the commodity, and its quality, with the price and quality of a simi

peting commodities. Write to a bill-board advertising company for advertising rates, and draw your concl

ng to the advertising manager of the magazine selec

economic prosperity. (Carver, El

gman, Principles of E

or existence. (Carver, Ele

c freedom. (Seligman, Princip

Principles of Economics, vol. ii, chapter liv; King, Wealth

alistic system. (Hobson, Evolution

fe. (Lessons in National and Commu

n life. (Burch and Patterson, Amer

S OF INDUS