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shall belong to the union, demand a voice in the discharge of employees, and try to force the employer, when taking on new men, to select them in order from lists of unemployed journeymen prepared by the union. These demands, of course, may be harmful; the working classes will have to learn by experience what measure of control it is best to have in the hands of the employer. The fact that power may be abused, however, is really beside the point. The point lies in the possibility, and in general the desirability, of extending the range of collective bargaining until the employees shall have a voice — and it is to be hoped a prevailing voice-in determining all the conditions of employment. Through collective bargaining the control of the employees over the business may be indefinitely expanded. Once having secured control, the majority will learn, as they have in political life, to leave certain particularly delicate questions to their industrial captains. In the past, labor has had to seek capital and serve it. In the future, capital may have to seek and serve labor. The past may be pictured by the single entrepreneur with his capital hiring a thousand men to do his bidding. The future may behold the thousand hiring the entrepreneur and his capital to do their bidding. And the latter is the more pleasing, the more democratic, and altogether the more wholesome picture.

These words are written in no spirit of advocacy, and with no intention of palliating the obvious shortcomings of the trades union. But the fact remains - whether we like it or not that economic theory and economic history unite in the conclusion that the union has come to stay as long as the system of capitalistic production. The union must be improved, it cannot be extirpated; and the most urgent task of the present is to convince employers and unionists that there will be no real peace until employers acknowledge the inevitableness of the union, and unions acknowledge - sympathetically and in practical ways the social serviceableness of the employer. Trades unions have been guilty of many sins - violence, monopoly, political corruption. But their gravest danger at the present time is a false philosophy, in accordance with which many unionists have come to believe that the best way to help the union is to oppose

the employer. This is not true of the more wisely conducted unions. The railway brotherhoods frequently unite with the railway managers in securing legislation favorable to the railway industry; and the history of the National Civic Federation, for example, proves that a number of the opposing leaders are keenly aware that capital and labor have interests in common as well as in opposition. In some way, however, united labor as a whole has got to learn this lesson how to drive just as favorable a bargain as possible with the employers in the first instance, and then, the bargain having been made, to bend every effort in loyal coöperation with the employer to make the business the greatest possible success. This is not mere platitude. In the long run, and whether we like the fact or not, productive efficiency is the supreme economic virtue; and the institution that stands in its way will perish. The trades union must bring into industry something besides conflict, or it will disappear. The union that so conducts itself as to make the non-union man or the non-union shop more efficient than the union man or the union shop, in the long run, simply puts a premium upon the suppression of unionism.

QUESTIONS

I. Is the industrial or the trades union the more logical form of organization? Can the two be reconciled? Mention as many kinds of jurisdiction disputes as you can.

2. Does the trades union rest upon a sound economic basis? Is it likely to endure? Is it in any large degree responsible for the conflict between labor and capital?

3. Are all attempts to achieve a monopoly illegitimate? Is there more justification for labor monopolies than industrial monopolies?

4. Is the policy of the closed shop ever justifiable? Intimidation of nonunion men? restriction of apprenticeship? regulation of output?

5. The strike has been defined as a "concerted cessation of work "; is this definition correct? Have men a "right" to strike whenever they wish? Are employers justified in "locking out" their men at pleasure?

6. Are "organized" strikes more successful than "unorganized" strikes? Are strikes more or less successful than formerly? Do they last longer? 7. Is the "blacklist" more justifiable than the boycott? Can either the "blacklist" or the boycott be conducted in a lawful manner?

8. Distinguish between trade arbitration, voluntary arbitration, "com

pulsory investigation," and compulsory arbitration. What are the defects of arbitration as a method of settling labor disputes?

9. Why do labor leaders oppose compulsory arbitration? Is their opposition a sufficient reason for rejecting it? Why is the plea for compulsory arbitration particularly strong in the case of monopolistic industries?

10. How does "gain sharing" differ from "profit sharing"? Is profit sharing necessarily paternalistic? If so, is this a defect?

11. Does consumers' coöperation materially advance industrial democracy? Is producers' coöperation likely to grow and expand?

12. How can a large measure of industrial control be secured for the wage earner through the trades union? Other things being equal, is it desirable that the wage earner should secure a large measure of control? Is it permissible to assume that other things will be "equal"?

LITERATURE

ADAMS, T. S., and SUMNER, H. L. Labor Problems.

BOOTH, CHARLES. Life and Labor of the People in London.

BROOKS, JOHN GRAHAM. The Social Unrest.

Bureau of Labor (U.S.).

Commission of Labor.

Bulletin Annual and Special Reports of the

COMMONS, JOHN R. Trade Unionism and Labor Problems.
ELY, RICHARD T. The Labor Movement in America.

GILMAN, N. P. Methods of Industrial Peace; A Dividend to Labor.

HALL, P. F. Immigration.

Industrial Commission (U.S.). Report, Vols., XVII and XIX.

LEVASSEUR, E. The American Workman.

MITCHELL, JOHN. Organized Labor.

ROWNTREE, B. SEEBOHM. Poverty: A Study of Town Life.

SCHLOSS, D. F. Methods of Industrial Remuneration.

WEBB, CATHERINE. Industrial Coöperation.

WEBB, BEATRICE and SIDNEY. History of Trade Unionism; Industrial Democracy.

CHAPTER XXIV

INTEREST

INTEREST is the price paid for the services of capital. It appears in two forms: loan interest, the amount paid by one man to another for the use of money or goods owned by the latter, and imputed interest, that portion of the value of the products of industry which is attributed or imputed to the services of capital, as distinct from the services of land and labor. Interest is usually measured as a percentage of the money value of capital, and this, coupled with the fact that capital is often lent in the form of money, has led to the prevalence of the idea that interest is a payment for the use of money. This is only a partial description of interest, however, for it does not include imputed interest nor the loan interest paid for the use of many forms of capital buildings, for example.

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Objections to Interest Taking. — It is only in modern times that interest has been generally considered a legitimate and necessary form of income. The strong denunciations of usury contained in both the Old and New Testaments are denunciations of interest taking, for the word “usury" formerly meant any kind of interest, and not merely excessive interest, as at present. The opinion of many classical writers is illustrated by Aristotle's dictum that "money was intended to be used in exchange, but not to increase at interest." During the greater part of the middle ages the authority and teaching of the church was set definitely against the taking of interest in any form. In the middle of the fourteenth century the prohibition of usury was incorporated in the civil law. These objections, however, had reference chiefly to loan interest, and interest on money lent for personal use at that; for capital was not thought of as one of the factors in production until comparatively modern times. In fact, by the fifteenth century, when opportunities for the profitable use of money had appeared in such forms as the purchase of rights to receive land rents, or partnership ventures in trade (where interest was held to be justified by the risk incurred), the canonists (the writers on church law) admitted the legitimacy not only of such gainful employments of money,

but also, in many cases, of interest on loans. The justification of loan interest took on at first many curious forms. It was regarded in some cases as a fine for delay in the repayment of the loan, so that lenders often resorted to the subterfuge of lending money gratuitously for a nominal period, the real agreement being that they were to get back their money principal, with a fine for the delay added, at a later date. In other cases loan interest was justified as a payment for the loss of the possible gains which the lender might have got by using his money himself. Usury, which at first meant any kind of loan interest, came to mean interest on money loans to relieve personal needs, rather than for gainful employment, then interest on loans in which the element of risk was lacking, and finally, excessively high interest.

To-day the use of capital is so prominent a feature of our productive methods that the legitimacy of interest is not generally questioned. Socialistic writers, however, insist that interest is only a result of the system of the private ownership of capital, and that with the abolition of private property in production goods what is now counted as interest would become part of the wages of labor. It is accordingly important that we should understand clearly why interest has to be paid, as well as that we should study the factors determining the rate of interest. We shall find, however, that the explanation of the necessity of interest is really a part of the explanation of the rate of interest.

An idea that naturally

Inadequate Explanations of Interest. suggests itself is that interest has to be paid for the use of money because "money can be profitably employed in business." This explanation, which is very much like one of the ways in which the canonists finally came to justify interest, is obviously inadequate. It is only an attempt to explain loan interest by assuming the existence of imputed interest. What we want to know is why "money can be profitably employed in business."

A similar, but somewhat more definite, attempt at an explanation is contained in the statement that interest is paid because capital is productive. It is pointed out that by the use of capital goods the product of industry is greatly increased over what could be produced by labor and land alone. This is, of course, true, but taken alone it does not explain interest. The problem of interest relates to the value of the product, not to the amount of the product. There is nothing in the mere quantity of the product that gives value to it. The farmers of this country have found more than once that a large wheat crop has sold for less in the aggregate than a small one. The real problem of interest is this: Why

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