PART VI

THE RELATION OF THE STATE TO INDUSTRY

CHAPTER XXVI

NECESSITY OF STATE ACTIVITY

The State and the Meaning of State Activity.—Without going into the question of what constitutes a State, it will answer our purpose here to notice the extent of the conception as we use it. We in the United States are familiar with many kinds of government. When we speak of " the government," we generally mean the federal government, with its seat at Washington. Then comes the state government, then the city, the county, the township, and the school district. Each of these has its own governing to do, and is backed up in the doing of it by all the governments superior to it. Now, it is entirely an accident with us that out of these half dozen forms of government only one, and that not the highest, is known as the state. In most countries the governmental divisions most nearly corresponding to our states are known by some other name departments, provinces, etc. When we use the term in the present work we never mean a state in our American sense unless that meaning is specified, but any society acting through government. Local governments are, of course, only branches of the main government. So, when a school district hires a school-teacher, or a township mends a road, or a city builds waterworks, or a "state" builds a penitentiary, or the federal government builds a post office, all these are State activities in the scientific sense of the word. So, too, when we speak of State intervention we may be talking about the township or the city or the general government. These are only different ways of

exercising one and the same kind of power

government.

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that of organized

State and Government. We use the word "State" then, in its generic sense. The term governmental activity" is sometimes employed but it is less desirable. The word "government" suggests to the ordinary mind a power apart from and superior to the people-a restraining, repressing, punishing power; whereas the modern concept of the State is that of a coöperative institution. To those not still bound by eighteenth century traditions, the modern State signifies people working together. The laissez-faire theory of the State is compatible with the idea of State merely as government. Those under the influence of this theory oppose the economic activity of the State on account of the educational value of private activity, not stopping to reflect that in democracy the things that are done are done by the people and not by an external power. It is not to be assumed without examination that the management of a public waterworks has an educational value to the people at large inferior to the educational value of the management of a private waterworks. Critical examination and observation will show that the advantage is not wholly with either side, but that each form of enterprise has its own educational value. Public enterprise educates in economic affairs more extensively; private enterprise more intensively.

Purity and Efficiency of the State in Relation to its Economic Activities. - The distinction that we have made between repressive government and the coöperative State is especially important to us, as it is in the economic sphere that the State becomes most prominent as a coöperative concern. When our forefathers in the eighteenth century looked upon the State as a repressive agency and at the same time had an exaggerated belief in human perfectibility, they thought of the State as gradually dwindling away. They entertained what is called the night-watchman theory of the State. It is now clear, however, that if the repressive powers of the State dwindle, its coöperative features must increase precisely in the same proportion. As men improve in character their fitness to act together increases. The French philosopher, Montesquieu, more than one hundred and fifty years ago, laid down as

a general principle that liberty invariably increases taxes. For a similar reason the purity and efficiency of the State always increase its economic activities.

We are not considering here primarily the political functions of the State. The importance of preserving law and order in the old restricted meaning of those terms is taken for granted. All the activities of the State naturally have their economic side; and, when there is a marked disturbance of law and order we appreciate the fact that its maintenance is, after all, fundamental in economic life, as it is in other departments of social life. All this, however, is treated in political science, and need not detain us here.

General Statement of the Necessity of State Activity. -The experience of the last century throughout the entire civilized world has convinced men that oppression and restriction are found, not only within the framework of government and because of government, but outside of government and in spite of government. World-wide experience has shown that to secure freedom it is necessary to regulate those economic relations upon which our very life depends. Production has become a social process and so has distribution; and social processes can be controlled only socially. But "social" in this sense does not necessarily mean state or governmental agencies. A great corporation is a social agency, so is a trade union, a consumers' league, or a charity organization society. But the supreme control is State control, and this alone is all-pervasive and in its very nature acts in the interest of all. It is a perversion of a private corporation when it does not act in the interest of the few who form it; it is perversion of the State when it acts in the interest of the few and not of the many. Thus we see in broad, general outlines the necessity for State activity in the economic life.

The State and the Fundamental Economic Institutions of Society. We may trace out the necessity for State activity very briefly along a few lines. First, we will take up the institutional field. The State establishes great fundamental institutions of society, such as property and contract, already discussed in Chapter II. Without the State we may have possession; it is only through the State that possession becomes property. Without the State

we may have agreement enforceable by the strong right arm of an interested party. The State steps in and makes agreements enforceable by its authority and they become contracts. The fundamental institutions of society are a matter of growth and are in a state of flux. They change more or less from time to time and from place to place. The inheritance of property has as many different regulations as there are States in the world. Every modification of any one of the fundamental institutions modifies economic life in general and the distribution of wealth in particular. As society becomes closely knitted and compact, the necessity of understanding the significance of the regulation of the fundamental institutions becomes increasingly apparent. If society is to be prosperous in all its members, we must have before us clearly a goal which we wish to reach and so shape our institutions as to enable us to reach the desired end. This does not mean any acceptance or arbitrary construction of Utopias, inasmuch as human nature has to be taken account of and the fact that it has been molded by past institutions and the past modes of production and exchange. It does mean, however, that we must use the same intelligence in constructing our economic policies that we do in constructing our private business policies.

Property, Private and Public. The right of private property is one so fundamental in our modern life that we scarcely think of it as a creation of man maintained by constant vigilance on the part of the State and subject to human modification. Still less, perhaps, does it seem to us a right open to question. It seems like bed rock, an ultimate right, needing no other justification than its own obviousness. It we feel thus, however, about the right of private property or ownership it is only because we are dominated by present and local customs rather than by the facts of history or reason. We do not intend to impeach the right of private ownership, but it is a right which may as fairly be called in question as any other and must justify itself in the same manner. When a custom has obtained very widely and is deeply rooted in human life there is often a tendency to claim it as a natural right." By a natural right men usually mean a right which is arbitrary, which is a right because it is a right, and "That's all

there is about it." There are no such rights. All true rights are rational rights, rights which can show good reason for their claims and can justify their existence on the ground that they promote human welfare.

There is no possible basis of human right except human welfare. To claim that certain rights are ultimate without reference to their effect on society is to beg the question, and has been well characterized as " dogmatism in disguise." It is characteristic of unscientific and superficial thought to talk much of natural rights, and it is an encouraging sign that in our day such rights are subjected more and more to searching scrutiny. It is, therefore, as scientists rather than as iconoclasts that we should inquire into this time-honored right of private property.

1. Beginning of the Right. Looking back into history we discover first that private property did not always exist. The savage at first owned nothing. Doubtless when he had caught or killed an animal he considered it more or less his, though even here it was the common property of the family or tribe rather than his own. Beyond this there were no property rights as we now understand them. Doubtless there were struggles for the possession of hunting grounds, but the victor's sense of ownership or right was little better developed than that of a victorious lion or buffalo. From these insignificant beginnings the right or sense of ownership has grown, including more and more articles and dividing up the ownership more and more, until at last nearly everything is owned and nearly everybody owns something. Not until the agricultural stage did land become property, and the last forms of tribal ownership have not yet everywhere disappeared before individual ownership.

2. Strengthening of the Right. -The next thing that impresses us is that private ownership has not always been so extensive or so exclusive as at present. We have seen already that the institution of private property has been extended to many things which were at first free goods. It is equally noticeable that the right of ownership has grown in intensity and exclusiveness. This is especially marked in the case of individuals whose claims as opposed to those of the tribe were at first slight and vague; but they