|By Scott Nearing.
Those who own and those who work face each other.
The worker demands a return for his work. The owner
demands a return for his ownership. The rapid growth
of property values during recent years has accentuated
and emphasized the conflict between work and
On the one hand, are the people who devote their time
and energy to the production of wealth. On the other
hand are the people who own income-yielding property.
The workers receive a wage or a salary; the owners
receive payments of rent, interest and dividends. Many
of the workers are growing clamorous over "human
rights." The property owners, persistent, and ever
watchful, urge the "rights of property." The time has
come when the claims of the contending interests must
be analyzed and understood.
A clearer idea of the points at issue will be assured
if the term "property income" is applied to the
returns that accrue from ownership and the term
"service income" is applied to the returns that accrue
from the expenditure of time and energy in the
rendering of service. All regular income owns its
origin to one of these two sources.
The owners of property bulwark themselves with certain
prerogatives that have proved of the greatest
importance in the conservation of property interests.
Speaking broadly, there are four characteristic
features of the shares of income which are derived
from the ownership of property. First, property income
enjoys priority in its claims upon the proceeds of
industry. Second, the vicissitudes of industry affect
property income less sharply than they affect service
income. Third, income-yielding property exhibits a
tendency to concentrate in the hands of a small
fraction of the people. The total effect of these
characteristics of property income is stupendous. The
priority, regularity, permanence and concentrability
of property income combine to place the owners of
modern income-yielding property in a position of
economic security that surpasses the dreams of past
Those who are giving their time and energy to the
production of wealth, face the fact that property
rights have been so construed as to give property
owners a first claim on production and to make
property income a fixed charge on the industry of the
community. This priority of claim has played a leading
part in raising property to a position of supremacy in
the economic world.
The risks of industry, the burden of economic
uncertainty, and the losses incident to the
dislocations of the industrial systems are carried ir,
the first instance by labor. The first appearance of
hard times is followed by a decrease in the working
force. The least curtailment in orders leads to
part-time work. Wage rates are not cut-that method is
crude and disastrous-but men and women are laid off
temporarily or permanently. Bonds still draw their
interest; the dividends are paid on stocks; . and
labor waits for a job. The defender of property income
will say at once, "If there is nothing to do, why pay
labor?" The counter question is obvious. "If there is
nothing to do, why pay capital?" "Ah," responds the
propertied interests, "you can get rid of the laborer
by firing him, but the investment still stands." That
answer I carries the essential distinction in priority
between the position of the property owner and of the
worker. Mines, railroads, factories, and machinery,
cannot be laid off.
Through good times and bad, they are a fixed charge,
unless the business wishes to face bankruptcy
proceedings. The most important obligation of a modern
business is the interest on its bonded debt. Wages and
salaries may stop, but interest on bonds must continue
if the business is to remain solvent.
Thus land owners, the owners of bonds and mortgages,
and in late years, the owners of stocks as well, have
saddled their property ownership claims on society.
They are possessed of the vitals of present-day
Armed with title deeds to natural resources and to
machinery alike, they are in a position to dictate
terms to the remainder of mankind. Before a tree can
be cut or a ton of coal mined; before a wheel can turn
or a locomotive speed along the steel pathway; before
a wage-earner can raise a hand to labor for himself
and his family, the proper owners must be assured that
they will receive a specified rate of return on their
Society, for the use of the earth which was here
before our forefathers came, and for the use of the
machinery of production which the people of America
have spent three centuries in building, must pay a
royalty, or tax, to the owners of land of machinery.
The method by which the owners came into possession of
this property is scarcely brought into question. As
owners, they are entitled to the first fruits.
The point is well illustrated by an analysis of the
way in which periods of prosperity and of adversity
affect the shares of income. First, take railroad
earnings. During a good year, a regular rate-say 5 per
cent.-is paid on bonds. The earnings being high, a
dividend of 8 per cent is paid on the stock. The
general run of wages and salaries remains the same,
although they are increased in a few departments. A
bad year ensues. The interest on the bonds is paid at
the same rate as. in a good year. Earnings are low,
therefore the dividends on the stock are cut from 8 to
5 per cent.
There are less freight and fewer passengers to carry.
No new construction work is undertaken; therefore, a
quarter of the railroad employees are dropped from the
pay rolls. No reduction is made in wages; the wage
earner is simply denied the opportunity to earn a
Interest must continue, else bankruptcy ensues.
Dividends may be, and frequently are, cut or passed.
Earnings for a considerable proportion of the
employees stop absolutely. In other industries, such
as textile manufacturing and coal mining, instead of
dismissing employees, the establishment is worked two
or three, or perhaps four days a week during bad
times. The interest on the bonds is, of course, paid.
Dividends on the stock may be passed or paid out of
surplus. Wages are decreased by the simple methods of
part-time work. In short, the incorporation of
industry, involving the issue of stocks and bonds,
creates a situation in which, during periods of
adversity, the chief burden is borne by the employees;
and year in and year out, through adversity and
prosperity, interest is paid to bondholders. Exactly
the same thing is true of the rent of land. In good
years and bad years alike, the tenants must pay the
same amount. Certain forms of vested income thus
continue, while earned income and the opportunity to
earn income are dependent on the caprice of industry.
Heretofore the bonds of an industrial enterprise have
been looked upon as the stable form df security. The
development of law and of public opinion has rendered
them ironclad. The United States Commission of
Internal Revenue reports, for the corporations coming
under its purview, a bonded indebtedness of
$34,749,516,354. Here is a fund, which at the very
outset will yield at 5 per cent, a billion and three
The same security which now surrounds bonds, is being
gradually thrown around stock issues. In days gone by,
stock issues were not taken seriously. Today, the
right to pay a 6 per cent return on stock-even if the
issue did not originally represent value invested-is
being recognized in court decisions, in the decisions
of railroad commissions, and in the attitude of
industry toward income. Thus there has b3en effected a
reversal in the relation between property claims and
the claims of labor. Time was when property shouldered
the give and take-the profits of industry. If there
was a lean year, profits were small. They were larger
in fat years.
The man invested his money, took the risk involved,
and was paid for it.
At present, labor shoulders the give and take of
prosperous and adverse years. When times are bad, men
are laid off. Orders decrease, and part-time
automatically ensues. Meanwhile the snipping of
coupons sounds at regular, unvaried intervals, and the
book in which dividend checks are drawn is busy four
times every year.
Modern business practice has wielded an immense
influence in the direction of property permanence. A
thousand dollars, once invested, is virtually
immortal, unless it is stolen, or disposed of in some
extra legal way.
Depreciation, amortization, insurance and special
surplus-fund charges throw around income earning
property a large guarantee of safety. Any failure in
the perpetuity of the property values is due to
inadvertence or impotence in the property interests.
For centuries the thought and effort of the business
world have been directed toward the increasing
permanence of property rights.
The efforts of the propertied interests have been
exerted to good purpose. The public. mind, the laws
and constitutions, the forms of judicial practice-in
short, all of the social forces that were of advantage
have been bent to the guarantee of property income
Granted the continuance of the present system of
property, the student trembles to think of the task in
store for the toiler of the future. Each year, besides
producing wealth in sufficient quantities to provide
for himself and his family, he must devote a large
portion of his energies to the provision of income for
the owners of a vast and ever-growing body of
immortalized property rights and interests.
Men look with pretended aversion toward the Feudal
System-an organization of society under which the
nobility and the priestcraft, through the control of
the natural resources (agricultural land) were able to
live upon the efforts of the great mass of the people.
Is it not time to turn from the perspective of history
to the realities of the present day economic
organizations? Here, in the twentieth century,
civilization of the Western World is an economic
system which automatically turns into the coffers of
those who control the natural resources (forests, ore,
coal, fertile land) an endless stream of wealth. As
rent ate up the fruits of a man's energy, under
feudalism, interest and dividends do likewise under
the modern system of industrialism, which has given to
income-yielding property a permanence that rivals that
estate held by the medieval landlord.
There is one further feature of the property income
situation which cannot be dismissed without a word of
comment-that is the tendency of property income to
concentrate in the hands of a small group of the
population. The tendency is revealed by the record of
wealth distribution in every society about which
history contains a page. It is present, no one can say
with what impetus, in the United .States today.
The present system of property ownership places no
limitations on the amount of income-yielding property
which one individual may control. The Rockefellers,
Guggenheims and Carnegies may secure title to a
hundred-thousand, a hundred-million, or a
hundred-billion estate. There is nothing in the custom
or law of the land to check such a procedure, and in
the course of the undertaking, business practice
affords every conceivable advantage. The modem
property-owning world is organized on the assumption
that every man has a right to as much property as he
can get. Under the circumstances, it is not strange
that there has been a very considerable concentration
of property ownership in a comparatively few hands.
The rapidity with which large fortunes have been
acquired is one of the wonders of the modern world. At
the present time, the United States numbers its
millionaires by thousands. The mere mention of such
names as Vanderbilt, Gould, Astor, Rockefeller,
Morgan, Havemeyer, Belmont, Whitney, Goelet, Carnegie,
Armour, Harriman and Dupont (all of them families
numbered among the multi-millionaires whose wealth was
acquired, for the most part, since the Civil War)
calls to mind the immense concentration of
income-yielding wealth which has been going on within
the past century. The industrial system is intertwined
with a device known as private property in
income-yielding wealth, which leads inevitably to the
concentration of property income in the hands of a
comparatively small portion of the population.
The exact figures showing the concentration of
property values are unobtainable, and of no great
moment in the present discussion. The tendency of
income-yielding property to concentrate in a
relatively small number of hands is evident on every
side. The extent of the concentration cannot, and need
not, be ascertained with accuracy.
The actual amounts paid to the men and women who do
the work of the industrial world are extremely small.
Current wage rates, placed side by side with the
expense accounts of thousands of families whose sole
claim to income rests upon their ownership of
property, are startling in their paucity. Five hundred
dollars a year paid to an able-bodied man whose back
was bent three hundred days of the year in his efforts
to support a wife and four small children; seven
dollars a week to the a n m i c man whose eye races
with his machine along the seams of ladies' coats;
fifteen dollars a week to a mechanic, keeping a family
in a big city; a thousand dollars a year to a skilled
artisan. These wage rates are meagre when contrasted
with the returns to the men who own the valuable
property of the country.
More than nine-tenths of those who are at work in
organized industry are clerks or wage-earners. Among .
male clerks and wage-earners an annual return of
$1,000 is exceptional, while $1,500 is almost unique.
Almost the entire male wage-earning population
receives less than $1.500 per year; most of it
receives less than $1,000, and full half of it falls
under $600. The incomes of women fall far below those
of men. At the same time the owners of property
receive an annual income of many billions. The facts
adduced in the present investigation tend to show at
least six billions of property income-a sum sufficient
to support the twelve million poorest families in the
United States on their present level of existence, or
to add $300 per year to the income of every family in
the United States. The amount now paid in property
income, distributed among the producers, would
probably raise every family income in the United
States to a level of decency or efficiency.
Property income is relatively stable. Numerous and
effective safeguards have been thrown around it.
Despite occasional breaks in the abatis protecting
property income rights, as a general rule, the
defenses erected by the propertied classes have proved
With those receiving service income the situation is
far different. Excepting the small percentage of
high-salaried workers, the great mass of those who
receive service income are forced to struggle in a sea
of economic uncertainties. There are five forces
always confronting the workers, any one of which may
reduce or entirely eliminate service income. They are
(1) overwork, (2) sickness and accidents, ( 3 )
invention of new machinery, (4) shutting-down of
individual plants and (5) industrial crises.
Under the strain incident to overwork, a man may break
down at forty and be discharged because he is
physically or nervously unable to continue with his
duties. Modern industry is run at a terrific speed
which leads inevitably to a shortened working life, or
decreased efficiency. The speeding-up system clearly
places a premium on youth and vigor and a serious
handicap on age. This fact the companies are not slow
to recognize. They do not want old men on their
pay-rolls-and they say so, clearly and emphatically.
There are many industries in which men are expected to
go to pieces before reaching normal old age. The pace
is set high, and those who cannot keep it, must drop
out or take less lucrative positions.
Industry offers the workingman an opportunity to earn
a living, subject to the caprice of overwork,
sickness, accidents, new machinery, individual
shut-downs .and general suspensions of industrial
activity-a hierarchy of forces which overshadow every
movement of his life, threatening continually to hurl
him into an abyss of hardship and misery. Any one, or
any combination of these five forces, may, at any
time, diminish, temporarily or permanently, the
income-earning capacity of the worker. All of them are
beyond his individual control, yet they strike, with
merciless certainty, the sources of livelihood of the
family in which they occur.
The nation is built on the work of its workers.
Today, as in every past age, the idler and the
parasite are burdens on national life. They add
nothing to national well-being, while they cost their
The workers are the nation. As they thrive, the nation
thrives. As they succeed in life, the nation is
prosperous and great. The future of the nation is
inseparable from the future of the nation's workers.
It was not for nothing that Capt. John Smith insisted,
"He who will not work, neither shall he eat."
Fronted by these facts, we are deliberately working
out an economic system which glorifies ownership and
penalizes work. The owner prospers; the worker exists.
The owner lives upon the fat of the land, which the
worker has created.
A survey of the relative positions occupied by the
recipients of service and of property income, shows
that the property owners hold practically all of the
strategic points. They are supported by tradition;
bulwarked by custom, and protected by most of the
motive forces of society. The social mind and the
social structure alike have been shaped so that they
would function in terms of property income rights and
Those who receive service income have the advantage of
numbers and the possibilities of organized action.
They are convinced of the essential injustice of their
position. Otherwise they are compelled to go
weaponless into the conflict. . Economic forces are
pushing forward the issue. They have placed on one
side the majority of the population, who carry the
burdens of economic society, and put forth the energy
necessary to propel industry. On the other side, the
economic forces have ranged a small group of persons
in whose hands is concentrated the great bulk of the
income-yielding wealth of the community. The forces of
economic society are sharpening the contrast between
service and property income, and adding daily to the
irony of a status which compels workers to skimp and
abstain while property owners may idle and luxuriate.
Wherever one group in a community secures large income
return without participating in the work of creating
those returns, while another group in the same
community carries the burden of the work and at the
same time receives a meager share of the product of
its labor, there, sooner or later, a conflict will
arise. The conflict may be peaceful, and long drawn
out, like that between the English peasantry and the
English landlords, or it may be dramatic, spectacular
and bloody like that between the French peasantry and
The conflict will come, however, because if there is
one deep-rooted conviction in the human breast, it is
that each person has a right to what he earns. Crude,
indeed, are the definitions, and the ideas and
standards for "earning" are incomplete. Always the
thought is there in its most general form, carrying
with it the possibility of revolt against any economic
order which denies to a man the right to his full
The economic conflict in the United States will
eventually develop between property owners and the
producers of wealth. A student of current American
economic facts is led to the inevitable conclusion
that there is only one economic contrast that can be
made clear cut and definite-the contrast between
service income and property income; between income
secured as a return for effort, and income secured in
return for property ownership.
The facts in the case point clearly to the distinction
between service income and property income. The line
of future contrast and of future conflict is the line
which separates these two ideas.
The student will search in vain through the annals of
economic history for a situation more fraught with
destructive possibilities than those now confronting
the American people. The recipients of property income
(derived from property ownership) and of service
income (paid for the expenditure of effort) face each
other and prepare for the conflict. Those who have put
forth the effort, declare their right to the products
of that effort. Those who own property hold fast to
their property and to the prerogatives which are
inseparable from them.
Law, custom, and business practice have made property
income a first charge on industry. There can be no
considerable readjustment of income values until the
pre-eminent position of property is overbalanced by
some social action.
The present tendency should greatly increase the total
amount of property income and the proportion of
property income paid with each passing decade. Land
values should continue to rise; as population grows
denser, demand for land increases, and methods of
using land are perfected. The returns to capital (the
interest rate) show every indication of advancing. It
certainly will not decrease in the near future.
Meanwhile the immortalization of capital proceeds
apace. The day when capital could be easily dissipated
has passed away. Accounting systems, insurance
devices, depreciation funds, boards of directors, and
trusteeships conserve capital, reduce risks,
distribute dangers, and in general, provide against
misadventures for which interest, at least in part, is
supposed to be a recompense. When once created,
capital does not disappear. Instead, every conceivable
method has been devised to perpetuate it. It may even
add to itself, iis it frequently does, when earnings,
instead of being used for the payment of dividends,
are reinvested and turned directly into new capital.
The workers, meanwhile, are living, for the most part,
a hand-to-mouth existence, successful if they are able
to maintain health and keep up appearances. Against
the value of the products which their energy creates,
is charged the property incomes for which the labor of
some one must pay. Today, the producers of wealth are
saddled with an enormous property income charge which
increases with each passing year-increases far faster
than the increase in the population-and which, from
its very nature, cannot be reduced, but must be
Were there no protests from the producers of wealth,
the future for capital would, indeed, be a bright one.
With increasing stability, increasing safety,
decreasing risks, an increasing interest rate, and
increasing land values, the property owners might face
a future of unalloyed hopefulness.
Fortunately, no such situation exists. On the
contrary, there is every indication that, with the
passing years, the producers of wealth will file a
protest of ever increasing volume against an economic
system which automatically gives to those who already
While the spirit of protest grows in intensity, the
form remains a matter which future years alone may
determine. An appeal to the available facts leads to
the conclusion that the most effective protest the
producers can make will be based on a clear
recognition of the distinction between service income
and property income. Shall the economic world decide
that only those who expend effort shall share in the
wealth which is the result of that effort? Shall the
economic world decide that each person expending
effort is entitled to all the value for which his
effort is responsible-no more and no less? Shall the
economic world set its stamp of approval on effort,
and its stamp of disapproval on parasitism, by turning
the income from activity into the hands of workers,
and denying income to all others? Has the time arrived
when a few may no longer live in idleness upon the
products created by those who give their lives to
labor? Shall not the social blessing be bestowed upon
those who labor and the social curse be hurled upon
the idler and the wastrel? Lo! these many years has
mankind looked forward to a day when economic justice
could prevail. Is not this the day and this new
century the seed-ground for this new idea? Who shall
say? Who but those who carry the burden of production,
and are bound by the bonds of economic necessity to
the tread-mill of toil? The hope of America lies in
its workers. To them the nation owes its existence.
Upon them rests the possibility of continued growth.
The worker must be encouraged and the idler penalized.
Pay should be a reward for work; not for ownership
which leads to idleness.