But still I refused to believe.

"Wait and see," Ernest said, and I waited.

Next morning I sent out for all the papers. So far Ernest was right. Not a word that Bishop Morehouse had uttered was in print. Mention was made in one or two of the papers that he had been overcome by his feelings.  Yet the platitudes of the speakers that followed him were reported at length.

Several days later the brief announcement was made that he had gone away on a vacation to recover from the effects of overwork. So far so good, but there had been no hint of insanity, nor even of nervous collapse.  Little did I dream the terrible road the Bishop was destined to travel--the Gethsemane and crucifixion that Ernest had pondered about.

CHAPTER VIII

THE MACHINE BREAKERS

It was just before Ernest ran for Congress, on the socialist ticket, that father gave what he privately called his "Profit and Loss" dinner. Ernest called it the dinner of the Machine Breakers. In point of fact, it was merely a dinner for business men--small business men, of course. I doubt if one of them was interested in any business the total capitalization of which exceeded a couple of hundred thousand dollars.  They were truly representative middle-class business men.

There was Owen, of Silverberg, Owen & Company--a large grocery firm with several branch stores. We bought our groceries from them. There were both partners of the big drug firm of Kowalt & Washburn, and Mr. Asmunsen, the owner of a large granite quarry in Contra Costa County.

Especially interesting was Mr. Asmunsen's narrative of his tribulations as a quarry owner. He confessed that he never made any profits out of his quarry, and this, in spite of the enormous volume of business that had been caused by the destruction of San Francisco by the big earthquake. For six years the rebuilding of San Francisco had been going on, and his business had quadrupled and octupled, and yet he was no better off.

"The railroad knows my business just a little bit better than I do," he said. "It knows my operating expenses to a cent, and it knows the terms of my contracts. How it knows these things I can only guess. It must have spies in my employ, and it must have access to the parties to all my contracts. For look you, when I place a big contract, the terms of which favor me a goodly profit, the freight rate from my quarry to market is promptly raised. No explanation is made. The railroad gets my profit. Under such circumstances I have never succeeded in getting the railroad to reconsider its raise. On the other hand, when there have been accidents, increased expenses of operating, or contracts with less profitable terms, I have always succeeded in getting the railroad to lower its rate. What is the result? Large or small, the railroad always gets my profits."

"What remains to you over and above," Ernest interrupted to ask, "would roughly be the equivalent of your salary as a manager did the railroad own the quarry."

"The very thing," Mr. Asmunsen replied. "Only a short time ago I had my books gone through for the past ten years. I discovered that for those ten years my gain was just equivalent to a manager's salary. The railroad might just as well have owned my quarry and hired me to run it."

"But with this difference," Ernest laughed; "the railroad would have had to assume all the risk which you so obligingly assumed for it."

"Very true," Mr. Asmunsen answered sadly.

Having let them have they say, Ernest began asking questions right and left. He began with Mr. Owen."You started a branch store here in Berkeley about six months ago?"

"Yes," Mr. Owen answered.

"And since then I've noticed that three little corner groceries have gone out of business. Was your branch store the cause of it?"

Mr. Owen affirmed with a complacent smile. "They had no chance against us."

"Why not?"

"We had greater capital. With a large business there is always less waste and greater efficiency."

"And your branch store absorbed the profits of the three small ones. I see. But tell me, what became of the owners of the three stores?"

"One is driving a delivery wagon for us. I don't know what happened to the other two."

Ernest turned abruptly on Mr. Kowalt.

"You sell a great deal at cut-rates.* What have become of the owners of the small drug stores that you forced to the wall?"

     * A lowering of selling price to cost, and even to less than cost. Thus, a large company could sell at a loss for a  longer period than a small company, and so drive the small company out of business.  A common device of competition.

"One of them, Mr. Haasfurther, has charge now of our prescription department," was the answer.

"And you absorbed the profits they had been making?"

"Surely. That is what we are in business for."

"And you?" Ernest said suddenly to Mr. Asmunsen. "You are disgusted because the railroad has absorbed your profits?"

Mr. Asmunsen nodded.

"What you want is to make profits yourself?"

Again Mr. Asmunsen nodded.

"Out of others?"

There was no answer."Out of others?" Ernest insisted.

"That is the way profits are made," Mr. Asmunsen replied curtly.

"Then the business game is to make profits out of others, and to prevent others from making profits out of you. That's it, isn't it?"

Ernest had to repeat his question before Mr. Asmunsen gave an answer, and then he said:

"Yes, that's it, except that we do not object to the others making profits so long as they are not extortionate."

"By extortionate you mean large; yet you do not object to making large profits yourself? . . . Surely not?"

And Mr. Asmunsen amiably confessed to the weakness. There was one other man who was quizzed by Ernest at this juncture, a Mr. Calvin, who had once been a great dairy-owner.

"Some time ago you were fighting the Milk Trust," Ernest said to him; "and now you are in Grange politics.* How did it happen?"

     * Many efforts were made during this period to organize the  perishing farmer class into a political party, the aim of which was destroy the trusts and corporations by drastic legislation.  All such attempts ended in failure.

"Oh, I haven't quit the fight," Mr. Calvin answered, and he looked belligerent enough. "I'm fighting the Trust on the only field where it is possible to fight--the political field. Let me show you. A few years ago we dairymen had everything our own way."

"But you competed among yourselves?" Ernest interrupted.

"Yes, that was what kept the profits down. We did try to organize, but independent dairymen always broke through us. Then came the Milk Trust."

"Financed by surplus capital from Standard Oil,"* Ernest said.

     * The first successful great trust--almost a generation in advance of the rest.

"Yes," Mr. Calvin acknowledged. "But we did not know it at the time.  Its agents approached us with a club. "Come in and be fat," was their proposition, "or stay out and starve." Most of us came in. Those that didn't, starved. Oh, it paid us . . . at first. Milk was raised a cent a quart. One-quarter of this cent came to us. Three-quarters of it went to the Trust. Then milk was raised another cent, only we didn't get any of that cent. Our complaints were useless. The Trust was in control. We discovered that we were pawns. Finally, the additional quarter of a cent was denied us. Then the Trust began to squeeze us out. What could we do?  We were squeezed out. There were no dairymen, only a Milk Trust.""But with milk two cents higher, I should think you could have competed," Ernest suggested slyly.

"So we thought. We tried it." Mr. Calvin paused a moment. "It broke us.  The Trust could put milk upon the market more cheaply than we. It could sell still at a slight profit when we were selling at actual loss. I dropped fifty thousand dollars in that venture. Most of us went bankrupt.* The dairymen were wiped out of existence."

     * Bankruptcy--a peculiar institution that enabled an individual, who had failed in competitive industry, to forego paying his debts. The effect was to ameliorate the too savage conditions of the fang-and-claw social struggle.

"So the Trust took your profits away from you," Ernest said, "and you've gone into politics in order to legislate the Trust out of existence and get the profits back?"

Mr. Calvin's face lighted up. "That is precisely what I say in my speeches to the farmers. That's our whole idea in a nutshell."

"And yet the Trust produces milk more cheaply than could the independent dairymen?" Ernest queried.

"Why shouldn't it, with the splendid organization and new machinery its large capital makes possible?"

"There is no discussion," Ernest answered. "It certainly should, and, furthermore, it does."

Mr. Calvin here launched out into a political speech in exposition of his views. He was warmly followed by a number of the others, and the cry of all was to destroy the trusts.

"Poor simple folk," Ernest said to me in an undertone. "They see clearly as far as they see, but they see only to the ends of their noses."

A little later he got the floor again, and in his characteristic way controlled it for the rest of the evening.

"I have listened carefully to all of you," he began, "and I see plainly that you play the business game in the orthodox fashion. Life sums itself up to you in profits. You have a firm and abiding belief that you were created for the sole purpose of making profits. Only there is a hitch. In the midst of your own profit-making along comes the trust and takes your profits away from you. This is a dilemma that interferes somehow with the aim of creation, and the only way out, as it seems to you, is to destroy that which takes from you your profits.

"I have listened carefully, and there is only one name that will epitomize you. I shall call you that name. You are machine-breakers. Do you know what a machine-breaker is? Let me tell you. In the eighteenth century, in England, men and women wove cloth on hand-looms in their own cottages. It was a slow, clumsy, and costly way of weaving cloth, this cottage system of manufacture. Along came the steam-engine and labor-saving machinery. A thousand looms assembled in a large factory, and driven by a central engine wove cloth vastly more cheaply than could the cottage weavers on their hand-looms. Here in the factory was combination, and before it competition faded away. The men and women who had worked the hand-looms for themselves now went into the factories and worked the machine-looms, not for themselves, but for the capitalist

owners. Furthermore, little children went to work on the machine-looms, at lower wages, and displaced the men. This made hard times for the men.  Their standard of living fell. They starved. And they said it was all the fault of the machines. Therefore, they proceeded to break the machines. They did not succeed, and they were very stupid.

"One and all you tell the same story,--the passing away of competition and the coming on of combination. You, Mr. Owen, destroyed competition here in Berkeley when your branch store drove the three small groceries out of business. Your combination was more effective. Yet you feel the pressure of other combinations on you, the trust combinations, and you cry out. It is because you are not a trust. If you were a grocery trust for the whole United States, you would be singing another song. And the song would be, 'Blessed are the trusts.' And yet again, not only is your small combination not a trust, but you are aware yourself of its lack of strength. You are beginning to divine your own end. You feel yourself and your branch stores a pawn in the game. You see the powerful interests rising and growing more powerful day by day; you feel their mailed hands descending upon your profits and taking a pinch here and a pinch there--the railroad trust, the oil trust, the steel trust, the coal trust; and you know that in the end they will destroy you, take away from you the last per cent of your little profits.

"You, sir, are a poor gamester. When you squeezed out the three small roceries here in Berkeley by virtue of your superior combination, you swelled out your chest, talked about efficiency and enterprise, and sent your wife to Europe on the profits you had gained by eating up the three small groceries. It is dog eat dog, and you ate them up. But, on the other hand, you are being eaten up in turn by the bigger dogs, wherefore you squeal. And what I say to you is true of all of you at this table.  You are all squealing. You are all playing the losing game, and you are all squealing about it.

"But when you squeal you don't state the situation flatly, as I have stated it. You don't say that you like to squeeze profits out of others, and that you are making all the row because others are squeezing your profits out of you. No, you are too cunning for that. You say something else. You make small-capitalist political speeches such as Mr. Calvin made. What did he say? Here are a few of his phrases I caught: 'Our original principles are all right,' 'What this country requires is a return to fundamental American methods--free opportunity for all,' 'The spirit of liberty in which this nation was born,' 'Let us return to the principles of our forefathers.'

"When he says 'free opportunity for all,' he means free opportunity to squeeze profits, which freedom of opportunity is now denied him by the great trusts. And the absurd thing about it is that you have repeated these phrases so often that you believe them. You want opportunity to plunder your fellow-men in your own small way, but you hypnotize yourselves into thinking you want freedom. You are piggish and acquisitive, but the magic of your phrases leads you to believe that you are patriotic. Your desire for profits, which is sheer selfishness, you metamorphose into altruistic solicitude for suffering humanity. Come on now, right here amongst ourselves, and be honest for once. Look the matter in the face and state it in direct terms."There were flushed and angry faces at the table, and withal a measure of awe. They were a little frightened at this smooth-faced young fellow, and the swing and smash of his words, and his dreadful trait of calling a spade a spade. Mr. Calvin promptly replied.

"And why not?" he demanded. "Why can we not return to ways of our fathers when this republic was founded? You have spoken much truth, Mr.  Everhard, unpalatable though it has been. But here amongst ourselves let us speak out. Let us throw off all disguise and accept the truth as Mr.  Everhard has flatly stated it. It is true that we smaller capitalists are after profits, and that the trusts are taking our profits away from us. It is true that we want to destroy the trusts in order that our profits may remain to us. And why can we not do it? Why not? I say, why not?"

"Ah, now we come to the gist of the matter," Ernest said with a pleased expression. "I'll try to tell you why not, though the telling will be rather hard. You see, you fellows have studied business, in a small way, but you have not studied social evolution at all. You are in the midst of a transition stage now in economic evolution, but you do not understand it, and that's what causes all the confusion. Why cannot you return? Because you can't. You can no more make water run up hill than can you cause the tide of economic evolution to flow back in its channel along the way it came. Joshua made the sun stand still upon Gibeon, but you would outdo Joshua. You would make the sun go backward in the sky.  You would have time retrace its steps from noon to morning.

"In the face of labor-saving machinery, of organized production, of the increased efficiency of combination, you would set the economic sun back a whole generation or so to the time when there were no great capitalists, no great machinery, no railroads--a time when a host of little capitalists warred with each other in economic anarchy, and when production was primitive, wasteful, unorganized, and costly. Believe me, Joshua's task was easier, and he had Jehovah to help him. But God has forsaken you small capitalists. The sun of the small capitalists is setting. It will never rise again. Nor is it in your power even to make it stand still. You are perishing, and you are doomed to perish utterly from the face of society.

"This is the fiat of evolution. It is the word of God. Combination is stronger than competition. Primitive man was a puny creature hiding in the crevices of the rocks. He combined and made war upon his carnivorous enemies. They were competitive beasts. Primitive man was a combinative beast, and because of it he rose to primacy over all the animals. And man has been achieving greater and greater combinations ever since. It is combination versus competition, a thousand centuries long struggle, in which competition has always been worsted. Whoso enlists on the side of competition perishes."

"But the trusts themselves arose out of competition," Mr. Calvin interrupted."Very true," Ernest answered. "And the trusts themselves destroyed competition. That, by your own word, is why you are no longer in the dairy business."

The first laughter of the evening went around the table, and even Mr. Calvin joined in the laugh against himself.

"And now, while we are on the trusts," Ernest went on, "let us settle a few things. I shall make certain statements, and if you disagree with them, speak up. Silence will mean agreement. Is it not true that a machine-loom will weave more cloth and weave more cheaply than a  and-loom?" He paused, but nobody spoke up. "Is it not then highly irrational to break the machine-loom and go back to the clumsy and more costly hand-loom method of weaving?" Heads nodded in acquiescence. "Is it not true that that known as a trust produces more efficiently and cheaply than can a thousand competing small concerns?" Still no one objected. "Then is it not irrational to destroy that cheap and efficient combination?"

No one answered for a long time. Then Mr. Kowalt spoke.

"What are we to do, then?" he demanded. "To destroy the trusts is the only way we can see to escape their domination."

Ernest was all fire and aliveness on the instant.

"I'll show you another way!" he cried. "Let us not destroy those wonderful machines that produce efficiently and cheaply. Let us control them. Let us profit by their efficiency and cheapness. Let us run them for ourselves. Let us oust the present owners of the wonderful machines, and let us own the wonderful machines ourselves. That, gentlemen, is socialism, a greater combination than the trusts, a greater economic and social combination than any that has as yet appeared on the planet. Itis in line with evolution. We meet combination with greater combination.  It is the winning side. Come on over with us socialists and play on the winning side."

Here arose dissent. There was a shaking of heads, and mutterings arose.

"All right, then, you prefer to be anachronisms," Ernest laughed. "You prefer to play atavistic roles. You are doomed to perish as all atavisms

perish. Have you ever asked what will happen to you when greater combinations than even the present trusts arise? Have you ever considered where you will stand when the great trusts themselves combine into the combination of combinations--into the social, economic, and political trust?"

He turned abruptly and irrelevantly upon Mr. Calvin.

"Tell me," Ernest said, "if this is not true. You are compelled to form a new political party because the old parties are in the hands of the trusts. The chief obstacle to your Grange propaganda is the trusts.  Behind every obstacle you encounter, every blow that smites you, every defeat that you receive, is the hand of the trusts. Is this not so? Tell me."Mr. Calvin sat in uncomfortable silence.

"Go ahead," Ernest encouraged.

"It is true," Mr. Calvin confessed. "We captured the state legislature of Oregon and put through splendid protective legislation, and it was vetoed by the governor, who was a creature of the trusts. We elected a governor of Colorado, and the legislature refused to permit him to take office. Twice we have passed a national income tax, and each time the supreme court smashed it as unconstitutional. The courts are in the hands of the trusts. We, the people, do not pay our judges sufficiently.  But there will come a time--"

"When the combination of the trusts will control all legislation, when the combination of the trusts will itself be the government," Ernest interrupted.

"Never! never!" were the cries that arose. Everybody was excited and belligerent.

"Tell me," Ernest demanded, "what will you do when such a time comes?"

"We will rise in our strength!" Mr. Asmunsen cried, and many voices backed his decision.

"That will be civil war," Ernest warned them.

"So be it, civil war," was Mr. Asmunsen's answer, with the cries of all the men at the table behind him. "We have not forgotten the deeds of our forefathers. For our liberties we are ready to fight and die."

Ernest smiled.

"Do not forget," he said, "that we had tacitly agreed that liberty in your case, gentlemen, means liberty to squeeze profits out of others."

The table was angry, now, fighting angry; but Ernest controlled the tumult and made himself heard.

"One more question. When you rise in your strength, remember, the reason for your rising will be that the government is in the hands of the trusts. Therefore, against your strength the government will turn the regular army, the navy, the militia, the police--in short, the whole organized war machinery of the United States. Where will your strength be then?"

Dismay sat on their faces, and before they could recover, Ernest struck again.

"Do you remember, not so long ago, when our regular army was only fifty thousand? Year by year it has been increased until to-day it is three hundred thousand."Again he struck.

"Nor is that all. While you diligently pursued that favorite phantom of yours, called profits, and moralized about that favorite fetich of yours, called competition, even greater and more direful things have been accomplished by combination. There is the militia."

"It is our strength!" cried Mr. Kowalt. "With it we would repel the invasion of the regular army."

"You would go into the militia yourself," was Ernest's retort, "and be sent to Maine, or Florida, or the Philippines, or anywhere else, to drown in blood your own comrades civil-warring for their liberties.  While from Kansas, or Wisconsin, or any other state, your own comrades would go into the militia and come here to California to drown in blood your own civil-warring."

Now they were really shocked, and they sat wordless, until Mr. Owen murmured:

"We would not go into the militia. That would settle it. We would not be so foolish."

Ernest laughed outright.

"You do not understand the combination that has been effected. You could not help yourself. You would be drafted into the militia."

"There is such a thing as civil law," Mr. Owen insisted.

"Not when the government suspends civil law. In that day when you speak of rising in your strength, your strength would be turned against yourself. Into the militia you would go, willy-nilly. Habeas corpus, I heard some one mutter just now. Instead of habeas corpus you would get post mortems. If you refused to go into the militia, or to obey after you were in, you would be tried by drumhead court martial and shot down like dogs. It is the law."

"It is not the law!" Mr. Calvin asserted positively. "There is no such law. Young man, you have dreamed all this. Why, you spoke of sending the militia to the Philippines. That is unconstitutional. The Constitution especially states that the militia cannot be sent out of the country."

"What's the Constitution got to do with it?" Ernest demanded. "The courts interpret the Constitution, and the courts, as Mr. Asmunsen agreed, are the creatures of the trusts. Besides, it is as I have said, the law. It has been the law for years, for nine years, gentlemen."

"That we can be drafted into the militia?" Mr. Calvin asked incredulously. "That they can shoot us by drumhead court martial if we refuse?"

"How is it that we have never heard of this law?" my father asked, and I could see that it was likewise new to him.

"For two reasons," Ernest said. "First, there has been no need to enforce it. If there had, you'd have heard of it soon enough. And secondly, the law was rushed through Congress and the Senate secretly, with practically no discussion. Of course, the newspapers made no mention of it. But we socialists knew about it. We published it in our papers. But you never read our papers."

"I still insist you are dreaming," Mr. Calvin said stubbornly. "The country would never have permitted it."

"But the country did permit it," Ernest replied. "And as for my dreaming--" he put his hand in his pocket and drew out a small pamphlet--"tell me if this looks like dream-stuff."

He opened it and began to read:

"'Section One, be it enacted, and so forth and so forth, that the militia shall consist of every able-bodied male citizen of the respective states, territories, and District of Columbia, who is more than eighteen and less than forty-five years of age.'

"'Section Seven, that any officer or enlisted man'--remember Section One, gentlemen, you are all enlisted men--'that any enlisted man of the militia who shall refuse or neglect to present himself to such mustering officer upon being called forth as herein prescribed, shall be subject to trial by court martial, and shall be punished as such court martial shall direct.'

"'Section Eight, that courts martial, for the trial of officers or men of the militia, shall be composed of militia officers only.'

"'Section Nine, that the militia, when called into the actual service of the United States, shall be subject to the same rules and articles of war as the regular troops of the United States.'

"There you are gentlemen, American citizens, and fellow-militiamen. Nine years ago we socialists thought that law was aimed against labor. But it would seem that it was aimed against you, too. Congressman Wiley, in the brief discussion that was permitted, said that the bill 'provided for a reserve force to take the mob by the throat'--you're the mob, gentlemen--'and protect at all hazards life, liberty, and property.' And in the time to come, when you rise in your strength, remember that you will be rising against the property of the trusts, and the liberty of the trusts, according to the law, to squeeze you. Your teeth are pulled, gentlemen. Your claws are trimmed. In the day you rise in your strength, toothless and clawless, you will be as harmless as any army of clams." "I don't believe it!" Kowalt cried. "There is no such law. It is a canard got up by you socialists."

"This bill was introduced in the House of Representatives on July 30, 1902," was the reply. "It was introduced by Representative Dick of Ohio. It was rushed through. It was passed unanimously by the Senate on January 14, 1903. And just seven days afterward was approved by the President of the United States."*

     * Everhard was right in the essential particulars, though his date of the introduction of the bill is in error.  The bill was introduced on June 30, and not on July 30.  The Congressional Record is here in Ardis, and a reference to it shows mention of the bill on the following dates: June 30,  December 9, 15, 16, and 17, 1902, and January 7 and 14,1903.  The ignorance evidenced by the business men at the dinner was nothing unusual.  Very few people knew of the  existence of this law.  E.  Untermann, a revolutionist, in July, 1903, published a pamphlet at Girard, Kansas, on the "Militia Bill."  This pamphlet had a small circulation among workingmen; but already had the segregation of classes proceeded so far, that the members of the middle class never  heard of the pamphlet at all, and so remained in ignorance of the law.

CHAPTER IX

THE MATHEMATICS OF A DREAM

In the midst of the consternation his revelation had produced, Ernest began again to speak.

"You have said, a dozen of you to-night, that socialism is impossible.  You have asserted the impossible, now let me demonstrate the inevitable.  Not only is it inevitable that you small capitalists shall pass away, but it is inevitable that the large capitalists, and the trusts also, shall pass away. Remember, the tide of evolution never flows backward.  It flows on and on, and it flows from competition to combination, and from little combination to large combination, and from large combination to colossal combination, and it flows on to socialism, which is the most colossal combination of all.

"You tell me that I dream. Very good. I'll give you the mathematics of my dream; and here, in advance, I challenge you to show that my mathematics are wrong. I shall develop the inevitability of the breakdown of the capitalist system, and I shall demonstrate mathematically why it must break down. Here goes, and bear with me if at first I seem irrelevant.

"Capital and labor added this value of one hundred dollars. Capital furnished the factory, the machines, and paid all the expenses. Labor furnished labor. By the joint effort of capital and labor one hundred dollars of value was added. Are you all agreed so far?"

Heads nodded around the table in affirmation.

"Labor and capital having produced this one hundred dollars, now proceed to divide it. The statistics of this division are fractional; so let us, for the sake of convenience, make them roughly approximate. Capital takes fifty dollars as its share, and labor gets in wages fifty dollars as its share. We will not enter into the squabbling over the division.*  No matter how much squabbling takes place, in one percentage or another the division is arranged. And take notice here, that what is true of this particular industrial process is true of all industrial processes.  Am I right?"

     * Everhard here clearly develops the cause of all the labor troubles of that time.  In the division of the joint-product, capital wanted all it could get, and labor wanted all it could get. This quarrel over the division was irreconcilable.  So long as the system of capitalistic  production existed, labor and capital continued to quarrel over the division of the joint-product.  It is a ludicrous spectacle to us, but we must not forget that we have seven centuries' advantage over those that lived in that time.

Again the whole table agreed with Ernest.

"Now, suppose labor, having received its fifty dollars, wanted to buy back shoes. It could only buy back fifty dollars' worth. That's clear, isn't it?

"And now we shift from this particular process to the sum total of all industrial processes in the United States, which includes the leather itself, raw material, transportation, selling, everything. We will say, for the sake of round figures, that the total production of wealth in the United States is one year is four billion dollars. Then labor has received in wages, during the same period, two billion dollars. Four billion dollars has been produced. How much of this can labor buy back? Two billions. There is no discussion of this, I am sure. For that matter, my percentages are mild. Because of a thousand capitalistic devices, labor cannot buy back even half of the total product."But to return. We will say labor buys back two billions. Then it stands to reason that labor can consume only two billions. There are still two billions to be accounted for, which labor cannot buy back and consume."

"Labor does not consume its two billions, even," Mr. Kowalt spoke up.  "If it did, it would not have any deposits in the savings banks."

"Labor's deposits in the savings banks are only a sort of reserve fund that is consumed as fast as it accumulates. These deposits are saved for old age, for sickness and accident, and for funeral expenses. The savings bank deposit is simply a piece of the loaf put back on the shelf to be eaten next day. No, labor consumes all of the total product that its wages will buy back.

"Two billions are left to capital. After it has paid its expenses, does it consume the remainder? Does capital consume all of its two billions?"

Ernest stopped and put the question point blank to a number of the men.  They shook their heads.

"I don't know," one of them frankly said.

"Of course you do," Ernest went on. "Stop and think a moment. If capital consumed its share, the sum total of capital could not increase. It would remain constant. If you will look at the economic history of the United States, you will see that the sum total of capital has continually increased. Therefore capital does not consume its share. Do you remember when England owned so much of our railroad bonds? As the years went by, we bought back those bonds. What does that mean? That part of capital's unconsumed share bought back the bonds. What is the meaning of the fact that to-day the capitalists of the United States own hundreds and hundreds of millions of dollars of Mexican bonds, Russian bonds, Italian bonds, Grecian bonds? The meaning is that those hundreds and hundreds of millions were part of capital's share which capital did not consume. Furthermore, from the very beginning of the capitalist system, capital has never consumed all of its share.

"And now we come to the point. Four billion dollars of wealth is produced in one year in the United States. Labor buys back and consumes two billions. Capital does not consume the remaining two billions. There is a large balance left over unconsumed. What is done with this balance?  What can be done with it? Labor cannot consume any of it, for labor has already spent all its wages. Capital will not consume this balance, because, already, according to its nature, it has consumed all it can.  And still remains the balance. What can be done with it? What is done with it?"

"It is sold abroad," Mr. Kowalt volunteered.

"The very thing," Ernest agreed. "Because of this balance arises our need for a foreign market. This is sold abroad. It has to be sold abroad. There is no other way of getting rid of it. And that unconsumed surplus, sold abroad, becomes what we call our favorable balance of trade. Are we all agreed so far?" "Surely it is a waste of time to elaborate these A B C's of commerce," Mr. Calvin said tartly. "We all understand them."

"And it is by these A B C's I have so carefully elaborated that I shall confound you," Ernest retorted. "There's the beauty of it. And I'm going to confound you with them right now. Here goes.

"The United States is a capitalist country that has developed its resources. According to its capitalist system of industry, it has an unconsumed surplus that must be got rid of, and that must be got rid of abroad.* What is true of the United States is true of every other capitalist country with developed resources. Every one of such countries has an unconsumed surplus. Don't forget that they have already traded with one another, and that these surpluses yet remain. Labor in all these countries has spent it wages, and cannot buy any of the surpluses. Capital in all these countries has already consumed all it is able according to its nature. And still remain the surpluses. They cannot dispose of these surpluses to one another. How are they going to get rid of them?"

     * Theodore Roosevelt, President of the United States a few years prior to this time, made the following public declaration: "A more liberal and extensive reciprocity in the purchase and sale of commodities is necessary, so that the overproduction of the United States can be satisfactorily disposed of to foreign countries."  Of course, this overproduction he mentions was the profits of  the capitalist system over and beyond the consuming power of the capitalists.  It was at this time that Senator MarkHanna said: "The production of wealth in the United States is one-third larger annually than its consumption."  Also a fellow-Senator, Chauncey Depew, said: "The American people produce annually two billions more wealth than they consume."

"Sell them to countries with undeveloped resources," Mr. Kowalt suggested.

"The very thing. You see, my argument is so clear and simple that in your own minds you carry it on for me. And now for the next step. Suppose the United States disposes of its surplus to a country with undeveloped resources like, say, Brazil. Remember this surplus is over and above trade, which articles of trade have been consumed. What, then, does the United States get in return from Brazil?"

"Gold," said Mr. Kowalt.

"But there is only so much gold, and not much of it, in the world," Ernest objected."Gold in the form of securities and bonds and so forth," Mr. Kowalt amended.

"Now you've struck it," Ernest said. "From Brazil the United States, in return for her surplus, gets bonds and securities. And what does that mean? It means that the United States is coming to own railroads in Brazil, factories, mines, and lands in Brazil. And what is the meaning of that in turn?"

Mr. Kowalt pondered and shook his head.

"I'll tell you," Ernest continued. "It means that the resources of Brazil are being developed. And now, the next point. When Brazil, under the capitalist system, has developed her resources, she will herself have an unconsumed surplus. Can she get rid of this surplus to the United States? No, because the United States has herself a surplus. Can the United States do what she previously did--get rid of her surplus to Brazil? No, for Brazil now has a surplus, too.

"What happens? The United States and Brazil must both seek out other countries with undeveloped resources, in order to unload the surpluses on them. But by the very process of unloading the surpluses, the resources of those countries are in turn developed. Soon they have surpluses, and are seeking other countries on which to unload. Now, gentlemen, follow me. The planet is only so large. There are only so many countries in the world. What will happen when every country in the world, down to the smallest and last, with a surplus in its hands, stands confronting every other country with surpluses in their hands?"

He paused and regarded his listeners. The bepuzzlement in their faces was delicious. Also, there was awe in their faces. Out of abstractions Ernest had conjured a vision and made them see it. They were seeing it then, as they sat there, and they were frightened by it.

"We started with A B C, Mr. Calvin," Ernest said slyly. "I have now given you the rest of the alphabet. It is very simple. That is the beauty of it. You surely have the answer forthcoming. What, then, when every country in the world has an unconsumed surplus? Where will your capitalist system be then?"

But Mr. Calvin shook a troubled head. He was obviously questing back through Ernest's reasoning in search of an error.

"Let me briefly go over the ground with you again," Ernest said. "We began with a particular industrial process, the shoe factory. We found that the division of the joint product that took place there was similar to the division that took place in the sum total of all industrial processes. We found that labor could buy back with its wages only

so much of the product, and that capital did not consume all of the remainder of the product. We found that when labor had consumed to the full extent of its wages, and when capital had consumed all it wanted, there was still left an unconsumed surplus. We agreed that this surplus could only be disposed of abroad. We agreed, also, that the effect of unloading this surplus on another country would be to develop the resources of that country, and that in a short time that country would have an unconsumed surplus. We extended this process to all the countries on the planet, till every country was producing every year, and every day, an unconsumed surplus, which it could dispose of to no other country. And now I ask you again, what are we going to do with those surpluses?"

Still no one answered.

"Mr. Calvin?" Ernest queried.

"It beats me," Mr. Calvin confessed.

"I never dreamed of such a thing," Mr. Asmunsen said. "And yet it does seem clear as print."

It was the first time I had ever heard Karl Marx's* doctrine of surplus value elaborated, and Ernest had done it so simply that I, too, sat puzzled and dumbfounded.

     * Karl Marx--the great intellectual hero of Socialism.  AGerman Jew of the nineteenth century.  A contemporary of John Stuart Mill. It seems incredible to us that whole generations should have elapsed after the enunciation of Marx's economic discoveries, in which time he was sneered at by the world's accepted thinkers and scholars.  Because of his discoveries he was banished from his native country, and he died an exile in England.

"I'll tell you a way to get rid of the surplus," Ernest said. "Throw it into the sea. Throw every year hundreds of millions of dollars' worth of shoes and wheat and clothing and all the commodities of commerce into the sea. Won't that fix it?"

"It will certainly fix it," Mr. Calvin answered. "But it is absurd for you to talk that way."

Ernest was upon him like a flash.

"Is it a bit more absurd than what you advocate, you machine-breaker, returning to the antediluvian ways of your forefathers? What do you propose in order to get rid of the surplus? You would escape the problem of the surplus by not producing any surplus. And how do you propose to avoid producing a surplus? By returning to a primitive method of production, so confused and disorderly and irrational, so wasteful and costly, that it will be impossible to produce a surplus."

Mr. Calvin swallowed. The point had been driven home. He swallowed again and cleared his throat.

"You are right," he said. "I stand convicted. It is absurd. But we've got to do something. It is a case of life and death for us of the middle class. We refuse to perish. We elect to be absurd and to return to the truly crude and wasteful methods of our forefathers. We will put back industry to its pre-trust stage. We will break the machines. And what are you going to do about it?""But you can't break the machines," Ernest replied. "You cannot make the tide of evolution flow backward. Opposed to you are two great forces, each of which is more powerful than you of the middle class. The large capitalists, the trusts, in short, will not let you turn back. They don't want the machines destroyed. And greater than the trusts, and more powerful, is labor. It will not let you destroy the machines. The ownership of the world, along with the machines, lies between the trusts and labor. That is the battle alignment. Neither side wants the destruction of the machines. But each side wants to possess the machines. In this battle the middle class has no place. The middle class is a pygmy between two giants. Don't you see, you poor perishing middle class, you are caught between the upper and nether millstones, and even now has the grinding begun.

"I have demonstrated to you mathematically the inevitable breakdown of the capitalist system. When every country stands with an unconsumed and unsalable surplus on its hands, the capitalist system will break down under the terrific structure of profits that it itself has reared. And in that day there won't be any destruction of the machines. The struggle then will be for the ownership of the machines. If labor wins, your way will be easy. The United States, and the whole world for that matter, will enter upon a new and tremendous era. Instead of being crushed by the machines, life will be made fairer, and happier, and nobler by them. You of the destroyed middle class, along with labor--there will be nothing but labor then; so you, and all the rest of labor, will participate in the equitable distribution of the products of the wonderful machines. And we, all of us, will make new and more wonderful machines. And there won't be any unconsumed surplus, because there won't be any profits."

"But suppose the trusts win in this battle over the ownership of the machines and the world?" Mr. Kowalt asked.

"Then," Ernest answered, "you, and labor, and all of us, will be crushed under the iron heel of a despotism as relentless and terrible as any despotism that has blackened the pages of the history of man. That will be a good name for that despotism, the Iron Heel."*

     * The earliest known use of that name to designate the Oligarchy.

There was a long pause, and every man at the table meditated in ways unwonted and profound.

"But this socialism of yours is a dream," Mr. Calvin said; and repeated, "a dream."

"I'll show you something that isn't a dream, then," Ernest answered.  "And that something I shall call the Oligarchy. You call it the Plutocracy. We both mean the same thing, the large capitalists or the trusts. Let us see where the power lies today. And in order to do so, let us apportion society into its class divisions."There are three big classes in society. First comes the Plutocracy, which is composed of wealthy bankers, railway magnates, corporation directors, and trust magnates. Second, is the middle class, your class, gentlemen, which is composed of farmers, merchants, small manufacturers, and professional men. And third and last comes my class, the proletariat, which is composed of the wage-workers.*

     * This division of society made by Everhard is in accordance with that made by Lucien Sanial, one of the statistical authorities of that time.  His calculation of the membership  of these divisions by occupation, from the United States Census of 1900, is as follows: Plutocratic class, 250,251;  Middle class, 8,429,845; and Proletariat class, 20,393,137.

"You cannot but grant that the ownership of wealth constitutes essential power in the United States to-day. How is this wealth owned by these three classes? Here are the figures. The Plutocracy owns sixty-seven billions of wealth. Of the total number of persons engaged in occupations in the United States, only nine-tenths of one per cent are from the Plutocracy, yet the Plutocracy owns seventy per cent of the total wealth. The middle class owns twenty-four billions. Twenty-nine per cent of those in occupations are from the middle class, and they own twenty-five per cent of the total wealth. Remains the proletariat. It owns four billions. Of all persons in occupations, seventy per cent come from the proletariat; and the proletariat owns four per cent of the total wealth. Where does the power lie, gentlemen?"

"From your own figures, we of the middle class are more powerful than labor," Mr. Asmunsen remarked.

"Calling us weak does not make you stronger in the face of the strength of the Plutocracy," Ernest retorted. "And furthermore, I'm not done with you. There is a greater strength than wealth, and it is greater because it cannot be taken away. Our strength, the strength of the proletariat, is in our muscles, in our hands to cast ballots, in our fingers to pull triggers. This strength we cannot be stripped of. It is the primitive strength, it is the strength that is to life germane, it is the strength that is stronger than wealth, and that wealth cannot take away.

"But your strength is detachable. It can be taken away from you. Even now the Plutocracy is taking it away from you. In the end it will take it all away from you. And then you will cease to be the middle class.  You will descend to us. You will become proletarians. And the beauty of it is that you will then add to our strength. We will hail you brothers, and we will fight shoulder to shoulder in the cause of humanity.

"You see, labor has nothing concrete of which to be despoiled. Its share of the wealth of the country consists of clothes and household furniture, with here and there, in very rare cases, an unencumbered home. But you have the concrete wealth, twenty-four billions of it, and the Plutocracy will take it away from you. Of course, there is the large likelihood that the proletariat will take it away first. Don't you see your position, gentlemen? The middle class is a wobbly little lamb between a lion and a tiger. If one doesn't get you, the other will. And if the Plutocracy gets you first, why it's only a matter of time when the Proletariat gets the Plutocracy.

"What power have the farmers? Over fifty per cent are thralls by virtue of the fact that they are merely tenants or are mortgaged. And all of them are thralls by virtue of the fact that the trusts already own or control (which is the same thing only better)--own and control all the means of marketing the crops, such as cold storage, railroads, elevators, and steamship lines. And, furthermore, the trusts control the markets. In all this the farmers are without power. As regards their political and governmental power, I'll take that up later, along with the political and governmental power of the whole middle class.

"Day by day the trusts squeeze out the farmers as they squeezed out Mr. Calvin and the rest of the dairymen. And day by day are the merchants squeezed out in the same way. Do you remember how, in six months, the Tobacco Trust squeezed out over four hundred cigar stores in New York City alone? Where are the old-time owners of the coal fields? You know today, without my telling you, that the Railroad Trust owns or controls the entire anthracite and bituminous coal fields. Doesn't the Standard  Oil Trust* own a score of the ocean lines? And does it not also control copper, to say nothing of running a smelter trust as a little side enterprise? There are ten thousand cities in the United States to-night lighted by the companies owned or controlled by Standard Oil, and in as many cities all the electric transportation,--urban, suburban, and interurban,--is in the hands of Standard Oil. The small capitalists who were in these thousands of enterprises are gone. You know that. It's the same way that you are going.

     * Standard Oil and Rockefeller--see upcoming footnote:  "Rockefeller began as a member . . ."

"The small manufacturer is like the farmer; and small manufacturers and farmers to-day are reduced, to all intents and purposes, to feudal tenure. For that matter, the professional men and the artists are at this present moment villeins in everything but name, while the politicians are henchmen. Why do you, Mr. Calvin, work all your nights and days to organize the farmers, along with the rest of the middle class, into a new political party? Because the politicians of the old parties will have nothing to do with your atavistic ideas; and with your atavistic ideas, they will have nothing to do because they are what I said they are, henchmen, retainers of the Plutocracy.

"I spoke of the professional men and the artists as villeins. What else are they? One and all, the professors, the preachers, and the editors, hold their jobs by serving the Plutocracy, and their service consists of propagating only such ideas as are either harmless to or commendatory of the Plutocracy. Whenever they propagate ideas that menace the Plutocracy, they lose their jobs, in which case, if they have not provided for the rainy day, they descend into the proletariat and either perish or become working-class agitators. And don't forget that it is the press, the pulpit, and the university that mould public opinion, set the thought-pace of the nation. As for the artists, they merely pander to the little less than ignoble tastes of the Plutocracy.

     * Even as late as 1907, it was considered that eleven groups dominated the country, but this number was reduced by the  amalgamation of the five railroad groups into a supreme combination of all the railroads.  These five groups so amalgamated, along with their financial and political  allies, were (1) James J. Hill with his control of the Northwest; (2) the Pennsylvania railway group, Schiff  financial manager, with big banking firms of Philadelphia  and New York; (3) Harriman, with Frick for counsel and Odell as political lieutenant, controlling the central continental, Southwestern and Southern Pacific Coast lines of transportation; (4) the Gould family railway interests; and (5) Moore, Reid, and Leeds, known as the "Rock Island crowd."  These strong oligarchs arose out of the conflict of competition and travelled the inevitable road toward combination.

"Let me point out the power of but one of them, the railroad group. It employs forty thousand lawyers to defeat the people in the courts. It issues countless thousands of free passes to judges, bankers, editors, ministers, university men, members of state legislatures, and of  Congress. It maintains luxurious lobbies* at every state capital, and at the national capital; and in all the cities and towns of the land it employs an immense army of pettifoggers and small politicians whose business is to attend primaries, pack conventions, get on juries, bribe judges, and in every way to work for its interests.**

     * Lobby--a peculiar institution for bribing, bulldozing, and corrupting the legislators who were supposed to represent the people's interests.

     ** A decade before this speech of Everhard's, the New York  Board of Trade issued a report from which the following is quoted: "The railroads control absolutely the legislatures of a majority of the states of the Union; they make and unmake United States Senators, congressmen, and governors, and are practically dictators of the governmental policy of the United States.""Gentlemen, I have merely sketched the power of one of the seven groups that constitute the brain of the Plutocracy.* Your twenty-four billions of wealth does not give you twenty-five cents' worth of governmental power. It is an empty shell, and soon even the empty shell will be taken away from you. The Plutocracy has all power in its hands to-day. It to-day makes the laws, for it owns the Senate, Congress, the courts, and the state legislatures. And not only that. Behind law must be force to execute the law. To-day the Plutocracy makes the law, and to enforce the law it has at its beck and call the, police, the army, the navy, and, lastly, the militia, which is you, and me, and all of us."

     * Rockefeller began as a member of the proletariat, and through thrift and cunning succeeded in developing the first  perfect trust, namely that known as Standard Oil.  We cannot  forbear giving the following remarkable page from the history of the times, to show how the need for reinvestment of the Standard Oil surplus crushed out small capitalists and hastened the breakdown of the capitalist system.  David  Graham Phillips was a radical writer of the period, and the  quotation, by him, is taken from a copy of the Saturday  Evening Post, dated October 4, 1902 A.D.  This is the only copy of this publication that has come down to us, and yet, from its appearance and content, we cannot but conclude that  it was one of the popular periodicals with a large circulation.  The quotation here follows:

     "About ten years ago Rockefeller's income was given as thirty millions by an excellent authority.  He had reached the limit of profitable investment of profits in the oil  industry.  Here, then, were these enormous sums in cash pouring in--more than $2,000,000 a month for John Davison  Rockefeller alone.  The problem of reinvestment became more serious.  It became a nightmare.  The oil income was swelling, swelling, and the number of sound investments  limited, even more limited than it is now.  It was through no special eagerness for more gains that the Rockefellers  began to branch out from oil into other things.  They were forced, swept on by this inrolling tide of wealth which  their monopoly magnet irresistibly attracted.  They developed a staff of investment seekers and investigators. It is said that the chief of this staff has a salary of $125,000 a year.

     "The first conspicuous excursion and incursion of the Rockefellers was into the railway field.  By 1895 they controlled one-fifth of the railway mileage of the country.

     "The Rockefellers went into gas and electricity when those industries had developed to the safe investment stage.  And now a large part of the American people must begin to enrich  the Rockefellers as soon as the sun goes down, no matter what form of illuminant they use.  They went into farm mortgages.  It is said that when prosperity a few years ago enabled the farmers to rid themselves of their mortgages,  John D. Rockefeller was moved almost to tears; eight millions which he had thought taken care of for years to come at a good interest were suddenly dumped upon his  doorstep and there set up a-squawking for a new home.  This  unexpected addition to his worriments in finding places for the progeny of his petroleum and their progeny and their progeny's progeny was too much for the equanimity of a man  without a digestion. . . .

     "The Rockefellers went into mines--iron and coal and copper and lead; into other industrial companies; into street railways, into national, state, and municipal bonds; into steamships and steamboats and telegraphy; into real estate, into skyscrapers and residences and hotels and business blocks; into life insurance, into banking.  There was soon literally no field of industry where their millions were not at work. . . .

     "The Rockefeller bank--the National City Bank--is by itself far and away the biggest bank in the United States.  It is exceeded in the world only by the Bank of England and the Bank of France.  The deposits average more than one hundred millions a day; and it dominates the call loan market on Wall Street and the stock market. But it is not alone; it is the head of the Rockefeller chain of banks, which includes  fourteen banks and trust companies in New York City, and banks of great strength and influence in every large money center in the country.

     "John D. Rockefeller owns Standard Oil stock worth between  four and five hundred millions at the market quotations.  He has a hundred millions in the steel trust, almost as much in a single western railway system, half as much in a second, and so on and on and on until the mind wearies of the cataloguing.  His income last year was about $100,000,000-- it is doubtful if the incomes of all the Rothschilds together make a greater sum.  And it is going up by leaps and bounds."Little discussion took place after this, and the dinner soon broke up.  All were quiet and subdued, and leave-taking was done with low voices.  It seemed almost that they were scared by the vision of the times they had seen.

     "The situation is, indeed, serious," Mr. Calvin said to Ernest.  "I have little quarrel with the way you have depicted it.  Only I disagree with you about the doom of the middle class.  We shall survive, and we shall overthrow the trusts."

     "And return to the ways of your fathers," Ernest finished for him.

     "Even so," Mr. Calvin answered gravely.  "I know it's a sort of machine-breaking, and that it is absurd.  But then life seems absurd to-day, what of the machinations of the Plutocracy.  And at any rate, our sort of machine-breaking is at least practical and possible, which your dream is not.  Your socialistic dream is . . . well, a dream.  We cannot follow you."

     "I only wish you fellows knew a little something about evolutionand sociology," Ernest said wistfully, as they shook hands.  "We would be saved so much trouble if you did."

In 1908 Jack London wrote a book about America under a plutocracy bent on total economic domination and about the revolution fought against it by populists, as socialists and progressives stand by and watch the crushing of the resisting small-businessmen and farmers.  The book ends with the triumph of the the oligarchy.  The book is depressingly on target and should considered "the great American novel"  -- a great book to for older home school students to introduce the grim issues facing the world without crushing them with the reality of the real Iron Heel grinding us down today.

Read it free online:

http://www.gutenberg.org/catalog/world/readfile?fk_files=231283

Two free download sources to choose from:

1.  The Iron Heel by Jack London  free e-book  HTML (542 KB or 198 KB zip)   or plain text 

http://www.gutenberg.org/etext/1164

2. Soft32.com Download Iron Heel:

http://www.soft32.com/Download/Free/The_Iron_Heel/4-16903-1.html

"The Iron Heel describes the fall of the United States to a cruel fascist dictatorship. Fearful of the backlash against capitalism, the plutocrats of the Iron Heel conspire to eliminate democracy and, with their secret police and military, terrorize the citizenry ..."

Recommended 9-11 frame-up conspiracy video:  http://video.google.com/videoplay?docid=2296490368603788739