Chapter 8: 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. And there were many similar men, owners or part-owners in small factories, small businesses and small industries--small capitalists, in short.

They were shrewd-faced, interesting men, and they talked with simplicity and clearness. Their unanimous complaint was against the corporations and trusts. Their creed was, “Bust the Trusts.” All oppression originated in the trusts, and one and all told the same tale of woe. They advocated government ownership of such trusts as the railroads and telegraphs, and excessive income taxes, graduated with ferocity, to destroy large accumulations. Likewise they advocated, as a cure for local ills, municipal ownership of such public utilities as water, gas, telephones, and street railways.

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 their 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.

“Yet you have not learned their lesson. Here are you, a century and a half later, trying to break machines. By your own confession the trust machines do the work more efficiently and more cheaply than you can. That is why you cannot compete with them. And yet you would break those machines. You are even more stupid than the stupid workmen of England. And while you maunder about restoring competition, the trusts go on destroying you.

“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 groceries 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.”