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mental pictures of the relative size and strength of the several factors entering into the broad problems of wealth.

The Institutional Basis of Inequalities in Fortune.-Why have these facts of wealth and property come to be what they are? Why do they tend to maintain themselves? In the very nature of things, are these inequalities immutable and inescapable?

The most useful method of answering these inquiries is to study property institutions. As C. H. Cooley has insisted, ownership and distribution are "essentially a historical and institutional phenomenon, economic technique being for the most part only a mechanism through which social organization expresses itself," and "pecuniary valuation is a social institution no less than the state or the church.” 22

An institution is a group of human tendencies and habits working out through an organized structure.23 It is the product of history. It has antecedents reaching back through generations, and is always in a state of flux and change. It is what it is today because it was something less satisfying yesterday. It will be something different in days ahead because it is not fully satisfying today An institution is on the march from yesterday forward to tomorrow. It is dynamic. It grows, develops, moves. This is not to deny that there are always forces at work trying to keep the institution static, trying to preserve the status quo, trying to maintain things as they are. But this is only the conservative side of growth. It combines with another side,-restless, forward-looking, dynamic. The two at their best balance in wholesome, gradual, safe advance; at their worst they fight it out.

If we view the church as an institution, at its beginning, then during the Middle Ages, through the Reformation, through the development of religious liberty in the American colonies, on through the last century of development in America, and finally in its present form, we have a fairly clear picture of the dynamic character of the church as an institution. Creeds, dogmas, rituals, teachings, theologies, interpretations, beliefs, constantly moving forward, appear simultaneously with organization, denominational structure, practice, custom, tradition and innovation. It is so with the institution of property. Every little while a student of economic life throws out the declaration that "We are living in a new economic world." 25 In other words, economic institutions are moving.

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Obviously then, the institution of property as it exists today is not fixed and static in all its detail and method. Institutions have much the same restless qualities as life. In fact, property is nothing unless a way of life. (To view property as a static order is to miss the true dynamic nature of property? The general point is emphasized by de Tocqueville when he says, "I am tempted to believe that what we

22 Social Process, pp. 302, 308.

23 W. G. Sumner, Folkways, p. 53.

24 Ross, Principles of Sociology, p. 489.

25 R. T. Ely, Property and Contract, p. 34.

call necessary institutions are often no more than institutions to which we have grown accustomed, and that in matters of social constitution the field of possibilities is much more extensive than men living in their various societies are ready to imagine." 26

Property has been defined as "a bundle of rights." There is no more conspicuous feature of the institution of property than this overwhelming emphasis upon the rights of property." The period when the American Constitution was established, and the foundations of the American system of government and property laid, was dominated by the philosophy of natural rights. European countries were repudiating old authorities, traditions and customs. The new freedom was akin to the freedom of the American Revolutionary group, and it furnished a soil in which flourished an extreme doctrine of the individualistic rights of all men to life, liberty and the pursuit of happiness. Accordingly property became a set of exclusive rights. The property owner had inalienable rights to do with his property as he pleased, subject only to a minimum of restraint from excessively anti-social practices. Property was something to be let alone by society. It had inalienable rights to be let alone. Property rights were individual rights, and this conception colors deeply the whole institution of property down to the present day.28

One weakness in this theory of property rights has become very prominent, namely, the implication that "the foundation of society is found, not in functions, but in rights; that rights are not deducible from the discharge of functions, so that the acquisition of wealth and the enjoyment of property are contingent upon the performances of services, but that the individual enters the world equipped with rights to the free disposal of his property and the pursuit of his economic self-interest, and that these rights are anterior to, and independent of, any service which he may render." 29 Rights come first and responsibilities second. Property is thought of primarily as a bundle of rights, but not emphatically as a bundle of duties. And the rights acquire a certain sacredness and awfulness. They command a sort of religious reverence which does not invite analysis. Such rights it seems sacrilege to question. In this atmosphere, it is hard to make a clean-cut mental approach to the problem of property and find just what it is all about. As a matter of fact, the so-called rights are simply rules of the institution; and if the rules are capable of improvement, then a blind awe of ancient rights should not stand in the way. The rules of the game are being tried out. There is nothing absolute and unapproachable about them. They should be exempted from superstitious reverence and treated with the same common sense which men use in coping with problems of everyday life. A proper infusion of duties, obligations, and responsibilities is indispensable, and an unquestioning reverence for rights as 26 Recollections, p. 101.

27 Ely, op. cit., p. 60.

28 See The Independent, April 16, 1908; also S. P. Orth, Relation of Govern ment to Property, pp. 7-84.

29 R. H. Tawney, The Acquisitive Society, p. 20.

rights must give way to a proper spirit of accommodation of the property institution to the needs of the present period.

A. T. Hadley states: "The general status of the property owner under the law cannot be changed by the action of the legislature or the executive, or the people of a State voting at the polls, or all three put together. It cannot be changed without either a consensus of opinion among the judges, which would lead them to retrace their old views, or an amendment of the Constitution of the United States by the slow and cumbersome machinery provided for that purpose. The voter was omnipotent-within a limited area. He could make what laws he pleased, as long as those laws did not entrench upon property rights. He could elect what officers he pleased, as long as those officers did not try to do certain duties confided by the Constitution to the property holders."

The United States Supreme Court asserts that, "Wherever the right of private property exists, there must and will be inequalities of fortune." It is "impossible to uphold freedom of contract and the right of private property without at the same time recognizing as legitimate those inequalities of fortune that are the necessary result of the exercise of those rights." In other words, the inequalities of wealth are bound up with the institution of property, and are inseparable from it.

The Corporation as a Property Institution.-The property owner under the corporate régime enjoys Timited liability. That is, he can be held liable for the debts of the corporation only in proportion to the shares of stock which he holds. Under the influence of this protection, ownership through bonds and stocks has largely displaced the old personal direct ownership of property and has become the typical form of ownership in modern organized industry. This evolution in ownership. was indispensable to the development of modern production, commerce and finance. Without the corporate form of ownership it is inconceivable that the modern economic system could have been developed. "Although merely an immaterial form, it has nevertheless wielded an economic and social influence greater than any other purely conceptual entity of the last century. The contribution of the corporation to the evolution. of the form of modern industry has been no less potent than that of machinery to its technique."' 30

Corporation methods allow for a scattering of ownership with a concentration of control. The scattering of ownership is carried to remarkable lengths. In a typical large scale enterprise, the owners of securities are scattered throughout most of the States of the Union, and through a number of foreign countries. People in Brazil, Japan, California and New York are owners of the securities of the typical large corporation of Pennsylvania or Ohio. Men and women, wage workers and farmers, savings banks and insurance companies, multi-millionaire estates and corporation executives, lawyers and doctors, all and several own a few or a great many shares of securities, and this grand miscellany in its totality is the ownership of the corporate property and under30 A. Dewing, The Financial Policy of Corporations, pp. x-xi.

taking. At the same time, the executive control and direction of the corporate property is highly concentrated A controlling amount is owned by specially interested parties and the votes of the remaining security holders are merely nominal votes. These major interests manage to secure a satisfactory Board of Directors, this Board in turn giving over the administrative tasks of the business to appointed executives. This highly concentrated control enables a relatively small number of aggressive, domineering persons to have at their disposal the accumulated savings of masses of people.

In 1922, there were 382,883 corporations listed on the records of the Bureau of Internal Revenue, representing a total capitalization of about one hundred billion dollars, approximately one-third of which was in bonds and two-thirds in stocks. Bonds appear in a variety of forms, but have one basic principle in common, namely, they are secured by a mortgage on definite property or have prior claims on the general assets and credit of the given corporation. Backed by such a security, the bond is the corporation's promise to pay the investor interest on a certain sum of money for a stated period of time, and at the end of that time to pay back the sum originally borrowed. The stockholders have a right to the income or property of the corporation only after the claims of bondholders are satisfied. As a rule the security behind stocks is secondary and inferior, but the rate of income is commonly higher. People who invest in bonds are usually more interested in the safety of their money than in high income; whereas people who invest in stocks are willing to sacrifice something of safety for the sake of securing large income.

The corporate form of ownership facilitates the exercise of the basic property rights. The right to acquire property is made easy of exercise for anybody who is able and willing to save money Bonds run in denominations from $50 to $1,000 and stocks from $5 to $100 par value. Partial payment plans enable the investor to buy stock, if he chooses, in essentially the same way that he may buy furniture, on the installment plan. Savings banks, investment banks, bond houses, stock exchanges, underwriting syndicates, all provide a ready opportunity for investment for both large and small sums. The wool grower in Australia can acquire the property of the Pennsylvania Railroad and the wage worker of Pittsburgh can acquire the property of English iron works. The farmer in Kansas can acquire the property of Pennsylvania coal mines, and the bank president of New York City can acquire the property of Brazilian coffee companies. If the would-be investor has the money wherewith to buy, he can have bonds or stocks, and no questions asked. The investment market is organized to attract investors, and corporations vie with each other in drawing the funds of investors toward their securities.

The real object of investment is not the possession of physical goods but of pecuniary rights. Investors buy a claim upon the earning power of the corporation. This phase of investment is especially apparent in

the purchase of those securities which represent intangible assets. Good will, intangible assets, earning capacity, etc., are common factors in stock issues, and mean simply that the man who buys them buys the right to an income in the future. If the buyer went to the plant of the corporation and asked to see his property, no one could show it to him. He would not own machines, or buildings, or raw or finished material. He would own earning capacity, an intangible concept, but nevertheless a reality on dividend day. But as a matter of fact the average owner of stock would never think of going to the corporation's plant and asking to see his property. He bought the right to an income and cares little or nothing where it comes from. He bought dividends, not tangible property. So long as dividends are forthcoming, his purchase of the earning power justifies itself. The stock purchaser may anticipate, at the same time, that a rise will occur in the market value of his stock. If he can, by holding it, sell for more than he paid, the difference represents gain.

Inequalities of Fortune Due to Unequal Privileges.-Under property institutions, various inequalities of opportunity develop and establish themselves. Special privilege aids one individual at the expense of another. It puts into the hands of the more fortunate superior acquisitive opportunity.

The chief inequalities of privileges are those arising from inheritance, monopoly powers, and unforeseen chance.

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Inheritance is a primary cause of the more extreme inequalities of income and ownership. Some people at birth are heirs to fortunes; others are heirs to nothing at all. Enormous estates are handed down from generation to generation and perpetuate the chasm between the extremes of possessors and non-possessors. It has been estimated that "four-fifths of the one hundred and fifty or more fortunes in the United States having incomes of over $1,000,000 a year have been accumulating for two generations or more.' In England, where the influence of inheritance has had a longer time to work itself out, "The number of wealthy men at the top is two and a quarter times as great, in proportion to population, as in the United States."

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At the other end of the scale stands the common worker, with practically no belongings except a few articles of furniture and clothing. Probably three out of five of the children of the country are born into propertyless families. Children of these classes inherit only bodies and brains to work with capital owned by others. Nothing is handed down to them in the form of a competence to begin life on. They have no assured means of livelihood. They are dependent upon the real property owners of the community.33

This contrast of inheritance has come to have some very serious results. The man who inherits property inherits not merely an assured

31 See Cannan's Wealth, pp. 182-184, and Taussig's Economics, pp. 248-250. 32 Irving Fisher, American Economic Review, March, 1919, p. 12.

33 Hobhouse, Property, Its Rights and Duties, p. 21.

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