included in the National Insurance Act of 1911 the requirement that employers in certain designated trades, embracing ome 2,200,000 wage-earners, must see to it that each of their employees was provided with an unemployment insurance card. To these each week they are required to attach five penny unemployment insurance stamps supplied by the PostOffice, contributing one-half of the cost of them from their own pockets and deducting the other one-half from wages. Employees presenting cards showing that the premiums have been regularly paid and proof that they have sought in vain for work may apply to the appropriate authorities for unemployment benefits. The benefit is only seven shillings a week and may be continued for no longer than fifteen weeks in any one year, but will, it is believed, suffice to encourage trade unions through their own funds to pay supplementary benefits and thus protect the wage-earners included and their families from outright destitution. To prevent fraud against the fund every employee applying for a benefit is required to register at the nearest employment exchange. Through it the sincerity of his desire to secure work can be tested, since there are always some calls for workers and these may be directed toward the applicants for work whose good faith is in question or who have been longest in receipt of payments from the fund. As the success of the plan is demonstrated it is proposed to extend it gradually to other trades until a large proportion of the wage-earners of the country is protected. Since this is the first national attempt to cope with the evil of unemployment through insurance, its operation is being followed with keen interest by economic students all over the world.

Insurance

§ 353. Except as regards industrial accident insurance, Future of the United States has not yet made a beginning in the field Social of social insurance. This backwardness has been due in part to the smaller need of such measures for American wage- United earners with their relatively higher wages, but even more States. to a general distrust of policies calling for a large measure of governmental interference and to sheer indifference. Signs are not lacking that fuller knowledge of the sufferings which fall to the lot of American wage-earners in consequence of

the misfortunes that have been enumerated is leading to a more sympathetic interest in such policies. European experience is now rich with lessons as to what may and what should not be done in substituting collective provision for these evils for the quite inadequate individual provision on which we have heretofore relied. As these lessons are learned, comprehensive systems of social insurance comparable with those of Germany and the United Kingdom are sure to be devised for the United States. While they are in the experimental stages, there are obvious advantages in having their operation limited to single states. As they are perfected, however, the greater economy, efficiency and uniformity of a national system of social insurance will suggest the desirability of federal legislation in this field. Thus in connection with social insurance as in connection with other economic and social reforms, we must be prepared for an extension of the powers and duties of the Federal Government. It is doubtful whether this can be accomplished without an amendment to the Federal Constitution, but as the income tax amendment demonstrates, this is an obstacle that can and will be overcome, so soon as the need for the change has been made clear to a sufficient number of intelligent citizens.

REFERENCES FOR COLLATERAL READING

*Frankel and Dawson, Workingmen's Insurance in Europe; *Eastman, Work-Accidents and the Law; *Seager, Social Insurance: A Program of Social Reform; *Rubinow, Social Insurance; Lewis, State Insurance, a Social and Industrial Need; Dawson, Social Insurance in Germany; *Beveridge, Unemployment: A Problem of Industry, second edition; Gibbon, Unemployment Insurance; Smith, Everybody's Guide to the (British) National Insurance Act of 1911; Hayes, British Social Politics; Report of United States Bureau of Labor on Workmen's Compensation and Insurance Systems in Europe, 2 vols.; *Number of American Labor Legislation Review on "Social Insurance" (June, 1913).

CHAPTER XXXIII

SOCIALISM

§ 354. The plans of economic reform that have been con- Socialism. sidered in previous chapters would modify but little the most characteristic features of our present industrial system -freedom of individual enterprise and private property in the instruments of production. Socialism, the plan of reform we are now to consider, proposes to do away with these features by substituting for private management of industry state management and for private ownership of the instru'ments of production collective ownership. Although these changes are economic and are urged usually on the basis of economic reasoning, socialism is more than a mere plan of economic reform. From the point of view of many of its advocates it is primarily a great plan of moral reform. It proposes to establish economic and social relations on a basis that will encourage all human virtues and at the same time discourage selfishness, greed, vanity and ostentation. Thus it is to many not only an economic program but a religion, the religion of humanity seeking for heaven not in the vague hereafter but here on earth. In this chapter it will be possible only to describe its growth and present importance and to indicate some of the most serious difficulties in the way of its realization.

§ 355. Modern socialism made its first appearance as a pro- The test against the evil consequences of the factory system and Utopian of capitalistic production. Saint-Simon (1760-1825) and Socialists. Fourier (1772-1837) in France and Robert Owen (1771-1858) in England urged their fellow countrymen to turn their backs on the crass materialism about them and to join together in the attempt to reorganize industrial society along fraternal lines. Their projects were utopian and they are usually called utopists, not because many of their plans and ideas

Socialism of Karl Marx.

Its Basic

were not admirable but because they greatly underrated the difficulties in the way of their execution. Of the numerous communities that were organized by their followers in different parts of the world, all but one or two proved failures. The only permanent results of their endeavors were the launching of the coöperative or copartnership movement described in Chapter XXXI. and the clear demonstration that efforts to reform industrial society in any fundamental way must prove abortive without the aid of society's most powerful organ, the state or government.

§ 356. The series of political revolutions which began in Europe in 1830 was associated with the second phase of the socialist movement, so-called revolutionary socialism. Louis Blanc (1813-1882) was the leader of this new movement in France, but it has owed its strength chiefly to Karl Marx (1818-1883), whose monumental work Das Kapital is not incorrectly described as the "bible of socialism." Karl Marx was the son of cultured Jewish parents, and combined with thorough university training in law and philosophy, profound sympathy with the democratic movements of his day. Exiled from Germany because of his radical opinions and declarations, he lived for the greater part of his life in London, where he formulated the system that has since come to be known as scientific socialism."

The basic principle of this system is the materialistic, or Principle. economic, interpretation of history. The institutions and standards of each historical period are, Marx thought, determined by the prevailing system of production and distribution. Through the industrial revolution, he believed, an irrepressible conflict of interest has arisen between capitalistemployers, who own the instruments of production, and wage-earners who depend upon capitalists even for the opportunity to work. This conflict, or "class struggle," will, he thought, become more and more acute, since "capitalistic production," as he conceived of it, tends inevitably toward greater and greater concentration of ownership on the one side and toward greater and greater misery for the "exploited wage-earners on the other. The only possible outcome of such a struggle, he predicted, is a social revolution.

Wage-earners, the "proletariat," will finally rise in their might and forcibly take over the instruments of production from their oppressors and the socialist state will be born. The coming of socialism is thus, in his opinion, inevitable. With this conviction, he conceived it to be his task to prepare men's minds for it by his teachings and to organize the proletariat for the responsibilities that would rest upon them when control of the socialist state of the future should come into their hands.

§ 357. In addition to the materialistic interpretation of Other history, the class struggle and the inevitable social revolu- Theories. tion, Marx advanced the theory of surplus value and the over-production theory of economic crises as further elements in his system. He accepted from the English economist, Ricardo, the view that value tends to be in proportion to the quantity of labor necessary to the production of a commodity. Since it was clear that only a part of the value of the products of industry was actually turned over to the workers to remunerate them for their toil, he maintained that capitalistic production involves constant exploitation of wage-earners. They receive of the values they produce only enough for their subsistence; the remainder, the " surplus value," goes to their capitalist-employers in consequence of the fact that the latter control the instruments of production, land and capital goods, without which the wage-earner cannot earn even his necessary subsistence.

The Marxian theory of crises is that unregulated competition causes capitalist-employers, in their greed for profits, to add constantly to the volume of products which they put upon the market. Since the consuming power of the masses is limited by the subsistence wages which they receive, production tends constantly to run ahead of consumption. As a result, there is a heaping up of unsold and unsalable commodities until a crisis is reached. Prices then drop to a point which makes further production unprofitable. Widespread depression and unemployment ensue and only after a drastic process of liquidation, which forces the smaller and weaker employers into the ranks of the proletariat, can industry be resumed. The same vicious round is then repeated, each