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No. 43 "The Duty Of The Church To The Social Order" An Address by S. Wells Utley, President and General Manager of The Detroit Steel Casting Company, May 21, 1935. American Liberty League. 400dpi TIFF G4 page images Digital Library Services, University of Kentucky Libraries Lexington, Kentucky Am_Lib_Leag_43 These pages may freely searched and displayed. Permission must be received for subsequent distribution in print or electronically. No. 43 "The Duty Of The Church To The Social Order" An Address by S. Wells Utley, President and General Manager of The Detroit Steel Casting Company, May 21, 1935. American Liberty League. American Liberty League. Washington, D.C. 1935. This electronic text file was created by Optical Character Recognition (OCR). No corrections have been made to the OCR-ed text and no editing has been done to the content of the original document. Encoding has been done through an automated process using the recommendations for Level 1 of the TEI in Libraries Guidelines. Digital page images are linked to the text file. yields to the productive efforts of man, they allow themselves to be governed by their emotions and espouse exactly the same doctrines as do those who are avowedly seeking the overthrow of both our Church and our Civilization. If they succeed, the fact that their intentions were good won't serve to mitigate the ensuing disaster, or excuse the part they have had in bringing it about. What, then, is the duty of the Church to the Social Order? For some years past a considerable part of the members of the ministry, a considerable part of the publications of the Church, have devoted their time to the preaching, not of Christian love, but of class hatred. Instead of pointing out the forward march of the race under the teachings of the Christian religion, they have magnified its deficiencies, have emphasized its shortcomings and its lack of perfection, in such a way as to arouse animosity and retard that progress which is admittedly all too slow. Obviously, they should cease such tactics, should discontinue proclaiming the identical doctrines upon which the Communist relies to bring about his class revolution. It is impossible for the Church, through its physical manifestations, to affect directly the action of its people. No pastor can be present to guide any single one of his hundreds of parishioners in making those decisions which must be made every day of our lives. They come in the home, in the midst of a business conference, at the end of a telephone wire, or more often than not in the silent hours of the night, when the conscious mind seeks rest in slumber, and the subconscious mind so rearranges the brain cells that with the coming of consciousness the solution of the problem is apparent. But the Spiritual Church can control these things! It can, and it does, so build character that when these cells are rearranged they are rearranged in patterns which conform to the teachings of Jesus Christ. This, then, is the duty of the Church and its ministers, to cease wasting time on the superficial, and devote its energy to the great fundamental problem of building Christian character. The duty of the Church is to make men and women of better and finer character, and only as it accomplishes this objective will it build a better and a finer Social Order. THE DUTY OF THE CHURCH TO THE SOCIAL ORDER By S. WELLS UTLEY President and General Manager The Detroit Steel Casting Company Chairman Board of Trustees First Congregational Church Detroit, Michigan Member National Advisory Council American Liberty League â˜… â˜… â˜… An Address before the Michigan Association of Congregational Churches Jackson, Michigan May 21, 1935 AMERICAN LIBERTY LEAGUE T^ational Headquarters NATIONAL PRESS BUILDING WASHINGTON, D. C. Document No. 43 June, 1935 The Duty of the Church to the Social Order â˜… In finding his way from one spot on the ocean to another, the navigator's first problem is to obtain very definitely the location of the place from which he is departing. In the same way, it seems to me that it is essential for us this afternoon to examine rather carefully the present "social order"; for, obviously, its present state may have a great deal to do with the Church's duty toward it. From the address we have just heard,* from other statements of Dr. Herring and those who were instrumental with him in setting up the Council for Social Action, from the pronouncements of the governing group of the Federal Council of Churches of Christ in America along similar lines, it is quite evident that there is a widespread disagreement between their ideas on this subject and my own. They apparently feel that the mere fact that a human being exists, irrespective of his ability or industry, gives him a right to a somewhat equal share of the world's possessions; while I feel that the best interests of society are served by giving him an opportunity which shall be equal under the law and customs with that of anyone else, and holding him responsible for the development of that opportunity. They hold that the system of individual initiative is a failure, and that society can best be served by discarding the old system and substituting one vaguely called "Production for use, and not for profit"; I hold that the American system has produced more advancement for the common man than any other yet conceived, and that it should therefore be continued; that the proposed system is nothing but a return to political dictatorship of our personal lives. They contend that there is a tremendous disparity in the distribution of the "good things of life," due to greed, corruption, and crookedness in the economic system; I contend that the maladjustment is not nearly so great as they claim; that the distribution of wealth under our system is infinitely more widespread than ever attained by any other; that what maladjustment there is, is due largely to the difference in human capacity and human capability; that the amassing of wealth honestly made is but a badge of service per- * The Council for Social Action. Rev. Hubert Herring, D.D. 2 formed to the community, and that the remedy of the defects of the present system lies not in its destruction but in the improvement of the character of the race, through Christian education. They claim that the present depression is quite different from those of the past, and was brought about by the criminal errors of a few of the bankers and business men; I claim that it is world-wide, brought about by the errors of the race, of yourself and myself as much as anyone else; that it is not essentially different from other depressions; that after all these periodic slumps are only nature's brakes to keep us from dashing to our own destruction. In view of this wide divergence of fundamental ideas, it seems to be essential that I outline to you my conception of the world around us, so that whether you agree with it or not you will at least understand what I am talking about. If I confine myself purely to the economic phase, please understand that that is due, not to a failure to realize that there are other considerations, but rather to a limitation of time. The National Wealth of America Economists agree that wealth is not what we call money, it is not currency, and it is not credit. These are but symbols we use to describe wealth. Real wealth consists of the things that human beings want, and of which they can make use. I take it that wealth in general is of two kinds: that which is natural given by God consisting of land, ores, forests, game and fish and so forth, and that which is made by man from these raw materials through labor of a physical or mental nature. We can safely say that the annual income from the natural wealth in the United States can be described as the amount sufficient to maintain life for the few hundred thousand Indians who inhabited the country at the coming of the white man; that the increase in that wealth produced by the labor of man can be measured by the additional support of approximately 125 million people, plus the addition necessary to take care of the difference in the standard of living between the modern white man and the ancient Indian. The United States is a relatively small part of the world, occupying about 6 per cent of the land area, and having about 6 per cent of the world's population. Her national wealth consists of 3,568,000 farms with their accompanying houses, barns, farming equipment, livestock, feed and so forth, and 14 million homes with their furniture, equipment and supplies, which are owned out-3 right by those who inhabit them; and an almost equal number, in each case, of establishments which are either rented or owned subject to mortgage, but in which the personal equipment is largely owned by the occupants. It consists of hundreds of thousands of stores, shops and small business enterprises, with goods upon the shelves and equipment for operating the business, and a few gigantic enterprises which depend for their success on being able to furnish goods or services which are of value to the general public. In addition, it consists of 45 million individual deposits in savings banks; 10 million memberships in building and loan associations with assets of 8 billion dollars; 113,700,000 life insurance policies with a face value of $97,985,000,000, and representing actual assets in 1933 of $21,424,000,000. The total national wealth includes one-third of the railroad mileage of the world, 73 per cent of the motor cars, 58 per cent of the telephones, 32 per cent of the coal, 62 per cent of the petroleum pumped, 35 per cent of the copper mined, 34 per cent of the pig iron, 37 per cent of the steel produced, and, up to the beginning of the present curtailment program, 52 per cent of the corn, and 62 per cent of the world's cotton. The American people have more public schools, colleges and universities, more libraries, hospitals and free clinics, more asylums and institutions for the defective, publish more newspapers, periodicals, and books, than any other people in the world. They have the opportunity of listening to more and better music, and of attending more theaters and movies than anyone else. They possess in their homes more electric lights, more electric irons and washing machines, more heating plants, more bathrooms with running water, more electric refrigeration and they have in their daily life more and greater variety of nourishing food than any other people. Whatever else may be said for or against the American system, no one can look at the cold facts without being forced to admit that it has been tremendously productive of "the good things of life." Nor can any one compare its record with that of any other country without admitting that it has produced more things to be divided than has any system yet devised. One cannot help feeling that perhaps one of the reasons why the Communist rails against it is because he feels that 6 per cent of the world's population has been altogether too successful in producing wealth, and that the easiest way for him to share in it is to overthrow the system which has produced it, rather than through labor and industry to produce some for himself. 4 Distribution of American Wealth The great bulk of our wealth is created through the labor of man through Industry, which may be defined as the cooperative effort of mind, labor, and capital, to produce additional values from raw material. It is estimated that in this country there are between one and two million individual businesses and partnerships. Obviously, the most of these are small and their ownership is widely diffused. There are between four hundred and five hundred thousand corporations, of which only between two thousand and three thousand are sufficiently large and important to have their shares listed on either the National or a local stock exchange. So much attention is given by the press and demagogues to the large corporations, that our conception of the business structure has become distorted, and we are prone to forget that just as our whole society consists of millions of what Lincoln called "common people," with a few outstanding ones who sometimes make the headlines, just so does our industrial structure consist of millions of little concerns, and a relatively few large ones. Every three years the Government conducts a census of the establishments engaged in manufacturing, and it is therefore possible to get some interesting and authoritative data on this department of industry. In the following table,* illustrating the structure of manufacturing industry in 1909, and again in 1929, the comparison in size is made on the basis of the number of persons employed: Manufacturing Establishments V. S. Census of Manufacturers 1909 1929 Total Number ................ 175,142 210,959 Number Employing: 1 to 20 workers.......... 73.0% 74.3% 21 to 50 workers.......... 12.9 11.9 51 to 100 workers.......... 6.3 5.9 100 to 250 workers.......... 4.6 4.8 251 to 500 workers.......... 17 1.8 500 to 1000 workers...........7 .8 Over 1000 .....................3 .5 These figures indicate that in 1909, 92.7 per cent of all manufacturing establishments in the United States were of a size employing less than 100 men, and that twenty years later, 92.1 per cent (194,300 establishments) were still of this relatively small size, while in the latter year but 1.3 per cent were of sufficient size to employ 500 men or over. The number of people employed in the various * National Industrial Conference Board Chart No. 285. classifications is likewise interesting, although the picture is somewhat different. Obviously, the concern with a thousand men on its payroll gives work to as many employees as do fifty concerns with twenty on the payroll. But even from this standpoint, these statistics give a vivid illustration of the tremendous importance of the relatively small unit in our social picture. Percentage of Total Employees in Each Class U. S. Census of Manufacturing Establishments 1909 1929 Total Workers .............. 6,472,616 8,838,743 In Establishments Employing: 1 to 20 workers.......... 12.5% 9.9% 21 to 50 workers.......... 11.8 9.2 50 to 100 workers.......... 12.1 10.1 100 to 250 workers.......... 19.4 18.0 251 to 500 workers.......... 15.5 15.1 500 to 1000 workers.......... 12.9 13.3 Over 1000.................... 15.7 24.4 The smaller concerns, employing less than a hundred, accounted for 36.4 per cent of total employees in 1909, and for 29.2 per cent twenty years later; those employing less than five hundred accounted for 70.3 per cent in the earlier year, and 62.3 per cent in the latter year, although, due to the increase in the total number employed in manufacturing, the actual number on the payrolls of the shops employing less than five hundred was nearly a million people greater than it was twenty years before. The percentage of total employees in the shops of those having more than five hundred increased from 28.6 per cent in 1909 to 37.7 per cent in 1929, so that in the latter year the large shops gave employment to almost twice as many individuals as they did in the earlier year. This is a very striking fact because the large shops are obviously those with considerable capital resources, unquestionably equipped with the latest labor-saving devices, and always keen to decrease cost by substituting machinery for hand labor, and yet it was in these shops that the greatest increase in the total number employed took place, indicating that, while in individual instances the use of the machine eliminates jobs, nevertheless, in the aggregate, the reduction in cost, produced by the machine, increases the demand for the product to a point where a larger number of people are actually employed. This thought is further emphasized by the fact that according to Colonel Ayers, while the use of the machine has increased by 1800 per cent between 1870 and 1930 and the increase in population has increased by 319 per cent, the number of gainfully employed in the country has increased by 409 per cent, or 28.2 per cent faster than the increase in population. The above figures prove conclusively that notwithstanding all the misinformation one continually hears, the great bulk of business in the United States, so far as manufacturing is concerned, is still the business of small units and small producers; that these, and not the gigantic corporations, form the major part of our industrial structure; and that the ownership of these is widely diffused and widely held, and that neither the ownership nor the operation is in the hands of a few individuals, as is so often and so erroneously charged. Let us turn our attention for a moment to the ownership of the gigantic corporations, which fills so much of the newspaper space and which apparently causes so much concern. With the advent of the large corporation, we have developed to an extent not equaled anywhere else in the world, a system of public ownership of the tools of production. Under it any individual, if he feels that a corporation, because of its strategic position, because of the ability of its management, or tbe foresight of its originator, is likely to make a satisfactory profit, is free to take for himself a part of that profit, by buying such part of its common stock as he desires to purchase, at a price which is determined by the supply of that stock as contrasted with the number of others who like himself desire to buy it. The result is that these corporations have become public institutions, just as truly as if they were Government-owned, except that they require that those who hold their shares shall have proved themselves, in a small way or a large way, to have been able to accumulate the price of the shares through their own willingness to work and to save. In this connection, it is well to remember that corporations, like individuals, always start as small institutions. The fact that they later grow to be large is prima facie evidence of the fact that they have been able to furnish goods or services to society, on a basis which is so satisfactory that there is an increasing demand for their product. As a result of this system, the ownership of our corporate structure has become very widespread and diversified. The General Motors Corporation at the end of the year was owned by 351,761 stockholders. Of these, 43.2 per cent, or approximately 151,000 owned ten shares or less; 82.5 per cent, or approximately 290,000 owned fifty shares or less; only 7.4 per cent of the entire list owned 101 shares or more. Each one of these owners has a voice proportionate to his holdings with every other owner in the selection of the directors who operate his property. Each one nas the privilege of selling his holdings any time he is dissatisfied with the way the property is managed, or feels that he can best advance his own interests by the ownership of some other property; and through our system of security exchanges he can find a buyer for his equity usually in a few moment's time, a strikingly different situation than that which confronts him when he puts his money into real estate. Whether he gets back what he puts in depends upon the skill with which the property has been managed by those he chose to represent him; the demand for the goods or services which he as an owner is furnishing; and the general condition of the country, just the same as is the case if he puts his savings into any other kind of property, such as a house and lot. The American Telephone and Telegraph Company had at the end of the year 680,939 stockholders; Cities Service Corporation, 635,143, etc. The sheet I have in my hand lists by name fourteen corporations, whose total stockholders number 3,746,310. Messrs. Fraser, Jelke & Co. have prepared a list of 225 corporations, totaling 10,-275,000 stockholders, and it is estimated that the total owners of stock in listed corporations in this country amounts to over 26 million individuals. This covers the ownership of less than three thousand corporations, out of a total of half a million, the ownership of the remaining being distributed in every city, village and hamlet throughout the entire country. It is obvious that this enormous number of stockholders are not separate individuals, that many of them own stock in several different corporations. It is worthy of note, however, that quite largely they are individuals, and not institutions, that savings banks, life insurance companies, and so forth are investors in bonds which are evidences of indebtedness, and that the ownership of these corporations resides in individuals. Of one thing we may be very sure, and that is that the ownership of the great corporations is in the hands, not of a few men of great wealth, but rather in a tremendous number of individuals of little wealth. It is interesting to note, too, that in many cases the number of owners very largely exceeds the number of employees. General Motors, for instance, reports a total of 191,157 employees, as against 351,164 stockholders, nearly two to one; while a summary of the iron and steel industry lists the employees at the end of the year as 420,397, and the stockholders as upwards of 550,000 persons. In view of this picture of the national wealth of the American people, I fail utterly to see how anyone can contend that 2 per cent of the people own 60 per cent (or 70 per cent or 90 per cent, as the varying statements are made) of the wealth, unless he totally disregards the facts definitely proved by all available statistics, or seeks deliberately to misinform his hearers. Distribution of National Income As individuals we are interested in the annual income, rather than the ownership of capital wealth; in what income the rolling mill produces, rather than how much is invested in it. Fortunately, we have very definite figures covering this matter, as well. In June, 1932, the Senate passed a resolution asking that the Secretary of Commerce report "Estimates of the total national income of the United States for each of the calendar years 1929, 1930, and 1931, including estimates of the portions of the national income originating from agriculture, manufacturing, mining, transportation, and other gainful industries and occupations, and estimates of the distribution of the national income in the form of wages, rents, royalties, dividends, profits, and other types of payment." This report throws a great deal of light on the question of how the income of the American people is distributed. In conformity with the terms of the resolution, the report * considers, first, "Income Produced," and then, "Income Paid Out," finding that there is a distinct difference between the two, in that in good years some of the "income produced" is retained as surplus, and that in bad years surplus is drawn upon to augment the income paid out, and make it greater than the income produced. The investigators found that the income produced was distributed as between wages and salaries and all other expenditures as shown in the following: Distribution of Income Produced 1929 1930 19S1 19S2 Wages and Salaries... . 63.6% 69.1% 74.8% 80.1% All Other Forms....... 36.4 30.9 25.2 19.9 The constantly increasing share of wages and salaries in the income produced; the constantly decreasing share of all other kinds of income *U. S. Senate document No. 124. Seventy-third Session. lends no support to the charge that during a period of depression the wage earners suffer for the benefit of other types of wealth. This is strikingly borne out by the following more detailed division, in which "income paid out" is considered, rather than "income produced," the difference being that in 1932 the former figure exceeded the latter by 9% billion dollars, withdrawn from surpluses stored up in better years. Distribution of Income Paid Out 1929 1932 Wages and Salaries............ 65.1% 64.5% Dividends .................... 7.4 5.3 Interest t ..................... 7.0 11.2 Balance Foreign Accounts.......6 .8 Rents and Royalties .......... 5.1 3.8 Entrepreneurial Withdrawals t â€¢ 14.8 14.4 The above indicates that while the national income dropped during the four-year period by 52.6 per cent, wages showed a drop of but 40.3 per cent, while further figures show that the interest and dividends paid out to those having an annual income of ten thousand dollars or over dropped by 67.1 per cent. In the low year of the depression, wages and salaries plus entrepreneurial withdrawals, types of income with the widest possible distribution accounted for 78.9 per cent of the entire national income, and again show that the statement that 2 per cent of the people received the major part of the national income is totally without foundation. The computation showing the difference between "income produced" and "income paid out" is given below, and indicates that in the three years, 1930 to 1932, American business took out of its surplus a total of $23,198,000,000, which was distributed largely in wages, and partly in interest and dividends, the great bulk, however, going to people of little means. Contrast the ease with which this was automatically done with the tremendous confusion now attending the proposed distribution of approximately one-fifth of that amount, through the machinery of Federal Government, and the difference in liability on the part of the ordinary citizen, when this is to be replaced through future earnings, as compared with his liability when it must be replaced through taxation! f Fixed charges. Does not go to business classes who are borrowers not lenders. Goes to retired farmers, small tradesmen, widows, life insurance companies, savings banks, building and loan associations. $ Individual proprietors, farmers, small business men, etc., who do not differentiate between salaries, wages and profits. 10 Income Produced vs. Income Paid Out (Millions of dollars) 1929 1930 1931 1932 Income Produced ....... 83,032 70,345 54,643 39,365 Savings ................. 1,896 ............ Losses (from surplus)....... 5,065 8,604 9,529 Income Paid Out .... 81,136 75,410 63,247 48,894 A computation of the net income after taxes of all corporations in the United States, as shown in their income tax returns for the fourteen years from 1919 to 1932, indicates that there were eleven profitable years and three losing years, and that the total profit during the entire period amounted to 2.42 per cent of the total sales. In other words, taking corporations as a whole over the entire period, of every hundred dollars taken in, $97.58 went as cost of the service rendered, and $2.42 went as a reward to the company's stockholders. This is accounted for by the fact that under the best of conditions a very considerable percentage of the corporations (46 per cent over this period) normally operate at a loss, and even in boom years at least one quarter of them show no profits at all. It is interesting to note that in 1929 there were 14,816 persons who reported incomes of $100,000 or over which represented 5.3 per cent of the national income; in 1932 this had dropped to 1,810 persons, who drew 1 per cent of the national income. The depression automatically wiped out seven-eights of those who were drawing incomes over this figure. Again, in 1929, 375,032 persons reported incomes of $10,000 or over, and accounted for 14.7 per cent of the national income. In 1932, this number dropped by 72 per cent, leaving 103,790 reporting in this bracket and drawing 6.4 per cent of the national income. In 1928, the peak year of national income, had the Government confiscated all incomes over $10,000, and distributed the amount equally to all those gainfully employed, it would have increased the annual wage of each one by $190, and if this sum had been distributed on the basis of population, the per capita gain would have been $76. Going a step farther, if all income over $5,000 had been confiscated, those gainfully employed would have had an increase of $260 per year, or, if it had been distributed on a per capita basis, the increase would have been $104 per year. Distributing the wealth of the wealthy does not mean much of an addition to the income of the ordinary man, especially when we realize that massed wealth produces much more in the way of expansion of employment, than does diffused wealth. Between 1840 and 1934 the hourly rate of 11 wages increased seven-fold. Wholesale prices (note this is not retail prices) advanced only one-seventh, so that relative to wholesale prices wages increased fifty times. The average factory wage in 1850 was $248 per year; in 1931 it was $1,102 for approximately half the number of hours. The per capita wealth in 1850 was $307. In 1934, after a reduction of 50 per cent due to the depression it was $2,220; making due adjustments for price changes, it increased 600 per cent in eighty-four years, or doubled every twelve years. Those who make the charge that there is a vicious maldistribution of industrial income, leave the inference that this is due to the fact that the system is crooked, that this maldistribution is a by-product of our method of issuing corporate securities, and is accomplished through special privileges, vested interests, and unfair advantages often secured through the employment of skilled legal service. They vigorously deny that it may be caused by the fact that the Lord has given to some men greater intelligence, greater daring, greater industry than he has given to others, and that their greater share of the income may be due to the fact that they have rendered to society a greater service, for which she is willing to recompense them. Colonel Ayers, the able statistician and economist of the Cleveland Trust Company, has just issued a study of the distribution of farm income as compared with income in other lines of business. He finds that, notwithstanding the fact that up until recently the farmer hasn't enjoyed special privileges, and hasn't been accused of being a part of a crooked system, but, on the other hand, has been generally pitied as a victim of that system notwithstanding these facts, farm income is distributed very much the same as is industrial income. He finds, for instance, that the richest 20 per cent of the farmers account for 48.59 per cent of the total farm income, while the richest 20 per cent in other walks of life account for 58.22 per cent; and, on the other hand, that the poorest 20 per cent of the farmers get but 3.93 per cent of the total income, while the poorest 20 per cent in other walks of life get 4.30 per cent of the income. This study most certainly suggests that among individuals there are inherent differences of ability, energy, and thrift, and that those who are possessed of these qualities, irrespective of the particular walk in life in which it is exhibited, do secure, and in my judgment should secure, more of the national income than do those who are not endowed with these qualities. 12 Distribution of Income * Farm Income Other Income Among Farm Among Other Families Families First 20% ......... 48.59% 58.22% Second 20% ....... 23.72 17.01 Third 20% ........ 14.26 11.77 Fourth 20% ....... 9.50 8.70 Fifth 20% ......... 3.93 4.30 Such is the picture of the social order as I see it. In my judgment, it has produced more of the good things of life, and, notwithstanding the many shortcomings of the human beings who constitute it, has secured a wider and more equitable distribution of those things than any other society man has yet seen. Before the Church decides what action it will take, it is its duty to examine this picture, and to evaluate its different parts. If it is impossible to find in the history of mankind another social order, in which these things have been so well done, then it is the duty of the Church, not to condemn and attempt to discard the present order, but rather to commend and strengthen it, working, not for its elimination, but for its constant improvement. The Capitalistic System Starting approximately one hundred and fifty years ago, possessed of almost a virgin country rich in natural resources, with a heterogeneous population of about 3% million people, the American people have achieved these marvelous results, largely because they adopted as their guiding economic principle the so-called Capitalistic System, the Enterprise System, the system of Individual Initiative, or the system of Laissez Faire, as you may choose to call it, for they are all the same. In 1776, when Adam Smith, a Scottish professor of moral philosophy, wrote the "Wealth of Nations," and described the motives which govern men's actions in the field of economics, he was but translating into that field the same principles of human freedom as were enunciated by Martin Luther in the Reformation and were exemplified in the religious world through the formation of the Protestant Church. The essence of the Capitalistic System is the freedom of man to direct his life in the economic world as best suits his needs, just as the fundamental principle of the Protestant Church is the freedom of a man to worship his God in that way which he most desires. The antithesis of the Capitalistic * The Cleveland Trust Company Business Bulletin, May 15, 1935. 13 System, and incidentally the only other system yet devised by man for motivating economic society, is the Oriental system of force, by which man's economic life is dictated and directed by a Government which is superimposed above him, just as in former days his religious life was dictated and directed by such a Government. Dr. Nicholas Murray Butler, president of Columbia University, defines Capitalism as follows: "There never has been such a thing as Capitalism. That was a debating term coined by Karl Marx. Capitalism is not a principle. It is what logicians call an accumulation. It is an accident, a by-product of successful labor, which has produced more than it spent. The principle is liberty, civil, political and economic, and the conflict is between liberty and compulsion. It is going on in every country in the world, and is going on in this country." Dr. Robert A. Milliken, the eminent physicist, and winner of the Nobel Prize, says of it: "If I read history aright, any system or set of conditions which furnishes wide opportunity for individual initiative, which inspires many people to thrift and to adventure, makes for progress, while any soft paternalism which kills that spirit makes for decay and retrogression; for a nation is obviously nothing but the composite of the individuals that unite to make it up. I have shuddered recently to hear men in high places in American life belittle those old-time virtues of industry and thrift, the discovery of which as fundamental virtues is probably the greatest achievement of the human race to date, transcending in importance all other scientific discoveries put together, for it has underlain them all and made them possible. Once lose that attitude, and we are gone." My own definition might be expressed somewhat as follows: "A society is operating under the Capitalistic System when the ownership of the tools of production (capital) is vested in the individual and not in the State, and when the incentive which causes the individual to engage in creative effort is a desire to achieve a reward, material or otherwise, or a fear of sustaining a business loss, or suffering a decrease in his personal standard of living." It is evident that whenever man makes use of tools to aid his production, whether it be a jack-knife or a rolling mill, he is using capital; that a steel plant capable of producing a railroad rail or a sheet for an automobile, is the same from the standpoint of mechanical equipment and capital invested, under the Communist System of Russia as under the Capitalistic System. 14 Under either system, the mill can be built only through savings or accumulated wealth. The essential difference lies in who makes the savings and who owns the productive capital. Under the Oriental, Socialistic, or Communistic System, the State forces the savings, owns the capital accumulation, and directs its operation by force, if necessary; under the Capitalistic System the individual does his own saving, owns the capital that is accumulated, and directs its operations, not through force, but through dividing the profits of operation with those who cooperate. Under the Oriental System, the driving force is the coercive power of the State; under the system of individual initiative, it is the hope of a reward. Society says in essence to the individual: "Think, work, produce. If you succeed I will give you a part of what you produce, to have and to hold only so long as you continue to work for me." The essence of this system is the fact that the reward attained by the individual (and it is immaterial whether it is money, power, prestige, satisfaction in the love of those dear to one, or anything else) is but a small part of the benefit derived by society from the accomplishment. No one ever bought a Ford automobile because he was desirous of helping Mr. Ford make a profit. Every one of the millions who have bought such cars has done so because he conceived it to be of benefit to himself, because the possession of this form of transportation meant more profit to him in his own business, the ability to cover more territory in his daily life, or an increase in satisfaction to himself and his family. In each case he paid out his money because he expected to get something in return which was worth more to him than the money he paid out, and the reason Mr. Ford has been so tremendously successful, and has sold so many cars, is because millions of people believed that he was giving them more than they were giving him. Profit and Loss System Nor does this operate only in one direction. We don't operate under a profit system, but rather under a profit and loss system, and the loss end is just as essential a part of it as is the profit end. This has been well pointed out by Dr. Virgil Jordan, president of the National Industrial Conference Board, in these words: "The American business system of free enterprise is a profit and loss system, in which the opportunity for profit is compensated by the chances of loss, and only the community of ultimate consumers wins. All profit, sooner or later, is spent as wages, 15 dissipated in investments, and returned to consumers in consumption goods. Except in periods of a general rise in prices, due to monetary and financial factors, the profits made by a part of business are offset by the losses of the rest; and even the net profits of business as a whole which are accumulated in periods of rising prices are dissipated and compensated for by net losses of business as a whole, in succeeding periods of falling prices, or depressions. In any system, those who accumulate property are only its temporary custodians; the ultimate benefits of all savings finally accrue only to the community as a whole, in a higher standard of living. "When we take the opportunity for profit the American Business system offers, we are compelled to accept the chances of loss it implies. Only on these stern terms of individual responsibility and self-reliance does it offer its highest gifts and rewards for risk and effort. Unquestionably it involves a high degree of inequality and concentration of incoming wealth, but this is the accompaniment of the inescapable natural fact of inequality of capacity and concentration of ability and enterprise, and willingness to assume risk and responsibility. Unquestionably, it involves a large amount of waste, instability, and insecurity, but these are the price of the progress and productive accomplishment it makes possible, and they are worth the price. In economic law, security, stability, and equality are incompatible with progress, and in any economic system we can only take our choice between them; we cannot have both." The truth of this statement is amply borne out by figures already referred to showing that while the average annual gross income of all manufacturing corporations in the United States for fourteen years amounted to 42 billion dollars per year, 54 per cent of them showed a total profit of $3,500,000,000 annually, while 46 per cent of them showed a total loss of $1,100,000,000 annually. The phrase with which we are all so familiar, "Ashes to ashes, dust to dust," applies not only to man himself, but to everything man has made. It is a common characteristic of all his wealth that no sooner has it been produced, than it immediately starts to deteriorate. No sooner has his house been completed than it begins to require repairs; no sooner has his concrete been laid than it begins to crack; no sooner has his steel become cool than through rust it begins to go back into the ore from which it came, and his most enduring handiwork immediately begins to disintegrate. On the balance sheet Industry 16 recognizes this erosion in the item of "depreciation"; society has not yet fully recognized its significance. Each day of the year erosion takes from the stockholders of General Motors $105,-800; from the stockholders of U. S. Steel, $120,900. If the General Motors plants operate forty-eight hours per week they must produce over and above all expenses $15,430 per hour to make up for this erosion; if they operate but thirty hours per week, they must produce a net of $24,680. If we assume a loss of 7 per cent to cover upkeep, amortization and depreciation on the total estimated value of the national wealth in 1932 of 247 billion dollars, the people of this country are losing every day, through unavoidable deterioration from natural causes, 47% million dollars. This means that there is no such thing as stability, security, ease; that when we cease to produce, we not only cease to go forward, but we immediately begin to go backward at a tremendous rate. We are not lolling at our ease in a boat on the placid bosom of a moonlit lake, but, rather, we are in a ten-oared cutter, trying to make headway against a tremendous current, with our progress coming only through every man in the boat giving his utmost as he tugs at the oars. So swift is the current against which we battle, that if we gauge our progress by the actual advancement of the country from 1790 to the present time, it is as though we row twenty-three miles through the foaming water for each mile we progress by the marks upon the shore, or, as the sailor puts it, we row twenty-three miles through the water to make one mile over the bottom. Our system is not only a profit and loss system, it is a hope and fear system. It spurs on the able, the industrious, the courageous, by the hope of obtaining a reward in payment for their efforts; it spurs on the lazy and indifferent by the fear that unless they strive they will lose that which they have, they will suffer a decrease in their standard of living, and perhaps starvation itself. It is the fear of loss, rather than the hope of profit, that has been the main incentive of human industry during the last three years. That old dictum of Captain John Smith, "Those who do not work shall not eat," is an absolutely indispensable part of any economic system which is based on freedom. When we remove that as a part of the driving power of the human race, we must inevitably substitute for it the driving power of the bayonets of the State! If practically all the wealth we know is created by man, then the problem of society is that of 17 production, rather than distribution. "Manna" no longer falls from Heaven, and our real problem is not determining the size of the baskets in which people shall gather it up. We must produce more bread first; the problem of dividing it among the children is secondary. If you earnestly feel that you will work as hard in the production of goods and services provided the reward for so doing is divided between yourself and somebody whom you have never heard of in California or New Mexico, as you will if it comes to you for distribution to your wife and your children; if you feel that you will work as hard to send some Negro boy in Alabama through college, as you will to send your own son or your own daughter, then you have a perfect right to feel that the system of "production for use, and not for profit" will provide as many of "the good things of life" for all the people as the present one. But if you feel that you will work harder for the advancement of your own loved ones, that you will sacrifice more, go without more to get necessities or luxuries for them, than you will for someone you do not know, then you have no right to believe that this system of "production without profit" will produce as much for society as a whole. I believe that the so-called Capitalistic System has brought more progress to the American people than has come to any other people, at any time in the world's history; and by progress I mean "the constantly increasing share of more and more people, in more and more of the good things of life." It has produced a greater abundance, it has produced a wider and more equitable distribution, on the basis that the man who by mental or physical labor has increased the sum-total of human wealth, is more entitled to share in it than the one who through sloth or ignorance has failed to produce. I believe that the principles of freedom underlying this system are definitely bound up with the principles of freedom underlying the Protestant Church, that you can't destroy Liberty and Freedom of the individual six days in the week, and still have them left for the worship of God on the seventh. I believe it is the duty of the Church to support and defend this social order, not only because it is the highest social order yet reached by man, but because, if it is destroyed, the freedom of the individual must be destroyed with it, and when the individual loses that freedom, he loses his right to worship God as he chooses, and the Protestant Church wilf perish, along with the social system which the Reformation inaugurated. In attacking the fundamental principles 18 of this system the right of the individual to plan his own life as so many leaders of the Church are now doing, they are inevitably attacking and attempting to destroy the very principle which enables man to worship his God as he chooses. Instead of condemning the American System, the Church should continually point out its glorious accomplishments as compared with any previous system, and should lay claim to the credit for these accomplishments on the ground that they are based on the fundamental principles of individual liberty and individual responsibility discovered by the Church and proclaimed to the world through the Reformation. Resolutions of the General Council* At the Oberlin meeting last year, as a result of a seminar discussion, the National Council of the Congregational and Christian Church passed the following resolutions: "Whereas, our present profit system has shown itself to be increasingly predatory and in growing opposition to accepted Christian principles because: 1. It denies brotherhood by making exploitation of one group by another necessary to its continued existence. 2. It destroys human values, moral and spiritual, through its inevitable conflicts issuing in international war and industrial and civil strife, and through unemployment, insecurity, starvation and misery. 3. It increasingly curtails the cultural and educational opportunities of our people. And Whereas, these flagrant social evils exist side by side with potential natural abundance, which cannot be utilized under our present system, And Whereas, our traditional profit economy is no longer able to sustain itself, but now must use the credit of the State to subsidize its financial structure, and must limit production in order to guarantee profits, which is the economic essence of Fascism, Therefore Be It Resolved, That we set ourselves to work toward: 1. The abolition of the profit system, the elimination of its incentives and habits, the legal forms by which it supports and the moral ideas by which it justifies itself. 2. The inauguration of a thoroughly planned and organized social economy, which will * As reported in the New York Times June 27, 1935. 19 apply all our natural and human resources directly to the meeting of human needs, in pursuit of values democratically chosen, which will: (a) Adjust production to measured consumption requirements, and maintain and extend social services, health, education, recreation and insurance for all. (b) Eliminate private ownership in the means of production and distribution wherever such private ownership interferes with the success of a planned social economy, making profit unnecessary and impossible. We are not interested in the statement that these resolutions are not binding on the individual churches, that they are not binding on the Council for Social Action; we are interested solely in the fact that they were drawn up by the same people who were responsible for the creation of the Council for Social Action, that they represent the inherent philosophy which motivated them in so doing, and the philosophy of those who now direct its action. Unfortunately, it apparently represents the fundamental philosophy of a large part of the clergymen, of both our own and other denominations, who are endeavoring to interpret the spirit of the Church to the public today. In order to clarify these resolutions, let us substitute in the first paragraph the definition given by Dr. Butler for the profit, or Capitalistic System. The paragraph then reads as follows: "Therefore Be It Resolved, That we set ourselves to work toward: the abolition of the principle of liberty, civil, political and economic; the elimination of the incentives and habits, the legal form by which it supports, and the moral ideas by which it justifies itself." What a spectacle this presents! The Congregational Church, throughout the entire history of this nation the great exponent of the Liberty and the Freedom of the individual, now solemnly declares that the principles of the past are a failure, and pledges itself to uproot those principles, to tear asunder the very foundation upon which it was built, and to go back to the things to escape which its founders fled not only from a country, but from a continent! What do we mean by "a thoroughly planned and organized social economy?" Planning is meaningless, unless those who do the planning have the authority to enforce their plans. Planned economy means that under it the individual surrenders his own right to think, to plan, 20 to act in his individual capacity, and confers upon someone else the right to think and plan for him, and the further right to force him to act in accordance with such plans, agreeing, in the final analysis, that if it be the will of the planning authority that he or his family no longer shall live, that planning authority, thinking of the alleged general welfare, is perfectly justified in eliminating him from the earth. Planned economy is nothing but a high-sounding synonym for dictatorship or despotism, and it makes no difference whether it is practiced by a Genghis Khan, or by a political bureaucracy. The arch advocate of economic planning, Dr. Tugwell, in his most recent book, "Our Economic Society," makes this significant statement: "For many years the technical task of devising plans for regulating our complex economic interests was too difficult to attempt, but today we know that this is no longer true, for Russia has shown that planning is practical." There is nothing mysterious about the ultimate result of these resolutions, should they actually come into effect in the life of the nation. They can mean but one thing, the substitution of the Russian Communistic system for the American system of free enterprise, the substitution of the Russian philosophy of life for the American philosophy of life, the substitution of the international capitol at Moscow for the Federal Capitol at Washington. The General Council of the Congregational Church is asking that its members assist in hauling down the Stars and Stripes, and substituting for them the red banner of the Soviet Republic! The Christian religion is an individualistic, not a collectivist conception. Its basic conception is a personal relationship existing between each individual and his God. Nowhere in this religious philosophy is there any thought of mass communication; nowhere is there any teaching that if the majority of any particular locality or class are good, that all, both the good and the bad, will meet the rewards of the good; nowhere is it taught that a righteous man will be condemned because those about him are unrighteous. This doctrine of individual responsibility, of individual control of a man over his own life, of individual reward, both here and hereafter,' for meritorious conduct, of individual punishment, both here and hereafter, for failure to live in a meritorious way, is the very essence of the Christian religion, and that religion cannot exist once that principle is destroyed. Men cannot exist six days of the week in a collective economic society, and exist on the seventh day in an indi-21 vidualistic religious society. You gentlemen who occupy the pulpit aren't so naive, I am sure, as to think that a political bureaucracy, planning the daily lives of the rest of us, will allow you with perfect freedom to plan the sermons you preach on Sunday, or the doctrines you teach during the week. The destruction of the Christian Church in Russia is no mystery, it is the logical, and the inevitable result of the destruction of the so-called Capitalistic System, which is nothing but the system of individual freedom applied to economic life. The Communist recognizes this fact fully. He states it frankly. He makes no attempt to conceal it. On the contrary, he laughs at us because we are such fools as not to recognize the inevitable truth of what he says. Mr. William Henry Chamberlin, for many years the Russian correspondent of the Christian Science Monitor, in his recent book, "Russia's Iron Age," in a chapter which he entitles, "Communism; The Faith Without God," makes this significant statement, which should serve as a challenge and a warning to every man who believes in his Church and the religion which it represents: "Present-day Russia can never be understood psychologically, except on the premise that its rulers are dominated by an intense, burning faith in the righteousness of their ultimate goal, which gives them a feeling of entire self-righteousness in applying any means, however ruthless, which may seem necessary in order to reach this goal. Indeed, it is just in Russia, which rejects and condemns all the familiar forms of religion, that we find one of the strongest organized faiths in the world. For Russian Communism, as it has developed during the sixteen years which have passed since the Revolution, displays in striking degree all the psychological traits, if not of a new religion and both communists and members of religious organizations would be inclined to protest against this definition at any rate, of a new crusading faith. Communism has its body of doctrine in the works of Marx, Engels, and Lenin; its creed and catechism in the Bolit-gramota, or course of instruction in communistic political and economic ideas, which is drilled into every school child; its ecumenical councils to determine matters of faith and discipline in the congresses of the Communist Party. Its insistence on the complete subordination of the individual to the requirements of the cause, its absolute intolerance of heresy and dissent, its conviction of a world Messianic mission all these traits of fanatical believers in new dogmas 22 are conspicuously characteristic of the Russian Communists." Karl Marx, whose writings form the very "bible" of Communism, in his "Capital in Formation," is definite and concise in his statements, and leaves no doubt of his meaning: "We shall have deserved well of it if we can stir up hatred and contempt against all existing institutions. We make war against all prevailing ideas of the State, of country, of patriotism. The idea of God is the keynote of a perfected civilization. It must be destroyed. The true root of liberty, equality, and culture is Atheism." Frederick Engels, his chief co-worker, in 1901 made this statement: "Nowadays there is absolutely no room for either a creator or a ruler." Liebnecht expresses the same thought in this manner: "It is our duty as Socialists to root out the faith in Ood with all our might. Nor is anyone worthy of the name who does not consecrate himself to the spread of Atheism." One of the leading German Socialists, August Babel, September 16, 1878, declared in the Reichstag: "Gentlemen, you attack our views on religion because they are atheistic and materialistic. I acknowledge the correctness of the impeachment. I am firmly convinced that Socialism finally leads to Atheism." Later he said: "Christianity and Socialism stand toward each other as fire and water. Christianity is the enemy of liberty and civilization. It has kept man confined in slavery and oppression." Bakunine states: "We declare ourselves Atheists. We seek the abolition of all religion, and the abolition of marriage." An official organ of the Moscow Committee of the All Russian Communist Party, printed in Moscow in 1928, says: "The Federal Committee of the All Russian Communist Party decided that the most important task at hand for the Party must be the most attentive consideration of the problems on the program of the Sixth Congress, and the most important question of the program for the Communist Internationale is the militant demand, the fight against religion." I would not for a moment suggest that the fine men and women who framed and voted for this resolution consciously did this monstrous thing; I am not suggesting that the many who are preaching these doctrines, not only in our own denomination but in others, are deliberately endeavoring to destroy the American System. Filled with compassion at the sight of suffering or want, never having spent a day as actual participant in the great productive machine, unfamiliar with the stern terms upon which nature 23