Problems in American Democracy Part 17

2. What is the "ethical argument" in favor of the single tax?

(_International Encyclopedia_, vol. 21, page 136.)

3. What is the "expediency argument" in favor of the single tax?

(_International Encyclopedia_, vol. 21, page 136.)

4. What is meant by "mining" the soil, and what is the relation of this practice to the single tax? (Carver, pages 375-376.)

5. What, according to George, would be the effect of the single tax upon production? (George, book ix, chapter i.)

6. What, according to George, would be the effect of the single tax upon the distribution of wealth? (George, book ix, chapter ii.)

7. What are the present aims of the single tax movement?

(_International Encyclopedia_, vol. 21, page 137.)

TOPICS FOR INVESTIGATION AND REPORT

I

1. Select for study a plot of farm or garden land in your locality.

(a) What is the market value of the land?

(b) Is it more or less valuable than similar plots in the same neighborhood? Why?

(c) To what extent is the value of the plot selected for study due to natural fertility?

(d) To what extent is the value due to location?

(e) To what extent is the value due to permanent improvements, such as drains, ditches, hedges, fences, or the use of fertilizer to retain or increase the natural fertility?

(f) If you were the owner of this plot, to what extent, if to any, would your future use of this land be affected by the adoption of the single tax program?

2. Select for study a plot of ground in your locality which has been idle for a number of years.

(a) Why has this ground been idle so long?

(b) Do you believe that this land is being held for speculative purposes?

(c) If so, suppose that a very heavy tax stimulated the owner to put the land to some use. Do you know of a productive use to which it could be put?

II

3. The life of Henry George. (Consult an encyclopedia.)

4. The economic background of Henry George's doctrine. (Young, _The Single Tax Movement in the United States_, chapter ii.)

5. Is land-owners.h.i.+p a monopoly? (Seligman, _Principles of Economics_, page 391.)

6. Tactics of the single tax movement. (Young, _The Single Tax Movement in the United States_, chapter xii.)

7. Relation of the single tax to socialism. (Young, _The Single Tax Movement in the United States_, pages 307-312.)

CHAPTER XII

PROFIT SHARING AND COoPERATION

A. PROFIT SHARING

110. THE NATURE OF PROFIT SHARING.--The essence of profit sharing is that the workmen in a given enterprise receive, in addition to their regular wages, a share in the profits which would ordinarily go entirely to the entrepreneur. The share going to the employees varies with the establishment, but generally from one quarter to three quarters of the profits are divided among them.

Distribution is by various methods. The workmen may receive their share in cash at the end of the year. Sometimes the money is placed in a provident fund for the workmen as a body; in other cases it is deposited in savings banks to the account of the individual workmen.

In still other cases the workman's share is invested in the business for him, the workman thereafter receiving dividends on this invested capital.

In every case, however, the division of profits among the individual laborers is on the basis of the wages received, that is to say, the higher the regular wage received by a workman, the larger will be his share of the profits set aside for distribution. Generally, too, only workmen who are steadily employed are allowed to share in the distribution of profits.

111. LIMITS OF PROFIT SHARING.--Profit sharing was once considered a remedy for many of our industrial troubles, but it is now generally conceded that the plan is decidedly limited in scope. Profit sharing increases the income of the workmen involved, but for this very reason it is often bitterly opposed by the trade unions. The unions fear, of course, that the plan will make the workmen interested chiefly in the employees of their particular establishment, rather than in the workmen in the trade as a whole. The trade unions also maintain that profit sharing is often administered in a patronizing manner, which is offensive to the self-respect of the workmen.

To a large extent, the spread of profit sharing depends upon the development of altruism among employers. But unfortunately altruistic employers are rare, and the majority of entrepreneurs will not adopt the profit-sharing plan unless it promises to result in some distinct advantage to themselves. This att.i.tude explains, in part, the failure of many profit-sharing experiments. Employers have sometimes tried out profit sharing in the hope that it would prevent strikes and other labor troubles. In some cases this expectation has been realized; in many other cases serious labor troubles have continued. This continuance of labor troubles has rendered profit sharing less attractive to certain types of employers.

In certain cases employers have experimented with profit sharing in the hope that it would stimulate efficiency and economy on the part of the workmen. Sometimes the immediate effect of the adoption of the plan has been to make the workmen more efficient and more interested in their tasks, but after the novelty of the scheme has worn off they have generally fallen back into their former pace. In justice to the workmen, it should be noted here that in most enterprises the conditions of the market and the employer's managerial ability have more influence upon profits than have the personal efforts of individual workmen. Where workmen realize this, they tend to lose faith in their ability to influence the share accruing to them under the profit-sharing plan.

A last important reason why profit sharing is limited in scope is that in many hazardous enterprises, such as mining, agriculture, fis.h.i.+ng, or building construction, the refusal and inability of the workmen to share in possible losses prevent the adoption of the plan. A mining corporation, for example, may make large profits one year, and lose heavily the second year. Profit sharing is here inadvisable, if not impossible. The distribution among the workmen of a large share of the profits accruing at the end of the first year might so deplete the financial reserves of the entrepreneur that he would be unable to meet the losses of the second year.

B. COoPERATION

112. RELATION OF PROFIT SHARING TO COoPERATION.--Profit sharing permits the workmen to secure more than a regular wage from a given enterprise, without, however, giving them any control over the management of the business. Cooperation goes a step farther, and attempts to dispense with either a number of middlemen or with the managing employer, or with both middlemen and employer. In the case of a profit-sharing scheme in which the share of the profits accruing to the workmen is invested in the business for them, ultimate control of the enterprise may come into the hands of the workmen through profit sharing. In such a case the plant might be conducted cooperatively. In practically every instance, however, cooperation does not grow out of profit sharing, but arises independently.

113. ESSENCE OF COoPERATION.--The essence of cooperation is that a group of individuals undertake to perform for themselves those functions which are commonly carried on by the business man.

Cooperatives are often workmen, though not necessarily so.

Under the cooperative plan, all of the profits of the enterprise are divided among the cooperators; on the other hand, the risks of the business must also be borne by them. Management of the enterprise is conducted partly by officers or committees serving without pay, and partly by paid agents. The general policies of the business are settled by the cooperators acting as a body.

Cooperation seeks to exchange the centralized control of the business man for the diffuse control of a group of cooperators. This arrangement, its advocates hope, will permit wealth and power to be distributed among more and more people, and especially among those cla.s.ses that possess relatively little property. Let us inquire briefly into the four types of cooperation.

114. CONSUMERS' COoPERATION.--Consumers' cooperation, also known as distributive cooperation or cooperation in retail trade, is the most common form of cooperation. It is also probably the most successful form.

In this form of cooperation, a number of individuals contribute their savings to a common fund, buy certain desired commodities at wholesale prices, and distribute these among themselves. Generally, the cooperative store sells to its members at the regular retail price, but at stated intervals throughout the year the profits of the business are distributed among the cooperatives in proportion to the amount of their individual purchases. Thus the difference between the wholesale and the retail price--minus the expense of conducting the store--goes to the cooperators, instead of to a store keeper or other middleman.

One of the best examples of consumers' cooperation is the Rochdale Society of Equitable Pioneers, established in England in 1844. This type of cooperation has also been remarkably successful in Germany, Belgium, and other continental countries. The idea was taken up in the United States about the middle of the nineteenth century, and at the present time there are in this country about 2000 cooperative stores, many of them doing a thriving business. These stores are located chiefly in New England, the North Central States, and the West, few being found in the South.

115. COoPERATION IN CREDIT.--Credit cooperation may take any one of a number of forms. In one of the best known forms, a group of persons form a credit society by contributing a proportion of their personal savings to a common fund. On the strength of this capital, and of their own individual liability, they borrow more capital. The total amounts thus got together are then loaned to the members of the society at a specified rate of interest. This rate of interest is higher than that at which the group had borrowed money from outside sources; nevertheless, it is lower than the rate members would have to pay if they individually sought loans at a bank. This is the aim of cooperation in credit: to enable persons of small means to secure loans without paying the high rates which as individuals they would ordinarily have to meet, if, indeed, they as individuals could secure loans under any conditions.