1920, to be making profits running up to one hundred per cent and more. A case argued before the Courts in 1919 brought out the fact that a certain Brooklyn Cloak and Suit Manufacturer who could neither read nor write had within a few years amassed a fortune of half a million dollars. The five leading meat packers of the country, who pull together and have a practical monopoly of the business, are said to have accumulated $178,000,000 in net profits during the years 1915-1917. Their rate of profit was said to be about four hundred per cent upon invested capital.

One expert estimates that the corporations of the country received $4,800,000,000 more in net profits during the years 1916-1918 than during the three preceding years which were by no means lean years. These excess profits would amount to a tax of $240 upon every family in the country. Another expert calculates that during four years the corporations of the country gathered in total net profits (that is, profits remaining after the payment of all their taxes) of $34,000,000,000. Not all of the corporations in the country made large profits, of course; on the contrary, many corporations, not in a strategic position, earned very meagre profits, or no profits at all. This immense sum went to those corporations that were in a favorable position to exact it. Besides the corporations, many individuals and unincorporated firms made fat profits. So that it is clear that a very large part of the total income of the country within the past few years has gone, in the form of "excess profits" that is, profits beyond what is considered the normal rate of interest upon investment-into the pockets of a comparatively few corporations and business men.

Even the summation of frankly acknowledged prof

its by no means completes the tale. For there are other channels by which the rewards of successful industry are distributed. A large sum is retained every year for the expansion of business, or for a reserve fund, or to pay off bonded indebtedness. This results ultimately in increased profits to the stockholders. Again, the declaring of stock dividends permits a really very high percentage of profit to be disguised as a normal dividend upon the amount of stock outstanding. A great deal of the capital stock of the more prosperous concerns is nothing but "water"; that is, it represents no money invested, it is simply a claim to an income from the industry.

To some extent these great profits accruing to the fortunate industries and to the owners of natural resources are distributed among a class of stockholders. But this is not a large class of people. And the bulk of the stock is owned by a comparatively small fraction of this class. The "insiders," also, have usually been the ones to buy the stock at a low price and so to make a large profit on their investment, whereas the other stockholders are apt to get their shares only at an advanced price and therefore to receive a smaller return for their money. Another way in which the "insiders" can increase their share of the booty is by paying high salaries to themselves as officers of the companies. For example, the American Metal Company was reported recently to be paying $1,000,000 a year in salaries to six officers. A firm of Wall Street brokers, according to the testimony of its president, was paying recently nearly a million dollars a year for the salaries of its twelve highest officers and directors; the president and first vice-president receiving $161,000 apiece, and four other officers close to or above $100,000 apiece.

There are, of course, all sorts of methods of getting big profits in business-if one has a strategic position. Perhaps the most anti-social method is that of curtailing production in order to make the article scarcer, and hence saleable at a higher price. For example, in the winter of 1917, when the world was facing famine, a combination of middlemen who had bought up a large part of the potato crop allowed a considerable percentage of these potatoes to rot in the ground, because they could make more money if there were fewer potatoes on the market. So, when cargo space was desperately wanted and available tonnage was not nearly adequate, bananas were being dropped overboard outside of New York harbor, in order not to reduce the price of that fruit by glutting the market. For a long time during which many thousands of children and babies were suffering, and actually dying, for want of milk, in the city of New York, milk dealers refused to bring into the city some two million quarts of milk produced within marketable distance-and even posted notices suggesting to farmers that they cease producing this surplus milk which they did not wish to distribute. Naturally the price of milk remained very high, and babies of the poor died.

These are not very unusual occurrences. In the South there is a recurrent crusade yearly against the "overproduction" of cotton. The Rubber Growers' Association, in 1920, suggested to plantation-owners that they reduce their tappings of rubber trees so as to effect a twenty-five per cent reduction in the output of rubber. This would have the effect of keeping the price of rubber high. The consumers would suffer, but the rubber producers would make a lot of money. Profiteering is, of course, not a new phenomenon.

But the War gave it an enormous boost. Business men have learned how to make the most of their opportunities. And while there are not a few Americans who refuse to make all the money they can, and find their happiness in producing or retailing needed goods at the lowest possible cost, the general trend has been heavily in the direction of reaping the greatest possible financial harvest. And this is the chief cause of that very great inequality in the distribution of wealth which we noted in the preceding chapter.

It seems obvious that Privilege and Profiteering must be curbed if our American system is to be retained. For a while we can muddle along with a comparatively small class of people raking in large profits, at one end of the scale, and a larger class of people at the other end of the scale lacking the essentials of life. But not forever. It will mean eventually reform or revolution. And by revolution much that is precious in our American tradition might be lost. So the conservative people, who make up the bulk of our population, must find some method of preventing the fortunate holders of the strategic positions in our economic life from profiting inordinately from their situation, and, at the same time, a method of ensuring to the poorest laborers a decenț livelihood.

This is the aim of much of the "progressive" legislation of the past generation. A beginning has been made. But as the experience of the last few years shows-only a beginning. We have minimum wage laws now in many States; the minimum is usually set below the standard of comfortable or even efficient living, is quite too low to be satisfactory; but it is a beginning. We have the machinery of taxation used

to divert a part of the excess profits of fortunate industries to the State. The Excess Profits Taxwhich leaves an eight per cent profit untaxed, and takes only a small percentage of the profits above eight per cent-went but a little way toward rectifying the situation; but the idea behind it was sound. The graduated Income Tax and Inheritance Tax go much further toward paring down the fortunes of the rich, and enable the State to raise its revenue without exacting too much from the poorer classes.

Of particular interest is the movement toward differentiating between "earned" income (wages, salaries up to a figure that can be honestly thought earned, professional receipts-i.e. what a man gets for his labor) and "unearned" income (interest on bonds, bank-deposits, and loans, dividends on stock, rent from land and property owned, excess profits from industry). It is no part of the American tradition to denounce unearned income. But it is an implication of our ideal of Equality that one class of society should not be allowed to divert to itself by this means such a large proportion of the national income that there is too little left for the greater numbers who are not property owners. To allow that is not a legitimate Individualism-which would seek to give every individual a fair chance-but individual or class selfishness.

It is doubtful whether taxation alone can remedy the excessive distortion of our distribution of wealth. It is quite possible that we may have to resort to State regulation of prices and wages. Perhaps we must come to State ownership of natural resources— the coal-mines, the oil-wells, the forests, the waterpower sites. It is no part of the plan of this volume to discuss the pros and cons of the highly intricate