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Page 27
It is difficult to ascertain the total wealth of the country. The census
bureau is notoriously dilatory. Its latest estimate was for 1904, when
this aggregate was computed to be $107,000,000,000, or about $1,300 _per
caput_. Assuming this ratio, the wealth of our people should now be over
$120,000,000,000; but the figures are largely conjectural. It happens,
however, that we possess some figures that are altogether trustworthy. In
the year 1909 the Federal Government imposed a tax of one per cent. on the
net income of every corporation, joint stock company, or association,
including insurance companies, organized for profit, whenever this net
income is over $5,000. There are some other exemptions, but they are not
sufficient to demand consideration, and may be disregarded. Now we may be
absolutely certain of one thing, and that is that the net income of those
concerns will not be overestimated. Their net income may be more than what
they report for the purposes of taxation, but it surely cannot be less.
For the past year it seems probable that this tax will produce nearly
thirty-five millions of dollars net income, after deducting all expenses,
losses, depreciation, interest on debts and on deposits paid by banks, and
dividends from other companies subject to the tax.
It may be more, but it cannot be less. Here our certainty ends. Guesses
will vary, but in view of what we know in a general way of the conditions
of business during the past year, we may perhaps venture to assume that
the net income of these concerns is six per cent. of their real wealth. If
this assumption is correct, their total wealth is 60 billions of dollars,
or one half of the total wealth of the nation.
This estimate may be confirmed to some extent by other statistics. Calling
the physical value of the railroads fourteen billions, their net earnings
at five per cent. would be 700 millions, which corresponds well enough
with the figures of the government, although some railroad men would make
their net earnings much less. We do not know the net income of the untaxed
corporations. Their returns would show its amount, but the government does
not supply the information. As there must be now nearly 250,000 such
corporations, if their average income is only $2,000 a year, the total
could be $500,000,000. If it is $4,000, their income would be almost a
billion dollars. On a 5 per cent. basis, the wealth of these corporations
would be nearly 20 billion dollars. It seems, on the whole, that the
wealth held by corporations is probably more than half our total wealth
rather than less.
* * * * *
The bearing of these figures on our subject is now apparent. All of this
property is disfranchised. It is, economically, to a very great extent
disfranchised; politically, it is altogether disfranchised. What I mean by
this is that the owners of this wealth, as owners, have very little to
say, and nothing to do, about its care and management. Probably more than
half of our people are directly or indirectly interested in it as owners.
They have been attracted by a desire to share, however humbly, in big and
famous enterprises, by the freedom from liability of the portion of their
estates outside the particular investments, and by the freedom at death or
withdrawal of associates from appraisals and accountings and probable
closing of the business, as is the inevitable practice in mere
partnerships. Two centuries ago people who saved money could hardly find
ways to invest it. The practice of incorporation has enormously increased
our wealth by putting a stop to hoarding without interest, stimulating
saving, and broadening industry. The number of individual owners of the
bonds and stocks of corporations is incalculable, and their holdings added
to those of savings banks, insurance companies, trust companies and other
fiduciary institutions, churches, hospitals, and colleges, make up a total
of almost fabulous extent. It is true that large sums are loaned to
persons, and on mortgages of real estate; but for most people such
investments are not desirable or convenient, and they are altogether
inadequate to absorb the vast sums that are available. In fact probably
most investments of this character are now made by corporations who gather
the savings of little depositors and premium payers; and it would cost
much more to make them in any other way.
* * * * *
Corporations, therefore, are necessary, but they necessarily separate the
ownership of wealth from its management. To invest is generally to entrust
your money to another, and those who invest in corporations, unless they
control them, are economically disfranchised, because the stockholders in
all large corporations almost never influence the management of their
property, and as a rule do not know anything about it. They don't because
they can't. A few years ago a very large number of people were much
worried by the exposure of some scandalous doings by the managers of
certain great life-insurance companies. They would have been very glad to
combine and choose better managers if they could; but they couldn't. Laws
were passed for the purpose of enabling the policy-holders to select their
trustees, but the only result has been a ridiculous and rather expensive
fiasco. As in politics, the rank and file select the managers selected for
them by a few men who understand the situation. When many thousands of
people own stock in a concern, they live all over this continent and in
foreign parts, and it is a physical impossibility to bring them together.
They do not know one another, and very few of them know much about the
affairs of the concern, and if they know anything of the candidates that
may be suggested, it is generally only by hearsay.
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