If The Capitalist Manifesto, by Louis 0. Kelso, a San Francisco corporation lawyer, and Mortimer J. Adler, a peripatetic philosopher (Random House, 265 pp., is significant of a trend, then its importance far transcends its in­trinsic worth as a blueprinted "cure" for what the authors call our "mixed capitalist" system. The book itself seems to embody several fallacies along with many worth-while observations. But fal­lacies or no, the very fact that a commercial publisher can now, after these many years, dare to use the word "capitalist" in a non-derogatory title is an immensely heartening straw in the wind.

The Messrs. Kelso and Adler are as daring as they are ingenious. They turn the tables on practically all the so-called "liberal" commen­tators on economics by insisting that more than 90 per cent of the newly produced wealth of the na­tion is accounted for by the capital instruments brought into being by the savings of corporation owners, i. e., stockholders. These modern capitalists, however, despite their major contribution to the wealth producing process, retrieve only a minor fraction of the total as com­pensation for their role. In other words, it is the capitalists who are being robbed of their surplus value by predatory labor unions.

This is turning Marx and Engels upside down with a vengeance. But at this point Kelso and Adler cringe before their own logic: they realize that it would be social suicide to suggest that labor be cut back from its present high percentage of the rewards of ma­chine production to a mere 10 per cent. If labor were to get its "just desserts" in a period in which the machine itself is the prime agent of increasing efficiency, there would be nobody to take our vast flow of refrigerators, washing machines, and automobiles off the market. Automation equipment does not ride around in cars, wear new clothes, and take trips to Miami in the winter. And the owners of the new automation equipment can’t possibly consume the stuff which the marvelous ma­chines turn out.

Without ever entertaining a sec­ond thought about the soundness of their theory that labor is cur­rently getting far more than its competitive reward, the Messrs. Kelso and Adler plunge wildly ahead into a "distributist" utopia that would put Gilbert Chesterton and Hilaire Belloc to shame. Real­izing that consumption must be kept going on some basis if capi­talism is to prosper, the authors suggest that the State step in to force, not a "laboristic" division of the product of the machine, but a relatively equalitarian division of stock ownership. Thus a diffu­sion of dividends might be prompted to replace our present method of spreading consumption via high wages. For the Robin Hood labor union (which they condemn), the Messrs. Kelso and Adler would substitute a Robin Hood law which would put top limits on what any given house­hold could own in the way of stocks and bonds.

Force Mixed with Freedom

Though one Robin Hoodism may be as good or as bad as an­other, a reader with a sharp sense of logic will at once want to ask the authors of this book why they call their system of compulsion "pure" capitalism when it involves a "mixture" of force and freedom that is just as pronounced as the present mixture. True, many of the devices for spreading owner­ship which Kelso and Adler pro­pose are seemingly gentle enough. Nonetheless, the iron hand rests inexorably within the velvet glove: a ceiling on ownership would necessarily function as an arbi­trary capital levy.

If it is true that capitalism can­not function without some meas­ure of State coercion designed to diffuse the wealth, then the Messrs. Kelso and Adler have a case for their enforced stock distribution. Within its limits this distribution would permit a greater freedom than can be found under any of the modern allotropes of Marxian socialism.

Fortunately for those who in­sist that progress is best achieved by voluntary methods, however, the Kelso-Adler analysis of our plight is itself at fault. It is true that many modern labor unions have monopolistic power, and it is also true that the unions have recently managed to push wages to uneconomic levels. But it does not follow that the vast rise in the wage level since the Civil War has in itself been uneco­nomic. As F. A. Harper has shown in his recent Why Wages Rise, the American wage has tended to in­crease with the productivity of the machine no matter what the contemporary status of unionism. And it has increased for one reason: the competition of capitalists for labor. The "market" has up to very recently prevailed.

What Kelso and Adler have done is to repeat Ricardo’s old mis­take: they have confused wages with the cost of labor. It may be perfectly true, as they say, that the physical contribution of labor to the production of new wealth is extremely small in the modern factory as compared with that of capital instruments. But the mar­velous modern capital equipment has enabled factory owners to pay present workers well by dispens­ing with the hordes of unskilled "hands" which they once paid poorly. The individual wage has risen; the cost of labor in the mass has gone down. No matter what the unions may do, this is the secular trend.

The Service Industries

One consequence of this trend is that our economy as a whole has become less "laboristic" and more "middle class." It is not the worker in the factory who has skimmed the cream of progress; it is the man who no longer has to look to the factory directly for a job.

For example, the automobile in­dustry does not support its workers and its owners alone; it also supports — by extension — a whole complex of tool and die makers, advertisers, dealers, road builders, resort managers, garage proprietors, service station me­chanics, oil companies, and so on. Men who used to machine the cyl­inder block by slow methods have, in effect, been released by automa­tion to run motels in Florida .

Kelso and Adler make little of this phenomenon, which is "non­laboristic" to the extent that motel owners and dealers are small capitalists themselves. Just how the release of men into non-factory work effects the statistics of property ownership I do not know — but it seems a matter of mere common-sense deduction that modern American society is far more "distributist" than Kelso and Adler are prepared to admit.

As part of their campaign for spreading ownership, Kelso and Adler suggest that the "mature" corporation be required by law to pay out all of its net income to the stockholders. Just how this would tend to diffuse ownership is a lit­tle hard to imagine. As things stand at present, retained profits ordinarily are reflected in a market rise of securities: the stock­holder can get his share of the retained net any time he wants merely by selling his stock. Under present tax law many a security owner does better that way, for the net that is reflected in a profit on a rise in capital values is taxed not as income at a high rate but as a capital gain at 25 per cent. No matter how they might choose to take their share of the net, pres­ent stockholders could only help "diff use" ownership by giving some of their income away to sons or nephews to buy stock. If they bought new stock themselves with the proceeds from old stock, it would change nothing.

Marginal Ownership

As for the Kelso-Adler sugges­tion that stock purchases be financed by credit corporations, just how would that add anything to facilities which are already available to the borrower? If one wants to buy stock on margin, sympathetic brokers stand ready to put up 50 per cent of the pur­chase price. Once upon a time a would-be stock owner could "fi­nance" the purchase of a security merely by putting up 10 per cent of the price. This may have "dif­fused" ownership for a period, but that glorious day came to a sudden end in October of 1929.

The trouble with the Kelso-Adler program for the diffusion of ownership is that it assumes everybody is just aching to take a chance on stocks. But there is little warrant for thinking this. Some people prefer to buy insurance; some prefer to put their money into homes, or hi-fi sets, or a weekend cabin at the lake. Some, with a passion for liquidity, like savings banks. There are many ways of augmenting one’s "estate" without going in for stock owner­ship.

With the broad Kelso-Adler aim there can be little cavil. It would be a good thing for the economy if there were more equity-shar­ing plans in industry, more encouragement to turn profit-shar­ing into stock purchases. It would be a good thing if the corporate income tax were abolished, and if inheritance taxes were drastically scaled down. Moreover, there is too much truth for comfort in the Kelso-Adler insistence that our fetish of full employment at all costs has led to much useless featherbedding throughout the economy.

Finally, it is incontestable that the "countervailing power" of government has been put all too indiscriminately behind unions which seek to impose impossible conditions on marginal employers. For pointing to such "laboristic" abuses, and for suggesting cer­tain needed reforms in the tax structure, The Capitalist Mani­festo should be welcomed. But the authors should have a second go at the central thesis of their stimu­lating book. 

“The American Cause” by Russell Kirk. (Chicago: Henry Regnery Company, 1957. 172 pp.)

Reviewed By Edmund A. Opitz

Russell Kirk’s latest book is an appropriate tract for the times. It is a statement — brief but full of conviction — of the principles undergirding American society; and it provides sober answers to check the barrage of communist propaganda. The book is readable enough to appeal to a high school student, and intelligent enough so that the more mature reader will not be shortchanged.

The characteristics which dis­tinguish one society from another reflect the general ideas by which the conduct of each society is governed. Americans make certain moral and intellectual assumptions which distinguish us from other peoples, but so much do we take our premises for granted that they are frequently overlooked. Dr. Kirk’s book is an apt reminder of the beliefs we live by.

"Three groups of ideas, or bodies of principles," writes the author, "invisibly control any people, whether those people are Austral­ian bushmen or highly civilized modern nations. The first, and most important, of these bodies of prin­ciple is the set of moral convic­tions which a people hold: their ideas about the relationship be­tween God and man, about virtue and vice, honesty and dishonesty, honor and dishonor. The second of these bodies of principle is the set of political convictions which a peo­ple hold: their ideas about justice and injustice, freedom and tyran­ny, personal rights and power, and the whole complex problem of liv­ing together peaceably. The third of these bodies of principle is the set of economic convictions which a people hold: their ideas about wealth and property, public and private responsibilities in the af­fair of making a living, and the distribution of goods and services."

The next six chapters, two apiece, are devoted to these three bodies of principles. Our institu­tions and way of life, Kirk shows, are intimately related to the basic dogmas of the Christian religion. From this faith we derive our no­tions of the meaning of life, the moral order, the dignity of per­sons, and the rights and responsibilities of individuals. Ours is a religious society, but it has its counterpart in our secular state. The Constitution forbids an offi­cial church, an act which permits religion to exercise its unique authority directly, unhampered by ecclesiasticism.

The founders of our republican form of government were not vi­sionaries. Their work was histori­cally grounded on English com­mon law, English constitutional practice, and English political theory, and they had the model of the ancient Roman republic in mind also. "Their political as­sumptions were compounded of Jewish religious doctrines, Chris­tian teachings, classical philoso­phy, medieval learning, and Eng­lish literature." The chief French revolutionaries, by contrast, "set out to establish what they thought would be a completely rational and completely new political order, independent of Providence and historical experience. In place of the old ideals of justice, order, and freedom, they shouted a novel slogan: ‘Liberty, equality, fraternity.’ "

After a brief description of the structure of our federal republic, Dr. Kirk goes on to devote the next two chapters to the principles of the free economy, which he endorses on the ground that "a free economy is a support of all free­dom." This makes his book espe­cially valuable because many other­wise able proponents of religious and political liberty do not under­stand that economic liberty is an integral part of the general theory of freedom. If the peaceful exer­cise of a man’s creative energies in his store, shop, or office may be curbed on principle, the same principle can be successfully in­voked to curb man’s freedom in the pulpit, press, and classroom.

We are being saddled with these latter limitations because lovers of freedom, misunderstanding the nature of the case, do not unite in strengthening the point in the line which is now sustaining the brunt of the attack against freedom —the economic order.

Free economic enterprise, which our American economy approxi­mates more closely than any other, "is important not merely for its own sake: its real importance is the contribution it makes to our justice and order and freedom, our ability to live in dignity as truly human persons. . . . (It) al­lows men and women to make their own principal choices in life;… reinforces political liberty;… adequately supplies the necessities of life;… recognizes and guides beneficiently the deep-seated hu­man longing for competition and mensurable accomplishment."

All human societies are imper­fect. "The American economy," writes Dr. Kirk, "has its faults; but they are faults which may be modified. The faults of commu­nism are so profound that they cannot be ameliorated." The book closes with two chapters which de­flate the claims of communism and rebut its attacks on capitalist America.

This is a modest little book, without a trace of smugness, whose tone never rises above that of intelligent conversation. On these and other counts it will be appreciated, as B. E. Hutchinson writes, by those who "are tired of being harassed by zealots."

“The Supreme Court” by Bernard Schwartz. (New York: The Ronald Press Company. 429 pp.)

Reviewed by Frank M. Covey, Jr.

Since the 1937 decision upholding the Oregon minimum wage law in West Coast Hotel Co. v. Parrish, the United States Supreme Court has fashioned a new jurisprudence dubbed by the author, a "consti­tutional revolution." In several ways the Court returned to solid early principles which had been ignored by it from 1880 to 1937, but in many other instances the Supreme Court has adopted new principles which do not accord with the basic concepts of the Ameri­can polity, particularly in the areas of interstate commerce, the conduct of foreign affairs, admin­istrative agencies, and federal-state relations.

The decisions of the post-1937 Supreme Court have, for instance, extended the power of Congress over interstate commerce to in­clude employees of a window-wash­ing firm that cleans the windows of people engaged in interstate commerce, to janitors in a building that stores goods for interstate commerce, and to any "potentially navigable stream," i.e., any stream.

These decisions have held that an executive agreement between the President and a foreign power is sufficient to alter the fixed and settled law of a state and deprive its citizens of rights vested in them by the laws of that state. The Court has given a blank check to administrative agencies in pro­cedure not directly governed by congressional mandate and coun­tenanced administrative hearings that seem clearly to deny due proc­ess of law to the persons involved.

In the area of federal-state re­lations the decisions have deprived the states of many necessary resid­ual powers, allowed federal taxa­tion of states’ proprietary func­tions, and struck down settled state laws on the theory of fed­eral "preemption of the field."

This useful summary of impor­tant cases since 1937 unfortunate­ly does not cover the last two court terms when such controver­sial issues as desegregation were before it.