The Engineers And The Price System
By Thorstein Veblen
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(New York: B. W. Huebsch, 1921)
Publishers' Note (from 1933, 3rd. printing)
The following series of papers is reprinted from the Dial, where they appeared
from time to time during 1919, in the month immediately following the Armistice.
Since then American industry has undergone a period of unprecedented prosperity,
which has in its turn been followed by a period of depression even more
aggravated than the one the author had before his eyes at the time of writing.
The effect has therefore been as if no substantial change had taken place in the
state of industry, of such a character as to make this discussion less pertinent
now than it was at the time it was first printed. Indeed, the contrary is the
case, not only because the difficulties inherent in our industrial practice have
since come into fuller bearing, but also because recent discussion has turned
more and more persistently upon the constructive suggestions embodied
particularly in the last essay, entitled "A Memorandum of a Practicable Soviet
of Technicians." The fact that these suggestions were put forward as they here
appear fourteen years ago removes them from the category of current "depression
cures"; they indicated fundamental problems whose present seriousness was
predictable to at least one thinker who did not subscribe to the truths of
conventional economics.
January, 1933.
Table of Contents:
I. On the Nature and Uses of Sabotage
II. The Industrial System and the Captains of Industry
III. The Captains of Finance and the Engineers
IV. On the Danger of a Revolutionary Overturn
V. On the Circumstances Which Make for a Change
VI. A Memorandum on a Practicable Soviet of Technicians
The Engineers and the Price System
I
On The Nature and Uses Of Sabotage
"Sabotage" is a derivative of "sabot," which is French for a wooden shoe. It
means going slow, with a dragging, clumsy movement, such as that manner of
footgear may be expected to bring on. So it has come to describe any manoeuvre
of slowingdown, inefficiency, bungling, obstruction. In American usage the word
is very often taken to mean forcible obstruction, destructive tactics,
industrial frightfulness, incendiarism and high explosives, although that is
plainly not its first meaning nor its common meaning. Nor is that its ordinary
meaning as the word is used among those who have advocated a recourse to
sabotage as a means of enforcing an argument about wages or the conditions of
work. The ordinary meaning of the word is better defined by an expression which
has latterly come into use among the I. W. W., "conscientious withdrawal of
efficiency" - although that phrase does not cover all that is rightly to be
included under this technical term.
The sinister meaning which is often attached to the word in American usage, as
denoting vio-[2]lence and disorder, appears to be due to the fact that the
American usage has been shaped chiefly by persons and newspapers who have aimed
to discredit the use of sabotage by organized workmen, and who have therefore
laid stress on its less amiable manifestations. This is unfortunate. It lessens
the usefulness of the word by making it a means of denunciation rather than of
understanding. No doubt, violent obstruction has had its share in the strategy of
sabotage as carried on by disaffected workmen, as well as in the similar tactics
of rival business concerns. It comes into the case as one method of sabotage,
though by no means the most usual or the most effective; but it is so
spectacular and shocking a method that it has drawn undue attention to itself.
Yet such deliberate violence is, no doubt, a relatively minor fact in the case,
as compared with that deliberate malingering, confusion, and misdirection of
work that makes up the bulk of what the expert practitioners would recognize as
legitimate sabotage.
The word first came into use among the organized French workmen, the members of
certain syndicats, to describe their tactics of passive resistance, and it has
continued to be associated with [3] the strategy of these French workmen, who
are known as syndicalists, and with their likeminded runningmates in other
countries. But the tactics of these syndicalists, and their use of sabotage, do
not differ, except in detail, from the tactics of other workmen elsewhere, or
from the similar tactics of friction, obstruction, and delay habitually
employed, from time to time, by both employées and employers to enforce an
argument about wages and prices. Therefore, in the course of a quartercentury
past, the word has quite unavoidably taken on a general meaning in common
speech, and has been extended to cover all such peaceable or surreptitious
manoeuvres of delay, obstruction, friction, and defeat, whether employed by the
workmen to enforce their claims, or by the employers to defeat their employées,
or by competitive business concerns to get the better of their business rivals
or to secure their own advantage.
Such manoeuvres of restriction, delay, and hindrance have a large share in the
ordinary conduct of business; but it is only lately that this ordinary line of
business strategy has come to be recognized as being substantially of the same
nature as the ordinary tactics of the syndicalists. So that it [4] has not been
usual until the last few years to speak of manoeuvres of this kind as sabotage
when they are employed by employers and their business concerns. But all this
strategy of delay, restriction, hindrance, and defeat is manifestly of the same
character, and should conveniently be called by the same name, whether it is
carried on by business men or by workmen; so that it is no longer unusual now to
find workmen speaking of "capitalistic sabotage" as freely as the employers and
the newspapers speak of syndicalist sabotage. As the word is now used, and as it
is properly used, it describes a certain system of industrial strategy or
management, whether it is employed by one or another. What it describes is a
resort to peaceable or surreptitious restriction, delay, withdrawal, or
obstruction.
Sabotage commonly works within the law, although it may often be within the
letter rather than the spirit of the law. It is used to secure some special
advantage or preference, usually of a businesslike sort. It commonly has to do
with something in the nature of a vested right, which one or another of the
parties in the case aims to secure or defend, or to defeat or diminish; some
preferential right or special advantage in respect of income or privilege,
something in the way of a [5] vested interest. Workmen have resorted to such
measures to secure improved conditions of work, or increased wages, or shorter
hours, or to maintain their habitual standards, to all of which they have
claimed to have some sort of a vested right. Any strike is of the nature of
sabotage, of course. Indeed, a strike is a typical species of sabotage. That
strikes have not been spoken of as sabotage is due to the accidental fact that
strikes were in use before this word came into use. So also, of course, a
lockout is another typical species of sabotage. That the lockout is employed by
the employers against the employées does not change the fact that it is a means
of defending a vested right by delay, withdrawal, defeat, and obstruction of the
work to be done. Lockouts have not usually been spoken of as sabotage, for the
same reason that holds true in the case of strikes. All the while it has been
recognized that strikes and lockouts are of identically the same character.
All this does not imply that there is anything discreditable or immoral about
this habitual use of strikes and lockouts. They are part of the ordinary conduct
of industry under the existing system, and necessarily so. So long as the system
remains unchanged these measures are a necessary and legitimate part of it. By
virtue of his [6] ownership the owneremployer has a vested right to do as he
will with his own property, to deal or not to deal with any person that offers,
to withhold or withdraw any part or all of his industrial equipment and natural
resources from active use for the time being, to run on half time or to shut
down his plant and to lock out all those persons for whom he has no present use
on his own premises. There is no question that the lockout is altogether a
legitimate manoeuvre. It may even be meritorious, and it is frequently
considered to be meritorious when its use helps to maintain sound conditions in
business - that is to say profitable conditions - as frequently happens. Such is
the view of the substantial citizens. So also is the strike legitimate, so long
as it keeps within the law; and it may at times even be meritorious, at least in
the eyes of the strikers. It is to be admitted quite broadly that both of these
typical species of sabotage are altogether fair and honest in principle,
although it does not therefore follow that every strike or every lockout is
necessarily fair and honest in its workingout. That is in some degree a
question of special circumstances.
Sabotage, accordingly, is not to be condemned out of hand, simply as such. There
are many [7] measures of policy and management both in private business and in
public administration which are unmistakably of the nature of sabotage and which
are not only considered to be excusable, but are deliberately sanctioned by
statute and common law and by the public conscience. Many such measures are
quite of the essence of the case under the established system of law and order,
price and business, and are faithfully believed to be indispensable to the
common good. It should not be difficult to show that the common welfare in any
community which is organized on the price system cannot be maintained without a
salutary use of sabotage - that it to say, such habitual recourse to delay and
obstruction of industry and such restriction of output as will maintain prices
at a reasonably profitable level and so guard against business depression.
Indeed, it is precisely considerations of this nature that are now engaging the
best attention of officials and business men in their endeavors to tide over a
threatening depression in American business and a consequent season of hardship
for all those persons whose main dependence is free income from investments.
Without some salutary restraint in the way of sabotage on the productive use of
the available [8] industrial plant and workmen, it is altogether unlikely that
prices could be maintained at a reasonably profitable figure for any appreciable
time. A businesslike control of the rate and volume of output is indispensable
for keeping up a profitable market, and a profitable market is the first and
unremitting condition of prosperity in any community whose industry is owned and
managed by business men. And the ways and means of this necessary control of the
output of industry are always and necessarily something in the nature of
sabotage - something in the way of retardation, restriction, withdrawal,
unemployment of plant and workmen - whereby production is kept short of
productive capacity.
The mechanical industry of the new order is inordinately productive. So the rate
and volume of output have to be regulated with a view to what the traffic will
bear - that is to say, what will yield the largest net return in terms of price
to the business men who manage the country's industrial system. Otherwise there
will be "overproduction," business depression, and consequent hard times all
around. Overproduction means production in excess of what the market will carry
off at a sufficiently profitable price. So it appears that the continued
prosperity of the [9] country from day to day hangs on a "conscientious
withdrawal of efficiency" by the business men who control the country's
industrial output. They control it all for their own use, of course, and their
own use means always a profitable price.
In any community that is organized on the price system, with investment and
business enterprise, habitual unemployment of the available industrial plant and
workmen, in whole or in part, appears to be the indispensable condition without
which tolerable conditions of life cannot be maintained. That is to say, in no
such community can the industrial system be allowed to work at full capacity for
any appreciable interval of time, on pain of business stagnation and consequent
privation for all classes and conditions of men. The requirements of profitable
business will not tolerate it. So the rate and volume of output must be adjusted
to the needs of the market, not to the working capacity of the available
resources, equipment and man power, nor to the community's need of consumable
goods. Therefore there must always be a certain variable margin of unemployment
of plant and manpower. Rate and volume of output can, of course, not be adjusted
by exceeding the productive capacity of the industrial system. So it has to be
regulated by keep-[10]ing short of maximum production by more or less as the
condition of the market may require. It is always a question of more or less
unemployment of plant and man power, and a shrewd moderation in the unemployment
of these available resources, a "conscientious withdrawal of efficiency,"
therefore, is the beginning of wisdom in all sound workday business enterprise
that has to do with industry.
All this is matter of course, and notorious. But it is not a topic on which one
prefers to dwell. Writers and speakers who dilate on the meritorious exploits of
the nation's business men will not commonly allude to this voluminous running
administration of sabotage, this conscientious withdrawal of efficiency, that
goes into their ordinary day's work. One prefers to dwell on those exceptional,
sporadic, and spectacular episodes in business where business men have now and
again successfully gone out of the safe and sane highway of conservative
business enterprise that is hedged about with a conscientious withdrawal of
efficiency, and have endeavored to regulate the output by increasing the
productive capacity of the industrial system at one point or another.
But after all, such habitual recourse to peaceable or surreptitious measures of
restraint, delay, [11] and obstruction in the ordinary businesslike management
of industry is too widely known and too well approved to call for much
exposition or illustration. Yet, as one capital illustration of the scope and
force of such businesslike withdrawal of efficiency, it may be in place to
recall that all the civilized nations are just now undergoing an experiment in
businesslike sabotage on an unexampled scale and carried out with unexampled
effrontery. All these nations that have come through the war, whether as
belligerents or as neutrals, have come into a state of more or less pronounced
distress, due to a scarcity of the common necessaries of life; and this distress
falls, of course, chiefly on the common sort, who have at the same time borne
the chief burden of the war which has brought them to this state of distress.
The common man has won the war and lost his livelihood. This need not be said by
way of praise or blame. As it stands it is, broadly, an objective statement of
fact, which may need some slight qualification, such as broad statements of fact
will commonly need. All these nations that have come through the war, and more
particularly the common run of their populations, are very much in need of all
sorts of supplies for daily use, both for immediate consumption and for produc-
[12]tive use. So much so that the prevailing state of distress rises in many
places to an altogether unwholesome pitch of privation, for want of the
necessary food, clothing, shelter, and fuel. Yet in all these countries the
staple industries are slowing down. There is an ever increasing withdrawal of
efficiency. The industrial plant is increasingly running idle or half idle,
running increasingly short of its productive capacity. Workmen are being laid
off and an increasing number of those workmen who have been serving in the
armies are going idle for want of work, at the same time that the troops which
are no longer needed in the service are being demobilized as slowly as popular
sentiment will tolerate, apparently for fear that the number of unemployed
workmen in the country may presently increase to such proportions as to bring on
a catastrophe. And all the while all these peoples are in great need of all
sorts of goods and services which these idle plants and idle workmen are fit to
produce. But for reasons of business expediency it is impossible to let these
idle plants and idle workmen go to work - that is to say for reasons of
insufficient profit to the business men interested, or in other words, for the
reasons of insufficient income to the vested interests which control the [13]
staple industries and so regulate the output of product. The traffic will not
bear so large a production of goods as the community needs for current
consumption, because it is considered doubtful whether so large a supply could
be sold at prices that would yield a reasonable profit on the investment - or
rather on the capitalization; that is to say, it is considered doubtful whether
an increased production, such as to employ more workmen and supply the goods
needed by the community, would result in an increased net aggregate income for
the vested interests which control these industries. A reasonable profit always
means, in effect, the largest obtainable profit.
All this is simple and obvious, and it should scarcely need explicit statement.
It is for these business men to manage the country's industry, of course, and
therefore to regulate the rate and volume of output; and also of course any
regulation of the output by them will be made with a view to the needs of
business; that is to say, with a view to the largest obtainable net profit, not
with a view to the physical needs of these peoples who have come through the war
and have made the world safe for the business of the vested interests. Should
the business men in charge, by [14] any chance aberration, stray from this
straight and narrow path of business integrity, and allow the community's needs
unduly to influence their management of the community's industry, they would
presently find themselves discredited and would probably face insolvency. Their
only salvation is a conscientious withdrawal of efficiency. All this lies in the
nature of the case. It is the working of the price system, whose creatures and
agents these business men are. Their case is rather pathetic, as indeed they
admit quite volubly. They are not in a position to manage with a free hand, the
reason being that they have in the past, under the routine requirements of the
price system as it takes effect in corporation finance, taken on so large an
overhead burden of fixed charges that any appreciable decrease in the net
earnings of the business will bring any wellmanaged concern of this class face
to face with bankruptcy.
At the present conjuncture, brought on by the war and its termination, the case
stands somewhat in this typical shape. In the recent past earnings have been
large; these large earnings (free income) have been capitalized; their
capitalized value has been added to the corporate capital and covered with
securities bearing a fixed income[15]charge; this incomecharge, representing
free income, has thereby become a liability on the earnings of the corporation;
this liability cannot be met in case the concern's net aggregate earnings fall
off in any degree; therefore prices must be kept up to such a figure as will
bring the largest net aggregate return, and the only means of keeping up prices
is a conscientious withdrawal of efficiency in these staple industries on which
the community depends for a supply of the necessaries of life.
The business community has hopes of tiding things over by this means, but it is
still a point in doubt whether the present unexampled large use of sabotage in
the businesslike management of the staple industries will now suffice to bring
the business community through this grave crisis without a disastrous shrinkage
of its capitalization, and a consequent liquidation; but the point is not in
doubt that the physical salvation of these peoples who have come through the war
must in any case wait on the pecuniary salvation of these owners of corporate
securities which represent free income. It is a sufficiently difficult passage.
It appears that production must be curtailed in the staple industries, on pain
of unprofitable prices. The case is not so desperate in those industries [16]
which have immediately to do with the production of superfluities; but even
these, which depend chiefly on the custom of those kept classes to whom the free
income goes, are not feeling altogether secure. For the good of business it is
necessary to curtail production of the means of life, on pain of unprofitable
prices, at the same time that the increasing need of all sorts of the
necessaries of life must be met in some passable fashion, on pain of such
popular disturbances as will always come of popular distress when it passes the
limit of tolerance.
Those wise business men who are charged with administering the salutary modicum
of sabotage at this grave juncture may conceivably be faced with a dubious
choice between a distasteful curtailment of the free income that goes to the
vested interests, on the one hand, and an unmanageable onset of popular
discontent on the other hand. And in either alternative lies disaster. Present
indications would seem to say that their choice will fall out according to
ancient habit, that they will be likely to hold fast by an undiminished free
income for the vested interests at the possible cost of any popular discontent
that may be in prospect - and then, with the help of the courts and the military
arm, presently make reasonable [17] terms with any popular discontent that may
arise. In which event it should all occasion no surprise or resentment, inasmuch
as it would be nothing unusual or irregular and would presumably be the most
expeditious way of reaching a modus vivendi. During the past few weeks, too,
quite an unusually large number of machine guns have been sold to industrial
business concerns of the larger sort, here and there, at least so they say.
Business enterprise being the palladium of the Republic, it is right to take any
necessary measures for its safeguarding. Price is of the essence of the case,
whereas livelihood is not.
The grave emergency that has arisen out of the war and its provisional
conclusion is, after all, nothing exceptional except in magnitude and severity.
In substance it is the same sort of thing that goes on continually but
unobtrusively and as a matter of course in ordinary times of business as usual.
It is only that the extremity of the case is calling attention to itself. At the
same time it serves impressively to enforce the broad proposition that a
conscientious withdrawal of efficiency is the beginning of wisdom in all
established business enterprise that has to do with industrial production. But
it has been found that this grave interest which the vested interests always
have in [18] a salutary retardation of industry at one point or another cannot
well be left altogether to the haphazard and illcoordinated efforts of
individual business concerns, each taking care of its own particular line of
sabotage within its own premises. The needed sabotage can best be administered
on a comprehensive plan and by a central authority, since the country's industry
is of the nature of a comprehensive interlocking system, whereas the business
concerns which are called on to control the motions of this industrial system
will necessarily work piecemeal, in severalty and at crosspurposes. In effect,
their working at crosspurposes results in a sufficiently large aggregate
retardation of industry, of course, but the resulting retardation is necessarily
somewhat blindly apportioned and does not converge to a neat and perspicuous
outcome. Even a reasonable amount of collusion among the interested business
concerns will not by itself suffice to carry on that comprehensive moving
equilibrium of sabotage that is required to preserve the business community from
recurrent collapse or stagnation, or to bring the nation's traffic into line
with the general needs of the vested interests.
Where the national government is charged with the general care of the country's
business in-[19]terests, as is invariably the case among the civilized nations,
it follows from the nature of the case that the nation's lawgivers and
administration will have some share in administering that necessary modicum of
sabotage that must always go into the day's work of carrying on industry by
business methods and for business purposes. The government is in a position to
penalize excessive or unwholesome traffic. So, it is always considered
necessary, or at least expedient, by all sound mercantilists, as by a tariff or
by subsidies, to impose and maintain a certain balance or proportion among the
several branches of industry and trade that go to make up the nation's
industrial system. The purpose commonly urged for measures of this class is the
fuller utilization of the nation's industrial resources in material, equipment,
and man power; the invariable effect is a lowered efficiency and a wasteful use
of these resources, together with an increase of international jealousy. But
measures of that kind are thought to be expedient by the mercantilists for these
purposes - that is to say, by the statesmen of these civilized nations, for the
purposes of the vested interests. The chief and nearly the sole means of
maintaining such a fabricated balance and proportion among the nation's
industries is to [20] obstruct the traffic at some critical point by prohibiting
or penalizing any exuberant undesirables among these branches of industry.
Disallowance, in whole or in part, is the usual and standard method.
The great standing illustration of sabotage administered by the government is
the protective tariff, of course. It protects certain special interests by
obstructing competition from beyond the frontier. This is the main use of a
national boundary. The effect of the tariff is to keep the supply of goods down
and thereby keep the price up, and so to bring reasonably satisfactory dividends
to those special interests which deal in the protected articles of trade, at the
cost of the underlying community. A protective tariff is a typical conspiracy
in restraint of trade. It brings a relatively small, though absolutely large,
run or free income to the special interests which benefit by it, at a
relatively, and absolutely, large cost to the underlying community, and so it
gives rise to a body of vested rights and intangible assets belonging to these
special interests.
Of a similar character, in so far that in effect they are in the nature of
sabotage - conscientious withdrawal of efficiency - are all manner of excise and
revenuestamp regulations; although [21] they are not always designed for that
purpose. Such would be, for instance, the partial or complete prohibition of
alcoholic beverages, the regulation of the trade in tobacco, opium, and other
deleterious narcotics, drugs, poisons, and high explosives. Of the same nature,
in effect if not in intention, are such regulations as the oleomargarine law; as
also the unnecessarily costly and vexatious routine of inspection imposed on the
production of industrial (denatured) alcohol, which has inured to the benefit of
certain business concerns that are interested in other fuels for use in
internalcombustion engines; so also the singularly vexatious and elaborately
imbecile specifications that limit and discourage the use of the parcel post,
for the benefit of the express companies and other carriers which have a vested
interest in traffic of that kind.
It is worth noting in the same connection, although it comes in from the other
side of the case, that ever since the express companies have been taken over by
the federal administration there has visibly gone into effect a comprehensive
system of vexation and delay in the detail conduct of their traffic, so
contrived as to discredit federal control of this traffic and thereby provoke a
popular sentiment in favor of its early return to pri-[22]vate control. Much the
same state of things has been in evidence in the railway traffic under similar
conditions. Sabotage is serviceable as a deterrent, whether in furtherance of
the administration's work or in contravention of it.
In what has just been said there is, of course, no intention to find fault with
any of these uses of sabotage. It is not a question of morals and good
intentions. It is always to be presumed as a matter of course that the guiding
spirit in all such governmental moves to regularize the nation's affairs,
whether by restraint or by incitement, is a wise solicitude for the nation's
enduring gain and security. All that can be said here is that many of these wise
measures of restraint and incitement are in the nature of sabotage, and that in
effect they habitually, though not invariably, inure to the benefit of certain
vested interests - ordinarily vested interests which bulk large in the ownership
and control of the nation's resources. That these measures are quite legitimate
and presumably salutary, therefore, goes without saying. In effect they are
measures for hindering traffic and industry at one point or another, which may
often be a wise business precaution.
During the period of the war administrative [23] measures in the nature of
sabotage have been ereatly extended in scope and kind. Peculiar and imperative
exigencies have had to be met, and the staple means of meeting many of these new
and exceptional exigencies has quite reasonably been something in the way of
avoidance, disallowance, penalization, hindrance, a conscientious withdrawal of
efficiency from work that does not fall in with the purposes of the
Administration. Very much as is true in private business when a situation of
doubt and hazard presents itself, so also in the business of government at the
present juncture of exacting demands and inconvenient limitations, the
Administration has been driven to expedients of disallowance and obstruction
with regard to some of the ordinary processes of life, as, for instance, in the
nonessential industries. It has also appeared that the ordinary equipment and
agencies for gathering and distributing news and other information have in the
past developed a capacity far in excess of what can safely be permitted in time
of war or of returning peace. The like is true for the ordinary facilities for
public discussion of all sorts of public questions. The ordinary facilities,
which may have seemed scant enough in time of peace and slack interest, had
after all developed a capacity far beyond what the governmental traffic
will bear in these uneasy times of war and negotiations, when men are very much
on the alert to know what is going on. By a moderate use of the later
improvements in the technology of transport and communication, the ordinary
means of disseminating information and opinions have grown so efficient that the
traffic can no longer be allowed to run at full capacity during a period of
stress in the business of government. Even the mail service has proved
insufferably efficient, and a selective withdrawal of efficiency has gone into
effect. To speak after the analogy of private business, it has been found best
to disallow such use of the mail facilities as does not inure to the benefit of
the Administration in the way of good will and vested rights of usufruct.
These peremptory measures of disallowance have attracted a wide and dubious
attention; but they have doubtless been of a salutary nature and intention, in
some way which is not to be understood by outsiders - that is to say, by
citizens of the Republic. An unguarded dissemination of information and opinions
or an unduly frank canvassing of the relevant facts by these outsiders, will be
a handicap on the Administration's work, [25] and may even defeat the
Administration's aims. At least so they say.
Something of much the same color has been observed elsewhere and in other times,
so that all this nervously alert resort to sabotage on undesirable information
and opinions is nothing novel, nor is it peculiarly democratic. The elder
statesmen of the great monarchies, east and west, have long seen and approved
the like. But these elder statesmen of the dynastic régime have gone to their
work of sabotage on information because of a palpable division of sentiment
between their government and the underlying population, such as does not exist
in the advanced democratic commonwealths. The case of Imperial Germany during
the period of the war is believed to show such a division of sentiment between
the government and the underlying population, and also to show how such a
divided sentiment on the part of a distrustful and distrusted population had
best be dealt with. The method approved by German dynastic experience is
sabotage, of a somewhat free swung character, censorship, embargo on
communication, and also, it is confidently alleged, elaborate misinformation.
Such procedure on the part of the dynastic statesmen of the Empire is
comprehensible even [26] to a layman. But how it all stands with those advanced
democratic nations, like America, where the government is the dispassionately
faithful agent and spokesman of the body of citizens, and where there can
consequently be no division of aims and sentiment between the body of officials
and any underlying population - all that is a more obscure and hazardous subject
of speculation. Yet there has been censorship, somewhat rigorous, and there has
been selective refusal of mail facilities, somewhat arbitrary, in these
democratic commonwealths also, and not least in America, freely acknowledged to
be the most naively democratic of them all. And all the while one would like to
believe that it all has somehow served some useful end. It is all sufficiently
perplexing.
II
The Industrial System and the Captains of Industry
It has been usual, and indeed it still is not unusual, to speak of three
coordinate "factors of production": land, labor, and capital. The reason for
this threefold scheme of factors in production is that there have been three
recognized classes of income: rent, wages, and profits; and it has been assumed
that whatever yields an income is a productive factor. This scheme has come down
from the eighteenth century. It is presumed to have been true, in a general way,
under the conditions which prevailed in the eighteenth century, and it has
therefore also been assumed that it should continue to be natural, or normal,
true in some eminent sense, under any other conditions that have come on since
that time.
Seen in the light of later events this threefold plan of coordinate factors in
production is notable for what it omits. It assigns no productive effect to the
industrial arts, for example, for the [28] conclusive reason that the state of
the industrial arts yields no stated or ratable income to any one class of
persons; it affords no legal claim to a share in the community's yearly
production of goods. The state of the industrial art is a joint stock of
knowledge derived from past experience, and is held and passed on as an
indivisible possession of the community at large. It is the indispensable
foundation of all productive industry, of course, but except for certain minute
fragments covered by patent rights or trade secrets, this joint stock is no
man's individual property. For this reason it has not been counted in as a
factor in production. The unexampled advance of technology during the past one
hundred and fifty years has now begun to call attention to its omission from the
threefold plan of productive factors handed down from that earlier time.
Another omission from the scheme of factors, as it was originally drawn, was the
business man. But in the course of the nineteenth century the business man came
more and more obtrusively to the front and came in for a more and more generous
portion of the country's yearly income - which was taken to argue that he also
contributed increasingly to the yearly production of goods. So a fourth factor
of production has provisionally [29] been added to the threefold scheme, in the
person of the "entrepreneur," whose wages of management are considered to
measure his creative share in the production of goods, although there still is
some question as to the precise part of the entrepreneur in productive industry.
"Entrepreneur" is a technical term to designate the man who takes care of the
financial end of things. It covers the same fact as the more familiar "business
man," but with a vague suggestion of big business rather than small. The typical
entrepreneur is the corporation financier. And since the corporation financier
has habitually come in for a very substantial share of the community's yearly
income he has also been conceived to render a very substantial service to the
community as a creative force in that productive industry out of which the
yearly income arises. Indeed, it is nearly true that in current usage "producer"
has come to mean "financial manager," both in the standard economic theory and
in everyday speech.
There need of course be no quarrel with all this. It is a matter of usage.
During the era of the machine industry - which is also the era of the commercial
democracy - business men have controlled production and have managed the [30]
industry of the commonwealth for their own ends, so that the material fortunes
of all the civilized peoples have continued to turn on the financial management
of their businessmen. And during the same period not only have the conditions of
life among these civilized peoples continued to be fairly tolerable on the
whole, but it is also true that the industrial system which these business men
have been managing for their own private gain all this time has continually been
growing more efficient on the whole. Its productive capacity per unit of
equipment and man power has continually grown larger. For this very creditable
outcome due credit should be, as indeed it has been, given to the business
community which has had the oversight of things. The efficient enlargement of
industrial capacity has, of course, been due to a continued advance in
technology, to a continued increase of the available natural resources, and to a
continued increase of population. But the business community have also had a
part in bringing all this to pass; they have always been in a position to hinder
this growth, and it is only by their consent and advice that things have been
enabled to go forward so far as they have gone.
This sustained advance in productive capacity, [31] due to the continued advance
in technology and in population, has also had another notable consequence.
According to the Liberal principles of the eighteenth century any legally
defensible receipt of income is a sure sign of productive work done. Seen in the
light of this assumption, the visibly increasing productive capacity of the
industrial system has enabled all men of a liberal and commercial mind not only
to credit the businesslike captains of industry with having created this
productive capacity, but also to overlook all that the same captains of industry
have been doing in the ordinary course of business to hold productive industry
in check. And it happens that all this time things have been moving in such a
direction and have now gone so far that it is today quite an open question
whether the businesslike management of the captains is not more occupied with
checking industry than with increasing its productive capacity.
This captain of industry, typified by the corporation financier, and latterly by
the investment banker, is one of the institutions that go to make up the new
order of things, which has been coming on among all the civilized peoples ever
since the Industrial Revolution set in. As such, as an [32] institutional
growth, his life history hitherto should be worth looking into for any one who
proposes to understand the recent growth and present drift of this new economic
order. The beginnings of the captain of industry are to be seen at their best
among those enterprising Englishmen who made it their work to carry the
industrial promise of the Revolution out into tangible performance, during the
closing decades of the eighteenth and the early decades of the nineteenth
century. These captains of the early time are likely to be rated as inventors,
at least in a loose sense of the word. But it is more to the point that they
were designers and builders of factory, mill, and mine equipment, of engines,
processes, machines, and machine tools, as well as shop managers, at the same
time that they took care, more or less effectually, of the financial end.
Nowhere do these beginnings of the captain of industry stand out so convincingly
as among the English toolbuilders of that early time, who designed, tried out,
built, and marketed that series of indispensable machine tools that has made the
practical foundation of the mechanical industry. Something to much the same
effect is due to be said for the pioneering work of the Americans [33] along the
same general lines of mechanical design and performance at a slightly later
period. To men of this class the new industrial order owes much of its early
success as well as of its later growth.
These men were captains of industry, entrepreneurs, in some such simple and
comprehensive sense of the word as that which the economists appear to have had
in mind for a hundred years after, when they have spoken of the wages of
management that are due the entrepreneur for productive work done. They were a
cross between a business man and an industrial expert, and the industrial expert
appears to have been the more valuable half in their composition. But factory,
mine, and ship owners, as well as merchants and bankers, also made up a vital
part of that business community out of whose later growth and specialization the
corporation financier of the nineteenth and twentieth centuries has arisen. His
origins are both technological and commercial, and in that early phase of his
life history which has been taken over into the traditions of economic theory
and of common sense he carried on both of these lines of interest and of work in
combination. That was before the large scale, [34] the wide sweep, and the
profound specialization of the advanced mechanical industry had gathered
headway.
But progressively the cares of business management grew larger and more
exacting, as the scale of things in business grew larger, and so the directive
head of any such business concern came progressively to give his attention more
and more exclusively to the "financial end." At the same time and driven by the
same considerations the businesslike management of industry has progressively
been shifting to the footing of corporation finance. This has brought on a
further division, dividing the ownership of the industrial equipment and
resources from their management. But also at the same time the industrial
system, on its technological side, has been progressively growing greater and
going farther in scope diversity, specialization, and complexity, as well as in
productive capacity per unit of equipment and man power.
The last named item of change, the progressive increase of productive capacity,
is peculiarly significant in this connection. Through the earlier and pioneering
decades of the machine era it appears to have been passably true that the
ordinary routine of management in industrial busi-[35]ness was taken up with
reaching out for new ways and means and speeding up production to maximum
capacity. That was before standardization of processes and of unit products and
fabrication of parts had been carried far, and therefore before quantity
production had taken on anything like its later range and reach. And, partly
because of that fact - because quantity production was then still a slight
matter and greatly circumscribed, as contrasted with its later growth - the
ordinary volume of output in the mechanical industries was still relatively
slight and manageable. Therefore those concerns that were engaged in these
industries still had a fairly open market for whatever they might turn out, a
market capable of taking up any reasonable increase of output. Exceptions to
this general rule occurred; as, e.g., in textiles. But the general rule stands
out obtrusively through the early decades of the nineteenth century so far as
regards English industry, and even more obviously in the case of America. Such
an open market meant a fair chance for competitive production, without too much
risk of overstocking. And running to the same effect, there was the continued
increase of population and the continually increasing reach and volume of the
means of transport, serving to [36] maintain a free market for any prospective
increase of output, at prices which offered a fair prospect of continued profit.
In the degree in which this condition of things prevailed a reasonably free
competitive production would be practicable.
The industrial situation so outlined began visibly to give way toward the middle
of the nineteenth century in England, and at a correspondingly later period in
America. The productive capacity of the mechanical industry was visibly
overtaking the capacity of the market, so that free competition without
afterthought was no longer a sound footing on which to manage production.
Loosely, this critical or transitional period falls in and about the second
quarter of the nineteenth century in England; elsewhere at a correspondingly
later date. Of course the critical point, when business exigencies began to
dictate a policy of combination and restriction, did not come at the same date
in all or in most of the mechanical industries; but it seems possible to say
that, by and large, the period of transition to a general rule of restriction in
industry conies on at the time and for the reason so indicated. There were also
other factors engaged in that industrial situation, besides those spoken of
above, [37] less notable and less sharply defined, but enforcing limitations of
the same character. Such were, e.g., a rapidly gaining obsolescence of
industrial plant, due to improvements and extensions, as also the partial
exhaustion of the labor supply by persistent overwork, underfeeding, and
unsanitary conditions - but this applies to the English case rather than
elsewhere.
In point of time this critical period in the affairs of industrial business
coincides roughly with the coming in of corporation finance as the ordinary and
typical method of controlling the industrial output. Of course the corporation,
or company, has other uses besides the restrictive control of the output with a
view to a profitable market, but it should be sufficiently obvious that the
combination of ownership and centralization of control which the corporation
brings about is also exceedingly convenient for that purpose. And when it
appears that the general resort to corporate organization of the larger sort
sets in about the time when business exigencies begin to dictate an imperative
restriction of output, it is not easy to avoid the conclusion that this was one
of the ends to be served by this reorganization of business enterprise. Business
enterprise may fairly be said to have shifted from the footing of [38]
freeswung competitive production to that of a "conscientious withholding of
efficiency," so soon and so far as corporation finance on a sufficiently large
scale had come to be the controlling factor in industry. At the same time and in
the same degree the discretionary control of industry, and of other business
enterprise in great part, has passed into the hands of the corporation
financier.
Corporate organization has continually gone forward to a larger scale and a more
comprehensive coalition of forces, and at the same time, and more and more
visibly, it has become the ordinary duty of the corporate management to adjust
production to the requirements of the market by restricting the output to what
the traffic will bear; that is to say, what will yield the largest net earnings.
Under corporate management it rarely happens that production is pushed to the
limit of capacity. It happens, and can happen, only rarely and intermittently.
This has been true, increasingly, ever since the ordinary productive capacity of
the mechanical industries seriously began to overtake and promised to exceed
what the market would carry off at a reasonably profitable price. And ever since
that critical turn in the affairs of industrial business - somewhere in the
middle half of the nineteenth century - it [39] has become increasingly
imperative to use a wise moderation and stop down the output to such a rate and
volume as the traffic will bear. The cares of business have required an
increasingly undivided attention on the part of the business men, and in an ever
increasing measure their day's work has come to center about a running
adjustment of sabotage on production. And for this purpose, evidently, the
corporate organization of this business, on an increasingly large scale, is very
serviceable, since the requisite sabotage on productive industry can be
effectually administered only on a large plan and with a firm hand.
"The leaders in business are men who have studied and thought all their lives.
They have thus learned to decide big problems at once, basing their decisions
upon their knowledge of fundamental principles." - Jeremiah W. Jenks. That is to
say, the surveillance of this financial end of industrial business, and the
control of the requisite running balance of sabotage, have been reduced to a
routine governed by settled principles of procedure and administered by suitably
trained experts in corporation finance. But under the limitations to which all
human capacity is subject it follows from this increasingly exacting dis-
[40]cipline of business administration that the business men are increasingly
out of touch with that manner of thinking and those elements of knowledge that
go to make up the logic and the relevant facts of the mechanical technology.
Addiction to a strict and unremitting valuation of all things in terms of price
and profit leaves them, by settled habit, unfit to appreciate those
technological facts and values that can be formulated only in terms of tangible
mechanical performance; increasingly so with every further move into a stricter
addiction to businesslike management and with every further advance of the
industrial system into a still wider scope and a still more diversified and more
delicately balanced give and take among its interlocking members.
They are experts in prices and profits and financial manoeuvres; and yet the
final discretion in all questions of industrial policy continues to rest in
their hands. They are by training and interest captains of finance; and yet,
with no competent grasp of the industrial arts, they continue to exercise a
plenary discretion as captains of industry. They are unremittingly engaged in a
routine of acquisition, in which they habitually reach their ends by a shrewd
restriction of output; and yet they continue to be entrusted with the com-
munity's industrial welfare, which calls for maximum production.
Such has been the situation in all the civilized countries since corporation
finance has ruled industry, and until a recent date. Quite recently this settled
scheme of business management has shown signs of giving way, and a new move in
the organization of business enterprise has come in sight, whereby the
discretionary control of industrial production is shifting still farther over to
the side of finance and still farther out of touch with the requirements of
maximum production. The new move is of a twofold character: (a) the financial
captains of industry have been proving their industrial incompetence in a
progressively convincing fashion, and (b) their own proper work of financial
management has progressively taken on a character of standardized routine such
as no longer calls for or admits any large measure of discretion or initiative.
They have been losing touch with the management of industrial processes, at the
same time that the management of corporate business has, in effect, been
shifting into the hands of a bureaucratic clerical staff. The corporation
financier of popular tradition is taking on the character of a chief of bureau.
The changes which have brought the corporation financier to this somewhat
inglorious position of a routine administrator set in along with the early
growth of corporation finance, somewhere around the middle of the nineteenth
century, and they have come to a head somewhere about the passage to the
twentieth century, although it is only since the latter date that the outcome is
becoming at all clearly defined. When corporate organization and the consequent
control of output came into bearing there were two lines of policy open to the
management: (a) to maintain profitable prices by limiting the output, and (b) to
maintain profits by lowering the production cost of an increased output. To some
extent both of these lines were followed, but on the whole the former proved the
more attractive; it involved less risk, and it required less acquaintance with
the working processes of industry. At least it appears that in effect the
preference was increasingly given to the former method during this halfcentury
of financial management. For this there were good reasons. The processes of
production were continually growing more extensive, diversified, complicated,
and more difficult for any layman in technology to comprehend - and the
corporation financier was such a layman, [43] necessarily and increasingly so,
for reasons indicated above. At the same time, owing to a continued increase of
population and a continued extension of the industrial system, the net product
of industry and its net earnings continued to increase independently of any
creative effort on the part of the financial management. So the corporation
financier, as a class, came in for an "unearned increment" of income, on the
simple plan of "sitting tight." That plan is intelligible to any layman. All
industrial innovation and all aggressive economy in the conduct of industry not
only presumes an insight into the technological details of the industrial
process, but to any other than the technological experts, who know the facts
intimately, any move of that kind will appear hazardous. So the business men who
have controlled industry, being laymen in all that concerns its management, have
increasingly been content to let well enough alone and to get along with an ever
increasing overhead charge of inefficiency, so long as they have lost nothing by
it. The result has been an ever increasing volume of waste and misdirection in
the use of equipment, resources, and man power throughout the industrial system.
In time, that is to say within the last few years, [44] the resulting lag, leak,
and friction in the ordinary working of this mechanical industry under business
management have reached such proportions that no ordinarily intelligent outsider
can help seeing them wherever he may look into the facts of the case. But it is
the industrial experts, not the business men, who have finally begun to
criticize this businesslike mismanagement and neglect of the ways and means of
industry. And hitherto their efforts and advice have met with no cordial
response from the business men in charge, who have, on the whole, continued to
let well enough alone - that is to say, what is well enough for a shortsighted
business policy looking to private gain, however poorly it may serve the
material needs of the community. But in the meantime two things have been
happening which have deranged the régime of the corporation financier:
industrial experts, engineers, chemists, mineralogists, technicians of all
kinds, have been drifting into more responsible positions in the industrial
system and have been growing up and multiplying within the system, because the
system will no longer work at all without them; and on the other hand, the large
financial interests on whose support the corporation financiers have been
leaning have gradually come to realize that [45] corporation finance can best be
managed as a comprehensive bureaucratic routine, and that the two pillars of the
house of corporate business enterprise of the larger sort are the industrial
experts and the large financial concerns that control the necessary funds;
whereas the corporation financier is little more than a dubious intermediate
term between these two.
One of the greater personages in American business finance took note of this
situation in the late nineties and set about turning it to account for the
benefit of himself and his business associates, and from that period dates a new
era in American corporation finance. It was for a time spoken of loosely as the
Era of TrustMaking, but that phrase does not describe it at all adequately. It
should rather be called the Era of the Investment Banker, and it has come to its
present stage of maturity and stability only in the course of the past
quartercentury.
The characteristic features and the guiding purpose of this improved method in
corporation finance are best shown by a showing of the methods and achievements
of that great pioneer by whom it was inaugurated. As an illustrative case, then,
the American steel business in the nine-[46]ties was suffering from the
continued use of outofdate processes, equipment, and locations, from wasteful
management under the control of stubbornly ignorant corporation officials, and
particularly from intermittent haphazard competition and mutual sabotage between
the numerous concerns which were then doing business in steel. It appears to
have been the lastnamed difficulty that particularly claimed the attention and
supplied the opportunity of the great pioneer. He can by no stretch of charity
be assumed to have had even a slight acquaintance with the technological needs
and shortcomings of the steel industry. But to a man of commercial vision and
financial sobriety it was plain that a more comprehensive, and therefore more
authoritative, organization and control of the steel business would readily
obviate much of the competition which was deranging prices. The apparent purpose
and the evident effect of the new and larger coalition of business interests in
steel was to maintain profitable prices by a reasonable curtailment of
production. A secondary and less evident effect was a more economical management
of the industry, which involved some displacement of quondam corporation
financiers and some introduction of industrial experts. A further, but unavowed,
[47] end to be served by the same move in each of the many enterprises in
coalition undertaken by the great pioneer and by his competitors was a bonus
that came to these enterprising men in the shape of an increased capitalization
of the business. But the notable feature of it all as seen from the point of
view of the public at large was always the stabilization of prices at a
reasonably high level, such as would always assure reasonably large earnings on
the increased capitalization.
Since then this manner of corporation finance has been further perfected and
standardized, until it will now hold true that no large move in the field of
corporation finance can be made without the advice and consent of those large
funded interests that are in a position to act as investment bankers; nor does
any large enterprise in corporation business ever escape from the continued
control of the investment bankers in any of its larger transactions; nor can any
corporate enterprise of the larger sort now continue to do business except on
terms which will yield something appreciable in the way of income to the
investment bankers, whose continued support is necessary to its success.
The financial interest here spoken of as the investment banker is commonly
something in the [48] way of a more or less articulate syndicate of financial
houses, and it is to be added that the same financial concerns are also
commonly, if not invariably, engaged or interested in commercial banking of the
usual kind. So that the same wellestablished, halfsyndicated ramification of
banking houses that have been taking care of the country's commercial banking,
with its center of credit and of control at the country's financial metropolis,
is ready from beforehand to take over and administer the country's corporation
finance on a unified plan and with a view to an equitable distribution of the
country's net earnings among themselves and their clients. The more inclusive
this financial organization is, of course, the more able it will be to manage
the country's industrial system as an inclusive whole and prevent any hazardous
innovation or experiment, as well as to limit production of the necessaries to
such a volume of output as will yield the largest net return to itself and its
clients.
Evidently the improved plan which has thrown the discretion and responsibility
into the hands of the investment banker should make for a safe and sound conduct
of business, such as will avoid fluctuations of price, and more particularly
avoid any unprofitable speedingup of productive indus-[49]try. Evidently, too,
the initiative has hereby passed out of the hands of the corporation financier,
who has fallen into the position of a financial middleman or agent, with limited
discretion and with a precariously doubtful future. But all human institutions
are susceptible of improvement, and the course of improvement may now and again,
as in his case, result in supersession and displacement. And doubtless it is all
for the best, that is to say, for the good of business, more particularly for
the profit of big business.
But now as always corporation finance is a traffic in credit; indeed, now more
than ever before. Therefore to stabilize corporate business sufficiently in the
hands of this inclusive quasisyndicate of banking interests it is necessary
that the credit system of the country should as a whole be administered on a
unified plan and inclusively. All of which is taken care of by the same
conjunction of circumstances; the same quasisyndicate of banking interests that
makes use of the country's credit in the way of corporation finance is also the
guardian of the country's credit at large. From which it results that, as
regards those largescale credit extensions which are of substantial
consequence, the credits and debits are, in effect, pooled within the syndicate,
so that no substantial de-[50]rangement of the credit situation can take effect
except by the free choice of this quasisyndicate of investment banking houses;
that is to say, not except they see an advantage to themselves in allowing the
credit situation to be deranged, and not beyond the point which will best serve
their collective purpose as against the rest of the community. With such a
closed system no extension of credit obligations or multiplication of corporate
securities, with the resulting inflation of values, need bring any risk of a
liquidation, since credits and debits are in effect pooled within the system. By
way of parenthesis it may also be remarked that under these circumstances
"credit" has no particular meaning except as a method of accounting. Credit is
also one of the timeworn institutions that are due to suffer obsolescence by
improvement.
This process of pooling and syndication that is remaking the world of credit and
corporation finance has been greatly helped on in America by the establishment
of the Federal Reserve system, while somewhat similar results have been achieved
elsewhere by somewhat similar devices. That system has greatly helped to extend,
facilitate, simplify, and consolidate the unified control of the country's
credit arrangements, and it has very [51] conveniently left the substantial
control in the hands of those larger financial interests into whose hands the
lines of control in credit and industrial business were already being gathered
by force of circumstances and by sagacious management of the interested parties.
By this means the substantial core of the country's credit system is gathered
into a selfbalanced whole, closed and unbreakable, selfinsured against all
risk and derangement. All of which converges to the definitive stabilization of
the country's business; but since it reduces financial traffic to a riskless
routine it also converges to the conceivable obsolescence of corporation finance
and eventually, perhaps, of the investment banker.
III
The Captains of Finance and the Engineers.
In more than one respect the industrial system of today is notably different
from anything that has gone before. It is eminently a system, selfbalanced and
comprehensive; and it is a system of interlocking mechanical processes, rather
than of skilful manipulation. It is mechanical rather than manual. It is an
organization of mechanical powers and material resources, rather than of skilled
craftsmen and tools; although the skilled workmen and tools are also an
indispensable part of its comprehensive mechanism. It is of an impersonal
nature, after the fashion of the material sciences, on which it constantly
draws. It runs to "quantity production" of specialized and standardized goods
and services. For all these reasons it lends itself to systematic control under
the direction of industrial experts, skilled technologists, who may be called
"production engineers," for want of a better term.
This industrial system runs on as an inclusive organization of many and diverse
interlocking me-[53]chanical processes, interdependent and balanced among
themselves in such a way that the due working of any part of it is conditioned
on the due working of all the rest. Therefore it will work at its best only on
condition that these industrial experts, production engineers, will work
together on a common understanding; and more particularly on condition that they
must not work at cross purposes. These technological specialists whose constant
supervision is indispensable to the due working of the industrial system
constitute the general staff of industry, whose work it is to control the
strategy of production at large and to keep an oversight of the tactics of
production in detail.
Such is the nature of this industrial system on whose due working depends the
material welfare of all the civilized peoples. It is an inclusive system drawn
on a plan of strict and comprehensive interdependence, such that, in point of
material welfare, no nation and no community has anything to gain at the cost of
any other nation or community. In point of material welfare, all the civilized
peoples have been drawn together by the state of the industrial arts into a
single going concern. And for the due working of this inclusive going concern it
is essential that that corps of [54] technological specialists who by training,
insight, and interest make up the general staff of industry must have a free
hand in the disposal of its available resources, in materials, equipment, and
man power, regardless of any national pretensions or any vested interests. Any
degree of obstruction, diversion, or withholding of any of the available
industrial forces, with a view to the special gain of any nation or any
investor, unavoidably brings on a dislocation of the system; which involves a
disproportionate lowering of its working efficiency and therefore a
disproportionate loss to the whole, and therefore a net loss to all its parts.
And all the while the statesmen are at work to divert and obstruct the working
forces of this industrial system, here and there, for the special advantage of
one nation and another at the cost of the rest; and the captains of finance are
working, at cross purposes and in collusion, to divert whatever they can to the
special gain of one vested interest and another, at any cost to the rest. So it
happens that the industrial system is deliberately handicapped with dissension,
misdirection, and unemployment of material resources, equipment, and man power,
at every turn where the statesmen or the captains of finance can touch its [55]
mechanism; and all the civilized peoples are suffering privation together
because their general staff of industrial experts are in this way required to
take orders and submit to sabotage at the hands of the statesmen and the vested
interests. Politics and investment are still allowed to decide matters of
industrial policy which should plainly be left to the discretion of the general
staff of production engineers driven by no commercial bias.
No doubt this characterization of the industrial system and its besetting
tribulations will seem overdrawn. However, it is not intended to apply to any
date earlier than the twentieth century, or to any backward community that still
lies outside the sweep of the mechanical industry. Only gradually during the
past century, while the mechanical industry has progressively been taking over
the production of goods and services, and going over to quantity production, has
the industrial system taken on this character of an inclusive organization of
interlocking processes and interchange of materials; and it is only in the
twentieth century that this cumulative progression has come to a head with such
effect that this characterization is now visibly becoming true. And even now
[56] it will hold true, visibly and securely, only as applies to the leading
mechanical industries, those main lines of industry that shape the main
conditions of life, and in which quantity production has become the common and
indispensable rule. Such are, e.g., transport and communication; the production
and industrial use of coal, oil, electricity and water power; the production of
steel and other metals; of wood, pulp, lumber, cement and other building
materials; of textiles and rubber; as also grainmilling and much of the
graingrowing, together with meatpacking and a good share of the stockraising
industry.
There is, of course, a large volume of industry in many lines which has not, or
only in part and doubtfully, been drawn into this network of mechanical
processes and quantity production, in any direct and conclusive fashion. But
these other lines of industry that still stand over on another and older plan of
operation are, after all, outliers and subsidiaries of the mechanically
organized industrial system, dependent on or subservient to those greater
underlying industries which make up the working body of the system, and which
therefore set the pace for the rest. And in the main, therefore, and as regards
these greater mechanical industries on whose due work-[57]ing the material
welfare of the community depends from day to day, this characterization will
apply without material abatement.
But it should be added that even as regards these greater, primary and
underlying, lines of production the system has not yet reached a fatal degree of
closeknit interdependence, balance, and complication; it will still run along
at a very tolerable efficiency in the face of a very appreciable amount of
persistent derangement. That is to say, the industrial system at large has not
yet become so delicately balanced a mechanical structure and process that the
ordinary amount of derangement and sabotage necessary to the ordinary control of
production by business methods will paralyze the whole outright. The industrial
system is not yet sufficiently closeknit for that. And yet, that extent and
degree of paralysis from which the civilized world's industry is suffering just
now, due to legitimate businesslike sabotage, goes to argue that the date may
not be far distant when the interlocking processes of the industrial system
shall have become so closely interdependent and so delicately balanced that even
the ordinary modicum of sabotage involved in the conduct of business as usual
will bring the whole to a fatal collapse. The derangement and priva-[58]tion
brought on by any well organized strike of the larger sort argues to the same
effect.
In effect, the progressive advance of this industrial system towards an all-
inclusive mechanical balance of interlocking processes appears to be approaching
a critical pass, beyond which it will no longer be practicable to leave its
control in the hands of business men working at cross purposes for private gain,
or to entrust its continued administration to others than suitably trained
technological experts, production engineers without a commercial interest. What
these men may then do with it all is not so plain; the best they can do may not
be good enough; but the negative proposition is becoming sufficiently plain,
that this mechanical state of the industrial arts will not long tolerate the
continued control of production by the vested interests under the current
businesslike rule of incapacity by advisement.
In the beginning, that is to say during the early growth of the machine
industry, and particularly in that new growth of mechanical industries which
arose directly out of the Industrial Revolution, there was no marked division
between the industrial experts and the business managers. That was before the
new industrial system had gone [59] far on the road of progressive
specialization and complexity, and before business had reached an exactingly
large scale; so that even the business men of that time, who were without
special training in technological matters, would still be able to exercise
something of an intelligent oversight of the whole, and to understand something
of what was required in the mechanical conduct of the work which they financed
and from which they drew their income. Not unusually the designers of industrial
processes and equipment would then still take care of the financial end, at the
same time that they managed the shop. But from an early point in the development
there set in a progressive differentiation, such as to divide those who designed
and administered the industrial processes from those others who designed and
managed the commercial transactions and took care of the financial end. So there
also set in a corresponding division of powers between the business management
and the technological experts. It became the work of the technologist to
determine, on technological grounds, what could be done in the way of productive
industry, and to contrive ways and means of doing it; but the business
management always continued to decide, on commercial grounds, how much work
should [60] be done and what kind and quality of goods and services should be
produced; and the decision of the business management has always continued to be
final, and has always set the limit beyond which production must not go.
With the continued growth of specialization the experts have necessarily had
more and more to say in the affairs of industry; but always their findings as to
what work is to be done and what ways and means are to be employed in production
have had to wait on the findings of the business managers as to what will be
expedient for the purpose of commercial gain. This division between business
management and industrial management has continued to go forward, at a
continually accelerated rate, because the special training and experience
required for any passably efficient organization and direction of these
industrial processes has continually grown more exacting, calling for special
knowledge and abilities on the part of those who have this work to do and
requiring their undivided interest and their undivided attention to the work in
hand. But these specialists in technological knowledge, abilities, interest, and
experience, who have increasingly come into the case in this way - inventors,
designers, chemists, mineralogists, soil experts, crop specialists, [61]
production managers and engineers of many kinds and denominations - have
continued to be employées of the captains of industry, that is to say, of the
captains of finance, whose work it has been to commercialize the knowledge and
abilities of the industrial experts and turn them to account for their own gain.
It is perhaps unnecessary to add the axiomatic corollary that the captains have
always turned the technologists and their knowledge to account in this way only
so far as would serve their own commercial profit, not to the extent of their
ability; or to the limit set by the material circumstances; or by the needs of
the community. The result has been, uniformly and as a matter of course, that
the production of goods and services has advisedly been stopped short of
productive capacity, by curtailment of output and by derangement of the
productive system. There are two main reasons for this, and both have operated
together throughout the machine era to stop industrial production increasingly
short of productive capacity, (a) The commercial need of maintaining a
profitable price has led to an increasingly imperative curtailment of the
output, as fast as the advance of the industrial arts has enhanced the
productive capacity. And (b) The continued advance of the [62] mechanical
technology has called for an everincreasing volume and diversity of special
knowledge, and so has left the businesslike captains of finance continually
farther in arrears, so that they have been less and less capable of
comprehending what is required in the ordinary way of industrial equipment and
personnel. They have therefore, in effect, maintained prices at a profitable
level by curtailment of output rather than by lowering productioncost per unit
of output, because they have not had such a working acquaintance with the
technological facts in the case as would enable them to form a passably sound
judgment of suitable ways and means for lowering productioncost; and at the
same time, being shrewd business men, they have been unable to rely on the
hiredman'sloyalty of technologists whom they do not understand. The result has
been a somewhat distrustful blindfold choice of processes and personnel and a
consequent enforced incompetence in the management of industry, a curtailment of
output below the needs of the community, below the productive capacity of the
industrial system, and below what an intelligent control of production would
have made commercially profitable.
Through the earlier decades of the machine era these limitations imposed on the
work of the ex-[63]perts by the demands of profitable business and by the
technical ignorance of the business men, appears not to have been a heavy
handicap, whether as a hindrance to the continued development of technological
knowledge or as an obstacle to its ordinary use in industry. That was before the
mechanical industry had gone far in scope, complexity, and specialization; and
it was also before the continued work of the technologists had pushed the
industrial system to so high a productive capacity that it is forever in danger
of turning out a larger product than is required for a profitable business. But
gradually, with the passage of time and the advance of the industrial arts to a
wider scope and a larger scale, and to an increasing specialization and
standardization of processes, the technological knowledge that makes up the
state of the industrial arts has called for a higher degree of that training
that makes industrial specialists; and at the same time any passably efficient
management of industry has of necessity drawn on them and their special
abilities to an everincreasing extent. At the same time and by the same shift
of circumstances, the captains of finance, driven by an increasingly close
application to the affairs of business, have been going farther out of touch
with the ordinary real-[64]ities of productive industry; and, it is to be
admitted, they have also continued increasingly to distrust the technological
specialists, whom they do not understand, but whom they can also not get along
without. The captains have per force continued to employ the technologists, to
make money for them, but they have done so only reluctantly, tardily, sparingly,
and with a shrewd circumspection; only because and so far as they have been
persuaded that the use of these technologists was indispensable to the making of
money.
One outcome of this persistent and pervasive tardiness and circumspection on the
part of the captains has been an incredibly and increasingly uneconomical use of
material resources, and an incredibly wasteful organization of equipment and
manpower in those great industries where the technological advance has been most
marked. In good part it was this discreditable pass, to which the leading
industries had been brought by these oneeyed captains of industry, that brought
the régime of the captains to an inglorious close, by shifting the initiative
and discretion in this domain out of their hands into those of the investment
bankers. By custom the investment bankers had occupied a position between or
overlapping the [65] duties of a broker in corporate securities and those of an
underwriter of corporate flotations - such a position, in effect, as is still
assigned them in the standard writings on corporation finance. The increasingly
large scale of corporate enterprise, as well as the growth of a mutual
understanding among these business concerns, also had its share in this new
move. But about this time, too, the "consulting engineers" were coming notably
into evidence in many of those lines of industry in which corporation finance
has habitually been concerned.
So far as concerns the present argument the ordinary duties of these consulting
engineers have been to advise the investment bankers as to the industrial and
commercial soundness, past and prospective, of any enterprise that is to be
underwritten. These duties have comprised a painstaking and impartial
examination of the physical properties involved in any given case, as well as an
equally impartial auditing of the accounts and appraisal of the commercial
promise of such enterprises, for the guidance of the bankers or syndicate of
bankers interested in the case as underwriters. On this ground working
arrangements and a mutual understanding presently arose be-[66]tween the
consulting engineers and those banking houses that habitually were concerned in
the underwriting of corporate enterprises.
The effect of this move has been twofold: experience has brought out the fact
that corporation finance, at its best and soundest, has now become a matter of
comprehensive and standardized bureaucratic routine, necessarily comprising the
mutual relations between various corporate concerns, and best to be taken care
of by a clerical staff of trained accountants; and the same experience has put
the financial houses in direct touch with the technological general staff of the
industrial system, whose surveillance has become increasingly imperative to the
conduct of any profitable enterprise in industry. But also, by the same token,
it has appeared that the corporation financier of nineteenthcentury tradition
is no longer of the essence of the case in corporation finance of the larger and
more responsible sort. He has, in effect, come to be no better than an idle
wheel in the economic mechanism, serving only to take up some of the lubricant.
Since and so far as this shift out of the nineteenth century into the twentieth
has been completed, the corporation financier has ceased to be a captain of
industry and has become a lieutenant [67] of finance; the captaincy having been
taken over by the syndicated investment bankers and administered as a
standardized routine of accountancy, having to do with the flotation of
corporation securities and with their fluctuating values, and having also
something to do with regulating the rate and volume of output in those
industrial enterprises which so have passed under the hand of the investment
bankers.
By and large, such is the situation of the industrial system today, and of that
financial business that controls the industrial system. But this state of things
is not so much an accomplished fact handed on out of the recent past; it is only
that such is the culmination in which it all heads up in the immediate present,
and that such is the visible drift of things into the calculable future. Only
during the last few years has the state of affairs in industry been obviously
falling into the shape so outlined, and it is even yet only in those larger and
pacemaking lines of industry which are altogether of the new technological
order that the state of things has reached this finished shape. But in these
larger and underlying divisions of the industrial system the present posture and
drift of things is unmistakable. Meantime very much [68] still stands over out
of that régime of ruleofthumb, competitive sabotage, and commercial
logrolling, in which the businesslike captains of the old order are so
altogether well at home, and which has been the best that the captains have
known how to contrive for the management of that industrial system whose
captains they have been. So that wherever the production experts are now taking
over the management, out of the dead hand of the selfmade captains, and
wherever they have occasions to inquire into the established conditions of
production, they find the ground cumbered with all sorts of incredible
makeshifts of waste and inefficiency - such makeshifts as would perhaps pass
muster with any moderately stupid elderly layman, but which look like blindfold
guesswork to these men who know something of the advanced technology and its
workingout.
Hitherto, then, the growth and conduct of this industrial system presents this
singular outcome. The technology - the state of the industrial arts - which
takes effect in this mechanical industry is in an eminent sense a joint stock of
knowledge and experience held in common by the civilized peoples. It requires
the use of trained and in-[69]structed workmen - born, bred, trained, and
instructed at the cost of the people at large. So also it requires, with a
continually more exacting insistence, a corps of highly trained and specially
gifted experts, of divers and various kinds. These, too, are born, bred, and
trained at the cost of the community at large, and they draw their requisite
special knowledge from the community's joint stock of accumulated experience.
These expert men, technologists, engineers, or whatever name may best suit them,
makeup the indispensable General Staff of the industrial system; and without
their immediate and unremitting guidance and correction the industrial system
will not work. It is a mechanically organized structure of technical processes
designed, installed, and conducted by these production engineers. Without them
and their constant attention the industrial equipment, the mechanical appliances
of industry, will foot up to just so much junk. The material welfare of the
community is unreservedly bound up with the due working of this industrial
system, and therefore with its unreserved control by the engineers, who alone
are competent to manage it. To do their work as it should be done these men of
the industrial general staff must have a free hand, unhampered by com-
[70]mercial considerations and reservations; for the production of the goods and
services needed by the community they neither need nor are they in any degree
benefited by any supervision or interference from the side of the owners. Yet
the absentee owners, now represented, in effect, by the syndicated investment
bankers, continue to control the industrial experts and limit their discretion,
arbitrarily, for their own commercial gain, regardless of the needs of the
community.
Hitherto these men who so make up the general staff of the industrial system
have not drawn together into anything like a selfdirecting working force; nor
have they been vested with anything more than an occasional, haphazard, and
tentative control of some disjointed sector of the industrial equipment, with no
direct or decisive relation to that personnel of productive industry that may be
called the officers of the line and the rank and file. It is still the unbroken
privilege of the financial management and its financial agents to "hire and
fire." The final disposition of all the industrial forces still remains in the
hands of the business men, who still continue to dispose of these forces for
other than industrial ends. And all the while it is an open secret that with a
reasonably free hand the production ex-[71]perts would today readily increase
the ordinary output of industry by several fold, - variously estimated at some
300 per cent, to 1200 per cent, of the current output. And what stands in the
way of so increasing the ordinary output of goods and services is business as
usual.
Right lately these technologists have begun to become uneasily "classconscious"
and to reflect that they together constitute the indispensable General Staff of
the industrial system. Their class consciousness has taken the immediate form of
a growing sense of waste and confusion in the management of industry by the
financial agents of the absentee owners. They are beginning to take stock of
that allpervading mismanagement of industry that is inseparable from its
control for commercial ends. All of which brings home a realization of their own
shame and of damage to the common good. So the engineers are beginning to draw
together and ask themselves, "What about it?"
This uneasy movement among the technologists set in, in an undefined and
fortuitous way, in the closing years of the nineteenth century; when the
consulting engineers, and then presently the "efficiency engineers," began to
make scat-[72]tered corrections in detail, which showed up the industrial
incompetence of those elderly laymen who were doing a conservative business at
the cost of industry. The consulting engineers of the standard type, both then
and since then, are commercialized technologists, whose work it is to appraise
the industrial value of any given enterprise with a view to its commercial
exploitation. They are a cross between a technological specialist and a
commercial agent, beset with the limitations of both and commonly not fully
competent in either line. Their normal position is that of an employée of the
investment bankers, on a stipend or a retainer, and it has ordinarily been their
fortune to shift over in time from a technological footing to a frankly
commercial one. The case of the efficiency engineers, or scientificmanagement
experts, is somewhat similar. They too have set out to appraise, exhibit, and
correct the commercial shortcomings of the ordinary management of those
industrial establishments which they investigate, to persuade the business men
in charge how they may reasonably come in for larger net earnings by a more
closely shorn exploitation of the industrial forces at their disposal. During
the opening years of the new century a lively interest centered on the views and
[73] expositions of these two groups of industrial experts; and not least was
the interest aroused by their exhibits of current facts indicating an
allpervading lag, leak, and friction in the industrial system, due to its
disjointed and oneeyed management by commercial adventurers bent on private
gain.
During these few years of the opening century the members of this informal guild
of engineers at large have been taking an interest in this question of habitual
mismanagement by ignorance and commercial sabotage, even apart from the
commercial imbecility of it all. But it is the young rather than the old among
them who see industry in any other light than its commercial value.
Circumstances have decided that the older generation of the craft have become
pretty well commercialized. Their habitual outlook has been shaped by a long and
unbroken apprenticeship to the corporation financiers and the investment
bankers; so that they still habitually see the industrial system as a
contrivance for the roundabout process of making money. Accordingly, the
established official Associations and Institutes of Engineers, which are
officered and engineered by the elder engineers, old and young, also continue to
show the commercial bias of their cre-[74]ators, in what they criticize and in
what they propose. But the new generation which has been coming on during the
present century are not similarly true to that tradition of commercial
engineering that makes the technological man an awestruck lieutenant of the
captain of finance.
By training, and perhaps also by native bent, the technologists find it easy and
convincing to size up men and things in terms of tangible performance, without
commercial afterthought, except so far as their apprenticeship to the captains
of finance may have made commercial afterthought a second nature to them. Many
of the younger generation are beginning to understand that engineering begins
and ends in the domain of tangible performance, and that commercial expediency
is another matter. Indeed, they are beginning to understand that commercial
expediency has nothing better to contribute to the engineer's work than so much
lag, leak, and friction. The four years' experience of the war has also been
highly instructive on that head. So they are beginning to draw together on a
common ground of understanding, as men who are concerned with the ways and means
of tangible performance in the way of productive industry, according to the
state of the industrial arts as they [75] know them at their best; and there is
a growing conviction among them that they together constitute the sufficient and
indispensable general staff of the mechanical industries, on whose unhindered
teamwork depends the due working of the industrial system and therefore also
the material welfare of the civilized peoples. So also, to these men who are
trained in the stubborn logic of technology, nothing is quite real that cannot
be stated in terms of tangible performance; and they are accordingly coming to
understand that the whole fabric of credit and corporation finance is a tissue
of makebelieve.
Credit obligations and financial transactions rest on certain principles of
legal formality which have been handed down from the eighteenth century, and
which therefore antedate the mechanical industry and carry no secure conviction
to men trained in the logic of that industry. Within this technological system
of tangible performance corporation finance and all its works and gestures are
completely idle; it all comes into the working scheme of the engineers only as a
gratuitous intrusion which could be barred out without deranging the work at any
point, provided only that men made up their mind to that effect - that is to
say, provided the makebelieve of absentee owner-[76]ship were discontinued. Its
only obvious effect on the work which the engineers have to take care of is
waste of materials and retardation of the work. So the next question which the
engineers are due to ask regarding this timeworn fabric of ownership, finance,
sabotage, credit, and unearned income is likely to be: Why cumbers it the
ground? And they are likely to find the scriptural answer ready to their hand.
It would be hazardous to surmise how, how soon, on what provocation, and with
what effect the guild of engineers are due to realize that they constitute a
guild, and that the material fortunes of the civilized peoples already lie loose
in their hands. But it is already sufficiently plain that the industrial
conditions and the drift of conviction among the engineers are drawing together
to some such end.
Hitherto it has been usual to count on the interested negotiations continually
carried on and never concluded between capital and labor, between the agents of
the investors and the body of workmen, to bring about whatever readjustments are
to be looked for in the control of productive industry and in the distribution
and use of its product. These negotiations have necessarily been, [77] and
continue to be, in the nature of business transactions, bargaining for a price,
since both parties to the negotiation continue to stand on the consecrated
ground of ownership, free bargain, and selfhelp; such as the commercial wisdom
of the eighteenth century saw, approved and certified it all, in the time before
the coming of this perplexing industrial system. In the course of these endless
negotiations between the owners and their workmen there has been some loose and
provisional syndication of claims and forces on both sides; so that each of
these two recognized parties to the industrial controversy has come to make up a
looseknit vested interest, and each speaks for its own special claims as a
party in interest. Each is contending for some special gain for itself and
trying to drive a profitable bargain for itself, and hitherto no disinterested
spokesman for the community at large or for the industrial system as a going
concern has seriously cut into this controversy between these contending vested
interests. The outcome has been businesslike concession and compromise, in the
nature of bargain and sale. It is true, during the war, and for the conduct of
the war, there were some halfconcerted measures taken by the Administration in
the interest of the nation at large, as a belligerent; but [78] it has always
been tacitly agreed that these were extraordinary war measures, not to be
countenanced in time of peace. In time of peace the accepted rule is still
business as usual; that is to say, investors and workmen wrangling together on a
footing of business as usual.
These negotiations have necessarily been inconclusive. So long as ownership of
resources and industrial plant is allowed, or so long as it is allowed any
degree of control or consideration in the conduct of industry, nothing more
substantial can come of any readjustment than a concessive mitigation of the
owners' interference with production. There is accordingly nothing subversive in
these bouts of bargaining between the federated workmen and the syndicated
owners. It is a game of chance and skill played between two contending vested
interests for private gain, in which the industrial system as a going concern
enters only as a victim of interested interference. Yet the material welfare of
the community, and not least of the workmen, turns on the due working of this
industrial system, without interference. Concessive mitigation of the right to
interfere with production, on the part of either one of these vested interests,
can evidently come to nothing more substantial than a concessive mitigation.
[79] But owing to the peculiar technological character of this industrial
system, with its specialized, standardized, mechanical, and highly technical
interlocking processes of production, there has gradually come into being this
corps of technological production specialists, into whose keeping the due
functioning of the industrial system has now drifted by force of circumstance.
They are, by force of circumstance, the keepers of the community's material
welfare; although they have hitherto been acting, in effect, as keepers and
providers of free income for the kept classes. They are thrown into the position
of responsible directors of the industrial system, and by the same move they are
in a position to become arbiters of the community's material welfare. They are
becoming classconscious, and they are no longer driven by a commercial
interest, in any such degree as will make them a vested interest in that
commercial sense in which the syndicated owners and the federated workmen are
vested interests. They are, at the same time, numerically and by habitual
outlook, no such heterogeneous and unwieldy body as the federated workmen, whose
numbers and scattering interest has left all their endeavors substantially
nugatory. In short, the engineers are in a position to make the next move.
[80] By comparison with the population at large, including the financial powers
and the kept classes, the technological specialists which come in question here
are a very inconsiderable number; yet this small number is indispensable to the
continued working of the productive industries. So slight are their numbers, and
so sharply defined and homogeneous is their class, that a sufficiently compact
and inclusive organization of their forces should arrange itself almost as a
matter of course, so soon as any appreciable proportion of them shall be moved
by any common purpose. And the common purpose is not far to seek, in the
allpervading industrial confusion, obstruction, waste, and retardation which
business as usual continually throws in their face. At the same time they are
the leaders of the industrial personnel, the workmen, of the officers of the
line and the rank and file; and these are coming into a frame of mind to follow
their leaders in any adventure that holds a promise of advancing the common
good.
To these men, soberly trained in a spirit of tangible performance and endowed
with something more than an even share of the sense of workmanship, and endowed
also with the common heritage of partiality for the rule of Live and Let Live,
the disallowance of an outworn and ob-[81]structive right of absentee ownership
is not likely to seem a shocking infraction of the sacred realties. That
customary right of ownership by virtue of which the vested interests continue to
control the industrial system for the benefit of the kept classes, belongs to an
older order of things than the mechanical industry. It has come out of a past
that was made up of small things and traditional makebelieve. For all the
purposes of that scheme of tangible performance that goes to makeup the
technologist's world, it is without form and void. So that, given time for due
irritation, it should by no means come as a surprise if the guild of engineers
are provoked to put their heads together and, quite out of hand, disallow that
large absentee ownership that goes to make the vested interests and to unmake
the industrial system. And there stand behind them the massed and roughhanded
legions of the industrial rank and file, ill at ease and looking for new things.
The older commercialized generation among them would, of course, ask themselves:
Why should we worry? What do we stand to gain? But the younger generation, not
so hardbitten by commercial experience, will be quite as likely to ask
themselves: What do we stand to lose? And there is the patent fact that such a
thing as a [82] general strike of the technological specialists in industry need
involve no more than a minute fraction of one per cent, of the population; yet
it would swiftly bring a collapse of the old order and sweep the timeworn fabric
of finance and absentee sabotage into the discard for good and all, Such a
catastrophe would doubtless be deplorable. It would look something like the end
of the world to all those persons who take their stand with the kept classes,
but it may come to seem no more than an incident of the day's work to the
engineers and to the roughhanded legions of the rank and file. It is a
situation which may well be deplored. But there is no gain in losing patience
with a conjunction of circumstances. And it can do no harm to take stock of the
situation and recognize that, by force of circumstance, it is now open to the
Council of Technological Workers' and Soldiers' Deputies to make the next move,
in their own way and in their own good time. When and what this move will be, if
any, or even what it will be like, is not something on which a layman can hold a
confident opinion. But so much seems clear, that the industrial dictatorship of
the captain of finance is now held on sufferance of the engineers and is liable
at any time to be discontinued at their discretion, as a matter of convenience.
IV
On the Danger of a Revolutionary Overturn
Bolshevism is a menace to the vested rights of property and privilege. Therefore
the guardians of the Vested Interests have been thrown into a state of Red
trepidation by the continued functioning of Soviet Russia and the continual
outbreaks of the same Red distemper elsewhere on the continent of Europe. It is
feared, with a nerveshattering fear, that the same Red distemper of Bolshevism
must presently infect the underlying population in America and bring on an
overturn of the established order, so soon as the underlying population are in a
position to take stock of the situation and make up their mind to a course of
action. The situation is an uneasy one, and it contains the elements of much
trouble; at least such appears to be the conviction of the Guardians of the
established order. Something of the kind is felt to be due, on the grounds of
the accomplished facts. So it is feared, with a nerveshattering fear, that
anything like uncolored in-[84]formation as to the facts in the case and
anything like a free popular discussion of these facts must logically result in
disaster. Hence all this unseemly trepidation.
The Guardians of the Vested Interests, official and quasiofficial, have allowed
their own knowledge of this sinister state of things to unseat their common
sense. The run of the facts has jostled them out of the ruts, and they have gone
in for a headlong policy of clamor and repression, to cover and suppress matters
of fact and to shut off discussion and deliberation. And all the while the
Guardians are also feverishly at work on a mobilization of such forces as may
hopefully be counted on to "keep the situation in hand" in case the expected
should happen. The one manifestly conclusive resolution to which the Guardians
of the Vested Interests have come is that the underlying population is to be
"kept in hand," in the face of any contingency. Their one settled principle of
conduct appears to be, to stick at nothing; in all of which, doubtless, the
Guardians mean well.
Now, the Guardians of the Vested Interests are presumably wise in
discountenancing any open discussion or any free communication of ideas and
opinions. It could lead to nothing more [85] comfortable than popular irritation
and distrust. The Vested Interests are known to have been actively concerned in
the prosecution of the War, and there is no lack of evidence that their
spokesmen have been heard in the subsequent counsels of the Peace. And, no
doubt, the less that is known and said about the doings of the Vested Interests
during the War and after, the better both for the public tranquility and for the
continued growth and profit of the Vested Interests. Yet it is not to be
overlooked that facts of such magnitude and of such urgent public concern as the
manoeuvres of the Vested Interests during the War and after can not be
altogether happily covered over with a conspiracy of silence. Something like a
middle course of temperate publicity should have seemed more to the point. It
may be unfortunate, but it is none the less unavoidable, that something
appreciable is bound to come to light; that is to say, something sinister.
It should be plain to all good citizens who have the cause of law and order at
heart that in such a case a more genial policy of conciliatory promises and
procrastination will be more to the purpose than any noisy recourse to the
strong arm and the Star Chamber. A touch of history, and more particularly of
contemporary history, would [86] have given the Guardians a touch of sanity.
Grown wise in all the ways and means of blamelessly defeating the unblest
majority, the gentlemanly government of the British manage affairs of this kind
much better. They have learned that bellicose gestures provoke ill will, and
that desperate remedies should be held in reserve until needed. Whereas the
Guardians of the Vested Interests in America are plainly putting things in train
for a capital operation, for which there is no apparent necessity. It should be
evident on slight reflection that things have not reached that fateful stage
where nothing short of a capital operation can be counted on to save the life of
the Vested Interests in America; not yet. And indeed, things need assuredly not
reach such a stage if reasonable measures are taken to avoid undue alarm and
irritation. All that is needed to keep the underlying population of America in a
sweet temper is a degree of patient ambiguity and delay, something after the
British pattern; and all will yet be well with the vested rights of property and
privilege, for some time to come.
History teaches that no effectual popular uprising can be set afoot against an
outworn institutional iniquity unless the movement effectually [87] meets the
special material requirements of the situation which provokes it; nor on the
other hand can an impending popular overturn be staved off without making up
one's account with those material conditions which converge to bring it on. The
long history of British gentlemanly compromise, collusion, conciliation, and
popular defeat, is highly instructive on that head. And it should be evident to
any disinterested person, on any slight survey of the pertinent facts, that the
situation in America does not now offer such a combination of circumstances as
would be required for any effectual overturn of the established order or any
forcible dispossession of these Vested Interests that now control the material
fortunes of the American people. In short, by force of circumstances, Bolshevism
is not a present menace to the Vested Interests in America; provided always that
the Guardians of these Vested Interests do not go out of their way to
precipitate trouble by such measures as will make Bolshevism of any complexion
seem the lesser evil, - which is perhaps not a safe proviso, in view of the
hysterically Red state of mind of the Guardians.
No movement for the dispossession of the Vested Interests in America can hope
for even [88] a temporary success unless it is undertaken by an organization
which is competent to take over the country's productive industry as a whole,
and to administer it from the start on a more efficient plan than that now
pursued by the Vested Interests; and there is no such organization in sight or
in immediate prospect. The nearest approach to a practicable organization of
industrial forces in America, just yet, is the A. F. of L.; which need only be
named in order to dispel the illusion that there is anything to hope or fear in
the way of a radical move at its hands. The A. F. of L. is itself one of the
Vested Interests, as ready as any other to do battle for its own margin of
privilege and profit. At the same time it would be a wholly chimerical fancy to
believe that such an organization of workmen as the A. F. of L. could take over
and manage any appreciable section of the industrial system, even if their
singleminded interest in special privileges for themselves did not preclude
their making a move in that direction. The Federation is not organized for
production but for bargaining. It is not organized on lines that would be
workable for the management of any industrial system as a whole, or of any
special line of production within such a system. It is, in effect, an
organization for the [89] strategic defeat of employers and rival organizations,
by recourse to enforced unemployment and obstruction; not for the production of
goods and services. And it is officered by tacticians, skilled in the ways and
means of bargaining with politicians and intimidating employers and employées;
not by men who have any special insight into or interest in the ways and means
of quantity production and traffic management. They are not, and for their
purpose they need not be, technicians in any conclusive sense, - and the fact
should not be lost sight of that any effectual overturn, of the kind hazily
contemplated by the hysterical officials, will always have to be primarily a
technical affair.
In effect, the Federation is officered by safe and sane politicians, and its
rank and file are votaries of "the full dinnerpail." No Guardian need worry
about the Federation, and there is no other organization in sight which differs
materially from the Federation in those respects which would count toward a
practical move in the direction of a popular overturn, - unless a doubtful
exception should be claimed for the Railroad Brotherhoods. The A. F. of L. is a
business organization with a vested interest of its own; for Keeping up prices
and keeping down the supply, [90] quite after the usual fashion of management by
the other Vested Interests; not for managing productive industry or even for
increasing the output of goods produced under any management. At the best, its
purpose and ordinary business is to gain a little something for its own members
at a more than proportionate cost to the rest of the community; which does not
afford either the spiritual or the material ground for a popular overturn.
Nor is it the A. F. of L. or the other organizations for "collective bargaining"
that come in for the comfortless attentions of the officials and of the many
semiofficial conspiracies in restraint of sobriety. Their nerveshattering
fears center rather on those irresponsible wayfaring men of industry who make up
the I. W. W., and on the helpless and hapless alien unbelievers whose
contribution to the sum total is loose talk in some foreign tongue. But if there
is any assertion to be made without fear of stumbling it will be, that this
flotsam of industry is not organized to take over the highly technical duties
involved in the administration of the industrial system. But it is these and
their like that engage the best attention of the many commissions, committees,
clubs, leagues, federations, syndicates, and corporations [91] for the chasing
of wild geese under the Red flag.
Wherever the mechanical industry has taken decisive effect, as in America and in
the two or three industrialized regions of Europe, the community lives from hand
to mouth in such a way that its livelihood depends on the effectual working of
its industrial system from day to day. In such a case a serious disturbance and
derangement of the balanced process of production is always easily brought on,
and it always brings immediate hardship on large sections of the community.
Indeed, it is this state of things - the ease with which industry can be
deranged and hardship can be brought to bear on the people at large - that
constitutes the chief asset of such partisan organizations as the A. F. of L. It
is a state of things which makes sabotage easy and effectual and gives it
breadth and scope. But sabotage is not revolution. If it were, then the A. F. of
L., the I. W. W., the Chicago Packers, and the U.S. Senate would be counted
among the revolutionists.
Farreaching sabotage, that is to say derangement of the industrial system, such
as to entail hardship on the community at large or on some particular section of
it, is easily brought to bear in any country that is dominated by the mechan-
[92]ical industry. It is commonly resorted to by both parties in any controversy
between the businesslike employers and the employées. It is, in fact, an
everyday expedient of business, and no serious blame attaches to its ordinary
use. Under given circumstances, as, e.g., under the circumstances just now
created by the return of peace, such derangement of industry and hindrance of
production is an unavoidable expedient of "business as usual." And derangement
of the same nature is also commonly resorted to as a means of coercion in any
attempted movement of overturn. It is the simple and obvious means of initiating
any revolutionary disturbance in any industrial or commercialized country. But
under the existing industrial conditions, if it is to achieve even a transient
success, any such revolutionary movement of reconstruction must also be in a
position from the outset to overcome any degree of initial derangement in
industry, whether of its own making or not, and to do constructive work of that
particular kind which is called for by the present disposition of industrial
forces and by the present close dependence of the community's livelihood on the
due systematic working of these industrial forces. To take effect and to hold
its own even for the time being, any movement of overturn [93] must from
beforehand provide for a sufficiently productive conduct of the industrial
system on which the community's material welfare depends, and for a competent
distribution of goods and services throughout the community. Otherwise, under
existing industrial conditions, nothing more can be accomplished than an
ephemeral disturbance and a transient season of accentuated hardship. Even a
transient failure to make good in the management of the industrial system must
immediately defeat any movement of overturn in any of the advanced industrial
countries. At this point the lessons of history fail, because the present
industrial system and the manner of closeknit community life enforced by this
industrial system have no example in history.
This state of things, which so conditions the possibility of any revolutionary
overturn, is peculiar to the advanced industrial countries; and the limitations
which this state of things imposes are binding within these countries in the
same measure in which these peoples are dominated by the system of mechanical
industry. In contrast with this state of things, the case of Soviet Russia may
be cited to show the difference. As compared with America and much of western
Europe, Russia is not an industrialized region, in any de-[94]cisive sense;
although Russia, too, leans on the mechanical industry in a greater degree than
is commonly recognized. Indeed, so considerable is the dependence of the
Russians on the mechanical industry that it may yet prove to be the decisive
factor in the struggle which is now going on between Soviet Russia and the
Allied Powers.
Now, it is doubtless this continued success of the Soviet administration in
Russia that has thrown this ecstatic scare into the Guardians of the Vested
Interests in America and in the civilized countries of Europe. There is nothing
to be gained by denying that the Russian Soviet has achieved a measure of
success; indeed, an astonishing measure of success, considering the extremely
adverse circumstances under which the Soviet has been at work. The fact may be
deplored, but there it is. The Soviet has plainly been successful, in the
material respect, far beyond the reports which have been allowed to pass the
scrutiny of the Seven Censors and the Associated Prevarication Bureaux of the
Allied Powers. And this continued success of Bolshevism in Russia - or such
measure of success as it has achieved - is doubtless good ground for a
reasonable degree of apprehension among good citizens elsewhere; but it does not
by any means [95] argue that anything like the same measure of success could be
achieved by a revolutionary movement on the same lines in America, even in the
absence of intervention from outside.
Soviet Russia has made good to the extent of maintaining itself against very
great odds for some two years; and it is even yet a point in doubt whether the
Allied Powers will be able to put down the Soviet by use of all the forces at
their disposal and with the help of all the reactionary elements in Russia and
in the neighboring countries. But the Soviet owes this measure of success to the
fact that the Russian people have not yet been industrialized in anything like
the same degree as their western neighbors. They have in great measure been able
to fall back on an earlier, simpler, less closeknit plan of productive
industry; such that any detailed part of this closeknit Russian community is
able, at a pinch, to draw its own livelihood from its own soil by its own work,
without that instant and unremitting dependence on materials and wrought goods
drawn from foreign ports and distant regions, that is characteristic of the
advanced industrial peoples. This oldfashioned plan of home production does not
involve an "industrial system" in the same exacting sense as the mechanical in-
[96]dustry. The Russian industrial system, it is true, also runs on something of
a balanced plan of give and take; it leans on the mechanical industry in some
considerable degree and draws on foreign trade for many of its necessary
articles of use; but for the transient time being, and for an appreciable
interval of time, such a homebred industrious population, living close to the
soil and supplying its ordinary needs by homebred handicraft methods, will be
able to maintain itself in a fair state of efficiency if not in comfort, even in
virtual isolation from the more advanced industrial centers and from the remoter
sources of raw materials. To the ignorant, - that is to say, to the wiseacres of
commerce, - this ability of the Russian people to continue alive and active under
the conditions of an exemplary blockade has been a source of incredulous
astonishment.
It is only as a fighting power, and then only for the purposes of an aggressive
war, that such a community can count for virtually nothing in a contest with the
advanced industrial nations. Such a people makes an unwieldy country to conquer
from the outside. Soviet Russia is selfsupporting, in a loose and comfortless
way, and in this sense it is a very defensible country and may yet prove
extremely difficult for the Allied Pow-[97]ers to subdue; but in the nature of
the case there need be not the slightest shadow of apprehension that Soviet
Russia can successfully take the offensive against any outside people, great or
small, which has the use of the advanced mechanical industry.
The statesmen of the Allied Powers, who are now carrying on a covert war against
Soviet Russia, are in a position to know this state of the case; and not least
those American statesmen, who have by popular sentiment been constrained
reluctantly to limit and mask their cooperation with the reactionary forces in
Finland, Poland, the Ukraine, Siberia, and elsewhere. They have all been at
pains diligently to inquire into the state of things in Soviet Russia; although,
it is true, they have also been at pains to give out surprisingly little
information, - that being much of the reason for the Seven Censors. The
wellpublished official and semiofficial apprehension of a Bolshevist offensive
to be carried on beyond the Soviet frontiers may quite safely be set down as an
article of statesmanlike subterfuge. The statesmen know better. What is feared
in fact is infection of the Bolshevist spirit beyond the Soviet frontiers, to
the detriment of those Vested Interests whose guardians these statesmen are.
[98] And on this head the apprehensions of these Elder Statesmen are not
altogether groundless; for the Elder Statesmen are also in a position to know,
without much inquiry, that there is no single spot or corner in civilized Europe
or America where the underlying population would have anything to lose by such
an overturn of the established order as would cancel the vested rights of
privilege and property, whose guardians they are.
But commercialized America is not the same thing as Soviet Russia. By and large,
America is an advanced industrial country, bound in the web of a fairly
closeknit and inclusive industrial system. The industrial situation, and
therefore the conditions of success, are radically different in the two
countries in those respects that would make the outcome in any effectual revolt.
So that, for better or worse, the main lines that would necessarily have to be
followed in working out any practicable revolutionary movement in this country
are already laid down by the material conditions of its productive industry. On
provocation there might come a flare of riotous disorder; but it would come to
nothing, however substantial the provocation might be, so long as the movement
does not fall in with those main lines of management which the state of the
industrial sys-[99]tem requires in order to insure any sustained success. These
main lines of revolutionary strategy are lines of technical organization and
industrial management; essentially lines of industrial engineering; such as will
fit the organization to take care of the highly technical industrial system that
constitutes the indispensable material foundation of any modern civilized
community. They will accordingly not only be of a profoundly different order
from what may do well enough in the case of such a looseknit and backward
industrial region as Russia, but they will necessarily also be of a kind which
has no close parallel in the past history of revolutionary movements.
Revolutions in the eighteenth century were military and political; and the Elder
Statesmen who now believe themselves to be making history still believe that
revolutions can be made and unmade by the same ways and means in the twentieth
century. But any substantial or effectual overturn in the twentieth century will
necessarily be an industrial overturn; and by the same token, any
twentiethcentury revolution can be combated or neutralized only by industrial
ways and means. The case of America, therefore, considered as a candidate for
Bolshevism, will have to be argued on its own merits, and the argument will
necessarily [100] turn on the ways and means of productive industry as
conditioned by the later growth of technology.
It has been argued, and it seems not unreasonable to believe, that the
established order of business enterprise, vested rights, and commercialized
nationalism, is due presently to go under in a muddle of shame and confusion,
because it is no longer a practicable system of industrial management under the
conditions created by the later state of the industrial arts. Twentiethcentury
technology has outgrown the eighteenthcentury system of vested rights. The
experience of the past few years teaches that the usual management of industry
by business methods has become highly inefficient and wasteful, and the
indications are many and obvious that any businesslike control of production and
distribution is bound to run more and more consistently at cross purposes with
the community's livelihood, the farther the industrial arts advance and the
wider the industrial system extends. So that it is perhaps not reasonably to be
questioned that Vested Interests in business are riding for a fall. But the end
is not yet; although it is to be admitted, regretfully perhaps, that with every
further advance in tech-[101]nological knowledge and practice and with every
further increase in the volume and complexity of the industrial system, any
businesslike control is bound to grow still more incompetent, irrelevant, and
impertinent.
It would be quite hazardous to guess, just yet, how far off that consummation of
commercial imbecility may be. There are those who argue that the existing system
of business management is plainly due to go under within two years' time; and
there are others who are ready, with equal confidence, to allow it a probable
duration of several times that interval; although, it is true, these latter
appear, on the whole, to be persons who are less intimately acquainted with the
facts in the case. Many men experienced in the larger affairs of industrial
business are in doubt as to how long things will hold together. But, one with
another, these men who so are looking into the doubtful future are, somewhat
apprehensively, willing to admit that there is yet something of a margin to go
on; so much so that, barring accident, there should seem to be no warrant for
counting at all confidently on a disastrous breakdown of the business system
within anything like a twoyear period. And, for the reassurance of the
apprehensive Guardian of the Vested Interests, it is to [102] be added that
should such a break in the situation come while things are standing in their
present shape, the outcome could assuredly not be an effectual overturn of the
established order; so long as no practicable plan has been provided for taking
over the management from the dead hand of the Vested Interests. Should such a
selfmade breakdown come at the present juncture, the outcome could, in fact,
scarcely be anything more serious than an interval, essentially transient though
more or less protracted, of turmoil and famine among the underlying population,
together with something of a setback to the industrial system as a whole. There
seems no reason to apprehend any substantial disallowance of the vested rights
of property to follow from such an essentially ephemeral interlude of
dissension. In fact, the tenure of the Vested Interests in America should seem
to be reasonably secure, just yet.
Something in the nature of riotous discontent and factional disorder is perhaps
to be looked for in the near future in this country, and there may even be some
rash gesture of revolt on the part of ill-advised malcontents. Circumstances
would seem to favor something of the kind. It is conservatively estimated that
there is already a season of privation and uncertainty in prospect for [103] the
underlying population, which could be averted only at the cost of some
substantial interference with the vested rights of the country's business men, -
which should seem a highly improbable alternative, in view of that spirit of
filial piety with which the public officials guard the prerogatives of business
as usual. So, e.g., it is now (September, 1919) confidently expected, or rather
computed, that a fuel famine is due in America during the approaching winter,
for reasons of sound business management; and it is likewise to be expected that
for the like reason the American transportation system is also due to go into a
tangle of congestion and idleness about the same time - barring providential
intervention in the way of unexampled weather conditions. But a season of famine
and disorderly conduct does not constitute a revolutionary overturn of the
established order; and the Vested Interests are secure in their continued
usufruct of the country's industry, just yet.
This hopeful posture of things may be shown convincingly enough and with no
great expenditure of argument. To this end it is proposed to pursue the argument
somewhat further presently; by describing in outline what are the infirmities of
the régime of the Vested Interests, which the [104] more sanguine malcontents
count on to bring that régime to an inglorious finish in the immediate future;
and also to set down, likewise in outline, what would have to be the character
of any organization of industrial forces which could be counted on effectually
to windup the régime of the Vested Interests and take over the management of the
industrial system on a deliberate plan.
V
On the Circumstances Which Make for a Change
The state of industry, in America and in the other advanced industrial
countries, will impose certain exacting conditions on any movement that aims to
displace the Vested Interests. These conditions lie in the nature of things;
that is to say, in the nature of the existing industrial system; and until they
are met in some passable fashion, this industrial system can not be taken over
in any effectual or enduring manner. And it is plain that whatever is found to
be true in these respects for America will also hold true in much the same
degree for the other countries that are dominated by the mechanical industry and
the system of absentee ownership.
It may also confidently be set down at the outset that such an impartial review
of the evidence as is here aimed at will make it appear that there need be no
present apprehension of the Vested Interests' being unseated by any popular
uprising in America, even if the popular irritation should rise very
appreciably above its present pitch, and even if certain advocates of "direct
action," here and there, should be so illadvised as to make some rash gesture
of revolt. The only present danger is that a boisterous campaign of repression
and inquisition on the part of the Guardians of the Vested Interests may stir up
some transient flutter of seditious disturbance.
To this end, then, it will be necessary to recall, in a summary way, those main
facts of the industrial system and of the present businesslike control of this
system which come immediately into the case. By way of general premise it is to
be noted that the established order of business rests on absentee ownership and
is managed with an eye single to the largest obtainable net return in terms of
price; that is to say, it is a system of businesslike management on a commercial
footing. The underlying population is dependent on the working of this
industrial system for its livelihood; and their material interest therefore
centers in the output and distribution of consumable goods, not in an increasing
volume of earnings for the absentee owners. Hence there is a division of
interest between the business community, [107] who do business for the absentee
owners, and the underlying population, who work for a living; and in the nature
of the case this division of interest between the absentee owners and the
underlying population is growing wider and more evident from day to day; which
engenders a certain division of sentiment and a degree of mutual distrust. With
it all the underlying population are still in a sufficiently deferential frame
of mind toward their absentee owners, and are quite conscientiously delicate
about any abatement of the free income which their owners come in for, according
to the rules of the game as it is played.
The business concerns which so have the management of industry on this plan of
absentee ownership are capitalized on their business capacity, not on their
industrial capacity; that is to say, they are capitalized on their capacity to
produce earnings, not on their capacity to produce goods. Their capitalization
has, in effect, been calculated and fixed on the highest ordinary rate of
earnings previously obtained; and on pain of insolvency their businesslike
managers are now required to meet fixed incomecharges on this capitalization.
Therefore, as a proposition of safe and sane business management, prices have to
be maintained or advanced.
From this businesslike requirement of meeting these fixed overhead charges
on the capitalization there result certain customary lines of waste and
obstruction, which are unavoidable so long as industry is managed by
businesslike methods and for businesslike ends. These ordinary lines of waste
and obstruction are necessarily (and blamelessly) included in the businesslike
conduct of production. They are many and various in detail, but they may for
convenience be classed under four heads: (a) Unemployment of material resources,
equipment and manpower, in whole or in part, deliberately or through ignorance;
(b) Salesmanship (includes, e.g., needless multiplication of merchants and
shops, wholesale and retail, newspaper advertising and billboards,
salesexhibits, salesagents, fancy packages and labels, adulteration,
multiplication of brands and proprietary articles); (c) Production (and
salescost) of superfluities and spurious goods; (d) Systematic dislocation,
sabotage and duplication, due in part to businesslike strategy, in part to
businesslike ignorance of industrial requirements (includes, e.g., such things
as crossfreights, monopolization of resources, withholding of facilities and
information from business rivals whom it is thought wise to hinder or defeat).
[109] There is, of course, no blame, and no sense of blame or shame attaching to
all this everyday waste and confusion that goes to make up the workday total of
businesslike management. All of it is a legitimate and necessary part of the
established order of business enterprise, within the law and within the ethics
of the trade.
Salesmanship is the most conspicuous, and perhaps the gravest, of these wasteful
and industrially futile practices that are involved in the businesslike conduct
of industry; it bulks large both in its immediate cost and in its meretricious
consequences. It also is altogether legitimate and indispensable in any
industrial business that deals with customers, in buying or selling; which comes
near saying, in all business that has to do with the production or distribution
of goods or services. Indeed, salesmanship is, in a way, the whole end and
substance of business enterprise; and except so far as it is managed with a
constant view to profitable bargains, the production of goods is not a business
proposition. It is the elimination of profitable transactions of purchase and
sale that is hoped for by any current movement looking to an overturn; and it is
the same elimination of profitable bargaining that is feared, with a
nerveshattering fear, by the Guardians of the estab-[110]lished order.
Salesmanship is also the most indispensable and most meritorious of those
qualities that go to make a safe and sane business man.
It is doubtless within the mark to say that, at an average, onehalf the price
paid for goods and services by consumers is to be set down to the account of
salesmanship - that is, to salescost and to the net gains of salesmanship. But
in many notable lines of merchandise the salescost will ordinarily foot up to
some ten or twenty times the productioncost proper, and to not less than one
hundred times the necessary cost of distribution. All this is not a matter for
shame or distaste. In fact, just now more than ever, there is a clamorous and
visibly growing insistence on the paramount merit and importance of salesmanship
as the main stay of commerce and industry, and a strenuous demand for more
extensive and more thorough training in salesmanship of a larger number of young
men - at the public expense - to enable a shrewdly limited output of goods to be
sold at more profitable prices - at the public cost. So also there is a visibly
increasing expenditure on all manner of advertising; and the spokesmen of this
enterprise in conspicuous waste are "pointing with pride" to the fact that the
American business community have already spent upward [111] of $600,000,000 on
billboards alone within the past year, not to speak of much larger sums spent on
newspapers and other printed matter for the same purpose - and the common man
pays the cost.
At the same time advertising and manoeuvres of salesmanlike spellbinding appear
to be the only resource to which the country's business men know how to turn for
relief from that tangle of difficulties into which the outbreak of a
businesslike peace has precipitated the commercialized world. Increased
salescost is to remedy the evils of underproduction. In this connection it may
be worth while to recall, without heat or faultfinding, that all the costly
publicity that goes into salescosts is in the nature of prevarication, when it
is not good broad mendacity; and quite necessarily so. And all the while the
proportion of salescosts to productioncosts goes on increasing, and the cost
of living grows continually greater for the underlying population, and business
necessities continue to enlarge the necessary expenditure on ways and means of
salesmanship.
It is reasonable to believe that this state of things, which has been coming on
gradually for some time past, will in time come to be understood and appreciated
by the underlying popula-[112]tion, at least in some degree. And it is likewise
reasonable to believe that so soon as the underlylying population come to
realize that all this wasteful traffic of salesmanship is using up their
productive forces, with nothing better to show for it than an increased cost of
living, they will be driven to make some move to abate the nuisance. And just so
far as this state of things is now beginning to be understood, its logical
outcome is a growing distrust of the business men and all their works and words.
But the underlying population is still very credulous about anything that is
said or done in the name of Business, and there need be no apprehension of a
mutinous outbreak, just yet. But at the same time it is evident that any plan of
management which could contrive to dispense with all this expenditure on
salesmanship, or that could materially reduce salescosts, would have that much
of a free margin to go on, and therefore that much of an added chance of
success; and so also it is evident that any other than a businesslike management
could so contrive, inasmuch as salescosts are incurred solely for purposes of
business, not for purposes of industry; they are incurred for the sake of
private gain, not for the sake of productive work.
But there is in fact no present promise of a [113] breakdown of business, due to
the continued increase of salescosts; although salescosts are bound to go on
increasing so long as the country's industry continues to be managed on anything
like the present plan. In fact, salesmanship is the chief factor in that
everincreasing cost of living, which is in its turn the chief ground of
prosperity among the business community and the chief source of perennial
hardship and discontent among the underlying population. Still it is worth
noting that the eventual elimination of salesmanship and salescost would
lighten the burden of workday production for the underlying population by some
fifty per cent. There is that much of a visible inducement to disallow that
system of absentee ownership on which modern business enterprise rests; and -
for what it may be worth - it is to be admitted that there is therefore that
much of a drift in the existing state of things toward a revolutionary overturn
looking to the unseating of the Vested Interests. But at the same time the
elimination of salesmanship and all its voluminous apparatus and traffic would
also cut down the capitalized income of the business community by something like
onehalf; and that contingency is not to be contemplated, not to say with
equanimity, by the Guardians; and it is after [114] all in the hands of these
Guardians that the fortunes of the community rest. Such a move is a moral
impossibility, just yet.
Closely related to the wasteful practices of salesmanship as commonly
understood, if it should not rather be counted in as an extension of
salesmanship, is that persistent unemployment of men, equipment, and material
resources, by which the output of goods and services is kept down to the
"requirements of the market," with a view to maintaining prices at a "reasonably
profitable level." Such unemployment, deliberate and habitual, is one of the
ordinary expedients employed in the businesslike management of industry. There
is always more or less of it in ordinary times. "Reasonable earnings" could not
be assured without it; because "what the traffic will bear" in the way of an
output of goods is by no means the same as the productive capacity of the
industrial system; still less is it the same as the total consumptive needs of
the community; in fact, it does not visibly tend to coincide with either. It is
more particularly in times of popular distress, such as the present year, when
the current output of goods is not nearly sufficient to cover the consumptive
needs of the community, [115] that considerations of business strategy call for
a wise unemployment of the country's productive forces. At the same time, such
businesslike unemployment of equipment and man power is the most obvious cause
of popular distress.
All this is well known to the Guardians of the Vested Interests, and their
knowledge of it is, quite reasonably, a source of uneasiness to them. But they
see no help for it; and indeed there is no help for it within the framework of
"business as usual," since it is the essence of business as usual. So also, the
Guardians are aware that this businesslike sabotage on productive industry is a
fruitful source of discontent and distrust among the underlying population who
suffer the inconvenience of it all; and they are beset with the abiding fear
that the underlying population may shortly be provoked into disallowing those
Vested Interests for whose benefit this deliberate and habitual sabotage on
production is carried on. It is felt that here again is a sufficient reason why
the businesslike management of industry should be discontinued; which is the
same as saying that here again is a visibly sufficient reason for such a
revolutionary overturn as will close out the Old Order of absentee ownership and
capitalized income. It is also evident that any plan [116] which shall contrive
to dispense with, this deliberate and habitual unemployment of men and equipment
will have that much more of a margin to go on, both in respect of practical
efficiency and in respect of popular tolerance; and evidently, too, any other
than a businesslike management of industry can so contrive, as a matter of
course; inasmuch as any such unbusinesslike administration - as, e.g., the
Soviet - will be relieved of the businesslike manager's blackest bugbear, "a
reasonably profitable level of prices."
But for all that, those shudderingly sanguine persons who are looking for a
dissolution of the system of absentee ownership within two years' time are not
counting on salesmanlike waste and businesslike sabotage to bring on the
collapse, so much as they count on the item listed under (d) above - the
systematic dislocation and allround defeat of productive industry which is due
in part to shrewd manoeuvres of businesslike strategy, in part to the habitual
ignorance of business men touching the systematic requirements of the industrial
system as a whole. The shrewd worldly wisdom of the businesslike managers,
looking consistently to the main chance, works in harmoniously with their
trained ignorance on matters of technology, to bring about what amounts to ef-
[117]fectual teamwork for the defeat of the country's industrial system as a
going concern. Yet doubtless this sinister hope of a collapse within two years
is too sanguine. Doubtless the underlying population can be counted on stolidly
to put up with what they are so well used to, just yet; more particularly so
long as they are not in the habit of thinking about these things at all. Nor
does it seem reasonable to believe that this allpervading waste and confusion
of industrial forces will of itself bring the business organization to a
collapse within so short a time.
It is true, the industrial system is continually growing, in volume and
complication; and with every new extension of its scope and range, and with
every added increment of technological practice that goes into effect, there
comes a new and urgent opportunity for the business men in control to extend and
speed up their strategy of mutual obstruction and defeat; it is all in the day's
work. As the industrial system grows larger and more closely interwoven it
offers continually larger and more enticing opportunities for such businesslike
manoeuvres as will effectually derange the system at the same time that they
bring the desired tactical defeat on some business rival; whereby the successful
business strategist is en-[118]abled to get a little something for nothing at a
constantly increasing cost to the community at large. With every increment of
growth and maturity the country's industrial system becomes more delicately
balanced, more intricately bound in a web of industrial give and take, more
sensitive to farreaching derangement by any local dislocation, more widely and
instantly responsive to any failure of the due correlation at any point; and by
the same move the captains of industry, to whose care the interests of absentee
ownership are entrusted, are enabled, or rather they are driven by the
necessities of competitive business, to plan their strategy of mutual defeat and
derangement on larger and more intricate lines, with an ever wider reach and a
more massive mobilization of forces. From which follows an ever increasing
insecurity of work and output from day to day and an increased assurance of
general loss and disability in the long run; incidentally coupled with increased
hardship for the underlying population, which comes in all along as a subsidiary
matter of course, unfortunate but unavoidable. It is this visibly growing
failure of the present businesslike management to come up to the industrial
necessities of the case; its unfitness to take anything like reasonable care of
the needed [119] correlation of industrial forces within the system; its
continual working at cross purposes in the allocation of energy resources,
materials, and man power - it is this fact, that any businesslike management of
necessity runs at cross purposes with the larger technical realities of the
industrial system, that chiefly goes to persuade apprehensive persons that the
régime of business enterprise is fast approaching the limit of tolerance. So it
is held by many that this existing system of absentee ownership must presently
break down and precipitate the abdication of the Vested Interests, under
conviction of total imbecility.
The theory on which these apprehensive persons proceed appears to be
substantially sound, so far as it goes, but they reach an unguardedly desperate
conclusion because they overlook one of the main facts of the case. There is no
reasonable exception to be taken to the statement that the country's industrial
system is forever growing more extensive and more complex; that it is
continually taking on more of the character of a closeknit, interwoven,
systematic whole; a delicately balanced moving equilibrium of working parts, no
one of which can do its work by itself at all, and none of which can do its
share of the [120] work well except in close correlation with all the rest. At
the same time it is also true that, in the commercialized nature of things, the
businesslike management of industry is forever playing fast and loose with this
delicately balanced moving equilibrium of forces, on which the livelihood of the
underlying population depends from day to day; more particularly is this true
for that largescale business enterprise that rests on absentee ownership and
makes up the country's greater Vested Interests. But to all this it is to be
added, as a corrective and a main factor in the case, that this system of
mechanical industry is an extremely efficient contrivance for the production of
goods and services, even when, as usual, the business men, for business reasons,
will allow it to work only under a large handicap of unemployment and
obstructive tactics. Hitherto the margin for error, that is to say for wasteful
strategy and obstructive ignorance, has been very wide; so wide that it has
saved the life of the Vested Interests; and it is accordingly by no means
confidently to be believed that all these ampler opportunities for swift and
widereaching derangement will enable the strategy of business enterprise to
bring on a disastrous collapse, just yet.
It is true, if the country's productive industry [121] were competently
organized as a systematic whole, and were then managed by competent technicians
with an eye single to maximum production of goods and services; instead of, as
now, being manhandled by ignorant business men with an eye single to maximum
profits; the resulting output of goods and services would doubtless exceed the
current output by several hundred per cent. But then, none of all that is
necessary to save the established order of things. All that is required is a
decent modicum of efficiency, very far short of the theoretical maximum
production. In effect, the community is in the habit of getting along
contentedly on something appreciably less than onehalf the output which its
industrial equipment would turn out if it were working uninterruptedly at full
capacity; even when, as usual, something like onehalf of the actual output is
consumed in wasteful superfluities. The margin for waste and error is very wide,
fortunately; and, in effect, a more patient and more inclusive survey of the
facts in the case would suffice to show that the tenure of the Vested Interests
is reasonably secure just yet; at least in so far as it turns on considerations
of this nature.
There is, of course, the chance, and it is by no means a remote chance, that the
rapidly increas-[122]ing volume and complexity of the industrial system may
presently bring the country's industry into such a ticklish state of unstable
equilibrium that even a reasonable modicum of willful derangement can no longer
be tolerated, even for the most urgent and most legitimate reasons of
businesslike strategy and vested rights. In time, such an outcome is presumably
due to be looked for. There is, indeed, no lack of evidence that the advanced
industrial countries are approaching such a state of things, America among the
rest. The margin for error and wasteful strategy is, in effect, being
continually narrowed by the further advance of the industrial arts. With every
further advance in the way of specialization and standardization, in point of
kind, quantity, quality, and time, the tolerance of the system as a whole under
any strategic maladjustment grows continually narrower.
How soon the limit of tolerance for willful derangement is due to be reached,
would be a hazardous topic of speculation. There is now a fair prospect that the
coming winter may throw some light on that dark question; but this is not saying
that the end is in sight. What is here insisted on is that that sinister
eventuality lies yet in the future, although it may be in the calculable future.
[123] So also it is well to keep in mind that even a fairly disastrous collapse
of the existing system of businesslike management need by no means prove fatal
to the Vested Interests, just yet; not so long as there is no competent
organization ready to take their place and administer the country's industry on
a more reasonable plan. It is necessarily a question of alternatives.
In all this argument that runs on perennial dislocation and cross purposes, it
is assumed that the existing businesslike management of industry is of a
competitive nature and necessarily moves on lines of competitive strategy. As a
subsidiary premise it is, of course, also assumed that the captains of industry
who have the direction of this competitive strategy are ordinarily sufficiently
ill informed on technological matters to go wrong, industrially speaking, even
with the most pacific and benevolent intentions. They are laymen in all that
concerns the technical demands of industrial production. This latter, and minor,
assumption therefore need not be argued; it is sufficiently notorious. On the
other hand, the first assumption spoken of above, that current business
enterprise is of a competitive nature, is likely to be questioned by many who
believe themselves to be familiar with the facts in the case. It is argued,
[124] by one and another, that the country's business concerns have entered into
consolidations, coalitions, understandings and working arrangements among
themselves - syndicates, trusts, pools, combinations, interlocking directorates,
gentlemen's agreements, employers' unions - to such an extent as virtually to
cover the field of that largescale business that sets the pace and governs the
movements of the rest; and that where combination takes effect in this way,
competition ceases. So also it will be argued that where there has been no
formal coalition of interests the business men in charge will still commonly act
in collusion, with much the same result. The suggestion is also ready to hand
that in so far as businesslike sabotage of this competitive order is still to be
met with, it can all be corrected by such a further consolidation of interests
as will do away with all occasion for competitive cross purposes within the
industrial system.
It is not easy to see just how far that line of argument would lead; but to make
it effective and to cover the case it would plainly have to result in so wide a
coalition of interests and pooling of management as would, in effect, eliminate
all occasion for businesslike management within the [125] system, and leave the
underlying population quite unreservedly at the disposal of the resulting
coalition of interests - an outcome which is presumably not contemplated. And
even so, the argument takes account of only one strand in that threeply rope
that goes to fashion the fatal noose. The remaining two are stout enough, and
they have not been touched. It is true, economists and others who have canvassed
this matter of competition have commonly given their attention to this one line
of competition alone - between rival commercial interests - because this
competition is conceived to be natural and normal and to serve the common good.
But there remains (a) the competition between those business men who buy cheap
and sell dear and the underlying population from and to whom they buy cheap and
sell dear, and (b) the competition between the captains of industry and those
absentee owners in whose name and with whose funds the captains do business. In
the typical case, modern business enterprise takes the corporate form, is
organized on credit, and therefore rests on absentee ownership; from which it
follows that in all largescale business the owners are not the same persons as
the managers, nor does the interest of the man-[126]ager commonly coincide with
that of his absentee owners, particularly in the modern "big business."
So it follows that even a coalition of Vested Interests which should be
virtually allinclusive, would still have to makeup its account with "what the
traffic will bear," that is to say what will bring the largest net income in
terms of price; that is to say, the coalition would still be under the
competitive necessity of buying cheap and selling dear, to the best of its
ability and with the use of all the facilities which its dominant position in
the market would give. The coalition, therefore, would still be under the
necessity of shrewdly limiting the output of goods and services to such a rate
and volume as will maintain or advance prices; and also to vary its manipulation
of prices and supply from place to place and from time to time, to turn an
honest penny; which leaves the case very near the point of beginning. But then,
such a remedy for these infelicities of the competitive system will probably be
admitted to be chimerical, without argument.
But what is more to the point is the fact, known even when it is not avowed,
that the consolidations which have been effected hitherto have not eliminated
competition, nor have they changed the [127] character of the competitive
strategy employed, although they have altered its scale and methods. What can be
said is that the underlying corporations of the holding companies, e.g., are no
longer competitors among themselves on the ancient footing. But strategic
dislocation and cross purposes continue to be the order of the day in the
businesslike management of industry; and the volume of habitual unemployment,
whether of equipment or of man power, continues undiminished and unashamed -
which is after all a major count in the case.
It is well to recognize what the business men among themselves always recognize
as a matter of course, that business is in the last analysis always carried on
for the private advantage of the individual business men who carry it on. And
these enterprising persons, being business men, will always be competitors for
gain among themselves, however much and well they may combine for a common
purpose as against the rest of the community. The end and aim of any gainful
enterprise carried through in common is always the division of the joint gains,
and in this division the joint participants always figure as competitors. The
syndicates, coalitions, corporations, consolidations of interests, so entered
into in the pur-[128]suit of gain are, in effect, in the nature of conspiracies
between business men each seeking his own advantage at the cost of any whom it
may concern. There is no ulterior solidarity of interests among the participants
in such a joint enterprise.
By way of illustration, what is set forth in the voluminous testimony taken in
the Colton case, before the California courts, having to do with the affairs of
the Southern Pacific and its subsidiaries, will show in what fashion the
businesslike incentives of associated individuals may be expected to work out in
the partition of benefits within a given coalition. And not only is there no
abiding solidarity of interests between the several participants in such a joint
enterprise, so far as regards the final division of the spoils, but it is also
true that the business interest of the manager in charge of such a syndicate of
absentee ownership will not coincide with the collective interest of the
coalition as a going concern. As an illustrative instance may be cited the
testimony of the great president of the two Great Northern railways, taken
before a Congressional commission, wherein it is explained somewhat fully that
for something like a quartercentury the two great roads under his management
had never come in [129] for reasonable earnings on their invested capital. And
it is a matter of common notoriety, although it was charitably not brought out
in the hearings of the commission, that during his incumbency as manager of the
two great railway systems this enterprising railway president had by thrift and
management increased his own private possessions from $20 to something variously
estimated at $150,000,000 to $200,000,000; while his two chief associates in
this adventure had retired from the management on a similarly comfortable
footing; so notably comfortable, indeed, as to have merited a couple of very
decent peerages under the British crown.
In effect, there still is an open call for shrewd personal strategy at the cost
of any whom it may concern; all the while that there is also a very appreciable
measure of collusion among the Vested Interests, at the cost of any whom it may
concern. Business is still competitive business, competitive pursuit of private
gain; as how should it not be? seeing that the incentive to all business is
after all private gain at the cost of any whom it may concern.
By reason of doctrinal consistency and loyalty to tradition, the certified
economists have habitu-[130]ally described business enterprise as a rational
arrangement for administering the country's industrial system and assuring a
full and equitable distribution of consumable goods to the consumers. There need
be no quarrel with that view. But it is only fair to enter the reservation that,
considered as an arrangement for administering the country's industrial system,
business enterprise based on absentee ownership has the defects of its
qualities; and these defects of this good old plan are now calling attention to
themselves. Hitherto, and ever since the mechanical industry first came into the
dominant place in this industrial system, the defects of this businesslike
management of industry have continually been encroaching more and more on its
qualities. It took its rise as a system of management by the owners of the
industrial equipment, and it has in its riper years grown into a system of
absentee ownership managed by quasi-responsible financial agents. Having begun
as an industrial community which centered about an open market, it has matured
into a community of Vested Interests whose vested right it is to keep up prices
by a short supply in a closed market. There is no extravagance in saying that,
by and large, this arrangement for controlling the production and distribution
of [131] goods and services through the agency of absentee ownership has now
come to be, in the main, a blundering muddle of defects. For the purpose in
hand, that is to say with a view to the probable chance of any revolutionary
overturn, this may serve as a fair characterization of the régime of the Vested
Interests; whose continued rule is now believed by their Guardians to be
threatened by a popular uprising in the nature of Bolshevism.
Now, as to the country's industrial system which is manhandled on this
businesslike plan; it is a comprehensive and balanced scheme of technological
administration. Industry of this modern sort - mechanical, specialized,
standardized, running to quantity production, drawn on a large scale - is highly
productive; provided always that the necessary conditions of its working are met
in some passable fashion. These necessary conditions of productive industry are
of a welldefined technical character, and they are growing more and more
exacting with every farther advance in the industrial arts. This mechanical
industry draws always more and more largely and urgently on the natural sources
of mechanical power, and it necessarily makes use of an ever increasingly wide
and varied range of materials, drawn from all latitudes and all geographical re-
[132]gions, in spite of obstructive national frontiers and patriotic
animosities; for the mechanical technology is impersonal and dispassionate, and
its end is very simply to serve human needs, without fear or favor or respect of
persons, prerogatives, or politics. It makes up an industrial system of an
unexampled character - a mechanically balanced and interlocking system of work
to be done, the prime requisite of whose working is a painstaking and
intelligent coordination of the processes at work, and an equally painstaking
allocation of mechanical power and materials. The foundation and driving force
of it all is a massive body by technological knowledge, of a highly impersonal
and altogether unbusinesslike nature, running in close contact with the material
sciences, on which it draws freely at every turn - exactingly specialized,
endlessly detailed, reaching out into all domains of empirical fact.
Such is the system of productive work which has grown out of the Industrial
Revolution, and on the full and free run of which the material welfare of all
the civilized peoples now depends from day to day. Any defect or hindrance in
its technical administration, any intrusion of non-technical considerations, any
failure or obstruction at any point, unavoidably results in a dispro-
[133]portionate setback to the balanced whole and brings a disproportionate
burden of privation on all these peoples whose productive industry has come
within the sweep of the system.
It follows that those gifted, trained, and experienced technicians who now are
in possession of the requisite technological information and experience are the
first and instantly indispensable factor in the everyday work of carrying on the
country's productive industry. They now constitute the General Staff of the
industrial system, in fact; whatever law and custom may formally say in protest.
The "captains of industry" may still vaingloriously claim that distinction, and
law and custom still countenance their claim; but the captains have no
technological value, in fact.
Therefore any question of a revolutionary overturn, in America or in any other
of the advanced industrial countries, resolves itself in practical fact into a
question of what the guild of technicians will do. In effect it is a question
whether the discretion and responsibility in the management of the country's
industry shall pass from the financiers, who speak for the Vested Interests, to
the technicians, who speak for the industrial system as a going concern. There
is no [133] third party qualified to make a colorable bid, or able to make good
its pretensions if it should make a bid. So long as the vested rights of
absentee ownership remain intact, the financial powers - that is to say the
Vested Interests - will continue to dispose of the country's industrial forces
for their own profit; and so soon, or so far, as these vested rights give way,
the control of the people's material welfare will pass into the hands of the
technicians. There is no third party.
The chances of anything like a Soviet in America, therefore, are the chances of
a Soviet of technicians. And, to the due comfort of the Guardians of the Vested
Interests and the good citizens who makeup their background, it can be shown
that anything like a Soviet of Technicians is at the most a remote contingency
in America.
It is true, so long as no such change of base is made, what is confidently to be
looked for is a régime of continued and increasing shame and confusion, hardship
and dissension, unemployment and privation, waste and insecurity of person and
property - such as the rule of the Vested Interests in business has already made
increasingly familiar to all the civilized peoples. But the vested rights of
absentee ownership are still em-[135]bedded in the sentiments of the underlying
population, and still continue to be the Palladium of the Republic; and the
assertion is still quite safe that anything like a Soviet of Technicians is not
a present menace to the Vested Interests in America.
By settled habit the technicians, the engineers and industrial experts, are a
harmless and docile sort, well fed on the whole, and somewhat placidly content
with the "full dinnerpail" which the lieutenants of the Vested Interests
habitually allow them. It is true, they constitute the indispensable General
Staff of that industrial system which feeds the Vested Interests; but hitherto
at least, they have had nothing to say in the planning and direction of this
industrial system, except as employées in the pay of the financiers. They have,
hitherto, been quite unreflectingly content to work piecemeal, without much of
an understanding among themselves, unreservedly doing jobwork for the Vested
Interests; and they have without much reflection lent themselves and their
technical powers freely to the obstructive tactics of the captains of industry;
all the while that the training which makes them technicians is but a
specialized extension of that joint stock of technological knowledge that has
been carried [136] forward out of the past by the community at large.
But it remains true that they and their dearbought knowledge of ways and means
- dearbought on the part of the underllying community - are the pillars of that
house of industry in which the Vested Interests continue to live. Without their
continued and unremitting supervision and direction the industrial system would
cease to be a working system at all; whereas it is not easy to see how the
elimination of the existing businesslike control could bring anything but relief
and heightened efficiency to this working system, The technicians are
indispensable to productive industry of this mechanical sort; the Vested
Interests and their absentee owners are not. The technicians are indispensable
to the Vested Interests and their absentee owners, as a working force without
which there would be no industrial output to control or divide; whereas the
Vested Interests and their absentee owners are of no material consequence to the
technicians and their work, except as an extraneous interference and
obstruction.
It follows that the material welfare of all the advanced industrial peoples
rests in the hands of these technicians, if they will only see it that way,
[137] take counsel together, constitute themselves the selfdirecting General
Staff of the country's industry, and dispense with the interference of the
lieutenants of the absentee owners. Already they are strategically in a position
to take the lead and impose their own terms of leadership, so soon as they, or a
decisive number of them, shall reach a common understanding to that effect and
agree on a plan of action.
But there is assuredly no present promise of the technicians' turning their
insight and common sense to such a use. There need be no present apprehension.
The technicians are a "safe and sane" lot, on the whole; and they are pretty
well commercialized, particularly the older generation, who speak with authority
and conviction, and to whom the younger generation of engineers defer, on the
whole, with such a degree of filial piety as should go far to reassure all good
citizens. And herein lies the present security of the Vested Interests, as well
as the fatuity of any present alarm about Bolshevism and the like; for the
wholehearted cooperation of the technicians would be as indispensable to any
effectual movement of overturn as their unwavering service in the employ of the
Vested Interests is indispensable to the maintenance of the established order.
[138]
VI
A Memorandum on a Practicable Soviet of Technicians
It is the purpose of this memorandum to show, in an objective way, that under
existing circumstances there need be no fear, and no hope, of an effectual
revolutionary overturn in America, such as would unsettle the established order
and unseat those Vested Interests that now control the country's industrial
system. In an earlier paper (Chapter IV), it has been argued that no effectual
move in the direction of such an overturn can be made except on the initiative
and under the direction of the country's technicians, taking action in common
and on a concerted plan. Notoriously, no move of this nature has been made
hitherto, nor is there evidence that anything of the kind has been contemplated
by the technicians. They still are consistently loyal, with something more than
a hiredman's loyalty, to the established order of commercial profit and
absentee ownership. And any adequate plan of con-[139]certed action, such as
would be required for the enterprise in question, is not a small matter that can
be arranged between two days.
Any plan of action that shall hope to meet the requirements of the case in any
passable fashion must necessarily have the benefit of mature deliberation among
the technicians who are competent to initiate such an enterprise; it must engage
the intelligent cooperation of several thousand technically trained men
scattered over the face of the country, in one industry and another; must carry
out a passably complete cadastration of the country's industrial forces; must
set up practicable organization tables covering the country's industry in some
detail,- energyresources, materials, and man power; and it must also engage the
aggressive support of the trained men at work in transportation, mining, and the
greater mechanical industries. These are initial requirements, indispensable to
the initiation of any enterprise of the kind in such an industrial country as
America; and so soon as this is called to mind it will be realised that any fear
of an effectual move in this direction at present is quite chimerical. So that,
in fact, it may be set down without a touch of ambiguity that absentee ownership
is secure, just yet.
Therefore, to show conclusively and in an ob-[140]jective way how remote any
contingency of this nature still is, it is here proposed to set out in a summary
fashion the main lines which any such concerted plan of action would have to
follow, and what will of necessity be the manner of organization which alone can
hope to take over the industrial system, following the eventual abdication or
dispossession of the Vested Interests and their absentee owners. And, by way of
parenthesis, it is always the selfmade though reluctant abdication of the
Vested Interests and their absentee owners, rather than their forcible
dispossession, that is to be looked for as a reasonably probable event in the
calculable future. It should, in effect, cause no surprise to find that they
will, in a sense, eliminate themselves, by letting go quite involuntarily after
the industrial situation gets quite beyond their control. In fact, they have, in
the present difficult juncture, already sufficiently shown their unfitness to
take care of the country's material welfare,- which is after all the only ground
on which they can set up a colorable claim to their vested rights. At the same
time something like an opening bid for a bargain of abdication has already come
in from more than one quarter. So that a discontinuance [141] of the existing
system of absentee ownership, on one plan or another, is no longer to be
considered a purely speculative novelty; and an objective canvass of the manner
of organization that is to be looked to to take the place of the control now
exercised by the Vested Interests - in the event of their prospective abdication
- should accordingly have some present interest, even apart from its bearing on
the moot question of any forcible disruption of the established system of
absentee ownership.
As a matter of course, the powers and duties of the incoming directorate will be
of a technological nature, in the main if not altogether; inasmuch as the
purpose of its coming into control is the care of the community's material
welfare by a more competent management of the country's industrial system. It
may be added that even in the unexpected event that the contemplated, overturn
should, in the beginning, meet with armed opposition from the partisans of the
old order, it will still be true that the duties of the incoming directorate
will be of a technological character, in the main; inasmuch as warlike
operations are also now substantially a matter of technology, [142] both in the
immediate conduct of hostilities and in the still more urgent work of material
support and supply.
The incoming industrial order is designed to correct the shortcomings of the
old. The duties and powers of the incoming directorate will accordingly converge
on those points in the administration of industry where the old order has most
signally fallen short; that is to say, on the due allocation of resources and a
consequent full and reasonably proportioned employment of the available
equipment and man power; on the avoidance of waste and duplication of work; and
on an equitable and sufficient supply of goods and services to consumers.
Evidently the most immediate and most urgent work to be taken over by the
incoming directorate is that for want of which under the old order the
industrial system has been working slack and at cross purposes; that is to say
the due allocation of available resources, in power, equipment, and materials,
among the greater primary industries. For this necessary work of allocation
there has been substantially no provision under the old order.
To carry on this allocation, the country's transportation system must be placed
at the disposal of the same staff that has the work of allocation [143] to do;
since, under modern conditions, any such allocation will take effect only by use
of the transportation system. But, by the same token, the effectual control of
the distribution of goods to consumers will also necessarily fall into the same
hands; since the traffic in consumable goods is also a matter of transportation,
in the main.
On these considerations, which would only be reinforced by a more detailed
inquiry into the work to be done, the central directorate will apparently take
the shape of a loosely tripartite executive council, with power to act in
matters of industrial administration; the council to include technicians whose
qualifications enable them to be called Resource Engineers, together with
similarly competent spokesmen of the transportation system and of the
distributive traffic in finished products and services. With a view to
efficiency and expedition, the executive council will presumably not be a
numerous body; although its staff of intelligence and advice may be expected to
be fairly large, and it will be guided by current consultation with the
accredited spokesmen (deputies, commissioners, executives, or whatever they may
be called) of the several main subdivisions of productive industry,
transportation, and distributive traffic.
[144] Armed with these powers and working in due consultation with a sufficient
ramification of subcenters and local councils, this industrial directorate
should be in a position to avoid virtually all unemployment of serviceable
equipment and manpower on the one hand, and all local or seasonal scarcity on
the other hand. The main line of duties indicated by the character of the work
incumbent on the directorate, as well as the main line of qualifications in its
personnel, both executive and advisory, is such as will call for the services of
Production Engineers, to use a term which is coming into use. But it is also
evident that in its continued work of planning and advisement the directorate
will require the services of an appreciable number of consulting economists; men
who are qualified to be called Production Economists.
The profession now includes men with the requisite qualifications, although it
cannot be said that the gild of economists is made up of such men in the main.
Quite blamelessly, the economists have, by tradition and by force of commercial
pressure, habitually gone in for a theoretical inquiry into the ways and means
of salesmanship, financial traffic, and the distribution of income and property,
rather than a study of the industrial [145] system considered as a ways and
means of producing goods and services. Yet there now are, after all, especially
among the younger generation, an appreciable number, perhaps an adequate number,
of economists who have learned that "business" is not "industry" and that
investment is not production. And, here as always, the best is good enough,
perforce.
"Consulting economists" of this order are a necessary adjunct to the personnel
of the central directorate, because the technical training that goes to make a
resource engineer, or a production engineer, or indeed a competent industrial
expert in any line of specialization, is not of a kind to give him the requisite
sure and facile insight into the play of economic forces at large; and as a
matter of notorious fact, very few of the technicians have gone at all far
afield to acquaint themselves with anything more to the point in this connection
than the halfforgotten commonplaces of the old order. The "consulting
economist" is accordingly necessary to cover an otherwise uncovered joint in the
new articulation of things. His place in the scheme is analogous to the part
which legal counsel now plays in the manoeuvres of diplomatists and statesmen;
and the [146] discretionary personnel of the incoming directorate are to be, in
effect, something in the way of industrial statesmen under the new order.
There is also a certain general reservation to be made with regard to personnel,
which may conveniently be spoken of at this point. To avoid persistent confusion
and prospective defeat, it will be necessary to exclude from all positions of
trust and executive responsibility all persons who have been trained for
business or who have had experience in business undertakings of the larger sort.
This will apply generally, throughout the administrative scheme, although it
will apply more imperatively as regards the responsible personnel of the
directorate, central and subordinate, together with their staff of intelligence
and advice, wherever judgment and insight are essential. What is wanted is
training in the ways and means of productive industry, not in the ways and means
of salesmanship and profitable investment.
By force of habit, men trained to a businesslike view of what is right and real
will be irretrievably biassed against any plan of production and distribution
that is not drawn in terms of commercial profit and loss and does not provide a
margin of free income to go to absentee owners. The personal exceptions to the
rule are apparently very [147] few. But this one point is after all of
relatively minor consequence. What is more to the point in the same connection
is that the commercial bias induced by their training in businesslike ways of
thinking leaves them incapable of anything like an effectual insight into the
use of resources or the needs and aims of productive industry, in any other
terms than those of commercial profit and loss. Their units and standards of
valuation and accountancy are units and standards of price, and of private gain
in terms of price; whereas for any scheme of productive industry which runs, not
on salesmanship and earnings, but on tangible performances and tangible benefit
to the community at large, the valuations and accountancy of salesmanship and
earnings are misleading. With the best and most benevolent intentions, men so
trained will unavoidably make their appraisals of production and their
disposition of productive forces in the only practical terms with which they are
familiar, the terms of commercial accountancy; which is the same as saying, the
accountancy of absentee ownership and free income; all of which it is the
abiding purpose of the projected plan to displace. For the purposes of this
projected new order of production, therefore, the experienced and capable
business men are at the [148] best to be rated as wellintentioned deaf-mute
blind men. Their wisest judgment and sincerest endeavors become meaningless and
misguided so soon as the controlling purpose of industry shifts from the footing
of profits on absentee investment to that of a serviceable output of goods.
All this abjuration of business principles and businesslike sagacity may appear
to be a taking of precautions about a vacant formality; but it is as well to
recall that by trained propensity and tradition the business men, great and
small, are after all, each in their degree, lieutenants of those Vested
Interests which the projected organization of industry is designed to displace,-
schooled in their tactics and marching under their banners. The experience of
the war administration and its management of industry by help of the business
men during the past few years goes to show what manner of industrial wisdom is
to be looked for where capable and wellintentioned business men are called in
to direct industry with a view to maximum production and economy. For its
responsible personnel the administration has uniformly drawn on experienced
business men, preferably men of successful experience in Big Business; that is
to say, trained men with a shrewd eye to the main chance. And the tale of its
adven-[149]tures, so far as a businesslike reticence has allowed them to become
known, is an amazing comedy of errors; which runs to substantially the same
issue whether it is told of one or another of the many departments, boards,
councils, commissions, and administrations, that have had this work to do.
Notoriously, this choice of personnel has with singular uniformity proved to be
of doubtful ad-viability, not to choose a harsher epithet. The policies pursued,
doubtless with the best and most sagacious intentions of which this businesslike
personnel have been capable, have uniformly resulted in the safeguarding of
investments and the allocation of commercial profits; all the while that the
avowed aim of it all, and doubtless the conscientious purpose of the
businesslike administrators, has been quantity production of essential goods.
The more that comes to light, the more visible becomes the difference between
the avowed purpose and the tangible performance. Tangible performance in the way
of productive industry is precisely what the business men do not know how to
propose, but it is also that on which the possible success of any projected plan
of overturn will always rest. Yet it is also to be remarked that even the
reluctant and blindfold endeavors of these businesslike administrators to break
away [150] from their lifelong rule of reasonable earnings, appear to have
resulted in a very appreciably increased industrial output per unit of man power
and equipment employed. That such was the out come under the war administration
is presumably due in great part to the fact that the business men in charge were
unable to exercise so strict a control over the working force of technicians and
skilled operatives during that period of stress.
And here the argument comes in touch with one of the substantial reasons why
there need be no present fear of a revolutionary overturn. By settled habit, the
American population are quite unable to see their way to entrust any appreciable
responsibility to any other than business men; at the same time that such a move
of overturn can hope to succeed only if it excludes the business men from all
positions of responsibility. This sentimental deference of the American people
to the sagacity of its business men is massive, profound, and alert. So much so
that it will take harsh and protracted experience to remove it, or to divert it
sufficiently for the purpose of any revolutionary diversion. And more
particularly, popular sentiment in this country will not tolerate the assumption
of responsibility by the technicians, who are in the popular apprehension con-
[151]ceived to be a somewhat fantastic brotherhood of overspecialized cranks,
not to be trusted out of sight except under the restraining hand of safe and
sane business men. Nor are the technicians themselves in the habit of taking a
greatly different view of their own case. They still feel themselves, in the
nature of things, to fall into place as employées of those enterprising business
men who are, in the nature of things, elected to get something for nothing.
Absentee ownership is secure, just yet. In time, with sufficient provocation,
this popular frame of mind may change, of course; but it is in any case a matter
of an appreciable lapse of time.
Even such a scant and bare outline of generalities as has been hastily sketched
above will serve to show that any effectual overturn of the established order is
not a matter to be undertaken out of hand, or to be maneuvered into shape by
makeshifts after the initial move has been made. There is no chance without
deliberate preparations from beforehand. There are two main lines of
preparations that will have to be taken care of by any body of men who may
contemplate such a move: (a) An inquiry into existing conditions and into the
available ways and means; and (b) the setting up of practicable organiza-
tion tables and a survey of the available personnel. And bound up with this
work of preparation, and conditioning it, provision must also be made for the
growth of such a spirit of teamwork as will be ready to undertake and undergo
this critical adventure. All of which will take time.
It will be necessary to investigate and to set out in a convincing way what are
the various kinds and lines of waste that are necessarily involved in the
present businesslike control of industry; what are the abiding causes of these
wasteful and obstructive practices; and what economies of management and
production will become practicable on the elimination of the present
businesslike control. This will call for diligent teamwork on the part of a
suitable group of economists and engineers, who will have to be drawn together
by self-selection on the basis of a common interest in productive efficiency,
economical use of resources, and an equitable distribution of the consumable
output. Hitherto no such self-selection of competent persons has visibly taken
place, and the beginnings of a plan for teamwork in carrying on such an inquiry
are yet to be made.
In the course of this contemplated inquiry and on the basis afforded by its
findings there is no less serious work to be done in the way of delib-
eration and advisement, among the members of the group in question and in
consultation with outside technological men who know what can best be done with
the means in hand, and whose interest in things drives them to dip into the same
gain-less adventure. This will involve the setting up of organization tables to
cover the efficient use of the available resources and equipment, as well as to
reorganize the traffic involved in the distribution of the output.
By way of an illustrative instance, to show by an example something of what the
scope and method of this inquiry and advisement will presumably be like, it
maybe remarked that under the new order the existing competitive commercial
traffic engaged in the distribution of goods to consumers will presumably fall
away, in the main, for want of a commercial incentive. It is well known, in a
general way, that the present organization of this traffic, by wholesale and
retail merchandising, involves a very large and very costly duplication of Work,
equipment, stock, and personnel,- several hundred per cent, more than would be
required by an economically efficient management of the traffic on a reasonable
plan. In looking for a way out of the present extremely wasteful merchandising
traffic, and in working out [154] organization tables for an equitable and
efficient distribution of goods to consumers, the experts in the case will, it
is believed, be greatly helped out by detailed information on such existing
organizations as, e.g., the distributing system of the Chicago Packers, the
chain stores, and the mail-order houses. These are commercial organizations, of
course, and as such they are managed with a view to the commercial gain of their
owners and managers; but they are at the same time designed to avoid the
ordinary wastes of the ordinary retail distribution, for the benefit of their
absentee owners. There are not a few objectlessons of economy of this practical
character to be found among the Vested Interests; so much so that the economies
which result from them are among the valuable capitalized assets of these
business concerns.
This contemplated inquiry will, of course, also be useful in the way of
publicity; to show, concretely and convincingly, what are the inherent defects
of the present businesslike control of industry, why these defects are
inseparable from a businesslike control under existing circumstances, and what
may fairly be expected of an industrial management which takes no account of
absentee ownership. The ways and means of publicity to be employed is a question
that plainly [155] cannot profitably be discussed beforehand, so long as the
whole question of the contemplated inquiry itself has little more than a
speculative interest; and much the same will have to be said as to the scope and
detail of the inquiry, which will have to be determined in great part by the
interest and qualifications of the men who are to carry it on. Nothing but
provisional generalities could at all confidently be sketched into its program
until the work is in hand.
The contemplated eventual shift to a new and more practicable system of
industrial production and distribution has been here spoken of as a
"revolutionary overturn" of the established order. This flagitious form of words
is here used chiefly because the Guardians of the established order are plainly
apprehensive of something sinister that can be called by no gentler name, rather
than with the intention of suggesting that extreme and subversive measures alone
can now save the life of the underlying population from the increasingly
disserviceable rule of the Vested Interests. The move which is here discussed in
a speculative way under this sinister form of words, as a contingency to be
guarded against by fair means and foul, need, in effect, be nothing spectacular;
assuredly it need involve no clash of arms [156] or fluttering of banners,
unless, as is beginning to seem likely, the Guardians of the old order should
find that sort of thing expedient. In its elements, the move will be of the
simplest and most matteroffact character; although there will doubtless be
many intricate adjustments to be made in detail. In principle, all that is
necessarily involved is a disallowance of absentee ownership; that is to say,
the disestablishment of an institution which has, in the course of time and
change, proved to be noxious to the common good. The rest will follow quite
simply from the cancelment of this outworn and footless vested right.
By absentee ownership, as the term applies in this connection, is here to be
understood the ownership of an industrially useful article by any person or
persons who are not habitually employed in the industrial use of it. In this
connection, office work of a commercial nature is not rated as industrial
employment. A corollary of some breadth follows immediately, although it is so
obvious an implication of the main proposition that it should scarcely need
explicit statement: An owner who is employed in the industrial use of a given
parcel of property owned by him, will still be an "absentee owner," within the
meaning of the term, in case he is not the only person habit-[157]ually employed
in its use. A further corollary follows, perhaps less obvious at first sight,
but no less convincing on closer attention to the sense of the terms employed:
Collective ownership, of the corporate form, that is to say ownership by a
collectivity instituted ad hoc, also falls away as being unavoidably absentee
ownership, within the meaning of the term. It will be noted that all this does
not touch joint ownership of property held in undivided interest by a household
group and made use of by the members of the household conjointly. It is only in
so far as the household is possessed of useful property not made use of by its
members, or not made use of without hired help, that its ownership of such
property falls within the meaning of the term, absentee ownership. To be
sufficiently explicit, it may be added that the cancelment of absentee ownership
as here understood will apply indiscriminately to all industrially useful
objects, whether realty or personality, whether natural resources, equipment,
banking capital, or wrought goods in stock.
As an immediate consequence of this cancelment of absentee ownership it should
seem to be altogether probable that industrially useful articles will presently
cease to be used for purposes of ownership, that is to say for purposes of
private [158] gain; although there might be no administrative interference with
such use. Under the existing state of the industrial arts, neither the natural
resources drawn on for power and materials nor the equipment employed in the
great and controlling industries are of a nature to lend themselves to any other
than absentee ownership; and these industries control the situation, so that
private enterprise for gain on a small scale would scarcely find a suitable
market. At the same time the inducement to private accumulation of wealth at the
cost of the community would virtually fall away, inasmuch as the inducement to
such accumulation now is in nearly all cases an ambition to come in for
something in the way of absentee ownership. In effect, other incentives are a
negligible quantity. Evidently, the secondary effects of such cancelment will go
far, in more than one direction, but evidently, too, there could be little
profit in endeavoring to follow up these ulterior contingencies in extended
speculations here.
As to the formalities, of a legal complexion, that would be involved in such a
disallowance of absentee ownership, they need also be neither large nor
intricate; at least not in their main incidence. It will in all probability take
the shape of a cancelment of all corporation securities, as [159] an initial
move. Articles of partnership, evidences of debt, and other legal instruments
which now give title to property not in hand or not in use by the owner, will be
voided by the same act. In all probability this will be sufficient for the
purpose.
This act of disallowance may be called subversive and revolutionary; but while
there is no intention here to offer anything in the way of exculpation, it is
necessary to an objective appraisal of the contemplated move to note that the
effect of such disallowance would be subversive or revolutionary only in a
figurative sense of the words. It would all of it neither subvert nor derange
any substantial mechanical contrivance or relation, nor need it materially
disturb the relations, either as workman or as consumer of goods and services,
of any appreciable number of persons now engaged in productive industry. In
fact, the disallowance will touch nothing more substantial than a legal
makebelieve. This would, of course, be serious enough in its consequences to
those classes - called the kept classes - whose livelihood hangs on the
maintenance of this legal makebelieve. So, likewise, it would vacate the
occupation of the "middleman," which likewise turns on the maintenance of this
legal makebelieve; which gives [160] "title" to that to which one stands in no
material relation.
Doubtless, hardship will follow thick and fast, among those classes who are
least inured to privation; and doubtless all men will agree that it is a great
pity. But this evil is, after all, a side issue, as regards the present
argument, which has to do with nothing else than the practicability of the
scheme. So it is necessary to note that, however detrimental to the special
interests of the absentee owners this move may be, yet it will not in any degree
derange or diminish those material facts that constitute the ways and means of
productive industry; nor will it in any degree enfeeble or mutilate that joint
stock of technical knowledge and practice that constitutes the intellectual
working force of the industrial system. It does not directly touch the material
facts of industry, for better or worse. In this sense it is a completely idle
matter, in its immediate incidence, whatever its secondary consequences may be
believed to be.
But there is no doubt that a proposal to disallow absentee ownership will shock
the moral sensibilities of many persons; more particularly the sensibilities of
the absentee owners. To avoid the appearance of willful neglect, therefore, it
is necessary to speak also of the "moral aspect." [161] There is no intention
here to argue the moral merits of this contemplated disallowance of absentee
ownership; or to argue for or against such a move, on moral or other grounds.
Absentee ownership is legally sound today. Indeed, as is well known, the
Constitution includes a clause which specially safeguards its security. If, and
when, the law is changed, in this respect, what is so legal today will of course
cease to be legal. There is, in fact, not much more to be said about it; except
that, in the last resort, the economic moralities wait on the economic
necessities. The economicmoral sense of the American community today runs
unequivocally to the effect that absentee ownership is fundamentally and
eternally right and good; and it should seem reasonable to believe that it will
continue to run to that effect for some time yet.
There has lately been some irritation and faultfinding with what is called
"profiteering" and there may be more or less uneasy discontent with what is felt
to be an unduly disproportionate inequality in the present distribution of
income; but apprehensive persons should not lose sight of the main fact that
absentee ownership after all is the idol of every true American heart. It is the
substance of things hoped for and the reality of [162] things not seen. To
achieve (or to inherit) a competency, that is to say to accumulate such wealth
as will assure a "decent" livelihood in industrial absentia, is the universal,
and universally laudable, ambition of all who have reached years of discretion;
but it all means the same thing - to get something for nothing, at any cost.
Similarly universal is the awestruck deference with which the larger absentee
owners are looked up to for guidance and example. These substantial citizens are
the ones who have "made good," in the popular apprehension. They are the great
and good men whose lives "all remind us we can make our lives sublime, etc."
This commercialized frame of mind is a sturdy outgrowth of many generations of
consistent training in the pursuit of the main chance; it is second nature, and
there need be no fear that it will allow the Americans to see workday facts in
any other than its own perspective, just yet. The most tenacious factor in any
civilization is a settled popular frame of mind, and to this abiding American
frame of mind absentee ownership is the controlling center of all the economic
realities.
So, having made plain that all this argument on a practicable overturn of the
established order has [163] none but a speculative interest, the argument can go
on to consider what will be the nature of the initial move of overturn which is
to break with the old order of absentee ownership and set up a régime of
workmanship governed by the country's technicians.
As has already been called to mind, repeatedly, the effective management of the
industrial system at large is already in the hands of the technicians, so far as
regards the work actually done; but it is all under the control of the Vested
Interests, representing absentee owners, so far as regards its failure to work.
And the failure is, quite reasonably, attracting much attention lately. In this
twocleft, or bicameral, administration of industry, the technicians may be
said to represent the community at large in its industrial capacity, or in other
words the industrial system as a going concern; whereas the business men speak
for the commercial interest of the absentee owners, as a body which holds the
industrial community in usufruct. It is the part of the technicians, between
them, to know the country's available resources, in mechanical power and
equipment; to know and put in practice the joint stock of technological
knowledge which is indispensable to industrial production; as well as to know
and take care of the community's [164] habitual need and use of consumable
goods. They are, in effect, the general staff of production engineers, under
whose surveillance the required output of goods and services is produced and
distributed to the consumers. Whereas it is the part of the business men to know
what rate and volume of production and distribution will best serve the
commercial interest of the absentee owners, and to put this commercial knowledge
in practice by nicely limiting production and distribution of the output to such
a rate and volume as their commercial traffic will bear - that is to say, what
will yield the largest net income to the absentee owners in terms of price. In
this work of sagaciously retarding industry the captains of industry necessarily
work at cross purposes, among themselves, since the traffic is of a competitive
nature.
Accordingly, in this twocleft arrangement of administrative functions, it is
the duty of the technicians to plan the work and to carry it on; and it is the
duty of the captains of industry to see that the work will benefit none but the
captains and their associated absentee owners, and that it is not pushed beyond
the salutary minimum which their commercial traffic will bear. In all that
concerns the planning and execution of the work done, [165] the technicians
necessarily take the initiative and exercise the necessary creative surveillance
and direction; that being what they, and they alone, are good for; whereas the
businesslike deputies of the absentee owners sagaciously exercise a running veto
power over the technicians and their productive industry. They are able
effectually to exercise this commercially sagacious veto power by the fact that
the technicians are, in effect, their employées, hired to do their bidding and
fired if they do not; and perhaps no less by this other fact, that the
technicians have hitherto been working piecemeal, as scattered individuals under
their master's eye; they have hitherto not drawn together on their own ground
and taken counsel together as a general staff of industry, to determine what had
best be done and what not. So that they have hitherto figured in the conduct of
the country's industrial enterprise only as a technological extension of the
business men's grasp on the commercial main chance.
Yet, immediately and unremittingly, the technicians and their advice and
surveillance are essential to any work whatever in those great primary
industries on which the country's productive systems turn, and which set the
pace for all the rest. And it is obvious that so soon as they shall draw [166]
together, in a reasonably inclusive way, and take common counsel as to what had
best be done, they are in a position to say what work shall be done and to fix
the terms on which it is to be done. In short, so far as regards the technical
requirements of the case, the situation is ready for a self-selected, but
inclusive, Soviet of technicians to take over the economic affairs of the
country and to allow and disallow what they may agree on; provided always that
they live within the requirements of that state of the industrial arts whose
keepers they are, and provided that their pretensions continue to have the
support of the industrial rank and file; which comes near saying that their
Soviet must consistently and effectually take care of the material welfare of
the underlying population.
Now, this revolutionary posture of the present state of the industrial arts may
be undesirable, in some respects, but there is nothing to be gained by denying
the fact. So soon - but only so soon - as the engineers draw together, take
common counsel, work out a plan of action, and decide to disallow absentee
ownership out of hand, that move will have been made. The obvious and simple
means of doing it is a conscientious withdrawal of efficiency; that is to say
the general [167] strike, to include so much of the country's staff of
technicians as will suffice to incapacitate the industrial system at large by
their withdrawal, for such time as may be required to enforce their argument.
In its elements, the project is simple and obvious, but its working out will
require much painstaking preparation, much more than appears on the face of this
bald statement; for it also follows from the present state of the industrial
arts and from the character of the industrial system in which modern technology
works out, that even a transient failure to make good in the conduct of
productive industry will result in a precipitate collapse of the enterprise.
By themselves alone, the technicians can, in a few weeks, effectually
incapacitate the country's productive industry sufficiently for the purpose. No
one who will dispassionately consider the technical character of this industrial
system will fail to recognize that fact. But so long as they have not, at least,
the tolerant consent of the population at large, backed by the aggressive
support of the trained working force engaged in transportation and in the
greater primary industries, they will be substantially helpless to set up a
practicable working organization on the new [168] footing; which is the same as
saying that they will in that case accomplish nothing more to the purpose than a
transient period of hardship and dissension.
Accordingly, if it be presumed that the production engineers are of a mind to
play their part, there will be at least two main lines of subsidiary preparation
to be taken care of before any overt move can reasonably be undertaken: (a) An
extensive campaign of inquiry and publicity, such as will bring the underlying
population to a reasonable understanding of what it is all about; and (b) the
workingout of a common understanding and a solidarity of sentiment between the
technicians and the working force engaged in transportation and in the greater
underlying industries of the system: to which is to be added as being nearly
indispensable from the outset, an active adherence to this plan on the part of
the trained workmen in the great generality of the mechanical industries. Until
these prerequisites are taken care of, any project for the overturn of the
established order of absentee ownership will be nugatory.
By way of conclusion it may be recalled again that, just yet, the production
engineers are a scattering lot of fairly contented subalterns, working [169]
piecemeal under orders from the deputies of the absentee owners; the working
force of the great mechanical industries, including transportation, are still
nearly out of touch and out of sympathy with the technical men, and are bound in
rival trade organizations whose sole and self-seeking interest converges on the
full dinnerpail; while the underlying population are as nearly uninformed on
the state of things as the Guardians of the Vested Interests, including the
commercialized newspapers, can manage to keep them, and they are consequently
still in a frame of mind to tolerate no substantial abatement of absentee
ownership; and the constituted authorities are competently occupied with
maintaining the status quo. There is nothing in the situation that should
reasonably flutter the sensibilities of the Guardians or of that massive body of
welltodo citizens who make up the rank and file of absentee owners, just yet.
--- The End ---
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