out-door advertising. There is nothing to say about this branch of
the profession save that it is bad beyond expression, and should be
removed from sight with all possible haste. In revolting against the
sign-board, direct action assumes the dignity of conservatism, and
although I do not recommend an immediate assault on all sign-boards,
I should be delighted if such an assault took place. Were I a judge
sitting on the case of a man apprehended in the act of destroying one
of these eyesores, I should give him the key to my private stock, and
adjourn the court for a week.
J. THORNE SMITH
BUSINESS
Modern business derives from three passions in this order, namely: The
passion for things, the passion for personal grandeur and the passion
for power. Things are multiplied in use and possession when people
exchange with each other the products of specialized labour. Personal
grandeur may be realized in wealth. Gratification of the third passion
in this way is new. Only in recent times has business become a means to
great power, a kind of substitute for kingship, wherein man may sate
his love of conquest, practise private vengeance, and gain dominion
over people.
These passions are feeble on the Oriental side of the world, strong
in parts of Europe, powerful in America. Hence the character of
American business. It is unique, wherein it is so, not in principle
but in degree of phenomena. For natural reasons the large objects of
business are most attainable in this country. Yet this is not the
essential difference. In the pursuit of them there is a characteristic
American manner, as to which one may not unreasonably prefer a romantic
explanation. No white man lives on this continent who has not himself
or in his ancestry the will that makes desire overt and dynamic, the
solitary strength to push his dream across seas. Islands had been
peopled before by this kind of selection, notably England; never a
continent. A reckless, egoistic, experimental spirit governs, betrays,
and preserves us still.
The elemental hunger for food, warmth, and refuge gives no direct
motive to business. People may live and reproduce without business.
Civilization of a sort may exist without its offices. The settler who
disappears into the wilderness with a wife, a gun, a few tools, and
some pairs of domestic beasts, may create him an idyllic habitation,
amid orchards and fields, self-contained in rude plenty; but he is lost
to business until he produces a money crop, that is, a surplus of the
fruits of husbandry to exchange for fancy hardware, tea, window glass,
muslin, china, and luxuries.
The American wilderness swallowed up hundreds of thousands of such
hearth-bearers. Business was slow to touch them. What they had to sell
was bulky. The cost of transportation was prohibitive. There were no
highways, only rivers, for traffic to go upon. Food was cheap, because
the earth in a simple way was bounteous; but the things for which food
could be exchanged were dear. This would naturally be true in a new
country, where craft industry must develop slowly. It was true also
for another reason, which was that the Mother Country regarded the New
World as a plantation to be exploited for the benefit of its own trade
and manufactures.
Great Britain’s claim to proprietary interest in America having been
established against European rivals by the end of the 17th century, her
struggle with the colonists began. The English wanted (1) raw materials
upon which to bestow their high craft labour, (2) an exclusive market
for the output of their mills and factories, and (3) a monopoly of
the carrying trade. The colonists wanted industrial freedom. As long
as they held themselves to chimney-corner industries, making nails,
shoes, hats, and coarse cloth for their own use, there was no quarrel.
But when labour even in a small way began to devote itself exclusively
to handicraft, so that domestic manufactures were offered for sale in
competition with imported English goods, that was business--and the
British Parliament voted measures to crush it. The weaving of cloth for
sale was forbidden, lest the colonists become independent of English
fabrics. So was the making of beaver hats; the English were hatters.
It was forbidden to set up an iron rolling-mill in America, because
the English required pig iron and wished to work it themselves. To all
these acts of Parliament the colonists opposed subterfuge until they
were strong enough to be defiant. That impatience of legal restraints
which is one of the most obstinate traits of American business was then
a patriotic virtue.
Meanwhile the New England trader had appeared--that adorable, hymning,
unconscious pirate who bought molasses in the French West Indies,
swapped it for rum at Salem, Mass., traded the rum for Negroes on the
African coast, exchanged the Negroes for tobacco in Virginia, and sold
the tobacco for money in Europe, at a profit to be settled with God.
This trade brought a great deal of money to the colonies; and they
needed money almost more than anything else. Then the British laid a
ban on trade with the French West Indies, put a tax upon coastwise
traffic between the colonies; and decreed that American tobacco should
be exported nowhere but to English ports, although--or because--tobacco
prices were higher everywhere else in Europe. The natural consequence
of this restrictive British legislation was to make American business
utterly lawless. As much as a third of it was notoriously conducted in
defiance of law. Smuggling both in domestic and foreign trade became
a folk custom. John Hancock, the first signer of the Declaration of
Independence, was a celebrated smuggler.
During the War of Independence domestic craft industry was stimulated
by necessity. But the means were crude and the products imperfect; and
when, after peace, British merchants with an accumulation of goods
on their hands began to offer them for sale in the United States at
low prices, hoping to recover their new-world trade in competitive
terms, the infant industries cried out for protection. They got
it. One of the first acts of the American Congress was to erect a
tariff against foreign-made goods in order that the country might
become self-sufficing in manufactures. This was the beginning of our
protectionist policy.
Fewer than four million unbusiness-like people coming into free
possession of that part of the North American continent which is
named America was a fabulous business event. We cannot even now
comprehend it. They had not the dimmest notion of what it was they were
possessed of, nor what it meant economically. Geography ran out at the
Mississippi. The tide of Westward immigration was just beginning to
break over the crest of the Alleghany mountains.
Over-seas trade grew rapidly, as there was always a surplus of food and
raw materials to be exchanged abroad for things which American industry
was unable to provide. Foreign commerce was an important source of
group-wealth and public interest was much concerned with it. Besides,
it was easier to trade across seas than inland. Philadelphia until
about 1835 was nearer London than Pittsburgh, not as the crow flies
but as freight moves. Domestic business, arising from the internal
exchange of goods, developed slowly, owing partly to the wretched state
of transportation and partly to the self-contained nature of families
and communities. The population was more than nine-tenths rural; rural
habits survived even in the towns, where people kept cows and pigs,
cured their own meats, preserved their own fruits and vegetables, and
thought ready-made garments a shocking extravagance. Business under
these conditions performed a subservient function. People’s relations
with it were in large measure voluntary. Its uses were more luxurious
than vital. There was not then, nor could any one at this time have
imagined, that interdependence of individuals, groups, communities,
and geographical sections which it is the blind aim of business
increasingly to promote, so that at length the case is reversed and
people are subservient to business.
In Southern New Jersey you may see a farm, now prosperously devoted to
berry and fruit crops, on which, still in good repair, are the cedar
rail fences built by a farmer whose contacts with business were six or
eight trips a year over a sand road to Trenton with surplus food to
exchange for some new tools, tea, coffee, and store luxuries. That old
sand road has become a cement pavement--a motor highway. Each morning
a New York baking corporation’s motor stops at the farm-house and the
driver hands in some fresh loaves. Presently a butcher’s motor stops
with fresh meat, then another one with dry groceries, and yet another
from a New York department store with parcels containing ready-made
garments, stockings and shoes.
Consider what these four motors symbolize.
First is an automobile industry and a system for producing, refining
and distributing oil which together are worth as much as the whole
estimated wealth of America three generations ago.
Back of the bakery wagon what a vista! An incorporated baking industry,
mixing, kneading, roasting, and wrapping the loaf in paraffine paper
without touch of human hands, all by automatic machinery. Beyond the
Mississippi, in a country undiscovered until 1804, the wheat fields
that are ploughed, sown, reaped by power-driven machinery. In Minnesota
a milling industry in which the miller has become an impersonal flour
trust. A railroad system that transports first the grain and then the
flour over vast distances at rates so low that the cost of two or three
thousand miles of transportation in the loaf of bread delivered to the
New Jersey farm-house is inexpressible.... Back of the butcher’s motor
is a meat-packing industry concentrated at Chicago. It sends fresh meat
a thousand miles in iced cars and sells it to a New Jersey farmer for
a price at which he can better afford to buy it than to bother about
producing it for himself.... Back of the grocer’s motor are the food
products and canning industries. By means of machinery they shred,
peel, hull, macerate, roll, cook, cool, and pack fruits, cereals, and
vegetables in cartons and containers which are made, labelled, and
sealed by other automatic machinery.... And back of the department
store motor are the garment-making, shoe-making, textile, and knitting
industries.
If one link in all this ramified scheme of business breaks there is
chaos. If the State of New Jersey were suddenly cut off from the
offices of business for six months, a third of her population might
perish; not that the State is unable potentially to sustain her own,
but that the people have formed habits of dependence upon others, as
others depend upon them, for the vital products of specialized labour.
All this has happened in the life of one cedar rail fence. You say
that is only fifty or sixty years. Nevertheless it is literally so.
The system under which we live has been evolved since 1860. The
transformation was sudden. Never in the world were the physical
conditions of a nation’s life altered so fast by economic means. Yet
it did not happen for many years. The work of unconscious preparation
occupied three-quarters of a century.
Man acts upon his environment with hands, tools, and imagination; and
business requires above everything else the means of cheap and rapid
transportation. In all the major particulars save one the founders
were ill-equipped for their independent attack upon the American
environment. At the beginning of the 19th century there were no
roads, merely a few trails fit only for horseback travel. There were
no canals yet. And the labour wherewith to perform heavy, monotonous
tasks was dear and scarce and largely self-employed. Though the hands
of the pioneer are restless they are not patiently industrious. There
was need of machinery such as had already begun to revolutionize
British industry, but the English jealously protected their mechanical
knowledge.
There is a tradition that the Americans were marvellously inventive
with labour-saving devices. That is to be qualified. Their special
genius lay rather in the adaptation and enthusiastic use of such
devices. The introduction of them was not resisted as in the older
countries by labour unwilling to change its habits and fearful of
unemployment. This was an important advantage.
The American textile industry was founded by British artisans who
came to this country carrying contraband in their heads, that is, the
plans of weaving, spinning, and knitting machines which the English
guarded as carefully as military secrets.... The pre-eminence of this
country in the manufacture and use of agricultural implements is set
out in elementary school-books as proof of American inventiveness; yet
the essential principles of the reaper were evolved in Great Britain
forty years before the appearance of the historic McCormick reaper
(1831) in this country, and threshing-machines were in general use in
England while primitive methods of flailing, trampling, and dragging
prevailed in America. As recently as 1850 the scythe and cradle reaped
the American harvest and there still existed the superstition that
an iron plough poisoned the soil and stimulated weeds. Of all the
tools invented or adopted the one which Americans were to make the
most prodigious use of was the railroad; yet the first locomotive was
brought from England in 1829, the embargo on machinery having by this
time been lifted--and it failed because it was too heavy!
Twenty years passed and still the possibilities of rail transportation
were unperceived, which is perhaps somewhat explained by the fact
that the one largest vested interest of that time existed in canals.
On the map of 1850 the railroads resemble earthworms afraid to leave
water and go inland. The notion of a railroad was that it supplemented
water transportation, connecting lake, canal, and river routes, helping
traffic over the high places.
But in the next ten years--1850 to 1860--destiny surrendered. There
was that rare coincidence of seed, weather, deep ploughing, and
mysterious sanction which the miracle requires. The essential power of
the American was suddenly liberated. There was the discovery of gold
in California. There was the Crimean War, which created a high demand
abroad for our commodities. The telegraph put its indignities upon
time and space. The idea of a railroad as a tool of empire seized the
imagination. Railroads were deliriously constructed. The map of 1860
shows a glistening steel web from the seaboard to the Mississippi.
The gigantesque was enthroned as the national fetich. Votive offerings
were mass, velocity, quantity. True cities began. The spirit of Chicago
was born. Bigness and be-damnedness. In this decade the outlines of our
economic development were cast for good.
In the exclusive perspective of business the Civil War is an indistinct
episode. It stimulated industry in the North, shattered it in the
South. The net result in a purely economic sense is a matter of free
opinion. The Morse telegraph code probably created more wealth than the
war directly destroyed. Or the bitter sectional row over the route of
the first transcontinental railroad which postponed that project for
ten years possibly cost the country more than the struggle to preserve
the Union. But that is all forgotten.
After 1860 the momentum of growth, notwithstanding the war and two
terrible panics, was cumulative. In the next fifty years, down to
1910, we built half as much railroad mileage as all the rest of
the world. Population trebled. This fact stands alone in the data
of vital statistics. Yet even more remarkable were the alterations
of human activity. The number of city dwellers increased 3½ times
faster than the population; the number of wage-earners, 2 times
faster; clerks, salesmen, and typists, 6½ times faster; banks, 7
times faster; corporations, 6½ times faster; miners, 3 times faster;
transportation-workers, 20 times faster, and the number of independent
farmers decreased. Wealth in this time increased from about $500 to
more than $1,500 _per capita_.
If America in its present state of being had been revealed to the
imagination of any hard-headed economist in, say, 1850, as a mirage or
dream, he would have said: “There is in all the world not enough labour
and capital to do it.” He could not have guessed how the power of both
would be multiplied.
First there was the enormous simple addition to the labour supply
in the form of immigration. Then the evolution of machinery and
time-saving methods incredibly increased the productivity of labour
per human unit. Thirdly, the application of power to agriculture and
the opening of all that virgin country west of the Mississippi to
bonanza-farming so greatly increased the production of food per unit
of rural labour that at length it required only half the population to
feed the whole. The other half was free. Business and industry absorbed
it.
Of what happened at the same time to capital, in which term we include
also credit, there could have been no prescience at all. Even now when
we think of building a railroad, a telephone system, or an automobile
factory the thought is that it will take capital, as of course it will
at first, but one should consider also how anything that increases the
velocity with which goods are exchanged, or reduces the time in which
a given amount of business may be transacted, adds to the functioning
power of capital. To illustrate this: the merchant of 1850 did business
very largely with his own capital unaided. He was obliged to invest
heavily in merchandise stocks. The turn-over was slow. His margin
of profit necessarily had to be large. But with the development of
transportation and means of communication--the railroad, telegraph,
and telephone--and with the parallel growth of banking facilities,
the conditions of doing business were fundamentally changed. All the
time-factors were foreshortened.
A merchant now has to lock up much less capital in merchandise, since
his stocks are easily and swiftly replenished. The turn-over is
much faster because people using suburban railways and street-cars
go oftener to shop. And not only is it possible for these reasons to
do a larger volume of business with a given amount of capital, but
the merchant now borrows two-thirds, maybe three-quarters, of his
capital at the bank in the form of credit. The same is true of the
manufacturer. Formerly he locked up his capital, first in raw materials
and then in finished products to be sold in season as the demand was;
and there was great risk of loss in this way of matching supply to
an estimated demand. Now he sells his goods before he makes them,
borrows credit at the bank to buy his raw materials, even to pay his
labour through the processes of manufacture, and when the customer
pays on delivery of the goods with credit which he also has borrowed
at the bank, the manufacturer settles with _his_ bank and keeps the
difference. An exporter was formerly one who bought commodities with
his own money, loaded them on ship, sent them on chance to a foreign
market, and waited for his capital to come back with a profit. Now he
first sells the goods to a foreign customer by cable, then buys them on
credit, loads them on ship, sells the bill of lading to a bank, uses
the proceeds to pay for the goods, and counts his profit. All large
business now is transacted in this way with phantom capital, called
credit; money is employed to settle differences only.
The effect of this revolution of methods upon the morals and manners
of business was tremendous. It destroyed the aristocracy of business
by throwing the field open to men without capital. Traders and brokers
over-ran it. The man doing business on borrowed capital could out-trade
one doing business on his own. The more he borrowed, the harder he
could trade. Salesmanship became a specialized, conscienceless art.
There was no rule but to take all the traffic would bear: let the
buyer look out. Dishonesty in business became so gross that it had
to be sublimated in the national sense of humour. There are many
still living who remember what shopping was like even in the largest
city stores when nobody dreamed of paying the price first asked and
counter-higgling was a universal custom. Indeed, so ingrained it
was that when A. T. Stewart in New York announced the experiment of
treating all buyers alike on a one-price basis his ruin was predicted
by the whole merchant community.
As credit both increases competition and enables a larger business
to be done on a small base of invested capital, the margin of profit
in business tends to fall. Under conditions of intense rivalry among
merchants and manufacturers operating more and more with phantom
capital the margin of profit did fall until it was very thin indeed.
This led to the abasement of goods by adulteration and tricks of
manufacture, which became at length so great an evil that the
government had to interfere with pure-food acts and laws forbidding
wilful misrepresentation.
There was a limit beyond which the cost of production could not be
reduced by degradation of quality. It was impossible to control prices
with competition so wild and spontaneous and with cheapness the
touchword of success. Therefore the wages of business were low, and
things apparently had come to an impasse. Yet out of this chaos arose
what now we know as big business. The idea was simple--mass production
of standardized foods. The small, fierce units of business began to be
amalgamated. As society is integrated by steps--clan, tribe, nation,
State--so big business passed through mergers, combines, and trusts
toward the goal of monopoly.
When a number of competing manufacturers unite to produce standard
commodities in quantity, much duplication of effort is eliminated,
time-saving methods are possible as not before, the cost of production
is reduced. There are other advantages. They are stronger than they
were separately, not only as buyers of labour, raw materials, and
transportation, but as borrowers of capital. The individual or firm
is the customer of a bank. The corporation makes a partnership with
finance.
Now a curious thing happens. The corporation with its mass production
restores the quality of goods. It is responsible for its products and
guarantees them by brands, labels and trade-marks. Sugar and oatmeal
come out of the anonymous barrel behind the grocer’s counter and go
into attractive cartons on his shelf, bearing the name of the producer.
Gloves, shirts, stockings, cutlery, furniture, meat products, jams,
watches, fabrics, everything in fact becomes standardized by name
and price and is advertised by the producer directly to the public
over the retailer’s head, so that the small retailer is no longer a
merchant in the old sense but a grumbling commission-man. Big business
has delivered itself from the impasse; it has recovered control of
its profits; but now the retailer’s margin of profit tends to become
fixed. What does the retailer do? He applies the same principle to the
last act of selling. Enter the chain-store. Obviously a corporation
owning a chain of several hundred stores and working, like the
manufacturer, with borrowed capital, is stronger than any one retailer
to bargain with the powerful producers, and as the chain-store tends
to displace the little retailer a balance is restored between the
business of production and the business of retailing. Mass production
is met by mass selling. The consumer as the last subject may resort to
legislation for his protection.