railroads. Their dilemma was similar. Strife and competition had ruined
their profits. To begin with, nobody knew what it cost to produce
transportation. When a new line was opened it made rates according to
circumstances. At points where it met water competition it charged
very little, sometimes less than the cost of its fuel, and at points
where there was no competition it charged all the traffic would stand.
Then as competitive railroad-building excessively increased the high
rates steadily fell. Once they got started people were obsessed to make
railroads. They made them for speculative reasons, for feudal reasons,
for political reasons, for any reason at all. Two men might quarrel in
Wall Street, and one would build a thousand miles of railroad to spite
the other--build it with the proceeds of shares sold to the public or
hypothecated at the bank. Then there would be two roads to divide the
business of one. Railroads under these conditions were unscientifically
planned and over-built. The profit was rather in the building than
in the working of them. There was scandal both ways. Quantities of
fictitious capital were created and sold to the public. And when a
railroad was built it became the plaything of its traffic manager, who
conspired with other traffic managers to sell favours to shippers and
to invent disastrous rate-wars in order to profit by the fall of shares
on the stock market.
Rates could not be raised or held up, owing to the irresponsible
nature of the competition. Transportation is a commodity that cannot
be adulterated. How was the profit to be restored in this field of
business? Why, by the same method as in industry. That is, by mass
production.
Some one discovered that once you got a loaded train out of the
terminal and rolling on the right-of-way it cost almost nothing to
keep it moving. There was no money in hauling small lots of freight
short distances at the highest rates that could be charged; but there
was profit in moving large quantities of freight in full cars over
long distances at very low rates. At this the railroad people went mad
over the long, heavy haul. Here was industry seeking to concentrate
itself in fewer places for purposes of mass production; and here were
the railroads wanting masses of freight to move long distances. Their
problems coincided.
Result: mass production gravitates to those far-apart long-haul points
to get the benefit of low rates, there is congestion of industrial
population at those points, industry at intermediate points is
penalized by higher freight rates, and the railroads henceforth equip
themselves with mass tonnage primarily in view. You begin now to have
steel towns, meat towns, flour towns, textile towns, garment towns, and
so on. That interdependence of communities and geographical sections
which makes business is in full development.
However, the second state of the railroad is worse than the first. It
is overwhelmed by the monster it has suckled. It is at the mercy of
a few big shippers, masters of mass production, who bully it, extort
lower and lower rates still, and at length secret rebates, under threat
of transferring their tonnage to another railroad or in some cases of
building their own railroad, which now they are powerful enough to do.
The railroad yields; and whereas before only such industry as survived
at intermediate points was penalized by higher freight rates, now
all industry outside of big business is at a disadvantage, since big
business is receiving secret benefits from the railroads.
There was no philosophy in any of this, not even a high order of
intelligence. The will of business is anarchistic; its religion is
fatalism. If let alone, it will seek its profit by any means that serve
and then view the consequences as acts of Providence.
It has been noted that big business, going in for mass production,
restored the honesty of goods. The motive was not ethical. It paid. The
public’s good will toward a brand or a trade-mark was an asset that
could be capitalized, sometimes for more than plant and equipment, and
the shares representing such capitalization could be sold to the public
on the Stock Exchange. But what was gained for morality in the honesty
of goods was lost again in new forms of dishonesty. Standard Oil
products were always cheap and honest; its oil was never watered. But
the means by which the Standard Oil Company gained its dangerous trade
eminence were dishonest, and the trust was dissolved for that reason by
the United States Supreme Court. It happens to be only the most notable
instance. There were and are still many others--combines and trusts
whose products are honest but whose tradeways are either illegal or
ethically repugnant.
One cannot say that business is either honest or dishonest. It is both.
Evidence of permanent gain in a kind of intrinsic commercial honesty is
abundant. Wild-cat banking has disappeared. A simple book entry between
merchants is as good as a promissory note. The integrity of merchandise
now is a trade custom. Vulgar misrepresentations have ceased save in
the slums of business. The practice of making open prices to all buyers
alike, wholesale and retail, is universal. It is no longer possible to
print railroad shares surreptitiously overnight and flood the Stock
Exchange with them the next morning, as once happened in Erie. Nowhere
is character more esteemed than in business.
And yet, in spite of all this and parallel with it, runs a bitter feud
between society and business. People are continually acting upon big
business through the agencies of government to make it behave. What is
the explanation?
Well, in the first place, the improvement in commercial honesty
has been owing not so much to ethical enlightenment as to internal
necessity. Big business must do its work on credit; there is no other
way. Therefore credit is a sacred thing, to be preserved by all
means. Men know that unless they are scrupulous in fulfilling their
obligations toward it, the system will collapse. As the use of credit
increases the code of business become more rigid. It must. One who
breaks faith with the code is not merely dishonest, man to man; he is
an enemy of credit.
If a stock-market coterie of this day could print Erie shares without
notice and sell them the public would suffer of course but Wall Street
would suffer much more. Its own affairs would fall into hopeless
disorder. That kind of thing cannot happen again. The code has been
improved. You now may be sure that anything you buy on the Stock
Exchange has been regularly issued and listed. No institution is more
jealous of the integrity of its transactions--transactions as such.
Purchases and sales involving millions are consummated with a nod
of the head and simple dishonesty is unknown. Nevertheless, it is a
notorious fact that the amount of money nowadays lost on the Stock
Exchange by the unwary public is vastly greater than in Jay Gould’s
time. There is, you see, an important difference between formal and
moral honesty.
Secondly, business morality is a term without meaning. There is no
such thing. Business is neither moral nor immoral. It represents man’s
acquisitive instinct acting outside of humanistic motives. Morals are
personal and social. Business is impersonal and unsocial.
So far we come clear. Only now, what shall be said of the man in
business? He is not a race apart. He may be any of us. How then shall
we account for the fact that those evils and tyrannies of big business
with which the Congress, the Interstate Commerce Commission, the
Department of Justice, the Federal Trade Board, and other agencies
of the social will keep open war are not inhibited at the head by an
innate social sense? Does the business man lose that sense? Or by
reason of the material in which he works does he become an unsocial
being? No. The answer is that the kind of business we now are talking
about is not conducted by men. It is conducted by corporations.
A thing of policy purely, with only legal responsibilities and no
personality, free from hope of heaven or fear of hell, the corporation
is both a perfect instrument for the impersonal ends of business and a
cave of refuge for the conscience. Business by corporations is highly
responsible in all that pertains to business. Business by corporations
is in all ethical respects anonymous. A corporation does many things
which no one of its directors would do as an individual. The head
of a corporation says: “If it were my own business, I should handle
this labour problem very differently. But it isn’t. I am a trustee,
answerable to five thousand stockholders for the security of their
dividends.” Each of the five thousand stockholders says: “It isn’t my
business. I am merely one of a great number of stockholders. What can I
do about it?”
Nobody is personally responsible.
More than two-thirds of our national wealth is owned by corporations.
They control at some point every process of economic life. Their power
is so great that many have wondered whether in time it might not
overwhelm popular government. Yet in all this realm of power there is
nowhere that sense of personal moral liability which is acknowledged
between men and without which civilized human relationships would
become utterly impossible. A corporation is like a State in this
respect: it cannot, if it would, make moral decisions. The right to do
that is not delegated by people to a State nor by stockholders to a
corporation. Both therefore are limited to material decisions.
It is probably owing as much to the power-thirsty, law-baiting
temperament of the American in business as to the magnitude of the
work to be done that the use of the corporation, like the use of
labour-saving machinery, has been carried further here than in any
other country. Railroads naturally were the first great corporations.
The amount of capital required to build a railroad is beyond the
resources of any small group of individuals; it must be gathered from
a large number, who become shareholders. The original railroads were
subsidized by the government with loans of money and enormous grants
of land. Industrial and trading corporations came later. For a long
time America was to all corporations a Garden of Eden. They were
encouraged, not precisely that they were presumed to be innocent but
because they were indispensable. Then they ate of the Tree of Political
Power and the feud was on. When people began really to fear them their
roots were already very deep and touched nearly everything that was
solid. The sinister alliance between big business and high finance was
accomplished.
One of the absurdities of the case was and is that any State according
to its own laws may grant corporation-charters which carry rights of
eminent domain in all other states. The Standard Oil Company was once
dissolved in Ohio. It took out a new charter in New Jersey, and went on
as before, even in Ohio.
Every attempt to reform their oppressive ways by law they have resisted
under the constitution as an attack upon the rights of property. And
there has always been much confusion as to what the law was. In one
case it was construed by the United States Supreme Court to mean that
bigness itself, the mere power of evil, was illegal whether it had been
exercised or not; in another, that each instance must be treated on its
merits by a rule of reason, and, in still another, that the potential
power to restrain trade in a monopolistic manner was not in itself
illegal provided it had never been used.
Nevertheless the doubt as to which should control the other--the State
the corporations or the corporations the State--has been resolved.
Gradually the authority of the State has been asserted. The hand of the
corporation in national politics is branded. The Federal Government’s
control over the rates and practices of the railroads is complete; so
likewise is the control of many of the several separate States over the
rates and practices of public-utility corporations. Federal authority
over the tradeways of the great industrial and trading corporations
whose operations are either so large or so essential, to economic
life as to become clothed with public interest is far advanced; and
supervision of profits is beginning.
Now what manner of profit and loss account may we write with American
business?
Given to begin with an environment superb, it has made wealth available
to an aggregate extent hitherto unimaginable in the world. But in doing
this it has created a conscious, implacable proletariat in revolt
against private profit.
In production it has brought about a marvellous economy of human
effort. At the same time it has created colossal forms of social
waste. It wastes the spirit by depriving the individual of that sense
of personal achievement, that feeling of participation in the final
result, which is the whole joy of craftsmanship, so that the mind is
bored and the heart is seared. It wastes all things prodigally in the
effort to create new and extravagant wants, reserving its most dazzling
rewards for him that can make two glittering baubles to sell where only
one was sold before. It wastes the living machine in recurring periods
of frightful and unnecessary idleness.
For the distribution of goods it has perfected a web of exchange, so
elaborate that the breaking of one strand is a disaster and yet so
trustworthy that we take its conveniences every day for granted and
never worry. But the adjustment of supply to demand is so rude and
uncontrolled that we suffer periodic economic calamities, extreme
trade depression, and social distress, because there has been an
over-production of some things at a price-impasse between producer and
consumer.
In the field of finance and credit it has evolved a mechanism of the
highest dynamic intensity known; yet the speculative abuse of credit is
an unmitigated scandal, and nothing whatever has been done to eliminate
or diminish those alternations of high and low prices, inflation and
deflation, which produce panics and perilous political disorder. On the
contrary, business continues fast in the antique superstition that such
things happen in obedience to inexorable laws.
In the Great War American business amazed the world, itself included.
In 1914 the United States was a debtor nation, owing Europe 3 billions
of dollars. By the end of 1920 we were the largest creditor nation
on earth, other nations owing us 15 billions. This means simply
that in six years this country produced in excess of its own needs
and sent abroad commodities amounting to 18 billions of dollars. In
1921, to the naïve astonishment of business, the foreign demand
for American goods slumped because foreign countries had not the
means to go on buying at any such rate. The result was an acute
panic in prices here, trade prostration, unemployment, and sounds of
despair. The case was stated by leaders of business and finance in
these ominous terms: “America is over-equipped. It has the capacity
to produce more of everything than it needs. Therefore unless we
continuously sell our surplus abroad, unless the American government
will lend foreign countries the credit with which to buy our excess
production, prosperity is shattered. Factories will shut up, fields
will lie fallow, labour will suffer for want of work. Moreover, we are
threatened with a deluge of foreign goods, for presently the countries
that owe us 18 billions of dollars will be trying to pay us with
commodities. If we open our markets to their goods our own industries
will be ruined. So we must have high tariffs to protect American
producers from the competition of foreign merchandise.”
Ruined by over-plenty!
We are equipped to produce more of the goods that satisfy human wants
than we can use, our command over the labour of foreign countries by
reason of the debt they owe us is enormous, and _business desponds_.
Attend. To keep our prosperity we must sell away our surplus, or if
necessary give it away to foreign countries on credit, and then protect
ourselves against their efforts to repay us! The simple absurdity
of this proposition is self-evident. We mention it only for what
it signifies. And it signifies that business is a blind, momentous
sequence, with extravagant reflex powers of accommodation and extension
and almost no faculty of original imagination.
American business despairing at over-production and the American Indian
shivering on top of the Pennsylvania coalfields--these are twin ironies.
John Law’s Mississippi Bubble dream three centuries ago was a phantasy
of escape from the boredom of toil. The bubble itself has been
captured. That is the story of American business. But who has escaped,
save always a few at the expense of many? There may be in fact no other
way. Still, the phantasy will not lie. And nobody knows for sure what
will happen when business is no longer a feudal-minded thing, with
rights and institutions apart, seeking its own profit as the consummate
end, and perceives itself in the light of a subordinate human function,
justified by service.
GARET GARRETT
ENGINEERING
American engineering made its beginning almost immediately after
the end of the War for Independence. The pursuits of the colonists
under British domination were mainly agricultural. Manufacturing was
systematically thwarted in order that the Colonies might become a
market for the finished goods of England. Objection to this form of
sabotage subsequently developed into one of the main causes of the
Revolutionary War. It was but natural, therefore, as soon as the
artificial restrictions imposed upon Colonial enterprise were removed,
for the new citizens of America to devise machinery, build roads and
canals, and plan cities.
The early engineers who carried on this work were seldom formally
trained. They were little more than higher types of artisans. It was
only after thirty-odd years of discussion and agitation that the first
scientific schools were established in this country--two in number. And
it was only after the enactment of the Morrill Act by Congress (1862)
that formal engineering training as we know it to-day was put on a firm
national basis. By 1870, 866 engineers had been graduated from American
technical schools and colleges. The real advent of the typical American
engineer, however, has only occurred since 1870. At present he is being
supplied to the industries of the country at the rate of 5,000 a year.
The coming of the formally trained technologist or scientist of
industry lagged somewhat behind the development of the industrial
revolution. This was particularly true in America. Originally all
attention was centered on the training of so-called civil engineers,
i.e., canal, bridge, road, dam and building designers and constructors.
The rapid rise of the mechanical arts after the Civil War focused
attention on the training of engineers expert in manufacturing. To-day
the mechanical and electrical engineers are more numerous than any
other group and have far outstripped the civil engineers.
The original function of the engineer, especially in the first
days of his systematic training, was to deal scientifically with
purely mechanical problems. Thus the oft quoted definition of the
British Institution of Civil Engineers that “Engineering is the art
of directing the great sources of power in nature for the use and
convenience of man” reveals quite clearly the legitimate field within
which the engineer was supposed to operate. He was to harness the
untamed energies of nature. That this conception was then sufficient,
and that the careers of most engineers were shaped accordingly, is
hardly to be disputed. Nor, judging from the achievement of American
engineers in the last fifty years, can it be contended that their
function was conceived in too narrow a light. Undoubtedly, the problems
of mechanical production, power-creation and transmission, bridge and
building construction, and railway and marine transportation, during
this period were largely material ones, and the opportunities for
their solution were especially good. To these the engineers directed
their attention. Thanks to their training, technique, and accumulated
experience, they became more and more successful in solving them.
At the same time, their relative freedom of thought and action with
reference to technological problems brought them into more or less
coherent groups which, as time went on, began to conceive a larger
function for the engineer--service to society as a whole rather than
the solving of mere concrete, specific difficulties.
For while the material problems of production are undoubtedly as
important as ever, the present-day industrial system has begun to
reveal new problems which the engineer in America has, to a limited
extent, come to realize must be faced. These new problems are not
material in the old sense of the word; they concern themselves with the
control and administration of the units of our producing system. Their
nature is psychological and economic.
Certain groups in the American engineering profession have become quite
conscious that these deeper problems are not being solved; at the same
time they consider it a necessary duty to help in their solution,
inasmuch as the engineer, they feel, is peculiarly fitted to see his
way clearly through them. Thus is being split off from the main body
of old-line engineers, a new wing not so much concerned with wringing
power from nature as with adjusting power to legitimate social needs.
As against the old engineer, concerned primarily with design and
construction, there is to be recognized the new engineer, concerned
mainly with industrial management.
Unfortunately, however, a strict evaluation of the engineer’s status
with reference to the influence he may have on the solution of these
social and economic problems causes serious doubts to arise regarding
his ultimate possibilities in this field. Despite his great value and
recognized indispensability as a technologist, expert in problems
of materials and processes of manufacture, he can at best but serve
in an advisory capacity on questions affecting the division of the
national surplus or the control of industry. Nevertheless, it is of
fundamental significance that the American engineering profession has
of late considerably widened the scope of the British Institution of
Civil Engineers’ definition of engineering, namely, to the effect that
“Engineering is the science of controlling the forces and utilizing the
materials of nature for the benefit of man _and the art of organizing
and of directing human activities in connection therewith_.” The
implications of this much broader definition, if widely accepted,
will bring the American engineers sooner or later squarely before a
fundamental issue.
The ideal of service is profoundly inherent in the profession of
engineering. But so, also, is the ideal of creative work. The
achievements of engineering enterprise are easily visualized and
understood, and from them the engineer is wont to derive a great
deal of satisfaction. Recently, however, the exactions of the modern
complex economic system, in which the engineer finds himself relatively
unimportant compared with, say, the financier, have contrived to rob
him of this satisfaction. And as his creative instincts have been
thwarted, he has turned upon business enterprise itself a sharp and
inquiring eye. From isolated criticisms of wastes and inefficiencies in
industry, for instance, he has not found it a long or difficult step to
the investigation of industry on a national basis for the purpose of
exposing technical and managerial shortcomings.
It appears, however, that the majority of American engineers
to-day believe that their position as a class is such that they can
effectively maintain an impartial position when differences which arise
between large economic groups of society such as those of the merchant,
the manufacturer, the labourer, the farmer, although these differences
frequently lead to economic waste and loss. At all events, it is on
this basis that attempts are being made to formulate a general policy
for engineers as a class to pursue. It is very doubtful, however,
whether a group such as the engineers, constituting the “indispensable
general staff of industry,” can long take an impartial attitude towards
two such conflicting forces as capital and labour so long as they (the
engineers) adhere to the ideal of maximum service and efficiency. The
pickets of the fence may eventually prove unduly sharp.