1. Why Organize?
2. Freedom from Primitive Struggle.
3. Freedom from Servility.
4. Wisdom in Consumption.
5. Leisure for Effective Expression.
6. Culture and Human Aspiration.
WHAT TO READ 164
THE NEXT STEP
I. THE NEW ECONOMIC LIFE
1. _The Historic Present_
The knell of a dying order is tolling. Its keynote is despair. Gaunt
hunger pulls at the bell-rope, while dazed humanity listens, bewildered
and afraid.
Uncertainty and a sense of futility have gripped the world. They are
manifesting themselves in unrest, disillusionment, the abandonment of
ideals, opportunism, and a tragic concentration on the life of the
moment, which alone seems sure. The future promises so little that even
the most hopeful pause on its threshold, hesitant, and scarce daring to
penetrate its mystery.
The war showed the impotence of the present order to assure even a
reasonable measure of human happiness and well-being. Of what profit the
material benefits of a civilization that takes a toll of thirty-five
millions of lives and that wrecks the economic machinery of a continent
in four short years? Yet the failure of the revolutionary forces to
avail themselves of the opportunity presented by the war proved the
unreadiness of the masses to throw off the yoke of the old regime and to
lay the foundations of a new order. The world rulers painted a picture
of liberated humanity that led tens of millions to fight with the
assurance that victory would make that hope a reality. The workers
yearned for the social revolution and for the establishment of the
co-operative commonwealth with its promise of equality and fraternity.
But the events that staggered the world between 1914 and 1920 shattered
both ideals.
Now that the terrible conflict has ceased, we pause and reflect.
Millions are weary, millions are old, millions are broken, millions are
disappointed, and the weary ones, the old ones, the broken ones and the
disappointed ones have lost their vision and have abandoned their faith.
Yet life sweeps on--its unity unimpaired, its continuity unbroken, its
force unchecked, its vigor unabated. Multitudes have been born since the
end of the Great War, and other multitudes, who were babes in arms when
the Great War began, are growing into young manhood and womanhood. The
war, with its hardships and its fearful losses, is history. The present,
merging endlessly with the future, makes of each day a to-morrow in
which hundreds of millions of those who now inhabit the earth will live.
How?
That is the question which the world to-day faces. The answer is in our
hands.
2. _Economic Needs_
Humanity has always been face to face with the bread and butter problem
because people must have food and clothing and a roof over their heads
or pay the penalty in physical suffering. Under the present world order,
for lack of these simple economic requirements, millions of
poverty-stricken workers perish each year, of slow starvation and
exposure in Paris, London, Chicago, Tokyo; of famine in China, Egypt and
India.
Some issues present themselves for consideration only occasionally. The
demand for economic necessaries each day recurs with tireless insistence
in the life of every individual. Men have learned this fact through
frightful experiences, and they look forward with hope or with dread to
the comfort of plenty or to the disaster of want. So effectually have
these forces entered into everyday life that they color all aspects of
human existence, and people continually think and act in terms of
economic hardship or of economic well-being. This simple fact of
economic determinism--the influence of the livelihood struggle upon the
conduct of individuals and of societies--plays a fateful part in shaping
both biography and history.
The economic issues before primitive society were comparatively simple
ones. The producer--the hunter, herder, farmer--snared his game and
cooked it, tended his goats and lived on their milk and flesh, planted
and reaped his crops, and used them to sustain life. Later, the baker,
the saddler, the tailor and the carpenter spent their energies in
producing the articles of their trade and in disposing of them. The
herdsman could live on his hills, the farmer in his valleys and the
artisans in their towns, content and at peace with the remainder of the
world, neither knowing nor caring what was happening to their fellow
dwellers on the planet. Confined within its narrow bounds, primitive
thought was as local as primitive life.
But such isolation is no longer possible. The currents of economic life,
like most other phases of human activity, have swept beyond the local
forests, the grass lands, the tilled fields, the oven and the
carpenter's bench, and gaining momentum in their ever-widening course,
they have circled the world.
3. _Worldizing Economic Activity_
The past hundred years have witnessed a speedy worldizing of human
affairs built upon a transformation in the ways of making a living.
These changes have been effected by the industrial revolution, which,
toward the end of the eighteenth century began to make itself felt in
Great Britain. Its influence spread over Europe, America and Australia
during the last three-quarters of the nineteenth century, but it did not
reach Japan until 1860. Almost within the memory of the present
generation, therefore, the scope of trade, manufacture and finance, the
search for markets, the organization and unification of labor and of
popular thinking about economic problems, have passed from a local into
a world field.
The inventions and discoveries which were the immediate cause of the
industrial revolution succeeded one another with a bewildering rapidity
that is well illustrated in the case of communication. The steamboat,
first made practicable in 1807, and the locomotive, invented about 1815,
provided the means of rapid transportation of goods, people and
messages. The power press (1814) and the manufacture of paper from
wood-pulp (begun in 1854) made possible cheap and abundant reading
matter. The telegraph, invented about 1837, laid the basis for
instantaneous communication. The first trans-Atlantic cable (1858)
annihilated the water barrier to thought. The telephone (1876) and the
wireless (1896) brought the more remote parts of each country and of the
world within easy reach of the centers of civilization, while the
radio-phone (1921) enables millions to sit around a common table for
thought, instruction or enjoyment. The camera (1802) supplemented by the
moving picture process (1890) has enabled those who do not read to
secure information that was formerly reserved for the learned and the
cultured. Thus steam, electricity, and a number of other discoveries and
inventions in the realm of natural science have brought the minds of the
world in as close touch as were the inhabitants of a fifteenth century
Italian city.
The effects of industrialism date only from history's yesterday, yet its
results have already been momentous and far-reaching. This is
particularly true of the close dependence of industries upon supplies of
raw materials and fuels, of the volume and the variety of the goods
produced and transported, of the speed with which communications are
sent, of the widened opportunities for travel, and of the immense amount
of information on the printed page and the film that goes, each day,
from one part of the world to another.
Nature has not scattered coal, iron, copper and sugarland over the earth
in the same lavish way that she has distributed air and sunshine. On the
contrary, the important resources from which industry derives its raw
materials and its fuels are found within very limited areas to which the
remainder of the world must go for the commodities that supply its basic
industries.
Within each country raw materials are produced at one point and shipped
elsewhere. Ore, coal, grain and meat-animals make up the bulk of the
freight tonnage in Europe, in America and in Australia. A similar
economic relation exists between the various countries, some of which
produce far more than their proportionate share of minerals and fuels.
Thus, in 1913, the United States, with but 7 per cent of the world's
population, produced 36 per cent and consumed 37 per cent of the world's
iron ore supply. The figures for the other important nations were:
("World Atlas of Commercial Geology," Dept. of the Interior, Washington,
1921, p. 27)
Per Cent Per Cent
Produced Consumed
Germany 20 27
Britain 9 14
France 12 7
Russia 5 5
Belgium 0 4
Spain 6 1
Only in France and Spain did production exceed consumption. Four of the
remaining countries used more iron ore than they produced, which meant
that they were forced to depend upon some other country for their
supply. Belgium, with her many industries, imported practically all of
the iron ore that she used.
Coal furnishes an even more striking illustration of the economic
dependence of one part of the world upon another. The production and
consumption of coal, for 1913, in millions of tons, were as follows:
Tons Tons
Produced Consumed
United States 517 495
Britain 292 217
Germany 191 167
France 40 60
Italy 1 10
Austria-Hungary 17 30
The United States, Britain and Germany produced, in this one year, 121
millions of tons of coal that were either stored or exported. France,
Italy and Austria, together with many of the smaller industrial
countries of Europe were forced to depend upon their neighbors for coal.
In the case of Italy, practically all of the coal used was imported.
Again, the United States and Spain are alone among the principal
countries producing a surplus of copper. Out of a consumption (1913) of
127,000 tons, Britain imported 126,572; France imported 91,437 of the
91,486 tons consumed, and Germany, out of 259,300 tons consumed,
imported 234,000 tons.
These figures of the production and consumption of iron, coal and copper
tell the story of an economic interdependence that makes isolated
industrial life virtually impossible. Manufacturing and transport depend
for their maintenance upon minerals and fuels, and those countries that
propose to manufacture and to transport must either produce minerals
themselves or depend upon some other country that does produce them. In
practice, a few countries are enabled to produce more of the minerals
and fuels than they themselves use, and to sell the surplus to their
needy neighbors.
With the spread of the industrial system, this dependence will increase
rather than diminish because of the way in which the reserve supplies of
minerals and fuels are distributed. The principal deposits of iron,
coal, copper and petroleum are apparently in the Western Hemisphere, and
particularly in North America. In so far as this is true, the remainder
of the world will be compelled to look to the Americas for these basic
commodities. Out of a total world product of iron ore (1913) of 177
millions of tons, the United States produced 63 millions (over a third)
because that country is far better supplied with available iron ore
deposits than is any other country. Since the war, France holds the
second largest deposits, but the third largest are in Newfoundland, the
fourth largest in Cuba, and the fifth largest in Brazil, whose "enormous
deposits are almost untouched" ("Atlas," p. 26). As for coal, about
three-fourths of the world's known reserves are in North America. The
largest known reserves of copper are in North and South America--those
of Canada and Mexico are comparatively important; those of Chili
probably greater than any other country except the United States.
Petroleum is also highly localized. Between 1857 and 1918 the world's
production of petroleum was 1,005 millions of tons. Of this total,
three-fifths came from the United States, while seventeen-twentieths
came from the United States and Russia. Indeed, resources are limited
and localized to such a point that the economic survival of many parts
of the industrial world depends upon the continued importation of raw
materials from other countries or from other continents.
This localization of resources has resulted in a corresponding
localization of many of the basic industries. Germany thus became a
manufacturing center and Argentina a producer of food. Necessarily these
two countries exchange their products, the Germans eating Argentinian
wheat reaped by German machinery. So complete has this specialization
become, that industrial communities, and even industrial countries, like
Britain and Germany, have ceased to produce sufficient food for their
maintenance, and have relied, instead, on the American, African and
Australian grain fields.[1]
In order to buy wheat, these countries must sell manufactured goods. In
order to manufacture, they are compelled to import the raw materials and
fuels--cotton, copper, rubber, petroleum, coal, iron. The countries with
highly developed industries have therefore ceased to be self-sufficient.
Their whole economic life has become a part and parcel of the life of
the world.
This world interdependence is reflected in the growth of world commerce
from a total value of 1,659 millions of dollars in 1820, 4,049 millions
in 1850, and 20,105 millions in 1900, to 75,311 millions in 1919.
Meanwhile, the nominal tonnage of steam and sailing vessels increased
from 5.8 millions of tons in 1820 to 12.3 millions of tons in 1850, to
20.5 millions in 1900, and to 32.2 millions in 1919.
Resources are sought after, raw materials are transported and
manufactured into usable products, manufactured products are exchanged
for food and raw materials, and the cycle is thus completed. In its
course, all of the principal countries and all of the continents are
drawn upon for the means of maintaining economic life.
While the industrial revolution broke the spell of isolation that lay so
heavily upon the remote parts of the world, the driving power of the
economic forces that followed in its wake, has battered down the
geographic barriers that separate men, almost to the vanishing point.
Peoples work together, exchange the products of their labor, travel,
accumulate and spread news, broadcast ideas and organize and co-ordinate
business ventures and labor unions, without any great consideration for
geography, and despite the political boundary lines that separate
nations. A century of rapid economic development has brought the world
into a physical unity the like of which it has never before experienced.
Through the ages, human brotherhood has been the theme of philosophers
and poets. Recent economic changes have established a world fellowship,
not, to be sure, of the kind about which utopists had dreamed, but one
growing out of the exigencies of world interdependence.
Tens of millions are to-day co-operating in production and exchange, not
because of any sweet reasonableness but because the pre-emptory demands
of existence leave them no choice. Of necessity, therefore, since they
are in constant touch with one another, they begin to learn one
another's little ways; to inquire into the personalities of the
"foreigners" that pass them on the street, work with them elbow to elbow
in the shops, and eat with them at the same restaurant tables. This new
brotherhood is an outgrowth of day-to-day relations in an industrial
community.
Old time questions were of a kind that divided men. "Are you a
Christian?" "Where were you born?" "Can you speak Spanish?" No matter
how a man answered these questions he got himself into difficulty. If he
was a Christian, he found two-thirds of the world confronting him with
different religious beliefs. If he was born in France, he was compelled
to assume all of the enmities, hatreds and antagonisms felt by Frenchmen
for their rivals. If he spoke anything except Spanish, he was a
"foreigner" in Spain. The old world was a separatist world, lined with
walls, fences, boundary stakes and frontiers.
Modern questions bring men into touch with one another. "Can you repair
a locomotive?" "Do you understand coal mining?" "Can you carry us safely
to Japan?" "Will you take shoes in exchange for petroleum?" "Are you
able to get along with people?" "Have you any surplus wheat?" "How do
you suppose we can get rid of the boll-weevil?" "Let us show you a new
style tractor." If a man can repair an engine, he is wanted in an engine
shop. If he can dig coal, he is needed in a coal mine. If he has shoes
to exchange for fuel, he finds a ready customer. If he can get along
with an odd assortment of his fellows, he is in demand everywhere. The
new world is a co-operative world in which people are working together,
living together, thinking together; and a test of man's capacity to take
part in its activities lies in his ability to be an effective,
co-operating member of a world group.
[Footnote 1: Before the war Great Britain imported about half of her
food. By 1920 she was importing about three-quarters of it. On the basis
of the 1919-1920 harvests, British wheat sufficed for less than a third
of the British population. See "The Fruits of Victory," Norman Angell,
Glasgow. Collins, 1921, p. 9.]
4. _The Basis of a World Program_
With economic life established on a world scale, it is inevitable that
the range of men's thoughts and the lines of their social groupings
should assume the same general scope. The late war made it quite
apparent that war means world war, and that a real peace is impossible
unless it is a world peace. The post-war experience has shown with equal
clearness, that prosperity means world prosperity, and that it is
impossible to destroy the economic well-being of an integral part of the
world without destroying the well-being of the whole world. These things
were suspected before the war, when they formed the themes of moral
dissertations and scholarly essays, of syndicalist pamphlets, socialist
programs and revolutionary appeals. But it required the hard knocks of
the past eight years to lift them so far out of the realm of theory into
that of reality, that any thinking human being who faces the facts must
admit their truth.[2]
The economics of the modern world make it inevitable that thinkers on
public questions, particularly on economic questions, should frame their
thoughts in world terms, and that the practical plans for the
organization and direction of human affairs should be built around an
idea which includes these three elements:
1. _Any workable plan for the organization of the world must have an
economic foundation._
2. _Such a plan must include all of the economically essential
portions of the world._ It will be ineffective if it is confined to
any one nation, to any one group of nations, or to any one continent.
3. _Such a plan must rely, for its fulfillment, on world thinking and
world organization._
These propositions do not imply that economic forces and world
organization must become the centers of exclusive attention. There are
potent forces, other than economic ones, and there are forms of local
organization that must be developed or perpetuated as a matter of
course. But for the moment the economic forces and the world phases of
organization have assumed a position of primary importance.
[Footnote 2: The Manchester Guardian Commercial, Supplement for April
20, 1922, page IV, carries an advertisement signed by Sir Charles W.
Macara, Chairman and Managing Director of Henry Bannerman and Sons,
Ltd., Chairman of the Manchester Cotton Employers Association, etc.,
which contains a very forceful presentation of this point. "It is
impossible for any country to expect to win economic success at the
expense or in total indifference to the success of others.... The good
of one country is bound up with the good of another, and it is only by
studying what will be mutually advantageous that we shall find the key
to our good fortune.... The whole world is interdependent, and you
cannot injure one member of the international body without injuring all
the rest."]
5. _The League of Nations Failure_
The principal scheme recently advanced as a means of co-ordinating the
life of the world--the League of Nations Covenant--violates all three of
these essential principles. In the first place, the League Covenant,
with certain minor exceptions, is a political and not an economic
document, devoting its attention to territorial integrity and the
preservation of sovereignty, and passing over such economic problems as
resource control, and the competition for raw materials, markets and
investment opportunities as though they were non-existent. In the second
place instead of concerning itself with all of the integral parts of the
world, it treats nations other than the "big five" (Britain, France,
Italy, Japan and the United States) as though they were of second or of
third rate importance. China, India, Germany, Russia and Latin America,
with considerably more than half of the world's population, and with at
least half of the world's essential resources, were slighted or
ignored. In the third place, the League Covenant is not based on world
thinking. On the contrary, it was designed to set up one part of the
world, the victorious Allies, against four other parts of the world: the
enemy countries, Soviet Russia, the undeveloped (unexploited) countries,
and the small and powerless countries. Political, sectional and
provincial in its point of view, the League, as a means of world
organization, was destined, from its inception, to pathetic failure.
World economic life is an established fact of such moment that it must
be reckoned with in any scheme for social rebuilding.
A capacity for organization and for conscious improvement distinguishes
man from most of the animals. In the past, men have organized the army,
the church, the city, the nation, the school. The events surrounding the
industrial revolution have placed a new task on their shoulders--the
task of organizing world economic life.
Without doubt this is the largest and the most intricate problem in
organization that the human race has ever faced. On the other hand, the
interdependence of economic life invites co-ordination, while the
advances in organization methods, particularly among the masses of the
people, render the transition from local to world organization quite
logical and relatively easy--far easier, certainly, than the first
hesitating steps that the race took in the direction of co-operative
activities. Even though the task were far more difficult than it is, the
race must perform it or pay an immense price in hardship, suffering and
decimation.
The work is already begun. Private capitalists have built world systems
of trade, transport and banking. Soviet Russia has made an heroic
attempt to organize one portion of the earth's surface along economic
lines. For the most part, however, the task of co-ordinating the world's
economic life awaits the courage and the genius of a generation that
shall add this triumph to the achievements of the race.
6. _Axioms of Economic Reorganization_
Certain well-defined and widely understood principles, that might almost
be called axioms of social procedure, are to be reckoned with in any
effort at world economic reorganization. For convenience of discussion,
they may be summarized thus:
1. _The wheels of industry must be kept turning smoothly, regularly
and efficiently._
A country like Russia, consisting, for the most part of agricultural
villages, can survive, even though machine industries practically cease
to function, while such countries as Germany and Britain, built of
Bremens, Hamburgs, Essens, Glasgows and Manchesters are dependent for
their food supply as well as for their supply of raw materials upon the
continued production and transport of commodities. The State of Rhode
Island, with its 97.5 per cent of city and town dwellers, typifies this
dependence. Given such concentrated populations engaged in specialized
industries, and the cessation of production means speedy starvation for
those that cannot migrate.
2. _Provision must be made for improvements and betterments._
The increase of population and the normal advances in science and
industry both demand a volume of product adequate to cover the necessary
increases in equipment.
3. _The people who do the work must dispose of the products they turn
out._
They may consume them all, or they may reserve a portion of them for new
roads, for additional rolling stock, for the advancement of art and
learning. Whatever the character of the decision, the right and power to
make it rests with those who produce the goods of which a disposition is
being made.
4. _Justice and fair dealing must be embodied in the scheme of
production and distribution._
This does not mean absolute justice, but as much justice as the
collective intelligence and will of the community are able to put into
force. For the attainment of such a result, the forms of social life
must be constantly altered to keep pace with economic change.
5. _The foregoing principles must apply, not to one man, or class, or
people, but to all men, all classes and all peoples._
Recent events have shown that an injury to one is an injury to all.
Reasoning, foresight and experience will convince the people of the
world that a benefit to one is a benefit to all. While men continue to
live together, their livelihood problems must be thought about
collectively, and the solutions that are determined upon must be applied
to all, without discrimination.
How shall such results be obtained? By what means is it possible to lead
men to a world vision? Who can persuade them to work toward the building
of a sounder society than that with which the world is now laboring?
Of all the issues that confront the teachers of men, this is one of the
most pressing and most insistent. Those who have taken upon themselves
the task of seeking out and of expounding ideas have seldom faced a
graver responsibility than that with which they are at the moment
confronted. World facts demand world thoughts and world acts, before the
human race can adopt saner, wiser and more enlightened economic
policies. World thoughts and acts are impossible without world
understanding. Therefore it is world understanding that is most
imperatively needed in this critical hour.
The people of the world have many things in common--economic interests,
science, art, ideas, ideals. Ranged against these common interests there
are the traditions, prejudices, hatreds, national barriers, sectarian
differences, language obstacles and racial conflicts that have proved so
effective in keeping the peoples separated. The common interests are the
vital means of social advancement, and it is upon them that the emphasis
of constructive thinking must be laid in an effort to promote world
understanding.
There is no need to apologize, then, for adding to groaning library
shelves a book dealing with world economics, the purpose of which is to
propose a plan that will pull together the scattered threads of world
economic life. The time is so ripe for an examination of these problems
that no man may consider himself informed who has not pondered them
deeply, and no man may consider that he has done his duty as a member of
this generation, who has not helped, at least in some degree, to unify
the world's economic activities. Most particularly does this apply both
to the statesmen and other public men who are striving to rejuvenate a
dying order, and to the organizers and leaders of the new order that is
even now pressing across the threshold of the western world.
II. THE ECONOMIC MUDDLE
1. _Bankruptcy and Chaos_
World economic affairs are in a muddle. Famine has gripped Central
Europe since 1918; unemployment is rife in Japan, Argentina, Britain,
and the United States; business depression is felt in all of the
principal industrial countries; producer and consumer alike find the
world's economic machinery sadly out of gear.
There have been innumerable predictions of "better times ahead," but
among those who are closely connected with industry, there is serious
concern over the future of the present economic system, while a
formidable array of students and investigators agree with Bass and
Moulton that: "It is not at all beyond the bounds of possibility that
all of continental Europe might in the course of the next twenty-five
years, or even sooner, go the way that Russia has already gone. It would
not necessarily be through the instrumentality of Bolshevism; it might
easily go in the Austrian way." ("America and the Balance Sheet of
Europe." New York. Ronald Press. 1921. p. 138-9.)
The cause for such gloomy utterances may be found in those superficial
indications of chaos such as the breakdown of exchange and of
international trade; the severe business depression; the waste and
inefficiency of industry; the prevalence of unrest and sabotage, and the
preparations for future wars.
Traditionally, the old institutions still exist and are cherished by
those who believe that they will be rehabilitated and re-established.
But as the months succeed one another and lengthen into years, without
any evidence that "things will right themselves as soon as the war is
over," it becomes increasingly apparent, even to the conservative that
the situation is far from what they had promised themselves it would be.
Europe's day-to-day experience between 1919 and 1922 has convinced
millions that some disaster impends. For the most part, however, they
fail to realize that the "disaster" is already upon them.
The disorganization of the world's financial structure, following on the
drains of the war and the debauches and exactions of the peace, has been
the object of much comment, with the emphasis laid on the aspects rather
than on the essential characteristics of the breakdown.
One of the basic assumptions of the present economic order is that
promises to pay must be redeemed at par. Failing in this redemption, the
promisor is declared bankrupt, and beyond the pale of reputable business
society.
During the past eight years, most of the leading countries of Europe
have become bankrupt. Before the World War, the sixteen principal
belligerents had total debts of 28,660 millions of dollars, with a total
note circulation of 5,000 millions, making a total of promises to pay
amounting to something more than 33 billions of dollars. When the Treaty
of Paris was signed, these sixteen countries reported debts of 171,633
millions of dollars and paper money issues of 77,954 millions, making a
total of promises to pay about eight times the volume of 1913. Since the
signing of the Treaty, most of the European countries, belligerents and
neutrals alike, have continued to pile up obligations. According to the
estimates of O.P. Austin, of the National City Bank of New York, world
indebtedness was 43 billions of dollars in 1913, 205 billions in 1918
and 400 billions in 1921. ("Our Eleven Billions," R. Mountsier. Seltzer.
1922. p. 43.) A point has now been reached where the French, Russian,
Italian, German, Austrian and Hungarian debts are equal to at least half
of the total estimated national wealth. When it is remembered that most
of this wealth is in private hands, and heavily encumbered with private
mortgages; that the cities have issued enormous numbers of bonds against
the same wealth, and that even though the wealth were in public hands it
could not be liquidated for anything like its estimated value, it must
be apparent that the capitalist world--particularly that part lying in
Central Europe--has put itself into a position where its governments
cannot meet their promises to pay.
Nor is this the worst. The war experience taught European government
officials that it was possible to make money and pay debts with the aid
of printing presses. The rapid increase in prices, and the unwillingness
of the owning classes to pay for the war by means of a capital levy,
placed the governments in a position where the ordinary expenses, plus
the costs of the war, the interest on the war bonds, the costs of
reparations and other extraordinary expenses amounted to far more than
the total government revenue. As lately as 1920, all of the European
belligerents, with the exception of Great Britain, all of the European
neutrals, except Sweden, and all of the other principal countries of the
world except Peru and the United States, reported expenditures in excess
of receipts. The deficit for Austria amounted to 38 per cent of its
expenditures. In other principal countries the ratio of deficit to
expenditure was:
Belgium 69 per cent
France 57 " "
Germany 46 " "
Italy 21 " "
Japan 17 " "
("Our Eleven Billions," p. 40-41).
These events led inevitably to a demoralization of the foreign exchange
market, which reflects the measure of confidence felt by the business
men of one community in the promises to pay made by the government of
another community. The exchange values of the non-warring countries
remained generally near to par during the entire war and post war
period. Japanese exchange fluctuated very little; British pounds, which
up to the time of the war were recognized the world over as the standard
of value, fell to about three fifths of their par value as expressed in
dollars; the French franc and the Italian lira fell to a quarter of
their par values, while the Russian ruble, the German mark, the Austrian
and the Polish crowns fell to less than one-tenth of one per cent of
par. In addition to the serious depreciation of these various
currencies, their values fluctuated from day to day and hour to hour,
making business transactions difficult or impossible.
Coupled with the disorganization of exchange has been the economic
depression which, beginning in March, 1920, spread like a tidal wave,
bringing disaster and hardship to workers, farmers and business men.
With abundant crops, with industries united into great combinations,
with the banks more efficiently organized than ever before in modern
times, there should have been no crisis according to the accepted
economic philosophy, or, if there was a temporary set-back following the
strain of the war, it should have been a regulated panic. But despite
the predictions the depression came, and proved to be one of the most
severe that the modern world has experienced. The thoughtful man noting
these facts, and then learning that, beginning with the hard times of
1814, there have been seventeen of these breakdowns in the economic
machinery of the United States, with corresponding derangements in
France, Britain, Germany and the other industrial countries; and
learning further that there is a tendency for such catastrophes to
become more, rather than less severe, begins to wonder whether the
difficulty is not very much more deep-seated than many public men would
have him believe. Even the most stalwart supporters of the present
order must agree that the system does not function smoothly. There are
many bumps, jars and hitches, and considerable friction.
Another evidence of economic chaos is furnished by the extent of
industrial waste. Studies in industrial efficiency have led recently to
the publication of a number of reports, the most ambitious of which,
"Waste in Industry," issued by the Committee on the Elimination of Waste
in Industry of the Federated Engineering Societies of the United States,
describes waste under four aspects:
1. Low production caused by faulty management of materials, plant,
equipment and men.
2. Interrupted production, caused by idle men, idle materials, idle
plant and idle equipment.
3. Restricted production, intentionally caused by owners, management
or labor.
4. Lost production, caused by ill health, physical defects and
industrial accidents. (Page 8.)
With these various kinds of waste in mind the committee made a survey of
some of the leading industries in the United States, and drew up a table
showing the percentage of waste found in each industry. The figures were
as follows:
Men's Clothing Manufacturing 63.78 per cent
Building Industry 53.00 " "
Printing 57.61 " "
Boot and Shoe Manufacturing 40.93 " "
Metal Trades 28.66 " "
Textile Manufacturing 49.20 " "
The bulk of the responsibility for this waste is placed on
"management,"--the lowest percentage (50 per cent) in Textile
Manufacturing, and the highest (81 per cent) in the Metal Trades. The
remainder of the responsibility is shared by labor, with a minimum of 9
per cent in the Metal Trades and a maximum of 28 per cent in Printing,
and by miscellaneous causes, with a minimum of 9 per cent in Men's
Clothing and Printing and a maximum of 40 per cent in Textile
Manufacturing. (Page 9.)
There are a number of angles from which this result may be viewed. Waste
may be looked upon merely as the index of industrial inefficiency due to
the failure of the industrial mechanism to adjust itself to the demands
made upon it. In that case the remedy for the waste is superior
adjustment of the present system to itself. On the other hand, if the
waste is the result of friction generated within the system, there must
be some change in the system before it can be eliminated. The latter
explanation seems to tally with the facts more thoroughly than does the
former. Certainly, the unrest, bitterness and general sabotage which are
encountered throughout the industrial order would point to the
conclusion that the economic system is generating its own condition of
chaos.
Sabotage, or "go slow," is becoming the dominant note of the entire
economic system. "Get the most you can out and put the least possible
in," is the theory upon which both workers and owners are operating.
There has been much comment upon the tendency of the workers to use the
go slow tactics. The real withholding of productive effort, however,
takes place among the owners and managers of industry.
Industrial leaders are well versed in the law of monopoly profit:
"Minimum product at maximum price." The railroad men have rephrased the
law thus: "All that the traffic will bear." Industry has been organized
and capitalized and is now owned by a group whose interests lie, not in
the extent of production, but in the volume of profit. When profit is no
longer forthcoming, the owners practice the conscious withholding of
efficiency. In accordance with this general policy the control of
industry is shifting from the hands of engineers into the hands of
financial experts "who 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
community industrial welfare, which calls for maximum production." ("The
Engineers and the Price System," Thorstein Veblen. Huebsch. 1921. p.
40-41.) The recent cry of the American farmer: "Produce only what you
need for your own keep," is a crude effort to imitate the successful
tactics of the business world in limiting production to the volume that
will yield the greatest possible profit to the owner.
War-menace constitutes another indication of the chaos existing in
modern economic society. The purpose of economic activity is to produce
wealth. The purpose of war is to destroy it. The two are therefore in
direct antagonism; yet the greatest war machines are maintained by the
greatest industrial nations. To reply that they have the big war
machines because they can afford to pay for them, is no conclusive
answer. The organizing of nations for war came into present-day society
with the present industrial system. Industrial leaders have engaged in a
great competitive struggle from which the final appeal was always the
appeal to arms. Furthermore, one of the most profitable businesses has
been that of making the munitions and supplies required for the
prosecution of war. Nor is there wanting evidence that modern wars have
been made for profits--that they have been "commercial wars," as
President Wilson put it.
There is no longer any question but that the forces behind the world war
were in the main economic. The war was fought by capitalist empires, for
the furtherance of capitalist enterprises. The publication of the secret
treaties entered into by the Allies in 1916 gives conclusive proof of
the land grabbing character of the Allies' intentions. There can
scarcely be any question of the existence of similar intentions on the
side of the Central Empires. The forces that constituted the war menace
in 1914 were the economic forces arising out of the competitive economic
regime that dominated the European world at that time.
Since the ending of the war, these forces have been augmented rather
than abated. To them there must be added the other element of danger
that threatens to throw Europe again into turmoil. Soviet Russia is and
for a time must remain a source of international bitterness among the
great capitalist nations, while the struggle for the control of the Near
East is fraught with consequences as momentous as was the pre-war German
dream of a railroad from Berlin to Baghdad. Unrest in Egypt, India,
Korea, and the other countries held in subjection by the power of the
bayonet; the contest between Japan, Britain and the United States for
the control of the Pacific and the exploitation of China; the unrest and
revolution that are stirring in China; the keen intensity of the
struggle for foreign markets and for such strategic resources as the
supply of petroleum, are all suggestive of a situation resembling an
open gasoline can surrounded by lighted matches. And to add the last,
and the most realistic touch to the picture, there are a million more
men under arms in Europe than there were in 1913, while the military and
naval authorities in all of the leading countries are busy planning how
and where the next war is to be fought. (See "The Next War," Will Erwin.
Dutton, 1921; "The Coming War with America," John MacLean. British
Socialist Party, 1920; "War in the Future," F. von Bernbardi. Berlin,
1920; "The Inevitable War between Japan and America," F. Wencker.
Stuttgart, 1921; "Coal, Iron and War," E.C. Eckel. New York, Holt, 1920,
etc.) Before the grass was green over the graves where lies the flower
of Europe's manhood, leaders of the present order were busy with the
blueprints of another carnage.
The facts speak for themselves. The existence of such chaos is a matter
of every day comment and experience. Though its nature and its causes
are little understood, there is no issue of more immediate concern to
the western world than the intelligent solution of the vexing questions
arising out of the production and distribution of wealth.
Until the Russian Revolution of 1917, the entire western world was so
organized that one group or class owned the land, the machines and the
productive devices with which other groups or classes worked in order to
live. The establishment of this "capitalist" system between 1750 when it
had its start in England, and 1860, when it secured a foothold in Japan,
has raised certain questions of economic procedure which lie at the
background of the economic problems which men are seeking to understand
and to solve.
There is no necessity for an elaborate discussion of these problems,
since they are at the moment quite generally under the dissecting knife
of social students, reformers and revolutionaries. They may be divided
into two main groups:--those which are localized in character and those
which are world-wide in character. Perhaps the latter group might be
called "worldized."
2. _Localized Problems_
There are a number of outstanding economic problems that affect locally,
each community that has adopted the capitalist system. Among the most
important of them are:
1. The relations between the job owner and the job taker.
These relations involve the question as to whether job control shall be
vested in those who hold the property or in those who do the work. The
issue is an old one, intensified to-day by the absentee ownership which
stocks and bonds make possible, and aggravated by the presence of vast
industrial establishments in which there are employed thousands of
workers without the possibility of any direct contact between job owners
and job takers.
2. The distribution of wealth and income.
Another old issue has returned to plague a society that makes it
possible for some to enjoy "progress" while others must suffer from
"poverty." Labor saving machinery has increased the quantity of the
industrial product, but as yet there has been no general effort to see
that the advantages of this wealth production go to those who are in
need of food, clothing and shelter. Indeed, under the present order,
millions of those who work are called upon to accept a standard of
living which represents less than physical health and social decency,
while those who own the land and the machinery with which the wealth is
produced are able to exact a rent or unearned income that keeps them
permanently on easy street. This embittering contrast between the house
of have and the house of want is leading to-day, as it has in any
historical society, to division and conflict, for, as Madison wisely
observed in the Federalist, "The most common and durable source of
factions has been the various and unequal distribution of property."
3. The interrelation of industries.
So long as there was a direct connection between a worker and the
product which he turned out, economic life was simple. When, however,
the coal dug in eastern Pennsylvania was used to heat houses in
Minneapolis, while wheat grown in Dakota was milled in Duluth, made into
crackers in Boston and sold all over New England, there arose the
problem of the relation between mining, wheat raising, transport,
manufacturing, and merchandising. Thus far the banker has acted as the
go-between in holding this machinery together, but he labors under two
important disqualifications: first, he does not represent anyone except
himself and his fellow owners and is therefore not socially responsible
for what he does; in the second place, like every other business man, he
is out to make a profit rather than to render the community a service.
Hence the structure of industrial society rests in chaotic dependence
upon the ambitions and foibles of self-selected financiers.
4. Attempts at government control of industry.
The irritated people, incensed by repeated acts of economic tyranny,
have turned to the political state, which has been thought of as the
guardian of popular rights in a democracy, and through regulatory
legislation the appointment of commissions, and even through state
competition they have sought to bring obstreperous business interests
under the wing of state control. These efforts have generally failed:
the business interests, through their control of the economic surplus,
have dominated the commissions and have used the machinery of the
political state as the instrument for further exploiting ventures; the
police, the courts, the executive power, the military--all have been
employed by the owners and exploiters against the workers. The issue
between the empires of industry and the political state still remains
one of the most vexing in the field of public life.
These problems of job control, of wealth and income distribution, of
industrial inter-relations and of the relation between the state and
industry are pressing for solution in every important centre of modern
economic life. Each constitutes a disturbing element and contributes its
mite to the aggregate of social instability and unrest that are racking
the economic world.
3. _World Problems_
Aside from these problems, localized in character, though world-wide in
their distribution, there are a number of other problems of a world
character which also are factors in the disorganization of economic
life. One of these world problems is the competitive struggle between
economic groups for trade, markets, resources and investment
opportunities; another is, the excessive concentration of the world's
wealth in a few centres.
4. _Competition for Economic Advantage_
The issue of non-redeemable promises to pay has crippled the world's
credit machinery. The competition for economic advantage has played
havoc with the world's social stability.
Theoretically the coffee grower of Brazil and the agricultural machine
manufacturer of Illinois produce and exchange those things that they can
turn out most advantageously. Practically the resources of the world are
monopolized by powerful financial interests each striving to destroy its
rivals, each seeking its own enrichment, and each busy reinvesting the
surplus wealth which piles up as the result of exploitation at home and
abroad.
Competition for economic advantage has followed the line of greatest
profit. The present age inherited from the medieval economic world
certain time-honored trade rivalries such as those which had existed
between Rome, Carthage and Corinth in classic times, or between Holland,
France and England in more modern days. These trade rivalries concern
themselves with:
1. The transport of goods and people.
2. The financing of such transactions through bills of exchange, and
the like.
3. The insuring of trading ventures.
The people which succeeded in obtaining the carrying trade quite
generally secured the banking and insurance business, both of which
until recent years, have been principally concerned with trading.
The trade of the middle ages was small in volume, and was carried on,
for the most part, in valuable commodities, since the cost of
transporting bulky, cheap articles was generally prohibitive. With the
emergence of modern industry, and its production of large amounts of
surplus commodities, important industrial groups like Britain and
Germany which depended for their prosperity on their ability to find
foreign markets for their surplus commodities, have been driven to a
fierce struggle for these markets.
Latterly the effort to dispose of surplus has taken a new form--the
investment of capital in foreign enterprises. Instead of trying to sell
an electrical plant to the city of Buenos Aires, a German business
adventurer (enterpriser) secures a contract to build the plant, buys the
equipment from the German General Electric Company, takes the bonds of
the City of Buenos Aires in payment for the plant, and finances the
transaction by selling the bonds to a German banking syndicate. Through
this process, the German (or Belgian, or British) business world invests
its funds in "undeveloped" countries.
At the outbreak of the World War, foreign investment had become a
science, with the British leading all of the investing nations. C.K.
Hobson, in his book, "The Export of Capital," and in a later article in
the "Annals of the American Academy" for November, 1916, throws some
important side-lights on British foreign investments. He notes that for
some years preceding the war, Britain had never invested less than 500
millions of dollars per year in foreign countries and that just before
the outbreak of the war, the annual export of capital had reached a
total of a billion dollars per year. In 1913 the British foreign
investments were approximately 20 billions of dollars, distributed
geographically in a most significant fashion. The largest investment
(3,750 millions of dollars) was in the United States; then came Canada
with 2,500 millions; following were India, 1,800 millions, South Africa,
the same amount, Australia, 1,500 millions, and Argentina a like sum.
The British investments in Belgium, France, Germany and Austria were
negligible. Thus it was in the new and undeveloped countries, not in the
old and developed ones that Britain sought her investment opportunities.
In their efforts to play at this great game of imperialism, and to win
their share of profitable business, Germany, France, Japan, Belgium and
the United States were dogging the British heels.
Each of the important producing countries must provide itself with the
essential raw materials--coal, iron, copper, cotton, rubber, wheat,
etc., upon which the continuance of its industrial life depends.
Consequently each of these countries busies itself to secure the control
of the largest possible reserves of the raw materials most needed by its
own industries.
The case of petroleum is peculiarly instructive. When it became
apparent, in the early years of the present century that oil burning
ships, motor vehicles and air craft were bound to play a determining
part in the economic life of the immediate future, various interests
such as the Shell Transport, Royal Dutch and the Standard Oil, with the
open or tacit backing of their respective state departments, entered on
a campaign to secure the world's supply of petroleum. In Mexico, Central
America, the Near East, Russia and the United States this struggle has
been waged, and it still continues to be one of the most active contests
for economic power that has been fought in recent times.
Petroleum-hunger is only one of the many economic factors that drive
modern nations. The efforts to control the coal and iron of Alsace and
Lorraine, the Saar and the Ruhr undoubtedly played a leading role in
making the War of 1914 and the Peace of 1919. The partition of Upper
Silesia was based on the same contest for iron and coal. Wherever the
coal veins or iron deposits are, there, likewise, are gathered together
the representatives of industrial enterprise, which depends for its life
upon iron and coal.
As the resources of the earth become better known, and their extent more
definitely established, there is every reason to believe that, with the
continuance of the present economic system, the necessity for exploiting
them will become greater, and the attempts to dominate them will become
more aggressive.
Whether the object of the contest be trade, markets, investment
opportunities or resources, the result is the same--rivalry, antagonism,
bitterness, hatred, conflict. Probably it is fair to say that these
economic rivalries constitute the largest single force now operating to
keep people apart and to continue the economic desolation and chaos
under which the world is suffering.
5. _Distribution of the World's Wealth_
There is another problem of world scope--the concentration of wealth in
a very few countries. At the present moment the wealth of the world is
distributed roughly as follows:
Great Britain 120 billions of dollars
France 100 " " "
United States 330 " " "
----
Total 550 " " "
Germany 20 billions of dollars
Russia 40 " " "
Italy 25 " " "
Japan 40 " " "
Belgium 15 " " "
Argentina 25 " " "
Canada 25 " " "
----
Total 190 " " "
Probably all of the other nations combined could not show a wealth total
of more than 100 billions. Great Britain, France and the United States
have just about 12 per cent of the population of the world, yet they
probably hold somewhere in the neighborhood of two-thirds of the world's
wealth. The United States alone, at the moment, has nearly half of the
world's gold supply and more than a third of the world's wealth. Of
course these wealth estimates are not to be accepted in detail,
particularly in view of the wide fluctuations in the exchange rate. They
serve, however, to give an idea of the relative wealth positions of the
leading countries.
The present economic position of the United States in particular, is a
perilous one. The estimated wealth of the United States is greater than
that of the four richest nations of the world combined. Within a decade,
the country has become the world's chief money lender, the world's
principal mortgage holder, the world's richest treasure house. The
results are inevitable. The United States will be an object of envy,
jealousy, suspicion, cajolery and hatred in the eyes of those peoples
who concern themselves with the present system of competition for
economic supremacy. She holds the wealth and power that they desire and
they cannot rest content until they secure it.
Past periods of civilization have witnessed the concentration of wealth
and power in some great city, like Carthage, or in some isolated region,
like Italy. All around were the "barbarians"--those who had less of the
good things of life than were at the disposal of the citizens of the
metropolis. Where two of these centres existed at the same time, they
warred for supremacy until one or both were destroyed.
Before the war the centre of the world's economic power was Great
Britain. To-day the economic centre has shifted to the United States,
while Britain is still the world's greatest political power. The
struggle between these two empires for the political suzerainty of the
planet must continue until one is victorious, or until both have been
reduced to impotence.
6. _The Livelihood Struggle_
Behind these struggles between various political and economic groups,
there is a broader reality in the shape of a billion and three quarters
of people, inhabiting the surface of the earth,--people of various
races, religions, nationalities, who, with all of their differences,
have this in common: that they are seeking life, striving to improve the
opportunities for its enjoyment, yearning for its enrichment, and,
despite the innumerable disappointments which they have suffered in the
past, willing to pay handsomely, in vast and patient effort for each
tiny gain that they secure.
One of the chief concerns of these human multitudes is the struggle for
livelihood--for the means of continuing physical existence and of
gaining the surplus and leisure out of which grow the higher life
satisfactions.
All men have certain simple economic needs--for food and shelter. Denied
these, they perish. Given them, they are able to devote their remaining
energies to one of the many lines of activity that men have developed.
What are these other wants of men, aside from the primitive needs for
food and shelter? Most prominent is the desire for human companionship,
friendship, love. Again, mankind has accumulated a vast store of
knowledge, of philosophy, of imagery, of artistic expression. Love,
truth and beauty sound an appeal that finds some answering echo in each
life. The leisure and the culture of the world, in the immediate past,
have been the heritage of a favored few: to-day they are the objectives
of the many. Heretofore it has been the belief of the aristocrats that
the best of life was none too good for them. To-day that idea has spread
among the people. Dimly, inarticulately, they feel that the world's
advantages are for them and for their children.
Before the cultural advantages of life may be enjoyed by the many,
wealth must be produced in sufficient quantities to provide food and
shelter. This provision of the economic necessaries is not a far goal.
Livelihood, when secured, does not make of man either a saint or an
artist, but it is a necessary step in the pursuit of either goodness or
beauty. The body must be fed before it will function, just as the engine
must be fed with fuel before it will run. The provision of a supply of
economic essentials is not the ultimate object of life, but until some
such provision is made, life in its fullest terms is impossible.
7. _Guaranteeing Livelihood_
The millions who inhabit the earth have a direct and immediate interest
in organizing economic life in such a way that the supply of economic
goods is made regular and certain. This is the premise on which all
constructive thinking about economics is necessarily founded.
How is this hope to be realized? What means are at hand to insure the
ultimate success of these efforts to guarantee livelihood?
Nature has provided an ample supply of the resources out of which the
economic necessaries may be produced. These resources fall mainly into
three general classes:
1. Climate, including those conditions of light, air, rainfall and
temperature that make possible the maintenance of life in its many
forms.
2. Fertility, including those qualities of the earth that are useful
to man in the pursuit of his economic activities.
3. Power, including those forces of nature which man may harness and
compel to do his bidding.
Climate, fertility and power are variously distributed over the earth.
The heat near the equator and the cold of the arctic regions make any
highly organized forms of economic life difficult. Consequently it is in
the temperate zones that industrial civilizations have developed. The
deposits of minerals and fuels are quite uneven. Take iron as an
example. The available deposits of iron ore are concentrated mainly in
Brazil, Cuba, the Appalachians and the Great Lake Basin, so that the
Americas and particularly North America have far more than a
proportionate share of the iron ore supply. Copper, coal and petroleum
are distributed with even greater irregularity. Equally uneven is soil
fertility. Beside a garden spot, like the Mississippi Valley, lies a
great Colorado-Utah desert. Nature has provided those requisites upon
which man must depend for his economic life. They are scattered it is
true, and with the present political barriers holding peoples apart,
many of them are politically unavailable but, economically, they are an
open door to the future.
Men have met with considerable success in availing themselves of
nature's bounty, and of converting it into useful and pleasing forms.
All of the tools, weapons, textiles, metals, wheels, machines, have been
the result of human effort and ingenuity, spread over long periods of
time, and gradually accumulated and concentrated. At last a day seems to
have dawned when machinery, applied to nature's bounty, could produce
the wealth necessary to support the world's existing population on a
minimum standard of living. Certainly the energy and wealth which went
into the five war years would have fed and clothed the people for that
period.
8. _Distribution and the Social Revolution_
Men have succeeded in kindling fires, making wheels, separating the
metal from the ore, harnessing electrical power and communicating their
thoughts to one another and to their descendants, but they have not made
themselves masters of those forces which work through fire and wheels.
Men have met the immediate economic problem by devising methods for
producing food, clothes and roof-trees, but they have been overwhelmed
by the social implications of these productive forces. Before the
problem of sharing the proceeds of their labor, they have stopped, and
the whole economic progress of the race now stands like an engine
stalled, awaiting some solution of the problems of distribution.
Through the ages various methods of making a living were inaugurated
successively. Medieval Europe had worked out a combination of herding,
agriculture, craft industry and trade that made a stable life for an
agricultural village a practical possibility.
This period of economic stability--this golden age--was followed by a
series of events that threw the fat into the fire. First in England,
and then in all of the important countries of Europe, the industrial
revolution turned the simple grazing, farming, craft-industry life of
the village topsy-turvy, by providing a new method of converting
nature's bounty into goods and services calculated to meet the
increasing needs and wants of mankind. So far-reaching was the change
that it has compelled a reorganization of virtually all phases of social
life, but for the present purpose, it has been felt chiefly in four
fields: manufacturing, commerce, wealth-surplus and population.
The efficiency of the new manufacturing processes has provided a large
surplus of goods that must be taken somewhere, exchanged for food and
raw materials, which must, in turn, be brought to the producers of
manufactured goods. In the course of these transactions, a generous
share of the values produced goes, in the form of profit, to the owners
of the industry, another considerable portion goes into reinvestment,
thus swelling the volume of productive capital.
The increased wealth, the larger capital and the greater amount of
surplus all make possible the maintenance of a larger population. Thus
it has come about during the past century, that the production of goods,
the transport of goods, and the population, have all been increasing at
a rate unheard of during the previous thousand years.
The suddenness of these economic changes has swept the world away from
its accustomed moorings, out upon an uncharted sea. Only yesterday the
race was struggling to make a meagre living: to-day the centres of
industry are glutted with bulging warehouses and equipped with idle
machinery that will produce unheard of quantities of shoes and blankets
and talking machine records, if the owners will but give the word to the
workers who are eager to perform those services that yield them a
living. Only yesterday the world was maintained by local production:
to-day it depends upon transport and exchange. All of these changes in
the accustomed ways and acts of men have been brought about in the
course of an economic revolution.
The tidal wave of the industrial revolution has not stopped with the
economic world. No phase of life has been exempt from the power of its
magic. The school, the church, the family, the home, the state, have all
felt its transforming might. The aggregate of these changes is the
profound social revolution that has been for some time, and that is at
present tearing the fabric of the old society to tatters, while beneath
its surface-chaos is forming the nucleus of a new social order.
9. _A New Order_
The results of profound changes such as those that are now occurring,
must be chaos except in so far as the ingenuity and organizing capacity
of man re-establishes order. The people in the world are in very much
the position of a valley population suffering from a disastrous flood.
Their houses and fruit-trees--the product of generations of labor--have
been swept away. The valley is filled with debris. As the water recedes,
the wreckage must first be picked up, then the whole population must
fall to with a will and rebuild the community--put up houses, re-plant
trees, re-make gardens, repair roads.
The social revolution has not swept everything away, but it has modified
the form of social institutions, and some of them, such as the old time
farm home, the individual workshop and the agricultural village have
been obliterated in many localities. How shall the new society be
rebuilt? Only as the old was built--by the expenditure of human effort
and under the guidance of the best wisdom that the community can muster.
There are a number of points of view from which the present-day economic
chaos may be regarded. The humanitarian feels pity for the suffering and
hardship imposed upon multitudes of the world's population. The
conservative laments the alterations which are being made in the
established order. The liberal regrets that the changes are occurring so
rapidly that construction cannot keep pace with destruction. The radical
sees, in these fundamental changes, the dawn of his millennium. The
scientist and the engineer upon whose shoulders will rest the burden of
rebuilding the new society, tighten their belts and turn to the
mightiest task that men have ever faced.
The economic muddle in which the world now finds itself is one of many
transition periods in the history of civilization,--a phase of the great
revolution. Like any period of chaos, it is the seed-ground of the new
order--the demolition which precedes construction.
Some day men may be wise enough and sufficiently well organized and
equipped to demolish and construct at the same time. As yet no such
stage has been reached. During the intervals of chaos which separate two
periods of forward movement (the dark ages of the world, as they are
sometimes called) the masses agonize and suffer, groping blindly and
crying out for guidance. Such is the period in which the world now finds
itself.
Out of this chaos, men must bring order; and to do this they must
discover the foundations upon which the new order can be successfully
built. This is the work of the engineers, the constructors of the new
society.[3]
10. _The Basis of World Reconstruction_
Asiatics, Europeans, Africans, Americans, Australians--all people who
follow the movement of events realize that the crisis confronting the
capitalist world is a serious one. Informed men like J.M. Keynes and
Frank Vanderlip believe that the situation is perilous. While many
persons see that something is wrong, and while some see what is wrong,
there is a great diversity of opinion as to the remedies that should be
adopted. What most of the writers fail to see, or at least to realize,
is that economic organization is the basis--the only possible basis--for
the reconstruction of the world.
The time has passed when political readjustments will meet the world
situation. The events accompanying the industrial revolution have
hammered the world into a closely knit economic whole, and until this
fact is understood, and made the basis of world thought and world
building, there can be no permanent solution of the world's problems.
The present chaos in world relations cannot be met and settled by war,
legislation, diplomacy or any similar means. All of the steps in these
fields imply some adjustment of political relationships, and it is the
economic institutions rather than the political institutions of the
world that are in need of constructive effort.
If a town is suffering from a break in the water-main, there are two
things that may be done! The old pipe may be patched or a new pipe may
be put in its place. It is sometimes possible for the engineers to patch
the old main temporarily, while they are getting in a new one. The same
situation confronts the people of the world. Their economic life is
disorganized and chaotic. Shall it be reorganized along old lines,
slightly modified in the light of experience, or shall it be built on
fundamentally different lines?
[Footnote 3: "Engineering is the science of controlling the forces and
of utilizing the materials of nature for the benefit of man, and the art
of organizing and directing human activities in connection therewith."
(Resolution of the Engineering and Allied Technical Societies in
creating the Federated American Engineering Societies. "Waste in
Industry" 1921, p. IV).]
III. ECONOMIC FOUNDATIONS
1. _The Social Structure_
When a town or a city decides to repair a water system or to replace an
old system by a new one, the plans are made and the work is carried on
in accordance with the soundest principles known to the engineering
profession. There are communities which neglect their water systems, and
which suffer accordingly. But for the most part, the water supply is
looked upon as so vital a factor in the common life that no pains are
spared to have it reflect the last word in sanitation and efficiency.
The same reasoning must apply to the economic machinery upon which a
community depends for the supply of its necessaries and comforts.
Economic life touches every home. No human being who eats food, wears
clothes, lives in a house, rides on street cars or reads papers and
books can escape its all pervasive influence. Therefore when changes are
made in an established system of economic life, or when a new economic
system is substituted for an old one, it behooves the people concerned
to see that the work of reorganization is done in accordance with the
soundest known principles of social science.
The principles of social science, like the principles of engineering,
are matters of profound concern to those who are compelled to depend for
health and livelihood on the outcome of a social experiment. The social
scientist studies society as the natural scientist studies nature, by
examining the social forms, the social forces, the ways of handling or
of administering these forces, and the means of making social
improvements. The social scientist, like the scientist working in any
other field, is concerned with making those additions to knowledge which
will prove of the greatest ultimate advantage to the human race.
The principles of social activity are not yet so well known as those of
astronomy, physics, mechanics or biology, but they operate none the less
surely. Until these principles are understood, and until men plan their
activities in relation to them, there will be no possibility of a
rationally organized and wisely managed society. The physicist who
planned a pump on the supposition that water is always liquid in form
would get no farther than the social scientist who advocated social
changes on the theory that the only motive that animated mankind was the
economic one.
Mankind is not wholly ignorant of the principles underlying social
structure and social activities. Philosophers and statesmen worked over
them in the ancient world. Within the past two centuries a flood of
books and pamphlets has appeared dealing with social organization. To be
sure, most of these publications have been of a political nature, but
the effort was made none the less to understand society and its
workings. The investigations, analyses, comparisons and conclusions are
formulating themselves gradually into certain well-defined social laws,
which men recognize as essential factors in social thinking.
Some of the more important among these social laws or principles which
have been determined by the painful processes of trial and error are
those relating to the manner in which the structure of society is built
up. Society is not a collection of people, in the sense that a basket of
eggs is a collection of eggs. Quite the contrary, society is a structure
formed through the association of individuals and of groups having some
common interests and some co-operative functions or activities. A
family, for example, consists of a number of persons, usually connected
by blood ties, living together in a common dwelling. A chamber of
commerce consists of individuals, firms and corporations, doing
business in one locality, and all concerned with the maintenance of
certain property rights. The British Miners Federation is composed of
local and of district organizations, which are built up around
collieries, towns, and coal deposits. The local union is composed of
individual mine workers. The district organization is composed of a
number of locals in the same field. The federation is composed of these
lesser organizations. No matter which one of the many forms of human
association is examined, the same thing will be found true. Each social
group is composed either of individuals or of lesser social groups which
have certain common interests and certain co-operative activities, and
which band themselves together in response to their interests and in
pursuance of these activities. It is this organic structure of society
to which Hobson applies the phrase "the federal units which society
presents." ("Work and Wealth." J.A. Hobson. Macmillan. 1914. p. vi.)
Among primitive peoples who have simple forms of social organization,
each individual is connected with some association like the clan or
tribe which is state, church and family, all in one. The stories of the
Jewish patriarchs are good illustrations of this stage in social
evolution. In advanced and complex societies, however, each individual
belongs to a number of groups--to a town, a factory, a school, a home, a
political party, a fraternal order, a church. In complex societies these
groups are united to form the whole social structure. The individual
belongs to society, therefore, because he belongs to one or more of the
groups composing society, and his membership in society is dependent
upon his membership in a social group.
Without making too much of the comparison between a living organism,
like the human body, and a society, the similarities between the two are
striking. The human body consists of various systems, such as the
circulatory system, the nervous system, the digestive system. Each of
these systems is composed of many parts, having separate functions to
perform. The circulatory system, for example, consists of the heart,
veins, arteries, capillaries, the blood, etc. These various parts of
each system are in their turn made up of different kinds of tissue. The
heart is a complicated organ consisting of muscle tissue, nerve fibers,
blood vessels, etc. Muscles, nerves and blood vessels are in their turn
composed of living cells, each of which contains the mechanism of a life
cycle. Among the unit cells, the various tissues, organs and systems of
the body, there is a working harmony. The whole complex machine
functions in unison. If one of the organs fails to do its work,--if the
heart fails to pump blood or if the lungs fail to inhale oxygen,--the
whole body ceases to function or "dies."
Throughout the series, from the single cell to the entire organism, the
human body is built up compositely. This method of composite structure
holds equally true in the composition of modern society.
A modern society or community consists of various systems, such as the
educational system, the economic system, the political system. Each of
these systems is, in its turn, composed of institutions. Thus, for
example, the educational system consists of the common schools, the high
schools, the normal and professional schools and universities, the
special schools, and so on. Each city school system is a going concern
with its pupils, teachers, officials, school buildings, textbooks,
courses of study. Each school building, each class room, each group of
pupils, is a social unit, composed either of individuals or of groups.
Like the single cell of the human body, the individual pupil is a living
organism, and it is out of a multitude of such organisms variously
grouped that school systems are built.
The social machinery, like the machinery of the body, must work
smoothly, otherwise misery will be the inevitable result. If the
educational or the economic life of a community breaks down, the whole
community suffers, as does the body through the failure of an important
organ. If the stoppage is significant enough, as for example, a stoppage
of the economic machinery like that experienced by central Europe since
1919, the social organism "dies,"--that is, it is resolved into its
constituent elements, some of which may disappear.
Those who object to the comparison between society and a living organism
like the body, find more satisfaction in likening the social machine to
an automobile, with its self-starter, its ignition system, its lighting
system, its steering gear, its driving mechanism. Each of the systems is
in turn composed of parts. Each part is made of wood, iron, copper,
rubber, and these materials are, in turn, composed of molecules and
atoms in certain combination. The automobile is not self-acting, like
the body or like society, but the failure of one of its essential parts
like the ignition system, means the failure of the whole machine.
Society, like the human being, or like the engine, is a highly complex
mechanism, and like them it cannot function successfully unless its
various parts function in harmony. The major problem before a society is
therefore the working out of a system of inter-relations between its
parts, that will make harmonious functioning possible and easy. Just as
the mechanical engineer who builds the automobile puts into it the
results of his wisdom in an effort to make it effective, so the social
engineer devotes himself to the problem of making society function in
the way that will yield the largest results to the individuals composing
it.
2. _Specialization, Association, Co-operation_
Every social group except the horde, which is an aggregation of
unspecialized and non-co-operating individuals, is constructed on the
principle of:
1. Specialization
2. Association
3. Co-operation
The social group--the family, the school, the factory--takes upon itself
the performance of a particular social function--it specializes itself.
Each group associates itself with other groups--families with families,
schools with schools, factories with mines and stores. Finally, these
associated groups work together or co-operate, exchanging the products
which their specializations have created, and uniting their efforts in
the furtherance of their common interests. These developments take time,
and some communities are more highly specialized than others, but all
societies which enter intimately into the life of the modern world are
thus constituted.
The more advanced the society, the more numerous and the more complex
are the relations between its component parts. The agricultural
inhabitants of the Ganges Delta have evolved a far more complex society
than that of the aborigines of Australia, but the civilization at the
mouth of the Ganges is simplicity itself compared with that of Britain,
Belgium or Japan. In the Ganges Delta each family group has a homestead.
Outside of the homestead, the community life is almost wholly
unspecialized. Even where the homesteads are clustered together there
are no stores, no recreation centres, and few churches or schools except
in the larger towns or in the market towns, of which there are a very
few, since only about one per cent of the people live in towns or
cities. Practically the entire population is occupied with the work of
the homestead, and the work of each homestead is very like the work of
every other homestead. ("The Economic Life of a Bengal District." J.C.
Jack. Oxford. Clarendon Press. 1916. pp. 1 to 40.)
How different is the French, German or Italian village, with its various
crafts, trades, professions, industries, recreation centres, schools,
churches and the like. Every such European community of three or four
thousand persons is in itself a complex society, while the industrial
city of fifty thousand people is a hive of related social activity.
The more highly specialized the group, the more complex, intricate and
precise are its workings.
This principle of social federation through specialization, association
and co-operation is nowhere better illustrated than in the case of the
present economic system. In each centre of population, in each town or
city, in each state, in each nation, in the world at large,--the
economic system is divided into various elemental economic groups or
units, falling under six main headings:
1. The extractive units, which are concerned with the taking of
wealth from nature's storehouse--the farm, the mine, the lumber camp.
2. The fabricating units, which are busy changing the products of
farm, mine and lumber-camp into semi-finished or finished forms--the
mill, the smelter, the factory.
3. The transportation units, which carry goods or people or messages
from place to place--railroads, ships, trucks, telephones.
4. The merchandising units, which assemble the goods turned out by
the fabricators and distribute them to the users, wholesalers,
jobbers, retailers.
5. Personal service units, which render a service to the consumer in
some direct, personal way--housekeepers, educators, entertainers,
health experts.
6. The financial units, which are concerned with the handling of
money and of credit (the counters of the economic system) banks, loan
associations, credit houses.
These are some of the main divisions of the economic system as it exists
at the present time. Each division is a great net-work of economic
inter-relations, specialized and subdivided into individual plants,
factories, departments and the like. Take, as an example, one group, the
manufacturing industries of the United States. When the Census of 1914
was compiled, the manufacturing industries were classed in fourteen
groups,--food and food products, textiles, iron and steel and their
products, lumber and its remanufactures, etc. There were 496,234
wage-earners working in 59,317 food and food products establishments,
1,498,644 wage-earners in 22,995 textile establishments, 1,061,058
individuals working in 17,719 iron and steel establishments, and so
forth. Each of the fourteen subdivisions of the manufacturing industries
of the United States employ hundreds of thousands of men and women who
are at work in tens of thousands of establishments in thousands of
cities and town. The same kind of specialization is to be found
throughout the various modern industries, and in the different
industrial countries.
Each one of the larger establishments--each factory or plant--is in turn
composed of departments, divisions, shops and the like.
Whether the individual establishment or the individual department be
regarded as the unit of economic activity, the outstanding feature of
the manufacturing industry is the immense number of units that must be
in working order and co-operating harmoniously with the others before
the whole can function smoothly. And this is but one of the general
divisions of industry. At the time of the Census of 1920 there were in
the United States alone, 6,447,998 farms; in 1914 there were 275,791
manufacturing establishments; in 1910 there were 1,127,926 retail
dealers and 50,123 wholesale dealers. Literally, there are millions of
productive economic units in this one country which are specialized,
which are associated in their activities and which must be put on a
co-operative basis if effective results are to be obtained from them.
3. _Three Lines of Economic Organization_
So much, then, for the interdependence of the various economic groups
under the present forms of society. This interdependence runs throughout
the capitalist system. Farms depend on railroads, railroads on mines,
mines on factories, factories on farms, and so on.
This extreme specialization of the economic system is the product of the
past two hundred years, the outcome primarily of the industrial
revolution. The experience of society with these specialized economic
forms does not, therefore, extend over more than five or six
generations. This experience is sufficient, however, to indicate, that
there are three general lines along which economic organization may
develop:
1. _Economic "states rights" or individualism_--the theory upon which
the present day industry as well as the modern state was founded.
Under this theory each economic group must be free to go its way,
cutting a path for itself through the ranks of its competitors, and
making its triumphant advance over their prostrate remains.
2. _Economic bureaucracy_, involving the concentration of economic
authority in the hands of a centralized group which, knowing little
or nothing about the requirements of particular localities, is
nevertheless in a position to legislate for them and to enforce its
mandates.
3. _Economic federation or federalism_, with local groups enjoying
local autonomy in all local matters, and only so much centralized
control as is necessary for the unified direction of the entire
enterprise.
American industry has had considerable experience with the two first
forms of organization. Until the period of the Civil War, competition
was the generally accepted rule in all phases of economic life. With the
formation of the Standard Oil Company in 1870, a new principle was
demonstrated, and the idea of centralization was embodied in a form that
served as the model for the American trust movement. By the time of the
late nineties, this principle of centralization had been carried so far
that a reaction set in, and when the United States Steel Corporation
was organized in 1901 local autonomy was recognized as one of the
essential principles around which its structure was built.
Experience points to the system of local autonomy in local matters and
to the central control of general matters as the most workable in a
complex society.
In the first instance, under such a system, each local unit is
responsible for its own activities and for its own discipline. It is
obvious that no matter how efficient the bureaucracy, it would hardly be
possible for a centralized authority to control, from one point, the six
millions of farms and the quarter million industrial establishments of
the United States. It is only where the handling of local matters rests
with those immediately concerned that the highest degree of local pride,
initiative and energy can be generated and maintained.
Such a system leaves the central authority free from detail so that it
may devote all of its energies to decisions on matters of general
policy, and to such procedure as affects the welfare of the whole rather
than of any particular part. Economic society, to be organized
successfully, must be built of units that will prove self-acting and
self-directing in all matters of purely local concern. At the same time,
a scheme of economic life must be devised that will make it easy and
natural for these economic units to function co-operatively in all
matters connected with the well-being of the whole industry or of the
whole economic society.
4. _Economic Forms_
Much has been done to organize the economic life of the planet,
particularly during the past two centuries. Prior to the industrial
revolution the economic life of the masses of the people, with the
exception of a little trading and shipping, was localized and
individualized in the village, the commune, the homestead and the home.
The industrial revolution, with its dependence upon mechanical power,
served to concentrate economic life in larger units--the factory, the
plant, the industrial city. As a matter of necessity, organization
followed in the wake of this concentration. The owners of industry
organized on the one side: the workers organized on the other. Besides
these two major forms of organization within the field of industry,
there was the organization of the state, which has played a leading role
in the life of present-day society.
The organization of the owners, which is far more complex and more
highly developed than that of the workers, has followed four general
lines:
1. The organization of one line of industry. Woolen mills in
Massachusetts and in New York unite to form the American Woolen
Company: sugar refineries are consolidated into the American Sugar
Refining Company.
2. The organization of those industries which are concerned with the
turning out of one product--industrial integration. The iron ore beds
of Michigan, the coal and coke industries of Pennsylvania, lime-stone
quarries, smelters, converters, rolling-mills, railroad connections
and selling organizations all unite into the Cambria Steel Company or
the Carnegie Steel Company. Timber tracts, ore properties, mills,
mines and selling agencies join to form the International Harvester
Company.
3. The organization of unlike and unrelated industries--manufacturing
industries, public utilities, insurance companies, railroads, trust
companies and banks brought under the financial control of Morgan and
Company or of some other banking syndicate.
4. The banding together of these various groups in mutual welfare
associations such as chambers of commerce, boards of trade,
manufacturers' associations and so on.
None of these organizations has any primary interest in geographic areas
or in national boundaries. Half of the business of the Standard Oil
Company of New Jersey is carried on outside of the United States; the
International Harvester Company puts up plants in Canada and in Russia;
United States Steel buys properties in Mexico; The National City Bank
opens agencies in Cuba and in Argentina. The great modern business units
deal, not with political boundaries, but with economic areas. They seek
out, as the field for their operations, abundant resources, cheap labor,
attractive markets.
The present economic system has made great strides toward the world
organization of economic life in a comparatively short time. Australia,
Canada and the United States furnish excellent illustrations of the way
in which continents have been surveyed, spanned with steel, populated
and exploited in three or four generations. So completely has the
economic system been altered that the seventeenth century world would
not recognize its infant great-grandson of the twentieth century.
5. _Limitations on Capitalism_
Important changes have been made in the structure of society since the
inauguration of the present economic system, but these changes have not
been radical enough to keep pace with the still more radical changes
that have occurred in the mechanism of economic production and exchange.
The chief failure of the present order is its failure to readjust social
machinery in conformity with the economic changes that have occurred in
society, and this failure is due, in large measure, to the limitations
contained within the capitalist system.
Like all social systems which attain to positions of consequence, the
capitalist system has played an important role in the development of
society, and like all such systems, it has had its day. The needs of the
community have advanced to a point at which they cannot be met under
capitalism, whose chief failure to function more effectively in the
present crisis may be traced to:
1. _Excessive centralization of the determining control of industry
in the hands of financial manipulators, who do not even enjoy the
advantage of owning the industries which they dominate._
Through shrewd financial dealing they have maneuvered themselves into
positions of importance, which they hold because of their ability to
manipulate, a political rather than an industrial virtue. The necessary
result of this concentration of authority is a denial of local
self-determination and a corresponding loss of local initiative. The
less local initiative there is, the more centralization is required to
keep the machinery running, until a point is reached where all power and
authority are exercised from the centre, and the local group is as
devoid of spontaneity as it is of authority. At somewhere about this
point, the friction involved in administration becomes so great that the
whole of the social energy is consumed in the routine of keeping the
social machinery running, and there is no surplus, either for leisure or
improvement. This was the outcome of a similar centralization of
authority under Feudalism, and it shows itself in any organization that
permits itself to drift into the danger-zone of bureaucracy.
2. _A second obstacle to the further development of the present
economic system is nationalism._
The political state has become an adjunct to the capitalist economic
system. It relies for one of its sources of driving power upon a concept
of nationalism which places the political boundary lines that happen to
surround a people first among the public limitations on conduct. "My
country, right or wrong," becomes a catch phrase on the lips of school
children. Whatever transpires inside these political boundary lines is
sanctified by its association with the fatherland, while events having
their origin outside of the country must be correspondingly discounted.
Since the middle of the nineteenth century the business men of every
great industrial nation have been compelled to go abroad for raw
materials, for markets and for investment opportunities. In order to
obtain these economic advantages, the citizens of the civilized nations
have not hesitated to plunder the natives, and if they resisted, to
murder them--as Britain has done in India, as Belgium has done in the
Congo, as Japan has done in Korea, as the United States has done in the
Philippines and Hayti. This robbing and murdering is sanctified by the
fact that "our interests were in danger" or that "our flag was fired
upon" or that "our citizens have lost lives and property." But during
the past few decades the exploiting nations have found more than natives
to deal with. In almost every instance there have been at least two
claimants for each choice economic morsel, and a conflict has frequently
resulted, like that between Russia and Japan for the control of Eastern
Asia or between Germany and France for the control of the iron and coal
deposits of Western Europe. In such cases the wars are justified to the
home populations as necessary defensive measures.
The justification may or may not be complete, but the bills must be
paid, and they have proved to be inordinately high. The cost of killing
African natives or unarmed Haytians is comparatively low, but the cost
of killing Frenchmen and Germans is enormous. If, as some experts have
estimated, the direct cost of the Great War was 250 billions of dollars,
and if only 10 millions were killed, it cost something like $25,000 to
kill each of the ten millions. It is at this point that nationalism
breaks down because of the sheer inability of the peoples to foot the
bills that have been contracted in destroying their "enemies"--namely,
the citizens of other nations.
When this point is reached--when the costs of expansion beyond boundary
lines of a nation are so great that the people who do the country's work
cannot or will not meet them, the end of the system that depends upon
expansion is already in sight. That point has been reached and passed in
capitalist society.
While the costs of expansion were merely the cost of subduing naked
savages, the business was a remunerative one; but when, to these
ordinary costs must be added the stupendous price of capturing trenches
protected by barbed wire entanglements, of bombing whole countrysides,
of desolating states and wiping out industries, not to mention the cost
of building forty million dollar ships that can be sunk in six or seven
minutes with one well aimed torpedo, the limit has been reached, and
bankruptcy sooner or later ensues. Capitalism is now paying that price
throughout most of Europe.
3. _A third obstacle to the continuance of the capitalist system lies
in the fact that it has fallen into the hands of profiteers (bankers
and absentee owners) whose chief purposes are to control economic
machinery for the money there is in it, and to guarantee their
clients (investors) an opportunity to live without working on the
labor of others._
By the very nature of their connections the managers of industry are
denied the right to think in economic terms. Their function is to "make
money" by exploiting nature and men. They are therefore profiteers
rather than producers, and no economic system can hope to survive unless
it is based on production rather than profiteering.
4. _The present economic system is in the hands of those who are
responsible to wealth (stockholders) and not to the masses of the
people._
A small fraction of the people in a modern industrial community--one in
30 or 40 or 50--holds the controlling vote in the strategic industrial
enterprises, and says the final word on all questions of industrial
policy. Their interest is a property interest. Automatically they are
precluded and prevented from thinking or acting in the interest of the
general welfare, since their clientele, which is seeking to live on the
labor of the masses of their fellow citizens, is only a minute part of
the general public.
5. _There is another limitation arising out of the third and fourth,
just enumerated--the limitation imposed upon the whole of society by
the incessant struggle between the owners of industry and the workers
in industry._
While the owning class continues, without labor, to derive an income
from the labor of the workers, the former will grip their privileges,
while the latter will oppose, obstruct, attack and ultimately deny the
rights of the owners.
These five limitations: centralization, nationalism, profiteering, the
handling of economic affairs in the name of property rather than in that
of human welfare, and the class struggle--make it difficult or
impossible for the directors of the present economic system to extend it
in response to the pressing demand for expansion. Like other social
systems that have prevailed in historic times, the capitalist system of
economic control has its limitations, and like many another system, it
seems to have reached them.
6. _The Growth of Capitalism_
The existing economic order has grown to its present proportions
competitively and nationalistically, without any centralized supervisory
control (without any board of strategy) just as one of the Canadian
cities out upon the plains has grown, or rather sprawled over the
prairie--each man building how and when and where he liked, each
industry choosing its own location, stores, schools, churches, theatres,
squatting at those points that seemed to be the centres of the crowd
life. Mines have been opened, factories established, railroads built,
electric plants constructed, by some individual or corporation
interested in making a profit on the investment, and with little or no
relation to the well-being of the community. There has been no
recognized intelligent guidance behind the development of the industrial
system.
In so far as the present economic life was planned, it was planned
locally, by the directors of one industry, by the chamber of commerce of
some city, by a far-sighted banker or financier who insisted upon
thinking in terms of the coming business generation. For the most part
the system grew, however, like stalks of corn in a field, each stalk
drawing its own nourishment from the soil and making what progress it
could along its own path toward the zenith.
Another serious drawback in the growth of the present economic system is
that much of it was developed as an underground organization. Even had
they decided to do so, individual business men have not been free to
plan ahead and work out a business policy in the light of day. On the
one side were the jealous competitors, watching every move and eager to
profit by any bit of information that they could secure with regard to
the plans of their rivals. On the other side was the government, with
its conspiracy laws and its anti-trust laws, ready to swoop down on the
business director who planned too broadly or thought too far into the
future. Then, too, there was an ever-growing force in a public opinion
that was suspicious of profiteers, no matter what their professions.
With competitors on the watch here, and government officials yonder,
there was nothing for it but to work in secret, to shadow the new
policies in mystery and to get as far as possible without being found
out.
Far-reaching changes have taken place, of late, in the type of men who
have held the reins of control over industry. During its early years the
economic machinery was constructed by men who had worked at their
trades; men who had begun at the bottom and climbed into a place of
authority; men who had a first-hand knowledge of the processes
underlying their industries. Latterly, however, with bankers and other
professional manipulators in control of economic life, the engineers,
with their intimate knowledge of forces and processes have been pushed
into the background, and the actual work of direction has been shifted
from producers to money makers.
Again, the present economic system, built for the profit of the builder
rather than for the welfare of the community, represents, not the
science of organization for production and use, but the science of
organization for exploitation and profiteering.
These are some of the reasons why the economic life of the modern world
has grown at haphazard. Each industrial director put his own ideas into
his business, and as it grew in response to them, the various businesses
differed as much in shape, size and character as did the early factory
buildings.
The time seems to have arrived when a new working plan of economic life
may be adopted. The faults and failures of the old are glaring and the
clamor for the new is reasonable and insistent.
The construction of factory buildings has been evolved into a science.
Why cannot the same thing be done with the whole scheme of economic
organization? Men no longer erect factory buildings according to
personal whim or to the chance ideas of some budding architect. Instead
they consult scientists in factory construction who have devoted years
to the study and to the practical supervision of the detail of factory
building. Can less be demanded of the community which hopes to build its
economic life soundly and solidly?
A modern steel plant, like that at Gary, Indiana, is carefully planned
before a sod is turned. The organization of the works is thought out,
sketched, drawn in detail, blue-printed, so that each group of workers
that participates in the construction is given a blue print that
specifies what is to be done, and where and how. When all of the tasks
are completed a steel plant has been called into being. But suppose that
each of the eighty gangs of workers, busy on the plant, had followed the
lines of its fancy or of its own special interest! The result would
resemble the helter-skelter of modern economic society.
7. _Effective Economic Units_
Economic life has been haphazard in the past. In the future it will be
one of the most scientifically built of all human institutions. It is so
vital a part of the social life, and it yields itself so readily to
structural co-ordination that the best structural minds will turn to it
perforce, as the logical field for their activities.
The economic structure of the future, to be sound, must be built of
effective working units. It is as impossible to build a live social
system with dead component elements as it is to build a live body with
dead cells.
At least for the time being, an intricate and complicated structure is
needed to handle the problem of livelihood. As time goes on, the nature
of the economic system may be greatly modified, and its structure
simplified correspondingly. While the complicated economic structure
remains, however, the problem will be one of co-relating the activities
of vast numbers of economic units, and of prevailing on them to function
with less friction and greater harmony.
Like every social structure, the economic system will be built up of
lesser social groups, beginning with the simplest local body of farmers,
miners or mill workers, and continuing on, by successive stages of
organization to the largest and most highly complex groups in the
community.
The nature of each of the units that enters into the economic structure
must vary with the locality, with the industry, and so on, hence it will
prove to be impossible to lay down any arbitrary rules concerning their
organization. It is possible, however, to suggest certain
characteristics that must be present in effective working units:
1. _The economic unit, which is to be built into the new society as
stones are built into a wall, must bear a very close relation to the
present working forms of economic life._
Ultimately, the economic units of which society is composed will differ
completely from those now existing. It is quite out of the question,
however, to build a new economic structure and new economic units at the
same time. Habit and convention are too strong. Innovation is too
terrifying and too problematical. The life of local economic units will
be carried on to-morrow very much as it is carried on to-day by the
masses of the people. The most workable economic superstructure, for a
new society, will be built upon an answer to the question: "How is work
done now?" This method of approach takes the basic economic activities
of the masses of the people for granted and seeks to build them into a
sounder type of super-organization than that now existing.
2. _The economic unit, whatever its size and function, must be
sufficiently homogeneous and coherent so that it will retain its
unity even in the face of severe stresses and strains._ That is, it
must be in a state of relatively stable equilibrium.
3. _The economic unit must be autonomous--self-governing,
self-motivating, and in a sense, self-sufficing._
4. _The organization and management of the unit must make possible an
efficiency in production that will supply human needs and furnish the
means of providing some comforts for the population._
5. _Units must be so organized that they will work effectively with
other units in the same industry and in related industries._
Whether plans are being made for the rebuilding of existing economic
institutions or for the establishment of new ones, these general rules
hold good. They have as their objective, a workable social system that
will turn the wealth of nature's storehouse into usable forms, and that
will procure the distribution of the good things of life, in an
equitable manner, among the groups that have assisted in their
production.
8. _Classes of Economic Units_
Those who are concerned with the establishment of a working basis for
economic society must bear constantly in mind the purpose of economic
organization--to provide livelihood on the most effective possible
terms. The economic system is not called on to perform any other
function.
Economic function would seem to be most effectively aided by some
organization of the economic units that would provide a structurally
sound skeleton for the whole economic mechanism. The needs of particular
localities, the requirements of larger groups within one industry, the
economic relations of continental areas, and finally the world
organization of industries must be provided for. In order to meet this
situation, it would seem desirable to think in terms of several
different grades or classes of economic units. As a working basis, four
are suggested:
1. _The local unit, which would be some particular phase of the
economic process that normally functions as a whole._
This unit is now a working part of the present economic order, and
whether it is a colliery in Wales, a division of the P.L.M. Railroad in
France, a mill in Bombay, or a farming community in Saskatchewan, it
would continue the process of turning out goods and services under the
new economic regime as it does under the present one.
2. _District units composed of a number of neighboring local units in
the same industry or in closely related and co-operative industries._
The district is an aggregation of conveniently situated local units, and
is organized as a ready means of increasing the efficiency of the groups
concerned. It might cover the tobacco factories of Havana, the coal
mining industry of the Pennsylvania anthracite fields or the dock
working activities of Belfast.
3. _The divisional units which would be designed to cover a
convenient geographic area, and to include all of the economic
activities in a particular major industry within that area._
The boundaries of the districts would vary from one industry to another.
The boundaries of the divisions would be uniform for all industries. The
whole world would therefore be partitioned into a number of divisions,
such, for example, as: North America, South America, South Africa, the
Mediterranean Basin, Northern Europe, Northern Asia, Eastern Asia,
Southern Asia and Australia. In setting the boundary lines of these
divisions, economic homogeneity, geographic unity, the distribution of
the world population and the character of existing civilization would
all be called into question. Under such a grouping would fall the
agricultural workers of Southern Asia, the transport workers of North
Europe, the manufacturing workers of North America.
4. _World industrial units, so designed as to include within their
scope all of the producers of the world classified in accordance with
their occupations._