which a group of managers or technicians have to consider. They have
also to weigh its effect on their professional status. Will they have
as much freedom, initiative and authority in the service of the
community as under private ownership? How that question is answered
depends upon the form given to the administrative system through which
a public service is {168} conducted. It is possible to conceive an
arrangement under which the life of a mine-manager would be made a
burden to him by perpetual recalcitrance on the part of the men at the
pit for which he is responsible. It is possible to conceive one under
which he would be hampered to the point of paralysis by irritating
interference from a bureaucracy at headquarters. In the past some
managers of "co-operative workshops" suffered, it would seem, from the
former: many officers of Employment Exchanges are the victims, unless
common rumor is misleading, of the latter. It is quite legitimate,
indeed it is indispensable, that these dangers should be emphasized.
The problem of reorganizing industry is, as has been said above, a
problem of constitution making. It is likely to be handled
successfully only if the defects to which different types of
constitutional machinery are likely to be liable are pointed out in
advance. Once, however, these dangers are realized, to devise
precautions against them appears to be a comparatively simple matter.
If Mr. Justice Sankey's proposals be taken as a concrete example of the
position which would be occupied by the managers in a nationalized
industry, it will be seen that they do not involve either of the two
dangers which are pointed out above. The manager will, it is true,
work with a Local Mining Council or pit committee, which is to "meet
fortnightly, or oftener if need be, to advise the manager on all
questions concerning the direction and safety of the mine," and "if the
manager refuses to take the advice of the Local Mining Council on any
question concerning the safety and health of the mine, such question
shall be referred to {169} the District Mining Council." It is true
also that, once such a Local Mining Council is formally established,
the manager will find it necessary to win its confidence, to lead by
persuasion, not by mere driving, to establish, in short, the same
relationships of comradeship and good will as ought to exist between
the colleagues in any common undertaking. But in all this there is
nothing to undermine his authority, unless "authority" be understood to
mean an arbitrary power which no man is fit to exercise, and which few
men, in their sober moments, would claim. The manager will be
appointed by, and responsible to, not the men whose work he supervises,
but the District Mining Council, which controls all the pits in a
district, and on that council he will be represented. Nor will he be
at the mercy of a distant "clerkocracy," overwhelming him with
circulars and overriding his expert knowledge with impracticable
mandates devised in London. The very kernel of the schemes advanced
both by Justice Sankey and by the Miners' Federation is decentralized
administration within the framework of a national system. There is no
question of "managing the industry from Whitehall." The
characteristics of different coal-fields vary so widely that reliance
on local knowledge and experience are essential, and it is to local
knowledge and experience that it is proposed to intrust the
administration of the industry. The constitution which is recommended
is, in short, not "Unitary" but "Federal." There will be a division of
functions and power between central authorities and district
authorities. The former will lay down general rules as to those
matters which must necessarily {170} be dealt with on a national basis.
The latter will administer the industry within their own districts,
and, as long as they comply with those rules and provide their quota of
coal, will possess local autonomy and will follow the method of working
the pits which they think best suited to local conditions.
Thus interpreted, public ownership does not appear to confront the
brain worker with the danger of unintelligent interference with his
special technique, of which he is, quite naturally, apprehensive. It
offers him, indeed, far larger opportunities of professional
development than are open to all but a favored few to-day, when the
considerations of productive efficiency, which it is his special
_metier_ to promote, are liable to be overridden by short-sighted
financial interests operating through the pressure of a Board of
Directors who desire to show an immediate profit to their shareholders,
and who, to obtain it, will "cream" the pit, or work it in a way other
than considerations of technical efficiency would dictate. And the
interest of the community in securing that the manager's professional
skill is liberated for the service of the public, is as great as his
own. For the economic developments of the last thirty years have made
the managerial and technical _personnel_ of industry the repositories
of public responsibilities of quite incalculable importance, which,
with the best will in the world, they can hardly at present discharge.
The most salient characteristic of modern industrial organization is
that production is carried on under the general direction of business
men, who do not themselves necessarily know anything of productive
processes. "Business" {171} and "industry" tend to an increasing
extent to form two compartments, which, though united within the same
economic system, employ different types of _personnel_, evoke different
qualities and recognize different standards of efficiency and
workmanship. The technical and managerial staff of industry is, of
course, as amenable as other men to economic incentives. But their
special work is production, not finance; and, provided they are not
smarting under a sense of economic injustice, they want, like most
workmen, to "see the job done properly." The business men who
ultimately control industry are concerned with the promotion and
capitalization of companies, with competitive selling and the
advertisement of wares, the control of markets, the securing of special
advantages, and the arrangement of pools, combines and monopolies.
They are preoccupied, in fact, with financial results, and are
interested in the actual making of goods only in so far as financial
results accrue from it.
The change in organization which has, to a considerable degree,
specialized the spheres of business and management is comparable in its
importance to that which separated business and labor a century and a
half ago. It is specially momentous for the consumer. As long as the
functions of manager, technician and capitalist were combined, as in
the classical era of the factory system, in the single person of "the
employer," it was not unreasonable to assume that profits and
productive efficiency ran similarly together. In such circumstances
the ingenuity with which economists proved {172} that, in obedience to
"the law of substitution," he would choose the most economical process,
machine, or type of organization, wore a certain plausibility. True,
the employer might, even so, adulterate his goods or exploit the labor
of a helpless class of workers. But as long as the person directing
industry was himself primarily a manager, he could hardly have the
training, ability or time, even if he had the inclination, to
concentrate special attention on financial gains unconnected with, or
opposed to, progress in the arts of production, and there was some
justification for the conventional picture which represented "the
manufacturer" as the guardian of the interests of the consumer. With
the drawing apart of the financial and technical departments of
industry--with the separation of "business" from "production"--the link
which bound profits to productive efficiency is tending to be snapped.
There are more ways than formerly of securing the former without
achieving the latter; and when it is pleaded that the interests of the
captain of industry stimulate the adoption of the most "economical"
methods and thus secure industrial progress, it is necessary to ask
"economical for whom"? Though the organization of industry which is
most efficient, in the sense of offering the consumer the best service
at the lowest real cost, may be that which is most profitable to the
firm, it is also true that profits are constantly made in ways which
have nothing to do with efficient production, and which sometimes,
indeed, impede it.
The manner in which "business" may find that the methods which pay
itself best are those which a truly {173} scientific "management" would
condemn may be illustrated by three examples. In the first place, the
whole mass of profits which are obtained by the adroit capitalization
of a new business, or the reconstruction of one which already exists,
have hardly any connection with production at all. When, for instance,
a Lancashire cotton mill capitalized at L100,000 is bought by a London
syndicate which re-floats it with a capital of L500,000--not at all an
extravagant case--what exactly has happened? In many cases the
equipment of the mill for production remains, after the process, what
it was before it. It is, however, valued at a different figure,
because it is anticipated that the product of the mill will sell at a
price which will pay a reasonable profit not only upon the lower, but
upon the higher, capitalization. If the apparent state of the market
and prospects of the industry are such that the public can be induced
to believe this, the promoters of the reconstruction find it worth
while to recapitalize the mill on the new basis. They make their
profit not as manufacturers, but as financiers. They do not in any way
add to the productive efficiency of the firm, but they acquire shares
which will entitle them to an increased return. Normally, if the
market is favorable, they part with the greater number of them as soon
as they are acquired. But, whether they do so or not, what has
occurred is a process by which the business element in industry obtains
the right to a larger share of the product, without in any way
increasing the efficiency of the service which is offered to the
consumer.
Other examples of the manner in which the control of {174} production
by "business" cuts across the line of economic progress are the wastes
of competitive industry and the profits of monopoly. It is well known
that the price paid by the consumer includes marketing costs, which to
a varying, but to a large, extent are expenses not of supplying the
goods, but of supplying them under conditions involving the expenses of
advertisement and competitive distribution. For the individual firm
such expenses, which enable it to absorb part of a rival's trade, may
be an economy: to the consumer of milk or coal--to take two flagrant
instances--they are pure loss. Nor, as is sometimes assumed, are such
wastes confined to distribution. Technical reasons are stated by
railway managers to make desirable a unification of railway
administration and by mining experts of mines. But, up to the war,
business considerations maintained the expensive system under which
each railway company was operated as a separate system, and still
prevent collieries, even collieries in the same district, from being
administered as parts of a single organization. Pits are drowned out
by water, because companies cannot agree to apportion between them the
costs of a common drainage system; materials are bought, and products
sold, separately, because collieries will not combine; small coal is
left in to the amount of millions of tons because the most economical
and technically efficient working of the seams is not necessarily that
which yields the largest profit to the business men who control
production. In this instance the wide differences in economic strength
which exist between different mines discourage the unification which is
economically desirable; naturally the {175} directors of a company
which owns "a good thing" do not desire to merge interests with a
company working coal that is poor in quality or expensive to mine.
When, as increasingly happens in other industries, competitive wastes,
or some of them, are eliminated by combination, there is a genuine
advance in technical efficiency, which must be set to the credit of
business motives. In that event, however, the divergence between
business interests and those of the consumers is merely pushed one
stage further forward; it arises, of course, over the question of
prices. If any one is disposed to think that this picture of the
economic waste which accompanies the domination of production by
business interests is overdrawn, he may be invited to consider the
criticisms upon the system passed by the "efficiency engineers," who
are increasingly being called upon to advise as to industrial
organization and equipment. "The higher officers of the corporation,"
writes Mr. H. L. Gantt of a Public Utility Company established in
America during the war, "have all without exception been men of the
'business' type of mind, who have made their success through
financiering, buying, selling, etc.... As a matter of fact it is well
known that our industrial system has not measured up as we had
expected.... _The reason for its falling short is undoubtedly that the
men directing it had been trained in a business system operated for
profits, and did not understand one operated solely for production_.
This is no criticism of the men as individuals; they simply did not
know the job, and, what is worse, they did not know that they did not
know it."
{176}
In so far, then, as "Business" and "Management" are separated, the
latter being employed under the direction of the former, it cannot be
assumed that the direction of industry is in the hands of persons whose
primary concern is productive efficiency. That a considerable degree
of efficiency will result incidentally from the pursuit of business
profits is not, of course, denied. What seems to be true, however, is
that the main interest of those directing an industry which has reached
this stage of development is given to financial strategy and the
control of markets, because the gains which these activities offer are
normally so much larger than those accruing from the mere improvement
of the processes of production. It is evident, however, that it is
precisely that improvement which is the main interest of the consumer.
He may tolerate large profits as long as they are thought to be the
symbol of efficient production. But what he is concerned with is the
supply of goods, not the value of shares, and when profits appear to be
made, not by efficient production, but by skilful financiering or
shrewd commercial tactics, they no longer appear meritorious. If, in
disgust at what he has learned to call "profiteering," the consumer
seeks an alternative to a system under which product is controlled by
"Business," he can hardly find it except by making an ally of the
managerial and technical _personnel_ of industry. They organize the
service which he requires; they are relatively little implicated,
either by material interest or by psychological bias, in the financial
methods which he distrusts; they often find the control of their
professions by business men who are {177} primarily financiers
irritating in the obstruction which it offers to technical efficiency,
as well as sharp and close-fisted in the treatment of salaries. Both
on public and professional grounds they belong to a group which ought
to take the initiative in promoting a partnership between the producers
and the public. They can offer the community the scientific knowledge
and specialized ability which is the most important condition of
progress in the arts of production. It can offer them a more secure
and dignified status, larger opportunities for the exercise of their
special talents, and the consciousness that they are giving the best of
their work and their lives, not to enriching a handful of uninspiring,
if innocuous, shareholders, but to the service of the great body of
their fellow-countrymen. If the last advantage be dismissed as a
phrase--if medical officers of health, directors of education,
directors of the co-operative wholesale be assumed to be quite
uninfluenced by any consciousness of social service--the first two, at
any rate, remain. And they are considerable.
It is this gradual disengagement of managerial technique from financial
interests which would appear the probable line along which "the
employer" of the future will develop. The substitution throughout
industry of fixed salaries for fluctuating profits would, in itself,
deprive his position of half the humiliating atmosphere of predatory
enterprise which embarrasses to-day any man of honor who finds himself,
when he has been paid for his services, in possession of a surplus for
which there is no assignable reason. Nor, once large incomes from
profits have been extinguished, need his salary be large, {178} as
incomes are reckoned to-day. It is said that among the barbarians,
where wealth is still measured by cattle, great chiefs are described as
hundred-cow men. The manager of a great enterprise who is paid
$400,000 a year, might similarly be described as a hundred-family man,
since he receives the income of a hundred families. It is true that
special talent is worth any price, and that a payment of $400,000 a
year to the head of a business with a turnover of millions is
economically a bagatelle. But economic considerations are not the only
considerations. There is also "the point of honor." And the truth is
that these hundred-family salaries are ungentlemanly.
When really important issues are at stake every one realizes that no
decent man can stand out for his price. A general does not haggle with
his government for the precise pecuniary equivalent of his contribution
to victory. A sentry who gives the alarm to a sleeping battalion does
not spend next day collecting the capital value of the lives he has
saved; he is paid 1/- a day and is lucky if he gets it. The commander
of a ship does not cram himself and his belongings into the boats and
leave the crew to scramble out of the wreck as best they can; by the
tradition of the service he is the last man to leave. There is no
reason why the public should insult manufacturers and men of business
by treating them as though they were more thick-skinned than generals
and more extravagant than privates. To say that they are worth a good
deal more than even the exorbitant salaries which a few of them get is
often true. But it is beside the point. No one has any business to
{179} expect to be paid "what he is worth," for what he is worth is a
matter between his own soul and God. What he has a right to demand,
and what it concerns his fellow-men to see that he gets, is enough to
enable him to perform his work. When industry is organized on a basis
of function, that, and no more than that, is what he will be paid. To
do the managers of industry justice, this whining for more money is a
vice to which they (as distinct from their shareholders) are not
particularly prone. There is no reason why they should be. If a man
has important work, and enough leisure and income to enable him to do
it properly, he is in possession of as much happiness as is good for
any of the children of Adam.
[1] The Coal Mines Department supplied the following figures to the
Coal Industry Commission (Vol. III, App. 66). They relate to 57 per
cent. of the collieries of the United Kingdom.
Salary, including bonus and Number of Managers
value of house and coal 1913 1919
L100 or less ............................... 4 2
L101 to L200 ............................... 134 3
L201 to L300 ............................... 280 29
L301 to L400 ............................... 161 251
L401 to L500 ............................... 321 213
L501 to L600 ............................... 57 146
L601 and over .............................. 50 152
{180}
XI
PORRO UNUM NECESSARIUM
So the organization of society on the basis of function, instead of on
that of rights, implies three things. It means, first, that
proprietary rights shall be maintained when they are accompanied by the
performance of service and abolished when they are not. It means,
second, that the producers shall stand in a direct relation to the
community for whom production is carried on, so that their
responsibility to it may be obvious and unmistakable, not lost, as at
present, through their immediate subordination to shareholders whose
interest is not service but gain. It means, in the third place, that
the obligation for the maintenance of the service shall rest upon the
professional organization of those who perform it, and that, subject to
the supervision and criticism of the consumer, those organizations
shall exercise so much voice in the government of industry as may be
needed to secure that the obligation is discharged. It is obvious,
indeed, that no change of system or machinery can avert those causes of
social _malaise_ which consist in the egotism, greed, or
quarrelsomeness of human nature. What it can do is to create an
environment in which those are not the qualities which are encouraged.
It cannot secure that men live up to their principles. What it can do
is to establish their social order upon principles to which, if they
please, they can {181} live up and not live down. It cannot control
their actions. It can offer them an end on which to fix their minds.
And, as their minds are, so, in the long run and with exceptions, their
practical activity will be.
The first condition of the right organization of industry is, then, the
intellectual conversion which, in their distrust of principles,
Englishmen are disposed to place last or to omit altogether. It is
that emphasis should be transferred from the opportunities which it
offers individuals to the social functions which it performs; that they
should be clear as to its end and should judge it by reference to that
end, not by incidental consequences which are foreign to it, however
brilliant or alluring those consequences may be. What gives its
meaning to any activity which is not purely automatic is its purpose.
It is because the purpose of industry, which is the conquest of nature
for the service of man, is neither adequately expressed in its
organization nor present to the minds of those engaged in it, because
it is not regarded as a function but as an opportunity for personal
gain or advancement or display, that the economic life of modern
societies is in a perpetual state of morbid irritation. If the
conditions which produce that unnatural tension are to be removed, it
can only be effected by the growth of a habit of mind which will
approach questions of economic organization from the standpoint of the
purpose which it exists to serve, and which will apply to it something
of the spirit expressed by Bacon when he said that the work of man
ought to be carried on "for the glory of God and the relief of men's
estate."
{182}
Viewed from that angle issues which are insoluble when treated on the
basis of rights may be found more susceptible of reasonable treatment.
For a purpose, is, in the first place a principle of limitation. It
determines the end for which, and therefore the limits within which, an
activity is to be carried on. It divided what is worth doing from what
is not, and settles the scale upon which what is worth doing ought to
be done. It is in the second place, a principle of unity, because it
supplies a common end to which efforts can be directed, and submits
interests, which would otherwise conflict, to the judgment of an
over-ruling object. It is, in the third place, a principle of
apportionment or distribution. It assigns to the different parties of
groups engaged in a common undertaking the place which they are to
occupy in carrying it out. Thus it establishes order, not upon chance
or power, but upon a principle, and bases remuneration not upon what
men can with good fortune snatch for themselves nor upon what, if
unlucky, they can be induced to accept, but upon what is appropriate to
their function, no more and no less, so that those who perform no
function receive no payment, and those who contribute to the common end
receive honourable payment for honourable service.
Frate, la nostra volonta quieta
Virtu di carita, che fa volerne
Sol quel ch'avemo, e d'altro non ci asseta.
Si disiassimo esse piu superne,
Foran discordi li nostri disiri
Dal voler di colui che qui ne cerne.
* * * * *
{183}
Anzi e formale ad esto beato esse
Tenersi dentro alla divina vogli,
Per ch'una fansi nostre vogli e stesse.
* * * * *
Chiaro mi fu allor com' ogni dove
In Cielo e paradiso, e si la grazia
Del sommo ben d'un modo non vi piove.