what appears? Their machine equipment has greatly increased. During the
War it increased for obvious reasons. God was on the side of the most
machines. Since the War it has continued to increase for other reasons.
One reason was peculiar to Germany. There the building of furnaces,
factories, and machine-works by a dynastic method, as the pyramids were
built, without credit or gold, simply by command of the industrialists
over labour and material, was a way of baffling the Allied creditors.
Another reason was peculiar to France. Restoring the industries of the
devastated regions meant building them a second time, since they had
been already once reproduced elsewhere in France during the War. But
the reason over all lay in that fixed idea of economic necessity, not
changed in the least by anything that had happened, only now more
desperate than ever, owing both to the intensified competition of the
older countries among themselves and to the spread of the machine into
other countries.
How the competition among themselves has been intensified may
be illustrated in the case of textiles as between Great Britain
and France. Before the War both imported raw cotton and exported
fabrications of cotton; but, whereas Great Britain exported principally
the cotton cloth of universal commerce, France exported special
products representing her genius for style and artistry. Now, however,
having made large additions to her general textile equipment, France
feels obliged to compete directly with Great Britain in cotton-cloth of
common commerce. To do this she must extend her foreign trade parallel
to Great Britain’s and divide the markets hitherto dominated by the
British. As with cotton-cloth, so with other manufactures, particularly
those of iron and steel, wherein France proposes to compete and is
equipped to compete with both Germany and Great Britain as never
before. Each step she takes in this direction augments her economic
necessity, for now almost the last thing you would expect to see in
France is taking place. The native population as a whole is static, but
its character is changing. The industrial part of it is growing; the
agricultural part is waning. People are deserting the fields to embrace
industrial life—to mind machines. In every city there is a housing
problem; public credit is employed to build small dwellings for the
wage-earners; yet in the country, two hours from Paris, you will see
houses empty and going to ruin, whole rural villages in the way to be
abandoned, vineyards perishing for want of care, fields going to grass
instead of grain. Their industrial power is rising; their agricultural
power is falling. Before the War they were, or might have been,
self-nourishing on their own soil like the people of the United States.
That precious security they cast away. In place of it they take on the
anxieties of empire. They must impose upon Morocco the blessings of
European civilization in order to have an outlet there for the surplus
of their machines.
Dramatic are the migrations of the machine and not unlike the
migrations of natural species, men and beasts, in search of food.
The machine seeks either cheaper raw material or people to mind its
processes.
There is Italy, with a population greater than that of France, growing
half-a-million a year. It is the most fecund race in Europe. Suddenly
the Italians wake up and are resolved upon an industrial career.
Before the War this thought was dim among them. In the crisis it took
shape. Since the War it has become an enthusiasm, and now smoke-towers
are rising very fast. Definitely they have turned their minds from
agriculture to industry, not merely in order that they may become
self-supplied with manufactures instead of buying them from other
countries with lemons and olive oil, but in order to grow rich and
powerful in foreign trade. They propose hereafter and progressively to
exchange machine-wares for food. Italy will be a formidable rival for
Great Britain, Germany, France, and Belgium, who are already beginning
to feel it.
Poland perceives her destiny to be industrial: she has already a large
surplus of manufactured goods to sell. Likewise Czechoslovakia.
These are instances of new countries. Spain and Greece are importing
machinery, and Spain is so anxious to develop industry that she
considers paying a bounty out of the public treasury on exports of
textiles. India, whose historic economic function had been to send
raw cotton to Great Britain and buy cotton cloth from Manchester,
now consumes half her own raw cotton in her native mills; she not
only satisfies three-quarters of her own want for cotton cloth but
is beginning actually to export that commodity, even to the United
States. This will seem very wasteful, indeed, when you pause to set
it against the historical background of the United States. For a long
time we exported raw cotton and imported cotton cloth. That was to have
been the pattern of our economic life as a British colony; we were to
produce only raw materials, ship them to Great Britain and buy from
her the surplus of her machines. We were forbidden, in fact, to weave
cloth for sale or to have iron mills. Now we are an industrial nation;
we consume more and more of our own raw cotton and export enormous
quantities of cotton cloth. Ultimately we shall have no raw cotton at
all to sell; our mills will require the whole of our annual crop; we
shall have nothing but cotton cloth to sell. To whom shall we sell it?
Not to the Indians; they wish to make their own. Probably not to the
Egyptians. The Japanese manufacturers of cotton goods have recently
invaded the Egyptian market that was formerly Great Britain’s own, and
are underselling the British there. You would think China would be
Japan’s natural outlet for cotton goods. So it is. The difficulty is
that Japan must be looking further because China is beginning to supply
herself.
The Chinese instance is poignant. A few years ago—until the War, in
fact—China exported food and raw materials and imported manufactured
goods—nothing else to speak of either way. This was as the Western
industrial nations wished it to be. So anxious were they to have it
so that they bound China by treaty not to put tariff barriers against
the goods they wished to sell in the Chinese markets, except by mutual
consent—that is to say, with their consent.
The War suspended this thraldom. The Chinese imported machines and
began to make their own things, especially cloth. Power-looms appeared
as by magic. And after the War, they continued to appear. During
three years after the War the number trebled, and in 1922, the table
of Chinese imports and exports presented a strange face. Among her
imports were machines and machine-parts; also semimanufactured goods to
be finished in Chinese factories. And one-fifth of her total exports
consisted of manufactured goods. China an exporter of machine products!
And so up and down the earth. In Brazil, where there was hardly any
visible production of artificial things before 1914, the whole outlook
has changed. That country is now able from her own machines to meet
the whole of her want for matches, textiles, footgear, wallpaper,
phonograph-discs, hardware, hats, and playing cards, and will soon be
self-supplied with practically everything she needs.
The Colonial System that was to have answered forever Great Britain’s
need for raw materials and food in exchange for machine-products will
not hold in that character. In India the revolt is political; elsewhere
it is peaceably economic. Canada is already powerfully machined; she
is exporting motor-cars. Australia, going in the same direction,
is beginning to export shoes. The Union of South Africa takes steps
to subsidize local industry. Ireland no sooner gains control of her
economic life than she puts a tariff-wall around herself to limit the
sale of foreign goods, meaning British goods as well, thinking thereby
to foster infant industries.
Well, everyone now is doing that. The old industrial countries, too,
are protecting themselves against one another’s goods, the last to
come to it being Great Britain herself. For more than half-a-century
she was the protagonist of free trade, abhoring tariffs, because she
was paramount in machine-craft and could beat her rivals both in their
own markets and in her own. That advantage having departed from her,
she is driven to tariff-protection: she puts up barriers against other
people’s goods if they are too cheap, because they are too cheap, and
calls it Safeguarding Home Industries.
V
THE PARADOX OF SURPLUS
What does it mean? Can there be too many desirable and useful things?
Can things be too cheap? You would say No. Surely, so long as any human
want remains unsatisfied, things cannot be either too plentiful or too
cheap? But there is another dimension.
Everything that is not still or dead must exist in a state of rhythmic
tension. It is true of the plant, it is true of the animal, it is true
of each race of plants and each race of animals, it is true of the
kingdom of plants against the kingdom of animals. It is true of people,
as individuals, as races, as a species. And it is true, also, of the
machine.
In the living organism growth of tissue at a normal rate consonant
with the rhythm is vital. A wild growth of that same tissue will be
fatal. In the aggregate of life there is equilibrium among millions
of different forms, each form striving but never succeeding and is
possessing every other form and taking the world. The oyster, if
unhindered, would displace every other living thing on the earth in
maybe ten generations, and then, of course, perish for want of space in
which to contain itself. What hinders the oyster and at the same time
preserves it is that principle of tension in nature, without which it
would be impossible for innumerable forms and varieties of life, the
relations of which to one another are reciprocal, neutral, hostile,
anonymous, to exist together all in one great taut pattern.
Now regard the third kingdom, artificial, implanted with mechanical
beasts, that contains civilization. Life in this environment is
economic. Its characteristic behaviour is a progressive differentiation
of labour. Tasks are divided and subdivided until, at length, there are
countless separate groups of people, each one performing a singular
function to which it is trained and tending to become unable to perform
any other. The subdivisions are beyond enumeration. They multiply so
fast that the book of the census cannot keep up with them.
The shoe-industry, for example, does not consist in shoemakers. You
might search it in vain for a shoemaker—that is, one who should know
how to raise a pair of shoes from flat leather. In the shoe factory the
material passes through a train of machines. Each machine is minded by
an operative who performs one little specialized part of the work in
endless repetition. The product is shoes by thousands of gross.
But who determines what kinds of shoe and how many shoes shall be made?
What becomes of them when they are made? Who knows they can be sold?
What if they are not saleable?
If you address these questions to one of the operatives minding a
machine you will find him dumb. He knows only his own function.
It is very complicated. There are two industries here. One is the
shoe-industry; the other is the shoe-machine industry. One could not
exist without the other, yet they are separate and very unlike. The
shoe-industry itself, that has dispensed with shoemakers, will have
a finance department, an economic department, a buying department, a
department of production science, a style and designing department, a
chemical department, a department of distribution, a sales department,
an advertizing department, and others we do not think of. It is all
about shoes. These are all shoe people. They agglomerate in shoe towns.
They think shoes. The world is a foot. The more it can be shod the
better. They live by shoes.
But to do this they must be able to exchange shoes for the things
they want. Shoes, therefore, must have a relation of value to every
other thing in the economic world. It follows that, in order to have
this exchange-value, shoes must have also a relation of quantity to
all other things. If for any reason the production of shoes becomes
suddenly abnormal that exchange-value is lost. It is like one kind
of tissue growing wild in the organism. Shoes are necessary; but an
excessive quantity cannot be absorbed by the economic body. There will
be in that case a morbid pathology in the shoe-industry, unemployment
in the shoe town, despair among the shoe people, many of whom have
never learned to do anything else. Left to themselves, without shoes to
make, they might even starve.
It may be in the same way a soap town, a textile town, a garment town,
an iron town, a motor town like Detroit, a rubber-tire town like Akron,
a furniture town like Grand Rapids. It may be all of these—that is to
say, industry as a whole, increasing its output at an abnormal rate. As
you project the thought you begin to see, first, the vital importance
of rhythm, equilibrium, tension, in the realm of industry, and then the
inverse meaning of a sudden competitive increase in the machine-power
of the world.
Ask the Italians what it means. They are an old people coming to
it with a fresh mind. The conversation that follows took place in
February, 1925. Talking are, on one side, the Italian Minister of
Finance, and on the other, a visiting journalist:
“The industrial idea is new in Italy. It is since the War. You had a
clean slate. You could have done anything you had the imagination to
do. First you might have made a scientific survey of Italy’s latent
genius and resources, and then you might have thought of producing
goods that should be uniquely Italian and therefore non-competitive.
But what have you done? You have gone in for the great staples of
world commerce, such as cotton and woollen textiles, artificial silk,
and motor-cars. Don’t you see that in doing this you take on the
competition of Great Britain, Germany, France, Belgium, the United
States?”
“Yes, we see that.”
“Those countries have the field and the experience and better access
than Italy to sources of raw material.”
“That we know, also.”
“Then how can you hope successfully to compete with them? What have you
that they have not? What advantage against theirs?”
“One you haven’t thought of.”
“What is it?”
“A man can live on less in Italy than anywhere else. We don’t know why
that is. It may be the way the sun shines on him. But it is a fact.
That is our advantage. With that we shall succeed.”
“Do you realize what that means? You are saying that Italy proposes to
found an industrial career on the lowest terms of human existence. Your
people will not accept it.”
“But they will.”
“How do you know they will?”
“Because they will do anything sooner than starve.”
What a finish for the morning hope of the machine-age!—if it were.
Monotonous tending of the machine on the lowest standard of living;
alternative, starvation.
Suppose it were true. Suppose the Italian people did accept the terms
and acquired the knack and skill. Then Italian manufactures, being
cheaper than any other, would sweep the markets of the world. The older
industrial nations—Great Britain, Germany, France, the United States,
_et al._—could protect their domestic markets by tariff-barriers,
but they would find themselves losing their foreign markets to the
Italians. For such industrial countries as are obliged to exchange a
machine-surplus abroad for food the loss of foreign markets would be
fatal. They would have to meet the Italian competition. They would
have to say, as the Italians now are saying: “It is that or starve.”
They would have to let down the standard of living to meet Italy’s
wage-cost. This would oblige Italy to make her standard lower still,
and thus, in a cycle, until all of them were sunk in misery.
And this is by no means an impossible progression of events. It has
once taken place on a lesser scale. Beginning about 1870, there was
a sudden and uncontrollable increase in the output of industry from
two principal causes. One was the rapid rise of competitive industry
in Germany and the United States; the other—much more potent—was the
discovery of a new and cheaper way of making steel. This one discovery
transformed the aspect of industry by increasing its potential power as
much, perhaps, as one-hundred fold. Until then people spoke of the iron
age; after that it was the steel age. For a quarter of a century prices
fell continuously, while solemn economic bodies sat pondering the
phenomenon. In that time all the capital employed in industry was lost
at least once, probably twice or three times. The producer’s only hope
was to improve his machines and increase production, for as he did that
his cost per unit fell and for a little while he could undersell his
competitor. In methods of production and in the efficiency of machines
there was necessarily amazing progress; nevertheless, when all other
means of reducing costs had failed, it had to be taken out of labour.
In the United States it was not so bad because here the domestic
demand for manufactures was unlimited, and a tariff-wall protected
industry from foreign competition. In Germany it was very bad.
Germany then was where Italy now is. Her advantage was that the
German people would work harder and longer for less money than the
British. The competition was between these two. The British Government,
disturbed by her new rival’s success in foreign trade, made a study of
labour conditions in Germany. It found Sunday labour very prevalent in
the factories. “Only the hours of divine service are excluded”, said a
report from Saxony.
Commenting, _The_ (London) _Economist_ said: “The question of Sunday
labour is one of considerable interest for England, for it is
unquestionable that among the causes of Germany’s ability to compete
with England as a mercantile and industrial country the fact that here
more hours are worked for less money is not the least important. The
prohibition of Sunday labour would, of course, mean increased cost of
production, and every increase in the cost of production will render it
more difficult for Germany to outrival older manufacturing countries
in the markets of the world.”
What might have happened does not detain us. What did happen was very
fortunate.
First, the food-supply from free virgin land in North and South
America increased at the same time in a prodigious manner, so that,
notwithstanding the wild energy of the machine, the equilibrium between
agriculture and industry was fairly well maintained.
Second, there was still room in the world for colonial development on
a vast scale. This occurred, and the outlets thereby created for the
surplus product of machines were most timely.
Third—and this is very important—finance, to save itself from deluge,
got control of industry. It was unable to buy industry out. All the
banks in the world had not money enough to do that. This apparently
insuperable difficulty it solved in a simple manner. It formed industry
by groups into great joint-stock corporations and sold the stock to
the public. And, although generally finance did not keep control
in a literal sense, it did so centre it as to make the management
responsive thereafter to financial counsel. The classic instance in the
United States was the formation of the Steel Trust, which was in very
earnest a measure of desperation. The steel-making machine had become a
demon whose pastime was panic. By this feat of finance, which occurred
in all industrial countries, a new rhythm was established. It was most
imperfect: absolute control of production was impossible. But panics
from overproduction were thereafter episodic, not continuous, and this
was a great improvement.
And now a second time the machine has got away. But how much more
powerful it is and widely planted than before. The industrial capacity
of the United States alone is greater than that of all Europe
twenty-five years ago. There are no more such virgin continents as
North and South America to be exploited for food; and, besides,
countries that were then content to play an agricultural part,
exchanging meat and grain and raw materials for machine-made wares,
now are resolved to have industries of their own—nay! more, to have an
industrial surplus for sale abroad, engaging in that game themselves.
Colonies are no longer docile. And as to finance, there is little
probability that it will be able again to lay its hand upon the
throttle. There are several reasons why.
The significance of industry has changed. Formerly it was a private
affair in which the State was but dimly concerned, and so concerned
only in a social sense, whereas now the idea of industry is basically
political. It associates with thoughts of security independence in
all circumstances, national welfare, power, and grandeur. A factory
is like a ship to be privately enjoyed in time of peace, subject to
mobilization for war. The War did that. Great Britain now subsidizes
so-called key-industries as before she subsidized ships under the eye
of the Admiralty if they were so built as to be easily converted into
cruisers. All this is beyond the control of finance.
For another reason, there are signs that industry in the future is more
likely to command finance than finance is to dominate industry.
By finance it shall be understood that we mean organized influence—in
short, banking. Its occult authority has been seriously impaired. The
high day of its priestcraft is gone.
Formerly it was consulted in war. You could not manage a war without a
gold-chest: it was the banker who said whether that could be filled or
not. Now one of the first steps you take in case of war is to suspend
the bank, declare a moratorium, and print paper money to pass from hand
to hand.
When the World-War started it was the opinion of finance that it could
not last above ninety days: it could not be financed beyond that limit.
It lasted four years and did not stop then for want of money.
After the War international finance was morally powerless to prevent
the colossal mark swindle, Germany printing and selling all over the
earth billions of paper marks that were to be flatly repudiated. Nor
was it able to visit the slightest penalty upon the authors of this
financial enormity, for immediately afterwards it was obliged, on
political grounds, to float a large gold loan for Germany and thereby
restore her to solvency and credit. In Germany finance was unable
to prevent the industrial dynasts from appropriating to themselves
all the middle-class wealth that was invested in bonds, mortgages,
annuities, and savings banks: they simply borrowed it and then paid it
back in worthless paper money.
It is very significant this humiliation of finance. In situations where
the political will is dominant and in those where economic forces act
alone the omens are the same. Henry Ford is the extraordinary instance
of an industrialist who proceeds without benefit of finance. He creates
his capital as he goes along; what he does not create he commands. He
does not borrow.
VI
IN PERIL OF TRADE
So now what will happen? From the excessive power already existing
to produce industrial commodities, from the continued increase of
that power nevertheless for political and national reasons, from the
raising of trade-barriers by one nation against another because every
one fears the effect upon its own industries of receiving cheap goods
from another, from this running of people out of the fields to tend
more machines, from the amazing growth of urban tissue in the economic
body—from all of this what follows?
The Italians suggest a bitter competition in terms of living, those
to survive who will accept most patiently and at the lowest wage the
drudgery of minding machines. That might go rather far; ultimately it
comes to absurdity. To whom at last should they sell their goods? Not
to the impoverished workers of other industrial countries, defeated
in the struggle. To whom else? To the agricultural countries? But
these, for the reasons we have seen, are tending as such to disappear.
They are buying machines. Italy brings nothing to the solution. She is
merely coming tardily to do what others have done to excess.