Chapter VIII: Economic Liberation 151 (2)

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 rôle 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 rôle 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 clientèle, 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._