The American Omen by Garet Garrett [1930]

8/10/2019 The American Omen by Garet Garrett [1930]

http://slidepdf.com/reader/full/the-american-omen-by-garet-garrett-1930 1/267



TheAMERICAN OMEN

B Y

G A R E T G A R R E T TAuthor of Ouroboros, The Cinder-Buggy, etc.

E . P. DUTTON CO., INC.

PUBLISHERS : : N E W YOKE



T H E A M E R I C A N O M E N , C O P Y R I G H T , 1 9 2 8

B Y E . P . D U T T O N & C O . , I N C .

ALL RI GHTS RESERVED : : PRINTED IN U.S.A.

First Prin ting September, 1928.Second Printing September, 1928.Third Printing September, 1928.Fourth Printing September, 1928.



N O T E :

Contained herein is matter that appeared seriallyas The American Book of Wonder in

The Saturday Evening Post.



CONTENTS

PageWITNESS OF EPOCH 3

I Interrogating the face of change . . 3I I Why has the sign of world supremacy

p a s s e d t o th i s hemisphere? . . . . 5I I I T h e f a l se wa r m y t h 1 0I V F a c t s t h a t c a n n o t e x p l a i n t he m se lv e s . 1 3

BEVOLT OF THE MIND 1 8

I T h e A m e r i c a n m e n t a l i t y 1 8I I N a t i v e w a y s of t h i n k i n g 2 4

I I I S t r u g g l e w i th th e old w or ld ' s doom bo okof pol i t ica l economy 2 8

I V T h e s ac red law of p o v e r t y . . . . 31V T h e t h o u g h t t h a t o v e r t h re w i t . . . 40

CONFLICT 43

I N a t i v e w a y s of fee l ing 43I I T h e economic secret i s h u m a n . . . 48

I I I D i scove r i e s in u n d e r s t a n d i n g . . . . 59I V E v o l u t i o n of scien ti fi c m a na gem ent . . 68

V T h o u g h t is emo t iona l ize d, fee l ing i sr a t i o n a l i z e d , and the r evo lu t ion i s com-

p l e t e 7 3KEYS TO PLENTY 78

I New time 78I I The forces of production set free . . 82

I I I Mechanical extensions 86IV Dilemma of quantity 90

V Save the man; spend the machine . . 94VI Our fifty tame slaves per capita . . . 97

VII Effects of this American tempo . • . 100[ v i i ]



CONTENTS

PageVIII On the capital function of money . . 103

IX On the output of wealth and power ofconsumption 107

X On Wall Street control of business . . 110

DIVISION 113

I Yours and mine and ours 113II The irrational dispute 115

III Creative parts 121IV The exploiting lord's solution . . . 125

V Uprooting the low wage fallacy . . . 128VI Finding the true law of wages—a law

of proportion 132VII Application of that law also to profits 138

VIII Bankrupt antagonisms 145

TH E NEW MEANING OF BUSINESS 1 51

I Rise of the moral structure . , . . 151II What was there before 153

III Motives 159IV The age of dread—socialism, revolution

or self-conquest 167V Sudden advent of a power no law could

tame 170VI Business immemorially stigmatized as

a vulgar art 173VII Its social redemption 175

VIII The word and spirit of service . . . 182IX Penetrations 186

TOMOEEOW 1 9 1

I The question: Is prosperity unlimited? 191

II Concerning the idea of progress . . 194III Two fears 196[viii]



ONT NTS

Page

IV Ov e rp roduc t i on c l a s s ica l l y r ega rde d a sa menace 1 9 9V I t s o the r mea n ing 2 03

V I Tw o r ea sons w hy peopl e m ay be unab l eto consume wha t they p roduce . . . 207

V I I O v e r p r o d uc t io n r e g a r d e d as t h e p r i c eo f g r ea t e r p l en ty 2 1 3

V I I I T h e second fea r a nnul s the first . . . 2 1 7I X Efficiency a s a new dimension . . . . 2 2 0X V a s t m a rg i n s 2 2 3

MACHINE PEOPLE 2 2 8

I M a n ' s f e a r of ma ch ines is d r e a d of h im-self 2 2 8

I I All w heels d o r u n by f a i t h 2 33I I I E x p l o r i ng t he abso lu t e s ea . . . . 2 40I V N o w a y t o go ba ck . . . . . . 2 45V T he i nco r rup t i b l e image of t r u t h . . 2 50

V I I t s effect up on ou r minds an d be-haviour 254*



V I S T A

H P HERE have been two great American construc--•• tions.

The first was political. Perilous ideas of com-mon freedom were put headlong to a working trial;and the proof now is that among the major unitsof human society this is the only one that has

endured as a nation for a century and a half by nograce of king, priest, tyrant or dictator.The second was economic; and here now is a

standard of common living the highest so far as weknow in the history of the race.

Beginning to appear are the ground signs of athird construction. I ts significance, if it ha ppens,will be social.

Freedom as we know it is a condition of ego.Prosperity is a condition of things. Increase thesesatisfactions to any degree and there is still thatknowledge of incompleteness which torments thespirit. Th is is the anxiety of the perishable I fra g-ment to make affinity with an imperishable whole.Beyond the sense of belonging to himself man cravesalso the sense of himself belonging. We are boundto live two lives a t a time. One is our own, a l ittlearc, sudden and discontinuous; the other is the lifeof society, perpetua l and perhaps imm ortal. To livethem consciously, without conflict, so that one shallfulfill the other, is the nex t achievement. Necessitylies in one, completion in the other.

That servile status of the individual binding himto the sceptre, to the sta te, to the lord, to the land on[ x i ]



VISTA

which he grew, with no inalienable rights of being,is the oldest political story . The extreme revolu-tion, wherein the state itself becomes the cringingbody, mob-serving, owing everything to the individ-ual who owes it nothing in return, is a complicatedmodern story, with some fearful and abrupt periods.An entirely new story would be that of a people jeal-ously egoistic dedicating their freedom to a social

imperative discovered in themselves and learning bythat act what freedom is for.In the mirror of fa ith there is a lready reflecting an

aerial image of this third great American construc-tion. Le t us be not discouraged if for momentstogether it disappears from view. It s beginnings,as were those also of the other two, are involved inconfusion, uproar and episodes of disaster, w ithbesides some aspects of new unsightliness. This isinevitable. We stand too near. So however theworld was made, it w as not made without much wasteand litter; and truth itself must first come true.

[xiil



THE AMERICAN OMEN



THE AMERICAN OMEN

WITNESS OF EPOCH

I

Interrogating the Face of Change

TO stand first in the earth, paramount thereon, is

the pa rt of one people at a time by lot and period.The sign regnant went to and fro in Asia beforethere was any western civilization, and sometimegilded the dome of Africa. Rome conquered it. Fora thousand odd years it was lost; then it rose againin Europe. Now it comes to us. I ts migration tothis hemisphere is a fundamental event and onemighty for change.

W orld supremacy is not by golden chance. Suchan idea was the bad star of Spain 4)00 years ago.What was it then seated Engla nd in th a t office ofpower? Economic facts, perhaps. Rich coal meas-ures at tidewater, skill of trade and banking, argo-sies, a monopoly of machine cra ft. Yet she had noore. There was other coal. The D utch were grea t

traders and bankers, with many ships, before theEnglish knew the art of international commerce.And as for machine craft, anyone so minded mighthave beaten her a t it. The Germans, when they wereready, did it in thirty years.

The weakness of economic explanations is theirsuave plausibility. They pass over the historicalfootnote that says supremacy has in every case indi-cated a significant contribution to the data of human

[



THE AMERICAN OMEN

experience. In the case of Great Britain , was it an

errand to the backward peoples of the earth in theguise of trade, or was it to demonstrate the first ageof industrialism? I t may be too soon to say . B utimagine wiping out the fact of British supremacy asif it had never been. Would the world be a differentplace? Or in the same way erase the fact of Romansupremacy. Certainly life now would be in someways very different. Yet you cannot say preciselyhow; you cannot say what would have happened inplace of what did.

And now American supremacy regarded as anevent: W ha t does tha t mean?

Here is the beginning of power in new series withnew meaning. Never before had people so muchpower either actua l or relative. The fact came sud-denly to view, as if it had not been historically pre-pared, and that is a way of happening peculiar tothe things of destiny. Nobody knows w hat destinyis. If perhaps it is in itself a necessity higher thanour own, we do not know w hat law it obeys. But wemay be sure it cannot act where there is nothing tobe acted upon. To bring its ends to pass, it mustbe supposed to require conditions. Therefore, asconcerning the cause, w hether you conceive i t to havebeen circumstantial or mysterious, you come to thesame question. You may ask by w hat means wehave arrived unawares at this place or you may askw hat was here to at tra ct this destiny. I t is all thesame.

W ha t were the conditions ?



WITNESS OF EPOCH

I I

Why Has the Sign of World Supremacy Passed toThis Hemisphere?

Other people are asking, most anxiously the peo-ple of Europe, because world supremacy in one handor another had been so long a possession of theirs that

they had come to think of it as a natural right.Engineers, bankers, economists, trained observersand various missions under private and public man-date have been sent hither to discover the sources andsecrets of American power. Wh at they have foundand reported in every case were the effects. Wealth,prosperity, method—these are the functions ofAmerican power; works and things are its visibleaspects. Wipe them out entirely and they will pre -sently appear again for the same first reason and inthe same meaning. No foreign analysis of what isworking in this country has discovered either thatreason or that meaning.

The German investigators, with no word in theirown language for what we mean when we say pros-

perity, have been deeply impressed by the rationalityof our mechanical and methodical procedures; theyhave already produced a literature on the rational-ization of industry, which is now having voguethroughout Europe; and they have, of course, beenrationalizing German industry, more or less as theBerlin banker rationalized his clerical department

after having seen in the Federal Reserve Bank ofNew York time-saving equipment and method by

[ 5]



THE AMERICAN OMEN

means of which one American clerk did the work of

twenty German clerks. He imported both the equip-ment and the method and let out nineteen clerks inevery twenty; but when an American asked him ifhe had raised the pay of the twentieth clerk he wasunable to comprehend the meaning of the question.Had the clerks bought the equipment or discoveredthe method? No. D id the twentieth clerk workany harder than he had worked before? No. Thenwhy should he have more pa y ? Tha t view, of course,is rational.

The British have identified a more significanteffect. They have been seeking the American secretof high wages.

A London newspaper sent a delegation of trades-union people on a voyage of discovery. They visitedmany w orks, touched the fur coats and silk garmentsin the individual lockers of American industry 'swomen workers, stared at the wage earners' motorcars parked by hundreds around the factory, talkeda good deal about wage-rate systems and the differ-ent theories that govern them—and went home nowiser. Their report was a tale of wonder.

Two British engineers produced a sensation witha book on the dynamics of American industry . Moremechanical power, keener instruments, better methodand mass production at low costs—there was thesecret. Let Engla nd mind. But here again themistake of tak ing effect as cause. Multiple produc-tion, now called mass production, is as old as indus-trial machines; Great Britain had it first. Whatmakes it so astonishing to them as they now see it in

[ 6 ]



WITNESS OF EPOCH

the United States is the degree of its development,which is merely an effect. Besides, there is mass pro -duction in Great Britain directly copied from us.You may see it. A t Oxford is a motor plant wherethe form of practice, moving chain and all, is asit is m Detroit. An American, who was neither an

engineer nor an industrialist, going through thisplant, came to the pa int job . They seemed particu-

la rly proud of it and said to him, "H ere we can pa inta body in two minutes."The American, knowing the output, made a men-

tal calculation and said, In tha t case you mighteasily do the whole job in one stall . W hy four stallshere in the middle of your pl ant, mak ing a bad trafficjam, when you could paint all your bodies in one?"

They said, "Our customers, unfortunately, arenot so easily pleased as your own. We have to givethem a choice of at least four colors."

The American said, "Yes. Still, why four stallswhen one would do ?"

They said, patiently, "Don't you see?—the manthere now is spra y ing black pa int. The next bodymay call for blue. If he should have to blow all theblack paint out of his tube and clean it for blue, tha twould be wasteful of time and ma terial— w hat youAmericans call inefficient."

The American said, "Yes. But why not four tubesto one sta ll? "

They were silent for a minute, and then answered,"Do you know, that idea had never occurred to any-

one here."The American tried to think of some way to tell[ 7 ]



THE AM ERICAN

them why it would be impossible for such an ideanot to occur to someone in an American plant, whyit might occur ju s t as easily to the man handling thepaint tube as to the superintendent, why the man atthe paint tube could not help imparting it once ithad occurred to him, and why But he gave itall up and said nothing. There was the form andnot spirit.

fhen a royal British delegation was appointed byHis Majesty's Government to study and report onindustria l conditions in the United Sta tes. I t dida typica l British job, full of excellence, and reported,among other discoveries, that:

"The workpeople accept experiments toward re-duced costs of production, as they have always foundthat the result of lower costs has been increased con-sumption and consequently more employment."

The British point of view is explicit in the term"workpeople." It is thereafter implicit in theassumption that when costs are reduced and con-sumption consequently has been increased, the bless-ing of it to the workpeople is simply more employ-ment.

Lastly, the League of Nations decides to make acareful study of American industry in contrast withthat of Europe in order to see if it will be possible,quoting the words of Monsieur Loucheur, "to trans-pose certain parts of the American system into theEuropean system."

As well speak of transposing certain parts of a

tree. You might have all the pa rts , yet w ithout thesubtle principle of the living tree, the natural laws[ 8 ]



WITNESS OF EPOCH

of its origin, growth and reproduction, you wouldhave only lumber for your pa ins. The whole Ameri-can industrial system is an effect—the mere visi-bility of invisible powers.

What parts of it, as parts, Europe would like totranspose are not ha rd to guess. One of the Frenchexplorers was Andre Siegfried, an eminent econo-mist, who wrote a book entitled America Comes of

Age. A brill iant book, containing glimpses of deeppolitical insight. The French mentality is political.But as to the American industrial system, touchingthe same idea that now animates the economic mindof the League of Nations, Monsieur Siegfried says:

"The question that Europeans find most intrigu-ing is whether America will be able to withstand

international competition and a t the same time main-tain her enormous wages and exceptional standardof living. Possibly we are not aw are of the immenseeffort that has been made since the war to adaptAmerican industry to the change in the labor mar-ket, by installing the very latest equipment. Oneis almost tempted to state that Europe, with herintelligence, technical perfection and high civiliza-tion, could adopt the same policy and also profit byher lower wages and less pretentious mode of living."

Which is only to show how far he had missed it—the secret they all come seeking.

They see in the American system low costs ofproduction, high wages, high standards of commonliving; and they think, "If only we had those lowAmerican costs with our low European wages, howprofitable that would be "

[ 9 ]



THE AMERICAN OMEN

I I I

The False War MythWhat they seek is not obvious. All the truth of it

is new and fundamentally strange to Old World tra-ditions and mind habits. But there is one definiteand fatuous reason why they miss it. Their charac-teristic approach is under tyranny of the idea thatAmericans got rich in the war. Thus all the higherphenomena of American prosperity appear to themto have occurred by chance and to wear an aspect ofpost-wartime unreality. Even when upon reflectionthey recognize that other causes must have beenacting, still, almost invariably they put that notionfirst. It has become a morbidity of Europeanthought. For a fairly complete representation of itsee any European article on the subject of war debtsor on the possibilities of an economic union of Europeagainst the United States.

The royal delegation appointed to study industrialconditions in the United States could not avoid thethought that we had been war-made. It wrote:

The war gave an impetus to the expansion ofmanufacture in all branches of industry and leftthe United States a creditor nation in relation toEurope. Immediately it was obliged to add: Since1922 there has been a rapid increase in the volumeof manufacture in most branches of industry.

It is true, the war stimulated industry in theUnited States, necessarily; it stimulated industry

also in Great Britain, France, Germany—every-where—to the utmost. That after the war there was

[10]



WITNESS OF EPOCH

not a farther expansion in Europe, such as occurredin the United Sta tes, is the crucial fact. Conditionswere similar on both sides. Inflated w ages, highcosts, people wanting more things than they hadever wanted before, and from the war an industrialcapacity much greater than had ever existed inpeacetime. The problem was the same there as itwas here—whether to cheapen goods or cheapen

labor.One way is to satisfy more w ants; the other way isto limit them. We cheapened the goods simply byincreasing the productivity of labor, and found notonly that what had been regarded as an excess ofindustrial capacity could be employed but that moreand more was needed.

In July, 1926, the Monthly Labor Review, pub-lished by the United States Department of Labor,sa id: "W e are a t the present time experiencing themost remarkable advance in productive efficiency inthe history of the modern industrial system." T ha tmeans the cheapening of goods; it means low costsand high w ages. The aim is prosperity .

This advance in productive efficiency was the

direct cause of that rapid increase in the volume ofmanufacture since 1922 referred to by the royaldelegation. The w ar stimulus had nothing w hat-ever to do with it; neither had gold anything to dowith it, nor the fact that we had become a creditornation in relation to Europe.

It is not entirely from selling itself a politicalpropaganda against debt payment that the Euro-pean mind becomes fixed upon the thought that it



THE AMERICAN OMEN

was the w ar made Americans rich. The Europea n

mind's traditional way of regarding wealth, conceiv-ing it to be a product whereas we conceive it to be afactor, would hinder its understanding. As we thinkof wealth it is not a sum, variable only by additionand subtra ction , nor is it extent of possession. I t isa body of great means, containing a principle ofproliferation that causes it to increase by division.

We think much less about wealth as such thanabout prosperity , and they are not the same. Themeasure of prosperity is not what people possess; itis w hat they consume. The per capita w ealth ofRobinson Crusoe's kingdom was very grea t. Tw omen possessed everything. Yet their state of pros-pe rity was low, because w ithout the engines and toolsto multiply the power of their hands they could notproduce more than enough to satisfy the wants ofsimple necessity. All the gold in the w orld, all theforeign investments in the world, plus unlimitedsources of raw materials, would not have increasedtheir prosperity in the least.

So in the foreign doctrine that the United Statesgot rich in the war one must recognize both malice

of fable and disability of view.The facts are these: Above their own exertionsin the war, the American people, out of their ownresources, produced and loaned to the Allies goodsto the va lue of $10,000,000,000. Then in the firstten years af ter the w ar, the American people, thoughtheir own wants were rising, nevertheless producedand loaned to European and other foreign countriesgoods to the va lue of $15,000,000,000 more. For

[12 1



WITNESS OF EPOCH

these goods we hold receipts in the form of paperpromises to repay . W hether in fact we shall everbe repa id, or if so, how, we do not know. T ha t is notthe topic. The question is how the United Sta tescould have got rich, how its prosperity could havebeen increased at all, by lending away to other peo-ple in the course of twelve years some $25,000,000,-000 worth of consumable goods.

If we were receiving any of them back, or thematerial equivalent, it might be supposed that wewere now enjoying a postponed power of consump-tion. But we are not. W e are still lending aw aymore than we are getting back. All we have to showfor the goods we have loaned away to Europe arebonds—some of them of very dubious value. W ecannot eat or wear foreign bonds, we cannot ridethem, we cannot use them as T-beams or turbineblades, and they have no fuel va lue. Among all theabsurdities of economic thought, this is perhaps theone most w eird, tha t a nation may achieve prosperityby exporting more goods than it imports.

IV

Facts That Cannot Explain ThemselvesNo material part of the spectacle of American

prosperity is owing to the war; it is in spite of thewar, in spite of our having loaned away, perhapsforever, enormous quantities of goods that we havenot ceased to w ant for ourselves. I t may be tha t weowe to the experience of war a sense of power thatmight otherwise have come a little more slowly, a

[ 1 3 ]



THE AMERICAN OMEN

lesson in solidarity, a clarification of the national

mind, a new fa ith in our own values; but it is no suchbusiness of the spirit people mean when they say itwas the war gave Americans first place in the world.

Explanation turns next to the catalogue of Amer-ca's na tura l advantages. Item : The extent andvariety of our resources in raw materials. Item :Our self-containment in essential food staples. Item :

The size of our jealously protected domestic market,with its apparently insatiable capacity to absorbgoods. Item : Enormous quantities of cheap me-chanical pow er. And so on.

But w hat all this amounts to is simply description.It may be that for world supremacy to pass fromEurope to America it was necessary that we shouldpossess these advantages: it is none the less certainthat merely the fact of our possessing them was notthe cause of tha t event. T ry b ut a few simplereductions.

Raw materials?Access to sources of raw material has presented no

problem to Europe in the past, nor does it presentany problem now. Those who are urging an eco-nomic union of Europe against America already areboasting that Europe, with her vast colonial posses-sions, is superior to the United States in suchresources, and this is undoubtedly true. Moreover,there is the fact that the United States is the world'sheaviest buyer of raw materials. We are, for ex-ample, Great Britain's largest rubber customer.

Our self-containment in food staples?Europe for more than half a century has delib-[ 1 4 ]



WITNESS OF EPOCH

erately pursued the policy of exchanging manufac-tured goods for food, that is to say, skilled labor forpeasant labor—as a pa y ing proposition. Besides,the market for food staples is an international mar-ket ; the price is a world price.

The capacity of our domestic market?Th is is, of course, very important. No country in

Europe knows the capacity of its own market, for

the simple reason th a t not one has ever systematicallyor intensively explored it. Only now, in the Am eri-can example, are the industries of Europe beginningto regard the possibility of really exploiting domestictrade.

Our supply of power?That we use much more mechanical energy per

capita than any other people is not owing to theextent of our power resources, nor to the fact thatour power is cheap. We do not use it because it ischea p; it is cheap because we use it. Europe has notutilized her resources to anywhere near the samedegree. Nor is it tha t our engineering and technicalskill is superior. England knows better tha n to w asteenergy by millions of horsepower burning her coalin open grates.

In any case, the physical, geographical and politi-cal conditions were all previously know n. W hyshould foreign countries be sending missions to theUnited States to confirm such facts as may be readout of the almanacs and yearbooks of any modernlanguage? W e have no hidden na tura l resources,

no secret sciences, no inventions that are not for sale.It is supposed that in the extremes of mechanical[ 1 5 ]



THE AMERICAN OMEN

skill we a re inferior, and this may well be true. Intechnical knowledge we are not superior. There isnothing we make that other people may not makealso, as well or perhaps better. We have nothing inthe way of industrial method that is not publishedin trade journa ls and magazines of technology. Any-one is free to copy our methods. The League ofNations is welcome to transpose the American sys-

tem into the European system by part or whole;we make no mystery of it. We have no new ideasamong us, abstract or concrete, but we give themimmediate circulation in print.

The American book lies open. I t expla ins every-thing and is itself unexplained. Who expounds themeaning that underlies the text?

W ha t is new in the world is w ithout a name. I t isnot a system, not a method, not yet a formulatedphilosophy. Out of it is proceeding a new reality .American prosperity is its light and witness.

D o we understand it ourselves ? Our relation to itis functional, not contemplative. Take certain prem-ises in the interrogative case, as for example:

American business is unlike business anywhereelse; it is unlike itself as it was only a few years ago.Wherein is this difference and what are its prin-ciples ?

Formerly the American business man, like anyother, was content with money profit alone; thedegree of his profit was the degree of his content-ment. Tha t is no longer true. W ha t has happenedto him?We were once facing all those evils of laborism,

[1 6 ]



WITNESS OF EPOCH

such as limitation of output, demarcation of jobs,puerile jurisdictional tyrannies, that still hinder theprosperity of Great Britain; there was a babel ofcounsel, no one knew the w ay out. Yet we escaped.How?

We had capitalism here in its dangerous forms.But now, as we know labor without laborism, so weknow capita l w ithout capitalism. How is tha t?

We have gone much further than other peoplewith standardization and mass production, and yetwhat was predicted as an inevitable consequence ofthis method when it should have been carried to theAmerican extreme—namely, th a t it would reducehuman beings to the mindless condition of automa-tons—has not happened. So fa r otherw ise, w hatstrikes the foreign observer deeply—even the Eng-lish, who most of all dread losing their individualismto machine craft—is the individualistic character ofAmerican w age earners. W ha t does tha t signify?

Why is the conflict of man with himself and withhis environment more creative here tha n in countriesthat are older in culture, richer in experience andhad first possession of the transforming power ofmachines ?

The American's own first impulse is to recitefacts from the open book that tells what we a re doingand how we are doing it and yet contains no accountof itself.

[ 1 7 ]



REVOLT OF THE MIND

The American Mentality/ I AHE first necessity is to comprehend American-•- prosperity as idea. Its works are for use and

wonder; but the works of a people can be nothing

else than their thoughts externalized. If we aremak ing an origina l a ttack upon the economic aspectsof rea lity , it follows tha t we have among us, and musthave had to begin w ith, original ways of thinking.W ha t are they? How do Americans think?

The American mind possesses certain characteris-tics uniquely its own. So does the German mind, theFrench mind, the English mind—any collective men-ta lity . Wherein they differ one from another maybe a m atter of very subtle comparison, and yet fromthe projection of such differences comes all contrast.

Consider the American mind on its inventive side.Whether it is more or less inventive than the Euro-pean mind is often debated. Suppose it were eithermore or less. There might still be an importantdifference in how it employs the inventiveness it has,and in fact there is. This can much better be illus-trated than defined.

A Russian removing a dead horse from the stablepremises proceeds in this manner: He arrives witha live horse and wagon, alone. I t is the wagon youfirst notice, for it is high and narrow, w ith a rack

around it, and has no tackle or equipment for ha n-dling a carcass. You wonder how he expects all by[ 1 8 ]





THE AMERICAN OMEN

come them. But he accepts the difficulties to beginw ith. There is the pointA typica l American, watching this Russian, wouldnot be in the least impressed by the ingenuity of theperformance. H e would say, "How dumb " mean-ing how stupid in the first place to accept the diffi-culties. W hy not remove them? T ha t is his impulse—remove the difficulties, change the facts. Specifi-

cally, he thinks of a wagon built for the purpose,low swung on bent ax les, w ith proper tackle attachedHaving imagined the special wagon, he asks himselfif it would pa y . Perhaps not. Such a wagon wouldnot be right for general purposes also. Thereforethe special wagon calls for an organized specialactivity. W ith two or three of them one mightremove all the dead horses in Moscow. Then i twould pay.

Such is the American's natural process of mind.Hence new forms, new methods, then new difficultiesand more new forms and methods, all in a state offluid change.

Another rare characteristic of the American mindrequires in the same way to be illustrated. ThomasEdison has been a deep observer of it. Some yearsago, when electric locomotives w ere evolving, he usedto ask:

"Have you seen that big electric engine on theNew York Central Railroad—how the power iscoupled to the wheels? No? I'l l tell you a storyabout it to show w hat happens to any of us when we

get in a rut from knowing too much about the diffi-culties. Those engineers had finished the engine, a ll[ 2 ]



REVOLT OF THE M IND

but one detail. They couldn't think of a proper wayto get the power down to the wheels. T ha t sillyproblem has bothered engineers all over the world.You will see if you look in how many different waysthey have solved it. Well, these engineers were stuck,all in a rut. They had looked at the thing so longand knew so much about it that they couldn't see it.So they posted a notice. Five hundred dollars to

anyone who could make a w orking suggestion. Weekspassed. Still nobody could think of a way to couplethe power to the wheels.

"One day a boy from the drafting room stoppedat the chief engineer's desk and made a little scrawlof a pencil sketch. ' I don 't know any thing about it,'he said, 'but would this w ork?' The engineer lookeda t it and said he believed it might—and it did. Youwill see it w orking the nex t time you leave the GrandCentral Terminal. Tha t boy w asn't in a ru t. H edidn't know w hat the difficulties were. He ju s tlooked at the thing."

That is what has been called the theory of igno-rance. Clearly, ignorance is not the right word.Innocence is not much better. There is no exactword for what is meant, which is that in order toact upon a thing in an original manner you must beable to see it naively, with no prepared ideas, takingnothing about it for granted. So Edison works. Ifhe were an economist he would not take the law ofsupply and demand for granted. So Ford w orks.They a re only celebrated examples. The head of the

largest industrial research laboratory in the country—in the world—began with a gang of linemen.[21 ]



THE AMERICAN OMEN

From post-hole digging to the mathematics and

physics of high mechanics by common sense andskepticism I t is one of the notable tra its of ourcommon mentality and so well known tha t an expres-sion of it occurs in vernacula r speech: "Show meI'm from Missouri "

It is important as a negative fact that the Ameri-can is not political minded. Superficially, this mayseem—and probably is—untrue; fundamentally, itis so. Certainly , no other people so distrust thepol itica l approach to an economic problem. On thep a rt of cap ital , this is fa irly notorious. Th e sameinstinct for keeping politics and economics a pa rt actsw ith labor. Trades-unionism in Grea t Brita in, forexample, is definitely pol itica l. There is a La borPa rty , and there has been a La bor government.Here trades-unionism.is just as definitely economic;temperamentally it is so, to the despair of an Ameri-can cult calling itself liberal, from some notion it hasof kinship with the Liberal Party in British politics.This fact of separation runs very deep, if you followit down, and has structural significance in the Amer-ican scheme.

Anciently it was that the individual existed forthe state in all senses, political, moral and economic.The true crime of Socrates against the Greek statewas to have ta ug ht the doctrine of individual r ig h ts ;the political offense of early Christianity was of thesame root. In the course of 2000 years the individ-ual became supreme in the highly civilized forms ofW estern society. The ancient doctrine was quite

[ 2 2 ]



REVOLT OF THE M IND

reversed. T h e sta te w as declared to exist for the

individual.The perfect acknowledgment of this modern idea

is in Great Britain, where a man, because he is Brit-ish born, is entitled to sustenance and to a certainstandard of l iving, irrespectively of what he may ordoes prod uce . H e does not alw ay s ge t the k ind ofliving to which he feels entitled and his disappoint-m ent is a chronic political issue. T h e E ng lish m a nw ho say s the sta te owes him a liv ing utt er s a n opinionth a t everyone accep ts. If he has no jo b the statem us t keep him in doles; if his w age is insufficient toprovide him a decent living the state must househim in a manner of minimum comfort, and so on.

Here, if a man says the state owes him liberty,protect ion, equal i ty of opportuni ty, that is a l readyack now ledged. Th ese a re politica l benefits. B u t ifhe says the state owes him a living he is ridiculed;if he insists we know there is something wrong withhim. H e is a fa ilure, a ne'er-do-w ell, a nuisance.Here the state exists for the individual in politicalsenses only; economically the individual is on his own.

Where it is otherwise—that is, where the active

responsibilities of the state to the individual are bothpolitica l and economic, there equa lity of op po r-tunity, which is a political conception, passes intothe economic life as levelment of rew a rd. T h a t isfinally to penalize efficiency for the benefit of in-efficiency. U nd er th a t condition such a th in g a sa fast piece worker receiving a higher rate per piecethan the slow worker would be unknown.

[ 2 3 ]



THE AMERICAN OMEN

This is one of the special fea tures of the American

wage system and represents a revolution of thought.As economics, it is sound in a new light. Obviouslythe labor of one who lays 2000 bricks per day in thewall of a building is worth more than twice as muchas the labor of one who lay s only 1000. I t is w orthmore per brick, because it brings the building somuch faster to completion, with all that means intime and interest saved; or, in the case of two costlymachines exactly alike, an output of 2000 units perday from one is cheaper per unit than an output of1000 units per day from the other; and rightly forth a t reason may bear a higher rew ard per un it to theone producing it. As a method, however, it is notpossible until both capital and labor see it alike inprinciple and labor can trust the employer not tobreak the basic piece ra te simply because the efficientman is making a handsome w age.

I INative Ways of Thinking

Given these three characteristics of mind, you

might expect strange American answers to the OldWorld problems and riddles of industrialism.You will remember that industrialism was immi-

gra nt here. W e did not conceive it. It s spontane-ous appearance was in Europe. When it was halfa century old and highly developed there, life in thiscountry presented still an agricul tura l picture. W ecame la te to machine craft. Europe's darling ambi-tion was to monopolize it in order to be able to

[ 2 4 ]



REVOLT OF THE MIND

exchange manufactured goods with the rest of theworld for food and raw materials. We importedmachines when we could, and when it was impossibleto buy them, owing to the European embargo, thenwe held out inducements to men who could carry theplans in their heads and build them here.

And as we got from the Old World the primarymethods and mechanisms of industrialism, so at thesame time we got the European ways of thinkingtha t had attended it. We imported the Europeanbook of political economy. I t did not belong here.It was a manual of instructions we had done betterperhaps never to have read at all.

There is grimness in the fact that a peopledeparted from Europe to find freedom of mind and

spirit in the wilderness of the New World and toembrace the dignity of labor should have imposedon themselves unawares at the beginning of theirindustrial career a set of Old World formulas, calledthe science of economics, that had come straight upfrom traditions of feudalism, caste and peasantry.That was one more piece of mysterious evil to chal-lenge the enterprise of Puritan faith.

You may take it classically that the science ofpolitical economy is the study of the creation anddistribution of w ealth. Historically , in Europe, itshows three principal figures—namely, the Utopian,the apologist and the radical. The Utopians a rethose who flee from reality and tak e refuge in fan-tasy . The apologists are those who hold tha t w hatis was to be. The radicals are those who propose toseize the moneybags.

[25 1



THE AMERICAN OMEN

Dissimilar as they earnestly think themselves tobe, they are rooted all alike. In the manner of theRussian loading the dead horse, they accept thedifficulties. They find industrialism w orking in acertain way and say that is the law of industrialism.They find capital working in a certain way and saythat is the law of capital—the law of its nature, asif it had an immutable na tu re They find men

behaving in certain ways for gain and say this isthe law of economic motive. They are one indespair.

The Utopians have generally said mankind wasspoiled in his nature by bad rulers and bad experi-ence ; so they have taken man as he ideally should beand arranged him in imaginary w orlds. T ha t ismerely to Lave the dead horse on the ground—reality too difficult.

Between the apologist and the radical there is fullagreement, save only as to what should be done inview of the accepted facts. Hav ing examined w ealth,idleness, poverty, the uses of capital and the frustra-tions of human happiness, the apologist has said,"Such is the economic law . The law is implacable.Let things be ." Th is is the celebrated doctrine oflaissez faire. The rad ical has amended this to say ,"Such is the law of capitalism, and that law isimplacable. Therefore destroy ca pita l."

Counsel of flight. Counsel of do nothing. Coun-sel of destruction. Make the economic life over bylegislating a fantasy; let it be and endure its evils;

abolish capitalistic society and save the people fromdoom.[ 2 6 ]



REVOLT OF THE M IND

Such were the ways of thinking about it that ioh

lowed industrialism from Europe to this country.The first fruits here were European fru its. Climatedid nothing to change them. The economic historyof the last third of the nineteenth century is thememory of an American nigh tmare. All tha t isnew began when the collective American mind, withits passion to alter the sacred circumstance and see

then what will happen, its gift for seeing only thething itself and its preference for any practicalsolution that will work, began freely to act uponthe phenomena of industrialism.

There is no natural law of capitalism any moretha n there is a na tura l law of voodooism. Capitaldoes not occur in a mysterious manner, with a natureof its own. People invent it, create it , consume it,destroy it. How they create it and w hat they dowith it is the way it works with them, and there is noother law. There was a Mosaic w ay with cap ita l; itwould work now if people were again like that.There is a Mennonite way with capital, there is aEuropean way with capital, and there is an Ameri-can way with capital, and it is in every case the way

of people w ith their own. Ev ery form of society m usthave an economic structure. A society of ants hastha t. But there is no universal law of economicsany more than there is a universal law of taste ormorals. How people produce, divide and consumewealth is according to their capabilities, understand-ing, industry and cha racter. The formal rules and

laws about it merely declare what is standard prac-tice in that time and place, and the practice comes[ 2 7 ]



THE AMERICAN OMEN

first. The pyram ids were built by one w ay with

w ealth, skyscrapers a re built by another.This had all to be imagined and then to be dem-onstra ted. F irs t of a ll, it was necessary to doubt aEuropean philosophy that assumed the existence ofa proletariat naturally consecrated to poverty.

I l l

Struggle With the Old World's Doom Booh ofPolitical Economy

The French originated systematic curiosity as tothe sources of wealth and how it passes around.They were the first to realize that society must havean organic economic struc ture. From thinking ofit, they visualized it and made a drawing to repre-sent it—the famous Tableau Economique—with hol-low columns to symbolize the different classes ofsociety, such as farmers, who alone were productive;then the proprietors and nobles, and finally thesterile class, which included tradesmen, artisans,servants, artists and intellectuals; and among thesecolumns were tubes in zigzag arrangement through

which the flow of wealth occurred, like the circula-tion of blood.The enthusiasm for this crude graph was extraor-

dina ry . Mirabeau said of it :"There have been since the world began three

great inventions which have principally given sta-bility to political societies, independent of manyother inventions which has enriched and advancedthem. The first is the invention of w riting. The

[ 2 8 ]



REVOLT OF THE MIND

second is the invention of money. The third is the

Economical Table, the result of the other two, whichcompletes them both by perfecting their object; thegrea t discovery of our age, bu t of which our posteritywill reap the benefit."

It was a mechanism hitherto invisible that hadbeen all the time working by itself. As they lookedat their picture of it they began to think of control-ling it. Then they broke into a violent dispute as towhether it was working as it should—whether whatthey saw happening was the natural order or adeformity of it. Those who believed w ith Rousseauthat man by nature was good, unselfish and wise,and had been degraded by government, so that theonly political problem was how to restore him to hisnatural disposition—these said the economic ma-chine was working in aberration; all you had to dowas to make it work as its own true nature was andthe world would be perfect. Utopias began to befounded. This was in the middle of the eighteenthcentury . There was yet to occur the French Revo-lution, in which so much economic fantasia wentheadlong to disaster that people everywhere turned

back to reality.The French had invented an economic mode ofthought; but the English founded what is called thescience of political economy. Adam Smith's book—The Wealth of Nations, published in 1776—is theimperishable old testament of tha t science. I t wasthe first work in which the economic life was treatedas a system of minute activities for the most partunknown and invisible to one another, and yet all

[29 1





REVOLT OF THE M IND

proportion which the demand for labor requires.If this demand is continually increasing, the rewardof labor must necessarily encourage in such a man-ner the marriage and multiplication of laborers asmay enable them to supply that continually increas-ing demand by a continually increasing population.If the reward should at any time be less than whatwas requisite for this purpose, the deficiency of hands

would soon raise it; and if it should at any time bemore, their excessive multiplication would soon lowerit to this necessary ra te. The mark et would be somuch understocked with labor in the one case and somuch overstocked in the other, as would soon forceback its price to that proper rate which the circum-stances of the society required. I t is in this manner

that the demand for men, like that for any othercommodity, necessarily regulates the production ofmen; quickens it when it goes on too slowly and stopsit when it advances too fast."

IV

The Sacred Law of Poverty

The ox prospect for human labor A proleta riat,automatically obedient to the law of demand andsupply, doomed to fluctuate between just enough atone time and misery a t another. If wages provideit with a little more than enough, it over-producesitself, wages fall and it sinks into misery; when the

mortality of misery has made it a little scarce, wagesrise to encourage a proper supply from procreation.[ 3 1 ]



THE AMERICAN OMEN

It happened that Adam Smith's doctrine of indi-vidual irresponsibility for how economic institutionsworked, and his remorseless theory of natural wages,perfectly suited the mentality and spirit with whichEurope approached the opportunities of industrial-ism. The idola try w ith which they were received,especially in Great Britain, is understood only onthe supposition that they met some urgent heed of

the hum an conscience. On The Wealth of Nationsas a Bible was reared a complete system of thought.It was taught in the primary schools and even innurseries as finished truth that children ought toundersta nd ; it was expounded in the form of pop ula rtales and conversations with young Caroline by MissM artineau and M rs. M arcet. Its hold on the men-ta lity of Eu rope is not broken to this day . Its influ-ence upon economic and political behavior is stillpowerful, if not dominant.

After Adam Smith came M althus, w ith his law ofpopulation, to prove that the human race tends toreproduce itself faster than the means of sustenancecan be increased; therefore inevitably, and as anatural fact, a great fringe of misery.

"The poor are themselves the cause of their ownpov erty ," he said, simply by not refraining fromexcessive procrea tion. Thus the responsibility forpoverty is passed from the ill working of economicinstitutions, which no one can help , to the pro leta ria titself.

Next came Ricardo, whose authority was great

because he was himself a capitalist and able from[ 3 2 ]





THE AMERICAN OMEN

institutions solely. The things once there, mankind

individually or collectively can do with them as theylike."Such a thought about division was heretical; it

was socialistic. But it was not serious, really , anddid no damage to the fundamental thought that gov-erned European industrialism, because at the sametime he w as, w ithin th a t thought, sound as to w ages.It was he who formulated in a final manner whatthe socialists have ever since called the brazen law ofw ages. N a tura l w ages, in the long run , he said,were determined, as the price of everything wasdetermined, by the cost of production—by the costof producing the human w orker. And the famouslimited-wage-fund law he stated thus:

"Wages depend on the proportion between thenumber of the laboring population and the capitaldevoted to the purchase of labor, and cannot underthe rule of competition be affected by anything else."

What did an emotional heresy about division mat-ter when at the same time he proved by logic thatwages, representing labor's share in the total prod-uct of wealth, were twice limited—once by a natural

price which was nothing else than the cost of pro-ducing a laborer, and again by a rigid wage fund?H e was himself distressed by the implications. Theonly means of amelioration he could suggest were,first, to increase the wage fund by saving, and, sec-ond, to limit procrea tion. When the socialistsretorted that from the natural wage as he defined itthere was nothing to be saved, and that his othermeans meant condemning the laborer to celibacy, he

[ 3 4 ]



REVOLT OF THE MIND

recanted and w ithdrew his theory. This produceda great sensation in the world of respectable eco-nomic thought. But on reflection he felt obliged toput it back, because it was logic, and he did put itback, w ishing it were not so. There it is.

In the industrial countries, or in those destined tobecome such, especially Great Britain and France,government very easily accepted the thought sys-

tem founded on Adam Smith, because it cancelledmoral responsibility. The economic affair was gov-erned by na tura l law. No one could change it. Theless it was meddled w ith the better. The pla y ofindividual self-interest was trium phant. Each forhimself and none for all. Sentiment, the humani-tarian impulse, a feeling for the poor, socialness—these were a ttributes of the emotional na ture. Theeconomic man was in that aspect another animal;the only way he could act was for his own, by anatural principle of selfishness.

And for a while it did seem that this was theregime required for the development of industry inits new form. I t flourished amazingly. Appearedthe great centers of production, such as Manchesterand Birmingham in England, Lille and Mulhouse inFrance. Wealth increased in a fabulous manner,with a concentrating tendency.

But where was the prosperity?There was much more w ealth. Tha t was evident

to all senses of measurement. There was more pov-erty , too; or, in any case, the spectacle of it was more

terrible. Misery, like w ealth, was tending to con-centrate itself in a few places and thus all contrasts[3 5 ]



THE AMERICAN OMEN

were intensified. Magnificence and high profits on

one hand, for the few; on the other hand, low wages,long hours, squalor and wretchedness for the many—for the proleta riat as a race apa rt. Conditionsbecame so bad that the manufacturers themselvesbecame alarmed lest the growing generation shouldbecome hopelessly enervated under the strain ofexhaustive toil for sometimes as many as fifteenhours a day, and insufficient nourishment at theend of it.

W ha t could they do? They w ere not responsible.Such was the economic law, including the law ofwages—the law that wages must vacillate betweenjust enough and not enough to sustain life, for thatwas the natural price of labor.

Sensitive na tures began to rebel. There arosesocialists, communists, ana rchists, mystics like Renanand moral judges like Carlyle, all saying the eco-nomic life was abominable.

Beneath the visible tragedy that moved them wasanother in which they themselves were involved un-aw ares. This was a tragedy of the mind. One spellworked upon Utopians, radicals and conservatives

alike. They believed the same things, held amongthem a common delusion. T ha t is to say , they re-garded the evils complained of as inherent in thenature of economic institutions, inevitably proceed-ing from the natural laws that governed them.

The Utopians, seeing how industrialism worked,and being unable to imagine its working in any other

w ay , pleaded w ith people to forsake it. Seeing howcompetition w orked, and unable to imagine any other[36



REVOLT OF THE MIND

principle of competition, they preached cooperation.

Seeing how private capital worked, and with nointuition that it could work differently in a capital-istic state of society, they embraced communism.

The radicals, believing with the conservatives thatthere was an eternal conflict between profits andwages, demanded that the wage and profit system beabolished. Believing w ith the conservatives th a t in

a capitalistic state of society, owing to that eternalconflict, there was bound to be a proletariat doomedto poverty, they advocated the overthrow of society.

This is finally illustrated in the case of K arl M arx ,the grea t B uddha of radicalism, whose name for morethan half a century has been a terror to Europeancapitalism. He did not a ttack the economic law asit was founded on Adam Smith. He agreed w ithSmith, Rica rdo and Mill. W ha t he undertook todo was to push the law to its ultimate conclusion, asno one else had da red to do. Not only would heprove that such was the law of capitalistic societyand capitalistic production; by the same pure logiche would prove tha t the law was implacable. Th isthe others had not prov ed; they had assumed it. In

a surprising manner Marx avoided the discovery tha tthe law was false. The spell saved him from tha tpitf a ll . Tw o or three times he seemed to glimpse itor suspect it, and each time he put a mark there.For, of course, if he had stumbled into it his wholethesis would have fallen.

W ha t he thought he had proved w as tha t the same

necessity obliging capitalistic society to exploit theproletariat equally obliged it to destroy itself. The[37]



THE AMERICAN OMEN

rich would become richer and fewer and the poor

more wretched and numerous, until at last the pro-letariat at one gulp would swallow up the rich."What the bourgeoisie"—the capitalistic middle

class—"produces above #11?" he said, "are its owngravediggers."

Thus, under the law, the doom of the proletariatwas poverty, but the doom of capitalistic society was

death. In his calm moments he seemed quite indif-

ferent as to when or how the fate should fall—whether by an act of violence or by a simple declara-tion of the fact accomplished. Most of his follow-ers, few of whom are capable of understanding hisprocess of logic, construe him to prefer class war inits violent aspect.

The whole drama of European industrialism waslike a dream to which no one had the key. In thephysical dimension appeared and reappeared a kindof reality tha t was mistaken for a mirage. T ha t wasthe phenomenon of overproduction, causing panics,periods of frightful depression and unemployment.The first occurrence of this kind was in 1815, whenthe British merchants and industrialists found them-

selves w ith more goods than they could sell. Theirown people had no reserve buying power becausethe natural wage had held them to the barest neces-saries of life from day to day; and the NapoleonicWars had left the world at large in a low eco-nomic state, so that the export market failed.The next crisis was in 1818. There was another in

1825.Every few years this thing occurred—overproduc-es ]



REVOLT OF THE M IND

tion and poverty at the same time, too many goodsand nothing to buy them with.The economists, as you might suppose, assumedthe existence of a natural law for this contradiction.The recurrence of crises suggested periodicity. Theword "periodicity " suggested "cycle." If you couldsee it all in one heap, you would be astonished atthe extent of the profound literature on cycles in

business. One eminent economist traced the na tu ra llaw thereof to sun spots and wrote a book to proveit. If sun spots caused industria l depressions, over-production and unemployment, then, of course, itwas God's business. Economic institutions were notto blame; again, nobody was responsible.

Why did the economic thought of Europe assumethis false fa tal istic shape? One is obliged to asktha t question. W hy was industrialism in Europeaccompanied by a logic that proved always its limi-tations—a natural wage just above the line of mis-ery, a proletariat whose lot could not be mitigated,a perpetual conflict between profit and wages, aremorseless law of capital, the utter impossibility ofdiffusing prosperity in a progressive manner?

The answer is, if they could persuade the mindto prove these things, then their scheme of humanrelationships was justified. Their think ing was rich,but their traditions were fixed. All the reasoningwith which they proved to themselves a false eco-nomic case was but a dialectic, and beneath it was asocial assumption tha t could not be proved. Thafc

assumption was, and still is, that a certain struc-ture of society is ordained and natural, a caste struc-[ 3 9 ]



THE AMERICAN OMEN

ture, one caste to labor, one to contrive and one to

enjoy—the lower, the middle and the upper classes.Thus, class warfare in the Old World, now takingits images from industrialism and employing thelanguage of economics, is simply the ancient socialstruggle among those three classes. Industrialismintensified it, principally by massing the politicalpower of the lower class.

Industrialism did not create the proleta ria t; it didnot limit the prosperity of the proleta riat. I t wasproletarianism deep-rooted in the Old World systemthat limited the tremendous social significance oftools and methods whereby for the first time in thehistory of mankind there is the feasibility of greatplenty.

The Thought That Overthrew It

It must now be fairly clear why the book of eco-nomics that we received along with industrialismfrom the Old W orld did not belong here. In thefirst place, it defined limitations, and we disbelieved

in limitations. In the second pla ce, it was designedfor and took to be forever granted a social structuretha t did not exist here. T ha t is to say , industrial -ism as we received it was founded on a foreign phi-losophy, one that we had definitely rejected in theD ecla ration of Independence. I t was one of twothings tha t could happen . We had either to changeour social philosophy or change the meaning of in-dustrialism; and for a long time, half a century at

[ 4 0 ]



REVOLT OF THE M IND

least, tHere was doubt as to which would, happen.It was an American, Francis Amasa Walker, in

1876, who prepared the destruction of the two dis-astrous foreign theories, namely—that there was ana tura l w age for labor, meaning the bare living w age,and, that profits and wages were in perpetual con-flict.

What did it mean that among competitive indus-

tries it often happened—as a rule, it happened—that the one making the highest profit was the onetha t paid also the highest wages? This invariablyturned out to be the most efficient industry of itskind.

Thus, it occurred to him that wages need be lim-ited in fact only by the productivity of labor; and

as for profits, it occurred to him that "Under freeand full competition, the successful employers oflabor would earn a remuneration which would beexactly measured, in the case of each man, by theamount of wealth which he could produce with agiven application of labor and capital, over andabove what would be produced by employers of thelowest industrial or no-profits grade, making use ofthe same amounts of capital and labor."

Therefore profit was not that horizontal chargeupon production which the European book of eco-nomics said it was. Profit, above interest on thecapital employed, might be pure surplus, a plusquantity altogether; that is to say, it might be anactual increase in the production of wealth frombetter methods and higher skill, with only the sameamount of capita l and labor as before. So wages

[41 ]



THE AMERICAN OMEN

and profits were limited not by each other at all, but

only by the productivity of capital and labor incollaboration.These ideas, though now so familiar among us,

were a t tha t time strange. W e did not copyrightthem. They were free to the whole w orld. But itwas only here they took root. They grew slowly a tfirst, and more slowly in the gardens of economictheory than in the testing grounds of experience.In notable instances they were proved by results.Their implications enlarged. Then suddenly theyput forth their strength and overthrew the Euro-pean book of economics.

This, you see, was their native soil.

• [ 4 2 ]



CONFLICT

Native Ways of Feeling

is a way of thinking? Thought may befeeling rationalized; feeling may be thought

emotionalized. A way of think ing will not move

people until it has become also a way of feeling.It was a characteristic way of American thinkingthat overthrew the fatal dogmas imbedded in theEuropean book of political economy—the book re*-ceived in this country along with the forms of OldWorld industrialism. ^,

The first and most disastrous of these dogmas wasthe brazen law of w ages. Such was the term fixedby socialists upon the economic doctrine that therewas a natural wage, or a natural price for labor,just above the line of misery, for if wages were morethan this the proletariat would multiply too fast,thereby increasing the supply of labor and breakingthe price. Another form of the same dogma wasthe doctrine of a limited wage fund. The tota l ofwages that could be paid was determined by theamount of capital available for the purchase oflabor—the wages fund—and this fund could beincreased only by capital savings from the profitsof industry.

Then the second dogma, namely—that profitsand wages were directly opposed in natural princi-

ple. Neither could be increased but a t the expenseof the other. Therefore profits, from which the[ 4 3 1





CONFLICT

the thought that wages were unlimited save by the

productiv ity of labor. This was a vast seed, con-taining the complete principle of economic deliv-erance. Yet it did not immediately transformAmerican industrialism.

W hy was tha t? And why was Europe , whoseeconomists took this American seed and examinedit critically—why was Europe unable to grow it atall in the soil of Old World industrialism?

The answer to the first question is th is : W e per-ceive that wages are limited only by the productiv-ity of labor. To increase wages in a progressivemanner you have only to increase the productivityof labor per man in the like manner. Very good.But how are you going to increase the productiv-ity of labor per man or per man hour? You may

put in the hand of labor a tool more powerful andcunning, you may devise a science of motion, youmay impose the perfect method; but if labor is darkat heart, if it is hostile or secretly disbelieving, stillproduction will be limited. You may promise tha tthe effort of willing collaboration shall be rewardedby higher wages, you may offer the wage before-hand; labor has heard all that before and has beenmany times so tempted to drive itself.

You see w hat has happened. Labor has acceptedthe old employers' law of conflict between wages andprofits in principle. I t has organized itself aga instthe despair implicit in that law, against an indus-trialism that treats labor as an impersonal commod-ity; specifically, it has bitterly organized itself to

limit the production per man per hour in order to[ 4 5 ]



THE AMERICAN OMEN

make more jobs. Suppose, it says, tha t for grea ter

productiv ity you did pa y higher wages. T ha t wouldmean fewer jobs, unemployment, then two men run-ning after one job everywhere and ultimately lowerwages than before.

So, notwithstanding the liberating thought, thebetter machines, the more scientific method, produc-tion is still hindered. I t is hindered by ways ofthinking and feeling on the part of labor, and whatlabor thinks and feels is inevitable from the wayof thinking that has hitherto governed industrialism.

There is the last impasse. No thought, merely asthought, has the power to break it. The thoughtmight lie for centuries on the shelf of abstraction.It contains the mystery of fecundity; to germinate,it requires to be buried in the ground of common

feeling. I t must grow downward into feeling andbecome emotionalized; it must appear again on theplane of thought as feeling rationalized. Then itbecomes dynamic. Tha t tak es a length of time.

As to the second question, why the American ideathat wages were limited only by the productivity oflabor was a seed that could not germinate in theground of Old World industrialism, the answer istha t it was alien to a social philosophy assuming thenatural existence of a proletariat in a condition dis-ciplined by poverty and fear of want.

There was all the time a characteristic way ofAmerican feeling. In the struggle between indus-trialism as it was in the 70's, 80's and 90's of thelast century, and the old Puritan expectation that

economic and social motives were to be reconciled,[ 4 6 ]



CONFLICT

it suffered many defea ts. A t crucia l moments it

appeared to have lost its v itality . The early successof industrialism as a heedless force so offended andmocked it that some of it had turned away, findingrefuge in cults of mortification. Much of it ha dbeen overwhelmed by the alien flood. This was theimmigration that began about 1870 and continuedfor forty years. Regarded merely as a movementof humanity from one world to another, it was ofepic proportions. Rega rded from the traditiona lAmerican point of view, it was catastrophic.

These were not such people as had been comingbefore, self-selected out of the ancestral stock. Theywere new people racially, and would be perhapsmuch more difficult to assimilate—some £5,000,000of them in four decades, added to a population that

was less tha n 40,000,000 when the inundation began.Generally their social emotions were class-conscious.They preferred the industrial centers and either re-garded themselves as wage slaves or responded tothat view of their condition when it was presentedto them by demagogic leaders. For this was theOld World proletariat, bringing its feelings with it.

American industrialism, be it said, treated it assuch; and the human spectacle in the environs oflarge production became even worse than it wasin Europe, because here the material was polyglot,with nothing more in common than fear of thepolice, hatred of the boss and a sense of oppression.

Thus, industrialism in the European meaning,governed by Old World dogmas of political econ-

omy, was continued here long after that event of[47 1



THE AMERICAN OMEN

thought which was sometime to transform it, simply

by reason of having this enormous and endless sup-ply of cheap labor that bred itself in Europe andmigrated hither.

Industry then had no ethical or social ground, notechnic of justice. As an assertion of pure will, un-tamed, neither moral nor immoral, it had an aspectof grandeur. The scars of its infliction were deep.Americans who lived by their hands were engulfedand suffered w ith the aliens. The words tha t followare those of an industrialist, Henry S. Dennison,president of the D ennison Manufacturing Company,and now a director of the American ManagementAssociation:

"There will be an underlying suspicion for onefull generation after employers have for the mostpa rt been square and wise. The tales to-day 's work-men heard their fathers tell at the supper tableset their subconscious attitudes."

I IThe Economic Secret Is Hwman

But a certain way of feeling was implicit in thisfoundation. The w ar was its powerful reagent ; andif the passion then and afterward to Americanizealien things did seem often unreasonable or intoler-ant, that was only the surface tension, the zeal thatgoes to waste in any great motion of the humanspirit. Those who sneered a t 100 per cent Ameri-canism, crude and ugly as the phrase was—Ameri-cans who sneered at it—were those who had gone so[ 4 8 ]



CONFLICT

far in contempt of their own that they did not know

what the word "loyality" was a touchstone of.And w hat was it a touchstone of? Pa rticula rly ,w hat does one mean by a way of feeling, native here,that could liberate the forces of production?

First, you might look. Glimpses of its effect onhuman behavior are everywhere familiar, only thatwe take them too much for granted and so miss the

essential impression.As a traveler by rail, you must sometime haveseen the official train go by—one or two Pullmansand the president's priva te work car. And haveyou noticed how it is saluted by the men on theground—yardmen, train crews, even section gangsout on the right of way ? They all make one gesturealike. I t is a free, wide sweep of the arm , w ith thisinteresting peculiarity—that although it takes formsuddenly as a reflex action, it ends slowly, insteadof snapping out like a military salute.

Its character as human expression lies in thatdifference. The power tha t sustains it in space forone more instant at the end of the arc—what is it?You do not see, perhaps, that the men on the offi-

cial train—executives, managers, superintendents,the president himself—are continually making thatsame gesture, no matter what else they may be doingor think ing . Sometimes they make it first, some-times they see it first; tha t is by chance. The ges-ture asserts nothing. I t is to and from a ll mannerof men alike and yet is no assertion of their equality.To assert equality is puerile, as we know, for if ithas to be asserted it does not in fact exist. The ges-

[ 4 9 ]



THE AMERICAN OMEN

ture is a sign of something they all know, and sealsit silently.As a refugee, a reporter, almost any kind of per-son, you might have been on a train that had wadedmiles through the Mississippi River flood, the traincrews out ahead of the locomotive using poles tomake sure the invisible track was still there; youmight have noticed that at the end of the journey

Secretary Hoover went forward and talked withthe engineer. As Secretary of Commerce in chargeof relief, it was his job to know more than anybodyelse about the flood. What he said to the engineerwas to this effect:

"I hate to think what would have happened tothis country without your railroad and its gang.I'm going to tell your president what I think of itall."

"He's doing a good job, isn't he?" said the en-gineer, adding the railroad president's surname.

"H e is," said M r. Hoover. "B ut I'm thinkingparticularly of the way you pulled us out of thewater today with this train."

"That's my job," said the engineer.Tha t is all there was of it. Still nothing asserted.Values implicit. H is job , the gang's job , the gen-

eral manager's job, the president's job, and thatone fine gesture as their common sign.

As one pursuing the economic theme, you mightcome to the grea t steel plant a t Ga ry. Here is thela test word in steel mak ing. The operation is so

large that you have to see it from an observation carattached to a ya rd engine. The superintendent saysr s i





THE AMERICAN OMEN

they go in and out of motion—then you rememberthe town and you understand how important it isthat steel people should have nice houses, parks,playtime, freedom from all unnecessary anxiety.

You remember the tw ins and make a relation. If,in the act of putting a million-dollar piece of me-chanical equipment into a motion, a man were to beseized with a panic about his twins or by a bitter

reflection on the wretchedness of their surroundings,he might jam the works quite without meaning todo it. Or if he had meant to do it, you w ould neverbe able to prove it. The hand slipped— that was a ll.

Leave out the slip. There is no visible accident.There is only the difference between a hand thatis willing, always pressing for the optimum result,and a hand that is slack or heavy because the mindbehind it is sullen, cares nothing for the ideal out-put, or means deliberately to retard production inorder to keep more men on the job . When by meansof mechanical equipment you have multiplied thepower of the hand a million times, so you have mul-tiplied this difference a million times, and it becomesenormous.

The more your investment is in machines, thegreater your stake is in the man who touches them,in his general well-being, his manner of living, hisconscious and unconscious a ttitudes. You see clea r-ly what the head of the United States Steel Corpora-tion means when he says the true problem of modernindustry is how to gain the loyalty, the cooperation

and the understanding of the individual man. Notmen in general— the man. And there is new mean-[ 5 2 ]



CONFLICT

ing in a saying you will hear very often among in-dustrial managers:

"The better the coat a man wears to his job, themore he is worth to industry."

Suppose you come to a motor tow n. I t may beFlint, where the General Motors Corporation, or-ganized somewhat like a federated government offree states, has several automobile companies, allcompetitive as to product and method, each one pos-sessing state rights of which it is very jea lous. Thegovernor of one of these state jobs is a man who eatsdrop forgings as an after supper delicacy. H ehandled machines before he could reach them fromthe floor, and the drive boss of old industry was hischildhood nature study, from the point of view ofthose who were driven.

He is talking when the personnel man walks in,and stops to introduce him. Everyw here, in every-body's office, the personnel man. W ha t does i tmean ?

"I 'l l tell you," says the governor. " It 's 90 percent bull." H e grins as he says it, and the person-nel man grins too.

The governor goes on with what he was saying.The man he keeps going around looking for roughspots had said to him the frame riveting job was badin any w ay of looking a t it. The hot rivets—one manto slip them into place, another to hold them, an-other to set them. A mean jo b ; nobody liking it.The trouble was no one could think of a way to doit in a neat automatic manner.

The governor had said to him, "You've got a[ 53 ]



THE AMERICAN OMEN

new job from today . D on 't do any thing else, don 'tthink of any thing else, until you find a way to changethat operation."

And they were now about to change it. The lit-tle thing to change it with was that—standing therein the middle of his desk—a new automatic tool.When you have admired it, he takes you to seewhat he thinks is the finest foundry in the world.No dirt, no dust. D o you know w hat a foundry usedto be?

On the way, as you are entering the works, hesays suddenly : "N o man in this plant can be firedby his boss. I can't fire one myself. The most aboss can do is to suspend a man and send him upto the personnel court for tr ia l. No boss can firea man. D o you get tha t? "

Along with it, lest you should forget it, you re-ceive a half-ton hydraulic thum p in the ribs. Re-calling what he said ten minutes before on themeaning of personnel work, you perceive that suchwas levity—his way of punching the personnel manin his ribs.

"Well, what do you think of that foundry?" heasks.

You tell him it is fine. Only at the shakeout—tha t's a little bad yet. The governor is terribly letdown.

He says, "Now, of course, you would notice that,w ouldn't you? It 's the one damn bad spot wehaven't ironed out. But w e're on it. "

Almost the last place you might think to lookwould be in the clothing trade, with the traditions

[ 5 4 ]



CONFLICT

of feud and discord that belong to it; and for thereason, moreover, that because the machines must besmall and individual, the industry would seem not topresent big opportunit ies for increased productivityper man by scientific management on a machinebasis. Nevertheless, in a ny one of the so-calledx-production shops in Chicago where the union ofAmalgamated Clothing Workers of America has

been developing the principle of collaboration youw ill see a new thin g. T h e prod uction ma na ger re p-resent ing capi tal meets the product ion manager rep-resenting labor—meets him on the floor in the openshop—and asks , "How's i t going?"

The product ion manager represent ing labor says,"H er e an d there a l i tt le pi l ing up . N othing weca n' t move. Look a rou nd ."

From opposite sides they come to common pointof view. T he w ork goes a t hig h speed, pa y m ent isby the piece, production is intensively intended, andyet the rhythm is spontaneous and self-sustaining.Wages are good—eighty cents to a dol lar an hourfor men and women together—and the costs arelow.

This is a case in which the intelligence acted first,the feeling ensued. N oto riously , it w as a sw eatedindustry, wages low, hours long, conditions wretched.Union thought was generally radical , imbued withthe idea of class warfare, learned in the Old World.If once the workers by militant solidarity could getphysical control of production, then they would be

able by extortion to take all the profit and thusdestroy the institution of capitalism, with its wage[55 1





CONFLICT

duction per man. Unless we do this, the garmentindustry here will perish."

The cutters were the aristocrats; they held thekeys of production. But the surviva l of the unionand of unionized industry was of more importancetha n jobs for cutters. In one case £00 of themwere removed from the industry by edict of theunion. The industry had agreed to give each cut-

ter $500 of farewell money. Some of them went toother cities, some bought taxicabs, some were pres-ently received back into the shops from which theyhad been expelled, because now, with lower laborcosts from increased production per man, thoughwages were higher than ever before, the industrybegan a t once to expand. Th e Chicago ma nufac-ture rs w ere able to make headway aga inst their com-petitors in the nonunion fields.

This had been a body of labor, nearly all of re-cent European origin, emotionally fixed in the fal-lacy shared by Old World radicals and conservativesalike that profits limited wages and that the con-flict between them was by a natural law of capital-ism. Therefore, from labor's point of view, theonly way to increase wages was to force capital tosurrender more of its profits. I t has learned theAmerican doctrine.

What limits both profits and wages is high cost.The manufacturer is not interested in low wagesa t a l l ; he is interested in low costs. And w herecapital and labor collaborate to increase production

per man per hour per dollar of capital invested,[ 5 7 ]





CONFLICT

dissimilar. From the point of view of an engineer

thinking to act upon them by extensions of methodand agencies of power, they would seem to presentunequal possibilities. And yet the force th a t doestruly release human energy may act upon all ofthem alike. I t must occur to you tha t the ultimatesecret of American production lies neither in scien-tific method nor in the multiple use of mechanicalpower. You might have the perfect method and thevery finest equipment, but without certain ways ofthinking and feeling, from the office of administra-tion down to the ga te, you w ould not get the fullnessof production.

I l l

Discoveries in UnderstandingScientific management as a way of thinking orig-

inated in a way of feeling. By an accidental pa thin the year 1880 a genius named Frederick W.Taylor appeared in American industry, in the guiseof machinist and pa ttern maker. Pa rtia l eye fail-ure had turned him from a career in law . He

learned this trade instead; and then having fin-ished his apprenticeship, he began as a day laborerw ith the Midvale Steel Company. Presently hegot a lathe job, and shortly after that he was madegang boss in charge of lathes.

As a lathe hand he had done as the others did.He had limited his output to about one-third of hisown and the machine's capacity. Such was the uni-versal practice of labor—called in this country sol-

[ 5 9 ]



THE AMERICAN OMEN

diering, in England hanging it out and in Scotlandcacanny. I t was more than a practice; it was aprinciple of behavior enforced by the group on theindividual as an ethic.

A man who would let himself go was disloyal tohis cra ft. The ground of it was fear—fear of in-justice and fear of unemployment. If pa y was bythe day, the lazy and the industrious received equalrew ard. Tha t was unfa ir. If pa y was by the piece,the fast worker was a rate breaker. This was sobecause employers treated the piece rate not asthe true value of a given unit of work performedbut as a price for labor as labor. If men exertedthemselves more in order to earn more, the rate wascut, for no reason other than they earned too much,or more than labor was worth, quite regardless of

the value of what it had produced.W ha t was too much? Anything more than theprevailing w age. A manufacturer who permittedhis workmen to earn more than the prevailing wagewas said to be spoiling the labor market and was li-able to be treated by other manufacturers as in thefactory other workmen treated that one who lethimself go. The prevailing w age, of course, wasa term to express the Old World idea of a naturalwage—a sustenance wage—having no relation what-ever to the productivity of labor at a given timeand place. Thus, labor limiting output becausethe employer limited wages, and both together inthis antagonistic spirit limiting the power of plenty.

When Taylor was made gang boss the men withwhom he had soldiered on the lathes said, "Now that

[6 1



CONFLICT

you are boss, you are not going to be a piecework

hog, are y ou ? " T h a t w as to ask if he intended todemand a grea ter ou tpu t . Th eir experience w asthat greater output meant inevi tably a cut t ing ofthe rate .

His sympathies were with the men, then and al-w ays af terw ard. H is du ty w as to the ma nagem ent .He said he was going to get more out of the lathes.T h a t w as his jo b . T he y said he w ould see; a ndthere was the beginning of a kind of fight that waschronic throughout industry between the drive bossseeking to increase production and the workmen re-solved to limit it.

Taylor tr ied persuasion; he tr ied to drive them.He trained some young men to handle lathes aspacemakers, under an agreement beforehand not to

limit output; but they were no sooner competentthan they went over to the other side and soldieredlike the rest. T h en a t la st he did deliberately b rea kthe piece rate so that to keep their wages up theyw ere obliged to pro du ce mo re. T h eir re to rt w asto break the machines, always in some ingeniousmanner to prove it was the speed that did it .

This was the point at which the management, asthe men knew, was always ready to give up thefight. T a y lo r ha d w arned his ma na gem ent th a t thisw ould ha pp en . I t w as the w orkmen's last w eapon.T h e ma nag ement stood by him. T he n he fined themen for machine breakage, no matter what the causewas. T he roof m ight fall and break a la the, bu t thela the ma n ha d to pa y . A t th a t the men gave up ,and agreed to do a fair day's work.

[ 6 1 ]



THE AMERICAN OMEN

Telling of that fight before a committee of Con-

gress years afterw ard, Ta y lor sa id: " I t took threeyears to bring this about. I was a young man inyears, but I give you my word I was a great dealolder than I am now with the worry, meanness andcontemptibleness of the whole damn thing. I t is ahorrid life for any man to live, not to be able to lookany workman in the face all day long without see-ing hostility there and feeling th a t every man aroundis his virtual enemy."

Out of that feeling grew the thought of scientificmanagement. Tay lor identified clearly the tw oradical problems.

First, industry had no means to determine pre-cisely what a man's output ought to be; thereforeit did not know to begin with what was a fair day's

work.Secondly, between employer and employe therewas a b ank rup t relationship, w ith so much suspicion,unreason, wrong thinking and bad faith on bothsides that collaboration was impossible.

In both dimensions it was production tha t suf-fered.

To the first problem there was obviously a sci-entific approach.Power machines had replaced hand tools, all the

conditions that governed production had changed,and yet trades were still taught and learned as inthe Middle Ages. The journeyman carried theknowledge in his head and impa rted it to the a ppren-tice by demonstration. The way the journeym ansaid to do it— tha t was the w ay. The speed the

[ 6 2 ]



CONFLICT

journeyman sa id was proper—that was the speed.None of the knowledge in the journeyman's headhad ever been submitted to analysis or scientificstu dy . No body knew, for ex am ple, the ideal speedat which a lathe should turn for any certain kindof w ork, not even the la the m ak ers. I t was w hatthe jou rne y m a n said. Ma chines w ere a tr iu m ph ofprecision; handling of them was by the old jour-

neyman's rule of thumb.He could not be expected to make a scientificstu dy of his jo b . H e ha d neither the tim e nor themea ns. Beyond his skil l a t la the w ork w as an a rtand science of cutting metals at high speed, andthis could be discovered only by research, experi-ment, patient observation of fact, t ime measure-ment of motion and then scientific imagination act-ing upon the da ta . And there w as perh a ps no kindof job that did not contain in itself the materials ofan undiscovered science.

To prove i t , Taylor undertook to develop a sci-ence of shoveling. T his ex perim ent took pla ce inthe yards of the Bethlehem Steel Company, wherethere w as a shovel g a n g of 600 men. All using thesame type of shovel, they would go from a pile ofrice coal, of which a shovel load was three and ahalf pounds, to a pile of ore, of which a shovel loadw eighed thir ty- eigh t pou nds. H is assum ption tobegin with was that somewhere between these twoextremes there must be an ideal shovel load—that is,a load at which a given amount of physical effort

would move the greatest quanti ty of stuff. Tw opairs of first-class shovelers were found willing to[ 6 3 ]



THE AMERICAN OMEN

submit themselves to observation and training.They shoveled all day, the shovel loads were accu-rately counted, the pile they had shoveled wasweighed. The w eight divided by the number ofshovel loads gave the average load per shovel, andit w as, say , thirty-eigh t pounds. The next day theshovels were shortened to hold only thirty-fourpounds, and at that average load, with no greater

exertion each man handled thirty tons, where theday before he had handled only twenty-five tons.The amount handled per man increased as the shovelwas further shortened, down to a load of twenty-one pounds; the amount handled per man decreasedas the shovel load was reduced below twenty-onepounds. Therefore tw enty-one pounds was the idealshovel load, provided the lift was not more than fivefeet, the throw not more than four feet.

Next the difficulty of suiting the shovel to thematerial. I t takes a large shovel to hold twenty-one pounds of rice coal; a small one holds thatw eight of ore. So now various types of shovels mustbe issued out of a tool shed as the men come to work,and the work must be planned ahead so that theright number of men will get coal shovels and goto the coal pile, or ore shovels and go to where theore is, and so on.

Moreover, there were many wrong ways and onlyone right way of driving a shovel into refractorystuff, like ore—a way of transmitting the weight ofthe whole body through a locked forearm. The dif-

ference between the right way and any other waymight be eight or ten tons a day in the quantity[6 ]



CONFLICT

} handled per man, with much more fatigue at theend. Th is had to be demonstrated, even to the first-class shovelers.

The result of putting shoveling on a scientificbasis was that 160 men, working no harder, didwhat 600 men had done before.

To determine the exact conditions under which aunit of human effort will produce the maximum re-

sult is purely a scientific task . Then you may knoww hat constitutes a fa ir day 's work. But how areyou going to get it when you know what it is?T ha t is where the second problem begins. Supposelabor declines to accept the scientific norm. Sup-pose it says, as it reasonably may , tha t w ages shouldbe determined by the result, not by the effort.Though the effort be less, still for the same wagesas before it will produce the same result. Thenwhat?

With all your knowledge, you are practicallywhere you were before. You may know how 160shovelers working no harder, only more scientifically,may accomplish as much as 600 working in the oldway; but you will not get the result until the mostscientific gang of shovelers in the world is also the(highest pa id ga ng of its k ind. Such was the casewith the Bethlehem Steel Company's shovel gang.The two basic conditions of scientific managementwere realized. Hence the importance of tha t ex-periment in the early history of the Taylor move-ment.

One of Frederick W. Taylor's perplexities was

to find the righ t name for what he meant. H e[ 6 5 ]





CONFLICT

t i tude of both the management and the men, bothas to their duty to cooperate in producing the larg-est possible surplus and as to the necessity for sub-stituting exact scientific knowledge for opinions orthe old rule of thumb or individual knowledge. . . .

"I say that any set of men who want to earn abig profi t in any industry must have that changeof mind. If th ey w ant to get a big profit , they

must have that view. You cannot keep menworking hard on one side and not have them workequally ha rd on the other side. If y ou w a nt aprofitable business, you cannot have meanness andinjustice on one side or the other; you havegot to eliminate meanness and injustice from bothsides."

From a characterist ic way of thinking had comethe American theory that wages were limited onlyby the productivity of labor and that profit in thehighest sense might be pure surplus—simply morewealth produced with the same amount of labor andca pita l as before. H ere in the w ords of T a y lo ris the translat ion of theory into the language ofa working principle.

It is feasible to conduct industry by a rule ofdogg ed conflict. F e a r of w an t w ill k eep men a twork; necessity will oblige capital to employ itself.I t is not possible by that rule to have prosperi ty.The surplus above a sustenance wage for labor anda rate of interest for capi ta l—that plus quant i ty outof which will come high wages, high profits and more

capital—simply, i t is not produced.[ 6 7 ]



THE AMERICAN OMEN

IVEvolution of Scientific Management

The mental revolution that Taylor talked of didnot come all a t once. Fo r th irty yea rs industry a tlarge understood scientific management to mean get-ting more for your money out of labor. The pro -duction engineer appea red. There was rapid im-

provement in shop practice general ly. "Efficiency"was the magic w ord. You did not drive labor toexert itself more; instead, you created the conditionsunder which it was bound to be more efficient; andnot the least important were conditions of workingenvironment, such as lighting, heating, sanitation,creature comforts. All this was to the good, ofcourse, but because the vital imponderable contentof scientific management was neglected, or misun-derstood, many disappointments occurred. Unionlabor was antagonistic. Scientific managementseemed always to be something that was done tolabor or for it, seldom was it anything in whichlabor had a sense of initiative.

As recently as 1912 the proposal to introduce sci-entific management on government work resulted inthe appointment of a special committee of the Houseof Representatives to see into it. A t about the sametime Dartmouth College arranged a conference tospread informa tion about it. The newspapers weregiving a grea t deal of space to the subject. Po p-ular interest had been originally excited by expert

testimony in a famous railroad rate case to the ef-fect that the railroads were inefficiently managed[ 6 8 ]



CONFLICT

and might very easily increase their profits out of

waste, with rates as they were, if they would onlyadopt scientific management. Much of the contro-versy was confusing from the fact that efficiency andscientific management were so often taken to be thesame thing.

Not until some time after 1910 was it possible torecognize definitely a science of management in in-dustry. Now one who seeks the meaning of Ameri-can business, the secret of its character and thesources of its power, will be astonished at the author-ity and scope of that science. Management as aninstitution, with its threefold responsibility—to cap-ital, to labor and to the public—has been an amazingdevelopment. It is a new science, with a new paintof view, a new quality of curiosity, a new literature.

A recent bulletin of the Taylor Society, touchingthe extent of accumulated book knowledge, said:

The literature of management has become soabundant that many individuals and firms are puz-zled by the problem of selecting a moderate-sized li-brary on management subjects. Stimulated bymany inquiries for assistance, the society has pre-

pared the following nucleus of a managementlibrary.The list, merely as a nucleus, contained 124? book

titles and twelve bulletins and periodicals, all onthe science of management.

In the earlier literature you will find the problemof human relationship regarded as one amongothers, under some such head as personnel adminis-tration. Steadily the emphasis has shifted, until

[69]



THE AMERICAN OMEN

now this is trea ted as the core problem. There is

no right solution of any other problem but in rela-tion to that one, and however you begin with thatone, you come naturally to all the others.

You may approach industry from the point ofview of profits and come eventually to the problemof unemployment as a na tura l evil. Tha t was theold way. Or you may approach industry from thepoint of view of unemployment, as an economic andsocial disaster, and come from that direction toevery other problem. To stabilize employment youhave to sell w hat labor produces. To sell it, theproduct must be right, the price must be right, thecost must be low. There a lready you begin to touchthe problems that belong to selling and productionmanagement. Then you have competition, change,seasonal rhythms, and so problems of policy, prin-ciple and general management.

How you will approach it is a matter of choice,and the choice will be determined by what is char-acteristic in ways of common thinking and feeling.

In 1923, when the American Management Asso-ciation was formed, to succeed the National Person-

nel Association, which had succeeded the NationalAssociation of Employment Managers, a convictionwas stated in these words:

"The association is organized on the principlethat the human problem in commerce and industry isa major problem, and that personnel administrationis a responsibility of the line executives, assistedwherever possible by the advice of staff executivestra ined and experienced in this field of activ ity. In

[ 7 1



CONFLICT

short , without in the least denying the validity ofother points of at tack, i t approaches the study ofthe whole management problem in terms of humanorgan iza t ion ."

This was subscribed to by a board of directorsrepresenting such industries as the American Tele-phone and Telegraph Company, the PennsylvaniaRai l road Company, the Eas tman Kodak Company,

the United States Rubber Company, the DennisonManufactur ing Company, the Genera l Elec t r icCompany, the American Roll ing Mil l Company, theMiami Copper Company, the American Radia torCompany and the Standard Oil Company of NewJe r sey.

Recognition of the human factor—such was the

formal phrase—expressed itself for a long time ina variety of worthy activities comprehended in theterm "w elfare w ork ." T h e common w eakness ofmuch of it was that it gave people a sense of re-ceiving from above what was benignly deemed to begood for them. T h a t is al l pa st . W h a t w as calledw elfare w ork is taboo by tha t nam e. In place ofit is merely the good sense to provide what thecivilities require, and nobody is either conscious orself-conscious about it.

Then came profit-sharing by various plans, someof them complicated, by no means all of them suc-cessful. Still som ething w as left ou t. Stock ow n-ership was a solid idea, leading as it did to employerepresen tation. I t w orked out slowly. Em ploy es

of the United States Steel Corporation had beenbuying stock under a felici tous arrangement with

[ 7 1 ]



THE AMERICAN OMEN

the management for more than twenty years beforethey quite realized the implications of joint pro-prietorship . T ha t corporation now has 50,000 em-ploye stockholders and is greatly pleased when ontheir own initiative they elect a representative toappear at the annual stockholders' meeting with acase to state or some observations to make from thepoint of view of labor pa rtnersh ip. Th is happens

to be only the most notable case. The tota l amountof employe stock ownership in American industryis approaching $1,000,000,000.

Recently there has developed very rapidly theidea of employe representation with or without stockownership, regarded either as a right that belongsto labor, or, if not as a right, then as a principleof relationship which the science of managementfinds to be sound. By employe representa tion ismeant some form of direct participation by laborin the councils of industry.

Number 32 of a series of bulletins addressed bythe American Management Association to produc-tion executives, entitled Some Major Aspects of Em-ploye Representation, says:

"The movement is a complex of many motives.Few innovations in the field of business manage-ment have so gripped the imagination of thoseresponsible for the conduct of American indus-tries."

The object is pla in. I t is tha t all matters shallbe made open to human understanding. Beneath

the object is the subject; and how the imaginationof the science of management acts on the subject[ 7 2 ]



CONFLICT

will be found at the end of the bulletin In thesewords:

"If it be true tha t the conditions of modern indus-trialism yield far richer experience than do the cir-cumstances of private life, that they broaden themental horizon and perfect the manual dexterity ofthe persons engaged in industry, then it should beconsidered equally true that employe representation

is an effective means to these desirable ends. Thisimprovement in individual quality constitutes thegreatest asset any organization can have. Again, ifwe maintain that the first duty of the worker be toadvance efficient production, should we not equallyaffirm that his willing consent establishes his moralclaim to an equivalent reward? Such a reward be-yond wages is found in employe representation. I tsplan reveals native ability by providing incentivesto originality and leadership. It s operation sup-plies contacts which illuminate the humblest task w iththe vision of mutual service. Each individual rea l-izes that the successful completion of his own workdepends largely on the assistance and cooperation ofothers."

Thought Is Emotionalized, Feeling Is Rationalized,and the Revolution Is Complete

Observe tha t a cycle is accomplished. The revolu-tion is w orking. A way of thinking tha t took rootin the ground of feeling reappears on the plane ofthought as feeling rationalized. Who now is ta lk ing

[73]



THE AMERICAN OMEN

of cultural values in the day 's work and tak ing it tha t

the meaning of the job to the man is of paramountimportance? Not the socialist, not the radical , notthe Utopian. I t is the science of management.

At this point it is no longer so difficult to definewhat it is characteristic in the American way offeeling tha t liberates the forces of production. Any -one may recognize it. D eeply, it is an a ttitude to-

ward work.If you ask again the question why and how weescaped those evils of laborism that limit productionin the European system, particularly in Great Brit-ain, the answer is indicated. Labor here is regardedfrom quite another point of view.

In the Old World, in perhaps every old system ofcivilization, labor has been treated as a curse, to beavoided or to be endured. Idleness was the blessing.All their economic Utopias turn out to be full ofidleness. I t was only in freedom from work tha t theindividual found culture and self-expression. Theact of producing wealth by contact of the hand withits raw ma terials was vulgar, low-caste. To com-mand and spend it was polite, high-caste.

For the American—speaking now of what is char-acteristic in him—all this is quite upside down. Hedoes not know w hat to do w ith idleness. He doesnot understand it. Generally it kills him.

Work is not a curse. I t is his soul's anxiety a ndthe universal medium of his self-expression. Tostain and roughen the hand in the creative conflict

w ith Na ture is no disgrace. There is a kind ofhunger for it, as if human experience without it[ 7 4 ]



CONFLICT

were somehow incomplete. Toil leaves no stimga onthe hand. The hand is free and the man is whole.

There is no surprise for us in the fact that all butthree members of President Coolidge's cabinet sometime made their living by use of their hands in sys-tematic manual labor. But even in the la te Laborgovernment of Great Britain there was no such his-tory of the hand. Here certainly for the first timein any form of industrial society the hand has beenrestored to full dign ity. There is no intellectualclass, born to that estate; there is no proletariat,born to tha t condition. I t is neither who a man isnor how he lives that determines his social status;w hat is in him does. The disparities are not inher-ited. They are from differences of ap titude , capac-

ity and character. W ha t a man has in him, tha t hemay be. At the top of the educational ladder norungs are reserved for those whose rights are sociallypredetermined.

The thought that increasingly governs Americaneducation all the way up is how to equip the individ-ua l for self-expression in work. The emphasis isthere, not on schola rship. I t is not the functionof the individual to exemplify learning; it is thefunction of education to discover and liberate thepowers of the individual for the purpose of his ownattack upon reality—for the job in life to which heis best suited. In the field of prim ary education thedemand is more and more that the aptitudes of theindividua l shall be discovered. W ha t is in him?

What can he do?It is illustrated again in the American idea of

[ 7 5 ]



THE AMERICAN OMEN

adult education, wherein it differs from the ideasth a t a re represented in tha t movement elsewhere. InEngland the intent of adult education is to give thewage earner a cultural interest to fill up his leisuretime—nature study, astronomy, the physics andchemistry of everyday life, litera ture , perhaps. InGermany the intent is technical. In D enmark it isto stimulate the mind generally . In Fra nce there

is not much of any k ind. But the American idea ofadult education is to enable the man to find greaterself-expression in his job.

And now big industry, with its daily problem ofbringing men and jobs together in a manner to pro-duce the ideal result, begins to regard the individualfirst, because th a t is the better method. Formerly theidea was to analyze the job and then find the man tofit it. The job was first regarded. Now the man isanalyzed. W ha t is he suited to do ? W ha t would helike to do ? Find tha t out and you know w hat he willdo well. This is the highest discovery y et made bythe science of management in the field of human rela-tions—that it pays to regard the individual first.That job a man can do well, whatever it may be, isthe job that will call forth his utmost productivepower. And it is the job in which also he will bemost content.

Inequalities a re facts of Na ture. They cannot beabolished. There is no evidence th a t men w ant tobe equal. Certainly they have no equal taste forresponsibility. W ha t they do w ant is equality of

opportunity to exercise their powers. Equa lity ofopportunity was first asserted as a social philosophy.[76



CONFLICT

Now the science of management gives it expression

as an active principle. So a t last after a long strug -gle in the dark, American industry conforms in waysboth of thinking and feeling to the social philosophylaid down by the founders.

There are compensations. We have to give upsomething. As we have no caste of labor, neitherhave we a caste of pure learning. There are someAmericans who sigh for the effect of American pros-perity on the life of the mind. Many pedagogueswill tell you that in fine scholarship we are inferiorto the people of the Old W orld. They w in the Nobelpriz es; and tha t, says the pedagogue, is owing to thefact th a t we spread education so far and thin. Andwhy we do that is explained in President Coolidge'sgrea t sentence: "W e have staked America on thepotential capacity of the average citizen."

Above a life of the mind for a few we esteem alife of richer values for the average. All the won-der of America is so derived.

[ 7 7 ]



KEYS TO PLENTY

New Time

D O you doubt that we are in a new time? Theeconomic life of everyday reality is so strange

that we have among us no proverbs about it to besmuggled into the gelatin as copy-book exercises.It is a curious fact. Life without folk maxims tosummarize our kitchen wisdom. There are some tha tsurvive from another time and we keep repeatingthem, but they are false and serve only to illustratewhat power there was in the old copy-book propa-ganda.

Suppose, for example, that one night everybodyshould come by way of a common dream to a convic-tion of thrift as it was taught in Poor Richa rd'sAlmanac and McGuffey's school readers; supposethat from the implanted suggestion of this dreampeople should begin all at once to practice old-fash-ioned thrif t, buy ing nothing but w hat was absolutelynecessary, thinking to save the rest and become rich

by self-denial. W ha t would happen?First there would be a terriffic slump in retailtrade , next a panic in W all Street, after tha t, fright-ful depression of industry . Factories tha t had beenproducing motors, textiles, shoes, garments, radios,furniture—all manner of things that satisfy humanwants—would have to close or go on short timebecause everybody had suddenly resolved to con-sume less and save more. All incomes, w hether in

[ 7 8 ]



KEYS TO PLENTY

the form of wages or profit, would be cut down.

People everywhere would be talking of hard times.The standa rd of living would fall. You would belucky to have enough to live on, with nothing at allto save.

The quantity everybody expected to save was aquantity that might have been consumed; but whenpeople all at once begin, as they think, to save it,

then it does not exist. W hy ? Because, since theydo not require it for purposes of consumption, itwill not be produced.

You may say : "B ut w hat people save is money.They put their surplus money in the bank and thebank lends it to others who will use it as capital tocreate more wealth."

By more wealth do you mean more motor cars,more textiles, shoes, garments, radio sets, furniture,better houses, with more plumbing and modern con-veniences? But as people now a re minded to savetheir money instead of spending it, they will buyfewer of a ll these things, not more. Therefore whyshould anyone be so stupid as to borrow the moneythe people have saved and use it to produce more of

the things the people are not buy ing? I t would notpay.So the seeming paradox that people may ruin

themselves by saving instead of spending. I t is nota pa radox . I t is simply true . I t was not alwaystrue, and it is now true for the first time in the eco-nomic annals of the race because the problem of

production has been solved. How to produce enough,even more than enough, is no longer any problem at[79]



THE 'AMERICAN OM EN

all . W e continue to recommend thrif t a s a priv ate

and public virtue without realizing that when onceyou have solved the problem of production, thenthrift universally and rigorously practiced—thekind of thrift that means doing with less in order tosave more—is economically disastrous.

W hy was sav ing ever a necessity ? Th is is to speakof saving in the economic sense, collective thrift asa national virtue, not thrift as a form of personalprovidence. The use of collective sav ing in the eco-nomic sense—the use of it in Ben Franklin's time—was in order to create capital means to the furtherproduction of w ealth. The means were more tools,machines, power stations, factories, mines, railroads,and so on. The only purpose of increasing these isto increase the production of goods that finally sat-isfy human wants, all precisely with the end in viewthat people shall be able to enjoy more, have more,exist in a state of plenty, with no necessity to stintand save and deny their w ants. After many y earsof saving, the time may come when you have meanssufficient or means in excess so that there is a poten-tia l surplus of consumable goods. Then collective

sav ing ceases to have any merit a t all. Your problemchanges. I t is no longer how to produce enoughwealth; it is how to distribute what you are able toproduce.

T ha t time has come. In a ny direction you mayhappen to look there is a potential capacity to pro-duce more things than the effective demand requires.I t is true of lumber, coal, bricks, steel, textiles, w ear-

[ 8 ]



KEYS TO PLENTY

ing apparel, food, chemicals, luxuries—whatever youlike.I t was only a few years ago tha t the possibility ofoversaving occurred to anyone as an idea. Now youmay hear it discussed as a problem of the utmostimportance. We must mind tha t we spend enough—consume enough—to keep our existing industrialmachine going at ideal capacity, for unless we de-

mand and consume what it is ready to provide, therewill be unemployment, from unemployment under-consumption, and the rhythm of prosperity willbreak . We must be careful a t the same time not toincrease our power of production faster than weincrease our power of consumption—careful, that isto say, not to go on adding to our capital means atthe expense of our current buying power, for thatis like plowing more land than you can sow or sow-ing more than you can reap.

You do not wear a power loom or a shoemakingmachine. You w ant textiles and shoes. If peoplehave already enough capital means in the form ofpower looms and shoemaking machinery, they arestupid to do without other things in order to createmore power looms and more shoe-making machinery.In doing so they lock up their labor in excess capac-ity . I t is no good to any one; it is waste—w astefrom oversaving—because it must lie idle and isindivisible. They had done much better to save lesscapital and spend more money for the immediatesatisfaction of their wants.

The fact is that we find it now much easier to[ 8 1 ]



THE AMERICAN OMEN,

increase our industrial capacity than to extend the

effective demand for consumable goods. The merewishing for things does not constitute effective de-mand. One must w ant them enough to be w illing toput forth the necessary exertion, and then, of course,the conditions of opportunity must be such that theexertion in itself becomes productive.

Increasingly the anxiety of modern business is

how to stimulate effective wanting, how to inducepeople in the average to exert themselves more inorder to be able to have and consume more. Insta ll-ment selling has tha t motive. Give a man on credita better house in a better neighborhood, give him oncredit a garage and a motor car to put in it, give himon credit all the goods tha t belong to a higher stand-ard of living than he has hitherto thought himselfable to afford, and what will he do? Will he giveup these things—the house, the neighborhood, thecar and all—because he cannot afford them? Notfor tha t reason. Not for any reason w hatever if hecan help it. He will think of ways to increase hisincome. This means only tha t he will exert himselfmore to produce other things the equivalent of these,

and that will be more than he ever produced before.

I I

The Forces of Production Set Free

Once you get the idea that the only use of wealth

is to be consumed, either directly in the form ofdivisible goods or indirectly and more slowly as the[ 8 2 ]





THE AMERICAN OMEN

sup port the motor industry. I t does not sustain this

rhythm of balanced exchange.So long as nothing happens to the rhy thm, so longas consumption and production are kept in balance,there is no limit to prosperity—to the satisfactionof human w ants—this side of satiety. A new p rin-ciple w orks. The principle is tha t consumptionfinances production. The more w ealth is consumedthe more it w ill increase— that is, provided the forcesof production have been set free.

Other people ha d caught glimpses of the tru th th a tprosperity is the total phenomena of consumption.High profits, high wages, even the rapid increase ofcapital, merely indicate the rate at which peopleconsume w ealth. They do not consume it becausethey are rich; they are rich because they consume it.

More than seventy-five years ago a French econo-mist named Bastiat delivered to his disciples fromhis deathbed the following dictum : "Political econ-omy should be considered from the consumer's stand-po int." D imly, he had seen a grea t light. The ideawas th a t the true economic end could be nothing elsethan consumer benefit. The idea was sound. But

for half a century it could not prevail; in Europeit has not yet prevailed against the tyranny of cer-ta in false notions about ca pita l, labor, profits, w ages,producers as a class and consumers as a class and anatural conflict between them.

In this country the demonstration of that idea hasoccurred. I t is the American contribution to eco-nomic experience. I t has occurred w ith no change

[ 8 4 ]



KEYS TO PLENTY

whatever in the common principles of what is calleda money and profit economy. All exchange takesplace in terms of money and the incentive is profit,as in other industrial societies. So it was neither asinister law of money nor depravity of the profitmotive, any more than it was the institution of pri-vate property, that ever hindered prosperity hereor elsewhere. All differences arise from w ha t

people conceive to be the right use of these powers.Yet it had been often proposed to abolish moneyand profit and destroy private property in orderthat people might freely produce and freely con-sume.

Between producer and consumer there is no con-flict. As well speak of a conflict between the twopoles of electricity. There is the necessity to crea teby effort that which we wish to enjoy, and from thiscomes a state of tension, the same in a man who maybe living alone on a South Sea island as among120,000,000 people living together on a continent.There is only this difference—that among 120,000,-000 people working together as one economic societythere must be a partition of effort and a division

of enjoyments. Then exchange, money, capita l,method, organization and system, tending tobecome impersonal, with the danger that muchquarreling over division will impede the effortand limit the quantity to be divided. A scienceof production develops sooner than a scienceof distribution. Natura lly so. Ex ertion before en-joyment.

[ 8 5 ]



THE AMERICAN OMEN

I I I

Mechanical Extensions

Not until about 1900 did the American mind beginto act in a characteristic manner on economic prob-lems. Previously it had been obsessed with produc-tion as phenomena. Since then it has more andmore emphasized the social meaning of production,and with this change of view came the astonishingrevelation that in proportion as you emphasize itssocial meaning so will it increase as phenomena.*

So great and unexpected has been the extension ofthe human power of production in American indus-try since 1900 that it begins to be treated as anevent—a second industrial revolution. And the rea-son why foreign observers find it so difficult to under-

stand is that they regard it as phenomena and notas idea.

In the first twenty-five years of this century—1899 to 1925—the population of the country in-creased one-half.

In the same period the output of agricultural,mineral and manufactured commodities and railroad

transportation increased two and a half times.* D ur ing the earlier history of the country its progress

in considerable part owing to the opening up of new resources.*The increase of output during recent decades, however, cannotbe attributed to this cause. There hav e been some new discov-»eries of minerals, notably of petroleum, but these contributionshave been offset by the partial using up of other resources andby the necessity, with the growth of population, of extendingcultivation to somewhat inferior lands. The principal factors inthe recent increase of productivity therefore are human as dis-tinct from natural factors. Comm erce Year Book of the UnitedStates, {Department of Commerce) 1926.

[ 8 6 ]



KEYS TO PLENTY

The output of wealth per cap ita was actua lly muchgrea ter than these figures indicate. The number ofpeople employed in agriculture, mines, industry andrailroad transportation increased only about one-third, as against an increase of one-half in the totalpopulation. To have produced two and a half timesas much wealth in 1925 as in 1899, with no increaseof productivity per worker, would have required thelabor of 43,000,000 people. We did it w ith the laborof 23,000,000.

And even yet the increased power of per capitaproduction is not fully indicated. All this time thelength of the w orkday was being shortened. Thestatistics here are incomplete. We know tha t since1910 the hours of labor in all industry have beenreduced more tha n one-tenth. W ork ing fewer and

fewer hours, one-third more workers produced twoand a half times more wealth in 1925 than in 1899.Thus the increase of the worker's power was greaterthan the increase in the actual quantity of wealthproduced.

To compare 1925 with 1919 will give results evenmore striking, tending to show not only that thecurve of productivity continues to rise; its rise isself-accelerating.Taking again the four great divisions—-agricul-ture, mining, industry and railroad transportation—the output in 1925 was nearly one-fifth greaterthan in 1919 from the effort of 1,800,000 fewerw orkers. Actua lly , in these four fields, a release ofworkers, though the output of wealth increasednearly one-fifth. Note tha t the increase in all cases

[ 8 7 ]



THE AMERICAN OMEN

is calculated in qua ntity, not in va lue. The value,if you took that, would be affected by fluctuationsof price.

What became of the 1,800,000 workers releasedfrom agriculture, mining, industry and railroadtransportation? They were absorbed into otherfields.* More tha n tha t number were required in thenew service of motor-truck transportation alone. Theincrease in motor trucks in those five years wasnearly 2,000,000.

This dispersion of workers is a continuous move-ment. W ith no change in productive pow er per m an,such a thing as increasing the product of agricul-ture, mines, industry and railroads two and a halftimes in twenty-five years would have been impos-

# If the productivity of industry through mechanization should

continue to increase in the same manner and at the same ratefor the next twenty-five years, it would at the end of that timerequire but forty-five men to produce what now requires aforce of nearly seventy, and which a little more than twenty-fivey ea rs ag o necessitated the employ ment of 100 men. Such ca l-culation, however speculative it may seem, does not overdrawthe striking advances constantly being made in the way of mech-anization and more efficient coordination of effort in manufac-turing processes.* * *

This process of mechanization has multiplied the availablestock of consumption goods, has made possible the wider use ofmany commodities formerly in the class of luxuries, and isstrikingly reflected in an effective increase of our national in-come of more than 40 per cent since 1914. The real wage ofindustrial workers—that is, the purchasing power of the in-dustrial wage earner 's average weekly pay—is now more thana thir d grea ter tha n it was in 1914. The increased mechaniza-tion also in effect has released many who otherwise would havebeen claimed for manual tasks for activity in other fields, thusaffording opportunity for not only a materially but also cul-,turally richer and broader national life, as is evidenced by theincreased proportion of the population attending schools andcolleges during the past few years. National Industrial Confer-

ence Board, 1927. I 88 ]



KEYS TO PLENTY

sible for two reasons. The labor could not hav e beenfound, for it would have required one-third of thetotal population to be engaged in those four divi-sions of economic activity; secondly, if that amountof labor had been forced into these occupations,there would have been nobody left to man the motor-trucks, mind the filling stations, make concrete roa ds,build garages, more houses, more factories, morebridges. Which is to say , even if the w ealth hadbeen produced, it could not have been consumed.

Why this intensive mechanization of Americanindustry? Machines are not a gift. Like every-thing else, they have to be produced, and if forcesof production new in kind or degree had not beenliberated among us, American industry would notbe mechanized as it is.

There is no new principle in machines. They a reall built upon six simple mechanical powers—thewheel, the pulley, the lever, the inclined plane, thescrew and the wedge—and all their actions are com-pounded of two movements, one rotary and one tan-gent. M an's first machines were driven by hand andfoot power. Then he hitched them to brute pow er,to w ater power and to the w ind. Only a centuryand a half ago he learned how to drive them withsteam pow er, and tha t w as the beginning of w hat wecall the industrial era.

We have nothing strange in the line of machines—certainly nothing that other people may not copy,as we to begin w ith, copied theirs. A machine as suchis no more powerful or cunning in this climate thanin any other. T ha t we use it more deftly may be[ 8 9 ]



THE AMERICAN OMEN

doubted. There is no evidence tha t we do. But we

do use more machines than any other people, anduse them harder. W hy we do tha t is the whole mat-ter. We do it because we have a peculiar philoso-phy of w ealth. Pursu ing it, we came to see machinesfrom a new point of view.

IV

Dilemma of QuantityFirst were certain characteristic ways of think-

ing and feeling that had to survive the sudden impactof industrialism governed by an alien doctrine ofpolitical economy. This has a lready been rep re-sented as a dram a of the spirit in which the joint dig-nity of hand and mind was triumphant, together

with the faith that economic and social motives wereto be reconciled. Then the approa ch to economicproblems began insensibly to change. You cannotsay quite where or how the new ideas emerged. Therewas an unconscious movement of the mind in therig ht direction. Now here, now there , someone actedas if upon dua l motives. In a given pioneer case theindividual would probably be himself unable to saywhether it was for profit or for another reason thathe embraced the thought of quantity . Enormousadditions of power were brought to bear upon thecontinuous production of goods in quantity in orderto reduce their cost and so increase consumption.No matter w hat the motive w as. The idea of quan-tity was economically sound; it swept American

industry and caused a great change of view.[90 1



KEYS TO PLENTY

Formerly a manufacturer guessed at his costs,

added his profits to arrive at a price, chen lifted hispra yer for a demand tha t would bear it. Now it isthe other way around. The manufacturer whoseobject is quantity assumes to begin w ith, tha t demandis expansible. I t is all a question of price. To reducehis price he must reduce his costs; to reduce hiscosts he must have quantity upon which to act withmore power, higher science of method, keener imagi-nation. Therefore cost is a function of quantity .The more, the cheaper. Instead of adding profit toyour costs to make a price, you reduce your costs tomake a profit from the price that is necessary toincrease the demand. The margin may be small, butwhen a small unit profit is multiplied by a greatquantity the total profit may be much larger thanbefore.

But there is a strange dilemma in this magicof qua ntity . To keep your costs down you have togo on increasing the qua ntity. If your output be-comes static your costs will begin to rise. W hy tha tis so would require too much explanation. Any w ay ,it is a fact. For many reasons costs tend alw ays to

rise; they run uphill na tura lly . To reduce themyou have to increase the quantity; then to keep themdown you have to continue increasing it. Unlessyou do, someone else will. The competition is keen.

From what now appears in the case it is easilyunderstood why industry is bound to witness theconsumer in a new light. D emand is no longer tha twant which creates itself and comes knocking at thedoor. D emand equals consumer buy ing power. It s

f 91 1



THE AMERICAN OMEN

potentia lity may be calculated scientifically. The

United States Treasury's figure of total nationalincome, divided by the population—that is the aver-age consumer buy ing power per cap ita. T h a t is themoney there is to spend for all goods. The con-sumer is everybody. W hatever else one may be, oneis certainly tha t— a consumer. The w age earners—they a re consumers. They represent in the aggre-gate the largest single body of consuming power.Th e qua ntity goes there. D emand—a very grea tpart of it always-1—is the dollar in the wage earner'spocket. Tw o dollars will represent tw ice as muchdemand as one.

Who puts the dollar in the wage earner's pocket?Industry does that?

How can it put two dollars there instead of one,

to increase demand? Simply by doubling the w ageearner's power of production.From this way of conceiving demand comes a new

way of regarding the machine in relation to labor.Always before this the machine had been regarded

as a substitute for labor. The capitalist had no otheropinion of it. If the cost of a machine and the w ork-

ing of it w ere less than the cost of the labor dispensedw ith, then it was said to be profitable. Ind us tryadopted the machine and the labor was dispensedw ith. T ha t is why labor so bitterly opposed theintroduction of labor-sav ing machines and why indus-trialism for so many y ears was a cruel mirage. Powerof plenty , power of qu antity , yet want and w retched-ness at the base of the social pyramid.

La bor was dispensed w ith. T ha t pa rt of it for[92 1



KEYS TO PLENTY

which the machine was substituted had no buying

pow er. T ru e, as the machine process of m anufac-ture cheapened goods, which it was bound to do, andas the cheapening of goods did ultimately increasedemand, the labor that had been dispensed with cameto be required again as machine w orkers. But inthe meantime, waiting for this of itself to happen,labor suffered terribly; and the competition for jobswas so great that wages were depressed, accordingto the ancient rule of supply and demand. So itwas that for a long time machine industry did tendto reduce the wage earner's buying power, actuallyand relatively.

Seeing this, and unable to imagine any otherresult, social-minded economists denounced machines.Where was the good of increasing the production ofwealth by use of machinery if poverty increased atthe same time, inevitably, as everyone believed?

A Swiss economist named Sismondi inventedagainst machines what became celebrated as thewinch argument. Suppose it were possible in E ng-land to do all work of every kind by steam power,so that the king, by merely turning a winch once a

day, could produce as much wealth as his subjectshad formerly produced by their collective exertions.In that case, all labor whatever having been dis-pensed w ith, save only tha t one daily ac t of the k ing,it followed that the people high and low became theking's paupers.

This illustrates no principle in economics. I t does

illustra te, first, an incredibly naive notion of machinepow er, simply tha t it comes to ex ist, no one to invent[ 9 3 ]



THE AMERICAN OMEN

it, mind it, repair it or reproduce it; and, secondly,

the fatal opinion that the machine was a substitutefor labor. The tru th is th a t the economists who gavelaws to the industrial age never understood machinepower in either economic or social principle, neverglimpsed the possibilities of an industrialized society.

Save the Man; Spend the MachineIn w hat is cha racteristic of our scheme the machine

is not regarded as a substitute for labor. W ha t weperceive is that when you dispense with the workeras a producer you dispense with him also as a con-sumer. And as a consumer he is indispensable.Unemployment, once the anxiety of the worker alone,

now becomes the anx iety of business. How to sus-tain and improve the wage earner's buying power isits scientific study.

The machine now comes rightly to be regardedas an extension of the wage earner's power of pro-duction in order that his power of consumption mayrise. Cheap labor is no longer an asse t; its w ants

are necessarily limited. Unskilled labor representsa waste of human effort. W ith the same expenditureof time and effort, plus skill, much more may be pro -duced, much more for that reason may be consumed.The cost of digging a ditch with hand shovelers at$2.50 a day may be the same as digging it withpower machines handled by men working in glovesat ten dollars a day—exactly the same cost per cubicy a rd of ma teria l moved. But in the la tter case you

[ 9 4 1



KEYS TO PLENTY

have high productivity per man, and as a consumerthat man is worth four hand shovelers.A few years ago, anytime before the war, youmight have seen men carrying pig iron and steelingots from the stock pile to the charging hopperson their backs. Their day w as twelve hours longand the pa y w as $2.50—a little more or less. T ha twas what that kind of labor was worth.

Now you will see this drudgery performed by acrane and swinging magnet. This one machine doesthe work that formerly required sixty or seventyhuman burden bearers. If the two men now opera t-ing the crane magnet were receiving the same wageas when they carried the load on their backs, thenyou would say the machine was a substitute for labor.But their wage is now seven or eight dollars for aneight-hour day. This is responsible work and muchmore productive. W ha t has become of the others?They, too, have been graded up into semi-skilledwork, touching machines, according to their apti-tudes, and their wages have increased as their laborhas become more productive.

The mechanization of American industry does notdispense w ith skill. On the contra ry , it requires a tthe top more and more skill and at the bottom lessand less unskilled drudgery . In the automobileindustry at Detroit alone you will find more skilledmen than in the entire motor industry of Europe.They are designers and builders of machines, makersof tools and patterns and gauges, engravers of dies,

w orkers in the mechanical laboratories. And in thefactories, serving the assembly line, you will find[95 1



THE AMERICAN OMEN,

thousands now graded as semi-skilled who formerlywere and might have been always unskilled workers.One will say there was vision in American indus-tr y . Another will say it was necessity acting. Thesupply of cheap labor was failing; wages began torise; industry was obliged for the sake of its coststo find ways of doing with power a great deal ofwork that had been performed as manual drudgery.

That is to debate whether efficiency was the cause ofhigh w ages or high w ages the cause of efficiency.I t does not matter. Proba bly it was both. Here isthe rule that works:

Save the man and spend the machine.This rule now colors the whole language of A meri-

can industry. Fo r a typica l expression of it, tak ethese words from a message addressed to industry ingeneral by the makers and designers of handlingequipment, who are now an industry of themselves:

"In many a concern and many an industry theloss of a nickel's worth of material is a great offense,while the w aste of men is suffered w ithout the ba ttingof an eye. This is neither logical, humane nor prof-itable. W asting men by keeping them at unproduc-tive work, when machinery would do it faster, betterand cheaper, is indefensible. The better way—theAmerican way—is to concentrate men upon produc-tive work at better pay and let iron and steel in theform of material-handling equipment attend to themoving of materials."

The great example is that the most prosperous

industries, or, within an industry, the representativesof it that have the lowest costs, the highest profits,[ 9 6 ]



KEYS TO PLENTY

the headway over competitors, are those that wastehuman labor least. And tha t is sav ing in the highestsense—the kind of saving that takes the place ofthrift as self-denial.

V IOur Fifty Tame Slaves per Capita

Once people begin really to command the powerof the machine as a free extension of themselves, itis as if a new force of N ature had been released. Therise of mechanical power in this country during thelast twenty-five years resembles a cosmic advent.The industrial age was already a century old, andno one faintly imagined that it contained a furtherpla neta ry possibility like this. Regard i t:

In the year 1899 the capacity of prime moversin American manufacturing was 10,000,000 horse-power. T ha t w as ju st more than two horse power foreach worker, and this was considered very high—the highest in the w orld. By a prime mover onemeans only the primary power unit, or the powergenerating plant, not any of the driven machinesthat consume the power.

In the year 1925 the capacity of prime moversin American manufacturing was 37,735,000horse power. T ha t is 4.5 horse power for eachworker.

Taking one horse power to be ten times one manpower, w hat do you see? In manufacturing alone

we have mechanical power equal to 377,350,000 tameslaves exerting their bodies for us—and that is more[9 7 1



THE AMERICAN OMEN

tha n three times the tota l popula tion. This is inmanufacturing only.

The total capacity of prime movers in manufac-turing and mining establishments and in electricplants in 1925 was approximately 73,373,000 horsepower.

That is the equivalent of 733,730,000 tame slavesexerting their bodies for us.

And this is nowhere nea r all. In railroad locomo-tives we have 26,000,000 horse pow er, equal to260,000,000 draft slaves.

In agriculture we have 5,000,000 mechanicalhorse power, equal to 50,000,000 ground slaves.

And lastly, in 23,000,000 automobiles and motortrucks, taken at an average of twenty horse power

each, we have 460,000,000 horse power, and that isas if we had 4,600,000,000 Chinese coolies to carryus about.

The figures are difficult to comprehend merely asfacts of magnitude. But consider, moreover, th a tnearly all this has occurred in twenty-five years.

Since 1899 the horse power capacity of primemovers in manufacturing, mining and electric plantshas increased five times. The horse power capa cityof railroad locomotives has increased four times.The mechanical horse power in agriculture has per-ha ps doubled. Tw enty-five years ago there were nomotor cars.

The total amount of primary mechanical powerthat could be accounted for in 1899 was probably

not more tha n 25 ,000,000, or the equiva lent of250,000,000 human slaves.[ 9 8 1



KEYS TO PLENTY

T h e tota l in 19 2 5, including a utomobiles, w as56 4,00 0,000 horse pow er, or the equiva lent of 5,640 ,-000,000 human slaves.

Of the whole earth the population is about 1,750,-000 ,000. I n term s of mechanical pow er we hav emultiplied it more than three times in twenty-fivey ea rs. T h e increase is here. W e hav e created it .Mechanical energy equal to nearly fifty docile slaves

pe r cap i t aThere are effects that are statistically visible andm ay be expressed in phy sical terms. T he re a reothers to which we are sti l l so strange that we haveno sho rt terms by w hich to sugg est them. T he re isone, profound an d sta rt l in g, which we have ha rdl ybegu n to realize. I t is as if t ime ha d chan ged, w ithnobody aware of i t , as if the world had suddenlybegun to make its revolutions at an acceleratingspeed and we ha d made our clocks ru n fa ster, s up -posing them to be wrong.

The machine has changed the tempo of l ife.Everyone knows this , and yet how l i t t le we think ofw ha t i t mea ns. W e look a t the clocks. T he y a rerun nin g as before. N oth ing has hap pened to the

astron om ical mechanism. Life nevertheless is ru n -nin g very much faster. T a k e i t not by the clock;take it by the time required to do things, to go fromplace to place, by the rate at which we consumegoods that formerly could not be consumed becauseenough could not be produced in time for everyoneto enjoy them—now as compared with twenty-fivey ears ag o. B y th a t measure we are l iving ma ybethirty or forty hours between suns.

]



THE AMERICAN OMEN

V II

Effects of This American Tempo

The tempo of life is so much faster here than inEurope tha t we may be said to exist on another timepla ne. W ha t now is to be illustrated is how speed,the tempo, the foreshortening of the time requiredto produce, distribute and consume wealth—how

this has altered the economic premises. For onething—and this is the particular effect—it hasgreatly modified the capital function of money.

I t is well to make sure we know w hat we mean whenwe speak of the capital function of money.

There is this story of money: Firs t it had localtoken value only. I t was something of small bulk ,like beads or ivory teeth, that people would take inexchange for any kind of goods; and that was thebeginning of a money economy in place of the moreprimitive barter economy, which was the swappingof goods for goods. As money was standardized inthe ideal substance of gold, it came to have a univer-sal hoarding and capital value.

Economists now say , and have said for many

years, that gold is not wealth, because you cannoteat it or wear it or w arm yourself w ith it. They havenever said it was not capital; they have alwaystreated it as capital, which of course leaves them inthe position of saying capital is not w ealth. Thefact is that gold as the universal money was wealth.I t was the perfect form of w ealth. If you had gold,you had command of wealth in any other form up tothe value of the gold measured in goods. You could

[100



KEYS TO PLENTY

not eat or wear the gold—no—and yet no man with

gold was ever hungry or without garments in anycivilized society. T he m erch ant princes of old ha dno ba nk credit to w ork with. Th ere were no ba nk s,only money lenders, who kept their wealth in goldand loaned it under pledge that two pieces shouldbe returned as three.

Then banking was invented and there was a new

form of ca pita l called credit. T h e ba nk er issued fortoken purposes pieces of paper that everybodythought were as good as gold, because, wheneverthey liked, they could go to the banker and cashthem for gold. As a m a tter of fa ct, the ba nk erissued more paper than he could cash in gold all atonce. H e w orked on the assum ption th a t it w ouldnever come back to him all at once, and it never didso long as everybody was content to think the paperwas as good as gold and could be cashed for gold.If they began to doubt it and went all at one timewith their paper demanding its face value in gold,the ba nk er ha d to shut up shop. T his hap pen edvery often; yet banking survived because the con-venience of paper over gold was too great to be

lost.Credit is precisely this power of the banker toissue not only paper in place of gold but more papertha n gold. I t became presently necessary th a t heshould do this . Commerce increased much fa sterthan the gold supply and there was not enough goldto transact the world's business.

But as such power was bound to be abused, and asbankers were always failing, the state was obliged to

[ 1 0 1 ]



THE AMERICAN OMEN

interfere, sa y ing: " I t is all very well to issue pa per

money in excess of your gold. Business could nototherwise be transacted . Nev ertheless, it must bemade safe. You must have on hand never less tha na certain proportion of gold—say, one-half or one-third of the amount of your pa per money out-standing."

Such was the origin of the gold reserve, on whichall bank ing now is founded. Therea fter banks an-nounced regularly how much paper they had out-standing and how much gold they had in their v aultsto protect the paper; and though everybody couldsee there was two or three times more pa per tha n thebanker could cash in gold if it should happen to bepresented all at once, still, that made no difference.Everybody knew the practice and how necessary itwas, and knew also as a matter of experience that itwas safe. The paper never was all presented at onetime to be cashed in gold. The gold remained inone place; the paper circulated continually fromhand to hand, effecting the endless exchanges ofdaily life.

Now it appea rs tha t gold has a new function. I t

is the basis of bank credit. As the use of it in tha tfunction increased very fast, use of it directly aseither token money or ca pita l declined. The mer-chant princes were overthrow n and ruined bythe competition of traders working with borrowedcredit.

The next thing to happen was that bank credit,based upon gold reserves in the banker's vault, cameto have two distinct functions. One was a token

[ 1 2 ]



KEYS TO PLENTY

function—pieces of pape r to pass from hand to handin place of gold. The other was a cap ital functionpurely . This has to be made clear.

V I I I

On the Capital Function of Money

Suppose you are a manufa cturer. You will need

to borrow at the bank a great deal of money fortoken purposes, such as to buy raw materials and topa y weekly wages. But this you need only for shortperiods—a week, a month, three months perhaps.As fast as the materials are worked up you sell themand from the proceeds you pay back what you haveborrowed a t the bank . But if you w ant to build anew pl ant, tha t is a different matter. Credit bor-rowed for that purpose you may be unable to payback in less tha n ten years. Hence the distinction.Credit borrowed for only a few weeks, as tokenmoney, to buy raw materials and pay wages, wouldbe called fluid capita l. I t is continually circu la ting ;you spend it, the people who receive it spend it. Butcredit borrowed for the purpose of building a fac-

tory would be called fixed capital, because for anumber of years it is fixed there in bricks and morta rand cannot be paid back except slowly and a little ata time from the annual revenues of the business.

A banker must be very careful not to lend toomuch credit as fixed ca pita l, for if he does, there willnot be enough fluid credit left to transact business

from day to day—that is, for token money purposes,to buy materials, to pay w ages, to effect the exchange[103]



THE AMERICAN OMEN

of goods among people. If there is no t enough

fluid credit for these purposes people get very un-easy; there is a rumor that money is bad, and thensomebody will come in the old way with a piece ofpa per demanding tha t it be cashed in gold. Thebanker cannot cash it in gold without drawing onhis gold reserve, and he cannot touch that becauseit is the basis of all the credit he has loaned away.So he is insolvent. He cannot pa y . When a goodmany banks are in this position at one time, fromhaving loaned too much of their credit as fixedcapital, there is a panic.

Formerly it happened from time to time, towardthe end of a great boom, that Wall Street bankerswould say publicly:

"W e have got to stop. W e cannot build any morerailroads or factories or power plants; we have usedup all the credit that can be loaned for such capitalpurposes. We cannot perform any new works untilwe have saved some more capital for that use."

Then everything stopped and there was a time ofunemployment, less spending, more saving, until thecredit 'reservoir had been refilled w ith credit th a t

could be used for so-called permanent investment.In fact there is no such thing as a permanentinvestment. No form of created w ealth is perma-nent. Railroads, factories, power plants, machines—they all wear out, and yet they are capital worksfor which long-time credit is required. They rep re-sent fixed capital.

If you analyze it, the only difference between fluidca pita l and fixed capita l is a difference of time. In

[104]





THE AMERICAN OMEN

year you will be paying it back out of revenue.

Well, it does actually occur now at that rate ofspeed. One of the big new motor plants a t F lint,Michigan, is the Oa kland-Pontiac. Seven monthsafter the ground was broken for the foundation2000 finished motor cars a day were rolling down theassembly line. Another motor pl ant , even la rger ,went into production within 200 days from the timeof breaking ground.

When capital works that formerly were years inmaking may be created and brought to the point ofproduction in a few months all relations are changed.Credit for capital purposes is needed for muchshorter periods; it becomes sooner productive andself-liquidating, is sooner returned, is sooner avail-able again to finance other capital works at the likespeed. And it is the same as if credit capital ha dbeen multiplied. Or it may be said in another w ay .Industry at this tempo creates new capital manytimes faster than it was ever created before.

When one begins to consider the effect of timeupon economic results a vast field opens.

Beginning in 1922, the railroads spent during

four years $3,000,000,000 to improve transporta tionservice. Their schedules were shortened, freightmoved faster and people could count on its promptarriva l. This was nothing less than an investmentof $8,000,000,000 in time. I t was as if many timesthe amount had been added suddenly to the workingcapital of business. Secretary Hoover, after astudy of it, said:

"We found that the lumber dealers were able to[106]



KEYS TO PLENTY

carry on their business with approximately 4,000,-

000,000 less board feet in stock than six years ago,estimated to be a saving of $200,000,000 of capitalin that one industry alone."

I XOn the Output of W ealth and Power of Consumption

Such was the experience of all industries, all busi-ness, down to the reta il tra de . Less money tied upin stocks because stock could be replenished quicklyw ithout fail. From this came a practice for whichno name quite appropria te has yet been found. Abusiness magazine recently set up a competition innam ing it. W ha t everybody calls it is hand-to-mouth buy ing. The retailer buys from the whole-

saler only as his immediate need is; the wholesalerbuys from the manufacturer accordingly. Themanufacturer, a steel man, perhaps, finds on hisdesk Monday morning only enough orders to runthe mill until Tuesday night. A few years ago ifthat had happened he would have been scared outof his wits, accustomed as he was to have orders

ahead for weeks, months—maybe a yea r. In theafternoon mail some orders come, the next morninga few more, and the mill keeps running steadily.

What all this means is that less capital lies deadon shelves and in w arehouses. Therefore muchless capital is required in the transaction of busi-ness.

No one comments on American prosperity but tosay one great cause of it is the abundance of capital.[107]



THE AMERICAN OMEN

The foreigner observer generally sets that out asthe first cause. We seem to have no end of ca pita l.Using it up faster than people ever consumed capi-tal before, still we have $2,000,000,000 more or lesseach year to lend away to other countries.

Seldom does anyone try to account for the factitself. Where does the capita l come from? I t doesnot fall out of the sky . I t does not gush up fromthe ea rth. The explanation stands illustrated. Wecreate capital two or three times faster than anyother people. W ha t does tha t mean— faster? I tmeans tha t we perform the work in less time.

Imagine that we lived on a timeless plan, thatthis life were eterna l. In th a t case it would notmatter how many automobiles we produced in whatnow we call a day or a year. We might produce

only one a year and you might have to wait a mil-lion years for yours; but if life were forever andtime non-existent that would be the same as gettingit today . Now bring time back and you see tha t thenumber of people who may enjoy automobiles in thecycle of one lifetime is in proportion to the speed atwhich they a re produced. The cost of them likewiseis in proportion to the time it takes to make them.You will find it very difficult to think of an item ofcost tha t does not analyze out to be a m atter of time.Production per man is not the measure. Productionper man per hour— that is it. And there is timeagain.

Quantity production is the method by which rawmaterials can be transformed in the least possibletime. Tha t is why the costs are low. Time is cost.

[108]



KEYS TO PLENTY

Continuous movement saves time, therefore it saves

cost.The head of the Buick Motor Company, tellinghow in fifteen years the output of cars increased1400 per cent, with an increase of only 10 per centin the number of men employed and only 25 per centin floor space, say s:

"Nowhere in our plant is there space for a day'ssupply of any finished pa rt except frames. I twould take a new set of buildings if we undertookto keep such a supply . One day 's supply comes insome time during the day before it will be used.If incoming materials or parts, for instance, areunloaded from the freight car and handled directlyto the point at which they will be used, this savesthe customary handling from stock to the machine.

If space is not provided for storing goods betweenmachine operations, the rental charge against mate-rial and pa rts is low. I t used to take eighteen day sfrom the time a wheel entered the wheel paint shopuntil it was ready for use. Now w ithin four hoursof the time a wheel enters the paint shop it is on theautomobile."

Formerly between machines in long lines youwould see tote boxes. One opera tor filled his totebox, then it was moved to the nex t machine. Butthe tote box represented material in a static state,not moving in a continuous manner through timeand space. Now no more tote boxes. The machinesare closer together, and as one operator finishes hisjob on the material he slides it along to the nex t one.

The result of this time saving multiplied in thou-[109 1



THE AMERICAN OMEN

sands of details is tha t the company turns its w ork-

ing capital over ten times faster tha n it once did.Tha t is to say, it needs only one-tenth as much w ork-ing capital—token money—per 1000 cars of outputas i t required before.

Acting under a new sense of the meaning of time,particularly as it affects costs, American industrymore and more creates its own capital as it goesalong. Out of its current revenues it builds moreplants and more machines, or replaces old with new,with a view to passing more production through aunit of time; and these capital works are so quicklyperformed, become so soon productive of morerevenue, that expansion of capacity tends to becomeself-financing in a pyramidal manner.

On Wall Street Control of Business

To the degree in which industry becomes self-contained in this way, in the same degree it is able todispense with the benefit of organized Wall Streetfinance. Now it is tha t grea t corporations which

were formerly borrowers of credit in W all Streetare lenders there to employ temporarily a t interesttheir surplus means. Actually, of course, the amountof capital employed in production is increasing. Inproportion to the number of wage earners, it isincreasing. The capital per w orker in the miningindustry is $10,500; in railroad transportation it is$8000; in manufacturing it is $5250. Yet rela-tively to the volume of wealth produced we use less

[110



KEYS TO PLENTY

and less capital, meaning only that capital itself ismore productive.

Parallel is the effect of hand-to-mouth buying,the quick handling of stock, more rapid turnoverof working capital in business generally—actuallythe sale of merchandise to the consumer while it is inprocess of manufacture—all of which is greatly toreduce the amount of credit necessary to conduct

trade.There is no mystery about the abundance of Amer-ican capita l. Time saving enables us to create itfaster than any other people; time saving enables usto conduct business with a minimum amount of it.We do not regard machines as labor-saving devices;they are time savers. We gea r them to a sense oftime.

All this, as you would think, is reflected in thecapital market. Formerly the problem of W allStreet was how to find cap ital for business. La tterlyits problem has been how to find business for ca pita l.It has had more credit to sell than American busi-ness and industry could use, for all the enormousexpansion tha t has taken place. T ha t is why W all

Street has been going so heavily into foreign loans.And as the necessity of business to seek credit inWall Street is less, so is Wall Street's authority overbusiness diminished. Once W all Street, as bankerand creditor, controlled big business. T ha t ty ra nn yis broken.

These are new facts of a new time. W hither do

they tend? W ha t is this time for tha t we save?There is no facile answer. But you may see



THE AMERICAN OMEN

already that a great deal of the time we save is forleisure. The hours of labor are fewer. A return tothe ten-hour day or the full six-day week would beeconomically disastrous. W hy ? Because peoplewould not have sufficient time or leisure to consumethat enormous quantity of divisible goods which hascome from liberating the forces of production.

112 ]



DIVISION

Yours and Mine and Ours

"V^OUR share and mine. How is this to be deter-•*" mined? Division is the grea t end and there is no

science of it. The divisions of N a ture , so fa r as we

know, are unscientific. The divisions of Reuben,touching land and w ater rights, caused grea t search-ings of hea rt because they were despotic. They werebound to be. Profits and w ages, as measures ofvalue, are arbitrary; this you immediately discoverwhen you try to prove w hat share belongs to capitaland w hat labor is worth.

It is perhaps the deepest error of economic think-ing to imagine there could be a science of division.There may be a philosophy of it that will compre-hend the facts not as truth but as points in fluidcircumstance, with always a view beyond them. W eare evolving in this country a philosophy of thatcha racter. I t is another phase of the American con-tribution to economic reality.

With the first rude act of human cooperation, theproblem of division begins. Tw o men mingle theirstrength to achieve a result neither one could haveachieved alone. There is then something to divide.

If it is a simple difficulty, like moving a stone todiscover the treasure, equal sharing is the law ofamity. Note, however, tha t even in this case there isa compound principle. W ha t two men have done isnot simply twice as much as one might have done.

[ 1 1 3 ]



THE AMERICAN OMEN

W orking separately, a lterna tely, independently, theycould have achieved nothing. Together they did it.If they separate, that mysterious power of combina-tion is lost. If they do not sepa ra te, there is thebeginning of organiza tion. Clearly, therefore, apart of the treasure belongs to neither of them asindividuals, but to an invisible new entity, which isboth of them inseparably—that is to say, society.

Now imagine it to be a stone that two men cannotmove—one that ten could not move by exerting theirbodies aga inst it. But a third man comes w ith anidea to exert mechanical power aga inst it. H e in-vents a lever device by means of which, acting underhis direction, the,, two men easily move the stone.How now shall the treasure be divided? You haveintroduced ideas and capital. How shall these berew arded? W ha t is their rightful share aga inst tha tof the two who contributed only the labor? W ha t ofthe tool? Sha ll something on account of the tool becharged aga inst the treasure as rent? Moreover,whose tool is it, since all three of them worked tomake it?

The third man says: "It is my tool and I am

entitled to be pa id for the use of it. I t is mine fortwo reasons. F irs t, I invented it. Secondly, whilewe were mak ing it, which was a labor of three months,I fed and clothed and housed you. Therefore, forall you contributed to the making of the tool—namely, your labor—you have received wages; andwhat is more, wages is all you are entitled to receive

as your share of the treasure; and even so you arebetter off, for without my idea and my device you



DIVISION

would not have got any thing. I made your laborproductive."

The two retort: "Without our labor you wouldnot have been able to create the tool or to use it after-w ard for the purpose intended. No w ealth can becreated but by labor. Therefore, if you become dog-matic, labor is entitled to the whole result."

Arguing in this manner, they will never agree. Inthe effort they were united. Hav ing by cooperationmultiplied their power to obtain a divisible result,they immediately separate again and begin to quar-rel as individuals. If the two will kill the capitalistand seize the treasure, they may; only then theydestroy what is more valuable than the treasure—nam ely, a source of ideas. If, on the other hand, thecapitalist leaves the two with wages only and takesall the rest for himself, he has destroyed the willing-ness of labor to cooperate, and that also is morevaluable than the treasure.

I IThe Irrational Dispute

This dispute, always in the same fundam entalshape, is the demon that has threatened economicsociety from the beginning of modern industry ,founded as it is on the principle of multiple effort.Like every other kind of demon, it has no rea lity butas a symbol of bad passions and unintelligence.

If it were that everyone separately possessed the

means of production—the farmer his land and theartisan his tools—there would be no such quarrel[115]



THE AMERICAN OMEN

over the worth of one kind of effort as against an-other, no wage system, no problem of division. Therewould be only problems of exchange. But tha twould be another state of economic life, more or lessidyllic, desirable perhaps, but not any longer pos-sible outside of fantasy . Under tha t system notmore than a quarter of the population now existingcould be sustained.

In this country, where it has been always easy foranyone who wanted it to acquire land, there is nosuch problem of division in agriculture as in indus-try . The ag ricultural problems are primarily prob-lems of exchange. But as to the industrial means ofproduction, especially in this country, they are socostly and so ramified in method and organization

that individual ownership as a rule is impossible.Multiple ownership, like multiple effort, is a neces-sity of the scheme.

Contrast the village smith and the man in a mod-ern automobile plant forging a crank shaft. Thesmith does it by hand. His capita l, besides his skill,will be a forge that he built himself, an anvil, a ham-mer, tongs, a few coals, the raw material, a shed overhis head. I t takes him a day a t least, and when hehas finished it he charges w hat he thinks his sk ill, histime and the material to be worth.

The other, standing in front of a drop-forgingmachine, a two-ton hammer rising and falling at thetouch of a lever, forges crank shafts at the rate ofone a minute. The material is brought to him whitehot. All he has to do is to place it squarely on thedies and trip the hammer. The power tha t drives

[116]



DIVISION

the machine is delivered to him. He did not inventthe machine. In a life-time he could not build one.Yet if it breaks or wears out, another will immedi-ately appea r in its place. If he owned it and had i tin a shed of his own, he could not use it. He prob-ably could not sell it for more than its junk value,because it fits only there in that one spot as a unitin a series of mechanical powers.

The amount of capital supporting this crank-shaft forger is by no means limited to the cost of themighty machine before him. Behind him is an origi-nating chain of means and coordination up to thepoint at which a crank shaft shall appear; beyondhim the chain of means and coordination continuesto the point at which a complete motor car appears,containing the crank shaft. The motor car has thento be sold, and there is another great organizationexpressly to do tha t. If it fails, there will be nothingto divide. Over all this lies a science of manage-ment of which he knows little or nothing.

Consider that some definite share of the total auto-mobile product must go to the man who forged thecrank shaft, on a machine he did not invent, could

not build or use as a smith in any enterprise of hisown, Gloved by power he did not originate, acting onmaterial delivered to his hand white hot, one actamong thousands contributing to the creation ofmotor cars in quantity under a science of method heprobably takes very little trouble to understand.W ha t shall his share be? There is the problem ofdivision in only one aspect, as it concerns labor.

Even if all the factors were constant, still it would[117]



THE AMERICAN OMEN

be impossible to determine the exact value of this one

ma n's labor. To attem pt it would require the workof analytical accountants to many times any imagin-able cost of forging a crank shaft, and when theywere through they would not agree. Fancy doingthis for thousands of different operations in onepla nt. Besides, none of the factors is constant.Suppose you had a figure to express with tolerableaccuracy the value of the labor required to forge acrank shaft. T h a t will be its value in terms ofw hat? Money, perha ps. But the buying power ofmoney is variable. Then will it be the va lue interms of the product—that is to say, a definite partof the tota l value of a motor car? W ho knows w hatthe va lue of a motor ca r is today or will be tomorrow ?

Value is one instant of equilibrium in a flux ofinnumerable forces; it is either that or an abstrac-tion. No other w ord has so bedeviled the minds ofeconomists. Hav ing imprisoned it many times in aformula only to see it escape again, it once occurredto them as a solution to abolish the w ord. Jevons,the English economist, seriously proposed it.

Since you cannot determine the specific value of

labor's contribution in a given case, there is nocoming th a t w ay to a science of division. You m ightthink to come a t it by another way. Suppose youtake the total product of wealth and slice it by seg-ments, so much for capital as interest and profit, somuch for labor, so much for reserve or to increasecapital, and so on, by some rational principle, leav-ing each segment to be divided by any rule thatw orks. Bu t w hat is tha t rationa l principle?

[118]



DIVISION

To find it has been the great task of economists.They began by trying to say what were the sourcesof w ealth. These, they have generally said, werethree—land, cap ital, labor. They still say land byhabit, meaning Nature in general; they said land atfirst because economic thinking began when agri-culture was the chief occupation and the artisan wasnot regarded as a producer a t all. By capita l they

meant w hat was on the land to work it w ith. Bylabor they meant a t first peasant labor only. Asindustry rose, these terms were extended in meaning.Land meant natural resources of any kind; capitalmeant all means of production whatever, includingplant, equipment, raw materials, credit and money;and labor meant wage earners either on the land orin factories.

No one will deny that land, capital and labor, inall such senses, are sources of w ealth. They are notthe only sources. I t is strange th a t economists haveso seldom regarded ideas as a source of w ealth. Yetit is possible to argue that ideas have created allmodern w ealth. T ru e, labor was required to exter-nalize the ideas, but without the ideas that half of

the population which is now industrial would notexist. I t could not exist. Not only would it notexist as industrial population; it would not exist atall. I t could never have lived. One must rememberalways that the most impressive single human factof the last century and a quarter has been the in-crease of population that was made possible only byindustry.

Having agreed that land, capital and labor were[119]



THE AMERICAN OMEN

the sources of all wealth—ideas vaguely included in

the term "capital," if at all—the economists pro-ceeded to imagine a law of rent, a law of profit, alaw of wages; and it was all arbitrary, since therewas no way to prove relative va lues. Some saidcapital was of first importance and should be firstrewarded, because without capital, labor would re-tu rn to a life primeval. Even these could not saywhat the reward of capital rightfully should be.How could they? Others said labor was of firstimportance because without labor the land wouldbe barren; capital alone could not make it produc-tive. Adam Smith, founder of conserva tive eco-nomic doctrine in Europe, said labor was the truesource of all wealth; then he propounded not a ratioof division but a natural law of wages, which wasthe market price, for labor as for any other com-modity, determined by conditions of supply anddemand. Karl M arx , founder of extreme radicaleconomic doctrine in the Old World, said labor wasthe only source of wealth and proposed to abolishcapitalists, intellectuals, all people whatever whodid not perform manual labor; others were para-

sites, living on the workers, exploiting them.Again the dispute stands precisely where it didin the imaginary case of three men who had moveda stone to discover the treasure, one contributingideas and capita l, two contributing labor. So thereis no coming by that way, either, to a science ofdivision. Nor is there any w ay of coming to it.

Science is of method and means. D ivision is atransa ction with life, concerning its ends. W ha t[ 1 2 0 ]



DIVISION

a re the ends? T h e ultim a te end we do not know .

W e know w ha t it is not. Certa inly we do not livein order to pro du ce. T h e object of increa sing p ro -duction is to make life richer, to free it of fear andw a nt, to m ultiply its extensions. Idealism is not ascience. F a ith m the perfectibility of hum an rela-tionsh ip is no t a science. F or eth ough t for the com-mon w elfare is a n emotion to begin w ith. T he re

may be a science of profit, if you mean the arith-metic of private gain; but for a sense of profit inworks without gain, for the sense of it in deservingthe good opinion of your fellow man, there is noscience w ha tever. D ivision is tow ard or from apeople 's da y dream . I t m ay be governed by a con-viction of thing s no one ha s y et seen. T h a t is w hythe re ca n be no science of it. T h er e m ay be bo than a rt an d a philosophy of i t . Th is is to be a p -proached.

I l l

Creative Parts

In the work of creating wealth there are several

p a r t s . F irs t , there is N a tur e 's p a rt , w hich is m irac-ulous—the soil, the minerals and gases below thesoil, moisture, sunshine, seasons and periodicities,energy, the mysterious principles of life, reproduc-tion an d subdivision. Fo rtun a tely the ea rth hasnever to be pa id . She loves to be explo ited.

T he re is lab or 's p a rt . Th is is to speak of ma n-

ua l labo r. I t is a definite p a r t ; yet in our a rra ng e-ment no one is fixed in th a t pa r t. One ma y stop in[ 121 ]





DIVISION

light, heat and power; their customers become stock-

holders. So is employe stock ow nership a w ide fa ct,of increasing significance. I t is to be no ted alsothat as ownership becomes more widely distributed,ownership and management tend to become sepa-ra te .

Management now appears as an insti tution initself, a nd it is a new pr inc ipl e. I ts point of viewis not th a t of either lab or or ca pita l. W h a t it doesis to combine these and add a third, which is thepoint of view of the consumer, who is everybody—that is to say, society; and society is conceded tohave rights of participation in the division of sur-pl us w ealth. T hi s is on the gro un d as it w as inthe imaginary case of the two who combined to movea stone. N eithe r could have moved it alone to dis-cover the trea sure . A pa r t of the trea sur e, there-fore, belonged to neither one of them individually,because neither one could have possessed it alone,but to both of them inseparably as a society of con-sumers.

There is the imaginat ion 's par t—ideas, that isto say . Idea s a re not sepa rately rew arded, save in

the case of one who gets a patent and sells his ideaon a roy a lty basis. W h a t ha ppe ns otherw ise, incases that are as a million to one, is that ideas arefreely contributed in the way of one's job; and onewho has many ideas will r ise through the job, what-ever it is, to superintendence, management, owner-ship. Th e rew ard is not for ideas pa rt ic ul a r l y ; itis for power of contribution to the science and un-derstanding of production.

F 123 1



THE AMERICAN OMEN

Then there is society's pa rt . How society, re-garded as an entity above the individuals who com-pose it contributes to the production of wealth mightbecome the subject of one dissertation. Tha t itdoes we know. Not only do we know it. We recog-nize its right to participate in division as society,beyond what its members receive in such forms asinterest, profit and wages. Society is the wholeorganism.

No one of us is society, but society is all of us.Its title to share in the total product of wealth isvalid, because it contributes the principle of powerth a t exists in combination. Moreover, it has needsand w ants of its own. The members of society a resepa rately discontinuous; society is continuous. I tslife runs in time far beyond the cycle of any indi-

vidual. Therefore it must govern both present andfuture. Its future objects and interests may oftenconflict with the present objects and interests of theindividua l. I t has two forms of investment to bealways mak ing. One for this time and one for thefuture. And it must have the means. Where w illit get the means if not from the total product ofw ealth? Educa tion is one of society's investmentsin its own future. The cost of education alone rep-resents a considerable participation in the divisionof wealth currently produced.

Merely to distinguish these parts is to see thatthey are reciprocal. How absurd to debate theirrelative importance As functions they are dif-ferent; as pa rts they are inseparable. They serveeach other, and this, as in any mechanism or organ-

[ 1 2 4 ]



DIVISION

ism, is according to laws of rhythm, harmony and

tension. W hat is jointly intended is a divisible re-sult.Ideas of economic society in this symphonic char-

acter are not origina l. You will find them scatteredall through the literature of conservative, radicaland Utopian economics. Always they broke downat the point of division.

What is new in the American way with the divis-ible result is the will to make the social impulse vic-torious on a plane of sound business. To see itacting you have only to regard characteristic Amer-ican division under its three principal heads—name-ly , w ages, profits, consumer benefit. In each casethere will appear to have taken place a definitechange of view; it will turn out to be all one move-ment of thought.

IVThe Exploiting Lord's Solution

The American way with wages is what Europeanpeople are trying most earnestly to understand.

The cause of their difficulty with it is historical.Ours is a new time and they do not know it. Oursis new m odern; theirs is old modern. And theyhave not yet broken w ith feudal time. The hered-itary capitalist is still the lord, representing su-preme ownership, which anciently was monopoly ofthe land; and the wage earners are still his depen-

dent people, with a continuous memory of havingbeen exploited for profit.[ 125 ]



THE AMERICAN OMEN

Here is curious history. When it was as it was

between the lord and the people, the lord possessingthe land and the people belonging to the land in-stead of the land belonging to them, then to exploitlabor was very simple. I t occurred na tura lly .What the people produced above their own sus-tenance—the surplus of their labor, that is tosay—belonged to the lord and was such as thelord and his retinue could directly consume: food,drink , clothing, armor, trapp ings and castles. Alltha t was the lord 's profit. Ev ery thing he consumedwas profit.

Now industry appea rs. The lord becomes capital-ist. Not the same lord, to be sure, but the lord inprinciple, symbol and fact of hereditary power ofpossession, with the same way of feeling about peo-ple and the same notion of his right to take the wholesurplus of labor because he owns or provides themeans of production.

But a new dilemma presents itself. H itherto thesurplus was such as he or his household could di-rectly consume. T ha t is no longer the case. W ha tshall he do with ten thousand pairs of shoes or halfa million yards of cloth? Th is is machine industry ,producing goods in grea t quantity . Now to gethis profit he must sell these gods. To whom? Tohis own people? They cannot buy them. How ,he may ask, can people buy their own surplus?Where will they get the money to buy it with?They have only their wage, and that is just enough

to sustain them. If he has to increase their wagesin order that they may be able to buy the surplus,[ 1 2 6 ]



DIVISION

that is the same as to give the goods back to them.In tha t case, where is the profit? H e will have onlywhat he himself can consume and they will have allthe rest. H e can see no profit in tha t, no sensew hatever. He is sure tha t if people had so muchthey would not work; plenty would debauch themor cause them to multiply excessively. Any w ay ,here is a surplus he can neither consume or sell tohis own people, unless, in effect, he gives it to them.

The solution of this riddle, when he thought ofit, was quite simple, though perhaps not permanent.It was to sell the surplus in foreign markets, awayfrom his own people, thereby converting it into goldprofit. Tha t was it— exchange the goods for gold.Hence foreign trade as it developed under the Eu-ropean system of industrialism; and this trade, un-like any that was in the world before, consisted notin silks, incense and jade; it was in staple goodsof common use such as the people who produced themhad never enough of for themselves.

There were two fallacies in the lord's point ofview. The first was the assumption tha t if peoplewere prosperous they would cease to work. T ha t

false notion, from regarding work as a curse, isimplanted in all the economic doctrines of the OldW orld. List, proposing a protective tariff systemto make Germany a powerful industrial nation, saidof course in the end, everybody having become pros-perous, the competition of free imports would benecessary to save workmen from indolence. Ameri-can labor is the most prosperous in the w orld. Is itthe most or the least indolent in the world?

f 127 1



THE AMERICAN OMEN

The other fallacy was to assume that if labor'sshare in the surplus be increased by higher wages,profits in the same ratio would fall, tending to dis-appea r. W ha t happens is tha t the standa rd ofliving rises, effective wanting increases, new forcesare released and the na ture of profit changes. I tceases to be a toll and rises anew from a productiveprinciple.

One is continually hearing that a cause of Amer-ican prosperity is the existence of an insatiable do-mestic market for goods, protected by tariffs.American industry therefore does not have to ped-dle its w ares in foreign ma rkets. But tha t is merelyto comment on the fact that the American peopledo, to a degree elsewhere unknown, consume theirown surplus, meaning by surplus all that prod-uct of wealth which is more than enough to sustainlife in the barest manner. Any other people mightdo the same thing. Number has nothing in pr in-ciple to do w ith it. And as for the tariff, that isa common instrument of economic policy. Althoughwe have used it in a way to oblige high wages, stillwe must have had a feeling for high wages to begin

w ith, for we might have used the tariff instrumentin many other ways.

VUprooting the Low Wage Fallacy

In European industry labor is a commodity, gov-erned by a law of supply and demand. The indus-trialist prefers an overstocked labor market and

[128]



DIVISION

speaks complacently of a labor reserve, meaning bythat a supply in excess of the demand, so that laborw ill be docile a nd w ages w ill sta y dow n. Sim ply , heis a buyer of labor and his first rule of profit is tocheapen what he buys.

That language was once current in this country.The low-wage fallacy went with the pattern of in-dustrialism as we received it from the Old World.

It was not so long ago that American industry sol-idly opposed any law to restrict immigration, sayingit could not do without cheap European labor toperform the m a nua l task . I t w as so cheap th a t in-dustry could afford to waste it , and did waste it ina callous m an ner. B u t the view has p rofou ndlychanged.

Those in the Department of Labor who haveworked for many years in the field of immigrationspeak kno w ingly of the cha nge. T he y hav e seenit ta k e pla ce. Fo rm erly their difficulty w as w iththe leaders of industry, who obstinately said that ifthey were cut off from the European labor supplythey w ould be ruined. T h e cou ntry , moreover,would be delivered bound and gagged to an organ-ized lab or monop oly. Now in all senses the D ep a rt-men t of La bo r finds ind us try sy m pa thetic. If it isa question of further restriction, some of the eldersmay be still a little dubious, wondering how far itis safe to go headlong in one direction, but the youngmen representing the science of management arespontaneous.

Th ey say , "N o, we don' t w ant tha t cheap labor.It is not good for the country."f 129



THE AMERICAN OMEN

There it is. F irst , is it good for the country?

Yes or no. On tha t ground i t shall be decided.And it turns out that what is good for the countryalso is best for business. This is the invariable factand has a kind of dramatic qua lity . I t is the ruleof experience, possessing apparently the validityof a natural law, that business has only to considerwhich of several w ays has the highest social meaning,

and that way, if it is pursued, will prove to be theone that pays best.The effect of a few great examples upon current

thought was transform ing and sudden. The recordsand recollections of the Department of Labor con-tain prophecies of disaster from closing our gatesto the cheap labor of the world by the same elderstatesmen of industry who now, as converts, talkthe new language as if they had always known it.High wages and low costs; greater productivity perman in order to increase the wage earner's buyingpower; progressive division of the total product ofwealth—and at the same time greater profits thanbefore. They have perha ps forgotten what theyformerly believed; at least, they seldom mention

the fact of their own conversion.What has happened in their lifetime to work thischange of view? Many w ill say , and do, tha t it wasthe w ar. Indu stry was suddenly cut off from itssupply of cheap unskilled labor; at the same timeit was obliged by the war enormously to increase itsou tpu t, w ith wages rising uncontrollably . There-

fore necessity obliged it to find ways of doing withautomatic equipment a great deal of work that had[130]



DIVISION

before this wasted men in drudgery . T ha t is to say ,

industry had to exploit machines in place of men.In doing this it discovered new sources of profit.Spending machines and saving men turned out topay- _

This is somewhat true—just enough to be mis-leading. The way had already been discovered.There was a working science of it, notably in the

automobile industry, where it had been demonstratedthat by method, power and automatons the produc-tive power of a man could be increased in a prodig-ious manner, with a result divisible in three direc-tions. The wage earner got more w ages, the publicgot cheaper motor cars and the profits were fabu-lous. The automobile industry offered only the moststriking example. The same principle was w orkingin many other places. Wages rising, costs fa lling,profits increasing. W ha t the w ar did was to causea wholesale reformation of industrial practice, un-der a new type of mentality, thus bringing to passall at once a change that had been bound in anycase to take place in a few years under stress ofcompetition.

Moreover, the opinion that necessity alone wasacting is blind to what it is that has changed.Not any view as to the rate of wage you can af-ford to pay as you increase the output of labor,not any view as to the effect of high wages on pro-duction. I t is the meaning of wages tha t haschanged.

There was for a long time no way of regardingwages but as the price of labor. To think of wages[1311



THE AMERICAN OMEN

as payment for work performed, roughly measured

by the quantity of output—even that was a bigstep. There was one more to tak e.Now more and more wages are regarded as la bor's

proportional share in the total product of wealth.I t is not enough tha t wages shall be high. I t is

necessary that they shall be proportional, for if theyare not, if the output of wealth increases faster thanwages, then no matter how high wages may be, therelative buy ing power of labor will fall. This is theview w hich comprehends the wage earner prima rily asa consumer, in which capacity he is indispensableto prosperity.

V I

Finding the True Law of Wages—A Law ofProportion

The great error of industry had been to see thewage earner only as a producer. Not until it be-gan to see him also as a consumer was it possiblefor a new philosophy of division to be imagined.

The equally great error of the wage earner had

been to see himself only as a consumer, and it wasnot until he began to see himself also as a producerthat it was possible for any philosophy of progres-sive division to act. There was nothing for it toact upon.

These two revolutions of thought have definitelyoccurred, and there is, for that reason, now the basis

of a common language between capital and labor.The American Federation of Labor, holding its[132]



DIVISION

forty-fifth annual convention at Atla ntic City in

1925, declared:"We hold that the best interests of wage earners,as well as the whole social group, are served by in-creasing production in quantity as well as quality,and by high-wage standards which assure sustainedpurchasing power to the workers, and thereforehigher national standards for the environment inwhich they live and the means to enjoy cultured op-portunities. We declare tha t wage reductions pro -duce social and industrial unrest and tha t low wagesare not conducive to low-production costs."

Production first.Here was a clean break with a doctrine that had

obsessed the thought of organized labor from thebeginning of its history—the doctrine that wagesa re paid out of capital 's profit. If tha t were true,then, as a wage earner, the less you gave to the jobthe more jobs there were and the more of its profitwould ca pita l be obliged to divide w ith labor. I tis not true . Wages are pa id out of production.La bor at last accepts the fact. In resisting the ef-forts of capital to increase the productivity of labor

it has been all the time limiting the fund of divisiblew ealth out of which wages a re pa id. The w ageearner now sees himself as producer. He embracesthe principle of high productivity . Then hesees himself again as a consumer and stipulatesthat he must share increasingly in what is pro-duced.

Business has already perceived him in the light ofconsumer, and how to sustain his buying power is

[ 1 3 3 ]



THE AMERICAN OMEN

its own anx iety. I t is ready therefore to indorse

both sides of the Atlantic City declaration.Four years before this, in 1921, business hadbeen divided. The evil of postw ar deflation wasupon it. Profits had collapsed. There were manywho said, "Now is the time once for all to liquidatew ages." There was a movement to do so. Labornaturally prepared to resist, but that was not whatstopped it.

There was a new faith to be tried. I t sa id: "T hetrouble is not high w ages. I t is high costs. Thetrouble is not overproduction from too much capac-ity . I t is tha t we employ our capa city w astefully.Let us reduce our costs by better method and morepower and let wages stand. The result will be agreater consuming power than we ever had before."

And so it w as; and so much more it w as tha n any -one could have imagined that capacity had to betremendously expanded to satisfy the demand forgoods.

Recently the American Federation of Labor hasformulated w hat it calls a modern wage policy. Inits first period organized labor struggled for higher

money w ages. But as prices sometimes rose fa sterthan wages, so that the higher money wage boughteven less than before, the demand was changed;it became a demand for higher real wages—that isto say, wages calculated on the buying power ofmoney. Now says the American Federation ofLabor:

"Very obvious changes in the productivity oflabor today induce organized labor again to widen

[ 134 ]



DIVISION

i ts w age policy. H igh er rea l w ages from a socialpoint of view do not improve the situation of theworker if productivity increases more than realw ages. F or higher produ ct ivi ty w ithout corre-sponding increase of real wages means that the ad-dit ional product has to be bought by others thanthe w age ea rners. Th is means th a t the social posi-tion of the wage earner in relation to other con-

sumers becomes worse, because his standard ofliving will not advance proportionately with thoseof other gro up s. D eterio ra ting social posit ion—that is, declining purchasing power of the mass ofthe wage earners in relation to the national prod-uct—brings about industrial instabil i ty, which willdevelop into industrial crisis.

"T h e Am erican F edera tion of L a bo r is the firstorganization of labor in the world to realize theimportance of the factor of production in economicsociety. I t no lon ger strives merely for h igh ermoney wages; it no longer strives merely for higherreal wages; it strives for higher social wages, forwages which increase as measured by prices andprod uctiv ity. Th is modern w age policy l if ts the

movement to an absolutely new level."There is the proportional idea of division clearly

set forth . Business accepts it . I t w as business th a tcame to it first from that point of view which regardsthe w age ea rner as a consumer. B u t there is thisdifference—that what business perceives to be botha necessity and a social ideal, labor claims as a moral

rig ht. In the Am erican Fed era tion's formula thesentence, "very obvious changes in the productivity[ 1 3 5 ]



THE AMERICAN OMEN

of labor . . . induces organized labor aga in to

widen its w age pol icy," is extremely na ive. Thosevery obvious changes—w hat are they? W ho is re-sponsible for them? La bor has not increased itsown productivity . The means, the science and themethod have all been provided. There you haveintroduced capital and ideas again and begin atonce to touch the historic dispute. W ho moved the

stone ?In a study entitled Wages in the United States,published in 19^7, showing among other facts thatwhile prices declined 17.5 per cent during 1924? and1926 wages actually advanced, the National Indus-trial Conference Board glances at this question ofmoral right, saying:

"It is clear that the increase in output per workerin recent years is due altogether to the greater useof machinery and power and to better management—that is, to the use of more capital and managerialintelligence, and not to any greater effort or moreefficient appl ication on the pa rt of labor itself. Pro-duction efficiencies have for the most part beenevolved through careful research and experimenta-tion on the part of highly skilled engineering staffs,and this work has been financed by the employerwithout any assurance that it would bring him areturn.

"It seems reasonable therefore that when this in-vestment has turned out profitably, the credit andthe profits which result should accrue to the em-

ployer and to the investors who supplied the capitalfor the experiment, and who would not have been[136



DIVISION

likely to undertake it except for the prospect of

profit. If, how ever, the employer belongs to theschool of economic thought which holds that mount-ing wages, by enlarging domestic markets, are thesurest insurance against business depression, hemay distribute any portion of the increased profitin the form of higher wages, but it is difficult toestablish any moral obligation to do so."

As to labor's attitude it says:"Labor's argument, briefly stated in generalterms, holds that since in the final analysis it islabor which applies and makes effective the im-proved agencies of production, it is rightly entitledto share in the increased w ealth created. While itis undoubtedly true that the most brilliantly con-ceived mechanical aid to production is worthlesswithout human direction, it is still open to questionwhether this makes a case for labor's demand."

I t is no issue w orth ra ising. W ha t organizedlabor now demands in the name of a modern wagepolicy, union and nonunion labor was already re-ceiving. La bor unionism contributed nothing to theAmerican philosophy of division and was slow

either to believe in it or try it. Indeed, as th a t philos-ophy has clarified and spread, the strength of laborunionism has declined. W ha t was required by scien-tific management was labor's collaboration to in-crease production. Th is organized labor was re-lucta nt to give. All the possibilities, together w iththe spirit of faith keeping, had first to be demon-

stra ted in open-shop practice. I t had to be demon-strated, and was demonstrated, notably in the motorf 137]



THE AMERICAN OMEN

industry, that with labor letting itself go and with

capital keeping faith, division according to scientificmanagement's idea of it was a higher wage thanorganized labor could extort from capital by threatand conflict. I t was higher because the energy oth-erwise wasted in the struggle to limit output wasdevoted to production.

Labor is following where it could not have led.

T o distribute the blame would be gra tuitou s. Forgenerations the wage earner had been exploited asa commodity and his suspicions were very deep. Hehad been exploited also by his leaders, most of themhonest, who kept telling him that since labor wasthe true source of wealth, even as Adam Smith ad-mitted, it followed that labor was entitled to thewhole product. They exhorted him therefore torise and take possession of the means of production.Why labor never in fact did this, or ever seldomtried, was a question its intellectually radical lead-ers were obliged at la st to examine. I t seemed tothem so easy . The owners were few, the workerswere many. The explana tion was tha t labor instinc-tively knew better. I t might seize the means of p ro-

duction. T ha t was simple enough to do. Howcould it seize the source of ideas?

V IIApplication of That Law Also to Profits

None of this change of view as to the meaningof w ages had ever been possible without also a changeof attitude on the part of capital toward profits.

[ 138 ]



DIVISION

This runs to the same deep level and recreates the

gr ou nd of economic assu m ption. One illustra tionof the change, containing the emotional measure ofit , happens to have presented itself in the perfectmanner—perfect , because everything about i t wasunconscious.

Anyone who knew American business twenty-fiveyears ago, par t icular ly anyone who knew i t f roma Wall Street point of observation, will recall whatthe state of its feeling was about President Roose-vel t. M an on horseback demagogue cha r la ta nra dic a l As a m a tter of ta ct , even as a m a tter o£precaution, one learned never to mention his namecarelessly in a Stock Exchange group, for the meresound of it unexpectedly pronounced had beenknow n to induce pa tholo gica l consequences. T h er eis a form al record of several Roosevelt pa nic s. Keepall this in mind as the historical fact ^m.d look nowat a decorative page printed in the August, 19&7,num ber of the M a ga z ine of Business. Y ou see ahalf-tone reproduction of a painting enti t led Mod-ern Industrial St . Louis, a symbolic representationof ind ustry . Ben ea th the pictu re is a tex t on busi-

ness ethics The Acquisition of Wealth by TheodoreRoosevel t , saying:"The mere acquisition of wealth, in and by itself,

beyond a certain point, speaks very little for theman compared with success in most other lines ofendeavor. . . . Furthermore, the wealthy men whomake money which does not represent service are

public enemies."In a magazine of business, whose audience is[ 1 3 9 ]



THE AMERICAN OMEN

business There was no da ring or propa ga nda in

it. The editor's thought was ornam ental. This isa text to which American business now subscribes.That is the ethic to which it aspires.

What has happened in these twenty-five years?Clearly, there is a new way of conceiving what

profit is. This was bound to occur. A philosophyof division that had changed the meaning of wagescould not have failed to bring an original light toplay on the question of capital's share.

Profit was another endless, indistinct beast thatdevoured the reason of economists, besides consum-ing the prosperity of the wage earner and damningthe souls of men. Economic li tera ture is full ofhis wickedness. For a long time there was no dis-tinction between him and a less Satanic animalcalled interest. They were hunted together. Butafter they had been separated by intelligence andprofit alone began to be tracked to his source andjustification the controversy became even more vio-lent and irrational.

W ha t was the na ture of profit? Always it seemedto be the difference between the cost of producing a

thing and the price a t which it was sold. W hy wasth a t difference? Ev en if you included interest asan item of cost, still there was that difference whichsomebody charged and everybody paid—and thatwas profit. Some said under a regime of perfectcompetition profit would tend to disappear, foreverything would have to sell a t cost. To this wasthe objection that if there was no profit, no hope ofit, there would be no adventuring of capital . Eco-

[140 1



DIVISION

nomic society would in that case stagnate and per-

ha ps die. Others, like Robert Owen, said competi-tion was economic warfare and profit was the spoils.Therefore competiton must be abolished togetherwith every trace of the heinous impulse to buy cheapand sell dea r. The profit motive and money as theinstrument of profit must be abolished, else therewas no sav ing of mankind. Profit was the forbiddenfruit that had wrecked the Garden of Eden.

That was seventy-five years ago, and the absurd-ity is still current in the w orld. I t is the dogmaticpuerility of communism.

However, there was no way to get rid of the profitmotive. All a ttempts to do so, notably those ofRobert Owen, with his labor exchange and labornotes in place of money, went shipwreck on therocks of human na ture . There came to be a fixedcynical notion about profit, that it was a toll uponwealth, charged by those who possessed the meansof producing wealth, and charged by no rule ofreason. W ha t the traffic would bea r— tha t was theonly rule.

Under the old economy, even to this day, that is

the nature of one kind of profit and that is the ruleby which it is calculated. Th e robber baron, tak -ing toll of the caravan, learned not to take more thanthe trader could afford to give, for if he took more,he either ruined the trade or caused the trader togo another w ay. Generally the industrial ca pitalistwas controlled by that same idea, hence his everlast-ing dream of monopoly. T o possess a monopolywas like holding a caravan pa ss. I t might be in one

[141]



THE AMERICAN OMEN

case a monopoly of goods that enabled him to sell

them dear; it might be also a monopoly of the meansof production that enabled him to buy labor cheap.Often it was both. All profit in tha t character—and there has been an enormous lot of it—is a tollupon wealth. Consumers as such and labor as suchare both exploited. Generally it was true tha t ca p-ital's share was determined by occasion, circum-stance and priv ilege. There was no social theoryof division, nor had capital any vision of its owndynamic function. W ha t it took for itself was asmuch as it could, and that was a large proportion ofthe total product.

Profit taking by that rule limits prosperity, forthe obvious reason that it limits the production andexchange of w ealth. Th is is commonly understood.The truth is not so clearly formulated that profittaking by that rule in any modern scheme limitsalso the power and profits of capital.

Here the proportional idea again, now touchingcapital's share in the same way as before it touchedlabor's share. There is no scientific way to deter-mine w hat the righ t proportions are. The impor-

ta n t thing is to have an idea of p roportion. There isno such idea in taking all you can get and callingth a t your own. T ha t is division by jung le law.

From a true philosophy of division you come nat-urally to a sense of proportion, and a proportionalshare defines itself as a quantity that bears a moreor less constant relation—ideally a constant rela-tion—to the total product of divisible wealth.

Now a principle begins to act. Proba bly it is a[ 142 ]



DIVISION

law . I t is th is: If capital 's profit in any case ismore than a proportional share, it may keep it andconsume it; but if it does, the profit ultimately willfail. W hy ? Because there is no permanent sourceof profit in itself. I t cannot survive bu t it is rootedin common prosperity, in the well-being of societyas a whole; and this is injured by disproportionaldivision.

It is easy to reconstruct a picture of Americanindustry as it w as. Many ruins survive. In oneof the old textile fields you may still see, in a valleyon a water-power site, where the factory w as. On ahigh hill, maybe boarded up, surrounded by a neg-lected private park, you will see what was the own-er's mansion. Obviously, a grea t deal was tak enout of that business as capital's share and consumed.The proportion was steep. The mansion and itssetting must have cost more tha n the factory. W ithw hat sequel? The business has vanished. I t wasruined by the competition of textile industrialistswho, tak ing only a proportiona l share for themselvespersona lly , returned their profits to the source, there-by increasing their plant, reducing their costs, im-

proving the status and productivity of their wageearners, until now the volume of wealth producedis so great that no mansion in a private park couldbear any important relation to it.

Perhaps the most impressive isolate example isH en ry Ford. You may tak e him to be the richestman in the w orld. But in w hat is he rich? Not in

money. In tw enty years, from nothing, he and hisassociates have created the largest one unit of indus-[1*3]



THE AMERICAN OMEN

tr y in the w orld. I t is the most celebrated instance

of profit mak ing. Where is the profit? In w hatform does it exist? A house to live in, w hat hishousehold has consumed in living, the Wayside Inn,a quantity of antiques and the Dearborn Independ-ent—these are the things Ford has taken for him-self personally, and the cost of them in proportionto the wealth he has created is trifling. The rest ofthe profit has been returned to its source. The moreof it that was returned, the more of it there was,until at last it ceases to have the meaning of money,or of anything that can be converted into money.I t is power. In one apea rance it is personal pow er;actually it is not, for unless it continues to be em-ployed in ways to increase the wealth of society asa whole it will fail, only to rise again in the handsof another.

He says himself, "All anybody can get out ofthis is a job."

Although it may be elsewhere less visible or lessdramatically emphasized, the same rule has gov-erned the entire American automobile industry . Andthat is one reason why the motor-car industry of the

world is centered here, not in Europe, where theymade motor cars first and made them much betterto begin w ith. The motive was profit. Tha t is so.Only, in w hat cha racter is profit? In the old char-acter profit was an appropriation of wealth, somearbitrary part of the product detained as capital'sshare, or a toll upon it—in any case, a quantity

deducted from the total divisible result of ideas andlabor and Nature collaborating.[ 144 ]



DIVISION

VIII

Bankrupt Antagonisms

In our scheme it appears that profit, instead ofrepresenting anything deducted from the total prod-uct, may arise from what is added to that product.Invariably in the grea t instances it is so. Th e ex-traordinary profit runs to those who by ideas and

method increase the productivity of capital and la-bor. T ha t is to say , they reduce the cost. Theirprofit is not in the pric e; it is in the cost. W ithno change in price, they increase the profit by re-ducing the cost. Thus profit creates itself and isitself divisible. I t a rises, as was said, from a pro-ductive principle and is a new thing.

Profit in th a t sense is not in w hat you tak e. I tis from w hat you give. To make a grea t profit youhave to increase the total product of wealth moreefficiently tha n your competitor. Hav ing made thegreat profit in that way, it is rightfully your ownto consume. You may remove it from the businessand do any thing you like w ith it. But unless youreturn it to its source—the greater part of it—thesource will dry up . W hy ? Because if you do notpursue that line, another will, and he who does willpresently have costs lower than yours, and yourprofit will cease.

Thus it is endlessly that profits are divided withsociety through a cheapening of goods. Th is da y 'sconsumer of goods is consuming also the profits that

cap ital made yesterday . The man who pays todaya thousand dollars for a motor car better than one[145]



THE AMERICAN OMEN

that sold for fifteen hundred dollars five years agois actually consuming that part of the profit fromfifteen-hundred-dollar motor cars that was returnedto the motor industry in order to reduce the costof production. The margin of profit in motor carsat one thousand dollars is less than it was in motorcars at fifteen hundred, but the quantity that canbe sold at one thousand dollars is greater and the

aggregate profit may be even more than before.Wherein you see that the consumer in the act ofconsuming profits returns them again to whencethey came.

The classic economic dogma of antagonism isbreak ing down. W e are privileged to w itness tha tcatastrophe, being the au thors of it. Wages andprofits are not opposed. Both derive from produc-tion. There is properly no conflict between pro -ducer and consumer. How could there be? P ro -ducer and consumer are the same person. Prosper-ity is from increasing the sum of social wealth forpurposes of proportional division, and all its phe-nomena belong to the wonder of orchestration. Ev -eryone's pa rt is supported by another's pa rt . Onepursuing private gain in a ruthless manner as anexclusive end is a wild piper playing his own tunein a symphony band. He is not of our time andway of life.

Such thoughts become suddenly commonplace.They occur now more frequently in what businessw rites about itself than anyw here else. Tak e as

typical this paragraph from the May, 1927,economic circular of the National City Bank of[146]



DIVISION

Wall Street, on the growth of wealth since 1921:

"Inasmuch as the amount which the individualcan spend on necessities such as food and clothingis fairly limited, the excess has flowed out and cre-ated the demand for better housing, for automobiles,radios and the like that has gone to sustain thebusiness boom. I t has also made possible a la rgerattendance at schools and colleges. Shortages cre-

ated by the war may be made up and the stimula-tion of business derived from them dissipated, butthe impetus received from an improving state ofgenera l w ell-being goes on so long as each individualrecognizes, and in his dealings with others is guidedby, the principle that prosperity is dependent uponan even exchange of goods and services and that itis the wealth which each one produces that enableshim to buy the products of others."

An even exchange of goods. How radical tha twould have seemed only a few years ago

We are hardly aware of the extent to which theidea of profit as private gain from ownership hasbeen subordinated to the idea of profit as a wagefor capital, social benefit regarded as its justifica-

tion. One takes it for gra nted, yet it is a significantfact. Grea t bodies of cap ital appea r tha t are pra c-tically unowned, unless you should say society ownedthem. The principle of priva te ownership has notbeen touched. Yet the meaning of ownership inthese cases has fundamentally changed.

As the holder of shares in a large corporation,

one is supposed to own some arithmetical part ofthe assets. T ha t is technical. Does one in fact[ 1 4 7 ]



THE AMERICAN OMEN

own tha t pa rt? I t is nothing one can separate or

take away or do with at all as one personally likes.Nor could all the stockholders together act as abso-lute owners of a property employed in producingw ealth essential to the w elfare of society. Couldthey, for example, in a pet with society, shut it upw illfully or destroy it? Formerly the owner couldhave done either—and any thought to the contrarywould have outraged his sense of right.

As ownership becomes more widely distributed,capital shares represent ownership in no sense ofold, bu t, instead, a rig ht to pa rticipa te in the profits.And more and more it is that the owners do notcontrol the policy th a t governs the profits. Themanagement does tha t. Management now becomesan institution a pa rt from ownership. If the case tobe supposed is that of a public-service corporation,which may be the highest example, the managementsays to the shareholders, technically the owners:

"We undertake to keep your investment safe andto retu rn you 6 per cent on it. Profits more tha nthat we propose to divide under three heads ofbenefit—namely, property benefit, to improve the

service; employe benefit, to improve relationship andrew ard loy a lty ; a nd, thirdly , consumer benefit, whichis the final aim."

What the investor gets beyond his 6 per cent isa sense of security, for he may know that a prop-erty so handled will endure.

One is no longer surprised to find in the annualreports of corporations to their shareholders that a

[148]



DIVISION

sense of social achievement is stressed above profit.

The report of the largest light-and-power companyin Virginia begins:"Your company is a public utility holding com-

pa ny . Its purposes are tw ofold: First, as to thepublic served, to improve and develop the servicein the territories occupied; and, second, as to theinvesting public"—to provide a sound investment.

The public first.The last annual report of the largest public-util-

ity corporation in the world said:"The ideal and aim today of the American Tele-

phone and Telegraph Company and its associatedcompanies is a telephone service for the nation, free,so far as humanly possible, from imperfections, er-rors or delays, and enabling at all times anyone,

anywhere, to pick up a telephone and talk to any-one else anyw here else, clearly , quickly and a t reason-able cost."

Service first. And from that motive more wealthamong us in telephones than among all other peo-ple in the world together.

A proportional wage for labor, a proportional

wage for capital, and from the profits that are overa distribution of benefits to the property, to theworkers and to the public—that is management'sidea of division.

In this American philosophy you may find eco-nomic chiva lry by looking for it. If you do, it isimplicit there. The conscious view is still p ra g-matic. Any other is obscured in a curious w ay.

[149]



THE AMERICAN OMEN

Long before this a state of society had been imag-

ined in which the desire for private gain as the par-amount economic motive should yield to the ideaof social function. But nobody ha d ever imaginedit would really pay.

[150]



T H E N E W M E A N I N G O F B U S I N E S S

Rise of the Moral Structure

* I A HINK how seldom it is nowadays that you hear-*- anybody say, "Business is business." Or think

what your mental reaction is when you do happen

to hear a man confessing tha t cynical code. Yourank him low in the scale of business. W hy ? Be-cause business is becoming both a civility and a pro-fession and your expectations of it have changed.

Two powerful forces are there acting and react-ing . Business expects you to respond to the viewit now wishes to take of itself, and even though youmay not be aw are of it, you do. Business, in tu rn ,responds to your higher expectations of it.

So all structures of moral progress are laid up,one course a t a time, in a tedious ma nner. Thebeginnings of the foundation are never witnessed.Words and ceremonies begin with the corner stone,which is a middle symbol, already supported byideas sunk deep in the ground. Presently there is

an elevation. You cannot see it originally becauseit advanced so little by little and you were look-ing at it all the time. Almost you forget by thetime it is finished what was there in that place be-fore.

Regard now the elevation of the structure thatmay be called the new meaning of American busi-

ness. In June, 1927, a group of big business menwere gathered together to dedicate a group of build-[151]



THE AMERICAN OMEN

ings comprising the George F. Baker Foundation ofthe Graduate School of Business Administration ofH a rv a rd University. George F . Baker is one ofthe very rich elder bankers of Wall Street. OwenD . Young, who made the dedication address, ischairman of the General Electric Company. Hesaid:

"If I were to speak for men of business, which

I am none too well qualified to do, it would be toexpress gratification that business is recognized atlast as a profession, and being so recognized byH a rv a rd , becomes a learned profession. If I wereto speak for men of learning, which I am less qual-ified to do, it would be to express satisfaction thatscholars are now to find their way to the marketplace as they have heretofore to the pulpit, to thelaw courts, to the hospital and to the forum.

"Looking backward, one wonders why our visitfor this purpose had been so long delayed. W hy isit that the Harvard Business School was not found-ed until 1908 and not adequately housed until thishour? The medical school was established in 178&,the law school in 1817 and a divinity school in 1819.The education of the ministry, however, may be saidto have been a prime object of the foundation itself,and the chief effort of our earlier yea rs. The found-ers of Harvard said that they 'dreaded to leave anilliterate ministry to the churches when our presentministers shall lie in the du st.' Is one to concludetha t H a rv a rd w as fearful of an illiterate ministry of

religion in 1636 and was not apprehensive of anilliterate ministry of business until 1908?"[152]



THE NEW MEAN ING OF BUSINESS

I I

What Was There efore

A nd can you remember w hat was ther e before—what American business signified before this newelevation of meaning came into it?

Less than twenty years before this, Mr. Jus t iceH a r l a n , of the Un ited States Supreme C ourt , dis-

senting from an opinion of the ma jor ity on the con-struction of the Sherman Ant i t rus t Act, reviewedthe background of that famous piece of legislationin these authentic words:

"Al l who recall the condition of the country in1890 will remember that there was everywhere,among the people general ly, a deep feeling of unrest .The nat ion had been rid of huma n s lavery— for tu-na te ly, as all now feel— but the conviction was uni-versa l tha t the coun try was in real danger from an-other kind of s lavery sought to be fastened on th eAmerican people—namely, the s lav ery th a t w ouldresul t f rom aggregat ions of cap i ta l in the hands ofa few individuals and corporations controll ing, fortheir own profit and a dv a nta ge exclusively, the en-

tire business of the country, including the p roduc-tion and sale of the necessaries of life. Su ch a dan-ger was t hough t to be then imminent, and all feltt h a t it must be met firmly and by such s ta tuto ryregulat ions as w ould adequa tely pro tect the peopleagainst oppression and w rong , Congress thereforetook the m a t ter up and gave the whole subject the

fullest consideration."His voice even then was of the pa s t. He was in -[ 153]



THE AMERICAN OMEN

sisting that the Supreme Court should interpret the

law in 1911 as it had in 1896, literally; but themajority, from wrestling with a sense of new un-formulated problems, had groped its way to adifferent conclusion. Conditions were changing.Change itself had become a condition. The grow -ing magnitude of business had overwhelmed corpora-tions as already partnerships had been overwhelmed.

Then had appeared the trust, a group of corpora-tions acting together. Moreover, the relation be-tween business and society was no longer volitionalon either side. I t was an imperative relation.

Many people believed, and it seemed logically in-dicated, that what had to be decided was whetherbusiness should govern society or society shouldgovern business. But how did society propose togovern business? By device of law , called the Sher-man Antitrust Act, intended to impose upon busi-ness a rule of competition, thinking thereby to limitthe power of business in any one of its body forma-tions. Tha t, of course, was fear. Oppositely, so-ciety on its material side was greatly to be servedby the very power it wished to limit, since businessin big vertical and horizontal formations, theoret-ically at least, could create wealth in a prodigiousmanner on a falling curve of cost, thereby not onlyincreasing the quantity of goods that satisfy humanwants but at the same time making them cheaper.

Moreover, as to competition—and this was theimmediate question—who knew the whole nature of

it? Hitherto it had been viewed always in one ligh t,as struggle and survival. W ha t did tha t mean if[154]



THE NEW MEANING OF BUSINESS

not that the strongest and most ruthless were boundto survive? In th a t case, the ultim a te end of com-petition was monopoly, and monopoly was the evilto be feared.

Was there no other truth about competit ion?How came it to be that in nature, al though the com-petition was apparently remorseless, still many softfra il forms w ere seen to surviv e a nd flourish? W h a t

was that pr inciple?At that time a thought that has since become com-monplace am ong us was s ti ll s t ran ge. T h a t wascom petition in service. T h e first nota ble ap plic a -tion of it w as in the case of rail roa ds . Co m petitionamong them as warfare , touching rates par t icular ly,had produced such intolerable evils that the Gov-ernment, through the Interstate Commerce Com-mission, was taking the power of rate making awayfrom them. T h us , on one ha nd , the Governmentwas making it impossible for the railroads to dowhat i t was, on the other hand, trying to make allother business do.

T o this contra diction we ha d come. On one sidew as fea r of the pow er of business. On the othe r w as

contempt of public opinion and rule of the ruthlessego, resisting every effort on the part of society toimpose upon it a sense of social a cco un tabil ity . B u twhen the railroads could no longer compete in rates,w as th a t the end of their com petition? On thecontrary, it became keener than ever before, only ina new ch a ra cter . I t w as com petition in service, so-

cial util ity , civility , w ith ra tes alike to all . W a sthat something business as a whole might learn?[155 1



THE AMERICAN OMEN

Such reflections as these animated the majoritymind of the court and moved it to express an opin-ion on the law that had nothing to do with the case.It said the law could not be understood to prohibitevery form of contract in restraint of trade, becausealmost any contract you could imagine had in itsome element of restraint; nevertheless, on specificground, it dissolved the defendant trust, saying it

was bad as a proposition of fact. M r. Justice H a r-lan concurred in the verdict and dissented from theexposition. He did not overdraw the picture as itwas in 1890. W ha t he did not share was a visionof fa ith tha t was in his associates. They had some-how got sense of a new principle transacting in thesematters. They ha d recognized the signs of a move-ment in business from a law of the ego to one ofthe herd.

What has happened to the law by interpretationis the obverse of what has happened to the regardin which business holds itself, and this is very strik-ing on both sides. The law has been completely re-volved.

The Sherman Antitrust Act say s: "Every con-

tract, combination in the form of trust or otherwise,or conspiracy, in restraint of trade or commerceamong the several states, or with foreign nations,is hereby declared to be illegal."

In 1896, deciding the celebrated Trans-MissouriFreight case, the court definitely refused to con-strue into the law either word "undue" or "unrea-

sonable," before restra int. Twice it did this and[156]




then declined to hear the matter argued. I t had

made up its mind and the law was clear.In 1904, deciding the famous Northern Secur-ities case—the Northern Securities holding com-pany, resulting from the Northern Pacific corneron the New York Stock Exchange, was an idea oflocking up control of railroads away from men likeE . H . Ha rriman— the court said: "The mere exist-ence of such a combination and the power acquiredby the holding company constitute a menace to anda restraint upon the freedom of commerce whichCongress intended to recognize and protect.''

The first interpretation now is complete. Thewords of the law are absolute, permitting of no def-initions, and bigness or power in itself is a menaceand illegal, regardless of how it is used.

Then came the Standard Oil and American To-bacco cases in 1911 and 191& respectively . Thecourt dissolved both trusts, not because they weretrusts, not because they were big, but because theywere proved by the evidence to be bad. Here thecourt begins to hold with Theodore Roosevelt's dis-tinction between good trusts and bad trusts, and

it is in each case a moral question on the merits. Inboth cases, however, the court paid more attentionto the law than to the deserts of the defendants, anddeclared that the law must be construed by lightand rule of reason. In doing this, as M r. JusticeHarlan said, the court reversed itself; moreover, hesaid, it committed an act of judicial legislation.

Well, but it could not stop there. I t had done[157 1



THE AMERICAN OMEN

w hat it had said it could not do. I t had construed

into the law the word "unreasonable," before re-stra int. I t had yet to undo the dictum tha t bignessor power was in itself illegal. This it did in 1920,deciding for the United States Steel Corporationand against the Government, on the ground that al-though this trust had been formed in defiance ofthe law, although it had committed acts in the samespirit, still this had been long before; and mean-while its behavior, its relationship to the industryas a whole, all economic conditions surrounding it,had changed. The Government contended tha tpower to do wrong was unlawful, no matter howit was used. The Government, said the court, wasw rong. The law was directed against monopoly,not against the expectation of it, and the United

States Steel Corporation had ceased to behave asa monopoly. Therefore it need not be dissolved.As w riting, the law has not been touched. It s

meaning has been revolved.But this did not happen, could not have hap-

pened, until business was ready to see itself by im-plication of such w ords as these: "T he sp irit of thebusiness world was exploitative and speculative.Make use of every resource that comes to hand, buy-ing labor and materials for as little as possible andselling dear tha t you may profit well. This mayseem but a page torn from the business code oftoda y , and so it is, but it is only one pa ge . Theothers reveal faith in the problem of service as asource of satisfaction both in pecuniary profit andin professional pride.[158]





THE AMERICAN OMEN.

w riting, much of it wholly unresponsive to the cha ng-ing state of facts.Taking it back to the personal reference, supposewe try asking ourselves what our common expecta-tions of business are.

First, perhaps, we think of value, quality, service.These integrities we take for granted in a mannerthat would have astonished those of the preceding

generation. Our w rath when we have been disap-pointed is evidence that disappointment is not therule. Formerly the haza rd of buying was in bothprice and quality, and the idea of service was so ex-ceptional that—as, for example, in the matter ofreplacement parts—the manufacturer's general no-tion was that once he had sold you the machine youhad to have the parts and these he could sell to youa t a high profit, exploiting your necessity. Nowservice—here limited to the sense of continuous cus-tomer satisfaction—is a universal and competitiverule of business.

As to price, or value, you may still believe thereis some hazard there, and of course there are manyinstances of apparently unreasonable discrepancybetween the cost of producing a thing and the pricea t which it reaches the consumer. Generalizationsare necessary here. F irst , the price, w hatever it is,is one that everybody pays, and is in itself an openchallenge to competition. I t was not until af ter theCivil War that retail merchants generally adoptedthe one-price system of merchandising. Before tha t

every transaction was by higgling over the counter.When, in New York, A. T. Stewart began marking[160]




prices on his goods, permitting no deviation, othermerchants could not imagine that he would not beruined . If he stuck to it a nd honestly m ea nt it , thenit would be simple for his competitors, knowing hisprices, to undersell him just enough to get all thetra de . I t did not w ork th a t w ay . N o one couldafford to undersell him, because with the fixed priceswent also quali ty, and the profit was reasonable.

What happened was that in a few years al l the im-portant business of retail merchandising was obligedto adopt the one-price system.

As for prices in general—value, that is to say—one must look not at a specific bargain, at one ortwo among mill ions occurring every minute, but tothe average economic cost of the total quantity ofgoods consumed. Is th a t r ising or fall ing? E v ery -one knows it is fa lling. Proof is th a t we a re ablesteadily to increase the quanti ty and variety of oursatisfactions. T his or th a t m ay be de a re r; otherthin gs , by offset, a re chea per. Coal a nd lum ber ar edearer, automobiles and electric appliances arecheaper.

The rule is that those things have been cheapenedmost that represent the highest degree of fabrica-tion; and this, when one thinks of it, seems an in-credible fa ct, w ith w ages steadily rising. I t show swhat skil l , imagination and power can do when in-tensively employed. Liv ing in gen era l, mea sured bythe average person's command over goods, is cheaperhere than ever before, and cheaper than anywhere

else in the w orld. Price s, a fter a ll , a re relative.W h a t do we have an d consume? T h a t is va lue in[161 1



THE AMERICAN OMEN

the rig ht sense. A pa rt from any theory of its so-

cial function, merely as sound modern principle,business is obliged to lower the price of goodscontinuously in order to sustain its volume. Profitin our scheme is from volume. And volume is frompressing goods lower and lower through the socialpyramid to the every base.

Value, quality, service—such are commonly our

expectations of business. Only, perha ps, we do notrealize that thirty years ago one who had taken somuch for granted could not have been trusted tospend the budget of an ordinary household. How -ever, as you see, if these three virtues of business aremoralities a t al l, the cha racter is utilita rian. Theycreate customer confidence, build assets of goodwilland name, and turn out to pay very handsomely.Why, therefore, had they been wanting in business?

They had not been alw ays w anting. Here againis curious history concerning the effect of the ma-chine upon business behavior. Old-fashioned busi-ness was honest. The importance of goodwill wasunderstood. Service, of course, had not beenthought of; there was no need to think of it. Mer-

chandise did not include such things as motor cars,tractors, private light, heat and power plants, auto-matic electrical appliances, farm implements withmoving replaceable parts, all requiring continuallymore or less service. T ha t was another w orld. Mer-chants had relations with one another extending todistant places and foreign countries, and these weregoverned by a code older tha n any modern language.

The relations of the merchant to his public, how-[ 1 6 2 ]




ever, were local, and he himself was subject to com-munity pressure. Unethical practices, quicklyfound out, not only got him into trouble with hiscustomers; he found himself in disgrace with publicopinion as a citizen and might be singled out forwords of reproach even as he sat in his church pew.This happened to Robert Keayne, one of the found-ers of the Boston Town House, who, when com-plained of before his church for having overchargedhis customers, "did with tears acknowledge and be-wail his covetous heart, yet making some excuse formany of the particulars which were charged uponhim, as partly by pretense of ignorance of the trueprice of some of the wares and chiefly by being mis-led by some false principles."

Then suddenly the world is another kind of place.

Machine craf t displaces handcra ft. Industrialismand factories succeed guildism and small workshops.What was trade, concerning itself only with ex-change, becomes business, concerned also with pro-duction. A t the same time new means of tra nspo rta -tion are created. The affair between business andthe public is no longer local. I t tends to becomeanonymous, and business morality passes under thestrain which moralists used to propose as a test ofindividual behavior, asking, "As against the cer-tainty of large private gain, how would you weighthe life of an unknown man in China?"

In his dedication address at the Harvard Schoolof Business Administration, Owen D . Young ex-plained it in this manner:

"Then the area of business operations widened.[163]



THE AMERICAN OMEN

The products dealt in became highly specialized and

technical. A man could not sell a spavined horseas sound in his own community without penalty, buthe could sell a spavined motor as sound in some othercommunity, perhaps indeed halfway around theworld, without being quickly discovered at home.Even if discovered, the penalty was not so great.The sale of a spavined horse to one of his own com-munity may have been a moral delinquency. Thesale of a spavined motor to people quite unknownmay have been regarded locally as a clever piece ofbusiness. The church became increasingly power-less, and local opinion might well be not too criticalof a man who brought wealth from other places tohis home community, especially if he contributed tothe local hospital and was otherwise generous in its

distribution. In a w ord, the w idening area of busi-ness . . . outstripped all local sanctions and tendedto leave the individual free from restraints."

Greed is the most futile kind of ugliness, and has,moreover, no imagination. Business by this rule—let the buyer beware—was not only insecure and inthe long run unprofitable; it was bound to fail forprecisely the same reasons that caused piracy'sdownfall. There is much more profit in the con-tinuity of trade tha n in fraud or pillage, if youcheat people they will stop trading; if you plunderthem they will have nothing left to trade with.

W ha t next happened was inevitable. There wasno limit to the growth of business but the consumingpower of the whole world. The physical limits ofthe world were fixed, but as business grew, this[164]




world contracted. The post, the telegraph, ocean

cables and steam transportation, foreshortened thetime dimensions of space. A distant mark et ceasedto be an opportunity you could exploit with impun-ity . You were too quickly found out and published,and then you lost the trade . Moreover, you gaveyour community or your country a bad name, hurt-ing all trade, and for this you were not easily for-given a t home. Tea rs in the local church wouldnot absolve you. In foreign tra de , for example, afew shipments of shoddy goods might create againstall goods of the same national origin a buyers' prej -udice, and tha t would be the na tion's loss.

Out of all this came trade-marks, brands, stand-ards, new codes of business practice, all with a viewto creating customer confidence. Now when a Chi-cago implement maker sends a threshing machineeither to Kansas or Australia, or when a Detroitmotor-car maker sends forth an automobile to besold to whom it may concern, he sends his reputationwith it and plans beforehand to follow it with serv-ice. "Satisfaction gua ranteed" ceases to be a hol-low selling phrase. I t is a principle w ithout which

business could not progress. This intelligence nowholds throughout. When suga r was sold in barrels—and that was in our own childhood—sand in thesugar was a staple almanac joke. Who pu t it inno one ever knew. I t had to be either the grocer orthe refiner, and they accused each other. Nowsugar is sold on the refiner's reputation, in sealedpackages, and anyone proposing to put sand in itwould be examined for lunacy.

[165]



THE AMERICAN OMEN

It is clear that any of these are utilitarian mo-

tives. They pa y . They would more easily provethat an ancient pride of trade has been restored tomodern business than that any new meaning has ap-peared. T ha t is all tr u e ; it is further true tha tso far as you can examine the mind of modern busi-ness, expressing itself in codes of ethics and idealsof behavior, you will find the practical element to bealways chemically present. Well, as to tha t, thereis a school of thought to hold that the basis of anymorality is utilitarian; moral is only a mode ofconduct that somehow rewards itself. Th a t may ormay not be, and it is irrelevant. There is a newmeaning in American business. All such motives asare represented by ideas of value, quality and serv-ice may together be put aside, and still our expec-tations of business are not exhausted. W ha t moredo we expect of business?

Harvard University now confers degrees in busi-ness as she confers degrees in law, and PresidentLowell speaks of business as the oldest of arts andthe newest of professions. A few years ago onewho had referred to the profession of business would

have had some difficulty to make the meaning clear.Now everyone knows what it means and more orless of what it implies.

The distinction between a profession and a busi-ness or between a profession and a trade is notmerely that a profession is supposed to call for for-mal training and a high degree of specialized skill.That would mean only a difference of capacity oreducation. There is a much deeper difference, and

[166]




this is in the way a professional man regards his

w ork. I t m ay be a ga inful occupa tion, bu t in hisexercise of it he will be guided by considerationsother tha n those of pr iv a te gain . H e w ill feel, inthe first place, a sense of obligation to the professionitself, not by any act of his to injure its good name—th a t is, disa pp oint the pub lic's ex pecta tions of it .H e w ill be jea lous of its ideals. A nd w ith a view

of his own work and the profit thereof, he will com-bine a view of social ends.The mechanic is not expected as a mechanic to see

his w ork in the lig ht of its social imp lications. T h eengineer is. Th erefo re engineering is a profession.In this country it is, and it was not until engineer-ing had come to be a profession here that the en-gineer extended his view to include social facts.Formerly he had been content to keep a technicalfield. Now no thin g th a t concerns the scientific m an-agement of business is beyond his view, so that heincludes, along with problems of power and produc-tive method, such other problems as those of distri-bution, social benefit and human behavior.

IVThe Age of Dread—Socialism, Revolution or Self-

Conquest?

It may not have been inevitable that a professionof business should a pp ea r. I t ha s a pp ea red nowhereelse, though the need of the light it breaks into

economic darkness was universal.Not for this country alone, for al l industrial



THE AMERICAN OMEN

countries, the last third of the nineteenth centurywas an age of dread. Pessimism, foreboding, a kindof cruel cynicism, cast ominous shadows on a sceneof trium phant material achievement. By use ofmachines and science, man had integrated a powerhe apparently could not control. Certainly he didnot comprehend its meaning or foresee its conse-quences. Th is was not merely a power to ex ternal-

ize things. The increase of things was the obviousresult.What the power did unawares was to alter the

status of humankind on ea rth. Not only did itchange the environment; it created a new race—namely, that part of the population which is calledindustrial because it lives by modern industry andcould not live by any other means. In W esterncivilization this now is more than half the total pop-ulation.

Rightly to perceive the status of it, you haveonly to imagine what would happen to it if suddenlythe world in all respects were again as it was a cen-tu ry and a half ago. D o you think it would returnto the land? I t was never on the land. Moreover,

the agricultural population now existing is certainlyquite all— probably much more— than the land couldsustain without the tools, the power, the methodand all which have been supplied and continue to berenewed by industry and industrial science; and allthis, according to the supposition, would be wipedout as if it had never been. The industria l racewould perish. Tha t is w hat would happen to it, for

[ 1 6 8 ]




it is plus upon the earth and industry is its mother.Industry, including all the mechanical and sci-

entific knowledge in which it consists, is only a hun-dred an d fifty y ea rs old. I n th a t time it ha s cre-ated a new civilization, a new race, and has intro-duced cha nge as a visible cond ition of life. T h eonly certitude is cha nge. T h e only stab ility is thera te of change. Th ink w hat tha t means.

For thousands of years before, change was soslow that it could not be measured in the contrastsof one lifetime. Peop le died in the same env iron-ment in which they were born, unchanged; life asthey left it was life as they found it, even to its ma-teri a l forms. One genera tion could no t see bo th thebeginning and the completion of an important build-ing, such as a ca thedra l . Life was rep eti t ion : changewas historical.

Then suddenly man discovers the secret of power—Science is the law of it; machine is its being.Knowledge thereafter is pursued with a new in-tention. T h e intention is pra ctica l . Know ledgem ust w ork. M a n no longer beholds the sun as aheavenly body and admires its geometries in space.

He studies it cunningly as a chemistry, hoping tolearn more ab out the prop erties of m a tter. H e re-gards the earth not as a goddess to be wheedled butas a mass of matter in tension, containing hiddensources of energy that perversely evade his control.H e does no t solicit her secrets. H e demands them .Once clumsily he found a thing first, wondered at

it , spent a long time thinking what he might do[ 1 6 9 ]



THE AMERICAN OMEN

w ith it. Now his intentions run beyond his know l-

edge. F irs t he w ants something and then sets outto find it. He knows beforehand w hat he will dow ith it. Industry , the new mother, is w aitingfor it.

Sudden Advent of a Power No Law Could Tame

The tempo of existence begins to change. I tchanges more in a few years than in all past humanexperience, actually; and the rate of change is self-accelerating. The environment becomes fluid. I talters in one lifetime beyond recognition. T ry , forexample, to imagine American life without automo-biles, radios, movies, electricity. You cannot imag-ine it. Yet you need not be an old man to remem-ber tha t there was life w ithout these things. W ha ttransforms the environment and produces all changeis that power of machine and science rising higherand higher together.

Where wheat was reaped last year does an indus-tria l city stand this year? Tha t is the creativemagic of this power.Where there was a human relationship betweenmaster artisan and journeyman, is there now a classconflict between capita l and labor? Tha t is thesocial disaster of this power.

Where formerly there were slow tides in the well-being of people from cycles of fecundity in the ea rth,

now are there sudden alternations of boom and crisis,with mass unemployment as a social scourge, effects[170]




as terrible as fam ine? T h a t is the economic stu pid -

ity of this power.Where formerly there had been rich and poor,known to each other, are there now industrial s lumsa nd incredible riches, both anon y mo us? T h a t is theindifference of this same power to the spectacle ofhumani ty.

Man's nature had been projected in a grotesquemanner, both the goodness and the badness of it , byterrific magnification, and more the badness thanany goodness, because in the exercise of this powerhe conceived himself to be neither moral nor im-moral— merely dy na m ic. M oreover, he ha d saidhe did not control this pow er. H e ha d said thepower was controlled by natural laws, wherefore hewas not responsible for the results.

The last ten years of the nineteenth century werecrucial . Th oug htfu l men w ere a sk ing: " W h a t isi t worth to go on creating material wealth in thisw ay ? Is society as a w hole a ny be tter off? A re wenot beguiled by things to give ourselves into abonda ge from which there m ay be no escape? W h a tis all this running to and fro of people to get them-selves better fed and housed and clothed and enter-tained ? T he y consume a gre a t deal an d possessno thin g, not even the ir own lives. Is i t no t a nillusion th a t we a re prog ressing at al l? A re wenot selling ourselves out to a power we cannot con-trol , one that may in the end destroy us?"

It is astonishing now to remember who they wereth a t enterta ined such gloomy reflections. N ot dema -gogues and str ife bringers, for these have no re-

[ 1 7 1 ]



THE AMERICAN OMEN

flections, bu t men full grown in wisdom, seers and

elders, even to members of the United States Su-preme Court who, knowing what the law was, allthe more clearly perceived its inadequacy. TheAmerican mind at this time was heavy with fore-boding. And yet the power threa tening to enslave afree people was a creative power. W ithout it mod-ern society could not exist. I ts life was caught onthis wheel.

Capitalism, industrialism, monopolism—thesewere all embraced in the one distinctively Americanterm, big business. I t was the power of big businesspeople dreaded. The only righ ts existing in itwere rights of proprietorship; and the proprietorswere feudal minded.

There was nothing new in feudal mindedness, nor

for that matter in such ungoverned exercise of thehuman will by the few as to outrage the humanitiesof the many.

The problem lay in this, that big business wasnow met with for the first time in human experience.Nobody understood it. Big business did not under-stand itself; it possessed no history . Law s repre-senting the solutions of a pre-industrial civilizationdid not comprehend it, and of course were impotentto deal with it.

That is why society's first efforts to reach bigbusiness by law produced only worse confusion andincreased the fear that it would turn out to beuncontrollable; for as the state undertook to regu-late it against its will the struggle was invariably

disastrous to the complex rhythm of production and[ 172 1




exchange by which life was sustained. The law was

generally stupid for want of economic understand-ing in the political mind, and ineffective for thereason that while it was writing conditions werechanging. How w rite a law to an ticipate change orto comprehend change itself as a condition? If thestate should go so far as to take control of businesswith intent to administer it, instead of laying downthe law to govern it, that would be socialism; toseize it would be revolution.

V IBusiness Immemorially Stigmatized as a Vulgar Art

There was all the time an obscure complication.Why was there no sense of socialness in business?Why so far as possible was the business mentalityexcluded from pa rticipa tion in government? Whywas it conceived to be a function of government toprotect society from the power of business, as ifbusiness were minded to devour society? W ha t wasthe difference between those who represented busi-ness and these who were all other people?

None, really; only an outworn tradition of it.As business by succession represented all the de-spised activities of mankind, so it inherited a veryancient social stigma.

All the early political economists treated tradersand artisans as parasites. Exchange and produc-tion. How stra nge, since we live by these activities,

tha t they should be socially disesteemed Butthis had been immemorially true, partly no doubt[ 1 7 3 ]



THE AMERICAN OMEN

from a far Oriental taste that causes the aesthete to

despise a flower, no matter how beautiful it may be,that has kitchen associations, and partly from alingering tradition that superiority divinely existsin the warrior or hero caste, whose contempt fortraders and producers was sublime.

Sam A. Lewisohn, president of the Miami CopperCompany and an active member of the AmericanManagement Association, has an interesting essayon this subject in the August, 1927, number of theManagement Review. Business, he say s, is onlynow setting itself free from the superstition thatgentlemen may not engage in it; and to indicate thegreat age and force of the taboo he quotes a para-graph from Xenophon, the historian, written fourcenturies before Christ,

"The arts that men call vulgar," said Xenophon,"are commonly decried and are held in disesteemby the judgment of states w ith good reason. Theyutterly ruin the bodies of workers and managersalike, compelling men as they do to lead sedentarylives and huddle indoors, or in some cases to spendthe day before a fire. Then as men's bodies become

enerva ted, so their souls grow sicklier. And thesevulgar crafts involve complete absence of leisureand hinder men from social and civic life. Conse-quently, men such as these are bad friends and indif-ferent defenders of their country."

"A similar attitude," says Mr. Lewisohn, "hasprevailed till today, particularly in England," withenormous social consequences.

In the American scheme such prejudice was weak-





THE AMERICAN OMEN

socially, to be esteemed, to be eased of the ancientstigma.The other is the need of society to civilize busi-ness and so incline its power to ideals of humanmeaning.

You cannot say precisely how or when these needscame face to face in mutua l recognition. I t wasnevertheless a definite event. I t happened. No one

brought it to pass. The genius of a people wasacting.There were certain obvious movements. For one

thing, the allurements of business as against thoseof the professions became so great as to be irresist-ible. Th is was not the temptation of profit prin-cipally. There was power to be shared, and poweris man's chief fascination. Business offered occa-sions of romance, adventure, combat, notable per-sonal achievement. You may see the enticementw orking. Of the Harv a rd class of 1896, 35 percent chose business, the rest professions. Of theHarvard class 1916, 55 per cent preferred business.Also, the problems were such as to engage theunique qualities of the American mind. Men ofactive imagination wearied of the futility of de-nouncing business from without, on academic as-sumptions of what it was and should be, and beganto explore it from within, meaning to know what itreally w as. They discovered it all over aga in, out-side of their textbooks, and found here and there inbusiness an anxiety as to the outcome equal to their

own. D ifferent types of mentality began to meeton this bridge.[176]




One must not forget either the epicycle of muck-raking, from about 1900 to 1910, when business forits sins was boiled in the caldron of hot publicity.The muckrakers—those of them who were honest—were crusaders, out to destroy what they called thesystem, which was a half-mythical monster, like theTurk the knights imagined before they had foughtw ith him. The first collisions were fana tical. Butman is an animal whose mind is cheered and chas-tened by conflict. T ha t is how he came to be civ-ilized. Much was learned on both sides; mutua lrespect emerged. I t was not exactly tha t there weretwo points of view to be reconciled; rather, the ne-cessity was to combine them, for neither had beencomplete by itself.

And there was another singularly potent fact.

The degree of intelligence that could be employedin mere money-making was, after all, limited; andthere was so much of that limited kind of intelli-gence that personal distinction ceased to issue fromit. All kinds of people, polite, vulga r, even morons,could get rich. The competition was disgusting.And then w hen the rich, having acquired their w ealthin disregard of social ethics, began to seek the goodopinion of society by great benefactions and peoplerejected them on the ground that the money wastainted, there was panic at the heart of wealth.Who were the rich? Nobody. If they built palacesand private golf courses they could not get thepeople they wanted to come and play with them.W ha t was it money could not buy? Social esteem.

There was never any serious attempt to found a[ 177 1



THE AMERICAN OMEN

cult of wealth, for the reason that the pursuit of

money-making left men with nothing in commonto think of, talk about or pass their leisure with.They were related only in sense of solitude. In astate of society where wealth is dynastic it is dif-ferent, of course; here wealth was personal. Mendid not inherit i t ; they made it themselves. Hav-ing made it, what could they do with it? If theyforgot it and went on w ith the game for the game'ssake, they became only more lonely and more dread-ed by society.

Out of these melancholy reflections grew a passionon the pa r t of business to explain itself. It wouldtell the truth, and the truth should acknowledgethe past. Th us the idea of cultivating public rela-tions, which was naively organized, and then ex-

ploited by a new figure calling himself a public-relations expert. He would set business right withpublic opinion. Often he did more harm than good;otherwise, he was handicapped by common suspicion.

That idea was not enough; it was incomplete.Wha t it lacked came partly from the other side,across the bridge, and pa rtly from the new mentality

now entering business. This was the idea of aworking adjustment between the profit motive andthe social motive. As service had proved itself inthe hitherto limited sense of customer satisfaction,so service in the much higher sense of social satis-faction would pay. Here we touch one of the deepsprings in the American way of thinking. W ha tis right will pay—which is to say, it will be self-

sustaining. That is a test,[178 1








sustained interest. W hy he kept failing nobody

knew.At last he said, "I must have been wrong entirelyto think I was interested in business. I'l l look forsomething else."

The personnel management urged him to try ita little further and moved him blindly to the spark-plug department. There suddenly he became deep-ly interested in a thing nobody could have guessed.Enam eling, it was. In three years he became notonly an expert but an authority in the world onenameling.

One function of the American Council on Educa-tion is to keep and improve the contact betweenthese two w orlds. This is from the report of lastyear's annual meeting of the Council:

"Industrial cooperation was the theme of an ad-dress by Mr. J. W. Dietz, of the Western ElectricCompany. M r. D ietz represents the AmericanManagement Association, which joined the councillast fall to help develop close cooperation betweencolleges and industry in solving their common prob-lem of personnel tra ining . He first traced the evo-

lution of present business and industrial philosophyconcerning education. . . . The most interestingfeature of this growth has been the discovery ofthe importance of the individual in industry. . . .Through . . . practical experiences in helping in-dividuals to help themselves industry is learninghow to liberate individual talent and is evolving areal democratic philosophy of business. . . . Thisevolution in industry has paralleled the evolution in

[181]



THE AMERICAN OMEN

educa tion. Schoolmen also have discovered the im-

portance of the individual. Therefore, we have acommon problem in dealing with the individual. . . .W e are now ready to sta rt on a new basis. W e willreport to you significant facts concerning the re-quirements of industry. . . . We ask you in turnto report to us significant facts about personnel andtraining."

V I I IThe Word and Spirit of Service

And with all there is yet a deep trace of snobberyamong us. I t has unconscious manifestations. Oneway of its appearing is in the form of a melancholysolicitude about people lest they be demoralizedw ith prosperity. Is there not grea t danger tha t inrunning a fter things they w ill lose their souls ? Thisdrea d of ma terialism is a t bottom snobbish. Whenmaterial things were differently divided, the fewhaving much and the many very little, there wasalmost no fear that the few, by reason of theirpossessions, would lose their souls.

It appears again more pointedly as ridicule ofthe word "service." Foreigners sneer a t it. Wellenough. But some Americans sneer a t it, too, andmost of all such as have for any reason taken tothemselves the vanity of dedicating their work tosocial service, preferably to mind the morals andmanners of society or to scold it upon them. I t isas if they were saying, "Service is all right if youhave the culture to know what it means, but when

[ 1 8 2 ]




bankers and plumbers begin to talk of service it is

too common to mean anything."The word is common and much ill used, yet in itstrue meaning it may well turn out to be one of theimportant words of this century . They sneer a t itwho would be embarrassed to answer you this ques-tion: W ha t does it mean tha t once a week at mid-day, in more than two thousand cities and towns,

one hundred and twenty-five thousand men sit downtogether under a self-imposed rule of compulsoryattendance, beneath the slogan Service Above Selfand mingle their thoughts and experiences "in theeffort to reconcile the conflict between the desire forprofit for oneself and the obligation and duty toserve others"—according to the text of Rotarian-ism?

Rota ry is only one cult of service. I t has absurd-ities. So has any religion. If it were fundamentallyabsurd or insincere, its growth from a meeting offour friends in Chicago in 1905 to a group of twothousand four hundred and twelve clubs in the

United States would reduce life to the importanceof a comic str ip . I t has spread to forty other coun-

tries, all taking their charters from the Rotary In-terna tional a t Chicago. An evangel of service aboveprofit in business going forth to the world fromChicago. How little we understand it ourselves

But it is difficult for other countries to masterthe idea. At a dinner in V ienna a Viennese Ro ta rianasked an American guest what kinds of people wereRotarians in the United Sta tes. All k inds, he wastold; anybody in business subscribing to the code.

[183]



THE AMERICAN

At this the Viennese was disappointed, for there they

had been trying to make it aristocratic, open onlyto the elite of business. In Ita ly also they make tha tmistak e. In Eng la nd not quite so much, but theEnglish were the most distressed by the singing androbust genia lity. Once they had tried the singing,they liked it better.

A Belgian visiting this country on a Rotary er-rand was asked if the movement in Belgium wastouching the intimate public relations of business.As he did not understand the question, it was illus-tra ted in the simplest w ay . A small-town Americanplumber had been heard complaining of the troublehe was having with a certain job from defective ma-terial and other frustrations, and to the general talehe added, "You know I belong to Ro ta ry now, and—w ell, tha t makes you think ." The Belgian listenedattentively, with a bothered expression and shookhis head. I t was illustrated then in another w ay. AChicago Rotarian invited the whole club to lunchat his factory, with no word that anything out ofthe ordinary was to happen. When the club mem-bers arrived each one was met a t the door by a w ork-

man in overalls, and so they paired off andsa t down to lunch. Th is puzzled the Belgian evenmore.

"W e are beginning," he said. "W e have not thisspirit."

When in two illustrations the thought of serviceboth touches the quality of a plumbing job and acts

upon human relations in large industry, you mustsuppose it has gained over men's imagination theL J



THE NEW MEAN ING OF BUSINESS

a uth or ity of a spell . If th a t w ere all , one m ight

take i t provisionally as being perhaps ephemeral .But there is all the time a deep need for this ideaof service to ex ist. T h e zeal w ith w hich it is em-braced is a m easure of th a t need. As i t is imp orta ntthat men should have a sense of cultural value intheir common tasks, so it is necessary that other menof the same piece of human nature should have asense of social v alue in the ir da ily business. I t isthe same th in g. T h e need of it is a t the to p as itis at the bottom.

It is necessary for the kind of men now in controlof the steel industry to see themselves as steel pro-ducers, with competition to meet, mechanical andchemical problems to solve, costs to be considered,profits to be calculated, all as before; it is necessaryalso that they shall see the industry in its socialaspect. I t is not steel prim a rily they are produc ing.Steel is only the accidental form of a tissue stuffrequired by the w hole social orga nism . Steel m a k ingin th a t view is a process of metabolism. I t is thebreaking down of crude materials in order to bringforth forms of substance essential to the life of

society.It is a necessity of the inner mind for those nowin control of business to see that the difference be-tween good times and bad times is much more thana difference between profit and loss; it is a differ-ence betw een society w ell a nd society sick. T h u sstability becomes a social ideal, and as you workto realize it you are serving both society andprofit.

[ 1 8 5 ]



THE AMERICAN OMEN

I X

PenetrationsBusiness could not hope to become a profession

w ithout becoming also a civility. In a few yearsthere has taken place an extraordinary change inits manners and customs. As an idea of service hascome to govern its external relations, so the thoughtof let live is coming to be its interna l law . Competi-tion is perhaps keener than ever, but the old ferocityhas gone out of it. Competition is in achievement,not in killing.

A fine example of the new spirit occurred during1927 in the automobile industry . As the outsiderimagined, a drama was prepa ring. H enry Ford,having lost a great share of the low priced motorcar market to the General Motors Corporation,whose Chevrolet had overtaken his Model T, wentout of production and was recreating his industryto produce a new car, obviously with intent to re-cap ture tha t ma rket. W all Street, think ing in theold language of lethal struggle, said there wouldbe no more profit in the motor car industry until

Ford had either lost his capital or caused his com-petitors to lose theirs. I t could see nothing less thana collision of giants in mortal combat, as in thedays when merely an offensive gesture among thebehemoths of industry was enough to produce aStock Ex cha nge convulsion. In the midst of thissuspense Alfred P. Sloan, jr., president of the Gen-eral Motors Corporation—Ford's only great rival—gave an interview to the new spapers, sa y ing: " I

r 186




do not think many of us appreciate the tremendous

debt we owe to Mr. Ford, not only for his conceptionof an idea, but his s ticking to i t. . . . I f the pa stis any indication of the future, the new Ford carwill be a car that will appeal to a great mass ofpeople. . . . A ny m a nu fa cturer th a t w ill give tothe public a definite number of dollars' worth ofvalue and do it constructively and honestly will geta certain proportion of the market that belongs toth a t num ber of dolla rs. T he re is pl enty of opp or-tunity in the world today for Mr. Ford to give thepublic honest value, which of course he will do,with the result that he will sell an enormous numberof cars per year, and there is equal opportunity forGeneral Motors to give the public honest value ata higher price and likewise sell a very large num-ber of cars per year."

And Mr. Ford, when entertained with the out-sider's notion of the struggle that was coming, saidsimply : "N o , no. N othing l ike tha t . Th ey 'vego t their jo b to do a nd this is ou rs. If we ca n' tdo our job better than anybody else then somebodyelse w ill do it . T h a t ' s a ll ."

Business is no t a finished civility. N eith er isciviliza tion finished. I t is alm ost as easy to pro v eas to say that practices do often depart from thecode to which the practitioner has solemnly sub-scribed. T h a t means very l i t tle, or only th a t hu-ma n na ture is w hat we alrea dy know i t to be. W h a trem a ins is significan t. T h a t is the need of busi-ness in the sense of its own meaning to have codes,even codes higher than the average of practice.

[ 1 8 7 ]







THE AMERICAN OMEN

ings first, industrial building only as it was really

needed, public building to w ait. The suggestionwas enough. One result of it was tha t during threeyears the largest building program in the historyof our country was carried through without a run-away market in building materials.

From the trade association that enables an indus-try to see itself whole and govern itself by thei ty ra nnyof facts it is only a step to a form of apex authoritythat shall enable business entire to see itself in thesame way, as a system of reciprocal functions withone rhy thm to keep and one vision to hold. Andwhen this happens we shall begin to glimpse thetrue vistas of modern industrial society.

So, at any rate, the dread power of business istaming itself. The forces acting upon it are in-telligent selfishness, civilized perception and a feel-ing of social solidarity. I t is unimportan t to notethat it is not quite tame, nor is it necessary to provethat any of these new meanings discovered in it arecompletely established. Once the right way hasbeen found, tha t is enough. D estiny is not servedby a bump of location. W ha t it requires is a sense

of direction.

[190]



TO M O R R O W

The Question: Is Prosperity Unlimited?

T HE chronological age of this nation is just moretha n 150 years. As grea t nations go, it is

nothing. Tak ing the whole of recorded human his-

tory as one day, the American extension of it is thelast half hour. In tha t time we have created a ma-terial standard of living that is not only the highestin the w orld; so far as we know it is the highest evera ttained in the experience of the human race. I t isstill rising; and now, more than the level, it is therate of rise that concerns us.

Our annual product of divisible wealth is greaterthan our total national wealth was thirty years ago.T ha t is to say , we now consume each year more tha nour tota l possessions were then. The Bureau ofInternal Revenue finds that the income of the Ameri-can people in the year 1926 was $90,000,000,000as against $62,000,000,000 in 192 1. T ha t was anincrease of more than 40 per cent in five years. Ifthis prodigious movement continues for another tenyears we shall have abolished ordinary poverty, andwe are the first people since the expulsion to comewithin sight of that goal.

If is the theme. W ill it continue?The question in that common form has a certain

implication—namely, that prosperity is phenome-

nal. I t happens, or does not ha ppen, or stops ha p-ening. To ask if it will continue is like proposing[191]



THE AMERICAN OMEN

a question to fa te. But if you conceive prosperityto be a product of forces and ideas for which peoplethemselves are responsible, you will ask: Can they goon w ith it? Tha t is the right question. I t suggestsa line of inquiry proceeding from the facts.

Those who regard more the superficial wonderthan the meaning of American prosperity seem tofind it very difficult to reconcile a sense of its reality

as achievement with a sense of its unreality in time.All this to have happened in the last half hour ofhistory So there is a way of speaking about Amer-icans as if they possessed youth, with all the ad-vantages, perils and illusions of tha t estate. Amer-ica's coming of age is a European topic. W ha taf ter tha t? A fall pe rhaps ; the beginning of dis-illusionment.

Not very long ago the settled Old World view ofus was th is: "W ait until their free land is all takenand they begin to crowd up. Then their troubleswill begin."

The refuge of free virgin land is exhausted andwe are beginning to carry water to the desert, yetagriculture is more productive per man that everbefore. We have begun to crowd up , yet densityappears to work no prejudice upon well-being, andit is the lot of the least favored that has been mostimproved.

Now it is the world's opinion that our troubleswill begin when our prosperity breaks. I t is thisecstasy of prosperity that holds us together in a

kind of superficial amity, above antagonisms thatare fundamental and reckless of problems we have[192]



TOMORROW

yet to face. W e are w alking until now in a juv e-nile dream.

Here are two thoughts in a state of confusion—namely, the thought of youth in people as a biolog-ical fact and the thought of an inevitable period toprogress, together, of course, with the vanity offoretelling.

It is a temptation to see in the rise and fall of

nations an analogy to the life pattern of the indi-vidual. A nation is born , grows up , grows old, be-comes senile and falls. This is probably no morethan historical fable. If instead of nations you saya people, a culture, or a civilization, you producethe same impression of cycle, period, succession,which seems to account for all th a t ha ppens. Youtnay then think of people that are old and peoplethat are young, or establish their age, as Spenglerdoes, by the phase their works are in, and life isrepresented as an endless repetition, governed byno principle of progress.

This doctrine is pessimistic; it is also very con-soling to people in certa in circumstances. I t solacedthe Greeks as they regarded the spectacle of theirown decline. They had lived and were old. Allthings had happened aga in and again. Even ifthe world should dissolve in space, it would be onlyto re-create itself aga in in the same cha racter. TheRoman barbarians, having youth and illusions, didnot know this. But was old age the reason for thefall of Greece?

As the earth ages and the race continues, how canthere be youth in one people and age in another?[193]





TOMORROW

and expiation, and the only right use of knowledge is

to prepare man for his exit .The modern idea of progress, much as we take

it for gra nte d, is quite new . I t was only ab out 300years ago that i t began to take shape at a l l , andso fa r as we know , it ha d never ex isted before inthe hum an mind. I t ap pea red in E uro pe in theseventeenth century, not complete, very vague at

first, and for a long time it was regarded as a faithto be embraced not as a fact that could be proved.Ev en y et it is often so reg a rded . Someone is con-tinually asking if the sum of happiness has beenincreased and what we know about l ife more thanthe ancients knew.

Nevertheless, the idea of progress has clarified.I t implies first of a ll a sense of direction . T ow a rdw hat? To w a rd perfec ting the condit ions of hum anex istence. I t supposes life to possess some va lue ofits own, here and now, and the world to be a hab-itable place. A nd i t s t ipulates th a t know ledge shallbe ma de to serve the a r t of living. Ess entia lly itis optimistic and so prefers that interpretation ofhistory which conceives man to be slowly advancing.

If there is progress, naturally i t wil l not be equalin all directions a t once. I t is more likely th a t onepeople a t a t ime w ill lead. He nce con trasts. A ndit may be that the phenomenon of lethary seemingto fall upon people here and there in place and timeis first a necessity of the historian and otherwise am a tter of con trast . T he re is now a strong co ntra stbetween the state of common well-being in Europeand the prosp eri ty of Am erica. B ut the s ta nda rds

[ 1 9 5 ]



THE AMERICAN OMEN

of living in Europe are actually higher than was

ever the case before. I t is not tha t Euro pe hasfallen back. I t is tha t the Americans have ad-vanced.

People may advance with no theory of progress.The Greeks did. An increase of wealth is in everycase a condition. Thucydides, tracing the historyof Greek civilization, was bound to conclude that thekey to it was the increase of na tional w ealth. But webegin now to distinguish between wealth as fortuneand wealth as idea. W ealth from conquest, discov-ery or invention may be only a rise in fortune, andif that is what it is, then it will presently be ex-hausted. Certainly if there is no conviction of socialprogress to govern its use it will not be distributedwith systematic anxiety for the common well-being,

which is to say, it will not create sustained prosper-ity . In the historic case w ealth in tha t chara cter iseither destroyed by the mob or surrendered to theenemy by a populace tha t has no sense of pa rticipa -tion in its benefits and therefore no incentive to de-fend it. Thus, limitations upon the increase ofwealth as fortune and sudden periods to its existence.

I l lTwo Fears

But need there be either limitation or period tow ealth as idea? This is to speak of w ealth which,w hether old or new in form, certainly is new in mean-ing. I t is to speak of material things increasingly

[196]



TOMORROW

produced and proportiona lly divided under a convic-

tion of social progress. W ealth in such cha racter isthe pursuit of people who believe that life has somefurther business in this world and cannot imaginethat to neglect it is a way to acquire merit in anyworld that may come after this one.

Almost one would say, as the strength of this doc-trine is among us, so is the degree of American pros-

perity . Tha t is not to say the idea of progress be-longs to us. I t is a common possession of W esterncivilization. But wholly to possess the ima gina tionit requires a casteless social structure. T ha t w ashere. Tw o other conditions were satisfied—namely,optimism as the dominant mentality and a strongpreference for the practical use of knowledge.

These conditions and qualities are durable. Soalso are the ways of thinking and feeling that haveproduced an American science of management, anAmerican profession of business, an American the-ory of proportional division, liberating the forces ofproduction in our economic scheme. The way isproved.

Nevertheless, there is a kind of vague anxietyamong us. People have advanced before, sometimesvery fast, as if each step forward accelerated theirspeed; then suddenly they have stopped and losttheir momentum for no exact cause, unless it was th a tthey had no idea of social progress as a principle andwere simply on a rise of fortune.

Assume that with us the idea is complete, even

tha t we a re the first to possess it completely, and still,[197]



THE AMERICAN OMEN

is there not some ha zard in the pace? I t has been

terrific. Can we keep it? If so, for how long? Isprogressive prosperity at this rate a reality?In these searchings of the horizon you may rec-

ognize two fears; and then, having discovered whatthey are, you will be struck by the fact that onelogically annuls the other. They cannot both betrue.

One is the fear that we may be touching the ex-treme limits of machine craft, method and scienceas means whereby until now we have increased theproductive power of labor and thus multiplied theannual output of wealth in a consistent and prodi-gious manner.

The other is a foreboding that the power of themachine will tu rn out to be uncontrollable. I t willoverwhelm us a t la st. The multiplication of thingsunder a system of mass production will reach a pointat which we shall be unable either to consume or sellour surplus ou tput. Then the catastrophe. D epres-sion, unemployment, social distress and disrhythm asphenomena of overproduction, on a scale perhapsnever before witnessed.

The first is a rationa l anxiety . The other isfounded on a riddle. But if one fear is valid, theother is false. If there is any reason to suppose th a twe have nearly exhausted the scientific possibilities ofmass production, it would be silly to fear overpro-duction; conversely, if there is danger of overpro-duction, then it is absurd to worry as to whether ornot the wizardry of machine craft, method andscience is at its apex.

[198]



TOMORROW

Nevertheless, these two fears lie side by side and

give rise to the question: Can we go on?Since there is no denying the riddle, it may bewell to take that fear first.

IV

Overproduction Classically Regarded as a Menace

Overproduction is a word that makes no sensewhatever to people who have yet nowhere near allthey need or want; on the other side, its meaning isquite clear to the industrialist who has on his handsmore goods than he can sell and may be ruined bythem. Such discrepan cy of view na tur a ll y did notescape the scrutiny of the economists. Long ago theybegan to say there was no such thing as overproduc-t ion ; the t rouble w as underconsumption. T h a tmight be so; yet there were the crises all the same.And in each case the fact was that industry hadruined its profit by producing more goods thanpeople could bu y . If th a t w as not ov erproduction,what was i t?

The economists said the confusion wTas from thin k -

ing of genera l ov erproduction. Certainly therecould be no such ab surdit}^ I t w as only th a t certa inthings had been excessively produced in relation tothe tota l of thin gs. Nev ertheless, these certa inthings were desirable things and the wanting of themin gen era l ha d never been satisfied. N ex t it w asperceived that when the industrialist said he had

produced more goods than he could sell he meantonly to say more th a n could be sold a t a profit . A t[ 1 9 9 ]



THE AMERICAN OMEN

this point the whole economic subject comes open.

W ha t is profit? W ha t is value? W ha t is price?Having wrestled with the slippery monster ofoverproduction until their minds were sore, it wasnot uncommon for the economists to propose that hebe chained. One hundred yea rs ago, before ra il-roads, telegraph, electric power or gas engines, oneSismondi, a famous economist, believed the stateshould intervene to retard production and check in-vention because wealth, increasing so fast, had be-come unmanageable, and in any case it was notw orth the crises. A few years la ter John Stua rtMill, expounder of classical economic doctrine inEngland, doubted whether mechanical inventionshad any social value whatever and despaired of arational way with such problems as that of appar-ently an overproduction of divisible wealth in aworld yet so full of poverty, until society had re-verted to a stationary state, with no fetish of prog-ress.

Such was the form of the riddle and such was theconfusion of thought among economists, some blank-ly despairing and some upholding the doctrine of

cycles, down to the year 1914. A t tha t time therewere only five great industrial nations, called sur-plus nations because they had a surplus of machine-made goods to sell—three in Europe, one in Amer-ica, one in Asia. And these five, w ith the wholeworld to be their market, were continually passingfrom one crisis to another in consequence of havingoverproduced things of use and va lue. Businessgenerally was conducted on the assumption that

[200]



TOMORROW

crises were inevitable and periodic. There was nohelp for it.

During the war the industrial capacity of thosefive nations was enormously increased. T ha t is notall. Since the w ar, machine craft has spread to thefour ends of the ea rth. Th is is for tw o reasons. Thew ar left, among other lessons, the one th a t w hen forceis abroad in the world a nation without machine

power of its own is helpless and contemptible. T h a tis the political reason. The machine becomes a sym-bol of strength and liberation to millions of peoplewho had never thought of it before. The otherreason derives from example. Which were the rich-est nations? Those, of course, tha t were most highlyindustrialized, exporting manufactured goods in ex-change for food and raw materials. Therefore in-dustrialism was the open road to national wealth.

So now, moved by thoughts of power, independ-ence and profit, people that formerly were the prin-cipal customers of the five great surplus nationsare founding industries of their own, with intent notonly to supply themselves but to compete in foreigntrade for gain. Ita ly is bent upon an industrialcareer and is seriously competing in motors and tex-tiles with England, Germany, France and Belgium.Nex t Poland has the same ambition. China is doingit, notably in textiles, and tha t is why she is resolvedto get control of her tariff ga tes. Ja pa n now goes toE gy p t looking for a place to sell cotton goods becausethe Chinese market is increasingly self-supplied.

But Egypt is England's market, and the Englishtextile trade is groa ning. India is vowed to be-[ 2 0 1 ]



THE AMERICAN OMEN

come industrially independent. Instead of sellingraw cotton to Manchester and buying it back inthe form of cloth, she will spin and weave her ownraw material and is beginning to export cottongoods. Australia, instead of selling raw hides,prefers to make shoes for export, and is doing it.Brazil, where there was almost no industry beforethe war, now is self-contained in a long list of man-

ufa ctured goods. Irela nd , the Union of SouthAfrica, Greece, Spain—they are all fostering infantindustry.

One at a time, they come to the wonder of quan-tity and find the law of it, which is an inverse re-la tion of cost to volume. The more of a sta ndardthing you can produce, the cheaper it is to makeand the lower the price at which you can afford tosell it. Thus competition tends to become fixed instaple machine products rather than in thingsunique and na tura lly less competitive. Alrea dythere are more ships on the seas than can be madeto pay; yet nations that can afford it are buildingnew fleets in which to send forth their goods, forth a t also is in the example.

Now as you look about the world you see in everydirection what is called excess industrial capacity.Machine power has multiplied faster than buyingpow er. The five grea t industrial nations tha t werethe principal suppliers before the war—England,France, Germany, the United States and Japan—have the capacity to flood the markets of the world

with goods; and there are, besides, all these othernations becoming industrialized for purposes bothr 2 2 1



TOMORROW

of self-containment and competition. If there wasany profit in it the world's output of industrialwealth could be increased perhaps one-half in thirtydays and doubled in six months; but if the powerof production were so released prices everywherewould collapse. Again the calamity of overproduc-tion. Generally the effort is to restra in production,especially in Europe, by such means as cartels, in-

ternational trusts and agreements to partition mar-kets.

Its Other Meaning

W ell, there is the riddle aga in. The need of theworld is to increase its wealth; at the same time thisapparent economic necessity to limit the productionof it.

In this country, though actual production runsvery high, still there is an excess capacity againstwhich one sets the symbol X because nobody knowshow grea t it is. Some estimate it conservatively a t25 per cent; others say it may be 50 per cent. Inthe motor industry it is definitely accounted for.There is capacity enough to produce 9,000,000 mo-tor cars a year; there is a market for not more thanhalf th a t number. The excess capacity in tha t caseis 100 per cent.

The existence of all this excess capacity is arestraint upon prices and therefore a kind of hor-

izontal limitation upon profits. If the demand in-creases, the ou tput rises. The tendency is for[203 ]



THE AMERICAN OMEN

prices to fall and profits to shrink. A new phra se

has appeared in the world of business—profitless in-dustry . The volume is la rge and rising ; the profittends to decline, and there is constant dread ofsuch overproduction as will swallow up profit en-tirely.

Europe's contemplation of the prospect takes agloomy tu rn . In Ita ly , for exam ple, you will betold that notwithstanding their handicaps, such asthe want of native fuel and ore and fibers, the Ital-ians will succeed in the competition because thepeople will endure a low standa rd of living. Thisis a characteristic way of Old World thinking.That nation whose people will perform the mostwork for the least wage will triumph in the indus-tria l struggle. Thu s, pa rallel, a tremendous in-crease in the world's power of wealth and a world-wide competition in pov erty Is it an illusion?

We understand, of course, that the Europeansare obsessed by a fa llacy . Low w ages and low stand-ards of living do not spell low labor costs. W ehave proved that high wages and high standards ofliving not only are compatible with but do actually

fav or, low labor costs. I t is all a matter of increas-ing the productivity of labor. Therefore we saythe European thought is w rong, and so it is. Butwe have an enormous fallacy of our own, derivingfrom the same riddle. Regard it.

We are lending to foreign countries, principallyEuro pe , as much as two billions a y ear, and from this

lending comes the delusion of a thriving foreignf 2 4]



TOMORROW

trade . In reality a grea t deal of it is not trade a t

all. Tra de is exchange. When, systematically, youlend your customers out of your till the money withwhich they buy your goods, tha t is not trade . Youare neither selling nor exchanging. You are simplylending.

If one attacks this delusion, how is one answered?In this manner one is answ ered: "Unless we lend

them the money they cannot buy our goods. Ifthey cannot buy our goods, what shall we do withour surplus? I t is true, we may never be repa id.We may be obliged to treat our foreign lending as apermanent investment abroad, actually unrepayable.Nevertheless, in this way we do find an outlet forthe surplus product of our machines. At any costour machines must be kept going at ideal capacity,for if we begin to idle them, up will go the costs ofproduction and goods will become dea rer. Not onlythat; buying power at the same time will fall, be-cause people who tend the machines will be disem-ployed. Better even to give our surplus away tha nto slow down our industrial mechanism."

What a preposterous dilemma—that a people

whose own wants are still far from a state of fullsatisfaction should nevertheless be obliged to lendor give away a large proportion of their annualproduct of wealth just to be rid of it, for unlessthey are rid of it quickly it will assume the diabol-ical form of overproduction and react upon themin a disastrous manner.

Yet this passes among us for sane economic doc-2 0 5



THE AMERICAN OMEN

trine. As a logical projection of it, one may imagine

a time to come when we shall have to sink our indus-trial surplus in the sea or invent a Moloch to con-sume it.

We know better. Guided only by our fa ith inthe idea of human progress, we have stumbled be-yond doctrine and logic into a region of commonsense. We have found the road to unlimited pros-perity, but with no light of theory, so that althoughwe are moving in the right direction, still we are insemidarkness.

More than any other people, we do consume ourown surplus. T ha t is why we are prosperous, whyour standard of living rises. W e do not consume a llof it. We have carried the riddle along w ith us, notrealizing that in the body of our experience there

is already enough truth to reduce its terms toreason.First take overproduction in the reverse aspect

of under consumption. W hy is it ever the case th a tpeople are unable to buy the wealth they have pro-duced by their collective exertions? They have cre-a ted it, yet they cannot enjoy it. There it lies, unsal-

able, a liability on the hands of business and a pro-vocation to those whose labor is locked up in it.Seeing that what people lack is the money to buyit, the solution seems very simple to a naive type ofmind. Increase the volume of money. But th a tis no cure a t all. You might prin t money and handit around and all that would happen would be arise in prices.

[206 1



TOMORROW

V I

Two Reasons W hy People M ay Be Unable to Con-sume What They Produce

There is no hope of cure until you have properlydiagnosed, the disease. Underconsumption is aneffect from one or both of two causes—namely, first,that the distribution of national income as wages,

profits and interest is not such as to represent aproportional division of the annual product ofwealth through the whole body of society; or, sec-ond, that too much of the annual product of divis-ible wealth is reserved for capital purposes.

Wealth devoted to capital purposes takes the formof more industrial capacity—that is, more plant,more machines, more power—and if you go too farwith this, adding up capacity when there is alreadyan excess of it, you withhold from society the meanswherewith it might otherwise have satisfied a greatnumber of immediate wants.

Such statements have unfortunately a very ab-stract sound. I t is a weakness of the economic lan-guage. Imagine the simplest case. A farmer who

already has all the barn space he can use decidesnevertheless to build a second barn, thinking hemay some time need it or that building is a goodway to save money. The cost of the barn w ill beone-third of his year's income, and because he de-votes that part of his income to this unnecessarycapital purpose, his family is obliged to do withoutsuch things as a motor car, a radio set, silk stock-ings and electric lights. There you have a true

[ 207 ]



THE AMERICAN OMEN

case of underconsumption. The ba rn is an additionto pla nt and equipment; but the money locked up init had better been spent to increase the family's en-joym ent of life. You have on one hand an increaseof capacity to excess—barn capacity—and on theother hand a minus demand for automobiles, radiosets, silks and electrical appliances.

We have by no means solved the problem of un-

derconsumption, but we have discovered the twocauses and now attack them.Here for the first time in the world appears a

theory of proportional wages, which means such adistribution of the nation's total annual income aswill enable labor to participate proportionately inthe increase of divisible w ealth. I t displaces al lformer wage theories. The last and most advancedtheory before it was that wages should be calculatedon the cost of living. T ha t was to maintain a cer-tain high standard of living.

The proportional theory goes much beyond that.I t contemplates no certain standa rd of living. W ha tit intends is that the wage earner's way of livingshall rise as the national output of wealth is in-creased. Under no other theory is it possible forpeople to enjoy their own surplus. If wages are socalculated as to insure a fixed standard of livingand then wealth goes on increasing, what shall bedone w ith the increase? I t cannot be sold to thosewhose labor has contributed to the production of it,because, with wages based on the cost-of-living the-

ory to provide a certain standard of living, the buy-ing power of labor will be stationary.1 [ 208 ]



TOMORROW

From the idea of a proportional wage distribu-tion it is only a step to the idea of proportionalprofits. One in fact entails the other. There can-not be a proportional distribution of the annualincome, in the form of w ages and a disproportiona lallotment of it in the form of profits.

There is left the other cause of underconsumption—namely, that too large a proportion of the an-

nual product of wealth is devoted to capital pur-poses, like the unnecessary barn. This also we area ttack ing w ith original though t. T ha t trend ofthinking among us which puts emphasis on use andconsumption, or the utmost satisfaction of humanwants as an end, over wealth regarded as a posses-sion, is illustra ted in a new idiom of speech. Whereformerly we spoke always of capital when we meantsuch things as factories, machines, power plants andraw materials, now more and more we say, inclu-sively, producer goods. And we understand tha tproducer goods also are to be consumed and haveno other use. Machines, structures , ra ilroads, mills,ships, all forms of capital, are consumed in the proc-ess of creating the kind of wealth we call consumer

goods. The only difference between divisible andindivisible wealth is just this difference in the useof things. They a re all to be consumed—consumergoods immediately, producer goods ultimately.

As consumers, all of us, we know a great dealabout the state of consumer goods, whether they arescarce or plenty , dear or cheap. Ev ery ba rgain we

make tells us something about it. We know verymuch less about the state of producer goods—that[ 209 ]



THE AMERICAN OMEN

is, whether they are increasing or decreasing and at

w hat ra te in either case. And until very recentlyproducers themselves, meaning the managers of in-dustry, knew very little about the state of producergoods in general. Ea ch separate industry mightknow a good deal about its own and little or nothingof conditions for industry as a whole.

Recall again the unnecessary ba rn. Tha t repre-

sented a use of income for what we had formerlycalled a cap ital purpose. But you see also tha t thebarn properly comes within the definition of pro-ducer goods. Nobody eats a ba rn. A ba rn is some-thing a farmer needs in order to produce whatpeople do ea t. The effect of building the ba rnwas to deprive the family of its proper enjoyments.That is precisely the effect upon society in generalfrom increasing producer goods too fast or unneces-sarily, and therein appears the importance of abalance between the proportion of a nation's annualincome that must be reserved for capital purposesand the proportion that may be set free for purposesof immediate division and enjoyment.

It was only five or six years ago that Mr. Hoover

began to talk of underconsumption as a socialliability. We were sav ing too much and spendingtoo little. W ha t was the good of developing ourpower to create wealth faster than we diffused theenjoyment of it? Too little of the annual incomewas distributed and too much was taking the formof indivisible producer goods, with two consequences.

Excess industrial capacity was created and consump-tion was restrained.[210]



TOMORROW

Since then Foster and Catchings, of the PollakFoundation for Economic Research, have made sev-eral important contributions to a new literature,uniquely American, on the sub ject: W hy , w iththe wants of society still unsatisfied, does industryfrom time to time slow down for want of consumerbuy ing power? Their conclusion is tha t overpro-duction—still regarded in the reverse aspect of

underconsumption—is owing mainly to the fact thatthe means of production do not expand in any or-derly, preconceived manner, but by sudden impulse,like the farmer's impulse to build the unnecessarybarn, with spasmodic effect upon the buying powerof society.

The idea is tak ing ground. Presently it will strikethe imagination, and when it does we shall see thatto progress in wealth by a series of violent wavelikemovements is w asteful and unintelligent. A newresponsibility will be added to business—namely,to see that a balance is kept between the power ofproduction and the means of enjoyment. Thus theproblem of underconsumption will be solved.

How the balance shall be kept is a matter thatmay be left to our genius for tria l and error. Theprincipal difficulties belong to vision and adminis-tra tion. I t will be necessary, certa inly , for business tobe able to see itself whole in rela tion to entire society.Exactly suited to this purpose, as if there had beensome instinctive foreknowledge of its use, we havebeen developing a system of new sense orga ns. Thesemay be called our statistical eyes. They are set in

[211]



THE AMERICAN OMEN

different bodies, such as trade associations, cham-bers of commerce, the Bureau of the Census, theDepartment of Commerce and various private or-ganizations that furnish weekly and monthly indexnumbers, graphs and tables to show the state ofproduction in separate industries, barometrics oft rade, the strength of demand, the trend of prices,the level of wages, the buying power of money, the

ra te of national saving and what disposition is mak-ing of the annual income in certain significant di-rections, as in building.

Nowhere else in the world does business receiveand give information as it does here. It has not beenpossible in other countries to develop the statisticalsense organs to a high point for the reason tha t busi-ness will not surrender the data about itself. Onlyrecently a census of production in Great Britain,which in any case would have been three or fouryears old when it was finished, practically failed forwant of da ta . Business refused to supply the fig-ures.

American business was like that twenty-five yearsago. Its affairs were conducted in separate yards,

each one

jealously guarding its own

secrets. And

its secrets were not so important, after all. Therewere no statistical records, no diagrams, no charts—no way whatever whereby business could visualizeitself. A business possessing a record of its owncustomers was very ra re. There was no exchangeof ideas or information. How far away that t imeseems

[ ]



TOMORROW

V IIOverproduction Regarded as the Price of Greater

PlentyWith all this to the sign of progress, yet the rid-

dle is not resolved. Underconsumption is, after a ll,only one aspect of the problem of overproduction.Suppose that between the power of production andthe means of enjoyment an equilibrium has at lastbeen established. The rhy thm is perfect. There isno such thing as a surplus of divisible wealth whichthose who have produced it a re unable to buy. Th isis ideal. But now there is the danger tha t societywill tend to become static; and if there is not thatdanger, then there is the certainty still of overpro-duction.

W ha t is it tha t happens? A textile m anufacturerdiscovers a way to double his output with no increaseof labor. T ha t means he has found a way to reducehis costs and improve his profit. Na tura lly he w illdouble his outpu t. A shoe manufacturer makesa similar discovery and so acts accordingly. Therea re like occurrences in va rious industries. W ithw hat result? More or less suddenly there is an ab-normal supply of goods, beyond the normal growthof demand. Prices fall. M anufacturers who havenot changed their methods have to shut up . La boris let out ; its buy ing power is impaired. Aga in tha told chain of distressing social and economic conse-quences from an increase in the output of actualwealth.

[213 ]



THE AMERICAN OMEN

It was at this point that Sismondi prayed for theintervention of the state to retard the increase ofwealth and check the wild onrush of invention.

Consider, however, that the consequences, no mat-te r how severe, a re immediate and tempora ry . Ul-timately, from the cheapening of goods the use ofthem expands, demand rises, rhythm is restored andsociety is richer tha n before. How a re these conse-quences to be regarded? W ha t do they represent?The answer is fa irly obvious. They represent theprice we pay—a price nobody can think hownot to pay—for the continuous readjustment ofcosts downward.

What has been supposed in the illustration is ac-tually all the time taking place in modern industry,else there would be no cheapening of goods and no

progressive enjoyment of w ealth. Ta ke any grea tindustry and see how the members of it fall intothree groups. One gro up , normally the largest ofthe three, is mak ing no profit. A middle group isma king ends meet and no more. The third group ,almost inva riably the smallest, is making a handsomeprofit. I t is so generally true tha t the no-profit-makers and the bare-end-meeters together constitutethe majority, that you are bound to wonder if nor-mally there is any profit in industry as a whole.Probably not, just as probably there is no profit inagricul ture as a whole. The profit makers in theminority group are the low-cost producers. The no-profit-makers a re the high-cost producers. W ha tthey stand for ia obsolescence.

No one could put it more tersely than Henry[214]



TOMORROW

Ford. He was asked to say what he understood over-production to mean."Overproduction," he said, "means something outof da te. Tha t's all it means."

"Something out of date would be a thing obso-lete m either price or Kind is tha t i t? "

Th is he studied for an insta nt, and said: "Ofcourse you could overproduce buggies at any price.

Nobody wants them at all."Recently an entire industry presented itself atthe Department of Commerce Clinic, asking forsomeone to tell it what it should do to be saved.Profit had departed from it and the cause of thiswas overproduction. The assistant chief physiciantook it in for examination. True, the industry as awhole was in a bad w ay and profitless. Neverthe-less, some members of it were doing very w ell. Therewere others who had changed neither their methodsnor their products since before the w ar. Yet these,all in x state of obsolescence, were those who com-plained most of overproduction. They could show,of course, tha t the industry was over developed. It scapacity was excessive. Therefore, merely to keepgoing, they were bound to produce a surplus. W ha tcould not be proved was that there was any excessof up-to-date capacity, efficiently handled, with lowcosts of production. Merely, there had accumulatedin that industry an abnormal amount of obsoles-cence.

From this the question: Who is to blame for the

surplus? Is it the high-cost producers who cling totheir old methods and keep going until their capitalT 215 1



THE AMERICAN OMEN

is gone or the low-cost producers who come in with

new methods? There is the same question in agri-cul ture. Is it the one-mule cotton grow er in theold South or the machine farmer in Texas who makesthe cotton surplus? The competition of the Tex astractor farmer with his low costs is very hard uponthe cotton growers of the old South and sometimesreduces them to distress. W ha t then? There can

be no doubt as to which contributes more to thew ealth of society. All you can say is tha t progressis not without cost.

The high-cost producer is losing his capita l. Andsurplus, or overproduction, considered in this light,is not what a t first it seems to be. W ha t it real lyrepresents is the destruction of antiquated capital.The realistic view is to say the sooner it is lost thebetter.

As concerning the immediate social consequences,which in the instance may be very harrow ing, we a p-pea r to have no new thought about them. But theyare greatly mitigated in this country by two facts.

The first is tha t as you solve the problem of under-consumption by a theory of proportional division,

the rhythm that may be broken by a sudden increasein the supply of cheapened goods is much soonerrestored. There is a t all times a tremendous buy ingpower in reserve; thus demand quickly overtakes anew supply.

The other fact is that as we destroy capital fasterthan any other people in the world, so at a corre-sponding rate we create new capital in place of it,even fa ster tha n we destroy it, so tha t the tota l body

[216]



TOMORROW

of it is always growing. In the motor-car industry ,for example, there is hardly a trace of the capitalth a t existed fifteen years ago. A few old w alls,perhaps; all the rest has disappeared, some of it lost,some of it purposefully destroyed to make way fornew. In order to produce a new motor car to suc-ceed the obsolete Model T, the Ford Motor Companyalone in six months probably junked more capital

in the form of machines and equipment than themotor-car industry of all Europe had scrapped inten years.

The American motor industry is doing this allthe time. T ha t is one reason why it is the la rgestsingle body of dynamic capita l in the w orld. I t isthe grea t symbol of our economic philosophy. In noother state of society had it been possible, certainlynot where the ownership of industry is dynastic andfeudal.

V I I IThe Second Fear Annuls the First

And what was the other fear—the one before theriddle? You may have forgotten. I t was tha t wehad begun perhaps to touch the effective limits ofmachine power and method. If tha t were tru e, fur-ther progress in wealth would be at a much slowerr a t e ; the curve of our ecstasy would begin tofall.

To be rid of this fear, one needs only to change

the po int of view. If the first sign of wisdom is aconviction of ignorance, the beginning of efficiency[217]



THE AMERICAN OMEN

is a sense of not possessing it. Hard ly have we

passed that point.Judged by other people's standards, we are indus-tria lly efficient. There is a worldwide legend of i t,just as before the war there was a legend of Germanefficiency, which turned out to be something we hadimagined about them. They had no word for itthemselves, nor have they one yet. They were only

intensive. Efficiency requires imagina tion, and theywere not imaginative. Judged by any ideal stand-ard of our own, our practice at its best is imperfectand at its worst so bad that one wonders how we canbe prosperous at all in spite of such appalling wasteof labor, time and material.

Efficiency, as now we perceive it, is a new dimen-sion of thought. We have been exploring it foronly a short time. Five years ago a motor companyadvertised the fact that its material traveled 3.5miles from the point at which it entered the factoryto the point a t which a car stood completed. I tadvertised this. Now a motor company boastingthat its material made a long journey through thefactory would be supposed to have fallen into thehands of luna tics. Anyone would know better. D is-tance is time and time is cost.

Owing partly to the kind of mentality that wentinto it to begin with, and partly to the fact thatthere were no traditions of how, the motor-car in-dustry is our highest example of efficiency. Yet therule is that where you find it at its best, there also

you find a management so disgusted with the wasteand awkwardness it still sees in its own practice that[ 2 1 8 ]



TOMORROW

it wants to tear the whole layout down to the ground

and sta rt a ll over. W ha t is more, it w ill.Obsolescence is from inertia of the mind. And thisdisease, you will find, is the basic trouble in the low-wage industries tha t still wish for cheap foreign laborto keep down their costs, complain of overproductionand exist in a state of chronic liability. A poor in-dustry is a sick industry . I t is governed by men

who say the nature of their product or the condi-tions surrounding them make it impossible for themto do what the motor-car makers have done.

If you could look at a motor car without knowingwhat had been done with it, or how it was produced,you would say it was of all industrial products theone least likely ever to be acted upon successfullyby the principles of mass production. Comparingit with a brick, a pair of shoes, a bolt of cloth ora piece of furniture, you would say that any of thesethings might be more easily submitted to intensivemultiple manufacture than an automobile, whichperhaps forever would have to be made one at atime, slowly. Then when you see how motor carsactually are made—first the automatic multiplica-

tion of parts from patterns and then the bringingtogether of the parts with such precision of time andaction that from the moment an automobile beginsto take shape it picks up its wheels, its engine, itstransmission, its body, and so on, as it moves andnever stops until it is finished—seeing this, youmight say, "Yes, but how does this method apply to

a brick tha t has no pa rts ?"How does it apply to glass that has no more parts[219]



THE AMERICAN OMEN

tha n a brick? Henry Ford asked tha t question.

He thought of making his own glass, and asked:"Why can't glass be made by a continuous processlike an automobile?"

He was laughed at by the glass makers. A manwho thought glass and automobiles were similarthin gs But they are similar things— that is, theyare both artifacts derived from raw materials. Nowthe glass makers come to look at his glass plant, thefirst of its kind in the world, where the sand andother materials spill out of a chute upon the hearthof a furnace and never for one instant stop movinguntil the glass is polished and cold and stands onedge before the inspector.

I X

Efficiency as a New DimensionMass production, you see, is not a method. I t

is an idea. The method is w hat will be determinedby the na ture of the problem in a specific case. Theidea is to move materials through the process ofmanufacture with the least possible expenditure oftime and labor. Not only is tha t idea applicable toany industry, and to agriculture as well; the limitsof it have never yet in any case been touched. More-over, it is only beginning to be understood. Take bu ta few examples of the spread between relative effi-ciency and obsolescence in the important industries.

"Most brickmaking plants in the United Statestoday," says Ethelbert Stewart, Commissioner of La-

bor Statistics, "are using precisely the same method[220]



TOMORROW

as that used in Egypt with Hebrew slave labor at

the time Moses led the great brickyard strike, whichI suppose the Egyptian br ick manufacturers con-sidered a failure, since the strikers' places were ta-ken by s tr ike breakers ."

He finds expenditure of human energy per thou-sand bricks to be in one plant four man hours andin an other p la n t 18.5 m an hou rs. T h u s in the bet-ter plant the productivity of labor is more thanthree times as g re a t as in the other. H e found inone Chicago plant a machine delivering 50,000bricks an hour and calculated that if the whole brickindustry were so equipped it could release 80 percent of its workers.

In the i ron industry, the Department of Laborfinds there are blast furnaces that require elevenhours of human labor to make a ton of pig iron andbla st furnaces th a t require only one ho ur. T he rethe productivity of labor in one case is eleven timesw ha t it is in the other. T he re a re shoe factorieswhere the output is two pairs of shoes per workerper day and factories where the output per workerpe r da y is tw elve p a irs . T he re a re sawmills w here

the output per man hour is fifteen board feet andothers w here it is 35 0 feet. T her e a re flour millswith an output of 9000 barrels of flour and otherflour mills with an output of 2500 barrels, per manper year.

In every case the obsolete plants pay lower wagesand have higher labor costs than the efficient plants.

Coal m ining is one of the sick indu stries. T h eoutput of coal per man is very much higher here

[ 2 2 1 ]



THE AMERICAN OMEN

than in England, and the American miner's wages

for tha t reason are higher. Com paring our coal in-dustry with England's, we may think it fairly effi-cient. Testing it by our own common sense, we knowhow inefficient it is. The D epartment of La bor saysthat one-quarter of the best American mines, highlyequipped and working 306 days a year, could pro-duce all the coal we could use and sell, with only 60per cent of the miners now engaged.

"In other words," it says, "250,000 men in thisindustry must be out of work all the time, whichmeans that the entire 700,000 are being wasted one-third of the time."

There was a question to be answered. W ere weapproaching the end?

From the most casual survey of American indus-

try one is obliged to say that the idea of efficiencyis only beginning to seize our imagination. I t hasyet very far to go.

Until now the competition between manual laborand machine power has survived. There is still tha tcompetition in other countries, and to challenge itin principle causes the utmost bewilderment. A E u-

ropean manufacturer, seeing in this country anoperation performed by machines that in his plantis done by hand, inquires the cost of the machine.Then he say s:

"But, you see, in my case wages are so low thathand labor is ju st as cheap. In a ny event, the dif-ference is so small in favor of the machine that itmight take me five or six years to save the cost ofit. Therefore it would not pa y ."

[222 ]





THE AMERICAN OMEN

thing, and there is a field in which enormous diffi-culties a re still to be overcome. From a study ofpay-roll data for industries employing 11,000,000wage earners, the Department of Labor concludesthat instability of employment, seasonal idleness,turnover, drifting and such causes, all more or lessremovable, entail an annual waste representing thelabor of 1,750,000 men, in normally good times.

Hitherto a condition of fluctuating employment hasbeen tak en to be inevitable. A t least, no one wasto blame for it.

Now occurs the thought that continuity of em-ployment is one of the great responsibilities of busi-ness. W hy tak e such pains to increase the produc-tivity of labor while it is employed, thereby savingit, and then let it run to waste wholesale in unem-ployment? There is the average annua l productiv-ity of labor as a whole to be considered; and that,of course, is reduced by unemployment, with exactlythe same effect upon the buying power of societyas if its productivity had been limited in any otherw ay. Progress in w ealth is reta rded; anything tha tchecks the continuous flow of wealth last and first isbad for business. People cannot consume unlessthey also produce. The idleness of 1,750,000 menfor want of stable employment is a load upon societyand a liability to business. The only excuse for itis that the idea of efficiency has not yet extended tothe ultimate problem of business, which is to solvethe terms of its universal relation to life.

There are many signs that it will do this, not somuch because it proposes to do it as because it isT 224 1



TOMORROW

bound to do it, from an impulse taking strength inits own na ture . A fact we seem continually to slightis that business is no longer trade, pursued primar-ily for gain by a minority cohort with certain moreor less common characteristics. W e used to speakof the instinct for trade, and not without justifica-tion. I t was by no means the highest human tra it.

Modern business is a new condition of life. I t

directly absorbs much more than one-half, possiblytwo-thirds, of all the genius, imagination, intelli-gence and greatness of spirit produced by society.Leadership, passing over to it, wears down the an-cient ba rrier. Where should leadership be foundif not where the dominant qualities of a people are?

The war called it forth in a surprising manner.The function of business in any war before had beenth a t of purvey or. Then for the first time the lifeof war, like the life of peace, assumed primarily aneconomic aspect, with problems as to which states-men, generals and military bureaus were quite help-less.

When the war was over, the dollar-a-year menreturned to business, and now you will find them,one in a banking office who for his services as ad-ministrator in some foreign country whose languagehe did not know has been decorated by three gov-ernments, another quietly pursuing the professionof engineer who with more power than any czarpartitioned the sinews of war among the Allied com-batants, or another in retired circumstances whoheld in one hand the entire economic power of Amer-ica and with the other moved food, munitions and

[225]



THE AMERICAN OMEN

raw materials to and fro in the earth as if it were

a two-foot chessboard, and so on—hundreds ofthem.This new power of leadership strikes downward.

W e are beginning to understand it. There was afine illustration of it in the ha ndling of the Missis-sippi River disaster. I t is M r. Hoover's story .He and his staff were w orking ahead of the flood.

Firs t they picked the towns of refuge. Then theythought of someone, Y or Z, who knew the people ineach of those towns. They called Y or Z on thetelephone asking, "Who is the man in X town bestqualified to take command in a great emergency?"Having got a name, they called it on the telephone,and said to the person who acknowledged it : "Youwill receive in your town 5000 homeless people infour days. Go to the local bank for money. Yourchecks will be honored there. Appoint a committeewith arbitrary power to do anything that is neces-sary . Build some ba rracks. You will need a com-misariat, doctors, nurses, and so on. . . . All right?. . . Good-bye."

Only one town in ninety-one failed. The poin t

is that the natural local leaders upon whom the re-sponsibility fell in this sudden manner were in everycase men of business, w ith here a nd there a ty pe th a tmight be called the business farmer.

Once it was, not long ago, that the power of busi-ness had an ominous meaning, for it was increasing-ly a power over the means of life, having within it

no controlling sense of social responsibility. W iththat sense rising, the view deepens. What busi-[226 1



TOMORROW

ness now seeks is power over itself, with intent todiscipline the anarchic impulse. As it conquers theexploiting motive it will discover the principleswhereby the law of competition is reconciled withwhat Bellamy called complex mutual dependence.Each for himself and. each for the other.

What follows is scientific control of the economiccircumstance. More and more w hat happens will

have been intended. Then we shall not ask whatthe business augury is or whether we are happilyto receive another year of prosperity, as if we werenavigating an economic sea in a sailing ship, withheadway, leeway or disaster a dispensation of weath-er. We shall ask, instead, what the program i s; itwill be published beforehand as a common plan, sothat everybody may know what is expected, andthere will be a statistical score, as simple as theweekly report of freight car loadings or the dailystanding of base ball clubs, to show the rate andscale of performance. How strange it will thenseem, that people once referred the state of prosper-ity to a theory of cycles, or supposed their materialprogress was conditioned by a wriggling line on a

sheet of quadruled paper showing the level of moneyreserves in banksT ha t is to say , all as may be. I t is rationa lly

possible. Certainly there is no longer any reasonin nature why the production and exchange ofwealth need be limited otherwise than by human in-tention.

[ 227 ]



MACHINE PEOPLE

Man's Fear of Machines s Dread of Himself

T H E spirit of man is in his machines. He seesit and is afraid. So also his spir it was in py r-

amids and temples. Yet these evoke simple feel-ings of awe and admiration whereas the machine in-spires a sentiment of dread. Where lies tha t dif-ference ?

The wonder of a pyramid is monumental. Thewonder of a temple is beauty . But the wonder ofmachine is function. There is the difference.

The machine is the will of man engined. It isthe free extension of himself in a new dimension andthat is the dimension of force.

Having as out of a dream raised up this force, thespirit of him externalized, and seeing how for goodor evil it may be multiplied by itself w ithout end,the conjurer has moments of terror. It is not themachine he fears, though he says it is.

First and last he has believed in many jealous

gods, all inha bitan ts of this dimension. H e has notyet met one of them face to face, but as he stands onthe rim of knowledge, where l ight ends, gropingfor more elemental facts, and remembers that heknows only how force acts and nothing at all aboutwhat it is—then, well, nothing tha t might happenwould grea tly surprise him. There is tha t.

But much more it is that he fears his own nature.The history of the human spirit is tha t often it

[228 ]



MACHINE PEOPLE

sees the better way and takes the worse. As the

spirit is so must the machine be. Demon spirit,demon machine. Thus there will be good and evilmachines and some good and some evil in any ofthem. The machine itself is not terrify ing. W ha tpossesses it may be. This is man afraid of himself.

Fea r moves the whole theme aga inst science. Anyone of its many variations may be so referred back.

And that few are entirely free of it may be inferredfrom the fact that protagonists of science them-selves contribute to the fear theme, as in the follow-ing expression, which is representative:

"Already the applications of science to humanaffairs have far outrun the ability of man to usethem wisely. The engineer has provided agenciesof incalculable value in time of peace, but they arealso endowed with prodigious powers of destructionwhich can be loosed in time of w ar. Unless we solvethe problems encountered in man himself the outlookis dark, indeed, and it may even be questionedwhether our civilization will endure."

This was said recently in an atmosphere of sci-ence by one of a board of trustees named by the

National Academy of Sciences to collect and ad-minister a national fund for the support of researchin pure science. The speaker subscribed to thethought that "science carries within it not only theseeds of its own destruction but the seeds of itsown salvation." Therefore, he said he was optimis-tic ; he proposed toward salvation more knowledge,especially scientific knowledge of human behaviour.His optimism, contemplating a social organism with

[ 229 ]



THE AMERICAN OMEN

million-minded knowledge and power, appears to rest

on the assumption that knowledge increases wisdom.Yet the problem, as he himself stated it, was thatknowledge had outrun wisdom.

Every other variety of the theme is pessimistic.Religion, advancing the claims of faith against rea-son, complains of scientism that it absorbs man'sidea of God and leaves him spiritua lly desolate. I ttakes away his beautiful myths, the inner truth ofthem along with the tale; it has made him to re-gard himself as an ascending beast, responsible tohis wayward will; it has delivered him in bondageto his senses and reason, with all of life that pro-ceeds from the heart left out and no way to satisfythe transcendental cravings of the spirit.

Among ardent religionists and modern mysticsare those who propose a science holiday for so longas may be necessary to restore the lost prestige ofthe soul. Some would make it forever, w ishing formankind a return to the middle ages when faith andreason were reconciled in one body of knowledgeand huma n thought reached to heaven. Yet eventhese will speak of a science of religion, a science of

morals, a science of ethics; and their science holidaywould tu rn out to be a selective suppression. Theywould doubtless wish to keep alive the sciences thatpertain to hygiene and medicine and perhaps asmuch of the science of biology as could be limitedto plant and animal life. They would admit astron-omy and orthodox philosophy as belonging to thetradition of classical lea rning. Mathema tics, tha t

[230]



MACHINE PEOPLE

once had equal rights in th a t estate, would have firstto be purified because it has latterly been a powerfultool in the hands of the profane. Zones free andforbidden would be necessary in chemistry, a littleof which is needful to medicine. This of courseleads to hopeless confusion.

I t is not science they are ta lk ing about. Onlycertain effects of science are deemed sinister, or

such new knowledge as tends to increase man'secstasy of self-extension in power on earth.The foreboding of the scientist is that with too

much knowledge man may be tempted to destroy hisciviliza tion. W ha t will save him is wisdom. Relig-ion's foreboding is that with too much knowledgehe will destroy his soul. What can save him isfaith.

It is true that knowledge will alter man's ways ofthink ing about na ture and God. T ha t has nothingwhatever to do with his religious feeling, which,though it may be intellectualized, has not its sourcein the intellect and is probably, as a scientific fact,an instinct. Grea t scientists have been believers andnon-believers, always in the individual case for areason tha t could not be given. Fa ra da y who cap-tured and delivered to inventive mankind the forceof electro-magnetism, belonged to a small sect thathired no preachers; and if the world where his famewas had w anted to find him on Sunda y it would havehad to look for him in the pulpit of a little churchin some unheard-of village, preaching a sermon on

the soul. [ 2 3 1 ]



THE AMERICAN OMEN

Steinmetz, a recent worker in the field opened by

Faraday, once drew a map to represent the idea ofsequence in the wave phenomena of cosmic energyand so divided it into octaves that it suggested thekey board of an orga n. Other scientists, seeingit, wished copies of it, and so it got scatteredaround.

A man at the top of a great private research lab-

oratory accidentally turns up his copy in the wayof looking for something else and thinks you maybe interested. Beneath the cha rt is a typed tex t,pasted on.

"Did Steinmetz write this?""No," he says. " I did tha t."This is the pasted-on text:

The Keyboard of God's Organ.

(Over sixty octaves.)

The flash of lightning.The roll of thunder,The wonder worker, electricity,The far-flung wireless waves,The searcher for truth, light,The conserver of life, heat,The X-rays, with their gift for divining the unseen—Are stops under the control of the master organist.Never out of tune,Perfect harmony,No interference,No friction,The energy of the universe.Why doubt God's existence.

[232 ]



MACHINE PEOPLE

I I

All W heels Do Run by Faith

Some heavenly creatures once came calling onEzekiel in a vision. Each one of them had fourfaces—cherub, lion, ox and. eagle—and they were inother details wonderful; but Ezekiel particularly no-ticed their celestial motor vehicle. The rims of its

wheels were high and dreadful, set with eyes, and:"The appearance of the wheels and their work waslike unto the color of a beryl, and they four had onelikeness; and their appearance and their work wasas it were a wheel in the middle of a w heel. Whenthey went they went upon their four sides, and theyturned not when they went."

He concluded that the spirit of the creatures wasin the wheels.

You would hardly expect a prophet to seize at aglance the physical principle of a four-sided wheelthat seemed to go on its four sides without turning.T ha t principle may yet be discovered. If this everhappens we shall call it science. But with tha t kindof wheel in his hands, though he were moving the

traffic of the world by means of it, still would thetrue scientist admit rationally what is stated emo-tionally in the negro spiritual:

Ezekiel saw the wheelWay up in the middle of the air.Little wheel run by faith,Big wheel run by the grace of God,Way up in the middle of the air.

[ 233 1



THE AMERICAN OMEN

Here, besides the rare aesthetic perception to make

poetical use of a mechanical image, is a profoundtru th . Ev ery wheel we have is a wheel w ithin awheel. Ev ery wheel tha t runs does run by fa ith,though you take it to be only the faith implicitamong us tha t the b ig cosmic wheel will run true andnot fail. And what makes the big wheel run a t allnobody knows.

Do you know what happens when you turn theswitch to light the house or cook the food or startthe electric motor? A t the power station they knowmany more facts about it tha n you know. In thelaboratory they have some scientific theories aboutit. But a t last, really , no one knows any more aboutthis force of electro-magnetism now touching ourevery-day existence at every point than you knowyourself when you turn the switch. You know whatwill happen . You know what tha t force will do.You do not know what it is, nor does anyone elseknow.

Certainly no one would hold that science is moreunreligious tha n a rt , especially modern a rt . Yetart supports the case of religion against science.

This it does on aesthetic ground. The machine ismak ing the world ugly . Machine civilization withits standards and methods of mass production issunk in idolatry of a fabulous materialism, power,w ealth, success. W here is culture in this vulgarscheme? Where is na ture?

But what art fears is that its own world of re-membered images, ideas and relations will be swal-lowed up; and it cannot imagine how to create an-

[ 234 ]



MACHINE PEOPLE

other tha t will contain this new rea lity . The world

of machine civilization is set with strange forms.These are not symbols. They a re direct facts, un-haunted by human experience. They have no an-alogies, no associations, no pa st. They exist forthe first time originally in the present; thereforethey recall nothing. T ha t is why they are notsymbols. Their meaning is not in them; it is out-side of them, in their functions. There is no arttradition of how these machine forms may be seizedby the aesthetic sense and made into art forms,nor of how people may be related to them in feeling.

Ruth gleaning in the fields of Boaz stands in asimple three-fold relation to the universe, to theea rth, to her man. She may be perceived aestheti-cally . A rt can tell her something she would not

otherwise know about herself.Ruth in three ounces of rayon minding a machinefor capital—how may she be perceived?

T ha t was life and a rt included it. This is lifeand a rt excludes it. Man interrogating the ser-pent is art material; man interrogating the atomictable is not. A rt has nothing to tell him about him-self. I t does not see him aesthetically, which is theonly way of seeing that can justify art; and there-fore it is probable tha t he will not see a rt . Nev-ertheless he will see many wonders.

Philosophy, too, has a case against scientism.This is high altitude. Philosophy once containedphysical science and then set it off as a satellite.Now the moon behaves in the manner of a planet,expecting other bodies to revolve around it.[235]



THE AMERICAN OMEN

Between philosophy and science, nevertheless, is

a working relation tha t cannot be broken. Whenscience cannot get any further with facts alone andis blocked for want of new ideas it takes its facts tophilosophy asking for another hypothesis to fitthem. Philosophy proposes a new hypothesis. I tmay or not be true, but science, returning with itto the field of experiment, says, "Let's behaveas if it were true and see w hat will happen. A t leastwe may be able to knock down some new facts."T ha t is generally what happens. True or false, thehypothesis is a weapon for prizing new facts out ofthe unknown. Fa cts are required to prove it eithertrue or false. The facts tha t prove it to be untruemay be strange enough to suggest a new hypothesis,and so the procedure is.

All of this, says philosophy, is quite righ t. T ha tis as the relation should be. But when science be-comes impatient with the rate of progress in theregion of pure thought, where the hypothesis shouldcome from, and enters it to find one on its own ac-count, it very often forgets what it came for andends by inventing a whole new system of thought,generalized from physical facts; and that is notits right business at all.

It is the affair of science, says philosophy, toexplore the cause of phenomena, whereas it is theaffair of philosophy to consider the cause of cause.It is not for science to comprehend philosophy, sincephilosophy comprehends everything—the whole,that is to say—and of the whole, science for all its

luminosity is merely one pa rt . Philosophy compre-[236 ]



MACHINE PEOPLE

hends also religion, art, ethics, first cause, the pur-

pose of life and the meaning of meaning. Science,not knowing its own limitations, is likely to betrayman with the delusion that an account of the uni-verse in physical terms is an account of everythingin it, including himself. T ha t is a disaster philos-ophy dreads.

Here is dangerous walking for the common layperson. H e shall w atch his step. Yet he may trus thimself to recognize feeling in any language, and itis with feeling that philosophy argues the matter.For this purpose it takes anything it likes from re-ligion, art or ethics, as it rightly may do, since itcomprehends them; and then as it comprehends sci-ence also it is in a position to scold science outof its own tex t. I t remembers many things about

science that science itself would just as soon forget.There was a great scientist who reduced the uni-verse to a mechanism, and sa id: "In this systemthere is no need of a God." H e was righ t unaw ares.There was no need of a God in his mechanism forthe reason, as it turned out, that there was no suchmechanism. I t would work ma thematically , but notin any other w ay. Fa cts destroyed it. M athe-matics is the scientific mind's tool of precision. Yetmore than once with that tool speculative science hasproved the existence of a non-existent universe.

Philosophy accuses science moreover of idolatryand confusion. I t has been heard w orshipping agod named ether that had promised to explain allthe mysteries of the physical w orld. Th is god was

invisible; his existence could not be proved. But[237j



THE AMERICAN OMEN

science said his existence was not at all important

as a fact, only as an idea, and it proposed to be-have as if the idea were true. Proposing, therefore,to found a physical doctrine on a metaphysical as-sumption. At another time science has seriouslyconsidered matter to be nothing but a series of holesin an ima ginary medium. Firs t it tries to explainthe unknown by the known; then it proposes to ex-plain the known by the unknown.

There is a rational solution that occurs even tothe stupidity of the lay person. The world is toocomplicated. T ha t seems to be the trouble. So whynot take it that Berkeley and Hobbes were right.One reasoned away matter; the other reasoned awaymind. In th a t case there is neither mind nor m atter,neither materiality nor immateriality. There is

nothing left to explain. Nothing exists. Then sci-ence perhaps could make a world fit for humanunderstanding.

Now science, injured in its feelings, will be heardfrom in its own case. In the first pla ce, if it werestupid it would not have this immense authority tobe challenged. There is a certain structure. A tthe top is speculative science. There the mind isintellectually naive, purposefully. I t will tak e any -thing to be true, or one and the same thing to beboth true and untrue or neither true nor untrue.This is the mind tha t may sa y : "W e know by oursenses tha t the w orld is round. But let us supposeit is flat and look at it tha t w ay ." I t is perhaps un-fortunate that what happens in this region of

thought becomes audible. No matter. From a[ 238 1



MACHINE PEOPLE

beam of light passing for the thousand and first timethrough a prism, from the chance contact of twopieces of substance, or from one instant of irrationalcuriosity, may come a fact that will open suddenlya whole vista of strange knowledge.

This is discovery, and there is no technic of it.Gali leo in a cathedral , gazing at the swinginglamps, perhaps because he was bored, discovered the

law of the pendulu m. T his w as of no pra ctica l usew hatever. M erely a fa ct. T he n someone inventeda clock, all but one troublesome deta il. How couldthe revolutions of its w heels be reg ul a ted? A h, thependulum

Many years ago a physicis t named La Grangemight have been seen in his laboratory playing witha stretched string that had been loaded with t inyw eights a t equal interva ls. H e w ould hav e saidhe was trying to make a mathematical analysis ofthe behav iour of mecha nically v ibr a ting bodies. H enoted certain facts of phenomena, gave them largenames and reduced them to a generalization thathad no relat ion whatever to anything real that peo-ple then ha d ever imagined w a nting. L a ter the

telephone w as invented. People did w an t th a t; a ndhaving found how convenient it was in the neighbor-hood they w ished to extend it over w ide a rea s. T h enthe problem of how to transmit electrical vibrationslong distances over a tin y w ire. In the search fora solution of this problem La Grange's work wasremembered. I n view of an alogies discovered sincehis time between the behaviour of mechanically andelectrically vibrating bodies, what did those little

[ 239 ]



THE AMERICAN OMEN

w eights on his str ing suggest? A device now calledthe loading coil. W ithout loading coils a t equal in-tervals along a telephone wire, behaving as thelittle weights behaved on La Grange's string, longdistance telephony would be practically impossible.

I l l

Exploring the Absolute Sea

The pure scientist, fishing in the absolute sea,is not an inventor. In the field of invention isthe practical science worker with a problem given.Something is wanted, like a machine to tell time.H e may have it all but the pendulum. If the lawof the pendulum has not been discovered he is stuck.It sometimes happens that he will then go fishinghimself beyond the rim of knowledge with miracu-lous luck. Nevertheless, discovery for its own sak e,above the plane of invention, has the use of increas-ing the stock and variety of pure fact-knowledge,which is to increase the probability that the partic-ular fact the inventor needs to solve his problemwill exist when he wants it, like the law of thependulum.

The modern idea of true scientific method is thatnew facts and the theories that correlate them shallcontinually descend into the hands of the practicalscience workers who make the crude, experimentalmodels. I t is on their benches you see the wonderof idea in the anguish of trial reality, spirit com-

manding matter and endowing it with form, purposeand function. The work of these is handed down to[ 24 1



MACHINE PEOPLE

the field of technology, w here the technician, the en-gineer and at last the mechanic bring the economicreality to pass.

The whole sequence lies in the history of thedynamo. An Ita lia n scientist named Galvani in179S happened to get a piece of iron and. a piece ofcopper into the leg of a dead frog, both at the sametime. The leg jerked. Thereupon he announced

excitedly to the scientific world that he had discov-ered the source of electricity in a frog's leg. An-other scientist named Volta said that was ridicu-lous ; it couldn't be in the frog's leg; it must be inthe conjunction of frog's leg, iron and copper.

From this controversy came the true discoverythat two metals immersed in acid produce an electriccurrent. There, then, was the ba ttery , which a tonce became the wonder toy of every scientific lab-ora tory . Quite by accident it was discovered nex tthat a wire charged with current from a battery hadpower to magnetize a near-by piece of iron. Thismeant that something jumped from the charged wireinto the dead iron.

Thus scientific electrical knowledge stood untilone day it occurred to Faraday to say, "If some-thing jumps from a charged wire into a piece ofiron to magnetize it, why won't something jumpfrom a piece of magnetized iron into an unchargedw ire?" He made a coil of w ire and a ttached theends of it to a galvanometer, which was an instru-ment Galvani had invented to register electric cur-

ren t. The purpose of the galvanometer was to showif anything jumped from the magnetized piece of[ 2 4 1 ]





MACHINE PEOPLE

that energy be led away by wire from where it was

produced to any distant point at which you wishedto use it?Thus was added the economic link to complete a

chain of events by which now all the electric powerin the world may be traced back to the jerk of adead frog's leg under the eye of naive scientificcuriosity.

All of this is science in its own case. And if itwere a body with a mechanism where the feelingsought to be it might rest its case on the evidence andsay no more. But it belongs to life; therefore it iscontroversial and has a spirit of reto rt. Reasoncan no more let faith lie than faith can let reasonlie.

Science boasts of having delivered man from dark-ness and superstition. Only ten generations agofaith burned a man for saying the earth revolvedaround the sun. Galileo, who founded experimentalscience with a thud by dropping two bodies of une-qual weight from the top of the leaning tower ofPisa to prove that the sacred Aristotle had blun-dered—he was imprisoned in his old age, not pre-

cisely for that impious act but because, besides, heheld with Bruno that the sun was the center of theuniverse; and although he recanted, still he was im-prisoned lest he should say it aga in. Even longafter this the pioneers of modern science wrote downtheir discoveries in cypher, backward, upside downand mirror-wise, fearing the fate of heretics. Someof these writings, notably those of Leonardo deVinci, perhaps the most gifted experimental scien-

[ 243 1



THE AMERICAN OMEN

tist since Archimedes, are not wholly deciphered to

this da y . The litera ture of science current— thelatest book or notable speech—will still recite theroll of martyrs.

Then there are those, not themselves scientists,who lisp the language of science with literary skilland say such stupid things as that philosophy isthe pursuit of infantile minds and cannot survivethe facts. This makes only a sense of scandal.W ha t is a fact? The simplest fact, if pursued, leadsscience to what it calls an explanatory crisis, asevery scientist will admit.

That science has moods of intolerance and some-times forgets the distinction between dogma andhypothesis is merely a weakness that keeps it kin.But of all its reactions the one most human is tothe taunt that in this scientific age human progress,if it may be called progress, is forward, not upward.To this science answers it is not a scientific age.Witness Dayton, Tennessee, or the fact that in thir-teen states people have tried to pass laws forbiddingthe evolution of man to be taught in public schoolsover the myth of special creation.

As it regards the material universe the scientificmind conceives order—complete, perfect and sub-lime order—and is moved thereby to awe and rev-erence, often to a state of deep religious feeling, withor w ithout a specific God image. Then it turns toregard human society and conceives it to be a bed-lam, a muddle, torn by disharmonies and uproar.And this it accounts for, saying the material uni-verse is the work of nature and therefore scientific;

[ 244 ]



MACHINE PEOPLE

but man made society, and society is artificial and

unscientific.As to the conclusion, it is probably w rong. So-ciety and everything belonging to it must have ex-isted from the beginning as a potential within na-ture. Society, therefore, is a na tura l thing. If not—if society is an artificiality and a disorder—thennature contained the potentiality of artificiality

and disorder, wherefore her own order is not perfect.But in any case, here are certain interesting impli-cations. Does the theory of evolution hold for thespecies man only up to the point at which he be-came a social animal and began to make society?If so, the law of evolution is not absolute, since itbreaks; if not, and the law of evolution holds forsociety, how is it that a law of nature has produced

a result, namely society, which the scientific mindcalls unscientific?

IV

No Way to Go Back

If at this point the question were moved it would

be: Shall man go back to an age of faith tha t heremembers or shall he move on through doubt anduproar, pursuing the idea of a scientific common-w ealth ?

The mystic who says back has the advantage ofbeing positive. Science says forward in knowledgeand all will be well, provided the problem of manhimself can be solved.

It seems a terrible dilemma; nevertheless it is sup-[245]



THE AMERICAN OMEN

posed tha t man has this choice to make. The sci-

entific mind supposes it . In a brillia nt little bookentitled "Daedalus, or Science and the Future,"J. B. S. Haldane, of Cambridge University, stopsto consider whether the pursuit of scientific knowl-edge is likely to be abandoned. " I t is after a ll ,"he says, "a very recent form of human activity anda sufficiently universal protest of mankind wouldbe able to arrest it even now."

He may have been thinking back to Archimedeswho, on discovering the law of the lever, exulted:"Give me whereon to stand and I will move theea rth ." M any years before Christ the Greeks andAlexandrians imagined cog wheels, pinions, pulleys,steam power, pumps, pneumatic and hydraulic ma-chines, and had enough sound knowledge of thephysical and mechanical sciences among them tohave begun at that time the true scientific age.

W ha t they lacked was the economic motive. TheRomans who succeeded them had no feeling forscience; they had only military and political in-stinct. After the rule of Romans came the rule offa ith. Man moved his whole treasure to heaven;

and forbade himself on pain of torture and deathto rediscover what the Greeks knew two thousandyears before.

The possibility that this history may be repeatedis a theatrica l thought. The imagination delightsto play with it. However, a crucial fact of differ-ence is left out. Proba bly because it had no eco-nomic motive behind it, or for want of time, orfor any reason that may be, the fact is that Greek

[246]



MACHINE PEOPLE

science did not enter the scheme of life. They go t

no further with it than theory, description andmodel. Though the whole of it were lost or forgottenlife would go on as before and on the same scaleas before. But if this knowledge had been used tomultiply the means of life—steam power for en-gines, industrial machines and transportation in-stead of turning toys and swinging temple doorswith it—then people had been no more likely to loseor forget it than to lose the rude art of agricultureby which they lived. Popula tion would have in-creased enormously, the phenomena of industrialempire would have appeared in the Mediterraneanpart of the world more than twenty centuries ago,and all modern history would be very different.

There was never any absolute necessity for themachine. Life could exist w ithout it, only, of courseon a much smaller tapestry . I t is use creates thenecessity for the machine. The scientific use ofphysical and mechanical knowledge to increase boththe agricultural and the industrial means of life hasmade it possible in our time to sustain on the eartha population that could not otherwise exist, that

would otherwise have perished before it was born.Th is is a fact we keep forgetting. I t is the fact th a trelates human life to science in a vital sense.

There is no way to go back.A wish to live again in the past is very old. The

future is unknown, the present is turmoil, but thepast may be anything we like to think it was—afine old ruin in romantic perspective, perfected bythe imagination, and we live in it as in our dreams.

[247 1



THE AMERICAN OMEN

Man has always had in him the myth of a golden

age, a time to go back to, a yearning for return . Allof this revolt against science, this fear of the ma-chine, this notion that knowledge may be leadingcivilization to an abyss, may be and probably isreferable to that ancient, infantile myth survivingunawares in the modern mentality.

No rational being would exchange the whole of

the present for the whole of the past, only parts ofone for the other. Well, th a t is impossible. Nor canany troublesome part of the present be got rid ofby the alternative, sometimes suggested, of standingstill. The science holiday aga in.

It is no more possible to stop than it is to goback . W hy this is true is not so easily stated. Aprinciple of acceleration acts. W e know it and feelit, our everyday calculations include it, and yet itis difficult to say w hat it is. Progress, though i twere progress forward only and not upward, mustbe a t an accelera ting ra te . Knowledge increases inthat manner; so does wanting.

Epochs and ages we speak of in a way to makebelieve we understa nd them. W e know much more

about the present than about any past age or epoch,and yet how little we understand the presentA way to see his own works and interpret them to

himself is one of man's great needs and he is notsufficiently aw are of it. When he is he will find theinstruments. W ha t they will be like we do notknow, any more than it was known beforehand what

the telescope or microscope would be like.[248]



MACHINE PEOPLE

One of the classics of science is the story of Her-schel, a musician whose interest in the heavens ledhim to become an astronom er. He had first to mas-ter mathematics. Then, as he could not afford tobuy a telescope, he resolved to make one; and forthis purpose he had to master the science of opticsand the technology of instrument ma king. From amusical performance he would rush back to his

lodgings to resume the labor of grinding and pol-ishing reflecting mirrors by haiid. Af ter hundredsof failures he produced a telescope equal to any inthe world and discovered the planet Uranus.

Such zeal is common among workers in the tra-dition of science. W ays therefore have been foundto search the remoteness of the heavens to discoverthe past of many things, to apprehend the unknownand to see the invisible, each way with its methodor science.

But where is any science of the present? Weknow more about the movements of astronomicalbodies than about the play of everyday economicforces. There is a way whereby man may contem-plate his own thoughts and yet no proper or deeply

considered way whereby he may contemplate hisown works and refer their significance to his under-standing. Philosophical contemplation of the uni-verse as a mechanism is a grand activity of the m ind;the machine that has appeared suddenly in the earthis an object of momentous meaning, and the philo-sophical mind is loath to perceive it; the aesthetic

mind will not. [249]



THE AMERICAN OM EN

V

The Incorruptible Image of Truth

The machine will rew ard contemplation. T ry it.Any machine will do—the small gasolene engine onone's own premises. There is much to be learnedfrom bringing the mind to dwell upon it.

The history of the human mind is there. Circles,

true angles and the revolving wheel first presentedthemselves to the intuition of man as symbols ofmy stery and superna tura l pow er. T ha t is to say ,they were seized by acts of religious and aestheticperception. Rea lity has also tha t way of disclosingitself long before the facts are found out. Manyyears before it could be proved scientifically atall the Greeks deduced the sphericity of the earthfrom their aesthetic sense. The sphere was theideal form of a solid; therefore the ea rth wasround.

The science of experimental mechanics, raisingsuch forms as the circle, the angle and the wheelto the power of function, was an achievement of thereason, w orking practically .

Invisible in the machine are phy sical laws. Mandid not invent these law s. They a re inherent in theuniverse. But he had to discover the facts and thenformulate them as laws, and this was the work of thespeculative faculty, working in abstraction.

How strange that the machine you are lookingat, acting by what is proved and proving that by

which it acts, should be a form of truth the signs ofwhich first appeared in superstitious rites of magic[250]



MACHINE PEOPLE

and had then to be pursued through millenniums of

error. Ev en this ma y not y et be its w hole rea lity .V ery l ikely not . W h a t pervers i ty is erro r Alw aysthe w rong w ay first an d the r ig ht w ay last . Inevery case the right way, once we find it, is so directand obvious that to have missed it seems the strang-est fact of all.

So there many be many ways of arr iving at t ruth.To the reali ty now acting in machine forms, rel i-gion, art, philosophy and science have all contrib-uted by moving knowledge one step at a time, withno sense of direction, no goal in sight, and yet stead-i ly hitherw ard. T he spectacle of the hum an mindexerting itself blindly, erringly, victoriously, tobring about a condition it cannot foresee is utterlymysterious to the reason.

And why suppose there is or ever will be a periodto th a t m y stery? F or al l the know ledge we thinkwe hav e, a child ga z ing a t the machine m ay askquestions that will bring us at once to the end of it.T a k e them to be physical questions. W h a t ha ppensinside the cy linder of the engine? A ga s m ix ture —air and gasolene—is first compressed, then receivesa spark and explodes, driving the piston downward.B u t w hy does it sometimes kno ck? T h a t questionexhausts our knowledge.

Searching for the answer a physicist in the Bu-rea u of Sta nda rds a t W as hington ma y be found a tthe beautiful play of exploding gases in a soapbubble. If you ask him w hat he is doing he w illsay he is making thermodynamic studies of gaseousexplosive reactions. T h a t means he w ants to know

[ 2 5 1 ]



THE AMERICAN OMEN

the answer to the child's question. Why does the

gasolene engine sometimes knock?In the research laboratory of a great automobilecorporation the approach is from a different angle.The reason for the knock is in the fuel, namely, gas-olene. Well then, w hat is gasolene? They breakgasolene down to its parts, burn each part sep-ara tely, and know w hat tha t stuff is. Then theyspread out before them the atomic table and beginto search for an organic compound which added togasolene will produce a more favorable happeningin the engine cylinder. They have no idea w hat itwill be; they know only what they want it to do,and there is no certa inty th a t it exists. Now, thenumber of organic compounds that may be con-structed from the atomic table, given an inch oftype each for description, would fill millions o£books. For all pra ctica l purposes the number isinfinite. Therefore when you go looking for a cer-tain compound, cha racter unknown tha t must do acertain thing, you are looking for one grain ofsand on the ocean beach. I t is impossible to searchthe beach one gra in a t a time. You can only pick

up a grain here and another there and examine ithopefully. So they explore the atomic table, try ingthis compound and then tha t one, and af ter fouryears they are discouraged. They have found com-pounds that are better than gasolene and compoundsthat are worse, and each one is marked on the table.So there is a point here and another there and oneaway up near the top, hundreds of them, in fact,but there is no drift to follow and they are sick of

[252]



MACHINE PEOPLE

just fumbling around. Then one man with noth-ing else to do sticks pegs into those points on theflat atomic map—an inch peg for gasolene, a half-inch peg for a compound half as good as gasolene,a longer peg for one a little better, and so on. Stillhe discerns nothing. But the boss scientist happensto see this peg field at a certain angle of vision andsays: " I think I see a w arp across the tops of

those pegs. Look. D on 't you see they tend slight-ly to grow ta ller in tha t direction to the upper lef t?"The others look as he is looking. They see it too.There is a warp in this third dimension and it givesthem for the first time a sense of direction. Fol-lowing the warp they come to something nobody hadever thought of—a lead compound which, added togasolene, does create a more favorable happeningin the engine cylinder.

The knock is the machine's own protest againsterror. The evil in itself is not serious. But thesound is one we ha te to hear. Sound of error. Thisis significant. W e should probably find by goingdeep enough for it that man's passion to perfect themachine, even the sound of it, though the upper

motive is rational or economic, is really from the es-sence of his na ture. I t is as if he were provingsomething to himself. W ha t science continually andrationa lly seeks is the constant. W ha t the restlessspirit seeks is certitude. Belief in human perfecti-bility is a faith of which the evidence is weak andconflicting. But in the machine man finds the prin-.ciple of perfectibility . To increase its precision,sweeten its rhythm and raise its power to any sign,

[ 253 1



THE AMERICAN OMEN

he has only to discover the true laws of its being and

bring them into a relation of harmony . Then logicis implicit in its behaviour.

V I

Its Effect Upon Our Minds and Behavior

It may be the spirit will not change, but fromperfecting, minding and living with machines thementality w ill. Certainly a machine environmentwill induce new habits of thinking. T o act upon amachine with passion, malice or impulsive ignoranceis to wreck it, and the lesson is final. To commandits power you are obliged to act upon it with knowl-edge, reflection and understanding. I t is not obedi-ent to you; it obeys laws you cannot alter or cor-ru pt. And since you can neither al ter nor corruptthem you may trust them. They cannot fail.

The garage mechanic is not a scientist; yet hethinks scientifically. Observe him. There is troublein the mechanism. The rhy thm breaks. Thepower is lost or it may be only that there is aw rong sound. H e takes your facts and entertains

your opinion. Yet he does nothing overt a t once.He listens, reflects, speeds up the engine and slowsit down, cuts out one cylinder at a time by shortingthe current across the tops of the spark plug, drivesthe car around the block, then leans against hisbench and lights a cigarette. " I think I know wherethe trouble is," he says. W ith tha t he enters themechanism at a certain point, goes to the spot andthere it is—what he thought it was.

[254]



MACH INE PEOPLE

Now consider what has occurred in this familiarinstance. W h a t w as to be found w as X , namely,the cause of troub le. T he re w ere m a ny facts inseveral categories—historical facts of doubtful im-portance from you, facts of knowledge in his ex-perience, facts of sensation in the particular case.How has he acted upo n these? B y methods of a n-alysis, analogy, synthesis, as if, is as, induction, de-

duction, generaliza tion a nd hy pothesis. H e m ayno t know w ha t a n hy pothesis is. If y ou should sa yto him that he has been thinking scientifically, orexplain to him the process by which he arrived athis I-th ink , he w ould be surp rised. H e think s sci-entifically without knowing that he does and callshimself a trou ble shooter. T h e w ay of it comesfrom experience.

Sooner from observing machines than from ob-serving ourselves we may come to precise ways ofthinking, to an understanding of the natural pr in-ciples of equivalence and reciprocation, applicablealso to human affairs, and to such a generalizationas th a t a thin g is for w hat i t is for. E a ch p a r t ofa ma chine is for w ha t it is for. E a ch ma chine inthe great scheme of machines is for what it is for.We make machines with organs and chemistries tosimula te cre a ture reactions to stimu li. A ll of themfeel. Some of them see. T h er e a re now some tothink mathematically, these substi tuting in drudg-ery for the mind as others substitute for the body;but how stupid it would be to expect them to think

politically or philosophically. Pe rha ps ma n shallnever know w ha t it is he is for. Nev ertheless her 255 1



THE AMERICAN OMEN

might very w ell know w hat his institutions and meth-ods and specializations are for. He might know,for example, that physical science is neither forprophecy nor for handing down the social law. Onewould think the scientific mind as such would knowthis. But there has lately come over it a rage toprophesy, to say not only what is but what willbe and should be in all things. And hav ing said

what ought to be believed it goes so far as to resentin the popular mind a lively scepticism, forgettingthat scepticism is its own first virtue.

W e are eminently the machine people. W e havemore machines than all other people in the world.Here the au thority of science, resting upon facts andupon the thing tha t w orks, is such tha t no a bsurditycan diminish it. Credulity for tha t which may bedemonstrated is unlimited. For the new fact thereis a kind of appetite. Here a t the same time is ascepticism from which science is no more immunetha n phrenology . Science giving law to ma n's w orksis unchallenged; undertaking to give him also thelaw of his being, it is challenged. The behaviour ofmind in the fundamentalist, even him in Tennessee,is somewhat like this. He ask s: " Is there any scien-tific theory of the origin of human beings that canbe proved on such evidence as would hang a man inTennessee?" The answer is no. In tha t case hewill believe w hat he likes. But believing in the theo-logical doctrine of the special creation of man hewill not for that reason reject a scientific fact in

plant or animal biology, say it is impossible to makea fuelless engine or impugn science as a whole. H e[256]





THE AMERICAN OMEN

called applied science research, that is, in finding

new ways to apply w hat is already known. But wehave no such record in the field of pure science;we have made very few new discoveries. And th a tis why a national fund of $20,000,000—called theHoover fund because it was his idea—now is beingraised to support pu re science research. Yet evenhere the end is practica l. The anx iety is not toimprove our standing in the world's hall of purefame; it is that our workers in the field of appliedscience may soon exhaust the stock of fact knowl-edge unless we take steps to increase it on our ownaccount.

When Abraham Lincoln was speaking of discov-ery and invention in that Lyceum Lecture, year1860, there were only five kinds of power in theworld—man power, animal power, water, wind andsteam. Since then two new pow ers have been added.Gas and electricity. A t any instant another maybe discovered. W here? There is no telling whereor w hat or under w hat circumstances. Th e un-known is nowhere, meaning it is everyw here. I t isin the common occurrence, in the fam iliar object,

in the artless question, in the queer twist of athought.Man's passion to pursue it is a fact he can give

no account of. Always he has been afra id. Doeshe go on notwithstanding, or is it because he isafraid th a t he goes on? In one case a lonely heroin the universe; in the other case a brave planeta-rian who would sooner meet the dangers of knowledgethan bear the terro rs of superstition. Once he gets

[ 258 ]



MACHINE PEOPLE

used to the idea it is much less appalling to live on

h h l h fl ld h

Documents

The American Omen by Garet Garrett [1930]