Part 13

Other examples of the manner in which the control of {174} production by "business" cuts across the line of economic progress are the wastes of competitive industry and the profits of monopoly. It is well known that the price paid by the consumer includes marketing costs, which to a varying, but to a large, extent are expenses not of supplying the goods, but of supplying them under conditions involving the expenses of advertisement and competitive distribution. For the individual firm such expenses, which enable it to absorb part of a rival's trade, may be an economy: to the consumer of milk or coal--to take two flagrant instances--they are pure loss. Nor, as is sometimes assumed, are such wastes confined to distribution. Technical reasons are stated by railway managers to make desirable a unification of railway administration and by mining experts of mines. But, up to the war, business considerations maintained the expensive system under which each railway company was operated as a separate system, and still prevent collieries, even collieries in the same district, from being administered as parts of a single organization. Pits are drowned out by water, because companies cannot agree to apportion between them the costs of a common drainage system; materials are bought, and products sold, separately, because collieries will not combine; small coal is left in to the amount of millions of tons because the most economical and technically efficient working of the seams is not necessarily that which yields the largest profit to the business men who control production. In this instance the wide differences in economic strength which exist between different mines discourage the unification which is economically desirable; naturally the {175} directors of a company which owns "a good thing" do not desire to merge interests with a company working coal that is poor in quality or expensive to mine. When, as increasingly happens in other industries, competitive wastes, or some of them, are eliminated by combination, there is a genuine advance in technical efficiency, which must be set to the credit of business motives. In that event, however, the divergence between business interests and those of the consumers is merely pushed one stage further forward; it arises, of course, over the question of prices. If any one is disposed to think that this picture of the economic waste which accompanies the domination of production by business interests is overdrawn, he may be invited to consider the criticisms upon the system passed by the "efficiency engineers," who are increasingly being called upon to advise as to industrial organization and equipment. "The higher officers of the corporation," writes Mr. H. L. Gantt of a Public Utility Company established in America during the war, "have all without exception been men of the 'business' type of mind, who have made their success through financiering, buying, selling, etc.... As a matter of fact it is well known that our industrial system has not measured up as we had expected.... _The reason for its falling short is undoubtedly that the men directing it had been trained in a business system operated for profits, and did not understand one operated solely for production_. This is no criticism of the men as individuals; they simply did not know the job, and, what is worse, they did not know that they did not know it."

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In so far, then, as "Business" and "Management" are separated, the latter being employed under the direction of the former, it cannot be assumed that the direction of industry is in the hands of persons whose primary concern is productive efficiency. That a considerable degree of efficiency will result incidentally from the pursuit of business profits is not, of course, denied. What seems to be true, however, is that the main interest of those directing an industry which has reached this stage of development is given to financial strategy and the control of markets, because the gains which these activities offer are normally so much larger than those accruing from the mere improvement of the processes of production. It is evident, however, that it is precisely that improvement which is the main interest of the consumer. He may tolerate large profits as long as they are thought to be the symbol of efficient production. But what he is concerned with is the supply of goods, not the value of shares, and when profits appear to be made, not by efficient production, but by skilful financiering or shrewd commercial tactics, they no longer appear meritorious. If, in disgust at what he has learned to call "profiteering," the consumer seeks an alternative to a system under which product is controlled by "Business," he can hardly find it except by making an ally of the managerial and technical _personnel_ of industry. They organize the service which he requires; they are relatively little implicated, either by material interest or by psychological bias, in the financial methods which he distrusts; they often find the control of their professions by business men who are {177} primarily financiers irritating in the obstruction which it offers to technical efficiency, as well as sharp and close-fisted in the treatment of salaries. Both on public and professional grounds they belong to a group which ought to take the initiative in promoting a partnership between the producers and the public. They can offer the community the scientific knowledge and specialized ability which is the most important condition of progress in the arts of production. It can offer them a more secure and dignified status, larger opportunities for the exercise of their special talents, and the consciousness that they are giving the best of their work and their lives, not to enriching a handful of uninspiring, if innocuous, shareholders, but to the service of the great body of their fellow-countrymen. If the last advantage be dismissed as a phrase--if medical officers of health, directors of education, directors of the co-operative wholesale be assumed to be quite uninfluenced by any consciousness of social service--the first two, at any rate, remain. And they are considerable.

It is this gradual disengagement of managerial technique from financial interests which would appear the probable line along which "the employer" of the future will develop. The substitution throughout industry of fixed salaries for fluctuating profits would, in itself, deprive his position of half the humiliating atmosphere of predatory enterprise which embarrasses to-day any man of honor who finds himself, when he has been paid for his services, in possession of a surplus for which there is no assignable reason. Nor, once large incomes from profits have been extinguished, need his salary be large, {178} as incomes are reckoned to-day. It is said that among the barbarians, where wealth is still measured by cattle, great chiefs are described as hundred-cow men. The manager of a great enterprise who is paid $400,000 a year, might similarly be described as a hundred-family man, since he receives the income of a hundred families. It is true that special talent is worth any price, and that a payment of $400,000 a year to the head of a business with a turnover of millions is economically a bagatelle. But economic considerations are not the only considerations. There is also "the point of honor." And the truth is that these hundred-family salaries are ungentlemanly.

When really important issues are at stake every one realizes that no decent man can stand out for his price. A general does not haggle with his government for the precise pecuniary equivalent of his contribution to victory. A sentry who gives the alarm to a sleeping battalion does not spend next day collecting the capital value of the lives he has saved; he is paid 1/- a day and is lucky if he gets it. The commander of a ship does not cram himself and his belongings into the boats and leave the crew to scramble out of the wreck as best they can; by the tradition of the service he is the last man to leave. There is no reason why the public should insult manufacturers and men of business by treating them as though they were more thick-skinned than generals and more extravagant than privates. To say that they are worth a good deal more than even the exorbitant salaries which a few of them get is often true. But it is beside the point. No one has any business to {179} expect to be paid "what he is worth," for what he is worth is a matter between his own soul and God. What he has a right to demand, and what it concerns his fellow-men to see that he gets, is enough to enable him to perform his work. When industry is organized on a basis of function, that, and no more than that, is what he will be paid. To do the managers of industry justice, this whining for more money is a vice to which they (as distinct from their shareholders) are not particularly prone. There is no reason why they should be. If a man has important work, and enough leisure and income to enable him to do it properly, he is in possession of as much happiness as is good for any of the children of Adam.

[1] The Coal Mines Department supplied the following figures to the Coal Industry Commission (Vol. III, App. 66). They relate to 57 per cent. of the collieries of the United Kingdom.

Salary, including bonus and Number of Managers value of house and coal 1913 1919

L100 or less ............................... 4 2 L101 to L200 ............................... 134 3 L201 to L300 ............................... 280 29 L301 to L400 ............................... 161 251 L401 to L500 ............................... 321 213 L501 to L600 ............................... 57 146 L601 and over .............................. 50 152

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XI

PORRO UNUM NECESSARIUM

So the organization of society on the basis of function, instead of on that of rights, implies three things. It means, first, that proprietary rights shall be maintained when they are accompanied by the performance of service and abolished when they are not. It means, second, that the producers shall stand in a direct relation to the community for whom production is carried on, so that their responsibility to it may be obvious and unmistakable, not lost, as at present, through their immediate subordination to shareholders whose interest is not service but gain. It means, in the third place, that the obligation for the maintenance of the service shall rest upon the professional organization of those who perform it, and that, subject to the supervision and criticism of the consumer, those organizations shall exercise so much voice in the government of industry as may be needed to secure that the obligation is discharged. It is obvious, indeed, that no change of system or machinery can avert those causes of social _malaise_ which consist in the egotism, greed, or quarrelsomeness of human nature. What it can do is to create an environment in which those are not the qualities which are encouraged. It cannot secure that men live up to their principles. What it can do is to establish their social order upon principles to which, if they please, they can {181} live up and not live down. It cannot control their actions. It can offer them an end on which to fix their minds. And, as their minds are, so, in the long run and with exceptions, their practical activity will be.

The first condition of the right organization of industry is, then, the intellectual conversion which, in their distrust of principles, Englishmen are disposed to place last or to omit altogether. It is that emphasis should be transferred from the opportunities which it offers individuals to the social functions which it performs; that they should be clear as to its end and should judge it by reference to that end, not by incidental consequences which are foreign to it, however brilliant or alluring those consequences may be. What gives its meaning to any activity which is not purely automatic is its purpose. It is because the purpose of industry, which is the conquest of nature for the service of man, is neither adequately expressed in its organization nor present to the minds of those engaged in it, because it is not regarded as a function but as an opportunity for personal gain or advancement or display, that the economic life of modern societies is in a perpetual state of morbid irritation. If the conditions which produce that unnatural tension are to be removed, it can only be effected by the growth of a habit of mind which will approach questions of economic organization from the standpoint of the purpose which it exists to serve, and which will apply to it something of the spirit expressed by Bacon when he said that the work of man ought to be carried on "for the glory of God and the relief of men's estate."

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Viewed from that angle issues which are insoluble when treated on the basis of rights may be found more susceptible of reasonable treatment. For a purpose, is, in the first place a principle of limitation. It determines the end for which, and therefore the limits within which, an activity is to be carried on. It divided what is worth doing from what is not, and settles the scale upon which what is worth doing ought to be done. It is in the second place, a principle of unity, because it supplies a common end to which efforts can be directed, and submits interests, which would otherwise conflict, to the judgment of an over-ruling object. It is, in the third place, a principle of apportionment or distribution. It assigns to the different parties of groups engaged in a common undertaking the place which they are to occupy in carrying it out. Thus it establishes order, not upon chance or power, but upon a principle, and bases remuneration not upon what men can with good fortune snatch for themselves nor upon what, if unlucky, they can be induced to accept, but upon what is appropriate to their function, no more and no less, so that those who perform no function receive no payment, and those who contribute to the common end receive honourable payment for honourable service.

Frate, la nostra volonta quieta Virtu di carita, che fa volerne Sol quel ch'avemo, e d'altro non ci asseta. Si disiassimo esse piu superne, Foran discordi li nostri disiri Dal voler di colui che qui ne cerne. * * * * *

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Anzi e formale ad esto beato esse Tenersi dentro alla divina vogli, Per ch'una fansi nostre vogli e stesse. * * * * * Chiaro mi fu allor com' ogni dove In Cielo e paradiso, e si la grazia Del sommo ben d'un modo non vi piove.

The famous lines in which Piccarda explains to Dante the order of Paradise are a description of a complex and multiform society which is united by overmastering devotion to a common end. By that end all stations are assigned and all activities are valued. The parts derive their quality from their place in the system, and are so permeated by the unity which they express that they themselves are glad to be forgotten, as the ribs of an arch carry the eye from the floor from which they spring to the vault in which they meet and interlace.

Such a combination of unity and diversity is possible only to a society which subordinates its activities to the principle of purpose. For what that principle offers is not merely a standard for determining the relations of different classes and groups of producers, but a scale of moral values. Above all, it assigns to economic activity itself its proper place as the servant, not the master, of society. The burden of our civilization is not merely, as many suppose, that the product of industry is ill-distributed, or its conduct tyrannical, or its operation interrupted by embittered disagreements. It is that industry itself has come to hold a position of exclusive predominance among human interests, which no single interest, and least of all the provision of the {184} material means of existence, is fit to occupy. Like a hypochondriac who is so absorbed in the processes of his own digestion that he goes to his grave before he has begun to live, industrialized communities neglect the very objects for which it is worth while to acquire riches in their feverish preoccupation with the means by which riches can be acquired.

That obsession by economic issues is as local and transitory as it is repulsive and disturbing. To future generations it will appear as pitiable as the obsession of the seventeenth century by religious quarrels appears to-day; indeed, it is less rational, since the object with which it is concerned is less important. And it is a poison which inflames every wound and turns each trivial scratch into a malignant ulcer. Society will not solve the particular problems of industry which afflict it, until that poison is expelled, and it has learned to see industry itself in the right perspective. If it is to do that, it must rearrange its scale of values. It must regard economic interests as one element in life, not as the whole of life. It must persuade its members to renounce the opportunity of gains which accrue without any corresponding service, because the struggle for them keeps the whole community in a fever. It must so organize industry that the instrumental character of economic activity is emphasized by its subordination to the social purpose for which it is carried on.

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INDEX

Abolition of private ownership, 147 Absenteeism, 152 Absolute rights, 50-51 Absolutism in industry, 144 Acquisitive societies, 29-32 Administration, 115-116 Allocation of power, 163-164 American Constitution, 18-19, 52 Annuities, 74 Arbitration, compulsory, 101

Bacon, quoted, 58, 181 Bentham, 16, 52, 55 Brain workers, position of the, 161-171 British Coal Industry, reorganization of, 166-171 Building Guilds, 103 Building Trade Report, 106-110 Bureaucracy, 116, 149

Capitalism, and production, 173-176; downward thrust of, 154; in America, 101; losing control, 141-142, 148 Cecil, Lord Hugh, 23, 58 Cecil, Robert, 59 Cecil, William, 59 Church and State, 10-13 Coal Industry Commission, 71, 126, 137, 143; report of, 166-167 Coal Mines Committees, 152 Combinations, 125, 130 Committee on Trusts, 153 Competition, 27 Compulsory arbitration, 101 Confiscations, 103 Conservatism, the New, 28 Consumer, exploitation of the, 133-134 Co-operative Movement and cost of coal, 125

Dante, quoted, 182-183 Death Duties, 22 Democratic control, 116 Dickenson, Sir Arthur Lowes, 71 Directorate control, 129 Duckham, Sir Arthur, 119 Duke of Wellington, quoted, 123

Economic confusion, cause of, 131-132 Economic discontent, increase of, 5 Economic egotism, 27, Economic expansion, 9 Efficiency, the condition of, 139-160; through _Esprit de Corps_, 149-150 Employer, waning power of the, 140 England, and natural right, 15-16; and France contrasted, 16-17; Industrialism in, 44-47; Liberal Movement in, 18; over-crowding of population in, 37; proprietary rights in, 64 _et seq._ English landlordism, 22-23 Englishmen, characteristics of, 1-3; vanity of, 129 English Revolution of 1688, 52 Esch-Cummins Act, 118 Expediency, rule of, 16

Feudalism, 18 Fixed salaries, 177-178 Forced labor, 102 France, social and industrial conditions in, 16-17; Feudalism in, 18; Revolution in, 15, 65, 69 French Revolution, 15, 65, 69 Function, definition of, 8; as a basis for remuneration, 41-42; as a basis of social reorganization, 180; Function and Freedom, 7 Functional Society, 29, 84-90 Functionless property-owners, 79, 86; abolishment of, 87-88; an expensive luxury, 87

Gainford, Lord, quoted, 26, 111 Gantt, H. L., 175 Government control in war time, 25-26 Ground-rents, 89-90, 91

Hobson, Mr., 63 "Hundred-Family Man," 178

Imperial Tobacco Company, 116 Incomes, 41 Income Tax, 22 Income without service, 68 Individualism, 48-49 Individual rights, 9 Individual rights _vs._ social functions, 27 Industrial problems, 7 Industrial reorganization, 151, 155 Industrial revolution, 9 Industrial societies, 9 Industrial warfare, cause of, and remedy for, 40-42 Industrialism, 18; a poison, 184; compared to Militarism, 44-46; exaggerated estimate of its importance, 45-46; failure of present system, 139-141; nemesis of, 33-51; spread of, 30; tendency of, 31-32 Industry, and a profession, 94, 97; as a profession, 91 _et seq._, 125-126; deficiencies of, 147; definition of, 6; how private control of may be terminated, 103-104; and the advantages of such a change, 106; Building Trades' Plan for, 108, 111; motives in, 155-159; nationalization of, 104, 114-118; present organization of intolerable, 129; purpose of, 8, 46, 181; right organization of, 6-7; the means not the end, 46-47 Inheritance taxes, 90 Insurance, 74

Joint control, 111-112 Joint-stock companies, 66 Joint-stock organizations, 97

Labor, absolute rights of, 28; and capital, 98-100, 108; compulsory, 100; control of breaking down, 139 _et seq._; degradation of, 35; forced, 102 League of Nations, 101 Liberal Movement, 18 Locke, 14, 52, 55

Management divorced from ownership, 112-113 Mann, Sir John, 126 Militarism, 44-45 Mill, quoted, 89 Mine managers, position of, 162, 166-168 Mining royalties, 23-24, 88

Nationalism, 48-49 Nationalization, 114, 117; of the Coal Industry, 115, 165, 168-169 Natural right in France, 15; in England, 15-16; doctrine of, 21

Officials, position under the present economic system, 162 Old industrial order a failure, 139; its effect on the consumer, 144 Organization, for public service instead of private gains, 127 Over-centralization, 121 Ownership, a new system of, 112-114

Pensioners, 34 Poverty a symptom of social disorder, 5 Private enterprise and public ownership, 118-120 Private ownership, 120; abolition of, 147; of industrial capital, 105-106 Private rights and public welfare, 14-15 Privileges, 24 Producer, obligation of the, 127-128; responsibility of, 128 Production, increased, 5; large scale and small scale, 87; misdirection of, 37-39; why not increased, 136 Productivity, 4, 46 Professional Spirit, the, 149-150 Profits, and production, 173-176; division of, 133 Proletariat, 19, 65 Property, absolute rights of, 52, 80; and creative work, 52 _et seq._; classification of, 63, 64; complexity of, 75; functionless, 76-77, 81; in land, 56-60; in rights and royalties, 62; minority ownership of, 79; most ambiguous of categories, 53-54; passive ownership of, 62; private, 70-72; protection of, 78-70; rights, 50-51; security in, 72-73; socialist fallacy regarding, 86 Proudhon, 54 Publicity of costs and profits, 85, 123-124, 126, 132

Redmayne, Sir Richard, 149 Reformation the, 10-13; effect on society, 12-14 Reform Bill of 1832, 69 Religion, 10; changes in, 11-12 Report of the United States Industrial Commission, 1916, 128-129 Riches, meaning of, 98 Rights of Man, French Declaration of, the, 16, 52 Rights, and Functions, 8-19; doctrine of, 21 _et seq._, 43-44; without functions, 61 Rights of the shareholder, 75 Royalties, 23-24, 62 Royalties, and property, 70; from coal mining properties, 88; a tax upon the industry of others, 89