An Inquiry into the Nature of Peace and the Terms of Its Perpetuation

The general ground on which the business system, as it works under the over-ruling exigencies of the so-called "big business," so defines the terms of life for the common man, who works and buys, is the ground afforded by the principle of "charging what the traffic will bear;" that is to say, fixing the terms of hiring, buying and selling at such a figure as will yield the largest net return to the business concerns in whom, collectively or in severalty, the discretion vests. Discretion in these premises does not vest in any business concern that does not articulate with the system of "big business," or that does not dispose of resources sufficient to make it a formidable member of the system. Whether these concerns act in severalty or by collusion and conspiracy, in so defining the pecuniary terms of life for the community at large, is substantially an idle question, so far as bears on the material interest of the common man. The base-line is still what the traffic will bear, and it is still adhered to, so nearly as the human infirmity of the discretionary captains of industry will admit, whether the due approximation to this base-line is reached by a process of competitive bidding or by collusive advisement.

The generalisation so offered, touching the material conditions of life for the common man under the modern rule of big business, may seem unwarrantably broad. It may be worth while to take note of more than one point in qualification of it, chiefly to avoid the appearance of having overlooked any of the material circumstances of the case. The "system" of large business, working its material consequences through the system of large-scale industry, but more particularly by way of the large-scale and wide-reaching business of trade in the proper sense, draws into the net of its control all parts of the community and all its inhabitants, in some degree of dependence. But there is always, hitherto, an appreciable fraction of the inhabitants—as, e.g., outlying agricultural sections that are in a "backward" state—who are by no means closely bound in the orderly system of business, or closely dependent on the markets. They may be said to enjoy a degree of independence, by virtue of their foregoing as much as may be of the advantages offered by modern industrial specialisation. So also there are the minor and interstitial trades that are still carried on by handicraft methods; these, too, are still somewhat loosely held in the fabric of the business system. There is one thing and another in this way to be taken account of in any exhaustive survey, but the accounting for them will after all amount to nothing better than a gleaning of remnants and partial exceptions, such as will in no material degree derange the general proposition in hand.

Again, there runs through the length and breadth of this business community a certain measure of incompetence or inefficiency of management, as seen from the point of view of the conceivable perfect working of the system as a whole. It may be due to a slack attention here and there; or to the exigencies of business strategy which may constrain given business concerns to an occasional attitude of "watchful waiting" in the hope of catching a rival off his guard; or to a lack of perfect mutual understanding among the discretionary businessmen, due sometimes to an over-careful guarding of trade secrets or advance information; or, as also happens, and quite excusably, to a lack of perfect mutual confidence among these businessmen, as to one another's entire good faith or good-will. The system is after all a competitive one, in the sense that each of the discretionary directors of business is working for his own pecuniary gain, whether in cooperation with his fellows or not. "An honest man will bear watching." As in other collusive organisations for gain, confederates are apt to fall out when it comes to a division of what is in hand. In one way and another the system is beset with inherent infirmities, which hinder its perfect work; and in so far it will fall short of the full realisation of that rule of business that inculcates charging what the traffic will bear, and also in so far the pressure which the modern system of business management brings to bear on the common man will also fall short of the last straw—perhaps even of the next-to-the-last. Again it turns out to be a question not of the failure of the general proposition as formulated, but rather as to the closeness of approximation to its theoretically perfect work. It may be remarked by the way that vigilant and impartial surveillance of this system of business enterprise by an external authority interested only in aggregate results, rather than in the differential gains of the interested individuals, might hopefully be counted on to correct some of these shortcomings which the system shows when running loose under the guidance of its own multifarious incentives.

On the opposite side of the account, it is also worth noting that, while modern business management may now and again fall short of what the traffic will bear, it happens more commonly that its exactions will exceed that limit. This will particularly be true in businessmen's dealings with hired labour, as also and perhaps with equally far-reaching consequences in an excessive recourse to sophistications and adulterants and an excessively parsimonious provision for the safety, health or comfort of their customers—as, e.g., in passenger traffic by rail, water or tramway. The discrepancy to which attention is invited here is due to a discrepancy between business expediency, that is expediency for the purpose of gain by a given businessman, on the one hand, and serviceability to the common good, on the other hand. The business concern's interest in the traffic in which it engages is a short-term interest, or an interest in the short-term returns, as contrasted with the long-term or enduring interest which the community at large has in the public service over which any such given business concern disposes. The business incentive is that afforded by the prospective net pecuniary gain from the traffic, substantially an interest in profitable sales; while the community at large, or the common man that goes to make up such a community, has a material interest in this traffic only as regards the services rendered and the enduring effects that follow from it.

The businessman has not, or at least is commonly not influenced by, any interest in the ulterior consequences of the transactions in which he is immediately engaged. This appears to hold true in an accentuated degree in the domain of that large-scale business that draws its gains from the large-scale modern industry and is managed on the modern footing of corporation finance. This modern fashion of business organisation and management apparently has led to a substantial shortening of the term over which any given investor maintains an effective interest in any given corporate enterprise, in which his investments may be placed for the time being. With the current practice of organising industrial and mercantile enterprises on a basis of vendible securities, and with the nearly complete exemption from personal responsibility and enduring personal attachment to any one corporate enterprise which this financial expedient has brought, it has come about that in the common run of cases the investor, as well as the directorate, in any given enterprise, has an interest only for the time being. The average term over which it is (pecuniarily) incumbent on the modern businessman to take account of the working of any given enterprise has shortened so far that the old-fashioned accountability, that once was depended on to dictate a sane and considerate management with a view to permanent good-will, has in great measure become inoperative.

By and large, it seems unavoidable that the pecuniary interests of the businessmen on the one hand and the material interests of the community on the other hand are diverging in a more and more pronounced degree, due to institutional circumstances over which no prompt control can be had without immediate violation of that scheme of personal rights in which the constitution of modern democratic society is grounded. The quandary in which these communities find themselves, as an outcome of their entrance upon "the simple and obvious system of Natural Liberty," is shown in a large and instructive way by what is called "labor trouble," and in a more recondite but no less convincing fashion by the fortunes of the individual workman under the modern system.

The cost of production of a modern workman has constantly increased, with the advance of the industrial arts. The period of preparation, of education and training, necessary to turn out competent workmen, has been increasing; and the period of full workmanlike efficiency has been shortening, in those industries that employ the delicate and exacting processes of the modern technology. The shortening of this working-life of the workman is due both to a lengthening of the necessary period of preparation, and to the demand of these processes for so full a use of the workman's forces that even the beginning of senescence will count as a serious disability,—in many occupations as a fatal disability. It is also a well ascertained fact that effectual old age will be brought on at an earlier period by overwork; overwork shortens the working life-time of the workman. Thorough speeding-up ("Scientific Management"?) will unduly shorten this working life-time, and so it may, somewhat readily, result in an uneconomical consumption of the community's man-power, by consuming the workmen at a higher rate of speed, a higher pressure, with a more rapid rate of deterioration, than would give the largest net output of product per unit of man-power available, or per unit of cost of production of such man-power.

On this head the guiding incentives of the businessman and the material interest of the community at large—not to speak of the selfish interest of the individual workman—are systematically at variance. The cost of production of workmen does not fall on the business concern which employs them, at least not in such definite fashion as to make it appear that the given business concern or businessman has a material interest in the economical consumption of the man-power embodied in this given body of employees. Some slight and exceptional qualification of this statement is to be noted, in those cases where the processes in use are such as to require special training, not to be had except by a working habituation to these processes in the particular industrial plant in question. So far as such special training, to be had only as employees of the given concern, is a necessary part of the workman's equipment for this particular work, so far the given employer bears a share and an interest in the cost of production of the workmen employed; and so far, therefore, the employer has also a pecuniary interest in the economical use of his employees; which usually shows itself in the way of some special precautions being taken to prevent the departure of these workmen so long as there is a clear pecuniary loss involved in replacing them with men who have not yet had the special training required. Evidently this qualifying consideration covers no great proportion of the aggregate man-power consumed in industrial enterprises under business management. And apart from the instances, essentially exceptional, where such a special consideration comes in, the businessmen in charge will, quite excusably as things go, endeavour to consume the man-power of which they dispose in the persons of their employees, not at the rate that would be most economical to the community at large, in view of the cost of their replacement, nor at such a rate as would best suit the taste or the viability of the particular workman, but at such a rate as will yield the largest net pecuniary gain to the employer.

There is on record an illustrative, and indeed an illustrious, instance of such cannily gainful consumption of man-power carried out systematically and with consistently profitable effect in one of the staple industries of the country. In this typical, though exceptionally thoroughgoing and lucrative enterprise, the set rule of the management was, to employ none but select workmen, in each respective line of work; to procure such select workmen and retain them by offering wages slightly over the ordinary standard; to work them at the highest pace and pressure attainable with such a picked body; and to discharge them on the first appearance of aging or of failing powers. In the rules of the management was also included the negative proviso that the concern assumed no responsibility for the subsequent fortunes of discharged workmen, in the way of pension, insurance or the like.

This enterprise was highly successful and exceedingly profitable, even beyond the high average of profits among enterprises in the same line of business. Out of it came one of the greater and more illustrious fortunes that have been accumulated during the past century; a fortune which has enabled one of the most impressive and most gracious of this generation's many impressive philanthropists, never weary in well-doing; but who, through this cannily gainful consumption of man-power, has been placed in the singular position of being unable, in spite of avowedly unremitting endeavour, to push his continued disbursements in the service of humanity up to the figure of his current income. The case in question is one of the most meritorious known to the records of modern business, and while it will conveniently serve to illustrate many an other, and perhaps more consequential truth come to realisation in the march of Triumphant Democracy, it will also serve to show the gainfulness of an unreservedly canny consumption of man-power with an eye single to one's own net gain in terms of money.

Evidently this is a point in the articulation of the modern economic system where a sufficiently ruthless outside authority, not actuated by a primary regard for the pecuniary interests of the employers, might conceivably with good effect enforce a more economical consumption of the country's man-power. It is not a matter on which one prefers to dwell, but it can do no harm to take note of the fact for once in a way, that these several national establishments of the democratic order, as they are now organised and administered, do somewhat uniformly and pervasively operate with an effectual view to the advantage of a class, so far as may plausibly be done. They are controlled by and administered in behalf of those elements of the population that, for the purpose in hand, make up a single loose-knit class,—the class that lives by income rather than by work. It may be called the class of the business interests, or of capital, or of gentlemen. It all comes to much the same, for the purpose in hand.

The point in speaking of this contingent whose place in the economy of human affairs it is to consume, or to own, or to pursue a margin of profit, is simply that of contrasting this composite human contingent with the common man; whose numbers account for some nine-tenths or more of the community, while his class accounts for something less than one-tenth of the invested wealth, and appreciably less than that proportion of the discretionary national establishment,—the government, national or local, courts, attorneys, civil service, diplomatic and consular, military and naval. The arrangement may be called a gentlemen's government, if one would rather have it that way; but a gentleman is necessarily one who lives on free income from invested wealth—without such a source of free, that is to say unearned, income he becomes a decayed gentleman. Again, pushing the phrasing back a step farther toward the ground facts, there are those who would speak of the current establishments as "capitalistic;" but this term is out of line in that it fails to touch the human element in the case, and institutions, such as governmental establishments and their functioning, are after all nothing but the accustomed ways and means of human behaviour; so that "capitalistic" becomes a synonym for "businessmen's" government so soon as it is designated in terms of the driving incentives and the personnel. It is an organisation had with a view to the needs of business (i.e. pecuniary) enterprise, and is made up of businessmen and gentlemen, which comes to much the same, since a gentleman is only a businessman in the second or some later generation. Except for the slightly odious suggestion carried by the phrase, one might aptly say that the gentleman, in this bearing, is only a businessman gone to seed.

By and large, and taking the matter naively at the simple face value of the material gain or loss involved, it should seem something of an idle question to the common man whether his collective affairs are to be managed by a home-bred line of businessmen and their successive filial generations of gentlemen, with a view to accelerate the velocity and increase the volume of competitive gain and competitive spending, on the one hand, or by an alien line of officials, equally aloof from his common interests, and managing affairs with a view to the usufruct of his productive powers in furtherance of the Imperial dominion.

Not that the good faith or the generous intentions of these governments of gentlemen is questioned or is in any degree questionable; what is here spoken of is only the practical effect of the policies which they pursue, doubtless with benevolent intentions and well-placed complacency. In effect, things being as they are today in the civilised world's industry and trade, it happens, as in some sort an unintended but all-inclusive accident, that the guidance of affairs by business principles works at cross purposes with the material interests of the common man.

So ungraceful a view of the sacred core of this modern democratic organisation will need whatever evidence can be cited to keep it in countenance. Therefore indulgence is desired for one further count in this distasteful recital of ineptitudes inherent in this institutional scheme of civilised life. This count comes under the head of what may be called capitalistic sabotage. "Sabotage" is employed to designate a wilful retardation, interruption or obstruction of industry by peaceable, and ordinarily by legally defensible, measures. In its present application, particularly, there is no design to let the term denote or insinuate a recourse to any expedients or any line of conduct that is in any degree legally dubious, or that is even of questionable legitimacy.

Sabotage so understood, as not comprising recourse to force or fraud, is a necessary and staple expedient of business management, and its employment is grounded in the elementary and indefeasible rights of ownership. It is simply that the businessman, like any other owner, is vested with the right freely to use or not to use his property for any given purpose. His decision, for reasons of his own, not to employ the property at his disposal in a particular way at a particular time, is well and blamelessly within his legitimate discretion, under the rights of property as universally accepted and defended by modern nations. In the particular instance of the American nation he is protected in this right by a constitutional provision that he must not be deprived of his property without due process of law. When the property at his disposal is in the shape of industrial plant or industrial material, means of transportation or stock of goods awaiting distribution, then his decision not to employ this property, or to limit its use to something less than full capacity, in the way for which it is adapted, becomes sabotage, normally and with negligible exceptions. In so doing he hinders, retards or obstructs the working of the country's industrial forces by so much. It is a matter of course and of absolute necessity to the conduct of business, that any discretionary businessman must be free to deal or not to deal in any given case; to limit or to withhold the equipment under his control, without reservation. Business discretion and business strategy, in fact, has no other means by which to work out its aims. So that, in effect, all business sagacity reduces itself in the last analysis to a judicious use of sabotage. Under modern conditions of large business, particularly, the relation of the discretionary businessman to industry is that of authoritative permission and of authoritative limitation or stoppage, and on his shrewd use of this authority depends the gainfulness of his enterprise.

If this authority were exercised with an eye single to the largest and most serviceable output of goods and services, or to the most economical use of the country's material resources and man-power, regardless of pecuniary consequences, the course of management so carried out would be not sabotage but industrial strategy. But business is carried on for pecuniary gain, not with an unreserved view to the largest and most serviceable output or to the economical use of resources. The volume and serviceability of the output must wait unreservedly on the very particular pecuniary question of what quantity and what degree of serviceability will yield the largest net return in terms of price. Uneconomical use of equipment, labor and resources is necessarily an everyday matter under these circumstances, as in the duplication of plant and processes between rival concerns, and in the wasteful use of all resources that do not involve expenditure on the part of the given concern.

It has been the traditional dogma among economists and publicists in these modern communities that free competition between the businessmen in charge will indefeasibly act to bring the productiveness of industry to the highest practicable pitch and would lead to the most unreserved and vigilant endeavour to serve the community's material needs at all points. The reasons for the failure of this genial expectation, particularly under latterday business management, might be shown in some detail, if that were needed to enforce the argument as it runs in the present connection. But a summary indication of the commoner varieties and effects of sabotage as it is systematically applied in the businesslike conduct of industry will serve the purpose as well and with less waste of words and patience.

It is usual to notice, and not unusual to deplore the duplication of plant and appliances in many lines of industry, due to competitive management, as in factories engaged in the same class of manufacture, in parallel or otherwise competing railways and boat lines, in retail merchandising, and in some degree also in the wholesale trade. The result, of course, is sabotage; in the sense that this volume of appliances, materials and workmen are not employed to the best advantage for the community. One effect of the arrangement is an increased necessary cost of the goods and services supplied by these means. The reason for it is competition for gain to be got from the traffic. That all this is an untoward state of things is recognised on all hands; but no lively regret is commonly spent on the matter, since it is commonly recognised that under the circumstances there is no help for it except at the cost of a more untoward remedy.

The competitive system having been tried and found good—or at least so it is assumed—it is felt that the system will have to be accepted with the defects of its qualities. Its characteristic qualities are held to be good, acceptable to the tastes of modern men whose habits of thought have been standardised in its terms; and it would be only reluctantly and by tardy concession that these modern men could bring themselves to give up that scheme of "Natural Liberty" within the framework of which runs this competitive system of business management and its wasteful manifolding of half-idle equipment and nugatory work. The common man, at the worst, comforts himself and his neighbour with the sage reflection that "It might have been worse." The businessmen, on the other hand, have also begun to take note of this systematic waste by duplication and consequent incompetence, and have taken counsel how to intercept the waste and divert it to their own profit. The businessmen's remedy is consolidation of competing concerns, and monopoly control.

To the common man, with his preconceptions on the head of "restraint of trade," the proposed remedy seems more vicious than the evil it is designed to cure. The fault of the remedy plainly is not that the mismanagement of affairs due to competitive business can not be corrected by recourse to monopoly, but only that the community, it is presumed, would still suffer all the burdens and discomforts of the régime of competition and sabotage, with, possibly, further inconveniences and impositions at the hands of the businesslike monopoly; which, men are agreed, may fairly be depended on to use its advantage unsparingly under the business principle of charging what the traffic will bear.