IX
AMERICA IN THE INDIVIDUALISTIC ERA
DURING the Civil War, when industrial capitalism extended its sway over the entire United States, and in the years following the war we were in the first period of the individualistic era, that of numerous small and independent producers, all more or less successful, due to the still almost untouched resources of the new continent. Then we had a large, prosperous middle class, and little difficulty existed for any man with a fair amount of intelligence and ambition to rise to independence. These were the golden days, to which our individualists hark back, which our legislatures and governments attempt to restore by legal enactments. But the world does not stand still, for standstill is death; in free competition, the more successful producers destroyed the less successful ones; companies and corporations formed and absorbed or defeated the individual producers, the larger corporations absorbed or vanquished the smaller ones, combined with each other in still larger ones, and so, by the working of inexorable economic laws, the consolidation of the industries progressed from numerous small producers to the formation of huge corporations, with competition steadily growing more strenuous, more intense, and more destructive.
Finally, in the 90's the end was reached; especially in those industries which had been organized into a few large corporations. The necessity of keeping the factories going, with the steadily increasing excess of productive capacity over the demand for the products, had made competition so vicious that it threatened with destruction the victor as well as the vanquished, in a universal wreck of the industry.
Thus co-operation had to come, of necessity, to avoid the destructive effects of competition.
Thus co-operative agreements between formerly competing corporations came, and the individualistic era seemed to approach its end, the co-operative era to arrive.
The fundamental principle of industrial co-operation between corporations in the same or similar fields comprise control of production; control of prices; interchange of information.
Control of production means: Elimination of the constantly recurring periods of business depression and business boom, by restricting excessive production in boom times, and maintaining production in times of impaired business confidence by manufacture for stock, by encouraging consumption by means of long-extended credits, acceptance of stock in payment, financial assistance for starting new enterprises and extending existing ones, etc.
Elimination of unrestricted competition is accomplished by dividing the production between the corporations in a definite percentage based on their previous business, or their capitalization, or their producing facilities; or by dividing the business territorially, or by dividing it by the character of the manufactured products, etc.
Control of prices means: Agreement on the same prices by all producers, either by definitely fixing such prices, where such is possible, with periodic readjustment; or by an agreement on the methods of computing selling prices from the individual items of the cost of production, etc.
Agreement on the legitimate profits of the middlemen, by fixing the retail prices, etc.
Interchange of information includes: Interchange of technical information and experience between manufacturing and technical staffs, joint use and interchange of patent rights, trade-marks, etc.
Mutual consultation on administrative problems, commercial and financial questions, etc.
Mutual holdings of stock of the corporations, interlocking directorates, etc.
Practically all these necessary requirements for safely guiding our industrial prosperity from the competitive age, which has failed and is dead, into the coming co-operative age, have been outlawed by our Government.
The result is that from the beginning of this century, when the corporate development of industry was arrested by the interference of the Government, instigated by a misguided public demand, our industrial development has not progressed, but lapsed back; the industries have grown larger, the corporations financially more powerful, but as an industrial nation we have gone backward with increasing rapidity. Competition has not been restored; no political law can resurrect a corpse, and while you can forbid co-operation by legislation, you cannot by law order people or corporations to commit suicide.
The result thus has been increasing disorganization, interference, inefficiency, and waste, leading to an industrial chaos just as regrettable for our national welfare as unnecessary.
What were the causes for this forcible arrest of the natural industrial development of our nation, which threatens its future welfare, nay, even its existence?
While in other nations the industrial development was fairly uniform throughout the nation, in our nation the development in the Eastern States was about a generation ahead of that in the middle West and the West. Thus, when in the East the corporate organization approached the co-operative stage there was still a large class of small, individual producers in the West who felt their existence threatened by the rise of corporate industrial power, and were ready to fight the corporation by all means, political and otherwise, in the vain attempt to avoid the inevitable, the extinction of the small producer before the higher efficiency of organized corporate production. Add thereto the not negligible independent middle class, which still exists in the East, and all those who have tried and failed, and therefore naturally hate those who have succeeded in organizing big production, and we get a formidable political power; but, however much we may sympathize with the individual who desires to preserve his industrial independence, it is a reactionary movement, however progressive some of its leaders may call themselves, and either the reactionary forces must be overcome by education and otherwise, or the nation's progress is threatened.
An equally serious enemy to the progress toward co-operation is the strong individualistic temperament of a large part of the American citizens, especially those who come from Anglo-Saxon descent; the attitude of mind which rather wishes to be the first in a small puddle than the second in the wide ocean; temperaments who prefer to be president of a ten-thousand-dollar business rather than assistant to the president of a hundred-million-dollar corporation. We must also consider that many of the organizers and corporation leaders are pronounced individualists, do not understand what they are doing and whereto the path leads into which economic laws forced them, and thus leadership in the transition from competition to co-operation by men understanding the industrial situation and its needs has often been lacking.
Then there was antagonism of the labor interests, unjustified and illogical, indeed, since all labor organizations are based on the principle of co-operation. However, they feared the greater power of organized industrial capital and point to powerful corporations who have kept union-ism out of their works. And in the days when this popular resentment against corporate organization originated, there were some industrial controversies fought to a finish by the corporations, to the suppression of the labor organizations, possibly beyond the point where social wisdom should have called a halt in the interest of future co-operation and friendly feeling with the masses of the people.
One of the most serious causes of the rise of popular resentment against the corporations was the character of the corporation itself, especially in the early days, its crudeness and inefficiency, which in many cases led to a failure of realizing the advantage expected from co-operation. There is no constructive supervisory power, in our country, as was represented by the central Government in Germany; our Governments, from the federal down to the municipal, are not organized for constructive activity, and thus their entrance in the field is largely inhibitory, liable to disorganize by interference. The tariff wall excluded the check afforded by competition with other nations. Thus over-capitalization was frequent, and seriously handicapped some corporations for years, until their business had grown up to their capitalization. Sometimes the over-capitalization was intentional; water, or the result of excessive organization charges; but the most frequent and most serious, because unavoidable, cause was the necessarily excessive cost of absorbing smaller competitors; the price usually is not the value of the competitor's business; often this is nil—but is based on the harm which the competitor could do in unrestrained competition, before it is destroyed. Thus millions have been paid for competitors which brought in practically no assets, and still it was a good bargain, since still more millions would have been lost in fighting the competitor.
Occasionally even competing companies have been organized, not for honest industrial production, but for forcing an established corporation to buy it out—a kind of blackmail against which no protection existed.
Thus the industrial consolidation was accomplished at heavy sacrifice in capital, and corresponding sacrifice in economic efficiency. Another incident in causing public hostility was the wreckers—those financiers who organized or got control of corporations, not for industrial production, but to get quickly as much out of them as possible, and then abandon them, squeezed out and wrecked. Some names of the previous generation are still remembered.
A most serious cause of the popular antagonism was the failure of the corporation in one of its most important activities, that of the social relations to its employees and to the public at large. In those early days the leaders and organizers of corporate production were altogether too much inclined to consider the corporation as their own private property, and felt that paying such wages as they had to pay to get efficient workers comprised all their relations to the employees, and that toward the general public they had no obligations at all. But while against the individual small employer of Lincoln's days the individual employee or the public could help themselves, they became helpless against the corporate power of organized industry.
The first time this was forcibly impressed upon the public by the great anthracite-coal strike, when miners and mine-owners could not agree, and as the result the people of New England suffered, their children died from exposure, until finally the Federal Government had to interfere in the "private relations" between employer and employee, in the interest of public welfare. The change brought about by the corporate development, in the power relation between the individual employee or the general public and the industrial employer, necessarily placed upon the corporation the duty to establish an efficient equivalent for the self-help of the individual. This is now gradually being recognized by the corporations, and more and more the social (and educational, as part thereof) relations with the employees and the general public have become a recognized part of corporation activity. But it took a long time for the corporations to realize it, and great harm had been done in the mean time to the relation between corporation and public.
It is in this direction that we must hope for the bringing about of a better understanding between corporate industrial organization and the general public.
To a rapidly increasing extent the industrial corporations thus realize their social duties, perceive that the establishment and preservation of harmonious social relations between the industrial corporation and the public, including its employees, is an essential and important part of corporation activity. Nevertheless, in most corporations this activity is still very far from what it must be to restore industrial peace. We need only to look at the names of the men who are in charge of the social activities of even very progressive corporations, and we cannot fail to realize that very often they are not the same class of men, not of the same caliber, as the men in charge of the technical, the administrative, and the financial activities of the corporation.
However, there is a rapid progress noticeable in this direction.
All this makes us realize that the present wide-spread hostility against corporations is not the work of irresponsible demagogues, but is the result of causes, deep-seated in our national and industrial development, and therefore requires the fullest attention of industry's most competent and able leaders.
The powerful, co-operating group of corporations, controlling an industry or a group of industries, if in the control of irresponsible men for selfish purposes, is a far more dangerous menace to the public than were the isolated small producers of bygone days; but so is a sharp-edged tool far more dangerous in the hand of the vicious or criminal than a dull one, and still nobody but a fool would dull his tools when he desires to accomplish results. But this is exactly what we as a nation have been doing steadily during the last eight years: we attempt to destroy by legislation modern industry's most efficient tool, outlaw all the actions which are necessary for industrial efficiency, and gradually get into the hysterical state where we begin to consider mere bigness and efficiency as criminal.
In the mean time the old world has gone to pieces in Europe, and a new one, an era of co-operation, begins to rise from the ruins. Germany already has organized its industries co-operatively, has encouraged and almost enforced by governmental acts all those co-operative activities of corporations which we have outlawed, and an industrial efficiency resulted which became a menace to the individualistic nations and led to the war, as discussed before. England is reorganizing co-operatively its industrial and financial system, apparently unnoticed and unobserved by us, at least in its significance, and is progressing in it at a rate of which we do not dream, and against the new Europe, as it will emerge from the war, our nation, with its present suicidal policy of industrial self-destruction, will be hopelessly outclassed.
This is the real danger which the European war threatens to us—not a foreign invasion—quite likely this is the last great military war the world will ever see, but an industrial war, and the destruction of a continent, our own America, by the high economic efficiency of the co-operative industrial organization of the nations tried in the fire of the European war—unless we awake in time, and prepare—not battle-ships and armies, however useful they may be in their limited sphere, but friendly relations based on the recognition of their interests, between all really progressive elements of society, finding their expression in legislation that will advance instead of retard industrial co-operation.