Modern civilization is dependent for its existence absolutely upon the proper functioning of the industrial and business system. If the industrial and business system fails to function properly in any important particular, such, for instance, as transportation, or the mining of coal, the large cities will in a short time run short of food, and industry throughout the country will be brought to a standstill for lack of power.
It is thus clearly seen that the maintenance of our modern civilization is dependent absolutely upon the service it gets from the industrial and business system.
This system as developed throughout the world had its origin in the service it could and did render the community in which it originated. With the rise of a better technology it was found that larger industrial aggregations could render better and more effective service than the original smaller ones, hence the smaller ones gradually disappeared leaving the field to those that could give the better service.
Such was the normal and natural growth of business and industry which obtained its profits because of its superior service. Toward the latter part of the nineteenth century it was discovered that a relatively small number of factories, or industrial units, had replaced the numerous mechanics with their little shops, such as the village shoemaker and the village wheel- wright, who made shoes and wagons for the community, and that the community at large was dependent upon the relatively smaller number of larger establishments in each industry.
Under these conditions it was but natural that a new class of business man should arise who realized that if all the plants in any industry were combined under one control, the community would have to accept such service as it was willing to offer, and pay the price which it demanded. In other words, it was clearly realized that if such combinations could be made to cover a large enough field, they would no longer need to serve the community but could force the community to do their bidding. The Sherman Anti-Trust Law was the first attempt to curb this tendency. It was, however, successful only to a very limited extent, for the idea that the profits of a business were justified only on account of the service it rendered was rapidly giving way to one in which profits took the first place and service the second. This idea has grown so rapidly and has become so firmly imbedded in the mind of the business man of today, that it is inconceivable to many leaders of big business that it is possible to operate a business system on the lines along which our present system grew up ; namely, that its first aim should be to render service.
It is this conflict of ideals which is the source of the confusion into which the world now seems to be driving headlong. The community needs service first, regardless of who gets the profits, because its life depends upon the service it gets. The business man says profits are more important to him than the service he renders; that the wheels of business shall not turn, whether the community needs the service or not, unless he can have his measure of profit. He has forgotten that his business system had its foundation in service, and as far as the community is concerned has no reason for existence except the service it can render. A clash between these two ideals will ultimately bring a deadlock between the business system and the community. The ‘laissez faire’ process in which we all seem to have so much faith, does not promise any other result, for there is no doubt that industrial and social unrest is distinctly on the increase throughout the country.
I say, therefore, we have come to the Parting of the Ways, for we must not drift on indefinitely toward an economic catastrophe such as Europe exhibits to us. We probably have abundant time to revise our methods and stave off such a catastrophe if those in control of industry will recognize the seriousness of the situation and promptly present a positive program which definitely recognizes the responsibility of the industrial and business system to render such service as the community needs. The extreme radicals have always had a clear vision of the desirability of accomplishing this end, but they have always fallen short in the production of a mechanism that would enable them to materialize their vision.
American workmen will prefer to follow a definite mechanism, which they comprehend, rather than to take the chance of accomplishing the same end by the methods advocated by extremists. In Russia and throughout eastern Europe, the community through the Soviet form of government is attempting to take over the business system in its effort to secure the service it needs. Their methods seem to us crude, and to violate our ideas of justice ; but in Russia they replaced a business system which was rotten beyond anything we can imagine. It would not require a very perfect system to be better than what they had, for the dealings of our manufacturers with the Russian business agents during the war indicated that graft was almost the controlling factor in all deals. The Soviet government is not necessarily Bolshevistic nor Socialistic, nor is it political in the ordinary sense, but industrial. It is the first attempt to found a government on industrialism. Whether it will be ultimately successful or not, remains to be seen. While the movement is going through its initial stages, however, it is unquestionably working great hardships, which are enormously aggravated by the fact that it has fallen under the control of the extreme radicals. Would it not be better for our business men to return to the ideals upon which their system was founded and upon which it grew to such strength ; namely, that reward should be dependent solely upon the service rendered, rather than to risk any such attempt on the part of the workmen in this country, even if we could keep it clear of extreme radicals, which is not likely if we all realize that any reward or profit that hitsiness arbitrarily takes, over and above that to which it is justly entitled for service rendered, is just as much the exercise of autocratic power and a menace to the industrial peace of the world, as the autocratic military power of the Kaiser was a menace to international peace. This applies to Bolshevists as well as to Bankers.
I am not suggesting anything new, when I say reward must be based on service rendered, but am simply proposing that we go back to the first principles, which still exist in many rural communities where the newer idea of big business has not yet penetrated. Unquestionably many leading business men recognize this general principle and successfully operate their business accordingly. Many others would like to go back to it, if they saw how such a move could be accomplished.
Under stress of war, when it was clearly seen that a business and industrial system run primarily for profits could not produce the war gear needed, we promptly adopted a method of finance which was new to us. The Federal Government took over the financing of such corporations as were needed to furnish the munitions of war. The financing power did not expect any profit from these organizations, but attempted to run them in such a manner as to deliver the greatest possible amount of goods.
The best known of these is the Emergency Fleet Corporation. It is not surprising that such a large corporation developed in such great haste should have been inefficient in its operating methods, but there are reasons to believe that it will, in the long run, prove to have handled its business better than similar undertakings that were handled directly through the Washington bureaus. It gave us a concrete example of how to build a Public Service corporation, the fundamental fact concerning which is that it must be financed by public money. That it has not been more successful is due, not to the methods of its financing, but to the method of its operation. The sole object of the Fleet Corporation was to produce ships, but there has never been among the higher officers of the Corporation a single person, who, during the past twenty years, has made a record in production. They have all without exception been men of the business type of mind who have made their success through financiering, buying, selling, etc.
If the higher officers of the Fleet Corporation had been men who understood modern production methods, and had in the past been successful in getting results through their use, it is probable that the Corporation would have been highly successful, and would have given us a good example of how to build an effective Public Service corporation.
Mr. William B. Colver, Chairman of the Federal Trade Commission in the summer of 1917, explained how we might have a Public Service corporation for the distribution of coal. In such a corporation as Mr. Colver outlined, there would be good pay for all who rendered good service, but no ”profit.” Of course, all those who are now making profits over and above the proper reward for service rendered in the distribution of coal, opposed Mr. Colver ‘s plan, which was that a corporation, financed by the Federal Government, should buy at the mouth of each mine such coal as it needed, at a fair price based on the cost of operating that mine ; that this corporation should distribute to the community the coal at an average price, including the cost of distribution. We see no reason why such a corporation should not have solved the coal problem, and furnished us with an example of how to solve other similar problems. We need such information badly, for we are rapidly coming to a point where we realize that disagreements between employer and employee as to how the profits shall be shared can no longer be allowed to work hardship to the community.
The chaotic condition into which Europe is rapidly drifting by the failure of the present industrial and financial system, emphasizes the fact that in a civilization like ours the problems of peace may be quite as serious as the problems of war, and the emergencies created by them therefore justify the same kind of action on the part of the government as was justified by war.
Before proper action can be taken in this no matter it must be clearly recognized that today economic conditions have far more power for good or for evil than political theories. This is becoming so evident in Europe that it is impossible to fail much longer to recognize it here. The revolutions which have occurred in Europe and the agitation which seems about to create other revolutions are far more economic than political, and hence can be offset only by economic methods.
The Labor Unions of Great Britain, and the Soviet System of Russia, both aim, by different methods, to render service to the community, but whether they will do it effectively or not is uncertain, for they are revolutionary, and a revolution is a dangerous experiment, the result of which cannot be foreseen. The desired result can be obtained without a revolution and by methods with which we are already familiar, if we will only establish real public service corporations to handle problems which are of most importance to the community, and realize that capital like labor is entitled only to the reward it earns. In as much as the profits in any corporation go to those who finance that corporation, the only guarantee that a corporation is a real public service corporation is that it is financed by public money. If it is so financed all the profits go to the community, and if service is more important than profits, it is always possible to get a maximum service by eliminating profits.
This is the basis of the Emergency Fleet Corporation, and numerous other war corporations, which rendered such public service as it was impossible to get from any private corporations. Realizing that on the return of peace many private corporations feel that they have no longer such social responsibilities as they cheerfully accepted during the war, it would seem that real public service corporations would be of the greatest possible advantage in the industrial and business reorganization that is before us.
We have in this country a little time to think, because economic conditions here are not as acute as they are in Europe, and because of the greater prosperity of our country. But we must recognize the fact that our great complicated system of modern civilization, whose very life depends upon the proper functioning of the business and industrial system cannot be supported very much longer unless the business and industrial system devotes its energies as a primary object to rendering the service necessary to support it. We have no hesitation in saying that the workmen cannot continue to get high wages unless they do a big day’s work. Is it not an equally self-evident fact that the business man cannot continue to get big rewards unless he renders a corresponding amount of service? Apparently the similarity of these two propositions has not clearly dawned upon the man with the financial type of mind, for the reason, perhaps, that he has never compared them.
Such a change would produce hardships only for those who are getting the rewards they are not earning. It would greatly benefit those who are actually doing the work.
In order that we may get a clear conception of what such a condition would mean, let us imagine two nations as nearly identical as we can picture them, one of which had a business system which was based upon and supported by the service it rendered to the community. Let us imagine that the other nation, having the same degree of civilization, had a business system run primarily to give profits to those who controlled that system, which rendered service when such service increased its profits, but failed to render service when such service did not make for profits. To make the comparison more exact, let us further imagine a large portion of the most capable men of the latter community engaged continually in a pull and haul, one against the other, to secure the largest possible profits. Then let us ask ourselves in what relative state of economic development these two nations would find themselves at the end of ten years. It is not necessary to answer this question.
I say again, then, we have come to the Parting of the Ways, for a nation whose business system is based on service will in a short time show such advancement over one whose business system is operated primarily with the object of securing the greatest possible profits for the investing class, that the latter nation will not be long in the running.
America holds a unique place in the world and by its traditions is the logical nation to continue to develop its business system on the line of service. What is happening in Europe should hasten our decision to take this step, for the business system of this country is identical with the business system of Europe, which, if we are to believe the reports, is so endangered by the crude efforts of the Soviet to make business serve the community. The lesson is this : the business system must accept its social responsibility and devote itself primarily to service, or the community will ultimately make the attempt to take it over in order to operate it in its own interest. The spectacle of the attempt to accomplish this result in easrtern Europe is certainly not so attractive as to make us desire to try the same experiment here. Hence, we should act, and act quickly, on the former proposition.