By Henry Gantt

7: ECONOMICS OF DEMOCRACY

The prime function of a science is to enable us to anticipate the future in the field with which it has to deal. Judged by this standard, economic science has in the past been practically-worthless; for it absolutely failed to warn us of the greatest catastrophe that has ever befallen the civilized world. Further, when the catastrophe burst upon us, economists and financiers persisted in belittling it by insisting that the great war could last only a few months. Are they any nearer the truth in their theories of labor and capital, protection and free trade, or taxation?

 

When they talk about preparedness, what do they mean? Do they mean that we must so order our living as to prevent another such catastrophe, or do they simply mean that we must aim to be strong when the next catastrophe comes?

 

The latest economic thought indicates clearly that the fundamentals of both kinds of preparedness are the same, and that preparation for the former is the best basis on which to establish preparation for the latter. True preparedness, then, would seem to consist in a readjustment of our economic conditions with the object of averting another such catastrophe.

 

In considering this subject we must realize that:

 

The Nation reflects its leaders.

 

The Army reflects its general.

 

The Factory reflects its manager.

 

In a successful industrial nation, the industrial leaders must ultimately become the leaders of the nation. The condition of the industries will then become a true index of the condition of the nation. If the industries are not properly managed for the benefit of the whole community, no amount of military preparedness will avail in a real war. The military preparations of Germany, vast as they were, would have collapsed in six months had it not been for the social and industrial conditions on which they were based.

 

Army officers and others have told us most emphatically what military preparedness is, and how to get it. Innumerable papers have been written on industrial preparedness, and people in general are getting a pretty clear idea of what we mean by the term. Moreover, many are beginning to appreciate our lack in this respect.

 

Admittedly these pictures are not typical of our industries, but they do represent a condition which is all too common, and which must be corrected if we are to be prepared either for peace or for war.

 

Our record in the production of munitions, especially of ammunition, is not one to be proud of. Note what Mr. Bascom Little, President of the Cleveland, Ohio, Chamber of Commerce, and Chairman of the National Defense Committee of the Chamber of Commerce of the United States, said in the spring of 1916 :

“The work of Mr. Coffin’s committee has seemed to us very important, and so clearly related, in such practical ways, to what the business organization of the country are trying to do to further national defense, that those with which I am connected immediately formed a union with the committee on learning of its work.”

“The thing that has stirred up the business men of the Middle West during the past eighteen months has been the lesson they have learned in the making of war materials. It points a very vivid moral to all our people. It all looked very easy when it started a year and a half ago. The plant with which I am associated in Cleveland got an order for 250,000 three-inch high explosive shells. It was a simple enough looking job — just a question of machining.”

Fig. 2 – Unprepared

Fig. 3 – Prepared
Two views of the same shop doing substantially the same work. The lower picture was taken about a year after the upper from a slightly different view point.

 

The forgings were shipped to us and we were to finish and deliver. It began to dawn on us when the forgings came that this whole order, that looked so big to us, was less than one day’s supply of shells
for France or England or Russia; and we felt that in eight months by turning our plant, which is a first-class machine shop, onto this job we could fill the order. In a little while we got up against the process of hardening.

 

That — and mark what I say — was fourteen months ago. To date we have shipped and had accepted 130,000 shells, and those, about half our order, are not complete. They still have to be fitted by the fuse maker, then fitted in the brass cartridge cases with the propelling charge, and somewhere, sometime, maybe, they will get on the battlefield of Europe. Up to the present, none of them has arrived there.

Now this is the situation in a high-class efficient American plant. This is what happened when it turned to making munitions of war. The same thing has occurred in so many Middle Western plants, that their owners have made up their minds that if they are ever going to be called upon for service to their own country, they must know more about this business. They feel that they are now liabilities to the nation, and not assets in case of war. Proud as we may be of our industrial perfection, it has not worked here, and the country — particularly you in the East —may as well know it.

 

The comment on this will be that it is three years old, and that we have made great advances since then. In reply I can only say that if we have made marked advances I have been utterly unable to discover them.

 

The most casual investigation into the reasons why so many of the munition manufacturers have not made good, reveals the fact that their failure is due to lack of managerial ability rather than to any other cause. Without efficiency in management, efficiency of the workmen is useless, even if it is possible to get it. With an efficient management there is but little difficulty in training the workmen to be efficient. I have proved this so many times and so clearly that there can be absolutely no doubt about it. Our most serious trouble is incompetency in high places. As long as that remains uncorrected, no amount of efficiency in the workmen will avail very much.

 

The pictures by which this chapter is illustrated do not show anything concerning the efficiency of the individual workman, but they are a sweeping condemnation of the inefficiency of those responsible for the management, and illustrate the fact, so well known to many of us, that our industries are suffering from lack of competent managers, — which is another way of saying that many of those who control our industries hold their positions, not through their ability to accomplish results, but for some other reason. In other words, industrial control is too often based on favoritism or privilege, rather than on ability. This hampers the healthy, normal development of industrialism, which can reach its highest development only when equal opportunity is secured to all, and when all reward is equitably proportioned to service rendered. In other words, when industry becomes democratic.

 

We are, therefore, brought face to face with a form of preparedness which is even more fundamental than the Industrial Preparedness usually referred to, and I am indebted to Mr. W. N. Polakov for the name “Social Preparedness”, which means the democratization of industry and the establishment of such relations among the citizens themselves, and between the citizens and the government, as will cause a hearty and spontaneous response on the part of the citizens to the needs of the country.

 

At the breaking out of the great war in Europe, the thing which perhaps surprised us most was the enthusiasm with which the German people entered into it. Hardly less striking was the slowness with which the rank and file of Englishmen realized the problems they were up against, and their responsibilities concerning them.

 

Fig. 4 – Unprepared

Fig. 5 – Prepared
Two views of the same shop doing substantially the same work. The lower picture was taken about a year after the upper from a slightly different view point.

 

A short consideration of what happened in Germany in the last half of the nineteenth century, or before the war, may throw some light on this subject. Bismarck and Von Moltke, following the lead of Frederick the Great, believed and taught that the great industry of a country was War. In other words, that it was more profitable to take by violence from another than to produce. The history of the world, until the development of modern industrialism seemed to bear out that theory. Bismarck argued that to be strong from a military standpoint the nation must have a large number of well trained, intelligent, healthy men, and he set about so ordering the industries of Germany as to produce that result.

 

Military autocracy forced business and industry to see that men were properly trained and that their health was safe-guarded. In other words, because of the necessity of the Military state for such men, the state saw to it that industry was so organized as to develop high-grade men, with the result that a kind of industrial democracy was developed under the paternalistic guidance of an autocratic military party.

 

Under such influences, the increase of education and the development of men went on a pace, and were soon reflected in an industrial system which bade fair to surpass any other in the world.

 

In England, on the other hand, the business system was controlled by an autocratic and “socially irresponsible finance”, which, to a large extent, disregarded the interest of the workman and of the community. At the breaking out of the war, the superiority of the industries of Germany over the industries of England was manifest, not only by the feeling of the people, but by their loyalty to the National Government, which had so cared for, or disregarded, their individual welfare. This superiority became so rapidly apparent, that in order to make any headway against Germany, England was obliged to imitate the methods which had been developed in Germany, and to say that the industries (particularly the munition factories) which were needed for the salvation of the country, must serve the country and not the individual. The increased efficiency which England showed after the adoption of this method was most marked, and in striking contrast with the inefficiency displayed previously in similar work.

 

Confessedly our industries are not managed in the interest of the community, but in that of an autocratic finance. In Germany it was proved beyond doubt that an industrial system, forced by military autocracy to serve the community, is vastly stronger than an industrial system which serves only a financial autocracy.

 

The method by which Germany developed a singleness of purpose and tremendous power both for peace and for war — namely, autocratic military authority — is hateful to us, but we must not lose sight of the fact that such power was developed and may be developed by some other nation again in the future. If we would be strong when we are again faced with a contingency of developing a greater strength, or submitting, we must first of all develop a singleness of purpose for the whole community.

 

England demonstrated the same thing; for had England not rapidly increased her efficiency in the production of munitions, it would have been indeed a sad day for the British Empire.

 

In considering these facts, we should ask ourselves if there is not some fundamental fact which is accountable for the success of industry under such control. The one thing which stands out most prominently is the fact that, in the attempt to make the industries serve the community, an attempt was made to abolish industrial privilege, and to give every man an opportunity to do what he could and to reward him correspondingly.

 

As before stated, the industrial system of Germany was developed largely as an adjunct to its military system, which, to a degree at least, forced the abolition of financial and industrial privilege, and thereby in a large measure eliminated incompetency in high places. What results may not be expected, therefore, if we abolish privilege absolutely, and devote all our efforts to the development of an industrialism which shall serve the community and thus “develop the unconquerable power of real democracy”!

 

The close of the war and the abolition of political autocracy has brought us face to face with the question of a choice between the economic autocracy of the past, or an economic democracy. To prove that this is not mere idle speculation, note what one of our leading financiers said on the subject during the war:

 

“The President of the New York Life Insurance Company”, says Mr. Charles Ferguson, told the State Chamber of Commerce, during the great war, that under modern conditions the existence of even two rival sovereignties on this little planet has become absurd. This is true. We must therefore drive forward, through incredible waste and slaughter, to the settlement of the question of which of the rival Powers is to build the New Rome, and establish a military world-state on the Cesarean model — or else we must now set our faces toward a real democracy!

 

What is the basis of such a democracy?

 

The one thing in all the civilized world, which, like the Catholic Church of the middle ages, crosses all frontiers and binds together all peoples, is business. The Chinaman and the American by means of an interpreter find a common interest in business. Business is therefore the one possible bond which may bring universal peace. Economists and financiers fully realized this, and believed that an autocratic finance could accomplish the result. That was their fatal error. The beneficiaries of privilege invariably battle among themselves, even if they are strong enough to hold in subjection those that have no privileges, and who have to bear the brunt of the fight.

 

This is true whether the beneficiaries be individuals or nations. Hence neither internal strife nor external war can be eliminated as long as some people have privileges over others.

 

If privilege be eliminated not only will the danger of war be minimized, but the causes of domestic strife will be much reduced in number.

 

Then, and not until then, will the human race be in a position to make a continuous and uninterrupted advance.

 

The nation which first realizes this fact and eliminates privilege from business, will have a distinct lead on all others, and, other conditions being equal, will rapidly rise to a dominating place in the world. Such a nation will do by means of the arts of peace, that which some Germans seemed to think it was their mission to do by means of war. The opportunity is knocking at our door. Shall we turn it away?

 

The answer is that we must not turn it away. In fact, we dare not, if we would escape the economic convulsion that is now spreading over Europe. Soon after the signing of the armistice Mr. David R. Francis, formerly ambassador to Russia, said that the object of the Soviet Government was to prevent the exploitation of one man by another. According to Mr. Francis, the cause of this convulsion is the attempt of the social body to free itself of the exploitation of one man by another. Then he added, “Such an aim is manifestly absurd.” The convulsion is made all the more severe because there are people in every community that not only consider this aim absurd, but use all their influence to prevent the accomplishment of it.

 

If, at the end of a victorious war for democracy, a prominent representative of the victors is willing to proclaim publicly such a sentiment, it is perfectly evident that we have not yet solved all of our problems. Whether we approve of the Soviet method of government or not, even Mr. Francis must admit that their aim, as expressed by him, is a worthy one. It would be surprising if in the time which has elapsed since the Russian revolution an entirely satisfactory and permanent method should have been developed to prevent the exploitation of one man by another, but the fact that they have not yet established such a government is hardly a basis for the statement that the establishment of such a government is absurd.

 

This statement by Mr. Francis brings clearly to the front the question — Is our business system of the future going to continue to be one of exploitation of one man by another, or is it possible to have a business system from which such privilege has been eliminated!

 

In this connection it may be interesting to note that, for the past fifteen years, I and a small band of co-workers have been attempting to develop a system of industrial management which should not be dependent on the exploitation of one man by another, but should aim to give each as nearly as possible his just dues.


Strange as it may seem to those of the old way of thinking, the more nearly successful we have been in this attempt, the more prosperous have the concerns adopting our methods become. In view of this fact we beg to submit that the proposition does not seem to us to be absurd, even though we may not admit that any of the solutions heretofore offered have really accomplished the result. In a subsequent chapter, however, we shall present the progress which we have recently made in this direction.

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