Thorstein Veblen
The Engineers And The Price System.
(New York: B. W. Huebsch, 1921, 169 p.)
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Publishers' Note (from 1933, 3rd. printing)
The following series of papers is reprinted from the Dial, where they appeared 
from time to time during 1919, in the month immediately following the Armistice. 
Since then American industry has undergone a period of unprecedented prosperity, 
which has in its turn been followed by a period of depression even more 
aggravated than the one the author had before his eyes at the time of writing. 
The effect has therefore been as if no substantial change had taken place in the 
state of industry, of such a character as to make this discussion less pertinent 
now than it was at the time it was first printed. Indeed, the contrary is the 
case, not only because the difficulties inherent in our industrial practice have 
since come into fuller bearing, but also because recent discussion has turned 
more and more persistently upon the constructive suggestions embodied 
particularly in the last essay, entitled "A Memorandum of a Practicable Soviet 
of Technicians." The fact that these suggestions were put forward as they here 
appear fourteen years ago removes them from the category of current "depression 
cures"; they indicated fundamental problems whose present seriousness was 
predictable to at least one thinker who did not subscribe to the truths of 
conventional economics.
January, 1933.

Contents
  I. On the Nature and Uses of Sabotage,                       1
 II. The Industrial System and the Captains of Industry,      27
III. The Captains of Finance and the Engineers,               52
 IV. On the Danger of a Revolutionary Overturn,               83
  V. On the Circumstances Which Make for a Change,           105
 VI. A Memorandum on a Practicable Soviet of Technicians,    138
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The Engineers and the Price System
[1]
I
On The Nature and Uses Of Sabotage

"Sabotage" is a derivative of "sabot," which is French for a wooden shoe. It 
means going slow, with a dragging, clumsy movement, such as that manner of 
footgear may be expected to bring on. So it has come to describe any manoeuvre 
of slowing­down, inefficiency, bungling, obstruction. In American usage the word 
is very often taken to mean forcible obstruction, destructive tactics, 
industrial frightfulness, incendiarism and high explosives, although that is 
plainly not its first meaning nor its common meaning. Nor is that its ordinary 
meaning as the word is used among those who have advocated a recourse to 
sabotage as a means of enforcing an argument about wages or the conditions of 
work. The ordinary meaning of the word is better defined by an expression which 
has latterly come into use among the I. W. W., "conscientious withdrawal of 
efficiency" - although that phrase does not cover all that is rightly to be 
included under this technical term.
The sinister meaning which is often attached to the word in American usage, as 
denoting vio-[2]lence and disorder, appears to be due to the fact that the 
American usage has been shaped chiefly by persons and newspapers who have aimed 
to discredit the use of sabotage by organized workmen, and who have therefore 
laid stress on its less amiable manifestations. This is unfortunate. It lessens 
the usefulness of the word by making it a means of denunciation rather than of 
understanding. No doubt, violent obstruction has had its share in the strategy of 
sabotage as carried on by disaffected workmen, as well as in the similar tactics 
of rival business concerns. It comes into the case as one method of sabotage, 
though by no means the most usual or the most effective; but it is so 
spectacular and shocking a method that it has drawn undue attention to itself. 
Yet such deliberate violence is, no doubt, a relatively minor fact in the case, 
as compared with that deliberate malingering, confusion, and misdirection of 
work that makes up the bulk of what the expert practitioners would recognize as 
legitimate sabotage.
The word first came into use among the organized French workmen, the members of 
certain syndicats, to describe their tactics of passive resistance, and it has 
continued to be associated with [3] the strategy of these French workmen, who 
are known as syndicalists, and with their like­minded running­mates in other 
countries. But the tactics of these syndicalists, and their use of sabotage, do 
not differ, except in detail, from the tactics of other workmen elsewhere, or 
from the similar tactics of friction, obstruction, and delay habitually 
employed, from time to time, by both employées and employers to enforce an 
argument about wages and prices. Therefore, in the course of a quarter­century 
past, the word has quite unavoidably taken on a general meaning in common 
speech, and has been extended to cover all such peaceable or surreptitious 
manoeuvres of delay, obstruction, friction, and defeat, whether employed by the 
workmen to enforce their claims, or by the employers to defeat their employées, 
or by competitive business concerns to get the better of their business rivals 
or to secure their own advantage.
Such manoeuvres of restriction, delay, and hindrance have a large share in the 
ordinary conduct of business; but it is only lately that this ordinary line of 
business strategy has come to be recognized as being substantially of the same 
nature as the ordinary tactics of the syndicalists. So that it [4] has not been 
usual until the last few years to speak of manoeuvres of this kind as sabotage 
when they are employed by employers and their business concerns. But all this 
strategy of delay, restriction, hindrance, and defeat is manifestly of the same 
character, and should conveniently be called by the same name, whether it is 
carried on by business men or by workmen; so that it is no longer unusual now to 
find workmen speaking of "capitalistic sabotage" as freely as the employers and 
the newspapers speak of syndicalist sabotage. As the word is now used, and as it 
is properly used, it describes a certain system of industrial strategy or 
management, whether it is employed by one or another. What it describes is a 
resort to peaceable or surreptitious restriction, delay, withdrawal, or 
obstruction.
Sabotage commonly works within the law, although it may often be within the 
letter rather than the spirit of the law. It is used to secure some special 
advantage or preference, usually of a businesslike sort. It commonly has to do 
with something in the nature of a vested right, which one or another of the 
parties in the case aims to secure or defend, or to defeat or diminish; some 
preferential right or special advantage in respect of income or privilege, 
something in the way of a [5] vested interest. Workmen have resorted to such 
measures to secure improved conditions of work, or increased wages, or shorter 
hours, or to maintain their habitual standards, to all of which they have 
claimed to have some sort of a vested right. Any strike is of the nature of 
sabotage, of course. Indeed, a strike is a typical species of sabotage. That 
strikes have not been spoken of as sabotage is due to the accidental fact that 
strikes were in use before this word came into use. So also, of course, a 
lockout is another typical species of sabotage. That the lockout is employed by 
the employers against the employées does not change the fact that it is a means 
of defending a vested right by delay, withdrawal, defeat, and obstruction of the 
work to be done. Lockouts have not usually been spoken of as sabotage, for the 
same reason that holds true in the case of strikes. All the while it has been 
recognized that strikes and lockouts are of identically the same character.
All this does not imply that there is anything discreditable or immoral about 
this habitual use of strikes and lockouts. They are part of the ordinary conduct 
of industry under the existing system, and necessarily so. So long as the system 
remains unchanged these measures are a necessary and legitimate part of it. By 
virtue of his [6] ownership the owner­employer has a vested right to do as he 
will with his own property, to deal or not to deal with any person that offers, 
to withhold or withdraw any part or all of his industrial equipment and natural 
resources from active use for the time being, to run on half time or to shut 
down his plant and to lock out all those persons for whom he has no present use 
on his own premises. There is no question that the lockout is altogether a 
legitimate manoeuvre. It may even be meritorious, and it is frequently 
considered to be meritorious when its use helps to maintain sound conditions in 
business - that is to say profitable conditions - as frequently happens. Such is 
the view of the substantial citizens. So also is the strike legitimate, so long 
as it keeps within the law; and it may at times even be meritorious, at least in 
the eyes of the strikers. It is to be admitted quite broadly that both of these 
typical species of sabotage are altogether fair and honest in principle, 
although it does not therefore follow that every strike or every lockout is 
necessarily fair and honest in its working­out. That is in some degree a 
question of special circumstances.
Sabotage, accordingly, is not to be condemned out of hand, simply as such. There 
are many [7] measures of policy and management both in private business and in 
public administration which are unmistakably of the nature of sabotage and which 
are not only considered to be excusable, but are deliberately sanctioned by 
statute and common law and by the public conscience. Many such measures are 
quite of the essence of the case under the established system of law and order, 
price and business, and are faithfully believed to be indispensable to the 
common good. It should not be difficult to show that the common welfare in any 
community which is organized on the price system cannot be maintained without a 
salutary use of sabotage - that it to say, such habitual recourse to delay and 
obstruction of industry and such restriction of output as will maintain prices 
at a reasonably profitable level and so guard against business depression. 
Indeed, it is precisely considerations of this nature that are now engaging the 
best attention of officials and business men in their endeavors to tide over a 
threatening depression in American business and a consequent season of hardship 
for all those persons whose main dependence is free income from investments.
Without some salutary restraint in the way of sabotage on the productive use of 
the available [8] industrial plant and workmen, it is altogether unlikely that 
prices could be maintained at a reasonably profitable figure for any appreciable 
time. A businesslike control of the rate and volume of output is indispensable 
for keeping up a profitable market, and a profitable market is the first and 
unremitting condition of prosperity in any community whose industry is owned and 
managed by business men. And the ways and means of this necessary control of the 
output of industry are always and necessarily something in the nature of 
sabotage - something in the way of retardation, restriction, withdrawal, 
unemployment of plant and workmen - whereby production is kept short of 
productive capacity.
The mechanical industry of the new order is inordinately productive. So the rate 
and volume of output have to be regulated with a view to what the traffic will 
bear - that is to say, what will yield the largest net return in terms of price 
to the business men who manage the country's industrial system. Otherwise there 
will be "overproduction," business depression, and consequent hard times all 
around. Overproduction means production in excess of what the market will carry 
off at a sufficiently profitable price. So it appears that the continued 
prosperity of the [9] country from day to day hangs on a "conscientious 
withdrawal of efficiency" by the business men who control the country's 
industrial output. They control it all for their own use, of course, and their 
own use means always a profitable price.
In any community that is organized on the price system, with investment and 
business enterprise, habitual unemployment of the available industrial plant and 
workmen, in whole or in part, appears to be the indispensable condition without 
which tolerable conditions of life cannot be maintained. That is to say, in no 
such community can the industrial system be allowed to work at full capacity for 
any appreciable interval of time, on pain of business stagnation and consequent 
privation for all classes and conditions of men. The requirements of profitable 
business will not tolerate it. So the rate and volume of output must be adjusted 
to the needs of the market, not to the working capacity of the available 
resources, equipment and man power, nor to the community's need of consumable 
goods. Therefore there must always be a certain variable margin of unemployment 
of plant and manpower. Rate and volume of output can, of course, not be adjusted 
by exceeding the productive capacity of the industrial system. So it has to be 
regulated by keep-[10]ing short of maximum production by more or less as the 
condition of the market may require. It is always a question of more or less 
unemployment of plant and man power, and a shrewd moderation in the unemployment 
of these available resources, a "conscientious withdrawal of efficiency," 
therefore, is the beginning of wisdom in all sound workday business enterprise 
that has to do with industry.
All this is matter of course, and notorious. But it is not a topic on which one 
prefers to dwell. Writers and speakers who dilate on the meritorious exploits of 
the nation's business men will not commonly allude to this voluminous running 
administration of sabotage, this conscientious withdrawal of efficiency, that 
goes into their ordinary day's work. One prefers to dwell on those exceptional, 
sporadic, and spectacular episodes in business where business men have now and 
again successfully gone out of the safe and sane highway of conservative 
business enterprise that is hedged about with a conscientious withdrawal of 
efficiency, and have endeavored to regulate the output by increasing the 
productive capacity of the industrial system at one point or another.
But after all, such habitual recourse to peaceable or surreptitious measures of 
restraint, delay, [11] and obstruction in the ordinary businesslike management 
of industry is too widely known and too well approved to call for much 
exposition or illustration. Yet, as one capital illustration of the scope and 
force of such businesslike withdrawal of efficiency, it may be in place to 
recall that all the civilized nations are just now undergoing an experiment in 
businesslike sabotage on an unexampled scale and carried out with unexampled 
effrontery. All these nations that have come through the war, whether as 
belligerents or as neutrals, have come into a state of more or less pronounced 
distress, due to a scarcity of the common necessaries of life; and this distress 
falls, of course, chiefly on the common sort, who have at the same time borne 
the chief burden of the war which has brought them to this state of distress.
The common man has won the war and lost his livelihood. This need not be said by 
way of praise or blame. As it stands it is, broadly, an objective statement of 
fact, which may need some slight qualification, such as broad statements of fact 
will commonly need. All these nations that have come through the war, and more 
particularly the common run of their populations, are very much in need of all 
sorts of supplies for daily use, both for immediate consumption and for produc-
[12]tive use. So much so that the prevailing state of distress rises in many 
places to an altogether unwholesome pitch of privation, for want of the 
necessary food, clothing, shelter, and fuel. Yet in all these countries the 
staple industries are slowing down. There is an ever increasing withdrawal of 
efficiency. The industrial plant is increasingly running idle or half idle, 
running increasingly short of its productive capacity. Workmen are being laid 
off and an increasing number of those workmen who have been serving in the 
armies are going idle for want of work, at the same time that the troops which 
are no longer needed in the service are being demobilized as slowly as popular 
sentiment will tolerate, apparently for fear that the number of unemployed 
workmen in the country may presently increase to such proportions as to bring on 
a catastrophe. And all the while all these peoples are in great need of all 
sorts of goods and services which these idle plants and idle workmen are fit to 
produce. But for reasons of business expediency it is impossible to let these 
idle plants and idle workmen go to work - that is to say for reasons of 
insufficient profit to the business men interested, or in other words, for the 
reasons of insufficient income to the vested interests which control the [13] 
staple industries and so regulate the output of product. The traffic will not 
bear so large a production of goods as the community needs for current 
consumption, because it is considered doubtful whether so large a supply could 
be sold at prices that would yield a reasonable profit on the investment - or 
rather on the capitalization; that is to say, it is considered doubtful whether 
an increased production, such as to employ more workmen and supply the goods 
needed by the community, would result in an increased net aggregate income for 
the vested interests which control these industries. A reasonable profit always 
means, in effect, the largest obtainable profit.
All this is simple and obvious, and it should scarcely need explicit statement. 
It is for these business men to manage the country's industry, of course, and 
therefore to regulate the rate and volume of output; and also of course any 
regulation of the output by them will be made with a view to the needs of 
business; that is to say, with a view to the largest obtainable net profit, not 
with a view to the physical needs of these peoples who have come through the war 
and have made the world safe for the business of the vested interests. Should 
the business men in charge, by [14] any chance aberration, stray from this 
straight and narrow path of business integrity, and allow the community's needs 
unduly to influence their management of the community's industry, they would 
presently find themselves discredited and would probably face insolvency. Their 
only salvation is a conscientious withdrawal of efficiency. All this lies in the 
nature of the case. It is the working of the price system, whose creatures and 
agents these business men are. Their case is rather pathetic, as indeed they 
admit quite volubly. They are not in a position to manage with a free hand, the 
reason being that they have in the past, under the routine requirements of the 
price system as it takes effect in corporation finance, taken on so large an 
overhead burden of fixed charges that any appreciable decrease in the net 
earnings of the business will bring any well­managed concern of this class face 
to face with bankruptcy.
At the present conjuncture, brought on by the war and its termination, the case 
stands somewhat in this typical shape. In the recent past earnings have been 
large; these large earnings (free income) have been capitalized; their 
capitalized value has been added to the corporate capital and covered with 
securities bearing a fixed income­[15]charge; this income­charge, representing 
free income, has thereby become a liability on the earnings of the corporation; 
this liability cannot be met in case the concern's net aggregate earnings fall 
off in any degree; therefore prices must be kept up to such a figure as will 
bring the largest net aggregate return, and the only means of keeping up prices 
is a conscientious withdrawal of efficiency in these staple industries on which 
the community depends for a supply of the necessaries of life.
The business community has hopes of tiding things over by this means, but it is 
still a point in doubt whether the present unexampled large use of sabotage in 
the businesslike management of the staple industries will now suffice to bring 
the business community through this grave crisis without a disastrous shrinkage 
of its capitalization, and a consequent liquidation; but the point is not in 
doubt that the physical salvation of these peoples who have come through the war 
must in any case wait on the pecuniary salvation of these owners of corporate 
securities which represent free income. It is a sufficiently difficult passage. 
It appears that production must be curtailed in the staple industries, on pain 
of unprofitable prices. The case is not so desperate in those industries [16] 
which have immediately to do with the production of superfluities; but even 
these, which depend chiefly on the custom of those kept classes to whom the free 
income goes, are not feeling altogether secure. For the good of business it is 
necessary to curtail production of the means of life, on pain of unprofitable 
prices, at the same time that the increasing need of all sorts of the 
necessaries of life must be met in some passable fashion, on pain of such 
popular disturbances as will always come of popular distress when it passes the 
limit of tolerance.
Those wise business men who are charged with administering the salutary modicum 
of sabotage at this grave juncture may conceivably be faced with a dubious 
choice between a distasteful curtailment of the free income that goes to the 
vested interests, on the one hand, and an unmanageable onset of popular 
discontent on the other hand. And in either alternative lies disaster. Present 
indications would seem to say that their choice will fall out according to 
ancient habit, that they will be likely to hold fast by an undiminished free 
income for the vested interests at the possible cost of any popular discontent 
that may be in prospect - and then, with the help of the courts and the military 
arm, presently make reasonable [17] terms with any popular discontent that may 
arise. In which event it should all occasion no surprise or resentment, inasmuch 
as it would be nothing unusual or irregular and would presumably be the most 
expeditious way of reaching a modus vivendi. During the past few weeks, too, 
quite an unusually large number of machine guns have been sold to industrial 
business concerns of the larger sort, here and there, at least so they say. 
Business enterprise being the palladium of the Republic, it is right to take any 
necessary measures for its safeguarding. Price is of the essence of the case, 
whereas livelihood is not.
The grave emergency that has arisen out of the war and its provisional 
conclusion is, after all, nothing exceptional except in magnitude and severity. 
In substance it is the same sort of thing that goes on continually but 
unobtrusively and as a matter of course in ordinary times of business as usual. 
It is only that the extremity of the case is calling attention to itself. At the 
same time it serves impressively to enforce the broad proposition that a 
conscientious withdrawal of efficiency is the beginning of wisdom in all 
established business enterprise that has to do with industrial production. But 
it has been found that this grave interest which the vested interests always 
have in [18] a salutary retardation of industry at one point or another cannot 
well be left altogether to the haphazard and ill­coordinated efforts of 
individual business concerns, each taking care of its own particular line of 
sabotage within its own premises. The needed sabotage can best be administered 
on a comprehensive plan and by a central authority, since the country's industry 
is of the nature of a comprehensive interlocking system, whereas the business 
concerns which are called on to control the motions of this industrial system 
will necessarily work piecemeal, in severalty and at cross­purposes. In effect, 
their working at cross­purposes results in a sufficiently large aggregate 
retardation of industry, of course, but the resulting retardation is necessarily 
somewhat blindly apportioned and does not converge to a neat and perspicuous 
outcome. Even a reasonable amount of collusion among the interested business 
concerns will not by itself suffice to carry on that comprehensive moving 
equilibrium of sabotage that is required to preserve the business community from 
recurrent collapse or stagnation, or to bring the nation's traffic into line 
with the general needs of the vested interests.
Where the national government is charged with the general care of the country's 
business in-[19]terests, as is invariably the case among the civilized nations, 
it follows from the nature of the case that the nation's lawgivers and 
administration will have some share in administering that necessary modicum of 
sabotage that must always go into the day's work of carrying on industry by 
business methods and for business purposes. The government is in a position to 
penalize excessive or unwholesome traffic. So, it is always considered 
necessary, or at least expedient, by all sound mercantilists, as by a tariff or 
by subsidies, to impose and maintain a certain balance or proportion among the 
several branches of industry and trade that go to make up the nation's 
industrial system. The purpose commonly urged for measures of this class is the 
fuller utilization of the nation's industrial resources in material, equipment, 
and man power; the invariable effect is a lowered efficiency and a wasteful use 
of these resources, together with an increase of international jealousy. But 
measures of that kind are thought to be expedient by the mercantilists for these 
purposes - that is to say, by the statesmen of these civilized nations, for the 
purposes of the vested interests. The chief and nearly the sole means of 
maintaining such a fabricated balance and proportion among the nation's 
industries is to [20] obstruct the traffic at some critical point by prohibiting 
or penalizing any exuberant undesirables among these branches of industry. 
Disallowance, in whole or in part, is the usual and standard method.
The great standing illustration of sabotage administered by the government is 
the protective tariff, of course. It protects certain special interests by 
obstructing competition from beyond the frontier. This is the main use of a 
national boundary. The effect of the tariff is to keep the supply of goods down 
and thereby keep the price up, and so to bring reasonably satisfactory dividends 
to those special interests which deal in the protected articles of trade, at the 
cost of the underlying community. A protective tariff is a typical conspiracy 
in restraint of trade. It brings a relatively small, though absolutely large, 
run or free income to the special interests which benefit by it, at a 
relatively, and absolutely, large cost to the underlying community, and so it 
gives rise to a body of vested rights and intangible assets belonging to these 
special interests.
Of a similar character, in so far that in effect they are in the nature of 
sabotage - conscientious withdrawal of efficiency - are all manner of excise and 
revenue­stamp regulations; although [21] they are not always designed for that 
purpose. Such would be, for instance, the partial or complete prohibition of 
alcoholic beverages, the regulation of the trade in tobacco, opium, and other 
deleterious narcotics, drugs, poisons, and high explosives. Of the same nature, 
in effect if not in intention, are such regulations as the oleomargarine law; as 
also the unnecessarily costly and vexatious routine of inspection imposed on the 
production of industrial (denatured) alcohol, which has inured to the benefit of 
certain business concerns that are interested in other fuels for use in 
internal­combustion engines; so also the singularly vexatious and elaborately 
imbecile specifications that limit and discourage the use of the parcel post, 
for the benefit of the express companies and other carriers which have a vested 
interest in traffic of that kind.
It is worth noting in the same connection, although it comes in from the other 
side of the case, that ever since the express companies have been taken over by 
the federal administration there has visibly gone into effect a comprehensive 
system of vexation and delay in the detail conduct of their traffic, so 
contrived as to discredit federal control of this traffic and thereby provoke a 
popular sentiment in favor of its early return to pri-[22]vate control. Much the 
same state of things has been in evidence in the railway traffic under similar 
conditions. Sabotage is serviceable as a deterrent, whether in furtherance of 
the administration's work or in contravention of it.
In what has just been said there is, of course, no intention to find fault with 
any of these uses of sabotage. It is not a question of morals and good 
intentions. It is always to be presumed as a matter of course that the guiding 
spirit in all such governmental moves to regularize the nation's affairs, 
whether by restraint or by incitement, is a wise solicitude for the nation's 
enduring gain and security. All that can be said here is that many of these wise 
measures of restraint and incitement are in the nature of sabotage, and that in 
effect they habitually, though not invariably, inure to the benefit of certain 
vested interests - ordinarily vested interests which bulk large in the ownership 
and control of the nation's resources. That these measures are quite legitimate 
and presumably salutary, therefore, goes without saying. In effect they are 
measures for hindering traffic and industry at one point or another, which may 
often be a wise business precaution.
During the period of the war administrative [23] measures in the nature of 
sabotage have been ereatly extended in scope and kind. Peculiar and imperative 
exigencies have had to be met, and the staple means of meeting many of these new 
and exceptional exigencies has quite reasonably been something in the way of 
avoidance, disallowance, penalization, hindrance, a conscientious withdrawal of 
efficiency from work that does not fall in with the purposes of the 
Administration. Very much as is true in private business when a situation of 
doubt and hazard presents itself, so also in the business of government at the 
present juncture of exacting demands and inconvenient limitations, the 
Administration has been driven to expedients of disallowance and obstruction 
with regard to some of the ordinary processes of life, as, for instance, in the 
non­essential industries. It has also appeared that the ordinary equipment and 
agencies for gathering and distributing news and other information have in the 
past developed a capacity far in excess of what can safely be permitted in time 
of war or of returning peace. The like is true for the ordinary facilities for 
public discussion of all sorts of public questions. The ordinary facilities, 
which may have seemed scant enough in time of peace and slack interest, had 
after all de-[24]veloped a capacity far beyond what the governmental traffic 
will bear in these uneasy times of war and negotiations, when men are very much 
on the alert to know what is going on. By a moderate use of the later 
improvements in the technology of transport and communication, the ordinary 
means of disseminating information and opinions have grown so efficient that the 
traffic can no longer be allowed to run at full capacity during a period of 
stress in the business of government. Even the mail service has proved 
insufferably efficient, and a selective withdrawal of efficiency has gone into 
effect. To speak after the analogy of private business, it has been found best 
to disallow such use of the mail facilities as does not inure to the benefit of 
the Administration in the way of good will and vested rights of usufruct.
These peremptory measures of disallowance have attracted a wide and dubious 
attention; but they have doubtless been of a salutary nature and intention, in 
some way which is not to be understood by outsiders - that is to say, by 
citizens of the Republic. An unguarded dissemination of information and opinions 
or an unduly frank canvassing of the relevant facts by these outsiders, will be 
a handicap on the Administration's work, [25] and may even defeat the 
Administration's aims. At least so they say.
Something of much the same color has been observed elsewhere and in other times, 
so that all this nervously alert resort to sabotage on undesirable information 
and opinions is nothing novel, nor is it peculiarly democratic. The elder 
statesmen of the great monarchies, east and west, have long seen and approved 
the like. But these elder statesmen of the dynastic régime have gone to their 
work of sabotage on information because of a palpable division of sentiment 
between their government and the underlying population, such as does not exist 
in the advanced democratic commonwealths. The case of Imperial Germany during 
the period of the war is believed to show such a division of sentiment between 
the government and the underlying population, and also to show how such a 
divided sentiment on the part of a distrustful and distrusted population had 
best be dealt with. The method approved by German dynastic experience is 
sabotage, of a somewhat free swung character, censorship, embargo on 
communication, and also, it is confidently alleged, elaborate misinformation.
Such procedure on the part of the dynastic statesmen of the Empire is 
comprehensible even [26] to a layman. But how it all stands with those advanced 
democratic nations, like America, where the government is the dispassionately 
faithful agent and spokesman of the body of citizens, and where there can 
consequently be no division of aims and sentiment between the body of officials 
and any underlying population - all that is a more obscure and hazardous subject 
of speculation. Yet there has been censorship, somewhat rigorous, and there has 
been selective refusal of mail facilities, somewhat arbitrary, in these 
democratic commonwealths also, and not least in America, freely acknowledged to 
be the most naively democratic of them all. And all the while one would like to 
believe that it all has somehow served some useful end. It is all sufficiently 
perplexing.
[27]
II
The Industrial System and the Captains of Industry

It has been usual, and indeed it still is not unusual, to speak of three 
coordinate "factors of production": land, labor, and capital. The reason for 
this threefold scheme of factors in production is that there have been three 
recognized classes of income: rent, wages, and profits; and it has been assumed 
that whatever yields an income is a productive factor. This scheme has come down 
from the eighteenth century. It is presumed to have been true, in a general way, 
under the conditions which prevailed in the eighteenth century, and it has 
therefore also been assumed that it should continue to be natural, or normal, 
true in some eminent sense, under any other conditions that have come on since 
that time.
Seen in the light of later events this threefold plan of coordinate factors in 
production is notable for what it omits. It assigns no productive effect to the 
industrial arts, for example, for the [28] conclusive reason that the state of 
the industrial arts yields no stated or ratable income to any one class of 
persons; it affords no legal claim to a share in the community's yearly 
production of goods. The state of the industrial art is a joint stock of 
knowledge derived from past experience, and is held and passed on as an 
indivisible possession of the community at large. It is the indispensable 
foundation of all productive industry, of course, but except for certain minute 
fragments covered by patent rights or trade secrets, this joint stock is no 
man's individual property. For this reason it has not been counted in as a 
factor in production. The unexampled advance of technology during the past one 
hundred and fifty years has now begun to call attention to its omission from the 
threefold plan of productive factors handed down from that earlier time.
Another omission from the scheme of factors, as it was originally drawn, was the 
business man. But in the course of the nineteenth century the business man came 
more and more obtrusively to the front and came in for a more and more generous 
portion of the country's yearly income - which was taken to argue that he also 
contributed increasingly to the yearly production of goods. So a fourth factor 
of production has provisionally [29] been added to the threefold scheme, in the 
person of the "entrepreneur," whose wages of management are considered to 
measure his creative share in the production of goods, although there still is 
some question as to the precise part of the entrepreneur in productive industry.
"Entrepreneur" is a technical term to designate the man who takes care of the 
financial end of things. It covers the same fact as the more familiar "business 
man," but with a vague suggestion of big business rather than small. The typical 
entrepreneur is the corporation financier. And since the corporation financier 
has habitually come in for a very substantial share of the community's yearly 
income he has also been conceived to render a very substantial service to the 
community as a creative force in that productive industry out of which the 
yearly income arises. Indeed, it is nearly true that in current usage "producer" 
has come to mean "financial manager," both in the standard economic theory and 
in everyday speech.
There need of course be no quarrel with all this. It is a matter of usage. 
During the era of the machine industry - which is also the era of the commercial 
democracy - business men have controlled production and have managed the [30] 
industry of the commonwealth for their own ends, so that the material fortunes 
of all the civilized peoples have continued to turn on the financial management 
of their businessmen. And during the same period not only have the conditions of 
life among these civilized peoples continued to be fairly tolerable on the 
whole, but it is also true that the industrial system which these business men 
have been managing for their own private gain all this time has continually been 
growing more efficient on the whole. Its productive capacity per unit of 
equipment and man power has continually grown larger. For this very creditable 
outcome due credit should be, as indeed it has been, given to the business 
community which has had the oversight of things. The efficient enlargement of 
industrial capacity has, of course, been due to a continued advance in 
technology, to a continued increase of the available natural resources, and to a 
continued increase of population. But the business community have also had a 
part in bringing all this to pass; they have always been in a position to hinder 
this growth, and it is only by their consent and advice that things have been 
enabled to go forward so far as they have gone.
This sustained advance in productive capacity, [31] due to the continued advance 
in technology and in population, has also had another notable consequence. 
According to the Liberal principles of the eighteenth century any legally 
defensible receipt of income is a sure sign of productive work done. Seen in the 
light of this assumption, the visibly increasing productive capacity of the 
industrial system has enabled all men of a liberal and commercial mind not only 
to credit the businesslike captains of industry with having created this 
productive capacity, but also to overlook all that the same captains of industry 
have been doing in the ordinary course of business to hold productive industry 
in check. And it happens that all this time things have been moving in such a 
direction and have now gone so far that it is today quite an open question 
whether the businesslike management of the captains is not more occupied with 
checking industry than with increasing its productive capacity.

This captain of industry, typified by the corporation financier, and latterly by 
the investment banker, is one of the institutions that go to make up the new 
order of things, which has been coming on among all the civilized peoples ever 
since the Industrial Revolution set in. As such, as an [32] institutional 
growth, his life history hitherto should be worth looking into for any one who 
proposes to understand the recent growth and present drift of this new economic 
order. The beginnings of the captain of industry are to be seen at their best 
among those enterprising Englishmen who made it their work to carry the 
industrial promise of the Revolution out into tangible performance, during the 
closing decades of the eighteenth and the early decades of the nineteenth 
century. These captains of the early time are likely to be rated as inventors, 
at least in a loose sense of the word. But it is more to the point that they 
were designers and builders of factory, mill, and mine equipment, of engines, 
processes, machines, and machine tools, as well as shop managers, at the same 
time that they took care, more or less effectually, of the financial end. 
Nowhere do these beginnings of the captain of industry stand out so convincingly 
as among the English tool­builders of that early time, who designed, tried out, 
built, and marketed that series of indispensable machine tools that has made the 
practical foundation of the mechanical industry. Something to much the same 
effect is due to be said for the pioneering work of the Americans [33] along the 
same general lines of mechanical design and performance at a slightly later 
period. To men of this class the new industrial order owes much of its early 
success as well as of its later growth.
These men were captains of industry, entrepreneurs, in some such simple and 
comprehensive sense of the word as that which the economists appear to have had 
in mind for a hundred years after, when they have spoken of the wages of 
management that are due the entrepreneur for productive work done. They were a 
cross between a business man and an industrial expert, and the industrial expert 
appears to have been the more valuable half in their composition. But factory, 
mine, and ship owners, as well as merchants and bankers, also made up a vital 
part of that business community out of whose later growth and specialization the 
corporation financier of the nineteenth and twentieth centuries has arisen. His 
origins are both technological and commercial, and in that early phase of his 
life history which has been taken over into the traditions of economic theory 
and of common sense he carried on both of these lines of interest and of work in 
combination. That was before the large scale, [34] the wide sweep, and the 
profound specialization of the advanced mechanical industry had gathered 
headway.
But progressively the cares of business management grew larger and more 
exacting, as the scale of things in business grew larger, and so the directive 
head of any such business concern came progressively to give his attention more 
and more exclusively to the "financial end." At the same time and driven by the 
same considerations the businesslike management of industry has progressively 
been shifting to the footing of corporation finance. This has brought on a 
further division, dividing the ownership of the industrial equipment and 
resources from their management. But also at the same time the industrial 
system, on its technological side, has been progressively growing greater and 
going farther in scope diversity, specialization, and complexity, as well as in 
productive capacity per unit of equipment and man power.
The last named item of change, the progressive increase of productive capacity, 
is peculiarly significant in this connection. Through the earlier and pioneering 
decades of the machine era it appears to have been passably true that the 
ordinary routine of management in industrial busi-[35]ness was taken up with 
reaching out for new ways and means and speeding up production to maximum 
capacity. That was before standardization of processes and of unit products and 
fabrication of parts had been carried far, and therefore before quantity 
production had taken on anything like its later range and reach. And, partly 
because of that fact - because quantity production was then still a slight 
matter and greatly circumscribed, as contrasted with its later growth - the 
ordinary volume of output in the mechanical industries was still relatively 
slight and manageable. Therefore those concerns that were engaged in these 
industries still had a fairly open market for whatever they might turn out, a 
market capable of taking up any reasonable increase of output. Exceptions to 
this general rule occurred; as, e.g., in textiles. But the general rule stands 
out obtrusively through the early decades of the nineteenth century so far as 
regards English industry, and even more obviously in the case of America. Such 
an open market meant a fair chance for competitive production, without too much 
risk of overstocking. And running to the same effect, there was the continued 
increase of population and the continually increasing reach and volume of the 
means of transport, serving to [36] maintain a free market for any prospective 
increase of output, at prices which offered a fair prospect of continued profit. 
In the degree in which this condition of things prevailed a reasonably free 
competitive production would be practicable.
The industrial situation so outlined began visibly to give way toward the middle 
of the nineteenth century in England, and at a correspondingly later period in 
America. The productive capacity of the mechanical industry was visibly 
overtaking the capacity of the market, so that free competition without 
afterthought was no longer a sound footing on which to manage production. 
Loosely, this critical or transitional period falls in and about the second 
quarter of the nineteenth century in England; elsewhere at a correspondingly 
later date. Of course the critical point, when business exigencies began to 
dictate a policy of combination and restriction, did not come at the same date 
in all or in most of the mechanical industries; but it seems possible to say 
that, by and large, the period of transition to a general rule of restriction in 
industry conies on at the time and for the reason so indicated. There were also 
other factors engaged in that industrial situation, besides those spoken of 
above, [37] less notable and less sharply defined, but enforcing limitations of 
the same character. Such were, e.g., a rapidly gaining obsolescence of 
industrial plant, due to improvements and extensions, as also the partial 
exhaustion of the labor supply by persistent overwork, underfeeding, and 
unsanitary conditions - but this applies to the English case rather than 
elsewhere.
In point of time this critical period in the affairs of industrial business 
coincides roughly with the coming in of corporation finance as the ordinary and 
typical method of controlling the industrial output. Of course the corporation, 
or company, has other uses besides the restrictive control of the output with a 
view to a profitable market, but it should be sufficiently obvious that the 
combination of ownership and centralization of control which the corporation 
brings about is also exceedingly convenient for that purpose. And when it 
appears that the general resort to corporate organization of the larger sort 
sets in about the time when business exigencies begin to dictate an imperative 
restriction of output, it is not easy to avoid the conclusion that this was one 
of the ends to be served by this reorganization of business enterprise. Business 
enterprise may fairly be said to have shifted from the footing of [38] 
free­swung competitive production to that of a "conscientious withholding of 
efficiency," so soon and so far as corporation finance on a sufficiently large 
scale had come to be the controlling factor in industry. At the same time and in 
the same degree the discretionary control of industry, and of other business 
enterprise in great part, has passed into the hands of the corporation 
financier.
Corporate organization has continually gone forward to a larger scale and a more 
comprehensive coalition of forces, and at the same time, and more and more 
visibly, it has become the ordinary duty of the corporate management to adjust 
production to the requirements of the market by restricting the output to what 
the traffic will bear; that is to say, what will yield the largest net earnings. 
Under corporate management it rarely happens that production is pushed to the 
limit of capacity. It happens, and can happen, only rarely and intermittently. 
This has been true, increasingly, ever since the ordinary productive capacity of 
the mechanical industries seriously began to overtake and promised to exceed 
what the market would carry off at a reasonably profitable price. And ever since 
that critical turn in the affairs of industrial business - somewhere in the 
middle half of the nineteenth century - it [39] has become increasingly 
imperative to use a wise moderation and stop down the output to such a rate and 
volume as the traffic will bear. The cares of business have required an 
increasingly undivided attention on the part of the business men, and in an ever 
increasing measure their day's work has come to center about a running 
adjustment of sabotage on production. And for this purpose, evidently, the 
corporate organization of this business, on an increasingly large scale, is very 
serviceable, since the requisite sabotage on productive industry can be 
effectually administered only on a large plan and with a firm hand.

"The leaders in business are men who have studied and thought all their lives. 
They have thus learned to decide big problems at once, basing their decisions 
upon their knowledge of fundamental principles." - Jeremiah W. Jenks. That is to 
say, the surveillance of this financial end of industrial business, and the 
control of the requisite running balance of sabotage, have been reduced to a 
routine governed by settled principles of procedure and administered by suitably 
trained experts in corporation finance. But under the limitations to which all 
human capacity is subject it follows from this increasingly exacting dis-
[40]cipline of business administration that the business men are increasingly 
out of touch with that manner of thinking and those elements of knowledge that 
go to make up the logic and the relevant facts of the mechanical technology. 
Addiction to a strict and unremitting valuation of all things in terms of price 
and profit leaves them, by settled habit, unfit to appreciate those 
technological facts and values that can be formulated only in terms of tangible 
mechanical performance; increasingly so with every further move into a stricter 
addiction to businesslike management and with every further advance of the 
industrial system into a still wider scope and a still more diversified and more 
delicately balanced give and take among its interlocking members.
They are experts in prices and profits and financial manoeuvres; and yet the 
final discretion in all questions of industrial policy continues to rest in 
their hands. They are by training and interest captains of finance; and yet, 
with no competent grasp of the industrial arts, they continue to exercise a 
plenary discretion as captains of industry. They are unremittingly engaged in a 
routine of acquisition, in which they habitually reach their ends by a shrewd 
restriction of output; and yet they continue to be entrusted with the com-
[41]munity's industrial welfare, which calls for maximum production.
Such has been the situation in all the civilized countries since corporation 
finance has ruled industry, and until a recent date. Quite recently this settled 
scheme of business management has shown signs of giving way, and a new move in 
the organization of business enterprise has come in sight, whereby the 
discretionary control of industrial production is shifting still farther over to 
the side of finance and still farther out of touch with the requirements of 
maximum production. The new move is of a twofold character: (a) the financial 
captains of industry have been proving their industrial incompetence in a 
progressively convincing fashion, and (b) their own proper work of financial 
management has progressively taken on a character of standardized routine such 
as no longer calls for or admits any large measure of discretion or initiative. 
They have been losing touch with the management of industrial processes, at the 
same time that the management of corporate business has, in effect, been 
shifting into the hands of a bureaucratic clerical staff. The corporation 
financier of popular tradition is taking on the character of a chief of bureau.
[42] The changes which have brought the corporation financier to this somewhat 
inglorious position of a routine administrator set in along with the early 
growth of corporation finance, somewhere around the middle of the nineteenth 
century, and they have come to a head somewhere about the passage to the 
twentieth century, although it is only since the latter date that the outcome is 
becoming at all clearly defined. When corporate organization and the consequent 
control of output came into bearing there were two lines of policy open to the 
management: (a) to maintain profitable prices by limiting the output, and (b) to 
maintain profits by lowering the production cost of an increased output. To some 
extent both of these lines were followed, but on the whole the former proved the 
more attractive; it involved less risk, and it required less acquaintance with 
the working processes of industry. At least it appears that in effect the 
preference was increasingly given to the former method during this half­century 
of financial management. For this there were good reasons. The processes of 
production were continually growing more extensive, diversified, complicated, 
and more difficult for any layman in technology to comprehend - and the 
corporation financier was such a layman, [43] necessarily and increasingly so, 
for reasons indicated above. At the same time, owing to a continued increase of 
population and a continued extension of the industrial system, the net product 
of industry and its net earnings continued to increase independently of any 
creative effort on the part of the financial management. So the corporation 
financier, as a class, came in for an "unearned increment" of income, on the 
simple plan of "sitting tight." That plan is intelligible to any layman. All 
industrial innovation and all aggressive economy in the conduct of industry not 
only presumes an insight into the technological details of the industrial 
process, but to any other than the technological experts, who know the facts 
intimately, any move of that kind will appear hazardous. So the business men who 
have controlled industry, being laymen in all that concerns its management, have 
increasingly been content to let well enough alone and to get along with an ever 
increasing overhead charge of inefficiency, so long as they have lost nothing by 
it. The result has been an ever increasing volume of waste and misdirection in 
the use of equipment, resources, and man power throughout the industrial system.
In time, that is to say within the last few years, [44] the resulting lag, leak, 
and friction in the ordinary working of this mechanical industry under business 
management have reached such proportions that no ordinarily intelligent outsider 
can help seeing them wherever he may look into the facts of the case. But it is 
the industrial experts, not the business men, who have finally begun to 
criticize this businesslike mismanagement and neglect of the ways and means of 
industry. And hitherto their efforts and advice have met with no cordial 
response from the business men in charge, who have, on the whole, continued to 
let well enough alone - that is to say, what is well enough for a short­sighted 
business policy looking to private gain, however poorly it may serve the 
material needs of the community. But in the meantime two things have been 
happening which have deranged the régime of the corporation financier: 
industrial experts, engineers, chemists, mineralogists, technicians of all 
kinds, have been drifting into more responsible positions in the industrial 
system and have been growing up and multiplying within the system, because the 
system will no longer work at all without them; and on the other hand, the large 
financial interests on whose support the corporation financiers have been 
leaning have gradually come to realize that [45] corporation finance can best be 
managed as a comprehensive bureaucratic routine, and that the two pillars of the 
house of corporate business enterprise of the larger sort are the industrial 
experts and the large financial concerns that control the necessary funds; 
whereas the corporation financier is little more than a dubious intermediate 
term between these two.

One of the greater personages in American business finance took note of this 
situation in the late nineties and set about turning it to account for the 
benefit of himself and his business associates, and from that period dates a new 
era in American corporation finance. It was for a time spoken of loosely as the 
Era of Trust­Making, but that phrase does not describe it at all adequately. It 
should rather be called the Era of the Investment Banker, and it has come to its 
present stage of maturity and stability only in the course of the past 
quarter­century.
The characteristic features and the guiding purpose of this improved method in 
corporation finance are best shown by a showing of the methods and achievements 
of that great pioneer by whom it was inaugurated. As an illustrative case, then, 
the American steel business in the nine-[46]ties was suffering from the 
continued use of out­of­date processes, equipment, and locations, from wasteful 
management under the control of stubbornly ignorant corporation officials, and 
particularly from intermittent haphazard competition and mutual sabotage between 
the numerous concerns which were then doing business in steel. It appears to 
have been the last­named difficulty that particularly claimed the attention and 
supplied the opportunity of the great pioneer. He can by no stretch of charity 
be assumed to have had even a slight acquaintance with the technological needs 
and shortcomings of the steel industry. But to a man of commercial vision and 
financial sobriety it was plain that a more comprehensive, and therefore more 
authoritative, organization and control of the steel business would readily 
obviate much of the competition which was deranging prices. The apparent purpose 
and the evident effect of the new and larger coalition of business interests in 
steel was to maintain profitable prices by a reasonable curtailment of 
production. A secondary and less evident effect was a more economical management 
of the industry, which involved some displacement of quondam corporation 
financiers and some introduction of industrial experts. A further, but unavowed, 
[47] end to be served by the same move in each of the many enterprises in 
coalition undertaken by the great pioneer and by his competitors was a bonus 
that came to these enterprising men in the shape of an increased capitalization 
of the business. But the notable feature of it all as seen from the point of 
view of the public at large was always the stabilization of prices at a 
reasonably high level, such as would always assure reasonably large earnings on 
the increased capitalization.
Since then this manner of corporation finance has been further perfected and 
standardized, until it will now hold true that no large move in the field of 
corporation finance can be made without the advice and consent of those large 
funded interests that are in a position to act as investment bankers; nor does 
any large enterprise in corporation business ever escape from the continued 
control of the investment bankers in any of its larger transactions; nor can any 
corporate enterprise of the larger sort now continue to do business except on 
terms which will yield something appreciable in the way of income to the 
investment bankers, whose continued support is necessary to its success.
The financial interest here spoken of as the investment banker is commonly 
something in the [48] way of a more or less articulate syndicate of financial 
houses, and it is to be added that the same financial concerns are also 
commonly, if not invariably, engaged or interested in commercial banking of the 
usual kind. So that the same well­established, half­syndicated ramification of 
banking houses that have been taking care of the country's commercial banking, 
with its center of credit and of control at the country's financial metropolis, 
is ready from beforehand to take over and administer the country's corporation 
finance on a unified plan and with a view to an equitable distribution of the 
country's net earnings among themselves and their clients. The more inclusive 
this financial organization is, of course, the more able it will be to manage 
the country's industrial system as an inclusive whole and prevent any hazardous 
innovation or experiment, as well as to limit production of the necessaries to 
such a volume of output as will yield the largest net return to itself and its 
clients.
Evidently the improved plan which has thrown the discretion and responsibility 
into the hands of the investment banker should make for a safe and sound conduct 
of business, such as will avoid fluctuations of price, and more particularly 
avoid any unprofitable speeding­up of productive indus-[49]try. Evidently, too, 
the initiative has hereby passed out of the hands of the corporation financier, 
who has fallen into the position of a financial middleman or agent, with limited 
discretion and with a precariously doubtful future. But all human institutions 
are susceptible of improvement, and the course of improvement may now and again, 
as in his case, result in supersession and displacement. And doubtless it is all 
for the best, that is to say, for the good of business, more particularly for 
the profit of big business.
But now as always corporation finance is a traffic in credit; indeed, now more 
than ever before. Therefore to stabilize corporate business sufficiently in the 
hands of this inclusive quasi­syndicate of banking interests it is necessary 
that the credit system of the country should as a whole be administered on a 
unified plan and inclusively. All of which is taken care of by the same 
conjunction of circumstances; the same quasi­syndicate of banking interests that 
makes use of the country's credit in the way of corporation finance is also the 
guardian of the country's credit at large. From which it results that, as 
regards those large­scale credit extensions which are of substantial 
consequence, the credits and debits are, in effect, pooled within the syndicate, 
so that no substantial de-[50]rangement of the credit situation can take effect 
except by the free choice of this quasi­syndicate of investment banking houses; 
that is to say, not except they see an advantage to themselves in allowing the 
credit situation to be deranged, and not beyond the point which will best serve 
their collective purpose as against the rest of the community. With such a 
closed system no extension of credit obligations or multiplication of corporate 
securities, with the resulting inflation of values, need bring any risk of a 
liquidation, since credits and debits are in effect pooled within the system. By 
way of parenthesis it may also be remarked that under these circumstances 
"credit" has no particular meaning except as a method of accounting. Credit is 
also one of the timeworn institutions that are due to suffer obsolescence by 
improvement.
This process of pooling and syndication that is remaking the world of credit and 
corporation finance has been greatly helped on in America by the establishment 
of the Federal Reserve system, while somewhat similar results have been achieved 
elsewhere by somewhat similar devices. That system has greatly helped to extend, 
facilitate, simplify, and consolidate the unified control of the country's 
credit arrangements, and it has very [51] conveniently left the substantial 
control in the hands of those larger financial interests into whose hands the 
lines of control in credit and industrial business were already being gathered 
by force of circumstances and by sagacious management of the interested parties. 
By this means the substantial core of the country's credit system is gathered 
into a self­balanced whole, closed and unbreakable, self­insured against all 
risk and derangement. All of which converges to the definitive stabilization of 
the country's business; but since it reduces financial traffic to a riskless 
routine it also converges to the conceivable obsolescence of corporation finance 
and eventually, perhaps, of the investment banker.
[52]
III
The Captains of Finance and the Engineers.

In more than one respect the industrial system of today is notably different 
from anything that has gone before. It is eminently a system, self­balanced and 
comprehensive; and it is a system of interlocking mechanical processes, rather 
than of skilful manipulation. It is mechanical rather than manual. It is an 
organization of mechanical powers and material resources, rather than of skilled 
craftsmen and tools; although the skilled workmen and tools are also an 
indispensable part of its comprehensive mechanism. It is of an impersonal 
nature, after the fashion of the material sciences, on which it constantly 
draws. It runs to "quantity production" of specialized and standardized goods 
and services. For all these reasons it lends itself to systematic control under 
the direction of industrial experts, skilled technologists, who may be called 
"production engineers," for want of a better term.
This industrial system runs on as an inclusive organization of many and diverse 
interlocking me-[53]chanical processes, interdependent and balanced among 
themselves in such a way that the due working of any part of it is conditioned 
on the due working of all the rest. Therefore it will work at its best only on 
condition that these industrial experts, production engineers, will work 
together on a common understanding; and more particularly on condition that they 
must not work at cross purposes. These technological specialists whose constant 
supervision is indispensable to the due working of the industrial system 
constitute the general staff of industry, whose work it is to control the 
strategy of production at large and to keep an oversight of the tactics of 
production in detail.
Such is the nature of this industrial system on whose due working depends the 
material welfare of all the civilized peoples. It is an inclusive system drawn 
on a plan of strict and comprehensive interdependence, such that, in point of 
material welfare, no nation and no community has anything to gain at the cost of 
any other nation or community. In point of material welfare, all the civilized 
peoples have been drawn together by the state of the industrial arts into a 
single going concern. And for the due working of this inclusive going concern it 
is essential that that corps of [54] technological specialists who by training, 
insight, and interest make up the general staff of industry must have a free 
hand in the disposal of its available resources, in materials, equipment, and 
man power, regardless of any national pretensions or any vested interests. Any 
degree of obstruction, diversion, or withholding of any of the available 
industrial forces, with a view to the special gain of any nation or any 
investor, unavoidably brings on a dislocation of the system; which involves a 
disproportionate lowering of its working efficiency and therefore a 
disproportionate loss to the whole, and therefore a net loss to all its parts.
And all the while the statesmen are at work to divert and obstruct the working 
forces of this industrial system, here and there, for the special advantage of 
one nation and another at the cost of the rest; and the captains of finance are 
working, at cross purposes and in collusion, to divert whatever they can to the 
special gain of one vested interest and another, at any cost to the rest. So it 
happens that the industrial system is deliberately handicapped with dissension, 
misdirection, and unemployment of material resources, equipment, and man power, 
at every turn where the statesmen or the captains of finance can touch its [55] 
mechanism; and all the civilized peoples are suffering privation together 
because their general staff of industrial experts are in this way required to 
take orders and submit to sabotage at the hands of the statesmen and the vested 
interests. Politics and investment are still allowed to decide matters of 
industrial policy which should plainly be left to the discretion of the general 
staff of production engineers driven by no commercial bias.

No doubt this characterization of the industrial system and its besetting 
tribulations will seem overdrawn. However, it is not intended to apply to any 
date earlier than the twentieth century, or to any backward community that still 
lies outside the sweep of the mechanical industry. Only gradually during the 
past century, while the mechanical industry has progressively been taking over 
the production of goods and services, and going over to quantity production, has 
the industrial system taken on this character of an inclusive organization of 
interlocking processes and interchange of materials; and it is only in the 
twentieth century that this cumulative progression has come to a head with such 
effect that this characterization is now visibly becoming true. And even now 
[56] it will hold true, visibly and securely, only as applies to the leading 
mechanical industries, those main lines of industry that shape the main 
conditions of life, and in which quantity production has become the common and 
indispensable rule. Such are, e.g., transport and communication; the production 
and industrial use of coal, oil, electricity and water power; the production of 
steel and other metals; of wood, pulp, lumber, cement and other building 
materials; of textiles and rubber; as also grain­milling and much of the 
grain­growing, together with meat­packing and a good share of the stock­raising 
industry.
There is, of course, a large volume of industry in many lines which has not, or 
only in part and doubtfully, been drawn into this network of mechanical 
processes and quantity production, in any direct and conclusive fashion. But 
these other lines of industry that still stand over on another and older plan of 
operation are, after all, outliers and subsidiaries of the mechanically 
organized industrial system, dependent on or subservient to those greater 
underlying industries which make up the working body of the system, and which 
therefore set the pace for the rest. And in the main, therefore, and as regards 
these greater mechanical industries on whose due work-[57]ing the material 
welfare of the community depends from day to day, this characterization will 
apply without material abatement.
But it should be added that even as regards these greater, primary and 
underlying, lines of production the system has not yet reached a fatal degree of 
close­knit interdependence, balance, and complication; it will still run along 
at a very tolerable efficiency in the face of a very appreciable amount of 
persistent derangement. That is to say, the industrial system at large has not 
yet become so delicately balanced a mechanical structure and process that the 
ordinary amount of derangement and sabotage necessary to the ordinary control of 
production by business methods will paralyze the whole outright. The industrial 
system is not yet sufficiently close­knit for that. And yet, that extent and 
degree of paralysis from which the civilized world's industry is suffering just 
now, due to legitimate businesslike sabotage, goes to argue that the date may 
not be far distant when the interlocking processes of the industrial system 
shall have become so closely interdependent and so delicately balanced that even 
the ordinary modicum of sabotage involved in the conduct of business as usual 
will bring the whole to a fatal collapse. The derangement and priva-[58]tion 
brought on by any well organized strike of the larger sort argues to the same 
effect.
In effect, the progressive advance of this industrial system towards an all-
inclusive mechanical balance of interlocking processes appears to be approaching 
a critical pass, beyond which it will no longer be practicable to leave its 
control in the hands of business men working at cross purposes for private gain, 
or to entrust its continued administration to others than suitably trained 
technological experts, production engineers without a commercial interest. What 
these men may then do with it all is not so plain; the best they can do may not 
be good enough; but the negative proposition is becoming sufficiently plain, 
that this mechanical state of the industrial arts will not long tolerate the 
continued control of production by the vested interests under the current 
businesslike rule of incapacity by advisement.

In the beginning, that is to say during the early growth of the machine 
industry, and particularly in that new growth of mechanical industries which 
arose directly out of the Industrial Revolution, there was no marked division 
between the industrial experts and the business managers. That was before the 
new industrial system had gone [59] far on the road of progressive 
specialization and complexity, and before business had reached an exactingly 
large scale; so that even the business men of that time, who were without 
special training in technological matters, would still be able to exercise 
something of an intelligent oversight of the whole, and to understand something 
of what was required in the mechanical conduct of the work which they financed 
and from which they drew their income. Not unusually the designers of industrial 
processes and equipment would then still take care of the financial end, at the 
same time that they managed the shop. But from an early point in the development 
there set in a progressive differentiation, such as to divide those who designed 
and administered the industrial processes from those others who designed and 
managed the commercial transactions and took care of the financial end. So there 
also set in a corresponding division of powers between the business management 
and the technological experts. It became the work of the technologist to 
determine, on technological grounds, what could be done in the way of productive 
industry, and to contrive ways and means of doing it; but the business 
management always continued to decide, on commercial grounds, how much work 
should [60] be done and what kind and quality of goods and services should be 
produced; and the decision of the business management has always continued to be 
final, and has always set the limit beyond which production must not go.
With the continued growth of specialization the experts have necessarily had 
more and more to say in the affairs of industry; but always their findings as to 
what work is to be done and what ways and means are to be employed in production 
have had to wait on the findings of the business managers as to what will be 
expedient for the purpose of commercial gain. This division between business 
management and industrial management has continued to go forward, at a 
continually accelerated rate, because the special training and experience 
required for any passably efficient organization and direction of these 
industrial processes has continually grown more exacting, calling for special 
knowledge and abilities on the part of those who have this work to do and 
requiring their undivided interest and their undivided attention to the work in 
hand. But these specialists in technological knowledge, abilities, interest, and 
experience, who have increasingly come into the case in this way - inventors, 
designers, chemists, mineralogists, soil experts, crop specialists, [61] 
production managers and engineers of many kinds and denominations - have 
continued to be employées of the captains of industry, that is to say, of the 
captains of finance, whose work it has been to commercialize the knowledge and 
abilities of the industrial experts and turn them to account for their own gain.
It is perhaps unnecessary to add the axiomatic corollary that the captains have 
always turned the technologists and their knowledge to account in this way only 
so far as would serve their own commercial profit, not to the extent of their 
ability; or to the limit set by the material circumstances; or by the needs of 
the community. The result has been, uniformly and as a matter of course, that 
the production of goods and services has advisedly been stopped short of 
productive capacity, by curtailment of output and by derangement of the 
productive system. There are two main reasons for this, and both have operated 
together throughout the machine era to stop industrial production increasingly 
short of productive capacity, (a) The commercial need of maintaining a 
profitable price has led to an increasingly imperative curtailment of the 
output, as fast as the advance of the industrial arts has enhanced the 
productive capacity. And (b) The continued advance of the [62] mechanical 
technology has called for an ever­increasing volume and diversity of special 
knowledge, and so has left the businesslike captains of finance continually 
farther in arrears, so that they have been less and less capable of 
comprehending what is required in the ordinary way of industrial equipment and 
personnel. They have therefore, in effect, maintained prices at a profitable 
level by curtailment of output rather than by lowering production­cost per unit 
of output, because they have not had such a working acquaintance with the 
technological facts in the case as would enable them to form a passably sound 
judgment of suitable ways and means for lowering production­cost; and at the 
same time, being shrewd business men, they have been unable to rely on the 
hired­man's­loyalty of technologists whom they do not understand. The result has 
been a somewhat distrustful blindfold choice of processes and personnel and a 
consequent enforced incompetence in the management of industry, a curtailment of 
output below the needs of the community, below the productive capacity of the 
industrial system, and below what an intelligent control of production would 
have made commercially profitable.
Through the earlier decades of the machine era these limitations imposed on the 
work of the ex-[63]perts by the demands of profitable business and by the 
technical ignorance of the business men, appears not to have been a heavy 
handicap, whether as a hindrance to the continued development of technological 
knowledge or as an obstacle to its ordinary use in industry. That was before the 
mechanical industry had gone far in scope, complexity, and specialization; and 
it was also before the continued work of the technologists had pushed the 
industrial system to so high a productive capacity that it is forever in danger 
of turning out a larger product than is required for a profitable business. But 
gradually, with the passage of time and the advance of the industrial arts to a 
wider scope and a larger scale, and to an increasing specialization and 
standardization of processes, the technological knowledge that makes up the 
state of the industrial arts has called for a higher degree of that training 
that makes industrial specialists; and at the same time any passably efficient 
management of industry has of necessity drawn on them and their special 
abilities to an ever­increasing extent. At the same time and by the same shift 
of circumstances, the captains of finance, driven by an increasingly close 
application to the affairs of business, have been going farther out of touch 
with the ordinary real-[64]ities of productive industry; and, it is to be 
admitted, they have also continued increasingly to distrust the technological 
specialists, whom they do not understand, but whom they can also not get along 
without. The captains have per force continued to employ the technologists, to 
make money for them, but they have done so only reluctantly, tardily, sparingly, 
and with a shrewd circumspection; only because and so far as they have been 
persuaded that the use of these technologists was indispensable to the making of 
money.
One outcome of this persistent and pervasive tardiness and circumspection on the 
part of the captains has been an incredibly and increasingly uneconomical use of 
material resources, and an incredibly wasteful organization of equipment and 
manpower in those great industries where the technological advance has been most 
marked. In good part it was this discreditable pass, to which the leading 
industries had been brought by these one­eyed captains of industry, that brought 
the régime of the captains to an inglorious close, by shifting the initiative 
and discretion in this domain out of their hands into those of the investment 
bankers. By custom the investment bankers had occupied a position between or 
overlapping the [65] duties of a broker in corporate securities and those of an 
underwriter of corporate flotations - such a position, in effect, as is still 
assigned them in the standard writings on corporation finance. The increasingly 
large scale of corporate enterprise, as well as the growth of a mutual 
understanding among these business concerns, also had its share in this new 
move. But about this time, too, the "consulting engineers" were coming notably 
into evidence in many of those lines of industry in which corporation finance 
has habitually been concerned.
So far as concerns the present argument the ordinary duties of these consulting 
engineers have been to advise the investment bankers as to the industrial and 
commercial soundness, past and prospective, of any enterprise that is to be 
underwritten. These duties have comprised a painstaking and impartial 
examination of the physical properties involved in any given case, as well as an 
equally impartial auditing of the accounts and appraisal of the commercial 
promise of such enterprises, for the guidance of the bankers or syndicate of 
bankers interested in the case as underwriters. On this ground working 
arrangements and a mutual understanding presently arose be-[66]tween the 
consulting engineers and those banking houses that habitually were concerned in 
the underwriting of corporate enterprises.
The effect of this move has been twofold: experience has brought out the fact 
that corporation finance, at its best and soundest, has now become a matter of 
comprehensive and standardized bureaucratic routine, necessarily comprising the 
mutual relations between various corporate concerns, and best to be taken care 
of by a clerical staff of trained accountants; and the same experience has put 
the financial houses in direct touch with the technological general staff of the 
industrial system, whose surveillance has become increasingly imperative to the 
conduct of any profitable enterprise in industry. But also, by the same token, 
it has appeared that the corporation financier of nineteenth­century tradition 
is no longer of the essence of the case in corporation finance of the larger and 
more responsible sort. He has, in effect, come to be no better than an idle 
wheel in the economic mechanism, serving only to take up some of the lubricant.
Since and so far as this shift out of the nineteenth century into the twentieth 
has been completed, the corporation financier has ceased to be a captain of 
industry and has become a lieutenant [67] of finance; the captaincy having been 
taken over by the syndicated investment bankers and administered as a 
standardized routine of accountancy, having to do with the flotation of 
corporation securities and with their fluctuating values, and having also 
something to do with regulating the rate and volume of output in those 
industrial enterprises which so have passed under the hand of the investment 
bankers.

By and large, such is the situation of the industrial system today, and of that 
financial business that controls the industrial system. But this state of things 
is not so much an accomplished fact handed on out of the recent past; it is only 
that such is the culmination in which it all heads up in the immediate present, 
and that such is the visible drift of things into the calculable future. Only 
during the last few years has the state of affairs in industry been obviously 
falling into the shape so outlined, and it is even yet only in those larger and 
pace­making lines of industry which are altogether of the new technological 
order that the state of things has reached this finished shape. But in these 
larger and underlying divisions of the industrial system the present posture and 
drift of things is unmistakable. Meantime very much [68] still stands over out 
of that régime of rule­of­thumb, competitive sabotage, and commercial 
logrolling, in which the businesslike captains of the old order are so 
altogether well at home, and which has been the best that the captains have 
known how to contrive for the management of that industrial system whose 
captains they have been. So that wherever the production experts are now taking 
over the management, out of the dead hand of the self­made captains, and 
wherever they have occasions to inquire into the established conditions of 
production, they find the ground cumbered with all sorts of incredible 
makeshifts of waste and inefficiency - such makeshifts as would perhaps pass 
muster with any moderately stupid elderly layman, but which look like blindfold 
guesswork to these men who know something of the advanced technology and its 
working­out.

Hitherto, then, the growth and conduct of this industrial system presents this 
singular outcome. The technology - the state of the industrial arts - which 
takes effect in this mechanical industry is in an eminent sense a joint stock of 
knowledge and experience held in common by the civilized peoples. It requires 
the use of trained and in-[69]structed workmen - born, bred, trained, and 
instructed at the cost of the people at large. So also it requires, with a 
continually more exacting insistence, a corps of highly trained and specially 
gifted experts, of divers and various kinds. These, too, are born, bred, and 
trained at the cost of the community at large, and they draw their requisite 
special knowledge from the community's joint stock of accumulated experience. 
These expert men, technologists, engineers, or whatever name may best suit them, 
makeup the indispensable General Staff of the industrial system; and without 
their immediate and unremitting guidance and correction the industrial system 
will not work. It is a mechanically organized structure of technical processes 
designed, installed, and conducted by these production engineers. Without them 
and their constant attention the industrial equipment, the mechanical appliances 
of industry, will foot up to just so much junk. The material welfare of the 
community is unreservedly bound up with the due working of this industrial 
system, and therefore with its unreserved control by the engineers, who alone 
are competent to manage it. To do their work as it should be done these men of 
the industrial general staff must have a free hand, unhampered by com-
[70]mercial considerations and reservations; for the production of the goods and 
services needed by the community they neither need nor are they in any degree 
benefited by any supervision or interference from the side of the owners. Yet 
the absentee owners, now represented, in effect, by the syndicated investment 
bankers, continue to control the industrial experts and limit their discretion, 
arbitrarily, for their own commercial gain, regardless of the needs of the 
community.
Hitherto these men who so make up the general staff of the industrial system 
have not drawn together into anything like a self­directing working force; nor 
have they been vested with anything more than an occasional, haphazard, and 
tentative control of some disjointed sector of the industrial equipment, with no 
direct or decisive relation to that personnel of productive industry that may be 
called the officers of the line and the rank and file. It is still the unbroken 
privilege of the financial management and its financial agents to "hire and 
fire." The final disposition of all the industrial forces still remains in the 
hands of the business men, who still continue to dispose of these forces for 
other than industrial ends. And all the while it is an open secret that with a 
reasonably free hand the production ex-[71]perts would today readily increase 
the ordinary output of industry by several fold, - variously estimated at some 
300 per cent, to 1200 per cent, of the current output. And what stands in the 
way of so increasing the ordinary output of goods and services is business as 
usual.

Right lately these technologists have begun to become uneasily "class­conscious" 
and to reflect that they together constitute the indispensable General Staff of 
the industrial system. Their class consciousness has taken the immediate form of 
a growing sense of waste and confusion in the management of industry by the 
financial agents of the absentee owners. They are beginning to take stock of 
that all­pervading mismanagement of industry that is inseparable from its 
control for commercial ends. All of which brings home a realization of their own 
shame and of damage to the common good. So the engineers are beginning to draw 
together and ask themselves, "What about it?"
This uneasy movement among the technologists set in, in an undefined and 
fortuitous way, in the closing years of the nineteenth century; when the 
consulting engineers, and then presently the "efficiency engineers," began to 
make scat-[72]tered corrections in detail, which showed up the industrial 
incompetence of those elderly laymen who were doing a conservative business at 
the cost of industry. The consulting engineers of the standard type, both then 
and since then, are commercialized technologists, whose work it is to appraise 
the industrial value of any given enterprise with a view to its commercial 
exploitation. They are a cross between a technological specialist and a 
commercial agent, beset with the limitations of both and commonly not fully 
competent in either line. Their normal position is that of an employée of the 
investment bankers, on a stipend or a retainer, and it has ordinarily been their 
fortune to shift over in time from a technological footing to a frankly 
commercial one. The case of the efficiency engineers, or scientific­management 
experts, is somewhat similar. They too have set out to appraise, exhibit, and 
correct the commercial short­comings of the ordinary management of those 
industrial establishments which they investigate, to persuade the business men 
in charge how they may reasonably come in for larger net earnings by a more 
closely shorn exploitation of the industrial forces at their disposal. During 
the opening years of the new century a lively interest centered on the views and 
[73] expositions of these two groups of industrial experts; and not least was 
the interest aroused by their exhibits of current facts indicating an 
all­pervading lag, leak, and friction in the industrial system, due to its 
disjointed and one­eyed management by commercial adventurers bent on private 
gain.
During these few years of the opening century the members of this informal guild 
of engineers at large have been taking an interest in this question of habitual 
mismanagement by ignorance and commercial sabotage, even apart from the 
commercial imbecility of it all. But it is the young rather than the old among 
them who see industry in any other light than its commercial value. 
Circumstances have decided that the older generation of the craft have become 
pretty well commercialized. Their habitual outlook has been shaped by a long and 
unbroken apprenticeship to the corporation financiers and the investment 
bankers; so that they still habitually see the industrial system as a 
contrivance for the roundabout process of making money. Accordingly, the 
established official Associations and Institutes of Engineers, which are 
officered and engineered by the elder engineers, old and young, also continue to 
show the commercial bias of their cre-[74]ators, in what they criticize and in 
what they propose. But the new generation which has been coming on during the 
present century are not similarly true to that tradition of commercial 
engineering that makes the technological man an awestruck lieutenant of the 
captain of finance.
By training, and perhaps also by native bent, the technologists find it easy and 
convincing to size up men and things in terms of tangible performance, without 
commercial afterthought, except so far as their apprenticeship to the captains 
of finance may have made commercial afterthought a second nature to them. Many 
of the younger generation are beginning to understand that engineering begins 
and ends in the domain of tangible performance, and that commercial expediency 
is another matter. Indeed, they are beginning to understand that commercial 
expediency has nothing better to contribute to the engineer's work than so much 
lag, leak, and friction. The four years' experience of the war has also been 
highly instructive on that head. So they are beginning to draw together on a 
common ground of understanding, as men who are concerned with the ways and means 
of tangible performance in the way of productive industry, according to the 
state of the industrial arts as they [75] know them at their best; and there is 
a growing conviction among them that they together constitute the sufficient and 
indispensable general staff of the mechanical industries, on whose unhindered 
team­work depends the due working of the industrial system and therefore also 
the material welfare of the civilized peoples. So also, to these men who are 
trained in the stubborn logic of technology, nothing is quite real that cannot 
be stated in terms of tangible performance; and they are accordingly coming to 
understand that the whole fabric of credit and corporation finance is a tissue 
of make­believe.
Credit obligations and financial transactions rest on certain principles of 
legal formality which have been handed down from the eighteenth century, and 
which therefore antedate the mechanical industry and carry no secure conviction 
to men trained in the logic of that industry. Within this technological system 
of tangible performance corporation finance and all its works and gestures are 
completely idle; it all comes into the working scheme of the engineers only as a 
gratuitous intrusion which could be barred out without deranging the work at any 
point, provided only that men made up their mind to that effect - that is to 
say, provided the make­believe of absentee owner-[76]ship were discontinued. Its 
only obvious effect on the work which the engineers have to take care of is 
waste of materials and retardation of the work. So the next question which the 
engineers are due to ask regarding this timeworn fabric of ownership, finance, 
sabotage, credit, and unearned income is likely to be: Why cumbers it the 
ground? And they are likely to find the scriptural answer ready to their hand.
It would be hazardous to surmise how, how soon, on what provocation, and with 
what effect the guild of engineers are due to realize that they constitute a 
guild, and that the material fortunes of the civilized peoples already lie loose 
in their hands. But it is already sufficiently plain that the industrial 
conditions and the drift of conviction among the engineers are drawing together 
to some such end.

Hitherto it has been usual to count on the interested negotiations continually 
carried on and never concluded between capital and labor, between the agents of 
the investors and the body of workmen, to bring about whatever readjustments are 
to be looked for in the control of productive industry and in the distribution 
and use of its product. These negotiations have necessarily been, [77] and 
continue to be, in the nature of business transactions, bargaining for a price, 
since both parties to the negotiation continue to stand on the consecrated 
ground of ownership, free bargain, and self­help; such as the commercial wisdom 
of the eighteenth century saw, approved and certified it all, in the time before 
the coming of this perplexing industrial system. In the course of these endless 
negotiations between the owners and their workmen there has been some loose and 
provisional syndication of claims and forces on both sides; so that each of 
these two recognized parties to the industrial controversy has come to make up a 
loose­knit vested interest, and each speaks for its own special claims as a 
party in interest. Each is contending for some special gain for itself and 
trying to drive a profitable bargain for itself, and hitherto no disinterested 
spokesman for the community at large or for the industrial system as a going 
concern has seriously cut into this controversy between these contending vested 
interests. The outcome has been businesslike concession and compromise, in the 
nature of bargain and sale. It is true, during the war, and for the conduct of 
the war, there were some half­concerted measures taken by the Administration in 
the interest of the nation at large, as a belligerent; but [78] it has always 
been tacitly agreed that these were extraordinary war measures, not to be 
countenanced in time of peace. In time of peace the accepted rule is still 
business as usual; that is to say, investors and workmen wrangling together on a 
footing of business as usual.
These negotiations have necessarily been inconclusive. So long as ownership of 
resources and industrial plant is allowed, or so long as it is allowed any 
degree of control or consideration in the conduct of industry, nothing more 
substantial can come of any readjustment than a concessive mitigation of the 
owners' interference with production. There is accordingly nothing subversive in 
these bouts of bargaining between the federated workmen and the syndicated 
owners. It is a game of chance and skill played between two contending vested 
interests for private gain, in which the industrial system as a going concern 
enters only as a victim of interested interference. Yet the material welfare of 
the community, and not least of the workmen, turns on the due working of this 
industrial system, without interference. Concessive mitigation of the right to 
interfere with production, on the part of either one of these vested interests, 
can evidently come to nothing more substantial than a concessive mitigation.
[79] But owing to the peculiar technological character of this industrial 
system, with its specialized, standardized, mechanical, and highly technical 
interlocking processes of production, there has gradually come into being this 
corps of technological production specialists, into whose keeping the due 
functioning of the industrial system has now drifted by force of circumstance. 
They are, by force of circumstance, the keepers of the community's material 
welfare; although they have hitherto been acting, in effect, as keepers and 
providers of free income for the kept classes. They are thrown into the position 
of responsible directors of the industrial system, and by the same move they are 
in a position to become arbiters of the community's material welfare. They are 
becoming class­conscious, and they are no longer driven by a commercial 
interest, in any such degree as will make them a vested interest in that 
commercial sense in which the syndicated owners and the federated workmen are 
vested interests. They are, at the same time, numerically and by habitual 
outlook, no such heterogeneous and unwieldy body as the federated workmen, whose 
numbers and scattering interest has left all their endeavors substantially 
nugatory. In short, the engineers are in a position to make the next move.
[80] By comparison with the population at large, including the financial powers 
and the kept classes, the technological specialists which come in question here 
are a very inconsiderable number; yet this small number is indispensable to the 
continued working of the productive industries. So slight are their numbers, and 
so sharply defined and homogeneous is their class, that a sufficiently compact 
and inclusive organization of their forces should arrange itself almost as a 
matter of course, so soon as any appreciable proportion of them shall be moved 
by any common purpose. And the common purpose is not far to seek, in the 
all­pervading industrial confusion, obstruction, waste, and retardation which 
business as usual continually throws in their face. At the same time they are 
the leaders of the industrial personnel, the workmen, of the officers of the 
line and the rank and file; and these are coming into a frame of mind to follow 
their leaders in any adventure that holds a promise of advancing the common 
good.
To these men, soberly trained in a spirit of tangible performance and endowed 
with something more than an even share of the sense of workmanship, and endowed 
also with the common heritage of partiality for the rule of Live and Let Live, 
the disallowance of an outworn and ob-[81]structive right of absentee ownership 
is not likely to seem a shocking infraction of the sacred realties. That 
customary right of ownership by virtue of which the vested interests continue to 
control the industrial system for the benefit of the kept classes, belongs to an 
older order of things than the mechanical industry. It has come out of a past 
that was made up of small things and traditional make­believe. For all the 
purposes of that scheme of tangible performance that goes to makeup the 
technologist's world, it is without form and void. So that, given time for due 
irritation, it should by no means come as a surprise if the guild of engineers 
are provoked to put their heads together and, quite out of hand, disallow that 
large absentee ownership that goes to make the vested interests and to unmake 
the industrial system. And there stand behind them the massed and rough­handed 
legions of the industrial rank and file, ill at ease and looking for new things. 
The older commercialized generation among them would, of course, ask themselves: 
Why should we worry? What do we stand to gain? But the younger generation, not 
so hard­bitten by commercial experience, will be quite as likely to ask 
themselves: What do we stand to lose? And there is the patent fact that such a 
thing as a [82] general strike of the technological specialists in industry need 
involve no more than a minute fraction of one per cent, of the population; yet 
it would swiftly bring a collapse of the old order and sweep the timeworn fabric 
of finance and absentee sabotage into the discard for good and all, Such a 
catastrophe would doubtless be deplorable. It would look something like the end 
of the world to all those persons who take their stand with the kept classes, 
but it may come to seem no more than an incident of the day's work to the 
engineers and to the rough­handed legions of the rank and file. It is a 
situation which may well be deplored. But there is no gain in losing patience 
with a conjunction of circumstances. And it can do no harm to take stock of the 
situation and recognize that, by force of circumstance, it is now open to the 
Council of Technological Workers' and Soldiers' Deputies to make the next move, 
in their own way and in their own good time. When and what this move will be, if 
any, or even what it will be like, is not something on which a layman can hold a 
confident opinion. But so much seems clear, that the industrial dictatorship of 
the captain of finance is now held on sufferance of the engineers and is liable 
at any time to be discontinued at their discretion, as a matter of convenience.
[83]
IV
On the Danger of a Revolutionary Overturn

Bolshevism is a menace to the vested rights of property and privilege. Therefore 
the guardians of the Vested Interests have been thrown into a state of Red 
trepidation by the continued functioning of Soviet Russia and the continual 
outbreaks of the same Red distemper elsewhere on the continent of Europe. It is 
feared, with a nerve­shattering fear, that the same Red distemper of Bolshevism 
must presently infect the underlying population in America and bring on an 
overturn of the established order, so soon as the underlying population are in a 
position to take stock of the situation and make up their mind to a course of 
action. The situation is an uneasy one, and it contains the elements of much 
trouble; at least such appears to be the conviction of the Guardians of the 
established order. Something of the kind is felt to be due, on the grounds of 
the accomplished facts. So it is feared, with a nerve­shattering fear, that 
anything like uncolored in-[84]formation as to the facts in the case and 
anything like a free popular discussion of these facts must logically result in 
disaster. Hence all this unseemly trepidation.
The Guardians of the Vested Interests, official and quasi­official, have allowed 
their own knowledge of this sinister state of things to unseat their common 
sense. The run of the facts has jostled them out of the ruts, and they have gone 
in for a headlong policy of clamor and repression, to cover and suppress matters 
of fact and to shut off discussion and deliberation. And all the while the 
Guardians are also feverishly at work on a mobilization of such forces as may 
hopefully be counted on to "keep the situation in hand" in case the expected 
should happen. The one manifestly conclusive resolution to which the Guardians 
of the Vested Interests have come is that the underlying population is to be 
"kept in hand," in the face of any contingency. Their one settled principle of 
conduct appears to be, to stick at nothing; in all of which, doubtless, the 
Guardians mean well.
Now, the Guardians of the Vested Interests are presumably wise in 
discountenancing any open discussion or any free communication of ideas and 
opinions. It could lead to nothing more [85] comfortable than popular irritation 
and distrust. The Vested Interests are known to have been actively concerned in 
the prosecution of the War, and there is no lack of evidence that their 
spokesmen have been heard in the subsequent counsels of the Peace. And, no 
doubt, the less that is known and said about the doings of the Vested Interests 
during the War and after, the better both for the public tranquility and for the 
continued growth and profit of the Vested Interests. Yet it is not to be 
overlooked that facts of such magnitude and of such urgent public concern as the 
manoeuvres of the Vested Interests during the War and after can not be 
altogether happily covered over with a conspiracy of silence. Something like a 
middle course of temperate publicity should have seemed more to the point. It 
may be unfortunate, but it is none the less unavoidable, that something 
appreciable is bound to come to light; that is to say, something sinister.
It should be plain to all good citizens who have the cause of law and order at 
heart that in such a case a more genial policy of conciliatory promises and 
procrastination will be more to the purpose than any noisy recourse to the 
strong arm and the Star Chamber. A touch of history, and more particularly of 
contemporary history, would [86] have given the Guardians a touch of sanity. 
Grown wise in all the ways and means of blamelessly defeating the unblest 
majority, the gentlemanly government of the British manage affairs of this kind 
much better. They have learned that bellicose gestures provoke ill will, and 
that desperate remedies should be held in reserve until needed. Whereas the 
Guardians of the Vested Interests in America are plainly putting things in train 
for a capital operation, for which there is no apparent necessity. It should be 
evident on slight reflection that things have not reached that fateful stage 
where nothing short of a capital operation can be counted on to save the life of 
the Vested Interests in America; not yet. And indeed, things need assuredly not 
reach such a stage if reasonable measures are taken to avoid undue alarm and 
irritation. All that is needed to keep the underlying population of America in a 
sweet temper is a degree of patient ambiguity and delay, something after the 
British pattern; and all will yet be well with the vested rights of property and 
privilege, for some time to come.

History teaches that no effectual popular uprising can be set afoot against an 
outworn institutional iniquity unless the movement effectually [87] meets the 
special material requirements of the situation which provokes it; nor on the 
other hand can an impending popular overturn be staved off without making up 
one's account with those material conditions which converge to bring it on. The 
long history of British gentlemanly compromise, collusion, conciliation, and 
popular defeat, is highly instructive on that head. And it should be evident to 
any disinterested person, on any slight survey of the pertinent facts, that the 
situation in America does not now offer such a combination of circumstances as 
would be required for any effectual overturn of the established order or any 
forcible dispossession of these Vested Interests that now control the material 
fortunes of the American people. In short, by force of circumstances, Bolshevism 
is not a present menace to the Vested Interests in America; provided always that 
the Guardians of these Vested Interests do not go out of their way to 
precipitate trouble by such measures as will make Bolshevism of any complexion 
seem the lesser evil, - which is perhaps not a safe proviso, in view of the 
hysterically Red state of mind of the Guardians.
No movement for the dispossession of the Vested Interests in America can hope 
for even [88] a temporary success unless it is undertaken by an organization 
which is competent to take over the country's productive industry as a whole, 
and to administer it from the start on a more efficient plan than that now 
pursued by the Vested Interests; and there is no such organization in sight or 
in immediate prospect. The nearest approach to a practicable organization of 
industrial forces in America, just yet, is the A. F. of L.; which need only be 
named in order to dispel the illusion that there is anything to hope or fear in 
the way of a radical move at its hands. The A. F. of L. is itself one of the 
Vested Interests, as ready as any other to do battle for its own margin of 
privilege and profit. At the same time it would be a wholly chimerical fancy to 
believe that such an organization of workmen as the A. F. of L. could take over 
and manage any appreciable section of the industrial system, even if their 
single­minded interest in special privileges for themselves did not preclude 
their making a move in that direction. The Federation is not organized for 
production but for bargaining. It is not organized on lines that would be 
workable for the management of any industrial system as a whole, or of any 
special line of production within such a system. It is, in effect, an 
organization for the [89] strategic defeat of employers and rival organizations, 
by recourse to enforced unemployment and obstruction; not for the production of 
goods and services. And it is officered by tacticians, skilled in the ways and 
means of bargaining with politicians and intimidating employers and employées; 
not by men who have any special insight into or interest in the ways and means 
of quantity production and traffic management. They are not, and for their 
purpose they need not be, technicians in any conclusive sense, - and the fact 
should not be lost sight of that any effectual overturn, of the kind hazily 
contemplated by the hysterical officials, will always have to be primarily a 
technical affair.
In effect, the Federation is officered by safe and sane politicians, and its 
rank and file are votaries of "the full dinner­pail." No Guardian need worry 
about the Federation, and there is no other organization in sight which differs 
materially from the Federation in those respects which would count toward a 
practical move in the direction of a popular overturn, - unless a doubtful 
exception should be claimed for the Railroad Brotherhoods. The A. F. of L. is a 
business organization with a vested interest of its own; for Keeping up prices 
and keeping down the supply, [90] quite after the usual fashion of management by 
the other Vested Interests; not for managing productive industry or even for 
increasing the output of goods produced under any management. At the best, its 
purpose and ordinary business is to gain a little something for its own members 
at a more than proportionate cost to the rest of the community; which does not 
afford either the spiritual or the material ground for a popular overturn.
Nor is it the A. F. of L. or the other organizations for "collective bargaining" 
that come in for the comfortless attentions of the officials and of the many 
semi­official conspiracies in restraint of sobriety. Their nerve­shattering 
fears center rather on those irresponsible wayfaring men of industry who make up 
the I. W. W., and on the helpless and hapless alien unbelievers whose 
contribution to the sum total is loose talk in some foreign tongue. But if there 
is any assertion to be made without fear of stumbling it will be, that this 
flotsam of industry is not organized to take over the highly technical duties 
involved in the administration of the industrial system. But it is these and 
their like that engage the best attention of the many commissions, committees, 
clubs, leagues, federations, syndicates, and corporations [91] for the chasing 
of wild geese under the Red flag.

Wherever the mechanical industry has taken decisive effect, as in America and in 
the two or three industrialized regions of Europe, the community lives from hand 
to mouth in such a way that its livelihood depends on the effectual working of 
its industrial system from day to day. In such a case a serious disturbance and 
derangement of the balanced process of production is always easily brought on, 
and it always brings immediate hardship on large sections of the community. 
Indeed, it is this state of things - the ease with which industry can be 
deranged and hardship can be brought to bear on the people at large - that 
constitutes the chief asset of such partisan organizations as the A. F. of L. It 
is a state of things which makes sabotage easy and effectual and gives it 
breadth and scope. But sabotage is not revolution. If it were, then the A. F. of 
L., the I. W. W., the Chicago Packers, and the U.S. Senate would be counted 
among the revolutionists.
Far­reaching sabotage, that is to say derangement of the industrial system, such 
as to entail hardship on the community at large or on some particular section of 
it, is easily brought to bear in any country that is dominated by the mechan-
[92]ical industry. It is commonly resorted to by both parties in any controversy 
between the businesslike employers and the employées. It is, in fact, an 
everyday expedient of business, and no serious blame attaches to its ordinary 
use. Under given circumstances, as, e.g., under the circumstances just now 
created by the return of peace, such derangement of industry and hindrance of 
production is an unavoidable expedient of "business as usual." And derangement 
of the same nature is also commonly resorted to as a means of coercion in any 
attempted movement of overturn. It is the simple and obvious means of initiating 
any revolutionary disturbance in any industrial or commercialized country. But 
under the existing industrial conditions, if it is to achieve even a transient 
success, any such revolutionary movement of reconstruction must also be in a 
position from the outset to overcome any degree of initial derangement in 
industry, whether of its own making or not, and to do constructive work of that 
particular kind which is called for by the present disposition of industrial 
forces and by the present close dependence of the community's livelihood on the 
due systematic working of these industrial forces. To take effect and to hold 
its own even for the time being, any movement of overturn [93] must from 
beforehand provide for a sufficiently productive conduct of the industrial 
system on which the community's material welfare depends, and for a competent 
distribution of goods and services throughout the community. Otherwise, under 
existing industrial conditions, nothing more can be accomplished than an 
ephemeral disturbance and a transient season of accentuated hardship. Even a 
transient failure to make good in the management of the industrial system must 
immediately defeat any movement of overturn in any of the advanced industrial 
countries. At this point the lessons of history fail, because the present 
industrial system and the manner of close­knit community life enforced by this 
industrial system have no example in history.
This state of things, which so conditions the possibility of any revolutionary 
overturn, is peculiar to the advanced industrial countries; and the limitations 
which this state of things imposes are binding within these countries in the 
same measure in which these peoples are dominated by the system of mechanical 
industry. In contrast with this state of things, the case of Soviet Russia may 
be cited to show the difference. As compared with America and much of western 
Europe, Russia is not an industrialized region, in any de-[94]cisive sense; 
although Russia, too, leans on the mechanical industry in a greater degree than 
is commonly recognized. Indeed, so considerable is the dependence of the 
Russians on the mechanical industry that it may yet prove to be the decisive 
factor in the struggle which is now going on between Soviet Russia and the 
Allied Powers.
Now, it is doubtless this continued success of the Soviet administration in 
Russia that has thrown this ecstatic scare into the Guardians of the Vested 
Interests in America and in the civilized countries of Europe. There is nothing 
to be gained by denying that the Russian Soviet has achieved a measure of 
success; indeed, an astonishing measure of success, considering the extremely 
adverse circumstances under which the Soviet has been at work. The fact may be 
deplored, but there it is. The Soviet has plainly been successful, in the 
material respect, far beyond the reports which have been allowed to pass the 
scrutiny of the Seven Censors and the Associated Prevarication Bureaux of the 
Allied Powers. And this continued success of Bolshevism in Russia - or such 
measure of success as it has achieved - is doubtless good ground for a 
reasonable degree of apprehension among good citizens elsewhere; but it does not 
by any means [95] argue that anything like the same measure of success could be 
achieved by a revolutionary movement on the same lines in America, even in the 
absence of intervention from outside.
Soviet Russia has made good to the extent of maintaining itself against very 
great odds for some two years; and it is even yet a point in doubt whether the 
Allied Powers will be able to put down the Soviet by use of all the forces at 
their disposal and with the help of all the reactionary elements in Russia and 
in the neighboring countries. But the Soviet owes this measure of success to the 
fact that the Russian people have not yet been industrialized in anything like 
the same degree as their western neighbors. They have in great measure been able 
to fall back on an earlier, simpler, less close­knit plan of productive 
industry; such that any detailed part of this close­knit Russian community is 
able, at a pinch, to draw its own livelihood from its own soil by its own work, 
without that instant and unremitting dependence on materials and wrought goods 
drawn from foreign ports and distant regions, that is characteristic of the 
advanced industrial peoples. This old­fashioned plan of home production does not 
involve an "industrial system" in the same exacting sense as the mechanical in-
[96]dustry. The Russian industrial system, it is true, also runs on something of 
a balanced plan of give and take; it leans on the mechanical industry in some 
considerable degree and draws on foreign trade for many of its necessary 
articles of use; but for the transient time being, and for an appreciable 
interval of time, such a home­bred industrious population, living close to the 
soil and supplying its ordinary needs by home­bred handicraft methods, will be 
able to maintain itself in a fair state of efficiency if not in comfort, even in 
virtual isolation from the more advanced industrial centers and from the remoter 
sources of raw materials. To the ignorant, - that is to say, to the wiseacres of 
commerce, - this ability of the Russian people to continue alive and active under 
the conditions of an exemplary blockade has been a source of incredulous 
astonishment.
It is only as a fighting power, and then only for the purposes of an aggressive 
war, that such a community can count for virtually nothing in a contest with the 
advanced industrial nations. Such a people makes an unwieldy country to conquer 
from the outside. Soviet Russia is self­supporting, in a loose and comfortless 
way, and in this sense it is a very defensible country and may yet prove 
extremely difficult for the Allied Pow-[97]ers to subdue; but in the nature of 
the case there need be not the slightest shadow of apprehension that Soviet 
Russia can successfully take the offensive against any outside people, great or 
small, which has the use of the advanced mechanical industry.
The statesmen of the Allied Powers, who are now carrying on a covert war against 
Soviet Russia, are in a position to know this state of the case; and not least 
those American statesmen, who have by popular sentiment been constrained 
reluctantly to limit and mask their cooperation with the reactionary forces in 
Finland, Poland, the Ukraine, Siberia, and elsewhere. They have all been at 
pains diligently to inquire into the state of things in Soviet Russia; although, 
it is true, they have also been at pains to give out surprisingly little 
information, - that being much of the reason for the Seven Censors. The 
well­published official and semi­official apprehension of a Bolshevist offensive 
to be carried on beyond the Soviet frontiers may quite safely be set down as an 
article of statesmanlike subterfuge. The statesmen know better. What is feared 
in fact is infection of the Bolshevist spirit beyond the Soviet frontiers, to 
the detriment of those Vested Interests whose guardians these statesmen are. 
[98] And on this head the apprehensions of these Elder Statesmen are not 
altogether groundless; for the Elder Statesmen are also in a position to know, 
without much inquiry, that there is no single spot or corner in civilized Europe 
or America where the underlying population would have anything to lose by such 
an overturn of the established order as would cancel the vested rights of 
privilege and property, whose guardians they are.
But commercialized America is not the same thing as Soviet Russia. By and large, 
America is an advanced industrial country, bound in the web of a fairly 
close­knit and inclusive industrial system. The industrial situation, and 
therefore the conditions of success, are radically different in the two 
countries in those respects that would make the outcome in any effectual revolt. 
So that, for better or worse, the main lines that would necessarily have to be 
followed in working out any practicable revolutionary movement in this country 
are already laid down by the material conditions of its productive industry. On 
provocation there might come a flare of riotous disorder; but it would come to 
nothing, however substantial the provocation might be, so long as the movement 
does not fall in with those main lines of management which the state of the 
industrial sys-[99]tem requires in order to insure any sustained success. These 
main lines of revolutionary strategy are lines of technical organization and 
industrial management; essentially lines of industrial engineering; such as will 
fit the organization to take care of the highly technical industrial system that 
constitutes the indispensable material foundation of any modern civilized 
community. They will accordingly not only be of a profoundly different order 
from what may do well enough in the case of such a loose­knit and backward 
industrial region as Russia, but they will necessarily also be of a kind which 
has no close parallel in the past history of revolutionary movements. 
Revolutions in the eighteenth century were military and political; and the Elder 
Statesmen who now believe themselves to be making history still believe that 
revolutions can be made and unmade by the same ways and means in the twentieth 
century. But any substantial or effectual overturn in the twentieth century will 
necessarily be an industrial overturn; and by the same token, any 
twentieth­century revolution can be combated or neutralized only by industrial 
ways and means. The case of America, therefore, considered as a candidate for 
Bolshevism, will have to be argued on its own merits, and the argument will 
necessarily [100] turn on the ways and means of productive industry as 
conditioned by the later growth of technology.

It has been argued, and it seems not unreasonable to believe, that the 
established order of business enterprise, vested rights, and commercialized 
nationalism, is due presently to go under in a muddle of shame and confusion, 
because it is no longer a practicable system of industrial management under the 
conditions created by the later state of the industrial arts. Twentieth­century 
technology has outgrown the eighteenth­century system of vested rights. The 
experience of the past few years teaches that the usual management of industry 
by business methods has become highly inefficient and wasteful, and the 
indications are many and obvious that any businesslike control of production and 
distribution is bound to run more and more consistently at cross purposes with 
the community's livelihood, the farther the industrial arts advance and the 
wider the industrial system extends. So that it is perhaps not reasonably to be 
questioned that Vested Interests in business are riding for a fall. But the end 
is not yet; although it is to be admitted, regretfully perhaps, that with every 
further advance in tech-[101]nological knowledge and practice and with every 
further increase in the volume and complexity of the industrial system, any 
businesslike control is bound to grow still more incompetent, irrelevant, and 
impertinent.
It would be quite hazardous to guess, just yet, how far off that consummation of 
commercial imbecility may be. There are those who argue that the existing system 
of business management is plainly due to go under within two years' time; and 
there are others who are ready, with equal confidence, to allow it a probable 
duration of several times that interval; although, it is true, these latter 
appear, on the whole, to be persons who are less intimately acquainted with the 
facts in the case. Many men experienced in the larger affairs of industrial 
business are in doubt as to how long things will hold together. But, one with 
another, these men who so are looking into the doubtful future are, somewhat 
apprehensively, willing to admit that there is yet something of a margin to go 
on; so much so that, barring accident, there should seem to be no warrant for 
counting at all confidently on a disastrous breakdown of the business system 
within anything like a two­year period. And, for the reassurance of the 
apprehensive Guardian of the Vested Interests, it is to [102] be added that 
should such a break in the situation come while things are standing in their 
present shape, the outcome could assuredly not be an effectual overturn of the 
established order; so long as no practicable plan has been provided for taking 
over the management from the dead hand of the Vested Interests. Should such a 
self­made breakdown come at the present juncture, the outcome could, in fact, 
scarcely be anything more serious than an interval, essentially transient though 
more or less protracted, of turmoil and famine among the underlying population, 
together with something of a setback to the industrial system as a whole. There 
seems no reason to apprehend any substantial disallowance of the vested rights 
of property to follow from such an essentially ephemeral interlude of 
dissension. In fact, the tenure of the Vested Interests in America should seem 
to be reasonably secure, just yet.
Something in the nature of riotous discontent and factional disorder is perhaps 
to be looked for in the near future in this country, and there may even be some 
rash gesture of revolt on the part of ill-advised malcontents. Circumstances 
would seem to favor something of the kind. It is conservatively estimated that 
there is already a season of privation and uncertainty in prospect for [103] the 
underlying population, which could be averted only at the cost of some 
substantial interference with the vested rights of the country's business men, - 
which should seem a highly improbable alternative, in view of that spirit of 
filial piety with which the public officials guard the prerogatives of business 
as usual. So, e.g., it is now (September, 1919) confidently expected, or rather 
computed, that a fuel famine is due in America during the approaching winter, 
for reasons of sound business management; and it is likewise to be expected that 
for the like reason the American transportation system is also due to go into a 
tangle of congestion and idleness about the same time - barring providential 
intervention in the way of unexampled weather conditions. But a season of famine 
and disorderly conduct does not constitute a revolutionary overturn of the 
established order; and the Vested Interests are secure in their continued 
usufruct of the country's industry, just yet.
This hopeful posture of things may be shown convincingly enough and with no 
great expenditure of argument. To this end it is proposed to pursue the argument 
somewhat further presently; by describing in outline what are the infirmities of 
the régime of the Vested Interests, which the [104] more sanguine malcontents 
count on to bring that régime to an inglorious finish in the immediate future; 
and also to set down, likewise in outline, what would have to be the character 
of any organization of industrial forces which could be counted on effectually 
to windup the régime of the Vested Interests and take over the management of the 
industrial system on a deliberate plan.
[105]
V
On the Circumstances Which Make for a Change

The state of industry, in America and in the other advanced industrial 
countries, will impose certain exacting conditions on any movement that aims to 
displace the Vested Interests. These conditions lie in the nature of things; 
that is to say, in the nature of the existing industrial system; and until they 
are met in some passable fashion, this industrial system can not be taken over 
in any effectual or enduring manner. And it is plain that whatever is found to 
be true in these respects for America will also hold true in much the same 
degree for the other countries that are dominated by the mechanical industry and 
the system of absentee ownership.
It may also confidently be set down at the outset that such an impartial review 
of the evidence as is here aimed at will make it appear that there need be no 
present apprehension of the Vested Interests' being unseated by any popular 
uprising [106] in America, even if the popular irritation should rise very 
appreciably above its present pitch, and even if certain advocates of "direct 
action," here and there, should be so ill­advised as to make some rash gesture 
of revolt. The only present danger is that a boisterous campaign of repression 
and inquisition on the part of the Guardians of the Vested Interests may stir up 
some transient flutter of seditious disturbance.

To this end, then, it will be necessary to recall, in a summary way, those main 
facts of the industrial system and of the present businesslike control of this 
system which come immediately into the case. By way of general premise it is to 
be noted that the established order of business rests on absentee ownership and 
is managed with an eye single to the largest obtainable net return in terms of 
price; that is to say, it is a system of businesslike management on a commercial 
footing. The underlying population is dependent on the working of this 
industrial system for its livelihood; and their material interest therefore 
centers in the output and distribution of consumable goods, not in an increasing 
volume of earnings for the absentee owners. Hence there is a division of 
interest between the business community, [107] who do business for the absentee 
owners, and the underlying population, who work for a living; and in the nature 
of the case this division of interest between the absentee owners and the 
underlying population is growing wider and more evident from day to day; which 
engenders a certain division of sentiment and a degree of mutual distrust. With 
it all the underlying population are still in a sufficiently deferential frame 
of mind toward their absentee owners, and are quite conscientiously delicate 
about any abatement of the free income which their owners come in for, according 
to the rules of the game as it is played.
The business concerns which so have the management of industry on this plan of 
absentee ownership are capitalized on their business capacity, not on their 
industrial capacity; that is to say, they are capitalized on their capacity to 
produce earnings, not on their capacity to produce goods. Their capitalization 
has, in effect, been calculated and fixed on the highest ordinary rate of 
earnings previously obtained; and on pain of insolvency their businesslike 
managers are now required to meet fixed income­charges on this capitalization. 
Therefore, as a proposition of safe and sane business management, prices have to 
be maintained or advanced.
[108] From this businesslike requirement of meeting these fixed overhead charges 
on the capitalization there result certain customary lines of waste and 
obstruction, which are unavoidable so long as industry is managed by 
businesslike methods and for businesslike ends. These ordinary lines of waste 
and obstruction are necessarily (and blamelessly) included in the businesslike 
conduct of production. They are many and various in detail, but they may for 
convenience be classed under four heads: (a) Unemployment of material resources, 
equipment and manpower, in whole or in part, deliberately or through ignorance; 
(b) Salesmanship (includes, e.g., needless multiplication of merchants and 
shops, wholesale and retail, newspaper advertising and bill­boards, 
sales­exhibits, sales­agents, fancy packages and labels, adulteration, 
multiplication of brands and proprietary articles); (c) Production (and 
sales­cost) of superfluities and spurious goods; (d) Systematic dislocation, 
sabotage and duplication, due in part to businesslike strategy, in part to 
businesslike ignorance of industrial requirements (includes, e.g., such things 
as cross­freights, monopolization of resources, withholding of facilities and 
information from business rivals whom it is thought wise to hinder or defeat). 
[109] There is, of course, no blame, and no sense of blame or shame attaching to 
all this everyday waste and confusion that goes to make up the workday total of 
businesslike management. All of it is a legitimate and necessary part of the 
established order of business enterprise, within the law and within the ethics 
of the trade.
Salesmanship is the most conspicuous, and perhaps the gravest, of these wasteful 
and industrially futile practices that are involved in the businesslike conduct 
of industry; it bulks large both in its immediate cost and in its meretricious 
consequences. It also is altogether legitimate and indispensable in any 
industrial business that deals with customers, in buying or selling; which comes 
near saying, in all business that has to do with the production or distribution 
of goods or services. Indeed, salesmanship is, in a way, the whole end and 
substance of business enterprise; and except so far as it is managed with a 
constant view to profitable bargains, the production of goods is not a business 
proposition. It is the elimination of profitable transactions of purchase and 
sale that is hoped for by any current movement looking to an overturn; and it is 
the same elimination of profitable bargaining that is feared, with a 
nerve­shattering fear, by the Guardians of the estab-[110]lished order. 
Salesmanship is also the most indispensable and most meritorious of those 
qualities that go to make a safe and sane business man.
It is doubtless within the mark to say that, at an average, one­half the price 
paid for goods and services by consumers is to be set down to the account of 
salesmanship - that is, to sales­cost and to the net gains of salesmanship. But 
in many notable lines of merchandise the sales­cost will ordinarily foot up to 
some ten or twenty times the production­cost proper, and to not less than one 
hundred times the necessary cost of distribution. All this is not a matter for 
shame or distaste. In fact, just now more than ever, there is a clamorous and 
visibly growing insistence on the paramount merit and importance of salesmanship 
as the main stay of commerce and industry, and a strenuous demand for more 
extensive and more thorough training in salesmanship of a larger number of young 
men - at the public expense - to enable a shrewdly limited output of goods to be 
sold at more profitable prices - at the public cost. So also there is a visibly 
increasing expenditure on all manner of advertising; and the spokesmen of this 
enterprise in conspicuous waste are "pointing with pride" to the fact that the 
American business community have already spent upward [111] of $600,000,000 on 
billboards alone within the past year, not to speak of much larger sums spent on 
newspapers and other printed matter for the same purpose - and the common man 
pays the cost.
At the same time advertising and manoeuvres of salesmanlike spell­binding appear 
to be the only resource to which the country's business men know how to turn for 
relief from that tangle of difficulties into which the outbreak of a 
businesslike peace has precipitated the commercialized world. Increased 
sales­cost is to remedy the evils of under­production. In this connection it may 
be worth while to recall, without heat or faultfinding, that all the costly 
publicity that goes into sales­costs is in the nature of prevarication, when it 
is not good broad mendacity; and quite necessarily so. And all the while the 
proportion of sales­costs to production­costs goes on increasing, and the cost 
of living grows continually greater for the underlying population, and business 
necessities continue to enlarge the necessary expenditure on ways and means of 
salesmanship.
It is reasonable to believe that this state of things, which has been coming on 
gradually for some time past, will in time come to be understood and appreciated 
by the underlying popula-[112]tion, at least in some degree. And it is likewise 
reasonable to believe that so soon as the underly­lying population come to 
realize that all this wasteful traffic of salesmanship is using up their 
productive forces, with nothing better to show for it than an increased cost of 
living, they will be driven to make some move to abate the nuisance. And just so 
far as this state of things is now beginning to be understood, its logical 
outcome is a growing distrust of the business men and all their works and words. 
But the underlying population is still very credulous about anything that is 
said or done in the name of Business, and there need be no apprehension of a 
mutinous outbreak, just yet. But at the same time it is evident that any plan of 
management which could contrive to dispense with all this expenditure on 
salesmanship, or that could materially reduce sales­costs, would have that much 
of a free margin to go on, and therefore that much of an added chance of 
success; and so also it is evident that any other than a businesslike management 
could so contrive, inasmuch as sales­costs are incurred solely for purposes of 
business, not for purposes of industry; they are incurred for the sake of 
private gain, not for the sake of productive work.
But there is in fact no present promise of a [113] breakdown of business, due to 
the continued increase of sales­costs; although sales­costs are bound to go on 
increasing so long as the country's industry continues to be managed on anything 
like the present plan. In fact, salesmanship is the chief factor in that 
ever­increasing cost of living, which is in its turn the chief ground of 
prosperity among the business community and the chief source of perennial 
hardship and discontent among the underlying population. Still it is worth 
noting that the eventual elimination of salesmanship and sales­cost would 
lighten the burden of workday production for the underlying population by some 
fifty per cent. There is that much of a visible inducement to disallow that 
system of absentee ownership on which modern business enterprise rests; and - 
for what it may be worth - it is to be admitted that there is therefore that 
much of a drift in the existing state of things toward a revolutionary overturn 
looking to the unseating of the Vested Interests. But at the same time the 
elimination of salesmanship and all its voluminous apparatus and traffic would 
also cut down the capitalized income of the business community by something like 
one­half; and that contingency is not to be contemplated, not to say with 
equanimity, by the Guardians; and it is after [114] all in the hands of these 
Guardians that the fortunes of the community rest. Such a move is a moral 
impossibility, just yet.

Closely related to the wasteful practices of salesmanship as commonly 
understood, if it should not rather be counted in as an extension of 
salesmanship, is that persistent unemployment of men, equipment, and material 
resources, by which the output of goods and services is kept down to the 
"requirements of the market," with a view to maintaining prices at a "reasonably 
profitable level." Such unemployment, deliberate and habitual, is one of the 
ordinary expedients employed in the businesslike management of industry. There 
is always more or less of it in ordinary times. "Reasonable earnings" could not 
be assured without it; because "what the traffic will bear" in the way of an 
output of goods is by no means the same as the productive capacity of the 
industrial system; still less is it the same as the total consumptive needs of 
the community; in fact, it does not visibly tend to coincide with either. It is 
more particularly in times of popular distress, such as the present year, when 
the current output of goods is not nearly sufficient to cover the consumptive 
needs of the community, [115] that considerations of business strategy call for 
a wise unemployment of the country's productive forces. At the same time, such 
businesslike unemployment of equipment and man power is the most obvious cause 
of popular distress.
All this is well known to the Guardians of the Vested Interests, and their 
knowledge of it is, quite reasonably, a source of uneasiness to them. But they 
see no help for it; and indeed there is no help for it within the framework of 
"business as usual," since it is the essence of business as usual. So also, the 
Guardians are aware that this businesslike sabotage on productive industry is a 
fruitful source of discontent and distrust among the underlying population who 
suffer the inconvenience of it all; and they are beset with the abiding fear 
that the underlying population may shortly be provoked into disallowing those 
Vested Interests for whose benefit this deliberate and habitual sabotage on 
production is carried on. It is felt that here again is a sufficient reason why 
the businesslike management of industry should be discontinued; which is the 
same as saying that here again is a visibly sufficient reason for such a 
revolutionary overturn as will close out the Old Order of absentee ownership and 
capitalized income. It is also evident that any plan [116] which shall contrive 
to dispense with, this deliberate and habitual unemployment of men and equipment 
will have that much more of a margin to go on, both in respect of practical 
efficiency and in respect of popular tolerance; and evidently, too, any other 
than a businesslike management of industry can so contrive, as a matter of 
course; inasmuch as any such unbusinesslike administration - as, e.g., the 
Soviet - will be relieved of the businesslike manager's blackest bug­bear, "a 
reasonably profitable level of prices."
But for all that, those shudderingly sanguine persons who are looking for a 
dissolution of the system of absentee ownership within two years' time are not 
counting on salesmanlike waste and businesslike sabotage to bring on the 
collapse, so much as they count on the item listed under (d) above - the 
systematic dislocation and all­round defeat of productive industry which is due 
in part to shrewd manoeuvres of businesslike strategy, in part to the habitual 
ignorance of business men touching the systematic requirements of the industrial 
system as a whole. The shrewd worldly wisdom of the businesslike managers, 
looking consistently to the main chance, works in harmoniously with their 
trained ignorance on matters of technology, to bring about what amounts to ef-
[117]fectual team­work for the defeat of the country's industrial system as a 
going concern. Yet doubtless this sinister hope of a collapse within two years 
is too sanguine. Doubtless the underlying population can be counted on stolidly 
to put up with what they are so well used to, just yet; more particularly so 
long as they are not in the habit of thinking about these things at all. Nor 
does it seem reasonable to believe that this all­pervading waste and confusion 
of industrial forces will of itself bring the business organization to a 
collapse within so short a time.
It is true, the industrial system is continually growing, in volume and 
complication; and with every new extension of its scope and range, and with 
every added increment of technological practice that goes into effect, there 
comes a new and urgent opportunity for the business men in control to extend and 
speed up their strategy of mutual obstruction and defeat; it is all in the day's 
work. As the industrial system grows larger and more closely interwoven it 
offers continually larger and more enticing opportunities for such businesslike 
manoeuvres as will effectually derange the system at the same time that they 
bring the desired tactical defeat on some business rival; whereby the successful 
business strategist is en-[118]abled to get a little something for nothing at a 
constantly increasing cost to the community at large. With every increment of 
growth and maturity the country's industrial system becomes more delicately 
balanced, more intricately bound in a web of industrial give and take, more 
sensitive to far­reaching derangement by any local dislocation, more widely and 
instantly responsive to any failure of the due correlation at any point; and by 
the same move the captains of industry, to whose care the interests of absentee 
ownership are entrusted, are enabled, or rather they are driven by the 
necessities of competitive business, to plan their strategy of mutual defeat and 
derangement on larger and more intricate lines, with an ever wider reach and a 
more massive mobilization of forces. From which follows an ever increasing 
insecurity of work and output from day to day and an increased assurance of 
general loss and disability in the long run; incidentally coupled with increased 
hardship for the underlying population, which comes in all along as a subsidiary 
matter of course, unfortunate but unavoidable. It is this visibly growing 
failure of the present businesslike management to come up to the industrial 
necessities of the case; its unfitness to take anything like reasonable care of 
the needed [119] correlation of industrial forces within the system; its 
continual working at cross purposes in the allocation of energy resources, 
materials, and man power - it is this fact, that any businesslike management of 
necessity runs at cross purposes with the larger technical realities of the 
industrial system, that chiefly goes to persuade apprehensive persons that the 
régime of business enterprise is fast approaching the limit of tolerance. So it 
is held by many that this existing system of absentee ownership must presently 
break down and precipitate the abdication of the Vested Interests, under 
conviction of total imbecility.

The theory on which these apprehensive persons proceed appears to be 
substantially sound, so far as it goes, but they reach an unguardedly desperate 
conclusion because they overlook one of the main facts of the case. There is no 
reasonable exception to be taken to the statement that the country's industrial 
system is forever growing more extensive and more complex; that it is 
continually taking on more of the character of a close­knit, interwoven, 
systematic whole; a delicately balanced moving equilibrium of working parts, no 
one of which can do its work by itself at all, and none of which can do its 
share of the [120] work well except in close correlation with all the rest. At 
the same time it is also true that, in the commercialized nature of things, the 
businesslike management of industry is forever playing fast and loose with this 
delicately balanced moving equilibrium of forces, on which the livelihood of the 
underlying population depends from day to day; more particularly is this true 
for that large­scale business enterprise that rests on absentee ownership and 
makes up the country's greater Vested Interests. But to all this it is to be 
added, as a corrective and a main factor in the case, that this system of 
mechanical industry is an extremely efficient contrivance for the production of 
goods and services, even when, as usual, the business men, for business reasons, 
will allow it to work only under a large handicap of unemployment and 
obstructive tactics. Hitherto the margin for error, that is to say for wasteful 
strategy and obstructive ignorance, has been very wide; so wide that it has 
saved the life of the Vested Interests; and it is accordingly by no means 
confidently to be believed that all these ampler opportunities for swift and 
wide­reaching derangement will enable the strategy of business enterprise to 
bring on a disastrous collapse, just yet.
It is true, if the country's productive industry [121] were competently 
organized as a systematic whole, and were then managed by competent technicians 
with an eye single to maximum production of goods and services; instead of, as 
now, being manhandled by ignorant business men with an eye single to maximum 
profits; the resulting output of goods and services would doubtless exceed the 
current output by several hundred per cent. But then, none of all that is 
necessary to save the established order of things. All that is required is a 
decent modicum of efficiency, very far short of the theoretical maximum 
production. In effect, the community is in the habit of getting along 
contentedly on something appreciably less than one­half the output which its 
industrial equipment would turn out if it were working uninterruptedly at full 
capacity; even when, as usual, something like one­half of the actual output is 
consumed in wasteful superfluities. The margin for waste and error is very wide, 
fortunately; and, in effect, a more patient and more inclusive survey of the 
facts in the case would suffice to show that the tenure of the Vested Interests 
is reasonably secure just yet; at least in so far as it turns on considerations 
of this nature.
There is, of course, the chance, and it is by no means a remote chance, that the 
rapidly increas-[122]ing volume and complexity of the industrial system may 
presently bring the country's industry into such a ticklish state of unstable 
equilibrium that even a reasonable modicum of willful derangement can no longer 
be tolerated, even for the most urgent and most legitimate reasons of 
businesslike strategy and vested rights. In time, such an outcome is presumably 
due to be looked for. There is, indeed, no lack of evidence that the advanced 
industrial countries are approaching such a state of things, America among the 
rest. The margin for error and wasteful strategy is, in effect, being 
continually narrowed by the further advance of the industrial arts. With every 
further advance in the way of specialization and standardization, in point of 
kind, quantity, quality, and time, the tolerance of the system as a whole under 
any strategic maladjustment grows continually narrower.
How soon the limit of tolerance for willful derangement is due to be reached, 
would be a hazardous topic of speculation. There is now a fair prospect that the 
coming winter may throw some light on that dark question; but this is not saying 
that the end is in sight. What is here insisted on is that that sinister 
eventuality lies yet in the future, although it may be in the calculable future. 
[123] So also it is well to keep in mind that even a fairly disastrous collapse 
of the existing system of businesslike management need by no means prove fatal 
to the Vested Interests, just yet; not so long as there is no competent 
organization ready to take their place and administer the country's industry on 
a more reasonable plan. It is necessarily a question of alternatives.
In all this argument that runs on perennial dislocation and cross purposes, it 
is assumed that the existing businesslike management of industry is of a 
competitive nature and necessarily moves on lines of competitive strategy. As a 
subsidiary premise it is, of course, also assumed that the captains of industry 
who have the direction of this competitive strategy are ordinarily sufficiently 
ill informed on technological matters to go wrong, industrially speaking, even 
with the most pacific and benevolent intentions. They are laymen in all that 
concerns the technical demands of industrial production. This latter, and minor, 
assumption therefore need not be argued; it is sufficiently notorious. On the 
other hand, the first assumption spoken of above, that current business 
enterprise is of a competitive nature, is likely to be questioned by many who 
believe themselves to be familiar with the facts in the case. It is argued, 
[124] by one and another, that the country's business concerns have entered into 
consolidations, coalitions, understandings and working arrangements among 
themselves - syndicates, trusts, pools, combinations, interlocking directorates, 
gentlemen's agreements, employers' unions - to such an extent as virtually to 
cover the field of that large­scale business that sets the pace and governs the 
movements of the rest; and that where combination takes effect in this way, 
competition ceases. So also it will be argued that where there has been no 
formal coalition of interests the business men in charge will still commonly act 
in collusion, with much the same result. The suggestion is also ready to hand 
that in so far as businesslike sabotage of this competitive order is still to be 
met with, it can all be corrected by such a further consolidation of interests 
as will do away with all occasion for competitive cross purposes within the 
industrial system.
It is not easy to see just how far that line of argument would lead; but to make 
it effective and to cover the case it would plainly have to result in so wide a 
coalition of interests and pooling of management as would, in effect, eliminate 
all occasion for businesslike management within the [125] system, and leave the 
underlying population quite unreservedly at the disposal of the resulting 
coalition of interests - an outcome which is presumably not contemplated. And 
even so, the argument takes account of only one strand in that three­ply rope 
that goes to fashion the fatal noose. The remaining two are stout enough, and 
they have not been touched. It is true, economists and others who have canvassed 
this matter of competition have commonly given their attention to this one line 
of competition alone - between rival commercial interests - because this 
competition is conceived to be natural and normal and to serve the common good. 
But there remains (a) the competition between those business men who buy cheap 
and sell dear and the underlying population from and to whom they buy cheap and 
sell dear, and (b) the competition between the captains of industry and those 
absentee owners in whose name and with whose funds the captains do business. In 
the typical case, modern business enterprise takes the corporate form, is 
organized on credit, and therefore rests on absentee ownership; from which it 
follows that in all large­scale business the owners are not the same persons as 
the managers, nor does the interest of the man-[126]ager commonly coincide with 
that of his absentee owners, particularly in the modern "big business."
So it follows that even a coalition of Vested Interests which should be 
virtually all­inclusive, would still have to makeup its account with "what the 
traffic will bear," that is to say what will bring the largest net income in 
terms of price; that is to say, the coalition would still be under the 
competitive necessity of buying cheap and selling dear, to the best of its 
ability and with the use of all the facilities which its dominant position in 
the market would give. The coalition, therefore, would still be under the 
necessity of shrewdly limiting the output of goods and services to such a rate 
and volume as will maintain or advance prices; and also to vary its manipulation 
of prices and supply from place to place and from time to time, to turn an 
honest penny; which leaves the case very near the point of beginning. But then, 
such a remedy for these infelicities of the competitive system will probably be 
admitted to be chimerical, without argument.
But what is more to the point is the fact, known even when it is not avowed, 
that the consolidations which have been effected hitherto have not eliminated 
competition, nor have they changed the [127] character of the competitive 
strategy employed, although they have altered its scale and methods. What can be 
said is that the underlying corporations of the holding companies, e.g., are no 
longer competitors among themselves on the ancient footing. But strategic 
dislocation and cross purposes continue to be the order of the day in the 
businesslike management of industry; and the volume of habitual unemployment, 
whether of equipment or of man power, continues undiminished and unashamed - 
which is after all a major count in the case.
It is well to recognize what the business men among themselves always recognize 
as a matter of course, that business is in the last analysis always carried on 
for the private advantage of the individual business men who carry it on. And 
these enterprising persons, being business men, will always be competitors for 
gain among themselves, however much and well they may combine for a common 
purpose as against the rest of the community. The end and aim of any gainful 
enterprise carried through in common is always the division of the joint gains, 
and in this division the joint participants always figure as competitors. The 
syndicates, coalitions, corporations, consolidations of interests, so entered 
into in the pur-[128]suit of gain are, in effect, in the nature of conspiracies 
between business men each seeking his own advantage at the cost of any whom it 
may concern. There is no ulterior solidarity of interests among the participants 
in such a joint enterprise.
By way of illustration, what is set forth in the voluminous testimony taken in 
the Colton case, before the California courts, having to do with the affairs of 
the Southern Pacific and its subsidiaries, will show in what fashion the 
businesslike incentives of associated individuals may be expected to work out in 
the partition of benefits within a given coalition. And not only is there no 
abiding solidarity of interests between the several participants in such a joint 
enterprise, so far as regards the final division of the spoils, but it is also 
true that the business interest of the manager in charge of such a syndicate of 
absentee ownership will not coincide with the collective interest of the 
coalition as a going concern. As an illustrative instance may be cited the 
testimony of the great president of the two Great Northern railways, taken 
before a Congressional commission, wherein it is explained somewhat fully that 
for something like a quarter­century the two great roads under his management 
had never come in [129] for reasonable earnings on their invested capital. And 
it is a matter of common notoriety, although it was charitably not brought out 
in the hearings of the commission, that during his incumbency as manager of the 
two great railway systems this enterprising railway president had by thrift and 
management increased his own private possessions from $20 to something variously 
estimated at $150,000,000 to $200,000,000; while his two chief associates in 
this adventure had retired from the management on a similarly comfortable 
footing; so notably comfortable, indeed, as to have merited a couple of very 
decent peerages under the British crown.
In effect, there still is an open call for shrewd personal strategy at the cost 
of any whom it may concern; all the while that there is also a very appreciable 
measure of collusion among the Vested Interests, at the cost of any whom it may 
concern. Business is still competitive business, competitive pursuit of private 
gain; as how should it not be? seeing that the incentive to all business is 
after all private gain at the cost of any whom it may concern.

By reason of doctrinal consistency and loyalty to tradition, the certified 
economists have habitu-[130]ally described business enterprise as a rational 
arrangement for administering the country's industrial system and assuring a 
full and equitable distribution of consumable goods to the consumers. There need 
be no quarrel with that view. But it is only fair to enter the reservation that, 
considered as an arrangement for administering the country's industrial system, 
business enterprise based on absentee ownership has the defects of its 
qualities; and these defects of this good old plan are now calling attention to 
themselves. Hitherto, and ever since the mechanical industry first came into the 
dominant place in this industrial system, the defects of this businesslike 
management of industry have continually been encroaching more and more on its 
qualities. It took its rise as a system of management by the owners of the 
industrial equipment, and it has in its riper years grown into a system of 
absentee ownership managed by quasi-responsible financial agents. Having begun 
as an industrial community which centered about an open market, it has matured 
into a community of Vested Interests whose vested right it is to keep up prices 
by a short supply in a closed market. There is no extravagance in saying that, 
by and large, this arrangement for controlling the production and distribution 
of [131] goods and services through the agency of absentee ownership has now 
come to be, in the main, a blundering muddle of defects. For the purpose in 
hand, that is to say with a view to the probable chance of any revolutionary 
overturn, this may serve as a fair characterization of the régime of the Vested 
Interests; whose continued rule is now believed by their Guardians to be 
threatened by a popular uprising in the nature of Bolshevism.
Now, as to the country's industrial system which is manhandled on this 
businesslike plan; it is a comprehensive and balanced scheme of technological 
administration. Industry of this modern sort - mechanical, specialized, 
standardized, running to quantity production, drawn on a large scale - is highly 
productive; provided always that the necessary conditions of its working are met 
in some passable fashion. These necessary conditions of productive industry are 
of a well­defined technical character, and they are growing more and more 
exacting with every farther advance in the industrial arts. This mechanical 
industry draws always more and more largely and urgently on the natural sources 
of mechanical power, and it necessarily makes use of an ever increasingly wide 
and varied range of materials, drawn from all latitudes and all geographical re-
[132]gions, in spite of obstructive national frontiers and patriotic 
animosities; for the mechanical technology is impersonal and dispassionate, and 
its end is very simply to serve human needs, without fear or favor or respect of 
persons, prerogatives, or politics. It makes up an industrial system of an 
unexampled character - a mechanically balanced and interlocking system of work 
to be done, the prime requisite of whose working is a painstaking and 
intelligent co­ordination of the processes at work, and an equally painstaking 
allocation of mechanical power and materials. The foundation and driving force 
of it all is a massive body by technological knowledge, of a highly impersonal 
and altogether unbusinesslike nature, running in close contact with the material 
sciences, on which it draws freely at every turn - exactingly specialized, 
endlessly detailed, reaching out into all domains of empirical fact.
Such is the system of productive work which has grown out of the Industrial 
Revolution, and on the full and free run of which the material welfare of all 
the civilized peoples now depends from day to day. Any defect or hindrance in 
its technical administration, any intrusion of non-technical considerations, any 
failure or obstruction at any point, unavoidably results in a dispro-
[133]portionate set­back to the balanced whole and brings a disproportionate 
burden of privation on all these peoples whose productive industry has come 
within the sweep of the system.
It follows that those gifted, trained, and experienced technicians who now are 
in possession of the requisite technological information and experience are the 
first and instantly indispensable factor in the everyday work of carrying on the 
country's productive industry. They now constitute the General Staff of the 
industrial system, in fact; whatever law and custom may formally say in protest. 
The "captains of industry" may still vaingloriously claim that distinction, and 
law and custom still countenance their claim; but the captains have no 
technological value, in fact.
Therefore any question of a revolutionary overturn, in America or in any other 
of the advanced industrial countries, resolves itself in practical fact into a 
question of what the guild of technicians will do. In effect it is a question 
whether the discretion and responsibility in the management of the country's 
industry shall pass from the financiers, who speak for the Vested Interests, to 
the technicians, who speak for the industrial system as a going concern. There 
is no [133] third party qualified to make a colorable bid, or able to make good 
its pretensions if it should make a bid. So long as the vested rights of 
absentee ownership remain intact, the financial powers - that is to say the 
Vested Interests - will continue to dispose of the country's industrial forces 
for their own profit; and so soon, or so far, as these vested rights give way, 
the control of the people's material welfare will pass into the hands of the 
technicians. There is no third party.
The chances of anything like a Soviet in America, therefore, are the chances of 
a Soviet of technicians. And, to the due comfort of the Guardians of the Vested 
Interests and the good citizens who makeup their background, it can be shown 
that anything like a Soviet of Technicians is at the most a remote contingency 
in America.
It is true, so long as no such change of base is made, what is confidently to be 
looked for is a régime of continued and increasing shame and confusion, hardship 
and dissension, unemployment and privation, waste and insecurity of person and 
property - such as the rule of the Vested Interests in business has already made 
increasingly familiar to all the civilized peoples. But the vested rights of 
absentee ownership are still em-[135]bedded in the sentiments of the underlying 
population, and still continue to be the Palladium of the Republic; and the 
assertion is still quite safe that anything like a Soviet of Technicians is not 
a present menace to the Vested Interests in America.
By settled habit the technicians, the engineers and industrial experts, are a 
harmless and docile sort, well fed on the whole, and somewhat placidly content 
with the "full dinner­pail" which the lieutenants of the Vested Interests 
habitually allow them. It is true, they constitute the indispensable General 
Staff of that industrial system which feeds the Vested Interests; but hitherto 
at least, they have had nothing to say in the planning and direction of this 
industrial system, except as employées in the pay of the financiers. They have, 
hitherto, been quite unreflectingly content to work piecemeal, without much of 
an understanding among themselves, unreservedly doing job­work for the Vested 
Interests; and they have without much reflection lent themselves and their 
technical powers freely to the obstructive tactics of the captains of industry; 
all the while that the training which makes them technicians is but a 
specialized extension of that joint stock of technological knowledge that has 
been carried [136] forward out of the past by the community at large.
But it remains true that they and their dear­bought knowledge of ways and means 
- dear­bought on the part of the underllying community - are the pillars of that 
house of industry in which the Vested Interests continue to live. Without their 
continued and unremitting supervision and direction the industrial system would 
cease to be a working system at all; whereas it is not easy to see how the 
elimination of the existing businesslike control could bring anything but relief 
and heightened efficiency to this working system, The technicians are 
indispensable to productive industry of this mechanical sort; the Vested 
Interests and their absentee owners are not. The technicians are indispensable 
to the Vested Interests and their absentee owners, as a working force without 
which there would be no industrial output to control or divide; whereas the 
Vested Interests and their absentee owners are of no material consequence to the 
technicians and their work, except as an extraneous interference and 
obstruction.
It follows that the material welfare of all the advanced industrial peoples 
rests in the hands of these technicians, if they will only see it that way, 
[137] take counsel together, constitute themselves the self­directing General 
Staff of the country's industry, and dispense with the interference of the 
lieutenants of the absentee owners. Already they are strategically in a position 
to take the lead and impose their own terms of leadership, so soon as they, or a 
decisive number of them, shall reach a common understanding to that effect and 
agree on a plan of action.
But there is assuredly no present promise of the technicians' turning their 
insight and common sense to such a use. There need be no present apprehension. 
The technicians are a "safe and sane" lot, on the whole; and they are pretty 
well commercialized, particularly the older generation, who speak with authority 
and conviction, and to whom the younger generation of engineers defer, on the 
whole, with such a degree of filial piety as should go far to reassure all good 
citizens. And herein lies the present security of the Vested Interests, as well 
as the fatuity of any present alarm about Bolshevism and the like; for the 
whole­hearted co­operation of the technicians would be as indispensable to any 
effectual movement of overturn as their unwavering service in the employ of the 
Vested Interests is indispensable to the maintenance of the established order.
[138]
VI
A Memorandum on a Practicable Soviet of Technicians

It is the purpose of this memorandum to show, in an objective way, that under 
existing circumstances there need be no fear, and no hope, of an effectual 
revolutionary overturn in America, such as would unsettle the established order 
and unseat those Vested Interests that now control the country's industrial 
system. In an earlier paper (Chapter IV), it has been argued that no effectual 
move in the direction of such an overturn can be made except on the initiative 
and under the direction of the country's technicians, taking action in common 
and on a concerted plan. Notoriously, no move of this nature has been made 
hitherto, nor is there evidence that anything of the kind has been contemplated 
by the technicians. They still are consistently loyal, with something more than 
a hired­man's loyalty, to the established order of commercial profit and 
absentee ownership. And any adequate plan of con-[139]certed action, such as 
would be required for the enterprise in question, is not a small matter that can 
be arranged between two days.
Any plan of action that shall hope to meet the requirements of the case in any 
passable fashion must necessarily have the benefit of mature deliberation among 
the technicians who are competent to initiate such an enterprise; it must engage 
the intelligent co­operation of several thousand technically trained men 
scattered over the face of the country, in one industry and another; must carry 
out a passably complete cadastration of the country's industrial forces; must 
set up practicable organization tables covering the country's industry in some 
detail,- energy­resources, materials, and man power; and it must also engage the 
aggressive support of the trained men at work in transportation, mining, and the 
greater mechanical industries. These are initial requirements, indispensable to 
the initiation of any enterprise of the kind in such an industrial country as 
America; and so soon as this is called to mind it will be realised that any fear 
of an effectual move in this direction at present is quite chimerical. So that, 
in fact, it may be set down without a touch of ambiguity that absentee ownership 
is secure, just yet.
Therefore, to show conclusively and in an ob-[140]jective way how remote any 
contingency of this nature still is, it is here proposed to set out in a summary 
fashion the main lines which any such concerted plan of action would have to 
follow, and what will of necessity be the manner of organization which alone can 
hope to take over the industrial system, following the eventual abdication or 
dispossession of the Vested Interests and their absentee owners. And, by way of 
parenthesis, it is always the self­made though reluctant abdication of the 
Vested Interests and their absentee owners, rather than their forcible 
dispossession, that is to be looked for as a reasonably probable event in the 
calculable future. It should, in effect, cause no surprise to find that they 
will, in a sense, eliminate themselves, by letting go quite involuntarily after 
the industrial situation gets quite beyond their control. In fact, they have, in 
the present difficult juncture, already sufficiently shown their unfitness to 
take care of the country's material welfare,- which is after all the only ground 
on which they can set up a colorable claim to their vested rights. At the same 
time something like an opening bid for a bargain of abdication has already come 
in from more than one quarter. So that a discontinuance [141] of the existing 
system of absentee ownership, on one plan or another, is no longer to be 
considered a purely speculative novelty; and an objective canvass of the manner 
of organization that is to be looked to to take the place of the control now 
exercised by the Vested Interests - in the event of their prospective abdication 
- should accordingly have some present  interest, even apart from its bearing on 
the moot question of any forcible disruption of the established system of 
absentee ownership.
As a matter of course, the powers and duties of the incoming directorate will be 
of a technological nature, in the main if not altogether; inasmuch as the 
purpose of its coming into control is the care of the community's material 
welfare by a more competent management of the country's industrial system. It 
may be added that even in the unexpected event that the contemplated, overturn 
should, in the beginning, meet with armed opposition from the partisans of the 
old order, it will still be true that the duties of the incoming directorate 
will be of a technological character, in the main; inasmuch as warlike 
operations are also now substantially a matter of technology, [142] both in the 
immediate conduct of hostilities and in the still more urgent work of material 
support and supply.
The incoming industrial order is designed to correct the shortcomings of the 
old. The duties and powers of the incoming directorate will accordingly converge 
on those points in the administration of industry where the old order has most 
signally fallen short; that is to say, on the due allocation of resources and a 
consequent full and reasonably proportioned employment of the available 
equipment and man power; on the avoidance of waste and duplication of work; and 
on an equitable and sufficient supply of goods and services to consumers. 
Evidently the most immediate and most urgent work to be taken over by the 
incoming directorate is that for want of which under the old order the 
industrial system has been working slack and at cross purposes; that is to say 
the due allocation of available resources, in power, equipment, and materials, 
among the greater primary industries. For this necessary work of allocation 
there has been substantially no provision under the old order.
To carry on this allocation, the country's transportation system must be placed 
at the disposal of the same staff that has the work of allocation [143] to do; 
since, under modern conditions, any such allocation will take effect only by use 
of the transportation system. But, by the same token, the effectual control of 
the distribution of goods to consumers will also necessarily fall into the same 
hands; since the traffic in consumable goods is also a matter of transportation, 
in the main.
On these considerations, which would only be reinforced by a more detailed 
inquiry into the work to be done, the central directorate will apparently take 
the shape of a loosely tripartite executive council, with power to act in 
matters of industrial administration; the council to include technicians whose 
qualifications enable them to be called Resource Engineers, together with 
similarly competent spokesmen of the transportation system and of the 
distributive traffic in finished products and services. With a view to 
efficiency and expedition, the executive council will presumably not be a 
numerous body; although its staff of intelligence and advice may be expected to 
be fairly large, and it will be guided by current consultation with the 
accredited spokesmen (deputies, commissioners, executives, or whatever they may 
be called) of the several main subdivisions of productive industry, 
transportation, and distributive traffic.
[144] Armed with these powers and working in due consultation with a sufficient 
ramification of sub­centers and local councils, this industrial directorate 
should be in a position to avoid virtually all unemployment of serviceable 
equipment and manpower on the one hand, and all local or seasonal scarcity on 
the other hand. The main line of duties indicated by the character of the work 
incumbent on the directorate, as well as the main line of qualifications in its 
personnel, both executive and advisory, is such as will call for the services of 
Production Engineers, to use a term which is coming into use. But it is also 
evident that in its continued work of planning and advisement the directorate 
will require the services of an appreciable number of consulting economists; men 
who are qualified to be called Production Economists.
The profession now includes men with the requisite qualifications, although it 
cannot be said that the gild of economists is made up of such men in the main. 
Quite blamelessly, the economists have, by tradition and by force of commercial 
pressure, habitually gone in for a theoretical inquiry into the ways and means 
of salesmanship, financial traffic, and the distribution of income and property, 
rather than a study of the industrial [145] system considered as a ways and 
means of producing goods and services. Yet there now are, after all, especially 
among the younger generation, an appreciable number, perhaps an adequate number, 
of economists who have learned that "business" is not "industry" and that 
investment is not production. And, here as always, the best is good enough, 
perforce.
"Consulting economists" of this order are a necessary adjunct to the personnel 
of the central directorate, because the technical training that goes to make a 
resource engineer, or a production engineer, or indeed a competent industrial 
expert in any line of specialization, is not of a kind to give him the requisite 
sure and facile insight into the play of economic forces at large; and as a 
matter of notorious fact, very few of the technicians have gone at all far 
afield to acquaint themselves with anything more to the point in this connection 
than the half­forgotten commonplaces of the old order. The "consulting 
economist" is accordingly necessary to cover an otherwise uncovered joint in the 
new articulation of things. His place in the scheme is analogous to the part 
which legal counsel now plays in the manoeuvres of diplomatists and statesmen; 
and the [146] discretionary personnel of the incoming directorate are to be, in 
effect, something in the way of industrial statesmen under the new order.
There is also a certain general reservation to be made with regard to personnel, 
which may conveniently be spoken of at this point. To avoid persistent confusion 
and prospective defeat, it will be necessary to exclude from all positions of 
trust and executive responsibility all persons who have been trained for 
business or who have had experience in business undertakings of the larger sort. 
This will apply generally, throughout the administrative scheme, although it 
will apply more imperatively as regards the responsible personnel of the 
directorate, central and subordinate, together with their staff of intelligence 
and advice, wherever judgment and insight are essential. What is wanted is 
training in the ways and means of productive industry, not in the ways and means 
of salesmanship and profitable investment.
By force of habit, men trained to a businesslike view of what is right and real 
will be irretrievably biassed against any plan of production and distribution 
that is not drawn in terms of commercial profit and loss and does not provide a 
margin of free income to go to absentee owners. The personal exceptions to the 
rule are apparently very [147] few. But this one point is after all of 
relatively minor consequence. What is more to the point in the same connection 
is that the commercial bias induced by their training in businesslike ways of 
thinking leaves them incapable of anything like an effectual insight into the 
use of resources or the needs and aims of productive industry, in any other 
terms than those of commercial profit and loss. Their units and standards of 
valuation and accountancy are units and standards of price, and of private gain 
in terms of price; whereas for any scheme of productive industry which runs, not 
on salesmanship and earnings, but on tangible performances and tangible benefit 
to the community at large, the valuations and accountancy of salesmanship and 
earnings are misleading. With the best and most benevolent intentions, men so 
trained will unavoidably make their appraisals of production and their 
disposition of productive forces in the only practical terms with which they are 
familiar, the terms of commercial accountancy; which is the same as saying, the 
accountancy of absentee ownership and free income; all of which it is the 
abiding purpose of the projected plan to displace. For the purposes of this 
projected new order of production, therefore, the experienced and capable 
business men are at the [148] best to be rated as well­intentioned deaf-mute 
blind men. Their wisest judgment and sincerest endeavors become meaningless and 
misguided so soon as the controlling purpose of industry shifts from the footing 
of profits on absentee investment to that of a serviceable output of goods.
All this abjuration of business principles and businesslike sagacity may appear 
to be a taking of precautions about a vacant formality; but it is as well to 
recall that by trained propensity and tradition the business men, great and 
small, are after all, each in their degree, lieutenants of those Vested 
Interests which the projected organization of industry is designed to displace,- 
schooled in their tactics and marching under their banners. The experience of 
the war administration and its management of industry by help of the business 
men during the past few years goes to show what manner of industrial wisdom is 
to be looked for where capable and well­intentioned business men are called in 
to direct industry with a view to maximum production and economy. For its 
responsible personnel the administration has uniformly drawn on experienced 
business men, preferably men of successful experience in Big Business; that is 
to say, trained men with a shrewd eye to the main chance. And the tale of its 
adven-[149]tures, so far as a businesslike reticence has allowed them to become 
known, is an amazing comedy of errors; which runs to substantially the same 
issue whether it is told of one or another of the many departments, boards, 
councils, commissions, and administrations, that have had this work to do.
Notoriously, this choice of personnel has with singular uniformity proved to be 
of doubtful ad-viability, not to choose a harsher epithet. The policies pursued, 
doubtless with the best and most sagacious intentions of which this businesslike 
personnel have been capable, have uniformly resulted in the safeguarding of 
investments and the allocation of commercial profits; all the while that the 
avowed aim of it all, and doubtless the conscientious purpose of the 
businesslike administrators, has been quantity production of essential goods. 
The more that comes to light, the more visible becomes the difference between 
the avowed purpose and the tangible performance. Tangible performance in the way 
of productive industry is precisely what the business men do not know how to 
propose, but it is also that on which the possible success of any projected plan 
of overturn will always rest. Yet it is also to be remarked that even the 
reluctant and blindfold endeavors of these businesslike administrators to break 
away [150] from their life­long rule of reasonable earnings, appear to have 
resulted in a very appreciably increased industrial output per unit of man power 
and equipment employed. That such was the out come under the war administration 
is presumably due in great part to the fact that the business men in charge were 
unable to exercise so strict a control over the working force of technicians and 
skilled operatives during that period of stress.
And here the argument comes in touch with one of the substantial reasons why 
there need be no present fear of a revolutionary overturn. By settled habit, the 
American population are quite unable to see their way to entrust any appreciable 
responsibility to any other than business men; at the same time that such a move 
of overturn can hope to succeed only if it excludes the business men from all 
positions of responsibility. This sentimental deference of the American people 
to the sagacity of its business men is massive, profound, and alert. So much so 
that it will take harsh and protracted experience to remove it, or to divert it 
sufficiently for the purpose of any revolutionary diversion. And more 
particularly, popular sentiment in this country will not tolerate the assumption 
of responsibility by the technicians, who are in the popular apprehension con-
[151]ceived to be a somewhat fantastic brotherhood of over­specialized cranks, 
not to be trusted out of sight except under the restraining hand of safe and 
sane business men. Nor are the technicians themselves in the habit of taking a 
greatly different view of their own case. They still feel themselves, in the 
nature of things, to fall into place as employées of those enterprising business 
men who are, in the nature of things, elected to get something for nothing. 
Absentee ownership is secure, just yet. In time, with sufficient provocation, 
this popular frame of mind may change, of course; but it is in any case a matter 
of an appreciable lapse of time.
Even such a scant and bare outline of generalities as has been hastily sketched 
above will serve to show that any effectual overturn of the established order is 
not a matter to be undertaken out of hand, or to be maneuvered into shape by 
makeshifts after the initial move has been made. There is no chance without 
deliberate preparations from beforehand. There are two main lines of 
preparations that will have to be taken care of by any body of men who may 
contemplate such a move: (a) An inquiry into existing conditions and into the 
available ways and means; and (b) the setting up of practicable organiza-
[152]tion tables and a survey of the available personnel. And bound up with this 
work of preparation, and conditioning it, provision must also be made for the 
growth of such a spirit of teamwork as will be ready to undertake and undergo 
this critical adventure. All of which will take time.
It will be necessary to investigate and to set out in a convincing way what are 
the various kinds and lines of waste that are necessarily involved in the 
present businesslike control of industry; what are the abiding causes of these 
wasteful and obstructive practices; and what economies of management and 
production will become practicable on the elimination of the present 
businesslike control. This will call for diligent teamwork on the part of a 
suitable group of economists and engineers, who will have to be drawn together 
by self-selection on the basis of a common interest in productive efficiency, 
economical use of resources, and an equitable distribution of the consumable 
output. Hitherto no such self-selection of competent persons has visibly taken 
place, and the beginnings of a plan for team­work in carrying on such an inquiry 
are yet to be made.
In the course of this contemplated inquiry and on the basis afforded by its 
findings there is no less serious work to be done in the way of delib-
[153]eration and advisement, among the members of the group in question and in 
consultation with outside technological men who know what can best be done with 
the means in hand, and whose interest in things drives them to dip into the same 
gain-less adventure. This will involve the setting up of organization tables to 
cover the efficient use of the available resources and equipment, as well as to 
re­organize the traffic involved in the distribution of the output.
By way of an illustrative instance, to show by an example something of what the 
scope and method of this inquiry and advisement will presumably be like, it 
maybe remarked that under the new order the existing competitive commercial 
traffic engaged in the distribution of goods to consumers will presumably fall 
away, in the main, for want of a commercial incentive. It is well known, in a 
general way, that the present organization of this traffic, by wholesale and 
retail merchandising, involves a very large and very costly duplication of Work, 
equipment, stock, and personnel,- several hundred per cent, more than would be 
required by an economically efficient management of the traffic on a reasonable 
plan. In looking for a way out of the present extremely wasteful merchandising 
traffic, and in working out [154] organization tables for an equitable and 
efficient distribution of goods to consumers, the experts in the case will, it 
is believed, be greatly helped out by detailed information on such existing 
organizations as, e.g., the distributing system of the Chicago Packers, the 
chain stores, and the mail-order houses. These are commercial organizations, of 
course, and as such they are managed with a view to the commercial gain of their 
owners and managers; but they are at the same time designed to avoid the 
ordinary wastes of the ordinary retail distribution, for the benefit of their 
absentee owners. There are not a few object­lessons of economy of this practical 
character to be found among the Vested Interests; so much so that the economies 
which result from them are among the valuable capitalized assets of these 
business concerns.
This contemplated inquiry will, of course, also be useful in the way of 
publicity; to show, concretely and convincingly, what are the inherent defects 
of the present businesslike control of industry, why these defects are 
inseparable from a businesslike control under existing circumstances, and what 
may fairly be expected of an industrial management which takes no account of 
absentee ownership. The ways and means of publicity to be employed is a question 
that plainly [155] cannot profitably be discussed beforehand, so long as the 
whole question of the contemplated inquiry itself has little more than a 
speculative interest; and much the same will have to be said as to the scope and 
detail of the inquiry, which will have to be determined in great part by the 
interest and qualifications of the men who are to carry it on. Nothing but 
provisional generalities could at all confidently be sketched into its program 
until the work is in hand.
The contemplated eventual shift to a new and more practicable system of 
industrial production and distribution has been here spoken of as a 
"revolutionary overturn" of the established order. This flagitious form of words 
is here used chiefly because the Guardians of the established order are plainly 
apprehensive of something sinister that can be called by no gentler name, rather 
than with the intention of suggesting that extreme and subversive measures alone 
can now save the life of the underlying population from the increasingly 
disserviceable rule of the Vested Interests. The move which is here discussed in 
a speculative way under this sinister form of words, as a contingency to be 
guarded against by fair means and foul, need, in effect, be nothing spectacular; 
assuredly it need involve no clash of arms [156] or fluttering of banners, 
unless, as is beginning to seem likely, the Guardians of the old order should 
find that sort of thing expedient. In its elements, the move will be of the 
simplest and most matter­of­fact character; although there will doubtless be 
many intricate adjustments to be made in detail. In principle, all that is 
necessarily involved is a disallowance of absentee ownership; that is to say, 
the disestablishment of an institution which has, in the course of time and 
change, proved to be noxious to the common good. The rest will follow quite 
simply from the cancelment of this outworn and footless vested right.
By absentee ownership, as the term applies in this connection, is here to be 
understood the ownership of an industrially useful article by any person or 
persons who are not habitually employed in the industrial use of it. In this 
connection, office work of a commercial nature is not rated as industrial 
employment. A corollary of some breadth follows immediately, although it is so 
obvious an implication of the main proposition that it should scarcely need 
explicit statement: An owner who is employed in the industrial use of a given 
parcel of property owned by him, will still be an "absentee owner," within the 
meaning of the term, in case he is not the only person habit-[157]ually employed 
in its use. A further corollary follows, perhaps less obvious at first sight, 
but no less convincing on closer attention to the sense of the terms employed: 
Collective ownership, of the corporate form, that is to say ownership by a 
collectivity instituted ad hoc, also falls away as being unavoidably absentee 
ownership, within the meaning of the term. It will be noted that all this does 
not touch joint ownership of property held in undivided interest by a household 
group and made use of by the members of the household conjointly. It is only in 
so far as the household is possessed of useful property not made use of by its 
members, or not made use of without hired help, that its ownership of such 
property falls within the meaning of the term, absentee ownership. To be 
sufficiently explicit, it may be added that the cancelment of absentee ownership 
as here understood will apply indiscriminately to all industrially useful 
objects, whether realty or personality, whether natural resources, equipment, 
banking capital, or wrought goods in stock.
As an immediate consequence of this cancelment of absentee ownership it should 
seem to be altogether probable that industrially useful articles will presently 
cease to be used for purposes of ownership, that is to say for purposes of 
private [158] gain; although there might be no administrative interference with 
such use. Under the existing state of the industrial arts, neither the natural 
resources drawn on for power and materials nor the equipment employed in the 
great and controlling industries are of a nature to lend themselves to any other 
than absentee ownership; and these industries control the situation, so that 
private enterprise for gain on a small scale would scarcely find a suitable 
market. At the same time the inducement to private accumulation of wealth at the 
cost of the community would virtually fall away, inasmuch as the inducement to 
such accumulation now is in nearly all cases an ambition to come in for 
something in the way of absentee ownership. In effect, other incentives are a 
negligible quantity. Evidently, the secondary effects of such cancelment will go 
far, in more than one direction, but evidently, too, there could be little 
profit in endeavoring to follow up these ulterior contingencies in extended 
speculations here.
As to the formalities, of a legal complexion, that would be involved in such a 
disallowance of absentee ownership, they need also be neither large nor 
intricate; at least not in their main incidence. It will in all probability take 
the shape of a cancelment of all corporation securities, as [159] an initial 
move. Articles of partnership, evidences of debt, and other legal instruments 
which now give title to property not in hand or not in use by the owner, will be 
voided by the same act. In all probability this will be sufficient for the 
purpose.
This act of disallowance may be called subversive and revolutionary; but while 
there is no intention here to offer anything in the way of exculpation, it is 
necessary to an objective appraisal of the contemplated move to note that the 
effect of such disallowance would be subversive or revolutionary only in a 
figurative sense of the words. It would all of it neither subvert nor derange 
any substantial mechanical contrivance or relation, nor need it materially 
disturb the relations, either as workman or as consumer of goods and services, 
of any appreciable number of persons now engaged in productive industry. In 
fact, the disallowance will touch nothing more substantial than a legal 
make­believe. This would, of course, be serious enough in its consequences to 
those classes - called the kept classes - whose livelihood hangs on the 
maintenance of this legal make­believe. So, likewise, it would vacate the 
occupation of the "middleman," which likewise turns on the maintenance of this 
legal make­believe; which gives [160] "title" to that to which one stands in no 
material relation.
Doubtless, hardship will follow thick and fast, among those classes who are 
least inured to privation; and doubtless all men will agree that it is a great 
pity. But this evil is, after all, a side issue, as regards the present 
argument, which has to do with nothing else than the practicability of the 
scheme. So it is necessary to note that, however detrimental to the special 
interests of the absentee owners this move may be, yet it will not in any degree 
derange or diminish those material facts that constitute the ways and means of 
productive industry; nor will it in any degree enfeeble or mutilate that joint 
stock of technical knowledge and practice that constitutes the intellectual 
working force of the industrial system. It does not directly touch the material 
facts of industry, for better or worse. In this sense it is a completely idle 
matter, in its immediate incidence, whatever its secondary consequences may be 
believed to be.
But there is no doubt that a proposal to disallow absentee ownership will shock 
the moral sensibilities of many persons; more particularly the sensibilities of 
the absentee owners. To avoid the appearance of willful neglect, therefore, it 
is necessary to speak also of the "moral aspect." [161] There is no intention 
here to argue the moral merits of this contemplated disallowance of absentee 
ownership; or to argue for or against such a move, on moral or other grounds. 
Absentee ownership is legally sound today. Indeed, as is well known, the 
Constitution includes a clause which specially safeguards its security. If, and 
when, the law is changed, in this respect, what is so legal today will of course 
cease to be legal. There is, in fact, not much more to be said about it; except 
that, in the last resort, the economic moralities wait on the economic 
necessities. The economic­moral sense of the American community today runs 
unequivocally to the effect that absentee ownership is fundamentally and 
eternally right and good; and it should seem reasonable to believe that it will 
continue to run to that effect for some time yet.
There has lately been some irritation and faultfinding with what is called 
"profiteering" and there may be more or less uneasy discontent with what is felt 
to be an unduly disproportionate inequality in the present distribution of 
income; but apprehensive persons should not lose sight of the main fact that 
absentee ownership after all is the idol of every true American heart. It is the 
substance of things hoped for and the reality of [162] things not seen. To 
achieve (or to inherit) a competency, that is to say to accumulate such wealth 
as will assure a "decent" livelihood in industrial absentia, is the universal, 
and universally laudable, ambition of all who have reached years of discretion; 
but it all means the same thing - to get something for nothing, at any cost. 
Similarly universal is the awestruck deference with which the larger absentee 
owners are looked up to for guidance and example. These substantial citizens are 
the ones who have "made good," in the popular apprehension. They are the great 
and good men whose lives "all remind us we can make our lives sublime, etc."
This commercialized frame of mind is a sturdy outgrowth of many generations of 
consistent training in the pursuit of the main chance; it is second nature, and 
there need be no fear that it will allow the Americans to see workday facts in 
any other than its own perspective, just yet. The most tenacious factor in any 
civilization is a settled popular frame of mind, and to this abiding American 
frame of mind absentee ownership is the controlling center of all the economic 
realities.

So, having made plain that all this argument on a practicable overturn of the 
established order has [163] none but a speculative interest, the argument can go 
on to consider what will be the nature of the initial move of overturn which is 
to break with the old order of absentee ownership and set up a régime of 
workmanship governed by the country's technicians.
As has already been called to mind, repeatedly, the effective management of the 
industrial system at large is already in the hands of the technicians, so far as 
regards the work actually done; but it is all under the control of the Vested 
Interests, representing absentee owners, so far as regards its failure to work. 
And the failure is, quite reasonably, attracting much attention lately. In this 
two­cleft, or bi­cameral, administration of industry, the technicians may be 
said to represent the community at large in its industrial capacity, or in other 
words the industrial system as a going concern; whereas the business men speak 
for the commercial interest of the absentee owners, as a body which holds the 
industrial community in usufruct. It is the part of the technicians, between 
them, to know the country's available resources, in mechanical power and 
equipment; to know and put in practice the joint stock of technological 
knowledge which is indispensable to industrial production; as well as to know 
and take care of the community's [164] habitual need and use of consumable 
goods. They are, in effect, the general staff of production engineers, under 
whose surveillance the required output of goods and services is produced and 
distributed to the consumers. Whereas it is the part of the business men to know 
what rate and volume of production and distribution will best serve the 
commercial interest of the absentee owners, and to put this commercial knowledge 
in practice by nicely limiting production and distribution of the output to such 
a rate and volume as their commercial traffic will bear - that is to say, what 
will yield the largest net income to the absentee owners in terms of price. In 
this work of sagaciously retarding industry the captains of industry necessarily 
work at cross purposes, among themselves, since the traffic is of a competitive 
nature.
Accordingly, in this two­cleft arrangement of administrative functions, it is 
the duty of the technicians to plan the work and to carry it on; and it is the 
duty of the captains of industry to see that the work will benefit none but the 
captains and their associated absentee owners, and that it is not pushed beyond 
the salutary minimum which their commercial traffic will bear. In all that 
concerns the planning and execution of the work done, [165] the technicians 
necessarily take the initiative and exercise the necessary creative surveillance 
and direction; that being what they, and they alone, are good for; whereas the 
businesslike deputies of the absentee owners sagaciously exercise a running veto 
power over the technicians and their productive industry. They are able 
effectually to exercise this commercially sagacious veto power by the fact that 
the technicians are, in effect, their employées, hired to do their bidding and 
fired if they do not; and perhaps no less by this other fact, that the 
technicians have hitherto been working piecemeal, as scattered individuals under 
their master's eye; they have hitherto not drawn together on their own ground 
and taken counsel together as a general staff of industry, to determine what had 
best be done and what not. So that they have hitherto figured in the conduct of 
the country's industrial enterprise only as a technological extension of the 
business men's grasp on the commercial main chance.
Yet, immediately and unremittingly, the technicians and their advice and 
surveillance are essential to any work whatever in those great primary 
industries on which the country's productive systems turn, and which set the 
pace for all the rest. And it is obvious that so soon as they shall draw [166] 
together, in a reasonably inclusive way, and take common counsel as to what had 
best be done, they are in a position to say what work shall be done and to fix 
the terms on which it is to be done. In short, so far as regards the technical 
requirements of the case, the situation is ready for a self-selected, but 
inclusive, Soviet of technicians to take over the economic affairs of the 
country and to allow and disallow what they may agree on; provided always that 
they live within the requirements of that state of the industrial arts whose 
keepers they are, and provided that their pretensions continue to have the 
support of the industrial rank and file; which comes near saying that their 
Soviet must consistently and effectually take care of the material welfare of 
the underlying population.
Now, this revolutionary posture of the present state of the industrial arts may 
be undesirable, in some respects, but there is nothing to be gained by denying 
the fact. So soon - but only so soon - as the engineers draw together, take 
common counsel, work out a plan of action, and decide to disallow absentee 
ownership out of hand, that move will have been made. The obvious and simple 
means of doing it is a conscientious withdrawal of efficiency; that is to say 
the general [167] strike, to include so much of the country's staff of 
technicians as will suffice to incapacitate the industrial system at large by 
their withdrawal, for such time as may be required to enforce their argument.
In its elements, the project is simple and obvious, but its working out will 
require much painstaking preparation, much more than appears on the face of this 
bald statement; for it also follows from the present state of the industrial 
arts and from the character of the industrial system in which modern technology 
works out, that even a transient failure to make good in the conduct of 
productive industry will result in a precipitate collapse of the enterprise.
By themselves alone, the technicians can, in a few weeks, effectually 
incapacitate the country's productive industry sufficiently for the purpose. No 
one who will dispassionately consider the technical character of this industrial 
system will fail to recognize that fact. But so long as they have not, at least, 
the tolerant consent of the population at large, backed by the aggressive 
support of the trained working force engaged in transportation and in the 
greater primary industries, they will be substantially helpless to set up a 
practicable working organization on the new [168] footing; which is the same as 
saying that they will in that case accomplish nothing more to the purpose than a 
transient period of hardship and dissension.
Accordingly, if it be presumed that the production engineers are of a mind to 
play their part, there will be at least two main lines of subsidiary preparation 
to be taken care of before any overt move can reasonably be undertaken: (a) An 
extensive campaign of inquiry and publicity, such as will bring the underlying 
population to a reasonable understanding of what it is all about; and (b) the 
working­out of a common understanding and a solidarity of sentiment between the 
technicians and the working force engaged in transportation and in the greater 
underlying industries of the system: to which is to be added as being nearly 
indispensable from the outset, an active adherence to this plan on the part of 
the trained workmen in the great generality of the mechanical industries. Until 
these prerequisites are taken care of, any project for the overturn of the 
established order of absentee ownership will be nugatory.
By way of conclusion it may be recalled again that, just yet, the production 
engineers are a scattering lot of fairly contented subalterns, working [169] 
piecemeal under orders from the deputies of the absentee owners; the working 
force of the great mechanical industries, including transportation, are still 
nearly out of touch and out of sympathy with the technical men, and are bound in 
rival trade organizations whose sole and self-seeking interest converges on the 
full dinner­pail; while the underlying population are as nearly uninformed on 
the state of things as the Guardians of the Vested Interests, including the 
commercialized newspapers, can manage to keep them, and they are consequently 
still in a frame of mind to tolerate no substantial abatement of absentee 
ownership; and the constituted authorities are competently occupied with 
maintaining the status quo. There is nothing in the situation that should 
reasonably flutter the sensibilities of the Guardians or of that massive body of 
well­to­do citizens who make up the rank and file of absentee owners, just yet.
--- The End ---