Part 7

“Because they will do anything sooner than starve.”

What a finish for the morning hope of the machine-age!—if it were. Monotonous tending of the machine on the lowest standard of living; alternative, starvation.

Suppose it were true. Suppose the Italian people did accept the terms and acquired the knack and skill. Then Italian manufactures, being cheaper than any other, would sweep the markets of the world. The older industrial nations—Great Britain, Germany, France, the United States, et al.—could protect their domestic markets by tariff-barriers, but they would find themselves losing their foreign markets to the Italians. For such industrial countries as are obliged to exchange a machine-surplus abroad for food the loss of foreign markets would be fatal. They would have to meet the Italian competition. They would have to say, as the Italians now are saying: “It is that or starve.” They would have to let down the standard of living to meet Italy’s wage-cost. This would oblige Italy to make her standard lower still, and thus, in a cycle, until all of them were sunk in misery.

And this is by no means an impossible progression of events. It has once taken place on a lesser scale. Beginning about 1870, there was a sudden and uncontrollable increase in the output of industry from two principal causes. One was the rapid rise of competitive industry in Germany and the United States; the other—much more potent—was the discovery of a new and cheaper way of making steel. This one discovery transformed the aspect of industry by increasing its potential power as much, perhaps, as one-hundred fold. Until then people spoke of the iron age; after that it was the steel age. For a quarter of a century prices fell continuously, while solemn economic bodies sat pondering the phenomenon. In that time all the capital employed in industry was lost at least once, probably twice or three times. The producer’s only hope was to improve his machines and increase production, for as he did that his cost per unit fell and for a little while he could undersell his competitor. In methods of production and in the efficiency of machines there was necessarily amazing progress; nevertheless, when all other means of reducing costs had failed, it had to be taken out of labour. In the United States it was not so bad because here the domestic demand for manufactures was unlimited, and a tariff-wall protected industry from foreign competition. In Germany it was very bad.

Germany then was where Italy now is. Her advantage was that the German people would work harder and longer for less money than the British. The competition was between these two. The British Government, disturbed by her new rival’s success in foreign trade, made a study of labour conditions in Germany. It found Sunday labour very prevalent in the factories. “Only the hours of divine service are excluded”, said a report from Saxony.

Commenting, The (London) Economist said: “The question of Sunday labour is one of considerable interest for England, for it is unquestionable that among the causes of Germany’s ability to compete with England as a mercantile and industrial country the fact that here more hours are worked for less money is not the least important. The prohibition of Sunday labour would, of course, mean increased cost of production, and every increase in the cost of production will render it more difficult for Germany to outrival older manufacturing countries in the markets of the world.”

What might have happened does not detain us. What did happen was very fortunate.

First, the food-supply from free virgin land in North and South America increased at the same time in a prodigious manner, so that, notwithstanding the wild energy of the machine, the equilibrium between agriculture and industry was fairly well maintained.

Second, there was still room in the world for colonial development on a vast scale. This occurred, and the outlets thereby created for the surplus product of machines were most timely.

Third—and this is very important—finance, to save itself from deluge, got control of industry. It was unable to buy industry out. All the banks in the world had not money enough to do that. This apparently insuperable difficulty it solved in a simple manner. It formed industry by groups into great joint-stock corporations and sold the stock to the public. And, although generally finance did not keep control in a literal sense, it did so centre it as to make the management responsive thereafter to financial counsel. The classic instance in the United States was the formation of the Steel Trust, which was in very earnest a measure of desperation. The steel-making machine had become a demon whose pastime was panic. By this feat of finance, which occurred in all industrial countries, a new rhythm was established. It was most imperfect: absolute control of production was impossible. But panics from overproduction were thereafter episodic, not continuous, and this was a great improvement.

And now a second time the machine has got away. But how much more powerful it is and widely planted than before. The industrial capacity of the United States alone is greater than that of all Europe twenty-five years ago. There are no more such virgin continents as North and South America to be exploited for food; and, besides, countries that were then content to play an agricultural part, exchanging meat and grain and raw materials for machine-made wares, now are resolved to have industries of their own—nay! more, to have an industrial surplus for sale abroad, engaging in that game themselves. Colonies are no longer docile. And as to finance, there is little probability that it will be able again to lay its hand upon the throttle. There are several reasons why.

The significance of industry has changed. Formerly it was a private affair in which the State was but dimly concerned, and so concerned only in a social sense, whereas now the idea of industry is basically political. It associates with thoughts of security independence in all circumstances, national welfare, power, and grandeur. A factory is like a ship to be privately enjoyed in time of peace, subject to mobilization for war. The War did that. Great Britain now subsidizes so-called key-industries as before she subsidized ships under the eye of the Admiralty if they were so built as to be easily converted into cruisers. All this is beyond the control of finance.

For another reason, there are signs that industry in the future is more likely to command finance than finance is to dominate industry.

By finance it shall be understood that we mean organized influence—in short, banking. Its occult authority has been seriously impaired. The high day of its priestcraft is gone.

Formerly it was consulted in war. You could not manage a war without a gold-chest: it was the banker who said whether that could be filled or not. Now one of the first steps you take in case of war is to suspend the bank, declare a moratorium, and print paper money to pass from hand to hand.

When the World-War started it was the opinion of finance that it could not last above ninety days: it could not be financed beyond that limit. It lasted four years and did not stop then for want of money.

After the War international finance was morally powerless to prevent the colossal mark swindle, Germany printing and selling all over the earth billions of paper marks that were to be flatly repudiated. Nor was it able to visit the slightest penalty upon the authors of this financial enormity, for immediately afterwards it was obliged, on political grounds, to float a large gold loan for Germany and thereby restore her to solvency and credit. In Germany finance was unable to prevent the industrial dynasts from appropriating to themselves all the middle-class wealth that was invested in bonds, mortgages, annuities, and savings banks: they simply borrowed it and then paid it back in worthless paper money.

It is very significant this humiliation of finance. In situations where the political will is dominant and in those where economic forces act alone the omens are the same. Henry Ford is the extraordinary instance of an industrialist who proceeds without benefit of finance. He creates his capital as he goes along; what he does not create he commands. He does not borrow.

IN PERIL OF TRADE

So now what will happen? From the excessive power already existing to produce industrial commodities, from the continued increase of that power nevertheless for political and national reasons, from the raising of trade-barriers by one nation against another because every one fears the effect upon its own industries of receiving cheap goods from another, from this running of people out of the fields to tend more machines, from the amazing growth of urban tissue in the economic body—from all of this what follows?

The Italians suggest a bitter competition in terms of living, those to survive who will accept most patiently and at the lowest wage the drudgery of minding machines. That might go rather far; ultimately it comes to absurdity. To whom at last should they sell their goods? Not to the impoverished workers of other industrial countries, defeated in the struggle. To whom else? To the agricultural countries? But these, for the reasons we have seen, are tending as such to disappear. They are buying machines. Italy brings nothing to the solution. She is merely coming tardily to do what others have done to excess.

A brilliant Belgian economist suggests that only the most efficient equipment will survive, and only enough of that to satisfy the natural demand for goods. All the rest must be abandoned because there will be no profit in working it. Well, it remains to be seen if people will abandon their machines without a struggle, purely for rational reasons. Much more is it likely that the higher cost of working the less efficient equipment will be compensated by a lower wage-rate, unemployment being the workers’ alternative. Moreover, if all the inefficient and unnecessary machines were scrapped that would mean only postponement of the sequel. The competition would begin all over again.

There are those who suggest that we are facing toward the mercantile system of the Middle Ages, when it was the custom for each nation jealously to protect its home-market from the competitive handicrafts of other nations, and to prohibit or punitively tax the exportation of raw material to rival countries. So we are. To say it is merely to indicate the rock upon which, if nothing happens, the ship of trade is bound to wreck herself.

A growing light on the actions of trade as it is organized by the industrial powers now impels nations hitherto agricultural to found industries of their own. As producers of foodstuffs and raw materials to be exchanged for machine-products they came to have a sense of being exploited. In academic theory this was an exchange by which the industrial nation satisfied its food wants and the agricultural nation its industrial wants, to mutual advantage. But how came the industrial nation also to acquire wealth by the transaction? Performing the preferred industrial task, it got not only its food but a profit over. What else could it mean but that after a series of years the industrial nation should come to have large interest-bearing investments in the agricultural country, owning its railroads, tramways, water works, and banks? What else could it mean but that the richest country in foreign investments was the one that had been for the longest time engaged in exchanging the surplus product of its machines for the food and raw materials of other countries? How was it that those other countries, after having served her for many years with food and raw materials, invariably owed her a great deal of money? Or, if you approach it from the other point of view, you find in the economic literature of industrial nations a certain finished doctrine, which is that the exchange of manufactured goods for food and raw materials is a business that pays. It is not primarily a vital transaction. It becomes vital by extension—that is to say, when in the course of time the industrial population has increased beyond the native food supply. But in the beginning the motive is gain. Nakedly, it is an exchange of skilled labour for unskilled labour, to the enrichment of the former; it is a division of labour among nations on a kind of caste plan.

There is much to be said for it. In no other way could civilization have been spread so fast; by no other method could the world have become so rich in a few years. There was much to be said, also, for piracy. It diffused, manners, customs, and wealth; it made peoples acquainted with one another; it made a flat world round and laid the foundations of modern commerce. In the modern case all difficulty begins when the peoples to whom the less profitable tasks have been allotted become intelligently dissatisfied and resolve to change their status, as the American colonists did, as the Japanese did, as now all lusty nations are doing, last of all the Chinese.

Modern trade evolved from piracy. There was a time when all transfer of goods between nations was by joyous might. It is pleasant to believe that the cause of the decline of piracy was a rise in the moral sense of mankind. It is more likely to have been the other way—that as piracy declined for rational reasons rules to govern commercial conduct became necessary. To enforce the rules became everyone’s duty. To break them was punishable. From this would germinate a moral sense. Piracy was bound to fail. On a large scale, continuous and competitive, it simply was not feasible. Competition ruined it.

There was a marginal time in which one was either pirate or trader, agreeably to circumstance. The early Greek in his dangerous ship never knew which he was; nor did anyone else. He took when the taking was good; when it was not, he bartered. The Romans finally abolished piracy in the Mediterranean, but on the high seas it was the great romantic enterprize down to a very recent time. Some of its heroes are venerated as daring navigators, pathbreakers of empire. It takes some effort to remember that trees are still standing that were already old when the world was a place where finding was keeping. If what you found was in the possession of savages or heathens, you exchanged for it the hope of civilization, maybe a few glass beads. Toward the end, this wonderful business began to be hedged about with restrictions. You had to be careful not to take anything forcibly from people who had treaties of amity with your own country, for if you did they made trouble for you at home, diplomatically, and you might even be hanged at the end of an otherwise glorious voyage.

But if you swindled them in trade, that was all right. Naturally, the first theory of trade was to give the least and get the most. There was else no point to it.