CHAPTER XVIII: SOCIAL HARMONY IN
ECONOMIC LIFE

§1. A brief summary of the actual tendencies towards harmony and discord at present visible in the economic world may be conveniently presented here.
We see among the fundamental industries the transformation of the structure of the single business; large numbers of little rivulets of savings from innumerable separate personal sources merging to form a single body of effective capital; large numbers of workers closely welded into a single body of effective labour-power; both operating in normal harmony under the direction of a common central management, and engaged in the continuous work of turning out a product, the price of which forms the common income alike for capitalists and workers. So far as that portion of the dividend is concerned which forms the economically necessary costs of these masses of capital and labour, there exists a harmony of interests between the two groups of claimants, which is more clearly recognised with every improvement of the general standard of intelligence and information. In most businesses that common area of interest covers by far the larger part of the business dividend. Where a surplus emerges in excess of these economic costs, an initial discord arises between the claims of the capital and labour. But this discord may be resolved in two ways, in each of which important experiments, attended by a growing measure of success, are being carried on. Large patches of the area of discord are being reclaimed to order by the modern State, whose policy is more and more directed to absorbing by taxation, and applying to the use of the community, great shares of these business surpluses, as they emerge in incomes and inherited properties. As regards the surplus which is not so absorbed, the grouped forces of capital and labour within the business are constantly engaged in seeking to discover pacific and equitable modes of division which shall reconcile, or at least mitigate, the remaining opposition. Though this remains at present the sharpest field of conflict, pacific forces are making more gain than perhaps appears upon the surface. Some of those industries, where such discords have been most rife and most wasteful, have been taken over by the State or the Municipality. In these cases such quarrels as may still arise in connection with the claims of labour admit of settlement by other means than economic force. In others, the State intervenes on behalf of public order by assisting to promote processes of arbitration or conciliation. In others, again, the organisation of the forces of capital on the one hand, labour on the other, over the whole range of businesses comprising a national trade, has tended to make actual conflicts rarer, and presents a machinery capable of application to pacific settlements. Grave as are the defects in the working of this machinery of Joint Boards, Sliding Scales, Conciliation and the like, and terrible as are the injuries these defects cause, they ought not to blind us to a recognition of the fact that the number of actual conflicts between capital and labour is constantly diminishing.
§2. This truth is better realised when we turn from the structure of the business to that of the trade or market. There, though keen and even cut-throat competition still survives, the tendency is more and more, especially in the great staple industries where large aggregates of capital and labour are employed, towards cooperation, combination and trade agreements. If, for the moment, we ignore the dangers which such combinations often threaten to consumers, and regard them from the standpoint of trade structure, we cannot fail to recognise the enormous advance they represent in the cause of industrial harmony. For whatever the degree of unity attained by such a Trust, Cartel, Conference, Trade Agreement, Federation, it means pro tanto a saving of the energy of capital and labour formerly expended upon conflict, and a concentration of the thoughts and purposes of business men upon the best performance of the useful functions of production which constitute the social value of their trade. So long as a trade remains in a distinctively competitive condition, an enormous part of the actual energy is consumed not in production but in warfare. The thoughts and wills of the controllers of the several businesses are deflected from the economical fulfilment of their social function to conscious rivalry. Neither the capital nor the labour in each several business enjoys a reasonable measure of security; and not only the profits but the wages of each firm are jeopardised by the success of a stronger competing firm. The growing displacement of this condition of a trade by the principle and practice of combination is perhaps the most conspicuous movement towards industrial peace. I am aware that, in itself, this concentration and combination of businesses within a trade afford no sure settlement for the differences between capital and labour. They may even aggravate those differences in several ways. For, in the first place, such combinations are expressly and chiefly designed to produce a larger quantity of surplus profits, thus stimulating conflict by offering a larger object of attack to labour. In the second place, such combinations, if at all complete, may prove more clearly than in any other way the superiority of organised capital over organised labour in the determination of wages and conditions of labour. Finally, private ownership of natural resources, producing for its owners economic rent, remains an unsolved antagonism. Though the extent to which the 'surplus', which monopolistic, protected or otherwise well-placed businesses obtain, as open or concealed 'rent', is not capable of exact estimate, many, if not most, profitable businesses derive some of their surplus from the possession or control of natural resources. Such natural resources are to all intents and purposes capital, so far as relates to issues of conflict between capital and labour. The amount and possibly the proportion of surplus (taking the whole industrial world into consideration) which is plain or disguised rent, is probably upon the increase. Even in Great Britain, though aggregate rents do not keep pace with profits and other incomes derived from business capital, they probably form an increasing proportion of that income which, according to our definition, ranks as 'unproductive surplus.' Though these rents, like other 'unproductive surplus,' could be advantageously diverted into wages on the one hand, public revenue upon the other, they are kept on the side of capital by the full force of combination.
Thus the labour in any trade may be confronted by a larger body of wealth which it would like to secure for higher wages, while at the same time it finds itself less able to achieve this object.
§3. Equally sharp may be the antagonism of interests set up between such a combine and the general body of consumers, by means of the control of prices which the former possesses. For the large surplus, which we see to be an object of desire to the workers in a combination or trust, represents to the Consumer an excess of prices. So it comes to pass that the consumer, unable to combine in his economic capacity, as the workers do in their trade unions, combines as citizen and calls upon the government to safeguard him against monopolies. His first instinctive demand is, that such combinations shall be declared illegal bodies, acting in restraint of trade, and broken up. But nothing proves more plainly the inherent strength of the cohesive unifying tendencies than the completeness of the failure to achieve this object. When business men desire to combine, it is impossible to force them to compete. The alternatives are, either to leave the consuming public to the tender mercies of a monopoly, which, from mere considerations of profit, may not be able to raise its prices beyond a certain limit, or else to impose legal regulations, or, finally, to buy out the business, transferring it from a private into a public monopoly.
Wherever the modern State is driven to confront this problem, it is compelled, in proportion as public opinion is articulate and politically organised, to fasten an increasing measure of public control upon such powerful combinations, and to take over into the sphere of State enterprises those which cannot effectively be controlled. In such ways does modern society seek to heal the new discords generated by the very processes employed by the several businesses and trades in their search after an internal harmony.
But the largest forms of capitalistic enterprise will tend more and more to transcend the limits of any single state, not only in their composition but in the powers they exercise upon subsidiary industries, and upon the general body of consumers throughout the industrial world.1 The privately organised apparatus of economic machinery, which constitutes the fabric of this economic world-state, has been described as a striking example of the expansion of industrial solidarity and harmony. But here again the possibilities, nay, certainties, of new discord between capital and labour, producer and consumer, cannot be ignored. Hence the great social problems of the future will to a less and less extent lie within the political competence of single states or be soluble by the separate action of the governments of those states. The vast currents of international capital and labour cannot flow without great disturbances of order and of economic interests often affecting several nations. The safe, successful, profitable, pursuit of large foreign enterprises by the capital and labour of persons belonging to many nationalities, will more and more involve common political action.
§4. We are already beginning to recognise that our State is disabled for the fully satisfactory solution of some of the most pressing of our social problems. The immigration of foreign labour complicates our treatment of sweated industries. The improvement of conditions of labour in our trades may be rendered more difficult by the admission of sweated imports, or our feelings may be shocked by the influx of the products of slave labour. The policy of taxing interests and profits may be thwarted by our inability to trace the incomes derived from foreign investment and trade. A financial crisis in America or germany may deplete our gold reserve and work havoc on our credit. As these movements gather force and frequency, the impotence of any single State to exercise an effective control over the primary economic interests of its people will grow more apparent. The gravest social-economic problems will be found insoluble except by international arrangement. An era of free conferences and of more or less loose agreements between States will lay the foundation for what in time must amount to international regulation of industry. In other words, the economic internationalism, which I have traced, will weave for itself the necessary apparel of political institutions. The true germ of world-federation is perhaps to be traced to-day less clearly at the Hague than at Bern, where the representatives of the leading industrial nations have already met to set the seal of their respective governments upon undertakings to promote common policies of legislation in such matters as the regulation of night labour for women, and the disuse of poisonous ingredients in the match trade. In such agreements, as in the better-known Postal Union (which also has its offices at Bern), one finds the earliest contributions made by modern industrialism to the federal government of the world.
These facts I cite, partly to enforce the thesis that the tendencies of modern industry which make for harmony and cooperation are gaining, both in the smaller and the larger areas, over those which make for discord and for competition. This growing harmony of fact must tend to evoke a corresponding harmony of thought and feeling. But here we are retarded by a set of psychological obstacles which pervert or disguise the truth. I have alluded to the damage due to the false representation of nations as rival traders, contending for a limited market upon terms which signify that the gain of one is the loss of another. But the whole intellectual and moral atmosphere is thick with similar mistakes of fact and fallacies of reasoning, chiefly sustained by false phrases which evoke false images and arouse injurious desires and passions. Ordinary business language is filled with selfish, separatist and combative phrases, representing trade as a warfare, in which every man must fight for his own hand, must force his wares upon the public, outwit or bludgeon his competitors, conquer new markets, beat down the prices of the goods he buys, or in finance become a 'bull' or a 'bear.' In certain large departments of the business world there still remains so much disorder, insecurity and competition as to afford support to these combative views and feelings. But they are no longer representative of the main normal activities of industry, and they ought and must by degrees be displaced by views and feelings accommodated to the more organic conception. It is an important task of economic science to enforce conceptions of the operation of economic laws which will support these newer and sounder views and feelings. For only with this growing recognition of the social harmony represented by industry can the social will be nourished that is necessary to support and further it. So long as the ordinary business man or worker has his eyes, his mind, his heart and will, glued to the tiny patch of industry to which his own directly personal effort is applied, the pulse of humanity beats feebly through the system of industry. But let the ordinary education of every man and woman impose clear images of this economic order as a great human cooperation in which each bears an essential part, as producer, consumer and citizen, the quickened intelligence and sympathy will respond, so that the blind processes of cooperation will become infused and strengthened by the current of a conscious will.

NOTES:

1. The foremost example of such organisation in a great staple industry is the International Iron & Steel Association, formed in July 1911 by representatives of Austria, Belgium, Canada, France, Germany, Great Britain, Hungary, Russia, Spain, United States. The objects of this organisation were to regulate production, so as to control profitable prices and to prevent undercutting in times of depression. (Cf. Chiozza-Money, Things that Matter, Ch. XI).