VTHE PARADOX OF SURPLUS
Whatdoes it mean? Can there be too many desirable and useful things? Can things be too cheap? You would say No. Surely, so long as any human want remains unsatisfied, things cannot be either too plentiful or too cheap? But there is another dimension.
Everything that is not still or dead must exist in a state of rhythmic tension. It is true of the plant, it is true of the animal, it is true of each race of plants and each race of animals, it is true of the kingdom of plants against the kingdom of animals. It is true of people, as individuals, as races, as a species. And it is true, also, of the machine.
In the living organism growth of tissue at a normal rate consonant with the rhythm is vital. A wild growth of that same tissue will be fatal. In the aggregate of life there is equilibrium among millionsof different forms, each form striving but never succeeding and is possessing every other form and taking the world. The oyster, if unhindered, would displace every other living thing on the earth in maybe ten generations, and then, of course, perish for want of space in which to contain itself. What hinders the oyster and at the same time preserves it is that principle of tension in nature, without which it would be impossible for innumerable forms and varieties of life, the relations of which to one another are reciprocal, neutral, hostile, anonymous, to exist together all in one great taut pattern.
Now regard the third kingdom, artificial, implanted with mechanical beasts, that contains civilization. Life in this environment is economic. Its characteristic behaviour is a progressive differentiation of labour. Tasks are divided and subdivided until, at length, there are countless separate groups of people, each one performing a singular function to which it is trained and tending to become unable to perform any other. The subdivisions are beyond enumeration. They multiply so fast that the book of the census cannot keep up with them.
The shoe-industry, for example, does not consist in shoemakers. You might search it in vain for a shoemaker—that is, one who should know how to raise a pair of shoes from flat leather. In the shoe factory the material passes through a train of machines. Each machine is minded by an operative who performs one little specialized part of the work in endless repetition. The product is shoes by thousands of gross.
But who determines what kinds of shoe and how many shoes shall be made? What becomes of them when they are made? Who knows they can be sold? What if they are not saleable?
If you address these questions to one of the operatives minding a machine you will find him dumb. He knows only his own function.
It is very complicated. There are two industries here. One is the shoe-industry; the other is the shoe-machine industry. One could not exist without the other, yet they are separate and very unlike. The shoe-industry itself, that has dispensed with shoemakers, will have a finance department, an economic department, a buying department, a department ofproduction science, a style and designing department, a chemical department, a department of distribution, a sales department, an advertizing department, and others we do not think of. It is all about shoes. These are all shoe people. They agglomerate in shoe towns. They think shoes. The world is a foot. The more it can be shod the better. They live by shoes.
But to do this they must be able to exchange shoes for the things they want. Shoes, therefore, must have a relation of value to every other thing in the economic world. It follows that, in order to have this exchange-value, shoes must have also a relation of quantity to all other things. If for any reason the production of shoes becomes suddenly abnormal that exchange-value is lost. It is like one kind of tissue growing wild in the organism. Shoes are necessary; but an excessive quantity cannot be absorbed by the economic body. There will be in that case a morbid pathology in the shoe-industry, unemployment in the shoe town, despair among the shoe people, many of whom have never learned to do anything else. Left to themselves, without shoes to make, they might even starve.
It may be in the same way a soap town, a textile town, a garment town, an iron town, a motor town like Detroit, a rubber-tire town like Akron, a furniture town like Grand Rapids. It may be all of these—that is to say, industry as a whole, increasing its output at an abnormal rate. As you project the thought you begin to see, first, the vital importance of rhythm, equilibrium, tension, in the realm of industry, and then the inverse meaning of a sudden competitive increase in the machine-power of the world.
Ask the Italians what it means. They are an old people coming to it with a fresh mind. The conversation that follows took place in February, 1925. Talking are, on one side, the Italian Minister of Finance, and on the other, a visiting journalist:
“The industrial idea is new in Italy. It is since the War. You had a clean slate. You could have done anything you had the imagination to do. First you might have made a scientific survey of Italy’s latent genius and resources, and then you might have thought of producing goods that should be uniquely Italian and therefore non-competitive. But what have you done? You have gone in for the greatstaples of world commerce, such as cotton and woollen textiles, artificial silk, and motor-cars. Don’t you see that in doing this you take on the competition of Great Britain, Germany, France, Belgium, the United States?”
“Yes, we see that.”
“Those countries have the field and the experience and better access than Italy to sources of raw material.”
“That we know, also.”
“Then how can you hope successfully to compete with them? What have you that they have not? What advantage against theirs?”
“One you haven’t thought of.”
“What is it?”
“A man can live on less in Italy than anywhere else. We don’t know why that is. It may be the way the sun shines on him. But it is a fact. That is our advantage. With that we shall succeed.”
“Do you realize what that means? You are saying that Italy proposes to found an industrial career on the lowest terms of human existence. Your people will not accept it.”
“But they will.”
“How do you know they will?”
“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 impossibleprogression 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 sobad 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)Economistsaid: “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 tooutrival 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 managementresponsive 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 beenseriously 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 appropriatingto 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.