In previous lessons we have described industrial growth in the United States, and have pointed out that under Price System operation and control it is becoming increasingly difficult, in accordance with the accepted rules of the game, to maintain industrial operation within the limits of social tolerance.  As yet, however, we have made no inquiries into the operating characteristics of industry when at its best under a Price System control.

Attention has already been called to the fact that business is engaged not primarily in the making of goods, but in the making of money.  If, in the course of making money, manufacture of goods happens to be indulged in, to the businessman that is a mere incident rather than a matter of primary importance.  From a social point of view, however, the only matter of consequence is the fact that somehow or other in the process, goods are manufactured and distributed.

Inferior Goods for Large Turnover.  From the point of view of making money by the manufacture and sale of a given commodity, it is in general true that, other things being equal, the larger the number of units of this commodity manufactured and sold per annum, the greater the profit.  Suppose, for example, that the commodity considered be razor blades.  Now, to begin with, the razors that are already in use are of the old-fashioned pre-safety razor type.  They are made of high quality steel, and will last, say, on an average, twenty years each, or approximately two razors per lifetime per each male inhabitant.  It will be seen that, once the male population is supplied with razors of this type, there will be no further expansion of the razor business, except for replacement of the existing razors as they wear out, and to supply razors to the increasing population.

Now, if a way can be found to make all of these men throw away their present razors, and buy some new ones, this would immediately produce a big increase in the razor business.  To accomplish this latter, suppose that we introduce on the market, supported by high-pressure ballyhoo and salesmanship, a new type of razor, the safety razor.  By this means, in about a generation, we succeed in coaxing the males of the population away from their old substantial razors and have them all using this new safety razor.  Suppose that up until this time the safety razor has removable blades that will last, say, a month each, and can be replaced by new blades at a nominal sum.  This simple change alone would result in an enormous increase in the razor blade business, for each man who originally used a single razor for twenty years would now buy 240 blades in that same time.  This would be good business as compared with that of the pre-safety razor days, but even this has its point of saturation.  The trouble with the razor blade business is that the blades last too long.  This, of course, can be remedied by a slight change in the metallurgical content of each blade.  The ideal blade for this purpose would be one which would shave fairly well for three or four times, and then be unalterably useless thereafter.  The razor blade manufacturer has his own staff of metallurgists, who determine how such a product may be produced.  This simple device alone multiplies the razor blade business by about seven times, without there having been a change in the sales price per blade.

By this time, the razor blade business is becoming so remunerative (and besides, the original patents are expiring) that other companies are organized to cut in on the racket.  These find that they can best get a foothold by turning out a slightly better blade than that produced by the original company.  The public, discovering the greater merit of the new blade, promptly change their patronage from the old to the new.  No sooner does this happen than it is observed that the quality of the new blades drops to about the standard of quality possessed by the old.  This is easily understood when one, upon scrutinizing the package of the new blades, discovers that, without its name or trademark having been changed, its company has now been bought by the original company (doubtless with a watered stock flotation on the side), and that now both the new and the old blades are the product of the same original company.

By this time, however, other manufacturers have begun to cut in so rapidly that, if possible, a method must be found whereby the blades of these latter can be excluded, and only those of the original company used.  This can be affected quite easily by making a new holder for the blade and changing the shape of the blade in such a manner that it will fit both the old holder and the new, but so that the blades of the competitors will not fit the new holder.  It is necessary, of course, that the purpose of this maneuver be concealed from the public.  This is deftly accomplished by launching a nation-wide advertising campaign of ballyhoo about the years and years of research that have been devoted to the study of the improvement of razors.  At last, it is announced, the great secret has been found; the trouble with the old razors was the corners, and now, as a result of this research, a razor has been produced without corners.  Of course, it is necessary to entice the public to throw away their old holders and get the new ones.  This can be accomplished by the selling of the new razors at a very reduced price, or else giving them away with tubes of shaving cream.  Also, it makes matters more convincing if the one or two blades included with the new razor be of considerably higher quality than those that can be bought in separate packages.

In spite of all this, competitors still seem to get a foothold, so finally the directors of our original company are obliged to face the fact that perhaps the public is getting wise to their little game, and that what the public really wants is a better grade of steel in their razor blades.  This demand on the part of the public is now met very nicely, and in true Barnum fashion, by an advertising campaign which confesses to the public that indeed the company has been lax, and that somehow or other without the officials ever having dreamed of such a thing, the research staff of chemists and metallurgists have allowed the quality of the steel to deteriorate.  Now that the fault has been discovered, no such negligence on the part of the research staff would ever be countenanced again.  As evidence of correction of this negligence, a new high quality blade would be issued, the Blue Blade.  The public, of course, swallows the ballyhoo, and buys the Blue Blade, only to discover, after a short-time period, that its lasting qualities were no higher than those of its predecessors which were admittedly inferior.  This is then followed by a Green Blade of the same quality.

In the meantime, a safety razor is developed abroad, the ‘Rolls Razor,’ which has the quality of steel and the durability of the old pre-safety razor product.  Since the public wants a good razor, and its habits are adjusted to safety razors, it follows that, if this new razor were admitted at a price which allowed it to compete readily with the prevailing domestic razors, it would stand a good chance of wrecking the domestic safety razor business.  This entry is prevented very effectively by erecting a tariff barrier so high against the foreign product as to render its importation, except in small quantities, almost prohibitive.

It might be mentioned, in passing, that a safety razor, the ‘Star’ was introduced to the American market in the 1890’s.  People who bought this razor over forty years ago are still using it with the original blades.  Business, of course, for this company could not have been very flourishing.  It does not appear strange, therefore, that it should long since have ceased to exist.

What we have been pointing out in the foregoing is simply the fundamental conflict between production for social welfare, on the one hand, as contrasted with what is good business, on the other.  It is not our purpose to intimate that the businessmen are at fault; we only want to point out that, under the rules of the game of the Price System, it is better business to maintain scarcity, and to turn out cheap and shoddy products which, like the Gillette razor blade, will be used a few times and then have to be discarded and replaced by another.  It is also observed that if, under the same rules of the game, one fails to conform and produces, as in the case of the ‘Star’ razor, a superior product, he does not long remain in business.

Foreign Trade and War.  It is a simple matter to follow the thread of this same type of reasoning into any domain that one wishes to investigate, and one will always come to the same inevitable conclusion that what is socially desirable becomes, from the point of view of business, objectionable.  Foreign trade and what the businessman chooses to call a ‘favorable trade balance’ has already been mentioned.  It is not amiss in this connection to mention the relationship between war and the munitions racket.

As a result of the good services of the Nye Committee of the United States Senate, it has now become fairly common knowledge that modern wars are promoted for reasons of business almost entirely; because, from the point of view of the munitions makers, it is good business to have a war every so often.  It might also be pointed out that one of the most likely ways of temporarily solving the depression would be to promote a nice friendly war with somebody.  This would solve the unemployment problem in two ways.  Industry would boom, turning out war munitions and military equipment generally.  This would absorb a considerable fraction of the present unemployed.  Debts could be created through Liberty Loan drives or their equivalent, and money would flow freely.  The remainder of the unemployed could be put in the army, and, preferably, be shot.  This would solve their difficulties, and there would be prosperity for all while it lasted.

It is now being generally recognized that the United States went into the late war for business reasons.  Neither will anyone deny that participation in the war brought about one of the most prosperous periods of United States history.

Curtailment and Destruction.  We have mentioned previously that a Price System economy is of necessity an economy of scarcity.  This is due to the fact that values go to pieces in the presence of abundance.  No better illustration of this fact could be found than that of the present policy of government as exemplified in the Agricultural Adjustment Administration.  Here the reasoning is, there was so much cotton, wheat, and so many hogs, that the farmer was not getting a sufficient price for his product.  The Price System remedy, therefore, was to be found in a curtailment of production.  If cotton, wheat, and hogs were made scarce enough, the price would go up.  The fact that 20 or 30 million people did not have enough to eat was of no consideration—not under the Price System.

Low Load Factors.  Another characteristic of industrial operation under the Price System is that of industrial load factors.  The load factor of a given piece of equipment may be defined as its actual output in a given period, say a day or a year, as compared with its output under continuous full load operation for the same period.  Thus, a factory that runs full-blast 24 hours for six months in the year, and is shut down for the remaining six months, would operate at a load factor on a year’s basis of only 50 percent.  Similarly, a plant that operated 8 hours per day, 365 days per year, would have a load factor of only 331/3 percent, because two-thirds of the time it would be shut down.  In other words, a load factor of 100 percent means a continuous full load operation 24 hours per day, 365 days per year.

It has been remarked previously that little of our present industrial equipment operates at more than one 8-hour shift per day, except for brief rush periods, and that for only a limited number of days per year.  On the other hand, if present productive equipment were operated at anywhere near a 100 percent load factor, such a plethora of goods and services would be produced that the American public would be sorely embarrassed to find a way to consume them, assuming that we had a suitable mechanism of distribution.

This prevailing low load factor is the result of two distinct causes: one is that the competition in a profitable field of production leads to the building of more plant than is necessary for the amount of production allowable, the second is that the actual production allowable must not be more than is necessary if scarcity is to be maintained, and prices kept up.

A low load factor may signify equally well either of two things.  It means that there is more than the needed amount of equipment to maintain the current rate of production.  This involves a wastage of capital equipment, not to mention the high physical cost involved in intermittent operation of such equipment.  It means, likewise, that were the existing equipment operated to capacity, the resultant physical output would be very much greater than it now is or was in 1929.  On either of these counts a low load factor is objectionable.  The average physical standard of living of our society is determined largely by the rate at which goods are produced and distributed.  Hence it follows that any attempt at social betterment that does not consider the operating of our industrial equipment at the highest possible load factor, and insists instead on dividing up the poverty while leaving the Price System enforcement of scarcity intact, is, no matter how well intentioned, sheer lunacy.

Housing.  One of our biggest industries, and one which along with food and clothing most vitally affects us personally, is that of housing.  There is probably no greater collection of outworn junk in this country than the houses in which we live, and our buildings generally.  From the point of view of the physical cost of operation alone, the inefficiency of our present structure is so great that, if we should tear them all down and rebuild them on a technically efficient basis, it is estimated that the energy saving in the operation of the new structures would compensate in about twenty years’ time for the entire cost of demolition and reconstruction.

From the point of public health and sanitary conditions generally, it would be safe to say that about three-quarters of the abodes at present occupied by American families are unfit for human habitation in a civilized community.  Under our present Price System there does not exist a modus operandi for either the design, construction, or operation of our housing industry, so as to allow the basic technical and social requirements to be complied with.

The same scale factor that has already been mentioned with regard to operating equipment applies equally well with regard to industrial and office floor space.  Our business and industrial structures have heretofore been built on the assumption of a continued rate of growth.  If in the past a given city doubled in size every forty years, why should it not also double in size the next forty years, has been the type of reasoning applied in this field.

Here, as elsewhere, the technological factor has upset the apple cart.  Every time new industrial or business equipment, which has an efficiency greater than that which it replaces, is installed, it requires less floor space for the same output than the equipment which it renders obsolete and replaces.  This is no less true in business offices than in factories.  Compare, for instance, the amount of floor space occupied by the old-fashioned bookkeeping clerks working over hand ledgers, with that required by modern high-speed, semi-automatic bookkeeping machinery when both do the same amount of accounting.  Now that the period of industrial expansion under Price System dominance is virtually over, it follows that in the future, due to the more widespread use of such equipment, the required floor space will decline, together with human employment.  If such buildings as the Empire State, Radio City, and similar buildings in other cities are to be occupied in the future it will probably be by leaving vacant an equal or greater amount of floor space in other buildings.

Interference by Business Expediency.  Perhaps the chief Price System method of control is interference.  The very nature of property rights themselves is that other individuals than the owner of a given piece of equipment are enjoined by law to refrain from doing certain things with regard to that equipment.  Note the fundamentally negative thou-shalt-not aspect of this relationship.

There is probably no branch of our social activity in which this sabotaging influence for reasons of business expediency is more keenly felt and more socially detrimental than in the domain of scientific research and technological development.  While it is true that many of our industrial establishments and business organizations retain research staffs to carry on various investigations in fields that show promise of being commercially profitable, nobody knows better than members of these research staffs that, should a discovery or invention be made which would be, if it were put into effect, better for the public, but worse for the business of the company, such discovery or invention would either be kept secret or tied up in patents to interfere with anyone else making use of it, and then carefully and permanently shelved.  It is true that technically trained men design our present equipment; it is equally true that, if the equipment be of the sort that is to be sold to the public, they are instructed to design it so that it will not last too long.  It takes great metallurgical skill to produce a razor blade which will last only four days.

An excellent example of this form of business sabotage of technological advance is to be found in the speech of Frederick E.  Williamson, president of the New York Central lines, before the Central Railway Club of Buffalo, January 10, 1935.  In discussing the St.  Lawrence waterway project, Mr.  Williamson remarked: ‘I do not intend to discuss this subject in more than a word or two, but I do wish to point out that, regardless of whether the emphasis be laid on the shipway or the power angle, the net results to the railroads of the East and the Middle West, and to the railroad men employed on them, will be just as disastrous in either case.  In the end, construction of the shipway, whether primarily for power or as a deepened waterway, would be a potent contribution toward breaking down the present rail transportation system.’

What Mr.  Williamson has implicitly admitted here is that the St.  Lawrence waterway is so far superior to the New York Central Railroad as a means of cheap transportation, that, should it be installed, the New York Central as a business organization would have a tough time making ends meet.  In other words, were the power which is now going to waste in the St.  Lawrence River to be utilized, and at the same time the river to be made navigable, the energy cost of freight transportation along this waterway would be more than offset by the power derived from the river itself.  From the point of view of our national economy, this would be a net gain.

It is a matter of common knowledge that there have been few major technological advances in American railroad equipment for many years past until the advent of the recent streamlined trains.  Speaking of these streamlined trains, Mr.  Williamson remarks further: ‘All this has captured the popular imagination, and rightly so.  A renaissance of railroading seems in sight.  At the same time, it appears to me desirable to sound a warning lest public expectations be aroused to such an extent that disappointment must inevitably follow.  In a plant as huge as a railroad, radical changes cannot be made overnight.  It must be a gradual process of evolution within the limitations fixed by existing investment and immediate financial ability, as well as a reasonable experience in operation of new type equipment.’

Particular attention is to be paid to what Mr.  Williamson aptly calls the ‘limitations fixed by existing investment and immediate financial ability’.  It is precisely these limitations so peculiar to the Price System which are rapidly precipitating a social crisis.  Mr.  Williamson is quite correct that certain things cannot be done under limitations set by the Price System.  Technologically, however, no corresponding limitations exist.  But for the Price System limitations, the entire rolling stock of the American railroads would be scrapped and replaced by a modern technologically integrated system.

Even where the technical work, such as geological work in the exploration for useful minerals, is socially desirable, its effects are commonly offset by business practices in connection therewith.  It is socially useful, for instance, to delineate oil structures, but one frequently wonders to what end when he watches the mad business rush of big and little oil companies, like so many buzzards fighting over a carcass, each trying to get his share, while the pool, in the meantime, is being drilled as full of holes as a pin-cushion and the gas pressure blown off into the air.

A similar paradoxical situation exists with the production and utilization of other mineral resources.  The fluorspar-bearing area of southern Illinois and northwestern Kentucky is practically our sole source of supply of this useful mineral.  From the point of view of our national well-being, it would behoove us to use this limited supply sparingly and wisely.  It is to the advantage of the business interests, on the other hand, to find bigger and better ways of getting rid of fluorspar.  Consequently, it is interesting to note that the Illinois Geological Survey, capitulating to those interests, has had a research chemist trying to find a way to use fluorspar in concrete.  Should this effort be successful, it is true that it would boom the fluorspar business, and, of course, it is not the concern of businessmen where we shall get our fluorspar in the future.

An interesting relationship between low load factors and the wastage of natural resources is to be found in coal mining.  In underground coal mining two principal alternative methods are employed, the room-and-pillar method and the long-wall method.  In the room-and-pillar method a part of the coal is mined, and the remainder is left in the ground intact as pillars to support the roof.  With this method, only about 50 percent of the coal is recovered, and, once the mine is abandoned, it is virtually impossible to go back and mine the rest.  In the long-wall method all of the coal is mined along a lengthy straight wall, and the roof is allowed to subside gradually in the rear as the mining along the wall progresses.  By this method approximately 90 percent of the coal is recovered from the ground.  Since with the long-wall method the roof subsides slowly but continuously, the mining operations must be continued without cessation in order to keep ahead of the subsiding roof.  The demand for coal, however, due to our low industrial load factor, is seasonal, and, since bituminous coal cannot be stored over long periods of time, the production at the mines has to be geared to coal consumption.  Consequently, the mines operate briskly for a season and then shut down.  This shutdown period precludes an extensive use of the long-wall method, and consequently results in a wastage of not less than one-third of our coal resources.

On the purely human side of the picture the same type of consequences prevail.  The general maintenance of poverty in the midst of potential plenty is too prevalent to need further comment here.  One factor that might be mentioned is the general debasement of human beings under the pressure of economic insecurity.  So effective is this pressure in our present society that the enjoyment of personal integrity has become one of the most expensive of human luxuries, because, unless one be of that small fraction of one percent in the higher income brackets, the price that he will pay for the privilege of indulging in personal honesty or integrity will almost certainly be his job; in other words, a salesman is not a liar because of the personal delight he takes in fleecing the public, but because he knows full well that if he told the public that the product he is asking them to buy is relatively worthless, if not actually harmful, he would soon be helping to increase the great army of the unemployed.

Institutional and Traditional Interference.  A similar thing is true in the field of public health.  About 1928 the Billings Hospital was opened in South Side Chicago as a part of the Rush Medical School of the University of Chicago.  This was the best hospital in that part of the city, and, if operated at all, would be a very important contribution to the public health service provided for the people in that part of Chicago.  The technical staff of this hospital was amongst the best that could be obtained.  Operating as a part of a medical school, it would also maintain free or low priced clinical service to the students of the University of Chicago, and to the local community.

It is interesting to observe that the most violent objectors to this hospital were the local members of the American Medical Association, who took such strenuous action that they finally succeeded in having the entire staff disbarred from membership in the American Medical Association on the grounds of unethical practice.  In other words, an adequate health service administered to the South Side of Chicago was ‘busting up their racket.’

Again, let it not be misunderstood what the essential elements of this picture are.  Under the Price System a medical doctor is not only a public servant looking after the health of the community; he is also a businessman with services to sell.  Approximately one-half of his life and an enormous amount of money besides has been spent in acquiring his professional training.  If this is to be compensated for, it means that the remainder of his life must be devoted to those activities for which a handsome fee can be collected.  If his professional services are to be sold at the necessary price, these services must be kept scarce.  A doctor has to make a living.  The net result is the inadequate and incompetent public health service with which the American public is all too familiar.

In other words, the ‘load factor’ of our doctors and our hospitals is as far below capacity at the present time as that of our power plants.  Stated conversely, if the public health personnel and equipment were allowed to operate at full load in the most efficient manner, according to present technical standards, it would be possible virtually to eliminate most contagious diseases within 10 years.

As this is being written (February 1935), the American Medical Association, at its meeting in Chicago, is making its perennial attack upon socialized medicine.

A similar situation prevails in the field of education.  Less than 15 percent of the youth of the nation is allowed the questionable privilege of a college and higher professional education.  There is hardly a classroom in a modern university that is filled to capacity, for the simple reason that enough students are not able to pay the tuition fees to take the courses.

The quality of instruction suffers correspondingly because of economic controls which are exercised over those doing the instructing.  The modern college instructor, with few exceptions, either conforms or gets out, voluntarily, or by invitation.  No more striking illustration of this could be offered than the career of Thorstein Veblen, who was one of the few truly great men America has ever produced, and who was virtually ‘kicked out’ of every university in which he ever taught.

Within the curriculum of our institutions of higher learning the same sabotaging influences prevail.  The Schools of Education, for instance, have, by playing politics with state legislatures, so completely tied up the public school system that it is now practically impossible for one to get a job in any public school in the country on the basis of technical training and competency.  One may not, and frequently does not, know anything about the particular subject he is supposed to teach, but he must have the requisite number of courses in education as to how it is to be taught.

And then there is the slavery to the Ph.D.  degree.  If a graduate student in one of our institutions of higher learning wishes to pursue his studies, it is expected that he will do so with the intention of becoming a Doctor of Philosophy.  It may, and commonly does, happen that the acquirement of technical competency in a particular field requires that the student pursue a course of studies entirely at variance with those prescribed in fulfillment of the more or less inane requirements for the Ph.D.  Here, as elsewhere, economic pressure is brought to bear, and those who do not conform are rather effectively excluded from getting jobs they might otherwise acquire.  It is needless to remark that the majority of the students of our higher institutions of learning are, accordingly, degree seekers rather than persons interested primarily in the acquisition of an adequate technical training.

The most tragic aspect of all exhibited by our present educational system, however, is to be found in the problems which the students themselves face.  It is a commonplace fact of human biology that, when only a small percent of the population is financially well to do, talented youth is by no means confined to that segment of the population in the higher income brackets.  An average figure of the cost per nine-month term of attending our present colleges and universities is around $800 to $1,000 per annum per student.  When it is considered that this sum is only slightly less than the average annual income of the great majority of the families in our population, it is a simple matter to see, in the light of this, that the selection of those who shall and those who shall not receive training in our institutions of higher learning is determined almost entirely on the basis of pecuniary standing of the parents of the prospective students.

It is true that we have all been fed on the Horatio Alger myth of the poor boy working his way through college, but the fact remains that those who do this successfully are few, and many are the unchronicled, bright-eyed lads who ‘crack up’ in the attempt.

The final blow, of course, is dealt when the students have completed their formal education, only to find that in their field, too, there is over-production, and few people are willing to engage their services.

In our educational system, as elsewhere, the fault is not to be found in the individual members of the personnel.  This state of affairs is the logical product of social administration under Price System rules.  If the university president allowed his faculty too free a rein, it is quite likely that somebody might offend the bankers, and this would result in a corresponding diminution of endowment funds.  If tuition fees were decreased sufficiently to fill up the class rooms the resulting decline in revenues might be serious.

Legal Interference.  Just a word may be said about criminal activity and the police force.  The term ‘crime’ is itself completely ambiguous, and there is no important distinction between socially objectionable activities that are legal and those that are illegal.  One of the fundamental properties of money, however, is that it constitutes a standing social reward to any individual who, legally or otherwise, ‘gyps’ the public successfully.  The tie-up of local political machines with such predatory activities, ranging from banking on the one hand to racketeering, gambling dives, and prostitution on the other, is too well known to need amplification.  The police force in such a situation are merely ‘the hired boys’, having their orders whom to molest and whom to let alone.  Politically, objectionable conscientious performance of duty on the part of the policeman can be very effectively handled through the mechanism of suspension, demotion, or transfer to an undesirable beat.

As a consequence of this tie-up between the political structure, with its police power, and the favored interests (whether these latter be Capones or Morgans, there is no particular distinction), it is relatively unimportant which particular things are legal and which are illegal.  The line between the two is extremely difficult to discern.  Both types of activity, whether legitimate business or avowed racketeering, are socially objectionable, though both are the direct consequence of playing the game according to the rules.  The role played in this by the legal profession is principally that of finding ways and means within the existing statutes whereby any particular kind of activity, provided it pays well enough, can be shown to be legal.  It is, of course, commonplace to anyone who has had any experience with courts of law, that to a very considerable extent the best lawyer wins, regardless of the merits of the case.  And, of course, the most money hires the best lawyer.

In this connection it has been interesting to observe the activities of the major oil companies over the last ten or fifteen years with regard to unit operation of oil pools.  Prior to about 1927 the rate of production of oil was sufficiently slow that a good price was maintained, and during that period the more oil produced the greater the profit.  Now, there are many technical reasons why a single oil pool should be produced as a unit.  Unit operation allows the most strategic location of producing wells and permits the maintenance of the gas pressure in the pool with which to force the oil out.  If this gas pressure is blown off in non-unit operation, the gas is wasted, and the remaining oil has to be pumped, allowing a much lower recovery of oil than is possible under unit operation.

During the period mentioned above it was to the business interests of the large companies to get oil out of a given pool as rapidly as possible, because if they pumped fast enough, they could produce not only the oil under their own land, but could also ‘steal’ a large part of the oil from the little fellows who happened to own adjoining tracts, but lacked capital enough to produce their own lands at the same rate.  This practice was called the ‘law of capture.’ The legal staffs of the big companies at this time could demonstrate by any amount of legal briefs that such practices were entirely legal, just, and as they should be.

After 1927 one large oil pool after another was ‘brought in’ in rapid succession, pouring so great a flood of oil on the market that ruinous prices resulted, and, as a consequence, it became the interest of the big companies to curtail production in order to enforce scarcity and thus keep the prices up.  The little fellows were also in a disadvantageous position, as even at ruinous prices, they had to produce or else go broke.  Hence, should big companies curtail production while the little fellows continued to produce, the law of capture would for the first time have worked to the advantage of these latter, and to the disadvantage of the former.  In the meantime, it has been highly illuminating to watch the same legal staffs render equally numerous briefs on the legality of unit operation and of curtailment and proration of oil production, enforced by the police power of the states.  ‘A criminal is a human being with predatory instincts but without sufficient capital to start a corporation.’

Political Interference.  Intimately linked with the activities of the legal profession and with business enterprise is our political government, the general incompetence of which, from the local wards and precincts to the national government, is a matter of such commonplace knowledge as to require little comment here.  Notable exceptions to this general statement are to be found in the purely technical bureaus, such as the United States Bureau of Standards, Geological Survey, Department of Agriculture, etc.  It is significant that the technical staffs of these bureaus are not elected by popular vote, nor are they appointed by the political chieftains of the present or past administrations, and hence are not subject to political contamination.  It need hardly be added that, were this not so, it is extremely doubtful that the work turned out by these bureaus would be of sufficiently high quality to merit scientific respect.

A system whereby governmental officers are chosen by popular ballot is immediately open to all the political chicanery that we are already familiar with, ranging all the way from the small town glad-handing and baby-kissing politician to the Tammany machines with their racketeering and patronage in our large cities, and finally to our national political government, with its deference to, and solicitation for, the interests of big business.  When it is borne in mind that the public is, and of necessity must be, almost completely ignorant of problems, either of personnel or of policy, which they are regularly called upon at election time to solve, it becomes a very simple matter, by means of a suitable expenditure of money, using the mediums afforded by the press, the radio and public speakers, to play upon public prejudice, and hence to swing the results of any election to the desired end.  While it is true that the illusion of alternatives is kept before the public through the device of opposing political parties, the fact remains that the similarity of the opponents in all fundamental particulars is so great that it makes virtually no difference at all, in the net effect to the country, who wins the election.  In other words, no question of really fundamental importance is ever submitted to popular election.  The real controls are exercised at all times behind closed doors and by a small minority of the population.

Propaganda.  Among the most powerful devices in social control at the present time are the radio and the press.  Just how powerful the press has been in the past can be seen when we review the propaganda which we were fed during the late World War.  At the beginning of the World War, we were a nation at peace with the world, and the great majority of the American people, were almost oblivious of the fact that Europe existed.  Finally, the House or Morgan became dangerously overloaded with debts of the allies, and succeeded in involving, in some measure, a large number of American businessmen besides.  Then, only a few weeks before our declaration of war, our Ambassador, Page, to England, cabled President Wilson that in order to maintain our preeminence in world trade, and to save Morgan, it would be necessary for the United States to enter the war on the side of the Allies.  We entered, and, in the light of this, our entry into the World War ‘to make the world safe for democracy’ and the events that followed are extremely interesting.  The American public as a whole had little knowledge of, and little interest in European affairs, and, least of all, had they a hatred of the Germans or a love for the French.  Consequently, to make it a successful war such a love and a hate had to be created synthetically.  To this end the best liars and ballyhoo artists that could be obtained were set to work grinding out lies about the atrocities of the Huns and disseminating them from the lecture platform and the press to the American public.  The results were those desired: America entered the war, large profits were made, and the gullible public swallowed it, hook, line, and sinker.

The same devices that were used then with regard to the war have subsequently been used with regard to political and economic matters.  Most of the major newspapers and magazines of wide circulation, such as the Saturday Evening Post, are chiefly organs of propaganda for favored business interests.  While the control may be quite impersonal, it is none the less positive, because all of these papers depend very largely upon the goodwill of business interests for their advertising, which is a highly essential part of their financing program.  If they print the right stuff, advertising and prosperity is theirs; if they do not, they stand a good chance of going out of business.

A very interesting example of such control of a journal was manifested in the case of The American Mercury.  The Mercury had adopted a militant editorial policy and had opened fire with a very significant article upon the activities of the American Red Cross, showing conclusively that the latter had become almost entirely a tool of financial interests, and was engaged in enterprises of highly questionable merit.  Other articles from a like point of view were to follow.  Almost immediately the bankers of Alfred A.  Knopf, the publisher, brought pressure to bear, and The American Mercury was promptly sold, to proceed henceforth under a new and doubtlessly less belligerent editorship.

Examples such as the foregoing, in every sphere of operation under a Price System, could be cited almost indefinitely.  Under the Price System at its best there is not a single field of endeavor where the best technical standards are allowed to prevail.  In other words, poverty, waste, crime, poor public health, bad living conditions, enforced scarcity, and low load-factors, are everyone the direct and necessary consequences of the Price System.  Let it be emphasized, however, that while certain individuals may be somewhat worse offenders than others, individuals are not to be blamed.  The system being what it is, if one is to hold political office, he will almost without exception find it necessary to indulge in the usual political practices.  If one is to become a successful businessman, he will only do so by engaging in those practices which characterize the activities of other successful businessmen.  The fundamental law of survival under the Price System is that one must create debt claims against others faster than debt claims are created against him, or else he does not remain in business.


What we have tried to make clear is that it is the Price System itself, and not the individual human being, which is at fault.  Granted the system, the human beings are obliged to act in accordance with its dictates, with the rather sorry results we have enumerated above.  Consequently, no amount of doctoring of symptoms while leaving the fundamental causes of the disease intact will be of any appreciable avail.  One does not eliminate bootlegging while prohibition in conjunction with a thirsty public exists; bootleggers are created thereby.  Abolish prohibition and bootleggers largely disappear.  One does not abolish or prevent war by pacifistic speeches, or by other means either, so long as foreign trade and the manufacture of munitions of war remain profitable.  Neither does one abolish disease while poverty, malnutrition and other disease-breeding conditions continue unaltered, nor so long as the economic well-being of the medical profession depends upon the prevalence of disease in profitable amounts.  Nor is crime ever abolished, either by coercive measures administered by officials whose activities are only slightly, if any, less socially objectionable than those which it is sought to suppress, or by any amount of moralistic railing or inculcation of doctrines of ‘brotherly love,’ so long as there continues to be offered a standing reward to all those who will ‘gyp’ society successfully.  Granted the offer of the reward, socially objectionable activities follow as consequence; withdraw the reward and these activities automatically disappear.  It is the Price System itself—the rules whereby the game is played—and not the individual human being which is at fault.


  • The Engineers and the Price System, Veblen.
  • Arms and the Man (Reprint from Fortune).