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effective paternalism; and without centralized administration you cannot run railroads, theatres, and pawnshops.

It is the one point usually overlooked by the enthusiasts. They paint glowing pictures of socialized Germany, but they fail to look under the surface. Germany's system is built upon discipline; hard, military, iron discipline, that grips every baby in its vise and forces every man into his place; a benevolent tyranny, no doubt, but nevertheless a tyranny; an efficient feudalism, but none the less a feudalism of self-conscious caste and fixed tradition.

No doubt the time has come when we must modify our system of extreme individualism by some system of social coöperation. How far shall we proceed in this path of socialized efficiency? Are we willing to pay the German price? Could we do it even if we wished to? Only a few peoples are fitted for such rigor. I believe that America would be a poor place for a Hohenzollern efficiency test. The carefully trained American barber would quite suddenly take it into his head to be a sailor or a constable, and "all the king's horses and all the king's men" couldn't hold him to his economic predestination.

When all has been said, I cannot escape the conviction that the real significance even of Germany is not in what the State has done for the workman but what the German workman has succeeded in doing for himself, in spite of the State.

"This brings us back to the first postulate of Anglo-Saxon individualism: the basis of social coöperation is self-help.

IV

THE PECUNIARY BASIS OF ECONOMIC

ORGANIZATION

"The industrial system in which we live is without order, plan, and system; its name is Chaos," asserts our socialist friend. In a lecture on "The Relation of Political Economy to Natural Theology," an English divine says in substance, "The almost perfect way in which, without conscious intervention, our multifarious industrial activities are co-ordinated into a system that satisfies our needs bears evidence of the mysterious way in which God moves 'his wonders to perform.'" These antagonistic opinions raise some of the most pertinent questions connected with the organization of society. Is our economic world one of order? Can industrial organization maintain itself without authoritative interference? Is the "automatic" organization of society the most economical? Can it be supplemented, controlled, or superseded? Does it serve, or can it be made to serve, the requisite ethical ends? In this division attention is given only to the more immediate aspects of these general problems. A consideration of the factors of a developing society which complicate them must be reserved to the next division.

The first question can be given a definite affirmative answer: our system is possessed of order. The nicety with which men and "jobs," capital and opportunities for investment, and supply of and demand for goods are brought together attests this. An examination reveals in our scheme of prices an admirable mechanism for preserving this organization. Rising prices attract capital, labor, or goods; falling prices repel them. Back of this we find an 'active organizing agency in pecuniary competition. Further examination shows that our system is admirably adapted to manipulation through price changes. Labor, capital, and goods are mobile; the industrial technique is plastic; and our scheme of values has translated itself very largely into pecuniary terms. We have also devised several special contrivances which tend to eliminate personal factors and make easier the exercise of the motivating power of price. Of these the corporation is typical. It reduces economic judgments to the cold calculus of dollars. It has split up business opportunities into bits small enough to fit the pocket-book of the most insignificant investor; it has distributed the risks of industry in accordance with the whims of different classes of capitalists; and it has served to place capital under the control of the pecuniarily ablest managements. It has, perchance, more than once freed the pecuniarily unfit from the burden of his possessions.

The second question can definitely be answered in the negative. The system cannot maintain itself without authoritative interference. The state must preserve "law and order," maintain the integrity of basic institutions, provide an efficient monetary system, keep free the channels of trade, and act as arbiter in industrial disputes. The various trades must have their bodies of developing custom. The constraints of social usage must give at least a modicum of order to the wants of consumers. Yet the important rôle of authority in industrial organization is often lost sight of and competition itself is denounced as "ruthless." This judgment springs from a confusion of competition and laissez-faire; of the process of organization and the fundamental institutions which condition it. The "plane" of competition can

be authoritatively determined, even though competition be left "free." Accordingly the ethical character of the result depends, not on the fact of competition, but on "the rules of the game."

The third question cannot, at least at this stage of our study, be answered definitely. More than one industrial activity has been pronounced uneconomical and its personnel parasites. It requires little effort to think of many trades or vocations which for a time have enabled their devotees to reap without sowing. Such methods of acquiring "easy money" necessarily involve "economic waste," and should be forbidden. Frequently "middlemen" and "speculators" are consigned to this class of unproductive and unprofitable servants. Analysis shows that both perform very necessary functions in the organization of the market. But this does not dispose of the question of economy in organization. It may well be that there are too many "middlemen"; that there is a waste of our limited social resources at this point. And it is doubtless true that speculation frequently degenerates into gambling. If so, two problems are presented: Can the waste of resources in mercantile pursuits be checked without interfering with efficiency in service? Can speculation be stripped of gambling without interfering with the performance of its organizing functions? Almost as often the economy of the system as a whole is called into question. Our attention is directed to the "wastes of competition"; and it is urged that these wastes can be eliminated either by a policy of "regulated monopoly" or by "the socialization of industry.' A consideration of these delicate problems of economic organization will have to be postponed until later in our study.

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The fourth question involves several questions which cannot be answered in a single statement. The evidence seems to be against society's being able arbitrarily to fix prices that are greatly at variance with "natural" prices. The wholesale prescription of a scheme of prices is a very complex question; it practically involves a socialization of industry; economists generally would pronounce against it. However, it seems evident that prices can be indirectly changed by means of controlling demand or supply. This indirect attempt to interfere with prices is characteristic of monopoly, of tradeunionism, and of such proposals as, say, a minimum wage coupled with a control of immigration. It will reappear in connection with each of these problems. Finally, as we have already seen, society can exercise an influence over the institutional situation within which price-fixing occurs.

The fifth question we must pass by. We cannot pronounce an ethical judgment upon the organization of the present system until we have had a chance to study both the problems referred to in this section and many others. It may perchance be that even then we will hesitate to pronounce a judgment.

A. PRICE AS AN ORGANIZING FORCE

67. The Social Order1

BY EDWIN CANNAN

Some would have us believe that at present there is in society no organization at all. They use hard words, such as "scramble for wealth," "suicidal competition," "exploitation," "profit-hunting," and say that the present state of things is "chaotic." Now, whatever our present state may be, however unsatisfactory it is, it is certainly not

1Adapted from Wealth: A Brief Explanation of the Causes of Economic Welfare, 72-75 (1914).

chaotic. If it were really chaotic, everyone who goes to his daily. work tomorrow must be a fool, since he would be just as likely to get his daily bread if he stayed at home. The very fact that we all know as well as we do that certain results will almost inevitably follow upon certain course of action shows that we are not living in chaos. Our system may be a bad system, but it is a system of some sort; it is not chaos. If a man holds a book too close to his nose he cannot read it, and so it is with the world of industry. If we look at it from too close a standpoint we can only see a blur.

Let us imagine a committee of the Economics Section of the Association for the Advancement of Science of the planet Saturn reporting on what they had been able to see of affairs on our planet through a gigantic telescope big enough for them to see human beings moving on its face. Would they be able to report that poor Mundus seemed quite chaotic? Would they report that everyone was scrambling for himself to the disadvantage of everyone else in such a way that the general good seemed entirely neglected? Would they say that all the land in the most convenient situations was lying idle, that nobody had a roof over his head, and that everyone was running about aimlessly or sitting idle in imminent danger of starvation? They might report something of the kind if they could carry on conversations with certain people here and if they believed all they were told, but certainly not if they judged by their own observation.

They would be more likely to report that they had seen a very orderly people co-operating on the whole with a wonderful absence of friction--that they had seen them come out of their homes in the morning in successive batches and wend their way by all sorts of means of locomotion to innumerable different kinds of work, all of which seemed somehow to fit into each other so that as a whole the vast population seemed to get fed, and clothed, and sheltered. They would not, of course, vouch for the perfection of the arrangements. They would see that there were occasional irregularities and hitches. They might see now and then too many vehicles in one street, too many passengers trying to travel by one train or tramcar. They. might even see along the country roads the melancholy spectacle of men tramping in both directions in search of the same kind of work. They might be able to see that some had too much—more than they seemed to know how to dispose of without hurting themselves and others while some evidently had too little for healthy and happy existence. But in spite of these defects they would report, I think, that on the whole the machinery, whatever its exact nature, seemed to do its work fairly effectively.

And if we can imagine them able to go back five hundred or a thousand years, we can feel tolerably sure that they would report still more favorably, since they would then see the enormous improvement which had taken place and would discover no appearance of any change which would suggest that the existing system is not the outcome of an orderly development of the institutions of the past. I insist so strongly on the fact that our existing machinery does work, not with any idea of contending that all is for the best in the best of all possible worlds, but because to understand economics it is necessary to begin by considering, not the defects in the machinery, but the main principles involved in its construction and working. We are likely to begin with the defects because it is they which strike our eye and excite our sympathy. Seven per cent of unemployed are much more likely to make us start thinking than ninety-three per cent who are in employment. The emaciated corpse of a single person starved to death naturally makes more impression on our minds than the comfortable bodies of a hundred thousand sufficiently fed citizens. But if we want to understand the reason why work and food do not quite "go round," we should begin by endeavoring to discover what, after all, certainly does not explain itself--why they go as far round as they do.

68. Competition and Industrial Co-operation2

BY RICHARD WHATELY

"Bees," said Cicero, "do not congregate for the purpose of constructing a honeycomb; but, being by nature gregarious animals, combine their labors in making the comb. And man, even more so, is formed by nature for society, and, subsequently, as a member of society, promotes the common good in conjunction with his fellowcreatures." Most useful to Society, and much to be honored, are those who possess the rare moral and intellectual endowment of an enlightened public spirit; but, if none did service to the Public except in proportion as they possessed this, Society, I fear, would fare but ill. As it is, many of the most important objects are accomplished by the joint agency of those who never think of them, nor have any idea of acting in concert; and that with a certainty, completeness, and regularity which probably the most diligent benevolence, under the guidance of the greatest human wisdom, could never have obtained.

Adapted from Introductory Lectures on Political Economy, 2d ed., 9098 (1832).

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