There is another curious question that will also have to be left as a moot question, in the absence of more specific information than that which is yet available; more a question of idle curiosity, perhaps, than of substantial consequence. How nearly is it likely that the total gains which accrue to these prosperous business concerns and their investors from their conscientious withdrawal of efficiency will equal the total loss suffered by the community as a whole from the incidental reduction of the output? Net production is kept down in order to get a profitable price for the output; but it is not certain whether the net production has to be lowered by as much or more than the resulting increased gain which this businesslike strategy brings to the businesslike strategists. The strategic curtailment of net production below productive capacity is net loss to the community as a whole, including both the business men and their customers; the gains which go to these business concerns in this way are net loss to the community as a whole, exclusive of the business concerns and their investors. The resulting question is, therefore, not whether the rest of the community loses as much as the business men gain, -- that goes without saying, since the gains of the business men in the case are paid over to them by the rest of the community in the enhanced (or maintained) price of the products, but rather it is a question whether the rest of the community, the common man, loses twice as much as the business concerns and their investors gain.
The whole case has some analogy with the phenomena of blackmail, ransom, and any similar enterprise that aims to get something for nothing; although it is carefully to be noted that its analogy with these illegitimate forms of gainful enterprise must, of course, not be taken to cast any shadow of suspicion on the legitimacy of all the businesslike sabotage that underlies this immaterial corporate capital and its earning-capacity. In the case of blackmail, ransom, and such like illegal traffic in extortion, it is known that the net loss suffered by the loser and the gainer together exceeds the net gain which accrues to the beneficiary, by as much as the cost of enforcement plus the incidental inconvenience to both parties to the transaction. At the same time, the beneficiary's subsequent employment and consumption of his "ill-gotten gains," as they are sometimes called, whether he consumes them in riotous living or in the further pursuit of the same profitable line of traffic, -- all this, it is believed, does not in any degree benefit the rest of the community. As seen in the perspective of the common good, such enterprise in extortion is believed to be quite wastefully disserviceable.
Now, this analogy may be taken for what it is worth; "Analogies do not run on all-fours." But when seen in the same perspective, the question of loss and gain involved in the case of these intangible assets and their earning-capacity falls into something like this shape: Does the total net loss suffered by the community at large, exclusive of the owners of these intangibles, exceed two-hundred percent of the returns which go to these owners? or, Do these intangibles cost the community more than twice what they are worth to the owners? -- the loss to the community being represented by the sum of the overhead burden carried on account of these intangibles plus the necessary curtailment of production involved in maintaining profitable prices. The overhead burden is paid out of the net annual production, after the net annual production has been reduced by so much as may be necessary to "maintain prices at a reasonably profitable figure."
A few years ago any ordinarily observant person would doubtless have answered this question in the negative, probably without hesitation. So also, any ordinarily intelligent votary of the established order, as, e.g., a corporation lawyer, a commercial trade journal, or a trade-union official, would doubtless, at that period, have talked down such a question out of hand, as being fantastically preposterous. That would have been before the war experience began to throw light into the dark places of business enterprise as conducted under the new order of industry. Today (October, 1918) -- it is to be admitted with such emotion as may come to hand -- this question is one which can be entertained quite seriously, in the light of experience. In the recent past, as matters have stood up to the outbreak of the war, the ordinary rate of production in the essential industries under businesslike management has habitually and by deliberate contrivance fallen greatly short of productive capacity. This is an article of information which the experience of the war has shifted from the rubric of "Interesting if True" to that of "Common Notoriety."
The question as to how much this "incapacity by advisement" has commonly amounted to may be attempted somewhat after this fashion. Today, under compulsion of patriotic devotion, fear, shame and bitter need, and under the unprecedentedly shrewd surveillance of public officers bent on maximum production, the great essential industries controlled by the vested interests may, one with another, be considered to approach -- perhaps even conceivably to exceed -- a fifty-percent efficiency; as counted on the basis of what should ordinarily be accomplished by use of an equally costly equipment having the disposal of an equally large and efficient labor force and equally good natural resources, in case the organisation were designed and managed with an eye single to turning out a serviceable product, instead of, as usual, being managed with an eye single to private gain in terms of price.
To the spokesmen of "business as usual" this rating of current production under the pressure of war needs may seem extravagantly low; whereas, to the experts in industrial engineering, who are in the habit of arguing in terms of material cost and mechanical output, it will seem extravagantly high.
Publicly, and concessively, this latter class will speak of a 25 percent efficiency; in private and confidentially they appear disposed to say that the rating should be nearer to 10 percent than 25. To avoid any appearance of an ungenerous bias, then, present actual production in these essential industries may be placed at something approaching 50 percent of what should be their normal productive capacity in the absence of a businesslike control looking to "reasonable profits." It is necessary at this point to call to mind that the state of the industrial arts under the new order is highly productive, -- beyond example.
This state of the case, that production in the essential industries presumably does not exceed 50 percent of the normal productive capacity, even when driven under the jealous eye of public officers vested with power to act, is presumably due in great part to the fact that these officers, too, are capable business men; that their past training and present bent is such as has been given them by long, exacting and successful experience in the businesslike management of industry; that their horizon and perspective in all that concerns industry are limited by the frame of mind that is native to the countinghouse. They, too, have learned how to think of industry and its administration in terms of profit on investment, and, indeed, in no other terms; that being as near as their daily work has allowed them to take stock of the ways and means of industry. So that they are still guided, in some considerable part, by considerations of what is decent, equitable and prudent in the sight of conservative business men; and this bias necessarily goes with them in their dealings with those ubiquitous, intricate and systematic dislocations of the industrial system which have been found profitable in the management of industry on a footing of competitive sabotage. They still find it reasonable to avoid any derangement of those vested interests that live on this margin of intangible assets that represents capitalised withdrawal of efficiency.
In so characterising the situation there is, of course, no inclination to impute blame to these businesslike officials who are patriotically giving their best abilities and endeavors to this work of enforcing an increased production in the essential industries and diverting needed labor and materials from the channels of waste; nor is it intended to cast aspersions on the good faith or the honorable motives of those grave captains of industry whom the officials find it so difficult to divert from the business man's straight and narrow path of charging what the traffic will bear. "They are all honorable men," But like other men they are creatures of habit; and their habit of mind is the outcome of experience in that class of large, responsible and remunerative business affairs that lie somewhat remote from the domain of technology, from that field where the mechanistic logic of the industrial arts has something