to a peculiar degree in the position of intermediaries within the range of the competitive industries, as is the case, e.g., with most railroads. But even in such a case the coalition which has a monopoly is more fortunate as regards the stability of its balance sheet than the same traffic would be without the advantage of monopoly.
Barring providential intervention, then, the only refuge from chronic depression, according to the view here set forth, is thoroughgoing coalition in those lines of business in which coalition is practicable. But since this would include the greater part of those lines of industry which are dominated by the machine process, it seems reasonable to expect that the remedy should be efficacious. The higher development of the machine process makes competitive business impracticable, but it carries a remedy for its own evils in that it makes coalition practicable. The ulterior effects of thoroughgoing monopoly, as regards the efficiency of industry, the constancy of employment, the rates of wages, the prices of goods to consumers, and the like, are, of course, largely matter of surmise, and cannot be taken up in this inquiry, the present purpose being merely to give in outline an economic theory of current business enterprise.
A further consideration hearing on the later phases of the business situation may be added. The great coalitions and the business manoeuvres connected with them have the effect of adding to the large fortunes of the greater business men; which adds to the large incomes that cannot be spent in consumptive expenditures; which accelerates the increase of investments; which brings competition if there is a chance for it; which tends to bring on depression, in the manner already indicated. The great coalitions, therefore, seem to carry the seed of this malady of competition, and this evil consequence can accordingly be avoided only on the basis of so comprehensive and rigorous a coalition of business concerns as shall wholly exclude competition, even in the face of any conceivable amount of new capital seeking investment.
What has made chronic depression the normal course of things in modern industrial business is the higher development of the machine process, given, of course, the traits of human nature as it manifests itself in business traffic. The machine process works this effect by virtue, chiefly if not altogether, of these two characteristics: (1) a relatively rapid rate of increasing efficiency; and (2) the close interdependence of the several lines of industrial activity in a comprehensive system, which is growing more comprehensive and closeknit as improvement and specialization of industrial processes go on. The last-named factor counts for more in proportion as the interdependence grows closer and more comprehensive. Disturbances are progressively transmitted with greater facility and effect throughout the system, and each line of industrial business comes to stand in relatively intimate relations to an ever increasing range of other lines with which it carries on a traffic of purchase or sale. A consequence of this state of things is that any business coalition, in order effectually to serve its purpose of maintaining earnings and capitalization, is required to be of larger scope and closer texture. As the exigencies which enforce the resort to coalition uninterruptedly gain in scope and urgency, the "trust" must take the same course of growth to meet these exigencies; until, with some slight further advance along the accustomed lines, the trust which shall serve the modern business situation must comprehend in one close business coalition virtually the whole field of industry within which the machine process is the dominant industrial factor.
To this there is a broad exception, given by the circumstances of the industrial organization. This organization rests on the distinction between business management and ownership. The workmen do not and cannot own or direct the industrial equipment and processes, so long as ownership prevails and industry is to be managed on business principles. The labor supply, or the working population, can therefore not be included in the ideally complete business coalition suggested above, however consummate the machine system and the business organization built upon it may become. So that when the last step in business coalition has been taken, there remains the competitive friction between the combined business capital and the combined workmen.
From the considerations recited above it appears that the competitive management of industry becomes incompatible with continued prosperity so soon as the machine process has been developed to its fuller efficiency. Further technological advance must act to heighten the impracticability of competitive business. As it is sometimes expressed, the tendency to consolidation is irresistible. Modern circumstances do not permit the competitive management of property invested in industrial enterprise, much less its management in detail by the individual owners. In short, the exercise of free contract, and the other powers inhering in the natural right of ownership, are incompatible with the modern machine technology. Business discretion necessary centres in other hands than those of the general body of owners. In the ideal case, so far as the machine technology and its business concomitants are consistently carried through, the general body of owners are necessary reduced to the practical status of pensioners dependent on the discretion of the great holders of immaterial wealth; the general body of business men are similarly, in the ideal outcome, disfranchised in point of business initiative and reduced to a bureaucratic hierarchy under the same guidance; and the rest, the populace, is very difficult to bring into the schedule except as raw material of industry. What may take place to accentuate or mitigate this tendency is a question of the drift of sentiment on the matter of property rights, business obligations, and economic policy. So far as the economic factors at play in the modern situation shape this drift of sentiment they do so in large part indirectly, through the disciplinary effect of new and untried circumstances of politics and legal relation to which their working gives rise.
Business Principles in Law and Politics
Popular welfare is bound up with the conduct of business; because industry is managed for business ends, and also because there prevails throughout modern communities a settled habit of rating the means of livelihood and the amenities of life in pecuniary terms. But apart from their effect in controlling the terms of livelihood from day to day, these principles are also in great measure decisive in the larger affairs of life, both for the individual in his civil relations and for the community at large in its political concerns. Modern (civilized) institutions rest, in great part, on business principles. This is the meaning, as applied to the modern situation, of the current phrases about the Economic Interpretation of History, or the Materialistic Theory of History.
Because of this settled habit of seeing all the conjunctures of life from the business point of view, in terms of profit and loss, the management of the affairs of the community at large falls by common consent into the hands of business men and is guided by business considerations. Hence modern politics is business politics, even apart from the sinister application of the phrase to what is invidiously called corrupt politics. This is true both of foreign and domestic policy. Legislation, police surveillance, the administration of justice, the military and diplomatic service, all are chiefly concerned with business relations, pecuniary interests, and they have little more than an incidental bearing on other human interests. All this apparatus is also charged with the protection of life and personal liberty, but its work in this bearing has much of a pecuniary color.
Legislation and legal decisions are based on the dogma of Natural Liberty. This is peculiarly true as regards the English-speaking peoples, the foundation of whose jurisprudence is the common law, and it holds true in an especial degree of America. In other European communities the sway of natural rights preconceptions is not so unmitigated, but even with them there is a visibly growing predilection for the natural-rights standpoint in all matters touching business relations. The dogma of natural liberty is peculiarly conducive to an expeditious business traffic and peculiarly consonant with the habits of thought which necessarily prevail in any business community.
The current body of natural-rights preconceptions antedates the modern business situation. The scheme of natural rights grew up and found secure lodgement in the common sense of the community, as well as with its lawgivers and courts, under the discipline of the small industry and petty trade ("domestic industry")
