use and capitalization in one corporation need not, and indeed does not, hinder or diminish the extent to which it may be used and capitalized in any other corporation. The case is analogous, though scarcely similar, to that of the workmanlike or artistic skill of a handicraftsman, or an artist, which may be embodied in a given product without abating the degree of skill possessed by the workman. Like other good-will, though perhaps in a higher degree of sublimation, it is of a spiritual nature, such that, by virtue of the ubiquity proper to spiritual bodies, the whole of it may undividedly be present in every part of the various structures which it has created. Indeed, the fact of such good-will having been incorporated in capitalized form in the stock of any given corporation seems rather to augment than to diminish the amount at which it may advantageously be capitalized in the stock of the next corporation into which it enters. It has also the correlative spiritual attribute that it may imperceptibly and inscrutably withdraw its animating force from any one of its creatures without thereby altering the material circumstances of the corporation which suffers such an intangible shrinkage of its forces.
There can be no question but that the good-will of the various great organizers and their financiering houses has repeatedly been capitalized, probably to its full amount, in the common stock of the various corporations which they have created; but taken in the sense of an asset belonging to the financing house as a corporation, it is not known that this item of immaterial wealth has yet been formally capitalized and offered in quotable shares on the market or included in the schedules of personal property.
The sublimation of business capital that has been going forward in recent times has grave consequences for the owners of property as well as for the conduct of industry. In so far as invested property is managed by the methods of modern corporation finance, it is evident that the management is separated from the ownership of the property, more and more widely as the scope of corporation finance widens. The discretion, the management, lies in the hands of the holders of the intangible forms of property; and with the extension of corporation methods it is increasingly true that this management, again, centres in the hands of those greater business men who hold large blocks of these intangible assets. The reach of a business man's discretionary control, under corporation methods, is not proportioned simply to the amount of his holdings. If his holdings are relatively small, they give him virtually no discretion. Whereas if they are relatively large, they may give him a business discretion of much more than a proportionate reach. The effective reach of a business man's discretion might be said to increase as the square of his holdings; although this is to be taken as a suggestive characterization rather than as an exact formula.
Among the holdings of industrial property that count in this way toward control of the business situation, the intangible assets (represented by common stock, good-will, and the like) are chiefly of consequence. Hence follow these two results: the fortunes of property owners are in large measure dependent on the discretion of others the owners of intangible property; and the management of the industrial equipment tends strongly to centre in the hands of men who do not own the industrial equipment, and who have only a remote interest in the efficient working of this equipment. The property of those who own less, or who own only material goods, is administered by those who own more, especially of immaterial goods; and the material processes of industry are under the control of men whose interest centres on an increased value of the immaterial assets.
Theory of Modern Welfare
Before business principles came to dominate everyday life the common welfare, when it was not a question of peace and war, turned on the ease and certainty with which enough of the means of life could be supplied. Since business has become the central and controlling interest, the question of welfare has become a question of price. Under the old regime of handicraft and petty trade, dearth (high prices) meant privation and might mean famine and pestilence; under the new regime low prices commonly mean privation and may on occasion mean famine. Under the old regime the question was whether the community's work was adequate to supply the community's needs; under the new regime that question is not seriously entertained.
But the common welfare is in no less precarious a case. The productive efficiency of modern industry has not done away with the recurrence of hard times, or of privation for those classes whose assured pecuniary position does not place them above the chances of hard times. Distress may not be so extreme in modern industrial communities, it does not readily reach the famine mark; but such a degree of privation as is implied in the term "hard times" recurs quite as freely in modern civilized countries as among the industrially less efficient peoples on a lower level of culture. The oscillation between good times and bad is as wide and as frequent as ever, although the average level of material well-being runs at a higher mark than was the case before the machine industry came in.
This visible difference between the old order and the new is closely dependent on the difference between the purposes that guide the older scheme of economic life and those of the new. Under the old order, industry, and even such trade as there was, was a quest of livelihood; under the new order industry is directed by the quest of profits. Formerly, therefore, times were good or bad according as the industrial processes yielded a sufficient or an insufficient output of the means of life. Latterly times are good or bad according as the process of business yields an adequate or inadequate rate of profits. The controlling end is different in the present, and the question of welfare turns on the degree of success with which this different ulterior end is achieved. Prosperity now means, primarily, business prosperity; whereas it used to mean industrial sufficiency.
A theory of welfare which shall account for the phenomena of prosperity and adversity under the modern economic order must, accordingly, proceed on the circumstances which condition the modern situation, and need not greatly concern itself with the range of circumstances that made or marred the common welfare under the older regime, before the age of machine industry and business enterprise.109 Under the old order, when those in whose hands lay the discretion in economic affairs looked to a livelihood as the end of their endeavors, the welfare of the community was regulated "by the skill, dexterity, and judgment with which its labor was generally applied."110 What would mar this common welfare was the occasionally disastrous act of God in the way of unpropitious seasons and the like, or the act of man in the way of war and untoward governmental exactions. Price variations, except as conditioned by these untoward intrusive agencies, had commonly neither a wide nor a profound effect upon the even course of the community's welfare. This holds true, in a general way, even after resort to the market had come to be a fact of great importance in the life of large classes, both as an outlet for their products and as a base of supplies of consumable goods or of raw materials, - as in the better days of the handicraft system.
Until the machine industry came forward, commerce (with its handmaiden, banking) was the only branch of economic activity that was in any sensible degree organized in a close and comprehensive system of business relations. "Business" would then mean "commerce," and little else. This was the only field in which men habitually took account of their own economic circumstances in terms of price rather than in terms of livelihood. Price disturbances, even when they were of considerable magnitude, seem to have had grave consequences only in commerce, and to have passed over without being transmitted much beyond the commercial houses and the fringe of occupations immediately subsidiary to commercial business.
Crises, depressions, hard times, dull times, brisk times, periods of speculative advance, "eras of prosperity," are primarily phenomena of business; they are, in their origin and primary incidence, phenomena of price disturbance, either of decline or advance. It is only secondarily, through the mediation of business traffic, that these matters involve the industrial process or the livelihood of the community. They affect industry because industry is managed on a business footing, in terms of price and for the sake of profits.
