facts are neither particularly obscure nor particularly elusive; only, they have had little attention in the argument of economists and politicians. Still less in the speculations of the captains of finance. The partition of incomes has always been more easily understood by these practically-minded persons, and it is also a more engrossing subject of argumentation than the production of goods. This would be particularly true for these economists and politicians, who are imbued with that legalistic spirit which pervades the modern point of view and all its votaries.
But it is known to all, even to the most safely guarded persons who do not come in contact with industry or production, or even with the products of the staple industries, that industry at large will always turn out something in the way of a net margin of product over human cost, -- over human effort and necessary consumption. It holds true as far back as the records have anything to say. It is evidently a question of the productivity of the industrial arts. Men at work turn out a net product because they know how and are interested in doing it; and their output is limited by the industrial methods which they have the use of. But the output is limited in such a way that it always exceeds the cost by more or less, barring accident. By and large, throughout past time the industrial arts have been gaining in efficiency, and the ordinary margin of net product over cost has consequently gone on widening. This is much of the meaning of "an advance in the industrial arts."
In an earlier time, by law and custom, the net margin of product habitually went to a master class, so-called, as the "earnings" or the due emoluments of their mastery over those industrious classes who carried forward and gave effect to the state of the industrial arts as known in their time. By virtue of their mastery and its incorporation in the institutions of the time, they had an equitable, and effectual, vested interest in the net product of the community's industry; and by virtue of the same settled principles of law and custom it was for them to see to the due consumption of any such net product above cost. In later times, and particularly in modern times and in the civilised countries, those immemorial principles of privilege equitably vested in the master class have fallen into discredit as being not sufficiently grounded in fact; so that mastery and servitude are disallowed and have disappeared from the range of legitimate institutions. The enlightened principles of self-help and personal equality do not tolerate these things. However, they do tolerate free income from investments. Indeed, the most consistent and most reputable votaries of the modern point of view commonly subsist on such income.
Ever since these enlightened principles of the modern point of view were first installed in the eighteenth century as the self-evident rule of reason in civilised life, the industrial arts have also continued to gain in productive efficiency, at an ever-accelerated rate of gain; so that today the industrial methods of the machine era are highly productive, beyond any earlier state of the industrial arts or anything that is known outside the range of this new order of industry. The output of this industrial system yields a wider margin of net product over cost than has ever been obtainable by any other or earlier known method of work. It consequently affords ground for an uncommonly substantial vested interest in this disposable net margin.
But the industrial system of the new order will work at the high rate of efficiency of which it is capable, only under suitable conditions. It is a comprehensive system of interdependent working parts, organised on a large scale and with an exacting articulation of parts, -- works, mills, railways, shipping, groups and lines of industrial establishments, all working together on a somewhat delicately balanced plan of mutual give and take. No one member or section of this system is a self-sufficient industrial enterprise, even if it is true that no one member is strictly dependent on any other one. Indeed, no one member or section, group or line of industrial establishments, in this industrial universe of the new order, is a productive factor at all, except as it fits into and duly gives and takes its share in the work of the system as a whole. Such exceptions to this rule of interlocking processes as may appear on first examination, are likely to prove exceptions in appearance only.
They are chiefly the backward trades and occupations which have not had the benefit of the Industrial Revolution and do not belong under the new, mechanistic order of industry; or they are trades, occupations and works devoted to the consumption of goods or to the maintenance of the rules governing the distribution and consumption of wealth, as, for instance, banking, menial service, police service and the apparatus of the law, the learned professions and the fine arts.
It is also of the essence of this industrial system and its technology that it necessarily involves the industrial community as a whole, its working population and its material resources; and the measure of its successful operation is determined by the effectual team-work of its constituent parts. And the industrial system of the new order is drawn on a large scale and rests on a comprehensive specialisation of processes and standardisation of output; so that the "community" which is required for the necessary team-work is necessarily a large community; larger than the total population and resources that would have served the like purpose under any earlier state of the industrial arts, at the same time that the needed coordination of processes is also wider and more delicately balanced than ever before. Indeed, the "industrial community" of the new order is always and necessarily larger than any existing national unit. The ramification of give and take under the new industrial system invariably overlaps the national frontiers, among all those peoples who occupy what would be called an "advanced" place in industry. The system, and therefore the industrial community engaged in team-work under this system, is drawn on cosmopolitan or international lines, both in respect of the body of technological knowledge which is turned to account and in respect of the range and volume of materials necessary to be used according to this new order in productive industry.
Evidently the total output of product turned out under this industrial system, the "annual production," to use Adam Smith's phrase, or the "annual dividend," to use a phrase taken from later usage, -- this total output is the output of the total community working together as a balanced organisation of industrial forces engaged in a moving equilibrium of production.
No part or fraction of the community is a productive factor in its own right and taken by itself, since no work can be done by any segment of the community in isolation from the rest; no one plant or works would be a producer in the absence of all the rest. The total product is the product of the total community's work; or rather it is the product of the work of that fraction of the people who are employed in productive work, which is not quite the same thing, since there is much work spent on the consumption of goods, and on ways and means for such consumption, as well as on their production.
Indeed, it is by no means certain that there is not more time, strain and ingenuity spent on the consumption of goods than on their production. Apart from sports, menial service, fashionable dress and equipage, pet animals and mandatory social amenities, there would also have to be included under the ways and means of consumption virtually all that goes into salesmanship and advertising. Virtually all of these things have to do with the organised consumption of goods; and virtually all are therefore to be written off as waste motion, so far as regards their effect on the net productive efficiency of the industrial community, or of the industrial system whose tissues are consumed in enterprise of that kind. The amount which is to be written off as consumptive waste in this way is approximately the same as the net margin of product over cost; and according to the enlightened principles of self-help and equal opportunity, as these principles work out under the new order of industry, it is for the investors to take care of this consumptive waste and to see that no unconsumed residue is left over to cumber the market and produce a glut.
Evidently, too, the amount of the annual production depends on the state of the industrial arts which the working population has the use of for the time being; which is in the main a matter of technological knowledge and popular education. So that the question of productivity and net productivity may be stated in general terms to the following effect: The possible or potential productive capacity of any given community, having the disposal of a given complement of man power and material resources, is a matter of the state of the industrial arts, the technological knowledge, which the community has the use of. This sets the limit, determines the "maximum" production
