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Tke

Meaning Business
"

of

OR-

Tbe

Science

of

Service

By

Transfw

Published

by

Tke

American
of
With

Credit-Inclcmmty
New

Co.

York

the pemiiasion

of the

Author.

Copyrighted

1918

by

Tte

American

Credit-Indemnity

Co.

New of

York

A^

^^K

THE
Economics,
as a

ESSAY
or

BEGINS

ON

PAGE
is viewed

Political Economy,

The
seem

dull and ponderous by subject,except doubtless is, that some Political Economists reason to have the notion that they are writing always to

generally Professors.

other Political Economists, and thus sacrifice simplicity and clearness for "scientific analyses."

Political Economy
Successful
or

simple exposition of Scientific Service, following causes to their

is

very

the pursuit of wealth. effectsupon As efficiencyof service is the measure of success, and Essay on the Meaning Business, or The Science as this of

of Service, tellsso simply what efficiency is, we it for complimentary distribution. It was written by a man attainments, of rare had
an

publish
who has

unusually successful career. We feel confident you will find pleasure and profit in be had, upon request, reading it. Additional copies may although only a limited supply has been printed.

THE
Of
New

AMERICAN
York
-

CREDIT-INDEMNITY
-

CO.
TREAT, President

E. M.

CREDIT
HOME OFFICE
.

INSURANCE
.
.

ST.

LOUIS,

MO.

1918

People must have sense do and why they do it.

enough

to understand

what they

The man who understands that he must serve thrivewill know what to do and what not to do. To do an to thrive.
thing unuseful
to is to fail; do
a

in order to

thing useful

is

Do what the community

needs to have done.

A
wise

makes what he sellsand buys what he needs. The thing to do is to make, in abundance, what people need.
man man can

No

help

himselfithout helping others. w

Business is

beneficence. profitable

CREDIT
ITS SERVICE

INSURANCE.
TO BUSINESS.

objectof the writer of |HE by

this pamphlet

was

to

thrive mutual service and not show that men by mutual spoliation. He justifies prosperity the of those engaged in making or distributing goods

by showing the contribution of each to the general welfare. American Credit-Indemnity Company The accepts the
and offers for the challenge conveyed by his argument the following vindication of consideration of business men
its usefulness.

The problems of business are numerous The seller and buyer seldom stand face
must

to

and perplexing. face. The seller

capital and credit rely in marketing his goods upon be so accurate of things cannot ratings which in the nature ing. as to preclude mistakes. The unexpected is always happentoday and bankrupt tomorrow; a and however efficient credit department may liabilities be. losses on sales are inevitable. The aggregate
A

buyer

may

be

prosperous

of firms which have become bankrupt in a single decade to m the United States have amounted about two billion

three hundred million dollars. Failures are due to all sorts of causes: to inexperience, insufficient capital, over-buying, false credit, speculation,

fraud,

violent fall in prices, seasonal failures,neglect of business, extravagance,

a

changes,

crop

competition,
any

endorsing shocking

for others,

or

commercial
or

crisis; and

sudden derangement from any cause a tide arrest may of commercial affairs of if variabl le. prosperity. Mortality in business is constant, The in percentage those engaged of failures among disaster of
any
sort,

any

business is greater
man

than
to

the mortaUty guard

among

men.

No

is wise
must
assume.

enough
a

against all the risks which

he

Because American

assume must merchant Company Credit- Indemnity

these
was

risks, the organized for

his protection. losses incurred

its bond in
excess

The
on

for all affords indemnity by goods sold within the period covered of those which are normal and expected,
company
to

mercantile affairs a stability and lack. security which otherwise they must to It helps the merchant It does more. sell goods him where he is likely to lose and where wisely, by telling he is relativelysafe. It helps to reduce his normal loss; it it assists with helps his credit department; past-due quent it obviates friction between him and his delinaccounts; and
thereby
gives
mass a of and it affords to him in his business. information which he will find of great use If you ask how it does these things, it replies that its a and contain period of twenty-five years records cover ness, businot the experience of one merchant engaged in one

customers;

but the experience of many engaged in allsorts of business in

The

thousands of merchants every part of the country.

claims filed with it growing out of unpaid accounts more aggregate since its business was established now than two billions dollars. It has sifted these records and of from them derived useful information with respect to the causes of various failures at various times under various From it has derived experience them circumstances. tables which show the actual risks in selling, what the loss is on credit ratings A, B, and all others. The average are premiums of the company adjusted to these risks, and by the emphasis of the charge upon against each, we warn the greater

risks. We

help the credit department

6

to

under-

stand

what
occur;

to

do, by
we

losses
be
more

and

showing the merchant where his help all business by compelling it to

prudent where prudence is requisite. We mitigate to the friction which results from an attempt enforce the by intervening between collection of an overdue account and his customer; reduce the merand we chant's not normal loss by collecting in time after but before failure.
the merchant
"

We

carry

into business

promise

of indemnity

against

thereby afford comfort and serenity and security at a cost which is far less than the benefit We perconferred and far less than the losses avoided. form

the unexpected, and

in fact for

commerce

military

discipline does

the same for young

sort
men.

of service that The average

between twenty-one men mortality among and thirty-one is eight thousand in a million each year; in the army it is expected to be within four to six thousand in a million. The average business mortality is about ten thousand in each

million;

among

those who
our

and
same

instructions of proportion.

comply with the terms policy it will be reduced in the

operated under the collection department due provisions of the policy, which provides that past covered accounts shall be delivered to us for collection
We

have

stated time; and we agree that the filingof such accounts shall have the effect of proving them against our liability bond. We instantly proceed to collect under our within
a

these

accounts

as

soon

as

of the

customer

possible, and before the embarrassment has become too serious to be

we protect the seller against coped with ; and in this manner liability. In a single year we loss and ourselves against have so collected many thousands of dollars which our policy-holderswere unable to collect. We have saved them

that much be prompt of

a

and

at

the

same

time

and understand
services it.
we

to helped their customers the sanctity and binding effect

promise.

offer in return less than their value and less than These who
pays

for
we

charge which is for the man save

a

business is also serving, and our serving is not but a scientific service based capricious and unintelligent, data which are numerous conupon stantly reliable and very
Our

sifted for
resources

information

and

suggestion.

Our

strength and our policies show the show our derived. are service from which those resources We do a general good and a special good. We are gradually in payment buyers to be prompt teaching and we are
is time to show the same sellers what prudent and what is imprudent selling. Business, as the writer of the pamphlet shows, concerns itself with the making and distribution of goods. We furnish a very important aid to distribution: we prevent

attempting

at

diminish loss; and indemnify against loss; we because we help both producer and consumer of goods, in the fruitsof his benefiwe cence. share with the business man We diminish the cost of distribution.
waste;
we
"

The American

Credit-Indemnity
York
By E. M.

Co.

of New

TREAT.

President

The Meaning
OR
"

of

Business

The

Science of Service

and good will of society depend upon tradition, and that tradition upon experience; but the connection between tradition and experience is not We perceive the always evident. value of marriage, but cannot always vindicate it; we feel the need for a State, but cannot its ments; justify encroach-

HE I

peace

we we

tolerate

manners

and approve accustomed to them. Among the institutions of society, none is harder to attacked and none
private
property.

understand

and institutions not but because them

is

because
we

are

more

frequently

defend,

than

cannot

who

think it is indispensable but we We have no answer explain why. ready for him distribution of uneven questions the justice of an
We
we

wealth;

cannot

tell why
nor

this

and that man become rich

we

poor,
save

even

at

the

cost

should be rich can man explain how one of his neighbors. When
man or

speak
mean

profit, we
men

of wealth, or use the words the

same

taxes,

capital,
sense we

or

wages,
no

or

in

vague

and
or

two

thing. Yet They are to these things. respect bad. If they are or good, they

should right should be

agree wrong,
so

with good

clearly as justified to convince those who are perplexed; if they are they should be got rid of. Civilization today wrong, Men co-operate to produce rests upon private property.
it. Some
men

have

more,

some

less. Why?

Politicaleconomy
For
some reason,

disrepute. Men

itselfwith such problems. to discover, it has fallen into difficult is a dismal say witty things of it,as that it
concerns

its and few attend to science and the gospel of selfishness; instruction. Yet it has occupied the thought and time of gible: Its doctrine is simple and intellimen. many very

able

why so led to useful an instruction is disregarded and have been has no time to give to the refined believe that the busy man he deems theoretical and discriminating thinking of one whom and and sophistical. Each
special experience; other. In common and has
can a

it deals with familiar facts; and what it says helpful. I have tried to understand

is interesting

neither

parlance, every

peculiar vision and a quite understand the word is freighted with

experience and that experience is shared by those who use it. The economist begins by inventing new words political into a strange significancein order that or ones twisting old he may self. express and fix a notion which is peculiar to him-

It ocfor such instruction. curred I might extract from the literature of to me that economy certain of its salient and most political useful
are

We

too

impatient

doctrines and translate them into language which should be intelligibleo every t man; and this essay is the result of that consideration. At the outset 1 must say a few words in explanation of the objectsand pretensions of the science. It is not and does not pretend to be a moral science. It does not teach

dut

inculcate philanthropy, nor itselfwith concern the benevolent and most worthy motives of private conduct. It is concerned with business only, with that which do in order that they may men live; with the production of wealth and its distribution. It observes, analyzes and It deals with known explains. It assumes nothing. and
y
nor

10

familiar facts. If it offers an explanation of those facts, it offers one which is consistent with all of them, and show their mutual relationship and influence. Its value is found in the broadness of its view. It considers fact only, but every related fact: effect as one not cause as well as cause, well as effect; use and function,
attempts
to

then exception and rule. What and consequence; are the facts with which it is concerned? This is a busy world. Men move to and fro incessantly, each intent on his own of them affairs. A vast
purpose

majority

differin character and capacity, work continually. they have divided and perform various labors. Somehow, have farmers and millers, we themselves into groups:
chants and shoemakers, merand carriers, bankers and brokers, each of whom does some No one for himself, to work seems special work. but everybody for somebody else. What one makes
miners

They

and

blacksmiths,

tanners

he sells;what he needs he buys. All are engaged either in the production or distribution of wealth, and the labor the of all is a co-operative labor. Each depends upon
other: the maker upon buyer, the borrower on
or

the

consumer,

the seller upon

the

to

co-operative each in accordance

grown up

the lender. The product of a joint labor is distributed in a conventional way with
us: some

rule

or

practice which

has

among

profits and another have established markets

receiving wages, another interest. Trade is everywhere. We

.

one

get and exchanges where we In some have. what we need and dispose of what we manner the right articlesare brought forward in the right quantities, and no need of a luxurious people remains unsatisfied. There is work for everybody willing to work.

The

prosperity of

one

man

does

not
are

goods of another.

Poor people
11

diminish the continually forging to

seem

to

dissipated. We co-operate not the front. Riches are soon but because we choose to do so: yet by because we must his work the individual seeks not another's good but his in Everybody seems that his motive own. selfish the sense for pay; if he sells,he he serves is selfish. If he serves, facts which confront us: sells for profit. These are the division of the spontaneous the selfishnessof mankind; labor; the co-operative character of all industry; the the unequal distribution of mutual dependence of men; is confacts political economy cerned. wealth; and with these What is its explanation? are it must, Assuming, as that all men and selfish, free play, how has it allowing the operation of this motive served to bring about the co-operative organization of industry which we now and free: observe? Men are selfish what influence has bound them to mutual service? Let us begin at the beginning and endeavor to trace the evolution of industry. Society as we know it is rather barbarians were a growth than a creation. Our ancestors compelled who moved about in search of food until they were They had by stress of circumstances. to settle
neither social,politicalnor Game sort. and fruits were

industrial organization of

any

by abundant, and every man their serious slight exertion might have enough. War was however, population increased in this When occupation. inevitable. The that favorable locality,a change was hunter became the herder, the gatherer of wild fruits the cultivator of the soil; and after a time settlements were formed which prospered or languished according to the
or

habits of the people and the resources they of the country inhabited. If they thrived, others envied them and disorder ensued which compelled the adoption of means of defense. So places of refuge were established and in the course of
12

or these places became walled towns, castles. Men forced into closer union and mutual dependence by were from without; and to meet constant stress these new

time

conditions industry had

town
was

unable
to
earn

to

be modified. The dweller in a therefore produce his food and was

to
some

compelled

it in

making tools, or weaving cloth, or dressing leather; and these products In a little he exchanged for what he wanted. while the

needs of the

country-man,

other manner. he set himself

Observing the
to

advantages

of

divided labor became

evident.

Better

the results of acquired clothing and better leather were skill,and the farmer, being relieved from the trouble of grain. Communities making these things, produced more therefore thrived and increased in power, and order was
ties extended farther and farther. Little states and communibegan to trade with each other, each availing itself of its own resources and devoting its energies to the work

it could do best. The South traded with the North, East with the West, and the argosies of commerce the known world.

the
en-

circled

In the light of history it is evident that selfishmen because they found began and continued to co-operate co-operation to be advantageous to themselves. They got

for themselves by producing goods for others than they could get by working for themselves only. Let us understand this result clearly. Its explanation is simple. No man be good at all trades. Practice makes can
more

in a given can perfect. The skilledworkman produce more can time than the unskilled. If a man make a hat and a day, he will be enabled by the practice pair of shoes in one of one or other trade to make three hats or three pairs of
time. Where therefore A makes shoes shoes in the same only and B hats only, the daily product of their divided
13

labor should be three pairs of shoes and three hats as hats. By exchanging a against two pairs of shoes and two hat for a pair of shoes each will have what he needs and a to use hat or a pair of shoes besides, which he may gratify is fruitless; Specialization without trade with other wants. trade it is beneficial precisely in proportion to the increased

product resulting from a divided industry. into co-operation. Selfishnesspushed men inexorable. Men seemed free but they was
Formerly

Its influence
were

not

so.

do what seemed advantageous forced to fight and some to their masters; some were furnish food. The Romans to that the state assumed man the choice of his could not safely leave to every occupation, and therefore compelled each to follow the

they

were

compelled

to

trade of his ancestor. be a blacksmith. By

or

blacksmith's

son

was

bound

to

leges established and exclusive priviwere them in order to encourage conferred upon Slowly and unconsciously crafts deemed useful to the state. in the course of a long period of time, as the result rather were of the stress than the instruction of experience, we

villeinsor In the cities guilds

were the law of England, men serfs birth. to the artisans according accident of
were

forced

away

from

slavery into

the

system

which

now

men are prevails. Today constrained by economic laws. We longer fear it. no allow them freedom because we Try as they may, by co-operating they cannot thrive save with their fellows. Meaning to work for themselves alone,

evolution of a co-operative industry is inevitable. Society is as selfishas the individuals it. who compose It will not let any man It thrive who will not serve. depends upon labor for all that it needs, and therefore
encourages

they The

must

work

for others.

labor and discourages inefficient. Where efficient

14

produce easily and cheaply and the other with difficultyand at he great cost, the former is more useful to the community: him, and discourages sell for less. So it encourages If it were for this not the other, by buying from him. The cost of correction, industry would fall into decay. be less than the price paid for them in order goods must
can

two

are

engaged in the

same

business and

one

can

be induced to make them; but the man may selfish be worth to the community more than the cost goods must be wasted. not may of making, in order that its resources He who spends ten dollars in making goods worth eight, has wasted two dollars and hurt both himself and others.
that
a

rather than a producer of goods. Competition and the selfishness the community of by continually operating against inefficient prevent this waste
a

He

has in fact become

consumer

labor.
Trade, which Money

distributes goods, is guided by like influenc does not obviate all the inconveniences the producer and of trade, for notwithstanding its use be brought together. The merchant consumer must still
of goods: he knows where they are cheap The and where dear, where abundant and where scarce. diversified industry is, the greater the need of trade. more Kansas New is a manufacturing England community;
is the marketer

raises

corn.

merchant

transports

grain

to

the manufacturer

and shoes and clothing to the farmer; and in order be familiar with the needs of each to do so profitably must depends upon his intelligence. If he locality. His success
carries dear goods to
a

cheap

market, he does

and its punishment in the same trade, he who offers goods at several engage the lowest price is preferred to him who charges more; and so by its discriminating buying society compels effithe community
15

good to is relentless. Where

no

tion brings about an advantageous distribuby the of goods. Trade like production is regulated law of supply and demand and controlled by competition; render a needed service and allof those engaged in it must in order to thrive. at least cost
cient service and
occupations, manufacturing choose their own or trade as they prefer, but their prosperity depends the need for and efficiencyof their service. always upon
men

So

Competition
every
man

is incessant, and under its constant do best. is forced to do what he can

our

stress

Such

in brief,is the origin and evolution of

present

plan for distributing the work of the world and rewarding industry. It is by no means a perfect plan, since it depends upon the intelligenceas well as the selfishnessof men and theless to do all sorts of are not competent work. Neverall men the plan is superior to any that could be devised It allows opportunity to ability, by the wit of man. stimulates industry by rewarding it, induces thrift, so motes proand
the welfare of the individual. It tends also
to

cheap production and justdistribution of the right sorts of the welfare of the community. goods and therefore promotes It is not only profitable to the worker and the
community,

free and indebut it is better suited to our pendent operati character than those enforced methods of coformerly tried. But being free, we which were the consequences

must

infirmities,and we willbe apt to accept them without repining ifwe remember are that the needs of the community paramount and better job to the better man. that we should yield the If the system does involve an distribution of uneven
accept

of

our

own

in intelligence,in vary goods, it is because men zeal and in industry and that rewards are apportioned in such to encourage manner as the best rather than the worst sort
16

are the suffer under it, their afflictions of service. If men demerits and are imposed not by any result of their own but by a universal law which is benign, corrective tyrant

and indispensable. There is no captain of industry with The employer is an humble servant of arbitrary power. its prosperity by society, forced to do its will and promote
be evaded; and so is compelling influences which cannot By these laws, private selfishness is comthe employe. pelled always to be subservient to the general good. The effectsof such a free plan upon the prosperity of be inferred from what has those engaged in industry can

been said. fact is apt

particular explanation of a special instructive than a general explanato be more tion I should discuss wages, it is proper that of many, profitand interest,and endeavor to show how the products of a particular co-operative industry are distributed among
as a

Yet

those engaged in it. fix his The laborer is free to choose his job,but cannot Is What law or influence fixes his wages? compensation.
it
an error

to

pay

what I have described

govern

that the employer cannot arbitrarily he chooses; is the theoretical freedom which
assume
a

myth

and

must

one

and reward according to duced which has inquestions lieat the root of the dissatisfaction the formation of unions. They should be clearly another
answered. The factors of wealth are the workman, the director for convenience s or employer, and the machine which may their united prosperity sake be called capital. That the results of their co-operation, primarily upon be upon the amount of wealth produced by it, ought to live upon an inaccessibleisland evident. If a hundred men what they produce for existence, their and depend upon
17

obey and his caprice? These

man

depends

prosperity

produce. the common

they what and how much if If they produce Httle, they will have little; tively. collecstock is great, they will have more
must

depend

upon

the stock should be distributed is a question by itself;but unless enough is produced there will not be be enough to go round, however the distribution may How
cannot effected. Wages be fixed, if the wealth or

be fund

high,
out

however

they
must

may

of which

they

be

paid is small. The laborer therefore is as employer in promoting by every

the efficiency of the industry Such efficiencydepends not only on himself but upon the intelligenceof the employer and upon the capital resources The employer must which he can study the command.

concerned as the means within his control in which he is engaged. much

markets and ascertain what the community needs, how much the goods cost and what he can sellthem for. The the raw capitalist provides the tools and machinery, be paid during the material and the wages which must making and distribution. Each factor is indispensable and

helpful.

So

far

capital is more
a

machine Quantity is of firstimportance. make five times as much. How, in the light of these considerations, should the fruits of the joint enterprise be distributed? Justice requires that each factor should be paid in proportion to
its contribution to the result. The distribution of goods is roughly accomplished under the free and spontaneous plan which is now established. Its actual operation is demand, controlled by what is called the law of supply

the actual production is concerned, influentialthan either of the others. Without a man can make so much; with it he can
as

and but back of that law is a subtle and abiding principle which I shall presently explain.
18

profit and interest depend then primarily upon the abundant production of the right articles. To produce little to produce the wrong or articlesis to impair at once Wages,
prosperity of the community, employer and the capitalist. Every

the
men

and factories are busy when trade is brisk, and trade time: the is brisk when wages and profits are high.

seem

to

be

prosperous

the the workman, has observed that one depressed at the same

therefore earned and profits and interest are paid by the industry, and except they be so earned they be paid. Assuming cannot that all are earned, what controls Laborers think the emthe relative part of each? ployer pays and the employer thinks the and fixes wages;
Wages,

labor union fixes them. control. Where a man

not

The
can

truth is that neither can get five dollars a day he will

an

make he will stop his enterprise. a Neither controls the other, each is subjectto the same more than he make compelling influence. Neither can less. However benevolent the employer may be, earns, nor work employer If he tries to high wages pay service, he compensating without some must will charge high prices, and these the community be bought for less. not tolerate where the goods may Neither can the employer pay less than the general rate, less than they to accept for he cannot compel free men he
cannot

for three, and where profit at the wages demanded

cannot

raise wages

above those earned.

are

worth and

can

get

elsewhere. The

case

ignorant is peculiar. Each year many the port of New York who know nothing of

of the foreigners land

our

"sweater" at

language

work in order to and industrial conditions. They must live,and they offer their services in competition with each fit, such as other to the special trades for which they are free They are in fact never sewing and garment making.
19

and afford not a refutation of the law under consideration but an example of the pathetic condition of the incompetent. Those craftswhich require the highest skillare best paid. A few years ago an automobile manufacturer tried
a

seemed to show that the he desired. He anas employer might pay such wages nounced he would pay not less than fivedollarsa day. that His subsequent success due however not to his benevolence was significant experiment which

the character of the special workmen whom he enlisted in his service. The wages high so offered were free to choose the best, and he rigorously that he was exacted of them one condition, namely, that each must his wages. He could not have so increased the wages earn He increased the efficiencyof his men. of incompetent factory by stimulating the zeal of selected mechanics and by means of their co-operation realized a greater output before in a like industry. His men at less cost than ever rarely observe: that an employer is excellently wise, that he knows trade and his business, that his credit is good because deserved, that he is emancipated from all injurious restraints, that he is
what
we so

but

to

earned their wages. Let me assume

to assist, and comsurrounded by skillful eager workmen mands best machinery known to the the craft. What be the consequences? must Will not the goods produced by such zealous and intelligent co-operation fulfill all the have outlined them: quantity, success as we conditions of Will not such an enterprise, so the right sort, cheapness? conducted, drive to the wall all competitors who lack similar advantages, or force them to equal efficiency? Will not such competition tend to the welfare of the whole community, and ultimately realize for everybody engaged in industry a corresponding advantage in the abundance

20

and cheapness of all goods? And will not the laborer get his share in the ease satisfy his wants? with which he may fail Goods are made for his consumption, and he cannot By conto tributin and cheapness. profit by their abundance his to the welfare of others, he promotes much own; thrive by mutual service. and so men Why
one man

than another is of easy day is paid less solution. The hatter who makes one hat a less than he who makes two: the man who rakes the fires, than he who controls the engine. The superior work gets less unnot the better wages, comfort and by superior I mean
gets
more

pay

but productive. The sum

more

difficult and

more

needed

or

more

depend of these considerations is this: wages the upon the product of labor, and that product upon efficiency of labor and the intelligence of the manager. If you wish to find a prosperous country where high wages machines and employs paid, seek that which uses most today, the highest intelligence. America is that country because we have protective laws and labor unions, but not
are

We produce more in spite of them. wealth per capita than to any nation in the world and therefore have more

distribute. Profits depend

they may
cost must
success

upon

like considerations.

In order that

be earned the factory must produce goods at a which is less than the market price. The employer business, and his compete with all others in the same his ability, all other things being The risks involved in the enterprise rest on him; pay wages and interest whether they are earned In time of prosperity he must accumulate enough

depends

upon

equal. he must
or

not.

for adversity. If his income seems times great, his at depend His fortune will ever losses are sometimes great.
21

upon
to

his intelligenceand his service. He cannot

If in
an
a

the long run. others have

be proportionate be overpaid nor underpaid, in too much, special industry he earns

resources

and

If he with him. little, will receive little. If he is unfit for his job, he earns him. That on the whole he earns what he nothing can save inducement
to

compete

gets

is evident to everyone

experiments

which

are

who considers the co-operative dustry from time to time tried. No inof workmen
compete,

controlled by a committee been able to long survive. It cannot

has

ever

lacking the factory which The lender as

requisite guidance. Interest is that part of the output of is paid for the use of the capital employed.
sort, and rule exacts security of some his reward depends upon the average
a
as

his risk is small cost of capital in

the money

market,
men

or

on

what

is called the supply.

The

credit of all another, but

on

is

every

equal. One deserves more borrower is dependent in some

not

than degree

lender. Interest the money market, and so is every fluctuate from time to time in response ating to a flucturates demand. An active trade requires more capital than
a

dull trade, and earns Rates are more. therefore low business is dull and high when it is active. They when higher in time of trial, when business is are as still perilous and unusual risks are to be confronted. In order to pay
interest, the industry in
must
earn

it. Interest is governed

wages

by the influences which control embarked

an

and profit. Capital

earn unuseful enterprise cannot and One capitalist must a cannot return. pay compete with another, and the results of this competition are felt in the No one can money markets. arbitrarilyfix interest rates.

therefore that wages, profitand interest cannot be arbitrarily fixed by anybody. All are controlled by
22

It seems

economic

influences which

none

can

disregard.

Primarily

depends upon the abundance the welfare of the community If everybody is intelligentlyemployed of goods needed. cost, and the right goods are produced abundantly at little the community thrives and everybody in it thrives who Wages and profit will be high because the will do his part.
Interest rewards of all industry are abundant and cheap. will be low because capital will be cheap. If on the other hand few goods are produced at great cost in human effort, it will languish in the community and all comprising There will be few goods, and wages poverty. and profits

will tend to a minimum while interest will tend to rise. The fruits of a co-operative labor are distributed not but in accordance with a just arbitrarily and useful economic law which secures to each worker a reward which corresponds his service. with
We
property
are
now

brought
we

face
to

what said that wealth is now produced by a divided but co-operative labor, yet that its distribution is There is a widespread notion that such distributi unequal.

which has been

set

out

face with that private from consider. It appears

to

social unrest which afflictsus results from the conviction that has received more one man somehow and another less than is due to him. That there are rich men and poor men; that the workman receives less than the employer; that
some no men

is

unjust because

it is unequal.

The

enjoy large
deny.
Do

one

can

without doing any labor; these facts justify the dissatisfaction

incomes
as

which is so frequently expressed? The question involves moral as

well

siderati practical con-

If what
cannot rests

seems

be justified on
upon

moral tradition. From

23

it right results in wrong, Private property grounds.

the beginning

it has

been

assumed

natural right, that is,an obvious and just claim, to goods produced by their own efforts. If I make a hoe, it is mine by the common opinion of My in injury to none. mankind. ownership can result
that
men a

have

Is this the case now which confronts us? Are men ing claimbelongs to them by natural right; is their partiwhat cipation in the fruits of a co-operative labor proportionate

the actual contribution of each such goods; ir inequality just in the

more

to

does

not

poor

because

the production of sense that my having result in another's having less;or are some the questions others are rich; these are
"

to

be answered. which must I have endeavored to fully explain the advantages of co-operation and to trace these advantages to the increased efficiency of the specialized or divided labor which now Men for each other characterizes all industry. work because it is more selves. profitableto do so than to work for themBy dividing labor they make more goods, and the increment in the output is shared by means of trade. 1 have altogether failed in this essay if it is not obvious that workers thrive in proportion to their service. If this be derives from his work, true, then the wealth which a man
is his
own

by the
must

common

opinion

upon

which

every

sort

of property

do what he ultimately rest; and he can in the wishes with it: for we cannot allow him a property in those which goods he creates and deny him a property another creates and gives him in exchange for his own.
Reason of property. however If
we

has very
envy
a

littleto do with
man

of greater natural to deny his superiority; ifwe have less than another by deserving less,we may question his right to more. still The
excuse

notions ability, it is

our

dissatisfied part
in
an

of the community In the present accusation.

24

will ever

find

an

instance however

by the accusation is fortified plausibleconsiderations which findsit hard to be rid of. We have recently man even a just "profiteer" which contains such invented an ugly word
" "

hate another's profit instinctively considerations. Men because they believe it involves a loss to themselves. No one greets the sellerwith the cordialitywhich he shows to

Nations fear what is called an adverse balance be an evil to have an income of trade, not because it can in excess of an outgo, but because they wish a profitwhich is to be derived from sellingmore than they they assume the buyer.
buy.
is so remarkable that persistence of this error it is necessary to understand its origin in order to refute it. What then is trade; what does it involve; what does it

The

result in? If I exchange a pair of shoes for a hat, I am a trading; if I sell pair of shoes and buy a hat, I am trading. The two transactions are identical:in the former I barter
one

of exchange called money. of a medium That the trade, however conducted, involves a profit or advantage to both parties, ought to be evident; yet while men admit the mutual profit of barter, they deny that such profit is mutual where goods are bought and sold.
Let
more us

commodity thing by means

for another and in the latter I do the

same

consider the
more

two
are

cases.

By

divided labor

hats and

shoes

man. made by one made assumed, three hats and three pairs of shoes are by A and B respectively as against a hat and a pair of A may shoes which each might have made independently, have two hats and one pair of shoes and B two pairs of

articles are

produced than where both Where, as in the case

shoes and If we assume

hat by trading a hat for a pair of shoes. that a hat is worth a pair of shoes, each is better oflFto the extent of that worth as the result of be specializationand trade. To such a trade neither can
one

25

for each is both, and both regarded as buyer or seller, profit. realize the same Now let us assume that the hatter and shoemaker use bartering their goods. money and selland buy instead of Each starts with say $5.00 and three articles, and each buys from the other a hat or a pair of shoes for $5.00. After such a trade has been effected,each will have $5.00 and precisely what he would have had if the shoes had been bartered for the hat; in other words, the profitrealized by buying and selling is precisely the profit realized from barter.

assumed, hats and shoes are reckoned at equal value. If a hat cost $3.00 and a pair of shoes $4.00, the problem is a little confused, but the result is the same. If each starts with $5.00 and the goods produced by
In the
case

himself, after selling and buying a hat or a pair of shoes the hatter will have two hats, a pair of shoes and $4.00; pairs of shoes, a hat and the shoemaker will have two in dollars only: and $6.00; or to express the account
"

Hatter's Account.

$14.

$14.

26

Shoemaker's Before trading.

Account,
at

^r. 3 pairs of shoes Cash on hand

$4.

$12.
5.

After trading.

Zr. 2 pairs of shoes at $4. 1 hat, costing $3.

Balance of cash Price of shoes

$8.
3.
2.
4.

$17.
Let
us

$17.
at

now

$1.00

more

that each values his commodity than it cost, and sells at that profit.
assume

Hatter's Account. Before trading. Cr. 3 hats at $4. Cash on hand

=

$12.

After trading.

Cr, 2 hats

at

$4.

$8.
5.
4.

1 pr. of shoes costing $5. Price received for hat

$17.

$17.

Shoemaker's

Account.
at

Before trading. Cr, 3 prs. of shoes Cash on hand After trading. Cr. 2
prs.

$5.

$15
5

of shoes

at
=

$5.

$10.
4, 1.
5.

1 hat costing $4.

Balance of cash Price received for shoes

$20.

$20.

These examples show that barter itself does not increase diminish the wealth of either party in any real sense. nor In the case last assumed, the shoemaker created a greater
27

than the hatter; but after value, measured in money, he started with. as trading each had precisely as much They exchanged one sort of goods for another, but the
were values exchanged equivalent. Each got what he needed in exchange for what he made; and this is the whole advantage involved in the trade. distinguished from such an The profit as nominal

to result from trade, is deceptive. advantage, which seems In order that tnis fact may be distinctlyunderstood, let us assume that each of the traders sellsthe whole of his goods

to

the other

at

profit:
Hatter's Account.

Before trading. Cr. Cash 3 hats

at

$15.
cost

$3. valued
12.

$4=
=

After trading.

Cr. Cash from 3 hats 3 pr. shoes costing $5.

$12. 15.

"$27^$27"
Shoemaker's
Account.

Before trading. Cr. Cash 3 pr. shoes

at

$15.
cost

$4. valued
15.

$5.=
==

After trading.

Cr. Cash from 3 pr. shoes 3 hats valued at $4. Cash balance

$15.
12.

3.

$30.
We
are

$30.

deceived by what seems a profit because the shoemaker and the hatter rarely do business together. Each sells the open in market and buys in the open market. The business of the merchant is to assemble goods in order
28

be exchanged, and if we assume that the merchant makes nothing out of his service the results of a trade to be as follows: made through him seem
that they may

Each The

therefore seems transaction however

to

made a profit of $3.00. is incomplete, for in the case

have

assumed

each buys the other's goods.

Hatter's Account.

Before buying.

Cr. Cash

$15.
at

Proceeds of 3 hats sold After buying.

$4.
at

12.

Cr. 3 pr. shoes bought Balance of cash

$5.

$15.
12.

$27.
29

$27.

Shoemaker's Before buying. Cr. Cash

Account.

Proceeds 3 After buying.

pr.

shoes
at

at

$15. $5. 15.

$12.
18.

Cr. 3 hats bought

$4. $30.

Balance of cash

$30.

It will be observed that as a result of the completed transaction ths hatter has lost $3.00 of his cash and the shoemaker has added $3.00 to his. The transaction seems therefore
to

have
to

unprofitable
neither is worse

been profitable to the shoemaker and the hatter; yet it is quite evident that better off than at the start. The hatter or

started with $15.00 of cash and 3 hats worth $4 each, or $27.00; he ended with $12 of cash and 3 pairs of shoes worth $15, which equal $27.00. The shoemaker started with $15 of cash and 3 pairs of shoes worth $15; he ended

with $18 of cash and 3 hats worth $12, which make $30.00. In other words, the shoemaker started than the with more hatter, and ended with more. The differencebetween the
value of three pairs of shoes and three hats was $3.00, and as the hats and the shoes were exchanged, the hatter paid to the shoemaker $3.00 to settlethe difference, but the hatter lost nothing by such exchange; neither did

assumed

the shoemaker the advantage gain anything, except of he wanted by sort of wealth getting what exchanging one for another. I mean no more than that trade can result in nothing but the for another one substitution of value equal value. The prosperity of every producer of goods depends not upon something derived from another, but
something hatters, he who
upon

produced

by

himself.

As

between
a

two

time

as

produces twice as many the other, will have twice as many

30

hats in
to

given

exchange for

what

be greater than his he needs. His income cannot less. Trade does not nor outgo, enrich a producer of industry and zeal and goods: he is enriched by his own
in proportion
as

intelligence and

these faculties are

em-

ployed

in production.

has been simple. We be disposed of. now reach a new perplexity which must In the case put the shoemaker of what produced $3. more be hatter. This excess we call value than the value may

Up

to

this point

the problem

due

either of harder, or he may

to

less supply. to be due seems

need. Assuming does it involve
not.

the shoemaker may work produce an article for which there is a In the latter event his greater prosperity
causes:

two

not

to

his be

own

industry, but

to

another's
unfair,
to

this
an

to

true,

is his prosperity

injury to the
no man

To
to
an

make

what

consumer? needs is to serve

Obviously

add
sort

abundant

supply

nobody: other articles of the same

render an unneeded service: to supply what is necessary and lacking is to render the best sort of service and to deserve a corresponding reward. The value of every
is
to

for it. If 1 create a the demand article depends upon value for which there is a great demand, I create a greater value than he who produces that which is less needed. I do more not good than he, and my prosperity represents
another's loss but that profits are according to my derived from trade by one man at the expense of another. Each gets what he gives, and gives what he gets; and the a general word "profiteer" contains in a general sense delusion. I have been discussing barter only, as that sort of selling and buying which results in immediate exchange, in order to show what it involves and what good results from it.
31

the good I do him. true service. It is never

am

stillpaid

Trade Where

however
labor
or

is never

so

simple

as

in the

cases

assumed.

industry is minutely divided as at present, one producer of goods rarely deals directly with another. All goods are marketed by intervening instrumentalities
to bring producer and consumer not together, which serve but to enable them to exchange goods without such contact. The most important of these instrumentalities is

money.

Money
is a in

is a commodity that wheat preciselyin the sense but it differsfrom every other commodity commodity, important
money

one

particular, namely:
money

the

owner

can

ex-

change other this

commodity
reason
we

commodity is exchangeable for

we
we we

for any

whatever;

every

firstbarter what for what barter the money such mediate barter, which

make need.

only. for money and then It is obvious that by

For

call sellingand buying, we diminish the value of what we neither add to nor give We exchange one value called goods for another and get.

equal value called money, and then exchange the money for another equal value in goods of As another sort. however money is apt to confuse commercial transactions, I shall attempt to ignore it wherever possible. Money does not avoid all the difficulties trade. The of find some one must producer of goods still who needs them. As a rule he is too busy to search out the consumer, and is entrusted to one business of a this task who makes trade. The merchant buys from the producer and sellsto As his service is a necessary he makes one, the consumer. what is called a profit by performing it.
Let unknown
a

me

assume

to

merchant.

are that the hatter and the shoemaker each other and conduct their trading through The hatter sells his hats to the merchant,

and the merchant

sellsone

hat
32

to

the shoemaker,

another

the blacksmith, etc., at a profit. At the same time the shoemaker sellshis shoes to the merchant and the merchant come sellsa pair to the hatter, etc., at a profit. Whence
to

Does the merchant get these profits, who pays them? rich His profits are by the at the expense of others? paid hatter and the shoemaker in one sense, but they represent

and not an injury. The need of the hat and the need of the hatter a pair was a shoemaker able to get what he wanted without of shoes. Neither was the intervention of another. The merchant is helpful to both and is paid by each because he helps each. Both
a

service to

each

better and not worse off as the result of his service. At this point we are again confronted with a fact to a which I have already referred: one merchant makes greater profit than another. The explanation is identical
are

with that already offered. The merchant who sells in a in cheap market, performs a lessservice than he who sells a dear market. To transfer goods from a market where they littleneeded to one are where they are greatly needed is

corresponding reward, and this reward is proportionate not to the harm but to the good done. Such is the service rendered by the merchant. What
to
a

deserve

of

the

banker?

Trade

cannot

be hard

conducted
to

money,

and

money

is sometimes

get.
to

without The great

his

merchant business.
money.

rarely has enough of his He must therefore borrow The banker is the lender.

own

conduct
one

from To

who has induce him to

lend, the merchant must part pay of his profit to the To banker, and this part is called usury or use money. What the imagination nothing is more odious than usury. he lends does What service does the banker perform?
not

belong

money

People who have no use in the bank, and the banker, who
to

him.

for it deposit
cannot
use

it,

33

lends

his charge unjust;does he not does he contribute anything to get rich without service; the goods of the world; does he distribute them? These questions also should be answered so clearly as doubt. Usury has always been hateful. Christ to leave no drove the bankers from the temple. For many centuries
to

another.

Is

not

By the common forbade usury. opinion of the Church "The usurer it has been deemed hateful and hurtful. man is the great Sabbath breaker; his plow goeth on Sunday." The
an

Church

was

unmixed

centuries right. During many in distress borrowed evil. Men

were

usury
so

was

spent

it and however usury

then
a

is quite

required to pay different thing.

more.

much, Today

The

borrower

the use of money and shares his gain with the lender. The service rendered by the banker is very great. left with him, honor all He must safeguard the funds If he lends trust funds, he checks and keep accounts.
gains by

know not only the character risk. He must but understand the of the borrower and his resources, business he is engaged in. If he lends for an unprofitable He enables the enterprise, he will lose his advance. borrower to do what he would otherwise be unable to do.

lends

at

his own

borrow the and lacking money, buy goods, move them to a good market and sell money, debt and interest and my pay at a profit, I can them have something left for myself. The banker by becoming
If I, being
a

merchant

partner

in my

service,

earns

and
not

deserves hurt
me,

fruits of that service. He help both and I in turn

does

of the he helps me;

part

of for by enabling them to exchange goods what they need. The maker of goods, the merchant who markets them and the banker who helps the merchant, share alike in the fruits of a divided industry.
34

the producer

and consumer what they make

this instance also there is a difference between banker makes more individuals: one than another, but if he does, it is because he renders a better or more needed He who lends a merchant money to buy corn in service. New

In

who England.

for sale in Kansas will not get so rich as he lends money in Kansas for sale in New to buy corn

England

thrive who does an unuseful If he does or helps to do a useful thing, he earns thing. the fruits of his service, and his profit is derived not from hurting but from helping another.
can

No

banker

distribution of wealth is due to salutary for the welfare of society and useful laws. It is necessary that men should have an inducement to do good and not to do evil: to do that which helps along rather than that

The

uneven

the welfare depends upon plentifulproduction of the right articlesat least cost, and their just distribution. Society helps itselfby rewarding which retards progress.
men

That

the good they do; and as one man than another, it lets him become The increase in one man's riches richer than another. deprive another of the fruits of his own industry. cannot We get rich at the same time. Every man's zeal helps all

proportionately does more good

to

the others. There is no limit to the amount of wealth that The be produced. What one can produces, he gets. diminish the goods of another. prosperity of one cannot The accumulation pensable of wealth by individuals is indisto

the community.

Accumulated

or

unconsumed

wealth is capital, and capital, as I have already explained, It affords the tools to work is most to industry. necessary

material and with, the machinery, the factory, the raw It does wages pending the completion and sale of goods. in the way of interest. good than it earns vastly more If I lend
a

reaper

to

farmer, charging for its use,

35

save

him
on

an

immense

amount
a

of labor and

machine to a his output five or tenfold and receive but help. of such increase for my

his crop.

If I lend

increase his profit I increase workman,

a

small

part

of capital by individuals cannot tend to cripple industry, for it is worth nothing to the If capitalist unless he employs it for the general good. there are many capitalists,and capital is abundant, one must compete with another in his charges, and business

The

appropriation

will lend for least. The right use high intelligence: that sort of of capital requires very intelligencewhich is requisite for a banker. To put capital always
goes
to

him who

foolish enterprise is to hurt at once the capitalist It cannot be accumulated without and the community. service nor preserved without service. The man who
into
a

is called a miser. He is miserable because he serves neither himself nor others. An incompetent man who employs it cannot retain it. It is a maxim of but three generations between experience that there are
money

hoards

shirt-sleevesand shirt-sleeves. Private property cannot therefore of itselfbe an evil. It enables the possessor to live in comfort and confidence no man man and injures unless its possession gives one
"

an

unfair advantage

competition which labor lacks two-thirds of its capacity. A Have machine can outstrip it in the race.

his fellows in that relentless I have described. Without capital

over

man
we

with a destroyed

the equal opportunity by permitting one man

to to
can

which
own

we

should

at

least aspire,

all its fruits? How for him?

A ready
answer

the earth and appropriate live: what is left the newcomer be found in what is continually with property

to

this question may

man

everybody

observes: the

36

losing it and the man who lacks it is ever acquiring it. boy who abandons The country to the farm and comes the city thrives because he finds there better opportunities. The economic answer rests upon the principle that
can neither personal nor real property the owner unless it be made of service to We to sow crops sell and thereby feed Property is like labor in the respect that of society. The man and not the master

be

profitable

to

the community. the community. it is the servant

who

owns

it,

willing or for his own

is not
more

not,

which is not necessary need for the good of others. Morever, property for labor than labor is for property. necessary
must
use

all that

part

Each

is dependent

upon

the other and

the

mastery

is

with neither. The fundamental that

one
man

error

will sow is wiser. We allow private property in land and goods because we know that only in such fashion can they be made available for the general good. The owner who seeks his
own

tion of socialism liesin the assumpperienc Exreap. what another may

entered upon all of these considerations to organization of industry show that the free and spontaneous have arrived after centuries of experiment is at which we
as just the whole an excellent and beneficialsystem; it. to those engaged in it as to those who depend upon I have tried to explain why labor became specialized,what its increased efficiency enured to results followed, how

accomplish I have

welfare his

must

do good

to

others in order

to

object.

upon

the advantage
what manner tried also
to

of the laborer and the community, distributed. those advantages were

prove

and in 1 have

of every class engaged either in the production or distribution of wealth be the direct and necessary must result of the service it
prosperity
37

that

the

has performed:
too
more

to

justify fulness private enrichment by the usecan

of capital: and to show that there man little wealth to go round because one than he needs.
I
cannot

never

be

accumulates

the causes of conclude without mentioning to overlook. are apt the prevailing discontent which we Men assume, tell,that wealth consists of why I cannot Nothing could be farther from the truth. The money.

gold of the United States constitutes perhaps one-fiftieth is wealth, but it is wealth in the same of its wealth. Money sense that a hoe is wealth. It is a tool of exchange, a convenient It contains a instrument an measure, of trade. definite and unfluctuating
of what we call value, but wheat and iron we measure other values; with which also contain value, and they and every other commodity
amount

other commodities constitute ninety-eight per cent as per against the two of the wealth of the community It is true that if one locks man cent contained by money.

and

up

money,

he

will diminish

cannot true

be produced as wheat that an increase in one

as

the general stock, as gold is produced. But it is not

man's

inishes general wealth dimEvery one is free to prothe wealth of another. duce much as he can, and what he produces for himself

does

are

affect what another produces for himself. by Our industrial freedom is justified its utility. We free,but free only to serve. If we failto serve we are
not
serve, we
are

if punished relentlessly; we
we save

ourselves and to are unequally divided because all men know what to do and how to do it and

is useful to

rewarded. What others. Wealth is

not
are

alike. Some

Others

are

ignorant

or

incompetent

or

willing to work. idle;and each reaps

what he sows. A slavish

system

would

be altogether less profitableto

38

If we say "to each the individual and to the community. one according to his need and from each according to his we over power," the bad to be tyrant the good, make diminish the product of industry and impair the prosperity I will not do freely for be of all. What myself I cannot for a master. compelled to do efficiently these general considerations to test the utility of the various expedients which are from time to time tried for the redress of grievances, we shall observe that most but to not of them are only hurtful to the promoters
use

If we

worthy objects, it attempts to commits curtail in order to provide places for more Let men. production us assume that a proper output of shoes per day is five
a

everybody else. The labor union,

while it has grievous blunder when

many

pairs:

to than three is to compel a man make no more depend upon reduce his wages; for wages, as we have seen, Trade adds nothing to the amount of wealth produced. involves the the value of such product. Restricted output

to

inversion of the present industrialsystem. labor in order that it may produce more. it
we

We

now

divide

If after dividing

produce less, the advantages of specialization will be impaired or lost. A restricted production cannot be good for the community unless to lack what we need be a

blessing.
The

required do the same to amount of work and thinks that therefore the laboring class is better off. This delusion is as old ignorance. The Chinese still cherish it and earn as day. Wages If a are cents about seven paid in money.
high, they seem high and be low.
men are

laborer is deceived by the He observes that output.

apparent
more men

stricti results of reare

Wages

seem satisfied. Yet they may are earned by labor and paid in

39

the fruitsof labor. If labor be efficient and there is much we to go round, wages will be high. If we produce little,
can

get

little. Money

wages

are

always

deceptive.

To

and be able to buy for it but receive $10 a day in money Cheap goods mean high $2 in value, is not to prosper.
If all labor shall zealously as possible at least cost, the exchange produce as much in goods will be high. If all value of labor measured
wages,

dear goods low

wages.

scamp

as their jobsand make as little possible,the exchange value of labor measured in goods will be low, however high The common seem. may wages the money stock of goods or
we

being large
or

small

as

we

littleas
more

nothing;

choose. be got cannot

make it, so shall we Something can never

out

have much be got for

of less,even

through the

intervention

of money.

in disregard of economic law All efforts to raise wages so must pay result in failure. An industry can much and If it earns demand no more. so the whole, much and wages

the employer lending. The

will
most

not

work

and

the capitalist will stop

effective check upon abnormal wages is that which results from the injury they attempt to Earned wages inflictupon a the community. represent
service
man
can

rendered; unearned
compel If I get

wages,

wrong

done.

No

afford.

another to pay what that other cannot for my labor $5.00 a day, 1 cannot pay

Rising prices kill trade, and abanother $10.00 a day. normal to high prices. A boom wages tend always collapses, law. to the economic must and wages ultimately conform

The
The
are

Union

seems

unable

to

dependence
man

of all classes engaged

the mutual in co-operative industry.

understand

that others who makes shoes will not remember gain an engaged in making hats, and that neither can without hurting him
40
on

unfair advantage

whom

his

own

The hatter needs shoes, the shoeprosperity depends. maker hats; and each must deal fairly with the other, or at all. Economic not which seeks the rewards selfishness of service is quite a different thing from that disorderly
spoliation. The Union selfishnesswhich attempts immediate advantage, but such advantage secure an be temporary. The
may

will

foolish as the laborer. as employer is sometimes He too tries by restricting output to control prices, or to m artificiallyaintain them by pools and conspiracies; but
it is
as

impossible for him

same
reason.

to

succeed

as

for the laborer,

The community so which earns What is called overproductio much can pay so much and no more. It does not mean deceives us. that too many pay goods have been produced but that the public cannot A manufacturer too may the price demanded. make hats while $5 hats, but he cannot many make too many and for the
men

need them and will pay $2 for them. The general propensity of every industry and
in it
to

of all

regard its welfare as something special and apart from that of others has defeated and perhaps economy always will defeat the plainestdoctrine of political
engaged lesson of experience. Laws are stillin force which pretend to satisfy this universal craving. They are called ingeniously "protective" laws. They protect A against B and B against A, and both are satisfied.

and

interesting manifestation of this the most delusion is to be found in the opinion of the business world with respect to foreigners and to what is called the balance able" of international trade. People say the balance is "favorbrought in. when more goods are sent out than are What nonsense! What is trade? Is it not the exchange of

Perhaps

goods for goods?

Is the balance "favorable" when

41

more

is

be even: it given for less? The truth is, the balance must be either favorable or unfavorable. 1 do not deny cannot
the United States has sent more goods it has received from England; but is the than Certainly not. We have been balance therefore uneven? that for a to England
century

for a century a debtor nation: we have borrowed England's capital to help our industries. We therefore ship her goods for goods and also goods for the use of her capital. The balance has always been even. The vague notion back of the words "favorable "unfavorable" is an inherited from apprehension
ancestors
"

and
our

that if we buy more than we sell we shall lose One simple fact should expel this delusion. Notwithstan money. have exceeded to England that our exports imports from England by a great sum during a whole our
century,

England

has lost

no

money

by

this "adverse"

during the whole of balance: she has, on the contrary, that time been the money market of the world. How can land this fact be reconciled with the prevailing delusion? Engand remained rich because her income has been greater than her outgo because it has been not less. The United States has also been prosperous not because her outgo has been greater than her income, but
"

has become

because the capital borrowed has been employed in industry and we have not only paid for its use but profited by its use.
an that under certain circumstances adverse balance of trade must be corrected by the export of money; but what is money for? If we send it out, it is because we fore wish something we purchase with it. Does disaster thereNo, because as soon as threaten us? the export of to deprive a country a necessary specie tends of medium of for domestic exchange must exchange, the value of money

It is true

42

in the exporting country rise;that is,its purchasing power increase, and the direct and necessary must result of such

from abroad. Money goes advance will be to draw money instinctively as wheat or any other to its best market as it is incredible that it shall long be lacking commodity, and in a commercial country where it will buy most. One other obsession which works great mischief in the is pleased world deserves consideration. The poor man the rich; and the when heavy taxes are imposed upon now tion. consists in predatory taxawhole art of government What is a tax; who pays it? It is a tolllevied upon industry, and it is paid by labor. Although collected in
is immediately spent yet the money what is called money, for goods and the goods so bought are withdrawn from the It cannot general stock and consumed by the tax-gatherer.

be advantageous for the poorer members munity of the comby those that many goods should be consumed so The hive may many support who produce nothing. be a blessing to the worker bee to drones, but it cannot
half of all If we assume that one endure such a burden. is appropriated by the wealth produced by everybody off as the State, is everybody or anybody better or worse

the resultof such spoliation? When be produced goods. Goods must the tax ultimately? It may pays
account,

we

tax,

by

appropriate labor. Who then

a

we

fall firstupon

bank
of

but in the end

may
or

it falls upon

the producers

wealth. Money

be the root of allevil,but it is bad thinking. From a false certainly the root of much delusions: function flow many notion of its character and as favorab that "protection" protects; that trade can have an unbalance; that the sellermakes something out of
may
not

the buyer;

or

that

one

man's

riches
43

cause

another

man's

poverty;

be rid of these obsessions. We must rennember constantly that industry is divided because a specialized labor is most productive; that the benefits
"

and it is hard

to

be realized save by trade; that of specialization cannot trade is good for the buyer as well as the seller;that it involves the exchange of goods for goods, or services for services; that what interfereswith trade impairs prosperity; for the exchange of is a convenient medium that money that what we carry into trade we goods and nothing more; get out of trade; and that the prosperity of all classes depends upon be the industry of all classes and cannot

otherwise realized.

the fruit of wrongdoing, but of one: service and self-denial. Its accumulation hurts no it helps every It provides comforts one. and luxuries,
is not

Private property

It provides also the should wish to have. be reduced to capital without which industry would The hate which it inspires is penury. undeserved. which all men I fully realize that this brief discussion of a great but it cannot convince the unthoughtful man, be useful to those who seek to understand what is

subject
may
con-

fused.
we

There
may

are

bad

men

in industry, captains whom

not

justly call buccaneers, and these I have

discussed.

I have confined myself to the normal sort of industry and to not thieving, because the latter is too fugitive and degrees various for discussion. There are

That
to

sort
men,

all

which 1 have treated is the and I have tried to

it does and

sort

of selfishness. which is common

showing
may

the good

make it respectable by do in order that it must

prosper.

In conclusion I venture to reiterate the propositions which I have endeavored to establish.

44

produce abundantly and cheaply the goods of which society has need. In the accomplishment of this object each individual may produce all of his own goods, or specialize his labor and produce he needs.
Of these

TTie

object of industry is

to

particular goods
two

to

be exchanged

for what

methods

conduces

to

skill and

specializationis better because it efficiencyand therefore to greater

production. The organization of industry may be either arbitrary free; the State may direct labor and distribute goods or be permitted to do arbitrarily, or each individual may what he likes and trade where he likes.
free system is preferable because selfishnessis a better spur to industry than altruism; freedom is better

The

than slavery, and private intelligenceis than official supervision.

The

more

trustworthy

free system cannot result in injury to anybody, because it is controlled by economic laws which none may disregard. Under it, selfishnesscan thrive only by doing who makes in order to sell must good. The man make

what someone else needs and offer it on satisfactory terms for what he himself needs. The selfishnessof all guide.s corrects and restrains the selfishness each. of
industry is divided, it is advantageous to all individuals that all goods should be abundant and not for the purchasing power scarce; of special goods depends the abundance of all other goods, that is upon the be paid for them. price which must Trade, which is indispensable to a divided industry, is
upon

Where

beneficial to trade what

all engaged in it, although each gets from he carries into it and no more. All share in
45

gets any the fruitsof a divided labor, but none advantage Trade should therefore be free. at the cost of the other. The worst enemy of society is he who strives to make and high or to curtail the markets for them. goods scarce is property Private property produced by work and

accumulated when

by self-denial. It is useful to the owner employed in aid of industry. It is the source

etc., to

capital, or tools, machinery, Land is given to industry.

may

which are individuals in order that it

cannot

only of the indispensable

the become rich only by can prosperity of another, for a man helping and not by hurting others; and his enrichment diminish their riches. cannot The free industrial system under which we live is excellen because it tends to the production of much wealth; to the distribution of such wealth to each according to his contribution; to zealous industry; to fair trade; and to mutual service. Political economy is in reality the science of service.

be made productive. Tlie prosperity of one

individual

impair

46

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CONGRESS

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