The Vested Interests and the Common Man

The Vested Interests and the Common Man is a 1919 book by Thorstein Veblen.

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Chapter 1 The Instability of Knowledge and Belief

• Any established system of law and order will remain securely stable only on condition that it be kept in line or brought into line to conform with those canons of validity that have the vogue for the time being; and the vogue is a matter of habits of thought ingrained by everyday experience. And the moral is that any established system of law and custom is due to undergo a revision of its constituent principles so soon as a new order of economic life has had time materially to affect the community's habits of thought. But all the while the changeless native proclivities of the race will assert themselves in some measure in any eventual revision of the received institutional system; and always they will stand ready eventually to break the ordered scheme of things into a paralytic mass of confusion if it cannot be bent into some passable degree of congruity with the paramount native needs of life.
  • p. 4

• The intellectual life of modern Europe and its cultural dependencies differs notably from what has gone before. There is all about it an air of matter-of-fact both in its technology and in its science; which culminates in a "mechanistic conception" of all those things with which scientific inquiry is concerned and in the light of which many of the dread realities of the Middle Ages look like superfluous make-believe.
  • p. 4

• By and large, this eighteenth-century stabilized modern point of view has governed men's dealings within this era, and its constituent principles of right and honest living must therefore, presumptively, be held answerable for the disastrous event of it all, -- at least to the extent that they have permissively countenanced the growth of those sinister conditions which have now ripened into a state of world-wide shame and confusion.
  • p. 6

Chapter 2 The Stability of Law and Custom

• it has been a period of unexampled change, -- swift, varied, profound and extensive beyond example. And it follows of necessity that the principles of conduct which were approved and stabilized in the eighteenth century, under the driving exigencies of that age, have not altogether escaped the complications of changing circumstances. They have at least come in for some shrewd interpretation in the course of the nineteenth century. There have been refinements of definition, extensions of application, scrutiny and exposition of implications, as new exigencies have arisen and the established canons have been required to cover unforeseen contingencies; but it has all been done with the explicit reservation that no material innovation shall be allowed to touch the legacy of modern principles handed down from the eighteenth century, and that the vital system of Natural Rights installed in the eighteenth century must not be deranged at any point or at any cost.
  • p. 7

• It is scarcely necessary to describe this modern system of principles that still continues to govern human intercourse among the civilized peoples, or to attempt an exposition of its constituent articles. It is all to be had in exemplary form, ably incorporated in such familiar documents as the American Declaration of Independence, the French Declaration of the Rights of Man, and the American Constitution; and it is all to be found set forth with all the circumstance of philosophical and juristic scholarship in the best work of such writers as John Locke. Montesquieu. Adam Smith, or Blackstone.
  • p. 7

• There are two main counts included in this modern -- eighteenth-century -- plan, which appear unremittingly to make for discomfort and dissension under the conditions offered by the New Order of things: -- National Ambition, and the Vested Rights of ownership. Neither of the two need be condemned as being intrinsically mischievous. Indeed, it may be true, as has often been argued, that both have served a good purpose in their due time and place; at least there is no need of arguing the contrary. Both belong in the settled order of civilized life; and both alike are countenanced by those principles of truth, equity and validity that go to make up the modern point of view. It is only that now, as things have been turning during the later one hundred years, both of these immemorially modern rights of man have come to yield a net return of hardship and ill-will for all those peoples who have bound up their fortunes with that kind of enterprise.
  • p. 8

• The facts, particularly the facts of industry and science, have outrun these provisions of law and custom; and so the scheme of things has got out of joint by that much, through no inherent weakness in the underlying principles of law and custom. The ancient and honorable principles of self-help are as sound as ever; it is only that the facts have quite unwarrantably not remained the same.
  • p. 8

• Such, in effect, has been the view habitually spoken for by many thoughtful persons of a conservative turn, who take an interest in concerting measures for holding fast that which once was good, in the face of distasteful facts. The vested right of ownership in all kinds of property has the sanction of the time-honored principles of individual self-direction, equal opportunity, free contract, security of earnings and belongings, self-help, in the simple and honest meaning of the word. It would be quite bootless to find fault with these reasonable principles of tolerance and security. Their definitive acceptance and stabilization in the eighteenth century are among the illustrious achievements of Western civilization; and their roots lie deep in the native wisdom of mankind. They are obvious corollaries under the rule of Live and let live, -- an Accidental version of the Golden Rule. Yet in practical effect those vested rights which rest blamelessly on these reasonable canons of tolerance and good faith have today become the focus of vexation and misery in the life of the civilized peoples. Circumstances have changed to such effect that provisions which were once framed to uphold a system of neighborly good-will have now begun to run counter to one another and are working mischief to the common good.
  • p. 8

• At the other hand the guiding principles in the case at certain other points have undergone a certain refinement of interpretation with a view to greater ease and security for trade and investment; and there has, in effect, been some slight abridgement of the freedom of combination and concerted action at any point where an unguarded exercise of such freedom would hamper trade or curtail the profits of business, -- for the modern era has turned out to be an era of business enterprise, dominated by the paramount claims of trade and investment. In point of formal requirements, these restrictions imposed on concerted action "in restraint of trade" fall in equal measure on the vested interests engaged in business and on the working population engaged in industry. So that the measures taken to safeguard the natural rights of ownership apply with equal force to those who own and those who do not. "The majestic equality of the law forbids the rich as well as the poor to sleep under bridges or to beg on the street corners." But it has turned out on trial that the vested interests of business are not seriously hampered by these restrictions; inasmuch as any formal restriction on any concerted action between the owners of such vested interests can always be got around by a formal coalition of ownership in the shape of a corporation. The extensive resort to corporate combination of ownership, which is so marked a feature of the nineteenth century, was not foreseen and was not taken into account in the eighteenth century, when the constituent principles of the modern point of view found their way into the common law.
  • p. 9

• Therefore the economic situation which so underlay and conditioned this modern point of view at the period when it was given its stable form becomes the necessary point of departure for any argument bearing on the changes that have been going forward since then, or on any prospective reconstruction that may be due to follow from these changed conditions in the calculable future. At this head, the students of history are in a singularly fortunate position. The whole case is set forth in the works of Adam Smith, with a comprehension and lucidity which no longer calls for praise. Beyond all other men Adam Smith is the approved and faithful spokesman of this modern point of view in all that concerns the economic situation which it assumes as its material ground; and his description of the state of civilized society, trade and industry, as he saw it in his time and as he wished it to stand over into the future, is to be taken without abatement as a competent exposition of those material conditions which were then conceived to underlie civilized society and to dictate the only sound reconstruction of civil and economic institutions according to the modern plan.
  • p. 10

• Yet the Industrial Revolution does not lie within Adam Smith's "historical present," nor does his system of economic doctrines make provision for any of its peculiar issues. What he has to say on the mechanics of industry is conceived in terms derived from an older order of things than that machine industry which was beginning to get under way in his own life-time; and all his illustrative instances and arguments on trade and industry are also such as would apply to the state of things that was passing, but they are not drawn with any view to that new order which was then coming on in the world of business enterprise.
  • p. 10

• The economic situation contemplated by Adam Smith as the natural (and ultimate) state of industry and trade in any enlightened society, conducted on sane and sound lines according to the natural order of human relations, was of a simple structure and may be drawn in few lines, -- neglecting such minor extensions and exceptions as would properly be taken account of in any exhaustive description. Industry is conceived to be of the nature of handicraft; not of the nature of mechanical engineering, such as it has in effect and progressively come to be since his time. It is described as a matter of workmanlike labor, "and of the skill, dexterity and judgment with which it is commonly applied." It is a question of the skilled workman and his use of tools. Mechanical inventions are "labor-saving devices," which "facilitate and abridge labor." The material equipment is the ways and means by manipulation of which the workman gets his work done. "Capital stock" is spoken of as savings parsimoniously accumulated out of the past industry of its owner, or out of the industry of those persons from whom he has legally acquired it by inheritance or in exchange for the products of his own labor. Business is of the nature of "petty trade" and the business man is a "middle man" who is employed for a livelihood in the distribution of goods to the consumers. Trade is subsidiary to industry, and money is a vehicle designed to be used for the distribution of goods. Credit is an expedient of the needy; a dubious expedient. Profits (including interest) are justified as a reasonable remuneration for productive work done, and for the labor-saving use of property derived from the owner's past labor. The efforts of masters and workmen alike are conceived to be bent on turning out the largest and most serviceable output of goods; and prices are competitively determined by the labor-cost of the goods. Like other men Adam Smith did not see into the future beyond what was calculable on the data given by his own historical present; and in his time that later and greater era of investment and financial enterprise which has made industry subsidiary to business was only beginning to get under way and only obscurely so.
  • p. 10

• To this "natural" plan of free workmanship and free trade all restraint or retardation by collusion among business men was wholly obnoxious, and all collusive control of industry or of the market was accordingly execrated as unnatural and subversive. It is true, there were even then some appreciable beginnings of coercion and retardation -- lowering of wages and limitation of output -- by collusion between owners and employers who should by nature have been competitive producers of an unrestrained output of goods and services according to the principles of that modern point of view which animated Adam Smith and his generation; but coercion and unearned gain by a combination of ownership, of the now familiar corporate type, was virtually unknown in his time. So Adam Smith saw and denounced the dangers of unfair combination between "masters" for the exploitation of their workmen, but the modern use of credit and corporation finance for the collective control of the labor market and the goods market of course does not come within his horizon and does not engage his attention.
  • p. 11

• So also Adam Smith knows and denounces the use of protective tariffs for private gain. That means of pilfering was familiar enough in his time. But he spends little indignation on the equally nefarious use of the national establishment for safe-guarding and augmenting the profits of traders, concessionaires, investors and creditors in foreign parts at the cost of the home community. That method of taxing the common man for the benefit of the vested interests has also grown to more formidable proportions since his time. The constituent principles of the modern point of view, as accepted advisedly or by oversight by Adam Smith and his generation, supply all the legitimation required for this larcenous use of the national establishment; but the means of communication were still too scant, and the larger use of credit was too nearly untried, as contrasted with what has at a later date gone to make the commercial ground and incentive of imperialist politics. Therefore the imperialist policies of public enterprise for private gain also do not come greatly within the range of Adam Smith's vision of the future, nor does the "obvious and simple system" on which he and his generation of thoughtful men take their stand comprise anything like explicit declarations for or against this later-matured chicane of the gentlemen-investors who have been managing the affairs of the civilized nations.
  • p. 11

• Since the underlying principles of the established order are of this make-believe character, that is to say, since they are built up out of the range of conceptions that have habitually been doing duty as the substance of knowledge and belief in the past, it follows in the nature of the case that any reconstruction of institutions will be made only tardily, reluctantly, and sparingly; inasmuch as settled habits of thought are given up tardily, reluctantly and sparingly. And this will particularly be true when the reconstruction of unseasonable institutions runs counter to a settled and honorable code of ancient principles and a stubborn array of vested interests, as in this instance. Such is the promise of the present situation, and such is also the record of the shift that was once before made from medieval to modern times. It should be a case of break or bend.
  • p. 13

Chapter 3 The State of the Industrial Arts

• This eighteenth-century order of nature, in the magic name of which Adam Smith was in the habit of speaking, was conceived on lines of personal initiative and activity. It is an order of things in which men were conceived to be effectually equal in all those respects that are of any decided consequence, -- in intelligence, working capacity, initiative, opportunity, and personal worth; in which the creative factor engaged in industry was the workman, with his personal skill, dexterity and judgment; in which, it was believed, the employer ("master") served his own ends and sought his own gain by consistently serving the needs of creative labor, and thereby serving the common good; in which the traders ("middle-men") made an honest living by supplying goods to consumers at a price determined by labor cost, and so serving the common good.
  • p. 13

• ... the new order of industrial ways and means has been progressively going out of touch with the essential requirements of this established scheme of individual self-help and personal initiative, on the realization and maintenance of which the best endeavors of the Liberals have habitually been spent.
  • p. 14

• Under the new order of things the mechanical equipment – the "industrial plant" -- takes the initiative, sets the pace, and turns the workman to account in the carrying-on of those standardized processes of production that embody this mechanistic state of the industrial arts; very much as the individual craftsman in his time held the initiative in industry, set the pace, and made use of his tools according to his own discretion in the exercise of his personal skill, dexterity and judgment, under that now obsolescent industrial order which underlies the eighteenth-century modern point of view, and which still colors the aspirations of Liberal statesmen and economists, as well as the standard economic theories.

The workman -- and indeed it is still the skilled workman -- is always indispensable to the due working of this mechanistic industrial process, of course; very much as the craftsman's tools, in his time, were indispensable to the work which he had in hand. But the unit of industrial organization and procedure, what may be called the "going concern" in production, is now the outfit of industrial equipment, a works, engaged in a given standardized mechanical process designed to turn out a given output of standardized product; it is the plant, or the shop.

• p. 14

• Under the new order the going concern in production is the plant or shop, the works, not the individual workman.
  • p. 14

• The workman has become subsidiary to the mechanical equipment, and productive industry has become subservient to business, in all those countries which have come in for the latter-day state of the industrial arts, and which so have fallen under the domination of the price system.
  • p. 14

• It is especially the latter-day system of transport and communication as it works out under the new order highly mechanical and exactingly scheduled for time, date and place -- that so controls and standardizes the ordinary life of the common man on mechanical lines.
  • p. 15

• The training enforced by this mechanical standardization, therefore, is of much the same order throughout the community as it is within the mechanical industries proper, and it drives to the same outcome, -- submergence of the personal equation. So that the workday information and the reasoning by use of which all men carry on their daily life under the new order is of the same general character as that information and reasoning which guides the mechanical engineers; and the unremitting habituation to its scope and method, its principles of knowledge and belief, leads headlong to a mechanistic conception of things, ways, means, ends, and values, whether it is called by that name or not. The resulting frame of mind is often spoken of as Materialism.
  • p. 15

• But it is also to be admitted that the typical owner-employer of the earlier modern time, such as he stood in the mind's eye of the eighteenth-century doctrinaires, -- this traditional owner-employer has also come through the period of the mutation in a scarcely better state of preservation. At the period of this stabilization of principles in the eighteenth century, he could still truthfully be spoken of as a "master," a foreman of the shop, and he was then still invested with a large reminiscence of the master-craftsman, as known in the time of the craft-gilds. He stood forth in the eighteenth-century argument on the Natural Order of things as the wise and workmanlike designer and guide of his workmen's handiwork, and he was then still presumed to be living in workday contact and communion with them and to deal with them on an equitable footing of personal interest.
  • p. 15

• The employer of labor in the staple industries of that time was, in his own person, commonly also the owner of the establishment in which his hired workmen were employed; and also -- again in passable accord with the facts -- he was presumed personally to come to terms with his workmen about wages and conditions of work. Employment was considered to be a relation of man to man.
  • p. 16

• So soon as the machine industry began to make headway, the industrial plant increased in size, and the number of workmen employed in each establishment grew continually larger; until in the course of time the large scale of organization in industry has put any relation of man to man out of the question between employers and workmen in the leading industries.
  • p. 16

• The place of the personal employer-owner is taken by a composite business concern which represents a combination of owners, no one of whom is individually responsible for the concern's transactions. So true is this, that even where the ownership of a given industrial establishment still vests wholly or mainly in a single person, it has commonly been found expedient to throw the ownership into the corporate form, with limited liability. The personal employer-owner has virtually disappeared from the great industries. His place is now filled by a list of corporation securities and a staff of corporation officials and employees who exercise a limited discretion. The personal note is no longer to be had in the wage relation, except in those backward, obscure and subsidiary industries in which the mechanical reorganization of the new order has not taken effect. So, even that contractual arrangement which defines the workman's relation to the establishment in which he is employed, and to the anonymous corporate ownership by which he is employed, now takes the shape of a statistical reckoning, in which virtually no trace of the relation of man to man is to be found. Yet the principles of the modern point of view governing this contractual relation, in current law and custom, are drawn on the assumption that wages and conditions of work are arranged for by free bargaining between man and man on a footing of personal understanding and equal opportunity.
  • p. 16

• Ownership has been "denatured" by the course of events; so that it no longer carries its earlier duties and responsibilities. It used to be true that personally responsible discretion in all details was the chief and abiding power conferred by ownership; but wherever it has to do with the machine industry and large-scale organization, ownership now has virtually lost this essential part of its ordinary functions.
  • p. 16

• To the common man who has taken to reckoning in terms of tangible performance, in terms of man power and material resources, these returns on investment that rest on productive enterprise as an overhead charge are beginning to look like unearned income. Indeed, the same unsympathetic preconception has lately come in for a degree of official recognition. High officials who are presumed to speak with authority, discretion and an unbiased mind have lately spoken of incomes from investments as "unearned incomes," and have even entertained a project for subjecting such incomes to a differential rate of taxation above what should fairly be imposed on "earned incomes," All this may, of course, be nothing more than an unseasonable lapse of circumspection on the part of the officials, who have otherwise, on the whole, consistently lived up to the best traditions of commercial sagacity; and a safe and sane legislature has also canvassed the matter and solemnly disallowed any such invidious distinction between earned and unearned incomes. Still, this passing recognition of unearned incomes is scarcely less significant for being unguarded; and the occurrence lends a certain timeliness to any inquiry into the source and nature of that net product of industry out of which any fixed overhead charges of this kind are drawn.
  • p. 17

• To come to an understanding of the source and origin of this margin of disposable revenue that goes to the earnings of corporate capital, it is necessary to come to an understanding of the industrial system out of which the disposable margin of revenue arises. Productive industry yields a margin of net product over cost, counting cost in terms of man power and material resources; and under the established rule of self-help and free bargaining as it works out in corporation finance, this margin of net product has come to rest upon productive industry as an overhead charge payable to anonymous outsiders who own the corporation securities.
  • p. 17

• 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."
  • p. 19

• In later times, and particularly in modern times and in the civilized 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.
  • p. 19

• 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 civilized 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.
  • p. 19

• 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 organized 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.
  • p. 20

• The state of the industrial arts, therefore, is the indispensable conditioning circumstance which determines the productive capacity of any given community; and this is true in a peculiar degree under this new order of industry, in which the industrial arts have reached an unexampled development.
  • p. 20

• The machine technology requires for its working a large and specialized mechanical apparatus, an ever increasingly large and increasingly elaborate material equipment. So also it requires a large and diversified supply of material resources, both in raw materials and in the way of motive power. It is only on condition that these requirements are met in some passable fashion that this industrial system will work at all, and it is only as these requirements are freely met that the machine industry will work at a high efficiency. At the same time the settled principles of law and usage and public policy handed down from the eighteenth century have in effect decided, and continue to decide, that all material wealth is, rightly, to be held in private ownership, and is to be made use of only subject to the unhampered discretion of the legally rightful owner. Meantime the highly productive state of the industrial arts embodied in the technological knowledge of the new order can be turned to account only by use of this material equipment and these natural resources which continue to be held in private ownership. From which it follows that these material means of industry, and the state of the industrial arts which these material means are to serve, can be turned to productive use only so far and on such conditions as the rightful owners of the material equipment and resources may choose to impose; which enables the owners of this indispensable material wealth, in effect, to take over the use of these industrial arts for their own sole profit.
  • p. 21

• The owners of the community's material resources -- that is to say the investors in industrial business -- have in effect become "seized and possessed of" the community's joint stock of technological knowledge and efficiency.
  • p. 22

• Unrestricted ownership of property, with inheritance, free contract, and self-help, is believed to have been highly expedient as well as eminently equitable under the circumstances which conditioned civilized life at the period when the civilized world made up its mind to that effect. And the discrepancy which has come in evidence in this later time is traceable to the fact that other things have not remained the same. The odious outcome has been made by disturbing causes, not by these enlightened principles of honest living. Security and unlimited discretion in the rights of ownership were once rightly made much of as a simple and obvious safeguard of self-direction and self-help for the common man; whereas, in the event, under a new order of circumstances, it all promises to be nothing better than a means of assured defeat and vexation for the common man.
  • p. 23

Chapter 4 Free Income

• So inordinately productive is this familiar new order of industry that in ordinary times it is forever in danger of running into excesses and turning out an output in excess of what the market -- that is to say the business situation -- will tolerate. There is constant danger of "overproduction," So that here is commonly a large volume of man power unemployed and an appreciable proportion of the industrial plant lying idle or half idle.
  • p. 23

• And all the while the owner of the equipment is some person who has contributed no more than his per-capita quota to this state of the industrial arts out of which his earnings arise. Indeed the chances are that the owner has contributed less than his per-capita quota, if anything, to that common fund of knowledge on the product of which he draws by virtue of his ownership, because he is likely to be fully occupied with other things, -- such things as lucrative business transactions, e.g., or the decent consumption of superfluities.
  • p. 25

• Intangible assets are the capitalized value of income not otherwise accounted for. Such income arises out of business relations rather than out of industry; it is derived from advantages of salesmanship, rather than from productive work; it represents no contribution to the output of goods and services, but only an effectual claim to a share in the "annual dividend," -- on grounds which appear to be legally honest, but which cannot be stated in terms of mechanical cause and effect, or of productive efficiency, or indeed in any terms that involve notions of physical dimensions or of mechanical action.
  • p. 26

• But while intangible assets represent income which accrues out of certain immaterial relations between their owners and the industrial system, and while this income is accordingly not a return for mechanically productive work done, it still remains true, of course, that such income is drawn from the annual product of industry, and that its productive source is therefore the same as that of the returns on tangible assets. The material source of both is the same; and it is only that the basis on which the income is claimed is not the same for both. It is not a difference in respect of the ways and means by which they are created, but only in respect of the ways and means by which these two classes of income are intercepted and secured by the beneficiaries to whom they accrue. The returns on tangible assets are assumed to be a return for the productive use of the plant; returns on intangible assets are a return for the exercise of certain immaterial relations involved in the ownership and control of industry and trade.
  • p. 26

• Good-will has long been known, discussed and allowed for as a legitimate, ordinary and valuable immaterial possession of men engaged in mercantile enterprise of all kinds. It has been held to be a product of exemplary courtesy and fair dealing with customers, due to turning out goods or services of an invariably sound quality and honest measure, and indeed due to the conspicuous practice of the ordinary Christian virtues, but chiefly to common honesty. Similarly valuable, and of a similarly immaterial nature, is the possession of a trade-secret, a trade-mark, a patent-right, a franchise, any statutory monopoly, or a monopoly secured by effectually cornering the supply or the market for any given line of goods or services.
  • 26

• After the analogy of good-will, it has been usual to trace any such special run of free income to the profitable use of a special advantage in the market.
  • p. 26

• These supernumerary and preferential gains, "excess profits," or whatever words may best describe this class of free income, may be well deserved by these beneficiaries, or they may not. The income in question is, in any case, not created by the good deserts of the beneficiaries, however meritorious their conduct may be.
  • p. 26

• A trade-secret may also be profitable to the concern which has the use of it, and the special process which it covers may be especially productive; but the same article of technological knowledge would doubtless contribute more to the total productivity of industry if it were shared freely by the industrial community at large. Such technological knowledge is an agency of production, but it is the monopoly of it that is profitable to its possessor as a special source of gain. The like applies to patent-rights, of course. Whereas monopolies of the usual kind, which control any given line of industry by charter, conspiracy, or combination of ownership, derive their special gains from their ability to restrain trade, limit the output of goods or services, and so "maintain prices."
  • p. 27

• The very large aggregate value of such assets indicates how imperative it is for the conduct of industrial business under the new order to restrict output within reasonable limits, and at the same time how profitable it is to be able to prevent the excessively high productive capacity of modern industry from outrunning the needs of profitable business. For the prosperity of business it is necessary to keep the output within reasonable limits; that is to say, within such limits as will serve to maintain reasonably profitable prices; that is to say, such prices as will yield the largest obtainable net return to the concerns engaged in the business.
  • p. 27

• In this connection, and under the existing conditions of investment and credit, "reasonable returns" means the same thing as "the largest practicable net returns." It all foots up to an application of the familiar principle of "charging what the traffic will bear"; for in the matter of profitable business there is no reasonable limit short of the maximum. In business, the best price is always good enough; but, so also, nothing short of the best price is good enough. Buy cheap and sell dear.
  • p. 27

• Intangibles of this kind, which represent a "conscientious withdrawal of efficiency," an effectual control of the rate or volume of output, are altogether the most common of immaterial assets, and they make up altogether the largest class of intangibles and the most considerable body of immaterial wealth owned. Land values are of much the same nature as these corporate assets which represent capitalized restriction of output, in that the land values, too, rest mostly on the owner's ability to withhold his property from productive use, and so to drive a profitable bargain. Rent is also a case of charging what the traffic will bear; and rental values should properly be classed with these intangible assets of the larger corporations, which are due to their effectual control of the rate and volume of production. And apart from the rental values of land, which are also in the nature of monopoly values, it is doubtful if the total material wealth in any of the civilized countries will nearly equal the total amount of this immaterial wealth that is owned by the country's business men and the investors for whom they do business. Which evidently comes to much the same as saying that something more than one-half of the net product of the country's industry goes to those persons in whom the existing state of law and custom vests a plenary power to hinder production.
  • p. 27

• There is another curious question that will also have to be left as a moot question, in the absence of more specific information than that which is yet available; more a question of idle curiosity, perhaps, than of substantial consequence. How nearly is it likely that the total gains which accrue to these prosperous business concerns and their investors from their conscientious withdrawal of efficiency will equal the total loss suffered by the community as a whole from the incidental reduction of the output?
  • p. 28

• The resulting question is, therefore, not whether the rest of the community loses as much as the business men gain, -- that goes without saying, since the gains of the business men in the case are paid over to them by the rest of the community in the enhanced (or maintained) price of the products, but rather it is a question whether the rest of the community, the common man, loses twice as much as the business concerns and their investors gain.
  • p. 28

• Does the total net loss suffered by the community at large, exclusive of the owners of these intangibles, exceed two-hundred percent of the returns which go to these owners? or, Do these intangibles cost the community more than twice what they are worth to the owners? -- the loss to the community being represented by the sum of the overhead burden carried on account of these intangibles plus the necessary curtailment of production involved in maintaining profitable prices. The overhead burden is paid out of the net annual production, after the net annual production has been reduced by so much as may be necessary to "maintain prices at a reasonably profitable figure."
  • p. 28

• Today (October, 1918) -- it is to be admitted with such emotion as may come to hand -- this question is one which can be entertained quite seriously, in the light of experience. In the recent past, as matters have stood up to the outbreak of the war, the ordinary rate of production in the essential industries under businesslike management has habitually and by deliberate contrivance fallen greatly short of productive capacity. This is an article of information which the experience of the war has shifted from the rubric of "Interesting if True" to that of "Common Notoriety."
  • p. 29

• To the spokesmen of "business as usual" this rating of current production under the pressure of war needs may seem extravagantly low; whereas, to the experts in industrial engineering, who are in the habit of arguing in terms of material cost and mechanical output, it will seem extravagantly high. Publicly, and concessively, this latter class will speak of a 25 percent efficiency; in private and confidentially they appear disposed to say that the rating should be nearer to 10 percent than 25.
  • p. 29

• To avoid any appearance of an ungenerous bias, then, present actual production in these essential industries may be placed at something approaching 50 percent of what should be their normal productive capacity in the absence of a businesslike control looking to "reasonable profits." It is necessary at this point to call to mind that the state of the industrial arts under the new order is highly productive, -- beyond example.
  • p. 29

• And, finally, there should be some gain of serenity in realizing how singularly consistent has been the run of economic law through the ages, and recalling, once more the reflection which John Stuart Mill arrived at some half-a-century ago, that, "Hitherto it is questionable if all the mechanical inventions yet made have lightened the day's toil of any human being."
  • p. 31

Chapter 5 The Vested Interests

• The system of free competition, self-help, equal opportunity and free bargaining which is contemplated by the modern point of view, assumes an industrial situation in which the work and trading of any given individual or group can go on freely by itself, without materially helping or hindering the equally untrammeled working of the rest.
  • p. 32

• Business is a pursuit of profits, and profits are to be had from profitable sales, and profitable sales can be made only if prices are maintained at a profitable level, and prices can be maintained only if the volume of marketable output is kept within reasonable limits; so that the paramount consideration in such business as has to do with the staple industries is a reasonable limitation of the output. "Reasonable" means "what the traffic will bear"; that is to say, "what will yield the largest net return."
  • p. 33

• The business man's place in the economy of nature is to "make money," not to produce goods. The production of goods is a mechanical process, incidental to the making of money; whereas the making of money is a pecuniary operation, carried on by bargain and sale, not by mechanical appliances and powers. The business men make use of the mechanical appliances and powers of the industrial system, but they make a pecuniary use of them. And in point of fact the less use a business man can make of the mechanical appliances and powers under his charge, and the smaller a product he can contrive to turn out for a given return in terms of price, the better it suits his purpose. The highest achievement in business is the nearest approach to getting something for nothing. What any given business concern gains must come out of the total output of productive industry, of course; and to that extent any given business concern has an interest in the continued production of goods. But the less any given business concern can contrive to give for what it gets, the more profitable its own traffic will be.
  • 34

• The common good, so far as it is a question of material welfare, is evidently best served by an unhampered working of the industrial system at its full capacity, without interruption or dislocation. But it is equally evident that the owner or manager of any given concern or section of this industrial system may be in a position to gain something for himself at the cost of the rest by obstructing, retarding or dislocating this working system at some critical point in such a way as will enable him to get the best of the bargain in his dealings with the rest... Sabotage of this kind is indispensable to any large success in industrial business.
  • p. 34

• However, it is well to call to mind that the community will still be able to get along, perhaps even to get along very tolerably, in spite of a very appreciable volume of sabotage of this kind; even though it does reduce the net productive capacity to a fraction of what it would be in the absence of all this interference and retardation; for the current state of the industrial arts is highly productive. So much so that in spite of all this deliberate waste and confusion that is set afoot in this way for private gain, there still is left over an absolutely large residue of net production over cost. The community still has something to go on. The available margin of free income -- that is to say, the margin of production over cost -- is still wide; so that it allows a large latitude for playing fast and loose with the community's livelihood.
  • p. 34-35

• Now, these businesslike manoeuvres of deviation and delay are by no means to be denounced as being iniquitous or unfair, although they may have an unfortunate effect on the conditions of life for the common man. That is his misfortune, which law and custom count on his bearing with becoming fortitude. These are the ordinary and approved means of carrying on business according to the liberal principles of free bargain and self-help as established in the eighteenth century; and they are in the main still looked on as a meritorious exercise of thrift and sagacity.
  • p. 35

• It should be added, as is plain to all men, that these ordinary and normal processes of private initiative never do provide employment for all the men available. In fact, unemployment is an ordinary and normal phenomenon. So that even in the present emergency, when the peoples of Christendom are suffering privation together for want of goods needed for immediate use, the ordinary and normal processes of private initiative are not to be depended on to employ all the available man power for productive industry. The reason is well known to all men; so well known as to be uniformly taken for granted as a circumstance which is beyond human remedy. It is the simple and obvious fact that the ordinary and normal processes of private initiative are the same thing as "business as usual," which controls industry with a view to private gain in terms of price; and the largest private, gain in terms of price cannot be had by employing all the available man power and speeding up the industries to their highest productivity, even when all the peoples of Christendom are suffering privation together for want of the ordinary necessaries of life. Private initiative means business enterprise, not industry.
  • p. 35-36

• The result of a businesslike management of industry for private gain in America has on the whole been a fairly high level of prosperity. For this there are two main reasons: (a) the exceptionally great natural resources of the country; and (b) the continued growth and spread of population, (a) Business enterprise, that is to say private ownership, has taken over these resources, by a process of legalized seizure, and has used them up as rapidly as may be, with a view to private gain; all of which has gone to make private business profitable to that extent, although it has impoverished the underlying community by using up its natural resources, (b) The continued growth and spread of population, by natural increase and by immigration, has furnished the business men of this country a continually expanding market for goods; both for goods to be used in production and transportation and for finished articles of consumption. Hence the American business men have been in the fortunate position of not having to curtail the output of industry harshly and persistently at all points.
  • p. 36

• It is, in effect, for this continued growth of their market, caused by the growth of population, that the business men claim credit when they "point with pride" to the resourcefulness and quick initiative with which they have "developed the country,".
  • p. 36

• In so far as this management creates an assured strategic advantage for any given business concern, the result is a vested interest. This may then eventually be capitalized in due form, as a body of intangible assets. As such it goes to augment the business community's accumulated wealth. And the country is statistically richer per capita. A vested interest is a marketable right to get something for nothing. This does not mean that the vested interests cost nothing. They may even come high. Particularly may their cost seem high if the cost to the community is taken into account, as well as the expenditure incurred by their owners for their production and up-keep. Vested interests are immaterial wealth, intangible assets. As regards their nature and origin, they are the outgrowth of three main lines of businesslike management: (a) Limitation of supply, with a view to profitable sales; (b) Obstruction of traffic, with a view to profitable sales; and (c) Meretricious publicity, with a view to profitable sales.
  • p. 36-37

• The ordinary expenditure incurred for this purpose is so considerable, in fact, that the "selling cost" will not infrequently be far and away the larger part of those costs that are to be covered by the price of advertised goods or advertised traffic. This necessary consumption of work and means with a view to increase sales and to create a prospective increase of profits is to be counted as net waste, of course; in the sense that it contributes nothing to the total output of serviceable goods, present or prospective. The net aggregate result is to lay equipment idle, hinder traffic, and induce credulous persons now and again to change their mind about what things they will buy.
  • p. 37

• Any person with a taste for curiosities of human behavior might well pursue this question of capitalized free income into its further convolutions, and might find reasonable entertainment in so doing. The topic also has merits as a subject for economic theory. But for the present argument it may suffice to note that this free income and the business-like contrivances by which it is made secure and legitimate are of the essence of this new order of business enterprise; that the abiding incentive to such enterprise lies in this unearned income; and that the intangible assets which are framed to cover this line of "earnings," therefore, constitute the substantial core of corporate capital under the new order.

P. 38

• From this arises one of the singularities of the current situation in business and its control of industry; viz., that the total face value, or even the total market value of the vendible securities which cover any given block of industrial equipment and material resources, and which give title to its ownership, always and greatly exceeds the total market value of the equipment and resources to which the securities give title of ownership, and to which alone in the last resort they do give title. The margin by which the capitalized value of the going concern exceeds the value of its material properties is commonly quite wide. Only in the case of small and feeble corporations, or such concerns as are balancing along the edge of bankruptcy, does this margin of intangible values narrow down and tend to disappear. Any industrial business concern which does not enjoy such a margin of capitalized free earning-capacity has fallen short of ordinary business success and is possessed of no vested interest.
  • p. 38

• This free income which the community allows its kept classes in the way of returns on these vested rights and intangible assets is the price which the community is paying to the owners of this imponderable wealth for material damage greatly exceeding that amount. But it should be kept in mind and should be duly credited to the good intentions of these businesslike managers, that the ulterior object sought by all this management is not the 100 per cent of mischief to the community but only the 10 per cent of private gain for themselves and their clients.
  • p. 39

• There is circumstantial evidence that very material gains in economy and expedition commonly resulted from these successive moves of consolidation in the steel business.
  • p. 40

• The U.S. Steel Corporation has vindicated the wisdom of an unreserved advance on lines of consolidation and recapitalization in the financing of the large and technical industries.
  • p. 40

• What is not doubtful, in the steel business or in any of the other industrial enterprises that run on a similar scale and a similar level of technology, is that the owners of the corporate capital have come in for a very substantial body of intangible assets of this kind, and that these assets of capitalized free income will foot up to several times the total value of the material assets which underlie them.
  • p. 40

• There is a great and pressing need of such a construction of these principles, which would greatly facilitate the work of corporation finance; but it is to be admitted that some slight cloud still rests on this manner of disposing of ownership. It involves abdication or delegation of that discretionary exercise of property rights which has been held to be of the essence of ownership.
  • p. 41

• The free income which is capitalized in the intangible assets of the vested interests goes to support the well-to-do investors, who are for this reason called the kept classes, and whose keep consists in an indefinitely extensible consumption of superfluities.
  • p. 41

Chapter 6 The Divine Right of Nations

• Within the nation the enlightened principles of self-help and free contract have given rise to vested interests which control the industrial system for their own use and thereby come in for a legal right to the community's net output of product over cost. Each of these vested interests habitually aims to take over as much as it can of the lucrative traffic that goes on and to get as much as it can out of the traffic, at the cost of the rest of the community.
  • p. 43

• Meantime the new order of industry has come into bearing, with the result that any disturbance which is set afoot by any one of these self-determining nations in pursuing its own ends is sure to derange the conditions of life for all the others, just so far as these others are bound up in the same comprehensive organization of trade and industry. Full and free self-determination runs counter to the rule of Live and let live. After the same fashion the businesslike maneuvers of the vested interests within the nations, each managing its own affairs with an eye single to its own advantage, deranges the ordinary conditions of life for the common man, and violates the rule of Live and let live by that much. Self-determination, full and free, necessarily encroaches on the conditions of life for all the others.
  • p. 43

• The keepers of the established order will always look to evasion and entertain a hope of avoiding casualties and holding the line by the use of a cleverly designed masquerade.
  • p. 44

• By use and wont, in the Liberal scheme of statecraft as well as in the scheme of freely competitive business, implicit faith has hitherto been given to the remedial effect of punitive competition and the punitive correction of excesses by law and custom. It has been a system of adjustment by punitive afterthought. All of which may once have been well enough in its time, so long as the rate and scale of the movement of things were slow enough and small enough to be effectually overtaken and set to rights by afterthought. The modern -- eighteenth-century -- point of view presumes an order of things which is amenable to remedial adjustment after the event. But the new order of industry, and that sweeping equilibrium of material forces that embodies the new order, is not amenable to afterthought. Where human life and human fortunes are exposed to the swing of the machine system, or to the onset of national ambitions that are served by the machine industry, it is safety first or none.
  • p. 45

• As is true of the divine right of kings, so also as regards the divine right of nations, it is extremely difficult to show that it serves the common good in any material way, in any way that can be formulated or verified in terms of tangible performance.
  • p. 45

• That such has been the practical outcome is due to the fact that these enlightened principles of the eighteenth century comprise as their chief article the "natural" right of ownership. The later course of events has decided that the ownership of property in sufficiently large blocks will control the country's industrial system and thereby take over the disposal of the community's net output of product over cost; on which the vested interests live and on which, therefore, the kept classes feed. Hence the chief concern of those gentlemanly national governments that have displaced the dynastic states is always and consistently the maintenance of the rights of ownership and investment.
  • p. 46

• But there are certain vested interests which find their profit in maintaining a tariff barrier as a means of keeping the price up and keeping the supply down; and the common man still faithfully believes that the profits which these vested interests derive in this way from increasing the cost of his livelihood and decreasing the net productivity of his industry will benefit him in some mysterious way.
  • p. 49

• He is persuaded that high prices and a scant supply of goods at a high labor cost is a desirable state of things. This is incredible, but there is no denying the fact.
  • p. 49

• He knows, of course, that the profits of business go to the business men, the vested interests, and to no one else; but he is still beset with the picturesque hallucination that any unearned income which goes to those vested interests whose central office is in New Jersey is paid to himself in some underhand way, while the gains of those vested interests that are domiciled in Canada are obviously a grievous net loss to him. The tariff moves in a mysterious way, its wonders to perform.
  • p. 49

• So long as industry is managed with a view to a profitable price it is quite indispensable to guard against an excessive rate and volume of output. In the absence of all businesslike sabotage the productive capacity of the industrial system would very shortly pass all reasonable bounds, prices would decline disastrously and overhead charges would not be covered, fixed charges on corporation securities and other credit instruments could not be met, and the whole structure of business enterprise would collapse, as it occasionally has done in times of "over-production." There is no doing business without a fair price, since the net price over cost is the motive of business. A protective tariff is, in effect, an auxiliary safeguard against overproduction. Incidentally the fact that its imposition does not result in insufferable hardship serves also to show that the new order of industry is highly productive, quite inordinately productive in fact.'
  • p. 50

• And it is a divine right of the nation to use its discretion and offset this inordinate efficiency of its common stock of knowledge by adroitly crippling its own commerce and the commerce of its neighbors, for the benefit of those vested interests that are domiciled within the national frontiers.
  • p. 50

• But the divine right of national self-direction also covers much else of the same description, besides the privilege of setting up a tariff in restraint of trade. There are many channels of such discrimination, of diverse kinds, but always it will be found that these channels are channels of sabotage and that they serve the advantage of some group of vested interests which do business under the shelter of the national pretensions. There are foreign investments and concessions to be procured and safeguarded for the nation's business men by moral suasion backed with warlike force, and the common man pays the cost; there is discrimination to be exercised and perhaps subsidies and credits to be accorded those of the nation's business men who derive a profit from shipping, for the discomfiture of alien competitors, and the common man pays the cost; there are colonies to be procured and administered at the public expense for the private gain of certain traders, concessionaires and administrative office-holders, and the common man pays the cost. Back of it all is the nation's divine right to carry arms, to support a competitive military and naval establishment, which has ceased, under the new order, to have any other material use than to enforce or defend the businesslike right of particular vested interests to get something for nothing in some particular place and in some particular way, and the common man pays the cost and swells with pride.
  • p. 50

Chapter 7 Live and Let Live

• At home in America for the transient time being, the war administration has under pressure of necessity somewhat loosened the strangle-hold of the vested interests on the country's industry; and in so doing it has shocked the safe and sane business men into a state of indignant trepidation and has at the same time doubled the country's industrial output.
  • p. 51

• Already the vested interests are again tightening their hold and are busily arranging for a return to business as usual; which means working at cross-purposes as usual, waste of work and materials as usual, restriction of output as usual, unemployment as usual, labor quarrels as usual, competitive selling as usual, mendacious advertising as usual, waste of superfluities as usual by the kept classes, and privation as usual for the common man.
  • p. 51

• So also it is plain that national pretensions in the field of foreign trade and investment, and all the diversified expedients for furthering and protecting the profitable enterprise of the vested interests in foreign parts, run consistently at cross-purposes with the keeping of the peace.
  • p. 53

• All these peoples that now hope to be nations have long been nationalities. A nation is an organization for collective offence and defense, in peace and war, -- essentially based on hate and fear of other nations; a nationality is a cultural group, bound together by home-bred affinities of language, tradition, use and wont, and commonly also by a supposed community race, -- essentially based on sympathies and sentiments of self-complacency within itself.
  • p. 54

• So also such a matter-of-fact project of reconstruction will be likely materially to revise outstanding credit obligations, including corporation securities, or perhaps even bluntly to disallow claims of this character to free income on the part of beneficiaries who can show no claim on grounds of current tangible performance. All of which is inimical to the best good of the vested interests and the kept classes. Reconstruction which partakes of this character in any sensible degree will necessarily be viewed with the liveliest apprehension by the gentlemanly statesmen of the old school, by the kept classes, and by the captains of finance. It will be deplored as a subversion of the economic order, a destruction of the country's wealth, a disorganization of industry, and a sure way to poverty, bloodshed, and pestilence. In point of fact, of course, what such a project may be counted on to subvert is that dominion of ownership by which the vested interests control and retard the rate and volume of production. The destruction of wealth, in such a case will touch, directly, only the value of the securities, not the material objects to which these securities have given title of ownership; it would be a disallowance of ownership, not a destruction of useful goods. Nor need any disorganization or disability of productive industry follow from such a move; indeed, the apprehended cancelment of the claims to income covered by negotiable securities would by that much cancel the fixed overhead charges resting on industrial enterprise, and so further production by that much. But for those persons and classes whose keep is drawn from prescriptive rights of ownership or of privilege the consequences of such a shifting of ground from vested interest to tangible performance would doubtless be deplorable.
  • p. 57

Chapter 8 The Vested Interests and the Common Man

• Things have changed in such a way since that time, that the ownership of property in large holdings now controls the nation's industry, and therefore it controls the conditions of life for those who are or wish to be engaged in industry; at the same time that the same ownership of large wealth controls the markets and thereby controls the conditions of life for those who have to resort to the markets to sell or to buy. In other words, it has come to pass with the change of circumstances that the rule of Live and Let Live now waits on the discretion of the owners of large wealth. In fact, those thoughtful men in the eighteenth century who made so much of these constituent principles of the modern point of view did not contemplate anything like the system of large wealth, large-scale industry, and large-scale commerce and credit which prevails today. They did not foresee the new order in industry and business, and the system of rights and obligations which they installed, therefore, made no provision for the new order of things that has come on since their time.
  • p. 58

• Invested wealth in large holdings controls the country's industrial system, directly by ownership of the plant, as in the mechanical industries, or indirectly through the market, as in farming. So that the population of these civilized countries now falls into two main classes: those who own wealth invested in large holdings and who thereby control the conditions of life for the rest; and those who do not own wealth in sufficiently large holdings, and whose conditions of life are therefore controlled by these others. It is a division, not between those who have something and those who have nothing -- as many socialists would be inclined to describe it -- but between those who own wealth enough to make it count, and those who do not.
  • p. 58

• But the gravest significance of this cleavage that so runs through the population of the advanced industrial countries lies in the fact that it is a division between the vested interests and the common man. It is a division between those who control the conditions of work and the rate and volume of output and to whom the net output of industry goes as free income, on the one hand, and those others who have the work to do and to whom a livelihood is allowed by these persons in control, on the other hand. In point of numbers it is a very uneven division, of course.
  • p. 59

• But the kept classes also comprise many persons who are entitled to a free income on other grounds than their ownership and control of industry or the market, as, e.g., landlords and other persons classed as "gentry," the clergy, the Crown – where there is a Crown -- and its agents, civil and military. Contrasted with these classes who make up the vested interests, and who derive an income from the established order of ownership and privilege, is the common man. He is common in the respect that he is not vested with such a prescriptive right to get something for nothing. And he is called common because such is the common lot of men under the new order of business and industry; and such will continue (increasingly) to be the common lot so long as the enlightened principles of secure ownership and self-help handed down from the eighteenth century continue to rule human affairs by help of the new order of industry.
  • p. 59

• But it is not usual to speak of the kept classes as the uncommon classes, inasmuch they personally differ from the common run of mankind in no sensible respect. It is more usual to speak of them as "the better classes," because they are in better circumstances and are better able to do as they like. Their place in the economic scheme of the civilized world is to consume the net product of the country's industry over cost, and so prevent a glut of the market.
  • p. 59

• The great distinguishing mark of the common man is that he is helpless within the rules of the game as it is played in the twentieth century under the enlightened principles of the eighteenth century.
  • p. 59

• There are all degrees of this helplessness that characterizes the common lot. So much so that certain classes, professions, and occupations -- such as the clergy, the military, the courts, police, and legal profession -- are perhaps to be classed as belonging primarily with the vested interests, although they can scarcely be counted as vested interests in their own right, but rather as outlying and subsidiary vested interests whose tenure is conditioned on their serving the purposes of those principal and self-directing vested interests whose tenure rests immediately on large holdings of invested wealth.
  • p. 59

• The income which goes to these subsidiary or dependent vested interests is of the nature of free income, in so far that it is drawn from the yearly product of the underlying community; but in another sense it is scarcely to be counted as "free" income, in that its continuance depends on the good will of those controlling vested interests whose power rests on the ownership of large invested wealth.Read more at location 2162
  • p. 59-60

• They are apparently moved by a feeling that so long as the established arrangements are maintained they will come in for a little something over and above what would come to them if they were to make common cause with the undistinguished common lot. In other words, they have a vested interest in a narrow margin of preference over and above what goes to the common man. But this narrow margin of net gain over the common lot, this vested right to get a narrow margin of something for nothing, has hitherto been sufficient to shape their sentiments and outlook in such a way as, in effect, to keep them loyal to the large business interests with whom they negotiate for this narrow margin of preference.
  • p. 60

• It may well be that the frame of mind engendered by this training in matter-of-fact ways of thinking will presently so shape popular sentiment that all income from property, simply on the basis of ownership, will be disallowed, whether the property is tangible or intangible. All that is a speculative question running into the future.
  • p. 62

• It is not that these and their like are ready with "a satisfactory constructive program," such as the people of the uplift require to be shown before they will believe that things are due to change. It is something of the simpler and cruder sort, such as history is full of, to the effect that whenever and so far as the time-worn rules no longer fit the new material circumstances they presently fail to carry conviction as they once did. Such wear and tear of institutions is unavoidable where circumstances change; and it is through the altered personal equation of those elements of the population which are most directly exposed to the changing circumstances that the wear and tear of institutions may be expected to take effect. To these untidy creatures of the New Order common honesty appears to mean vaguely something else, perhaps something more exacting, than what was "nominated in the bond" at the time when the free bargain and self-help were written into the moral constitution of Christendom by the handicraft industry and the petty trade. And why should it not
• p. 66