the vested interests and the common man-第16章
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time a lien on the corporation's real property； which in turn is
likely to be of less value than the corporation's total
liabilities。 Evidently the case is sufficiently confusing；
considered as a problem in the economic theory of capital； but it
offers no particular difficulty when considered as a proposition
in corporation finance。
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？ Net production is kept down in order to
get a profitable price for the output； but it is not certain
whether the net production has to be lowered by as much or more
than the resulting increased gain which this businesslike
strategy brings to the businesslike strategists。 The strategic
curtailment of net production below productive capacity is net
loss to the community as a whole； including both the business men
and their customers； the gains which go to these business
concerns in this way are net loss to the community as a whole；
exclusive of the business concerns and their investors。 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。
The whole case has some analogy with the phenomena of
blackmail； ransom； and any similar enterprise that aims to get
something for nothing； although it is carefully to be noted that
its analogy with these illegitimate forms of gainful enterprise
must； of course； not be taken to cast any shadow of suspicion on
the legitimacy of all the businesslike sabotage that underlies
this immaterial corporate capital and its earning…capacity。 In
the case of blackmail； ransom； and such like illegal traffic in
extortion； it is known that the net loss suffered by the loser
and the gainer together exceeds the net gain which accrues to the
beneficiary； by as much as the cost of enforcement plus the
incidental inconvenience to both parties to the transaction。 At
the same time； the beneficiary's subsequent employment and
consumption of his 〃ill…gotten gains；〃 as they are sometimes
called； whether he consumes them in riotous living or in the
further pursuit of the same profitable line of traffic； all
this； it is believed； does not in any degree benefit the rest of
the community。 As seen in the perspective of the common good；
such enterprise in extortion is believed to be quite wastefully
disserviceable。
Now； this analogy may be taken for what it is worth；
〃Analogies do not run on all…fours。〃 But when seen in the same
perspective； the question of loss and gain involved in the case
of these intangible assets and their earning…capacity falls into
something like this shape： 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。〃
A few years ago any ordinarily observant person would
doubtless have answered this question in the negative； probably
without hesitation。 So also； any ordinarily intelligent votary of
the established order； as； e。g。； a corporation lawyer； a
commercial trade journal； or a trade…union official； would
doubtless； at that period； have talked down such a question out
of hand； as being fantastically preposterous。 That would have
been before the war experience began to throw light into the dark
places of business enterprise as conducted under the new order of
industry。 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。〃
The question as to how much this 〃incapacity by advisement〃
has commonly amounted to may be attempted somewhat after this
fashion。 Today； under compulsion of patriotic devotion； fear；
shame and bitter need； and under the unprecedentedly shrewd
surveillance of public officers bent on maximum production； the
great essential industries controlled by the vested interests
may； one with another； be considered to approach perhaps even
conceivably to exceed a fifty…percent efficiency； as counted
on the basis of what should ordinarily be accomplished by use of
an equally costly equipment having the disposal of an equally
large and efficient labor force and equally good natural
resources； in case the organisation were designed and managed
with an eye single to turning out a serviceable product； instead
of； as usual； being managed with an eye single to private gain in
terms of price。
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。 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。
This state of the case； that production in the essential
industries presumably does not exceed 50 percent of the normal
productive capacity； even when driven under the jealous eye of
public officers vested with power to act； is presumably due in
great part to the fact that these officers； too； are capable
business men； that their past training and present bent is such
as has been given them by long； exacting and successful
experience in the businesslike management of industry； that their
horizon and perspective in all that concerns industry are limited
by the frame of mind that is native to the countinghouse。 They；
too； have learned how to think of industry and its administration
in terms of profit on investment； and； indeed； in no other terms；
that being as near as their daily work has allowed them to take
stock of the ways and means of industry。 So that they are still
guided； in some considerable part； by considerations of what is
decent； equitable and prudent in the sight of conservative
