Revolt of the Mind

I

The American Mentality

THE first necessity is to comprehend American prosperity as idea. Its works are for use and wonder; but the works of a people can be nothing else than their thoughts externalized. If we are making an original attack upon the economic aspects of reality, it follows that we have among us, and must have had to begin with, original ways of thinking. What are they? How do Americans think?

The American mind possesses certain characteristics uniquely its own. So does the German mind, the French mind, the English mind—any collective mentality. Wherein they differ one from another may be a matter of very subtle comparison, and yet from the projection of such differences comes all contrast.

Consider the American mind on its inventive side. Whether it is more or less inventive than the European mind is often debated. Suppose it were either more or less. There might still be an important difference in how it employs the inventiveness it has, and in fact there is. This can much better be illustrated than defined.

A Russian removing a dead horse from the stable premises proceeds in this manner: He arrives with a live horse and wagon, alone. It is the wagon you first notice, for it is high and narrow, with a rack around it, and has no tackle or equipment for handling a carcass. You wonder how he expects all by himself to lift half a ton of dead horse into it. Leisurely he proceeds to do that thing. He unhooks the live horse and uses it to drag the carcass to a position parallel to the wagon and about five feet from it. Next he goes to the other side of the wagon and with the leverage of a pole first sets it rocking and then tips it over toward the dead horse on the ground. Now, with the wagon resting on its side, almost touching the carcass, he passes a rope around the neck of the dead horse, which is limp, and easily lifts it—the neck alone—to the center of the wagon bed; there he suspends it by making the end of the rope fast. Another rope he ties around the rump, and the free end of that rope is laid around the hub of the upper rear wheel, which, with the wagon on its side, revolves in a horizontal plane.

Now, using the wheel as a powerful windlass, he lifts the whole body of the dead horse to the center of the wagon bed, where he suspends it, as he suspended the neck, by making the rope fast. With the carcass secured in the bed of the wagon, it is easy to tip the wagon back again to its natural position by using the pole as a lever; or, if that is too much exertion, he can do it with an overslung rope attached to the live horse. This done, he hooks the live horse to the wagon and disappears.

That the particular Russian one may happen to see at this job did not invent the procedure is irrelevant. It is a fine example of Russian ingenuity. No American could beat it, because, given the difficulties, the solution is perfect. The Russian is thus resourceful with difficulties; he invents ways to overcome them. But he accepts the difficulties to begin with. There is the point

A typical American, watching this Russian, would not be in the least impressed by the ingenuity of the performance. He would say, “How dumb!” meaning how stupid in the first place to accept the difficulties. Why not remove them? That is his impulse—remove the difficulties, change the facts. Specifically, he thinks of a wagon built for the purpose, low swung on bent axles, with proper tackle attached. Having imagined the special wagon, he asks himself if it would pay. Perhaps not. Such a wagon would not be right for general purposes also. Therefore the special wagon calls for an organized special activity. With two or three of them one might remove all the dead horses in Moscow. Then it would pay.

Such is the American’s natural process of mind. Hence new forms, new methods, then new difficulties and more new forms and methods, all in a state of fluid change.

Another rare characteristic of the American mind requires in the same way to be illustrated. Thomas Edison has been a deep observer of it. Some years ago, when electric locomotives were evolving, he used to ask:

“Have you seen that big electric engine on the New York Central Railroad—how the power is coupled to the wheels? No? I’ll tell you a story about it to show what happens to any of us when we get in a rut from knowing too much about the difficulties. Those engineers had finished the engine, all but one detail. They couldn’t think of a proper way to get the power down to the wheels. That silly problem has bothered engineers all over the world. You will see if you look in how many different ways they have solved it. Well, these engineers were stuck, all in a rut. They had looked at the thing so long and knew so much about it that they couldn’t see it. So they posted a notice. Five hundred dollars to anyone who could make a working suggestion. Weeks passed. Still nobody could think of a way to couple the power to the wheels.

“One day a boy from the drafting room stopped at the chief engineer’s desk and made a little scrawl of a pencil sketch. ‘I don’t know anything about it,’ he said, ‘but would this work?’ The engineer looked at it and said he believed it might—and it did. You will see it working the next time you leave the Grand Central Terminal. That boy wasn’t in a rut. He didn’t know what the difficulties were. He just looked at the thing.”

That is what has been called the theory of ignorance. Clearly, ignorance is not the right word. Innocence is not much better. There is no exact word for what is meant, which is that in order to act upon a thing in an original manner you must be able to see it naïvely, with no prepared ideas, taking nothing about it for granted. So Edison works. If he were an economist he would not take the law of supply and demand for granted. So Ford works. They are only celebrated examples. The head of the largest industrial research laboratory in the country—in the world—began with a gang of linemen. From post-hole digging to the mathematics and physics of high mechanics by common sense and skepticism! It is one of the notable traits of our common mentality and so well known that an expression of it occurs in vernacular speech: “Show me! I’m from Missouri!”

It is important as a negative fact that the American is not political minded. Superficially, this may seem—and probably is—untrue; fundamentally, it is so. Certainly, no other people so distrust the political approach to an economic problem. On the part of capital, this is fairly notorious. The same instinct for keeping politics and economics apart acts with labor. Trades-unionism in Great Britain, for example, is definitely political. There is a Labor Party, and there has been a Labor government. Here trades-unionism is just as definitely economic; temperamentally it is so, to the despair of an American cult calling itself liberal, from some notion it has of kinship with the Liberal Party in British politics. This fact of separation runs very deep, if you follow it down, and has structural significance in the American scheme.

Anciently it was that the individual existed for the state in all senses, political, moral and economic. The true crime of Socrates against the Greek state was to have taught the doctrine of individual rights; the political offense of early Christianity was of the same root. In the course of 2000 years the individual became supreme in the highly civilized forms of Western society. The ancient doctrine was quite reversed. The state was declared to exist for the individual.

The perfect acknowledgment of this modern idea is in Great Britain, where a man, because he is British born, is entitled to sustenance and to a certain standard of living, irrespectively of what he may or does produce. He does not always get the kind of living to which he feels entitled and his disappointment is a chronic political issue. The Englishman who says the state owes him a living utters an opinion that everyone accepts. If he has no job the state must keep him in doles; if his wage is insufficient to provide him a decent living the state must house him in a manner of minimum comfort, and so on.

Here, if a man says the state owes him liberty, protection, equality of opportunity, that is already acknowledged. These are political benefits. But if he says the state owes him a living he is ridiculed; if he insists we know there is something wrong with him. He is a failure, a ne’er-do-well, a nuisance. Here the state exists for the individual in political senses only; economically the individual is on his own.

Where it is otherwise—that is, where the active responsibilities of the state to the individual are both political and economic, there equality of opportunity, which is a political conception, passes into the economic life as levelment of reward. That is finally to penalize efficiency for the benefit of inefficiency. Under that condition such a thing as a fast piece worker receiving a higher rate per piece than the slow worker would be unknown.

This is one of the special features of the American wage system and represents a revolution of thought. As economics, it is sound in a new light. Obviously the labor of one who lays 2000 bricks per day in the wall of a building is worth more than twice as much as the labor of one who lays only 1000. It is worth more per brick, because it brings the building so much faster to completion, with all that means in time and interest saved; or, in the case of two costly machines exactly alike, an output of 2000 units per day from one is cheaper per unit than an output of 1000 units per day from the other; and rightly for that reason may bear a higher reward per unit to the one producing it. As a method, however, it is not possible until both capital and labor see it alike in principle and labor can trust the employer not to break the basic piece rate simply because the efficient man is making a handsome wage.

II

Native Ways of Thinking

Given these three characteristics of mind, you might expect strange American answers to the Old World problems and riddles of industrialism.

You will remember that industrialism was immigrant here. We did not conceive it. Its spontaneous appearance was in Europe. When it was half a century old and highly developed there, life in this country presented still an agricultural picture. We came late to machine craft. Europe’s darling ambition was to monopolize it in order to be able to exchange manufactured goods with the rest of the world for food and raw materials. We imported machines when we could, and when it was impossible to buy them, owing to the European embargo, then we held out inducements to men who could carry the plans in their heads and build them here.

And as we got from the Old World the primary methods and mechanisms of industrialism, so at the same time we got the European ways of thinking that had attended it. We imported the European book of political economy. It did not belong here. It was a manual of instructions we had done better perhaps never to have read at all.

There is grimness in the fact that a people departed from Europe to find freedom of mind and spirit in the wilderness of the New World and to embrace the dignity of labor should have imposed on themselves unawares at the beginning of their industrial career a set of Old World formulas, called the science of economics, that had come straight up from traditions of feudalism, caste and peasantry. That was one more piece of mysterious evil to challenge the enterprise of Puritan faith.

You may take it classically that the science of political economy is the study of the creation and distribution of wealth. Historically, in Europe, it shows three principal figures—namely, the Utopian, the apologist and the radical. The Utopians are those who flee from reality and take refuge in fantasy. The apologists are those who hold that what is was to be. The radicals are those who propose to seize the moneybags.

Dissimilar as they earnestly think themselves to be, they are rooted all alike. In the manner of the Russian loading the dead horse, they accept the difficulties. They find industrialism working in a certain way and say that is the law of industrialism. They find capital working in a certain way and say that is the law of capital—the law of its nature, as if it had an immutable nature! They find men behaving in certain ways for gain and say this is the law of economic motive. They are one in despair.

The Utopians have generally said mankind was spoiled in his nature by bad rulers and bad experience; so they have taken man as he ideally should be and arranged him in imaginary worlds. That is merely to leave the dead horse on the ground—reality too difficult.

Between the apologist and the radical there is full agreement, save only as to what should be done in view of the accepted facts. Having examined wealth, idleness, poverty, the uses of capital and the frustrations of human happiness, the apologist has said, “Such is the economic law. The law is implacable. Let things be.” This is the celebrated doctrine of laissez faire. The radical has amended this to say, “Such is the law of capitalism, and that law is implacable. Therefore destroy capital.”

Counsel of flight. Counsel of do nothing. Counsel of destruction. Make the economic life over by legislating a fantasy; let it be and endure its evils; abolish capitalistic society and save the people from doom.

Such were the ways of thinking about it that followed industrialism from Europe to this country. The first fruits here were European fruits. Climate did nothing to change them. The economic history of the last third of the nineteenth century is the memory of an American nightmare. All that is new began when the collective American mind, with its passion to alter the sacred circumstance and see then what will happen, its gift for seeing only the thing itself and its preference for any practical solution that will work, began freely to act upon the phenomena of industrialism.

There is no natural law of capitalism any more than there is a natural law of voodooism. Capital does not occur in a mysterious manner, with a nature of its own. People invent it, create it, consume it, destroy it. How they create it and what they do with it is the way it works with them, and there is no other law. There was a Mosaic way with capital; it would work now if people were again like that. There is a Mennonite way with capital, there is a European way with capital, and there is an American way with capital, and it is in every case the way of people with their own. Every form of society must have an economic structure. A society of ants has that. But there is no universal law of economics any more than there is a universal law of taste or morals. How people produce, divide and consume wealth is according to their capabilities, understanding, industry and character. The formal rules and laws about it merely declare what is standard practice in that time and place, and the practice comes first. The pyramids were built by one way with wealth, skyscrapers are built by another.

This had all to be imagined and then to be demonstrated. First of all, it was necessary to doubt a European philosophy that assumed the existence of a proletariat naturally consecrated to poverty.

III

Struggle With the Old World’s Doom Book of Political Economy

The French originated systematic curiosity as to the sources of wealth and how it passes around. They were the first to realize that society must have an organic economic structure. From thinking of it, they visualized it and made a drawing to represent it—the famous Tableau Economique—with hollow columns to symbolize the different classes of society, such as farmers, who alone were productive; then the proprietors and nobles, and finally the sterile class, which included tradesmen, artisans, servants, artists and intellectuals; and among these columns were tubes in zigzag arrangement through which the flow of wealth occurred, like the circulation of blood.

The enthusiasm for this crude graph was extraordinary. Mirabeau said of it:

“There have been since the world began three great inventions which have principally given stability to political societies, independent of many other inventions which has enriched and advanced them. The first is the invention of writing. The second is the invention of money. The third is the Economical Table, the result of the other two, which completes them both by perfecting their object; the great discovery of our age, but of which our posterity will reap the benefit.”

It was a mechanism hitherto invisible that had been all the time working by itself. As they looked at their picture of it they began to think of controlling it. Then they broke into a violent dispute as to whether it was working as it should—whether what they saw happening was the natural order or a deformity of it. Those who believed with Rousseau that man by nature was good, unselfish and wise, and had been degraded by government, so that the only political problem was how to restore him to his natural disposition—these said the economic machine was working in aberration; all you had to do was to make it work as its own true nature was and the world would be perfect. Utopias began to be founded. This was in the middle of the eighteenth century. There was yet to occur the French Revolution, in which so much economic fantasia went headlong to disaster that people everywhere turned back to reality.

The French had invented an economic mode of thought; but the English founded what is called the science of political economy. Adam Smith’s book—The Wealth of Nations, published in 1776—is the imperishable old testament of that science. It was the first work in which the economic life was treated as a system of minute activities for the most part unknown and invisible to one another, and yet all related in a definite manner to one whole scheme. The industrial revolution now was taking place—machine craft displacing hand craft, industrialism in opposition to agriculture, division of labor, foreign trade regarded as an international division of labor, phenomena of cost, value, price and exchange—and always poverty. The wealth of the world increasing prodigiously by new means and still the ache and scandal of human poverty.

Smith’s work was primarily descriptive. But running all through it was a thesis that justified the first 100 years of industrialism as a horrible paradox. The thesis was that economic institutions were of natural origin. Therefore nobody could be held responsible for how they worked. Nobody could help how they worked. It was to be supposed that on the whole they worked in a beneficent manner, like other natural things. Labor touched his sympathies. Also, he said, labor was the true source of wealth. Nevertheless, he said, there was a natural wage determined by the number of people.

“The number of people,” he went on, “depends on the demand of society, and this is how it works: Among the proletariat, generally speaking, children are plentiful enough. It is only when wages are very low that poverty and misery cause the death of many of them; but when wages are very high, several of them manage to reach maturity.”

That is to say, the wage rates regulates the supply of proletariat.

“It deserves to be remarked,” he continued, “that it necessarily does this as nearly as possible in the proportion which the demand for labor requires. If this demand is continually increasing, the reward of labor must necessarily encourage in such a manner the marriage and multiplication of laborers as may enable them to supply that continually increasing demand by a continually increasing population. If the reward should at any time be less than what was requisite for this purpose, the deficiency of hands would soon raise it; and if it should at any time be more, their excessive multiplication would soon lower it to this necessary rate. The market would be so much understocked with labor in the one case and so much overstocked in the other, as would soon force back its price to that proper rate which the circumstances of the society required. It is in this manner that the demand for men, like that for any other commodity, necessarily regulates the production of men; quickens it when it goes on too slowly and stops it when it advances too fast.”

IV

The Sacred Law of Poverty

The ox prospect for human labor! A proletariat, automatically obedient to the law of demand and supply, doomed to fluctuate between just enough at one time and misery at another. If wages provide it with a little more than enough, it over-produces itself, wages fall and it sinks into misery; when the mortality of misery has made it a little scarce, wages rise to encourage a proper supply from procreation.

It happened that Adam Smith’s doctrine of individual irresponsibility for how economic institutions worked, and his remorseless theory of natural wages, perfectly suited the mentality and spirit with which Europe approached the opportunities of industrialism. The idolatry with which they were received, especially in Great Britain, is understood only on the supposition that they met some urgent need of the human conscience. On The Wealth of Nations as a Bible was reared a complete system of thought. It was taught in the primary schools and even in nurseries as finished truth that children ought to understand; it was expounded in the form of popular tales and conversations with young Caroline by Miss Martineau and Mrs. Marcet. Its hold on the mentality of Europe is not broken to this day. Its influence upon economic and political behavior is still powerful, if not dominant.

After Adam Smith came Malthus, with his law of population, to prove that the human race tends to reproduce itself faster than the means of sustenance can be increased; therefore inevitably, and as a natural fact, a great fringe of misery.

“The poor are themselves the cause of their own poverty,” he said, simply by not refraining from excessive procreation. Thus the responsibility for poverty is passed from the ill working of economic institutions, which no one can help, to the proletariat itself.

Next came Ricardo, whose authority was great because he was himself a capitalist and able from experience to confirm what the economists had deduced by theory. He said:

“The natural price of labor is that price which is necessary to enable the laborers one with another to subsist and to perpetuate their race without either increase or diminution.”

Adam Smith had treated labor as a commodity. Here Ricardo treats it as of a race apart. He added:

“It is a truth which admits of no doubt that the comforts and well-being of the poor cannot be permanently secured without some regard on their part or some effort on the part of the legislature to regulate the increase of their numbers.”

And it was Ricardo who stated it as a law that wages and profits were in direct opposition. One could not be increased except at the expense of the other, and this conflict was eternal, again like any other natural fact.

The revised and polished version of all this thinking was written by John Stuart Mill, who, from regarding with his emotions what his mind said was logically true, became a tormented pessimist, full of melancholy reflections on the futility of progress, wishing for a stationary state and wondering if life was not destined to run itself out in a quagmire. There was some heresy in him. All the laws of economics, he said, were not natural laws, immutable.

“The laws and conditions of the production of wealth partake of the character of physical truths,” he said. “It is not so,” he believed, “with the distribution of wealth. This is a matter of human institutions solely. The things once there, mankind individually or collectively can do with them as they like.”

Such a thought about division was heretical; it was socialistic. But it was not serious, really, and did no damage to the fundamental thought that governed European industrialism, because at the same time he was, within that thought, sound as to wages. It was he who formulated in a final manner what the socialists have ever since called the brazen law of wages. Natural wages, in the long run, he said, were determined, as the price of everything was determined, by the cost of production—by the cost of producing the human worker. And the famous limited-wage-fund law he stated thus:

“Wages depend on the proportion between the number of the laboring population and the capital devoted to the purchase of labor, and cannot under the rule of competition be affected by anything else.”

What did an emotional heresy about division matter when at the same time he proved by logic that wages, representing labor’s share in the total product of wealth, were twice limited—once by a natural price which was nothing else than the cost of producing a laborer, and again by a rigid wage fund? He was himself distressed by the implications. The only means of amelioration he could suggest were, first, to increase the wage fund by saving, and, second, to limit procreation. When the socialists retorted that from the natural wage as he defined it there was nothing to be saved, and that his other means meant condemning the laborer to celibacy, he recanted and withdrew his theory. This produced a great sensation in the world of respectable economic thought. But on reflection he felt obliged to put it back, because it was logic, and he did put it back, wishing it were not so. There it is.

In the industrial countries, or in those destined to become such, especially Great Britain and France, government very easily accepted the thought system founded on Adam Smith, because it cancelled moral responsibility. The economic affair was governed by natural law. No one could change it. The less it was meddled with the better. The play of individual self-interest was triumphant. Each for himself and none for all. Sentiment, the humanitarian impulse, a feeling for the poor, socialness—these were attributes of the emotional nature. The economic man was in that aspect another animal; the only way he could act was for his own, by a natural principle of selfishness.

And for a while it did seem that this was the régime required for the development of industry in its new form. It flourished amazingly. Appeared the great centers of production, such as Manchester and Birmingham in England, Lille and Mulhouse in France. Wealth increased in a fabulous manner, with a concentrating tendency.

But where was the prosperity?

There was much more wealth. That was evident to all senses of measurement. There was more poverty, too; or, in any case, the spectacle of it was more terrible. Misery, like wealth, was tending to concentrate itself in a few places and thus all contrasts were intensified. Magnificence and high profits on one hand, for the few; on the other hand, low wages, long hours, squalor and wretchedness for the many—for the proletariat as a race apart. Conditions became so bad that the manufacturers themselves became alarmed lest the growing generation should become hopelessly enervated under the strain of exhaustive toil for sometimes as many as fifteen hours a day, and insufficient nourishment at the end of it.

What could they do? They were not responsible. Such was the economic law, including the law of wages—the law that wages must vacillate between just enough and not enough to sustain life, for that was the natural price of labor.

Sensitive natures began to rebel. There arose socialists, communists, anarchists, mystics like Renan and moral judges like Carlyle, all saying the economic life was abominable.

Beneath the visible tragedy that moved them was another in which they themselves were involved unawares. This was a tragedy of the mind. One spell worked upon Utopians, radicals and conservatives alike. They believed the same things, held among them a common delusion. That is to say, they regarded the evils complained of as inherent in the nature of economic institutions, inevitably proceeding from the natural laws that governed them.

The Utopians, seeing how industrialism worked, and being unable to imagine its working in any other way, pleaded with people to forsake it. Seeing how competition worked, and unable to imagine any other principle of competition, they preached coöoperation. Seeing how private capital worked, and with no intuition that it could work differently in a capitalistic state of society, they embraced communism.

The radicals, believing with the conservatives that there was an eternal conflict between profits and wages, demanded that the wage and profit system be abolished. Believing with the conservatives that in a capitalistic state of society, owing to that eternal conflict, there was bound to be a proletariat doomed to poverty, they advocated the overthrow of society.

This is finally illustrated in the case of Karl Marx, the great Buddha of radicalism, whose name for more than half a century has been a terror to European capitalism. He did not attack the economic law as it was founded on Adam Smith. He agreed with Smith, Ricardo and Mill. What he undertook to do was to push the law to its ultimate conclusion, as no one else had dared to do. Not only would he prove that such was the law of capitalistic society and capitalistic production; by the same pure logic he would prove that the law was implacable. This the others had not proved; they had assumed it. In a surprising manner Marx avoided the discovery that the law was false. The spell saved him from that pitfall. Two or three times he seemed to glimpse it or suspect it, and each time he put a mark there. For, of course, if he had stumbled into it his whole thesis would have fallen.

What he thought he had proved was that the same necessity obliging capitalistic society to exploit the proletariat equally obliged it to destroy itself. The rich would become richer and fewer and the poor more wretched and numerous, until at last the proletariat at one gulp would swallow up the rich.

“What the bourgeoisie”—the capitalistic middle class—“produces above all,” he said, “are its own gravediggers.”

Thus, under the law, the doom of the proletariat was poverty, but the doom of capitalistic society was death. In his calm moments he seemed quite indifferent as to when or how the fate should fall—whether by an act of violence or by a simple declaration of the fact accomplished. Most of his followers, few of whom are capable of understanding his process of logic, construe him to prefer class war in its violent aspect.

The whole drama of European industrialism was like a dream to which no one had the key. In the physical dimension appeared and reappeared a kind of reality that was mistaken for a mirage. That was the phenomenon of overproduction, causing panics, periods of frightful depression and unemployment. The first occurrence of this kind was in 1815, when the British merchants and industrialists found themselves with more goods than they could sell. Their own people had no reserve buying power because the natural wage had held them to the barest necessaries of life from day to day; and the Napoleonic Wars had left the world at large in a low economic state, so that the export market failed. The next crisis was in 1818. There was another in 1825.

Every few years this thing occurred—overproduction and poverty at the same time, too many goods and nothing to buy them with.

The economists, as you might suppose, assumed the existence of a natural law for this contradiction. The recurrence of crises suggested periodicity. The word “periodicity” suggested “cycle.” If you could see it all in one heap, you would be astonished at the extent of the profound literature on cycles in business. One eminent economist traced the natural law thereof to sun spots and wrote a book to prove it. If sun spots caused industrial depressions, overproduction and unemployment, then, of course, it was God’s business. Economic institutions were not to blame; again, nobody was responsible.

Why did the economic thought of Europe assume this false fatalistic shape? One is obliged to ask that question. Why was industrialism in Europe accompanied by a logic that proved always its limitations—a natural wage just above the line of misery, a proletariat whose lot could not be mitigated, a perpetual conflict between profit and wages, a remorseless law of capital, the utter impossibility of diffusing prosperity in a progressive manner?

The answer is, if they could persuade the mind to prove these things, then their scheme of human relationships was justified. Their thinking was rich, but their traditions were fixed. All the reasoning with which they proved to themselves a false economic case was but a dialectic, and beneath it was a social assumption that could not be proved. That assumption was, and still is, that a certain structure of society is ordained and natural, a caste structure, one caste to labor, one to contrive and one to enjoy—the lower, the middle and the upper classes. Thus, class warfare in the Old World, now taking its images from industrialism and employing the language of economics, is simply the ancient social struggle among those three classes. Industrialism intensified it, principally by massing the political power of the lower class.

Industrialism did not create the proletariat; it did not limit the prosperity of the proletariat. It was proletarianism deep-rooted in the Old World system that limited the tremendous social significance of tools and methods whereby for the first time in the history of mankind there is the feasibility of great plenty.

V

The Thought That Overthrew It

It must now be fairly clear why the book of economics that we received along with industrialism from the Old World did not belong here. In the first place, it defined limitations, and we disbelieved in limitations. In the second place, it was designed for and took to be forever granted a social structure that did not exist here. That is to say, industrialism as we received it was founded on a foreign philosophy, one that we had definitely rejected in the Declaration of Independence. It was one of two things that could happen. We had either to change our social philosophy or change the meaning of industrialism; and for a long time, half a century at least, there was doubt as to which would happen.

It was an American, Francis Amasa Walker, in 1876, who prepared the destruction of the two disastrous foreign theories, namely—that there was a natural wage for labor, meaning the bare living wage, and, that profits and wages were in perpetual conflict.

What did it mean that among competitive industries it often happened—as a rule, it happened—that the one making the highest profit was the one that paid also the highest wages? This invariably turned out to be the most efficient industry of its kind.

Thus, it occurred to him that wages need be limited in fact only by the productivity of labor; and as for profits, it occurred to him that “Under free and full competition, the successful employers of labor would earn a remuneration which would be exactly measured, in the case of each man, by the amount of wealth which he could produce with a given application of labor and capital, over and above what would be produced by employers of the lowest industrial or no-profits grade, making use of the same amounts of capital and labor.”

Therefore profit was not that horizontal charge upon production which the European book of economics said it was. Profit, above interest on the capital employed, might be pure surplus, a plus quantity altogether; that is to say, it might be an actual increase in the production of wealth from better methods and higher skill, with only the same amount of capital and labor as before. So wages and profits were limited not by each other at all, but only by the productivity of capital and labor in collaboration.

These ideas, though now so familiar among us, were at that time strange. We did not copyright them. They were free to the whole world. But it was only here they took root. They grew slowly at first, and more slowly in the gardens of economic theory than in the testing grounds of experience. In notable instances they were proved by results. Their implications enlarged. Then suddenly they put forth their strength and overthrew the European book of economics.

This, you see, was their native soil.