American industry has had considerable experience with the two first forms of organization. Until the period of the Civil War, competition was the generally accepted rule in all phases of economic life. With the formation of the Standard Oil Company in 1870, a new principle was demonstrated, and the idea of centralization was embodied in a form that served as the model for the American trust movement. By the time of the late nineties, this principle of centralization had been carried so far that a reaction set in, and when the United States Steel Corporation was organized in 1901 local autonomy was recognized as one of the essential principles around which its structure was built.

Experience points to the system of local autonomy in local matters and to the central control of general matters as the most workable in a complex society.

In the first instance, under such a system, each local unit is responsible for its own activities and for its own discipline. It is obvious that no matter how efficient the bureaucracy, it would hardly be possible for a centralized authority to control, from one point, the six millions of farms and the quarter million industrial establishments of the United States. It is only where the handling of local matters rests with those immediately concerned that the highest degree of local pride, initiative and energy can be generated and maintained.

Such a system leaves the central authority free from detail so that it may devote all of its energies to decisions on matters of general policy, and to such procedure as affects the welfare of the whole rather than of any particular part. Economic society, to be organized successfully, must be built of units that will prove self-acting and self-directing in all matters of purely local concern. At the same time, a scheme of economic life must be devised that will make it easy and natural for these economic units to function co-operatively in all matters connected with the well-being of the whole industry or of the whole economic society.

4. Economic Forms

Much has been done to organize the economic life of the planet, particularly during the past two centuries. Prior to the industrial revolution the economic life of the masses of the people, with the exception of a little trading and shipping, was localized and individualized in the village, the commune, the homestead and the home. The industrial revolution, with its dependence upon mechanical power, served to concentrate economic life in larger units—the factory, the plant, the industrial city. As a matter of necessity, organization followed in the wake of this concentration. The owners of industry organized on the one side: the workers organized on the other. Besides these two major forms of organization within the field of industry, there was the organization of the state, which has played a leading role in the life of present-day society.

The organization of the owners, which is far more complex and more highly developed than that of the workers, has followed four general lines:

1. The organization of one line of industry. Woolen mills in Massachusetts and in New York unite to form the American Woolen Company: sugar refineries are consolidated into the American Sugar Refining Company.

2. The organization of those industries which are concerned with the turning out of one product—industrial integration. The iron ore beds of Michigan, the coal and coke industries of Pennsylvania, lime-stone quarries, smelters, converters, rolling-mills, railroad connections and selling organizations all unite into the Cambria Steel Company or the Carnegie Steel Company. Timber tracts, ore properties, mills, mines and selling agencies join to form the International Harvester Company.

3. The organization of unlike and unrelated industries—manufacturing industries, public utilities, insurance companies, railroads, trust companies and banks brought under the financial control of Morgan and Company or of some other banking syndicate.

4. The banding together of these various groups in mutual welfare associations such as chambers of commerce, boards of trade, manufacturers' associations and so on.

None of these organizations has any primary interest in geographic areas or in national boundaries. Half of the business of the Standard Oil Company of New Jersey is carried on outside of the United States; the International Harvester Company puts up plants in Canada and in Russia; United States Steel buys properties in Mexico; The National City Bank opens agencies in Cuba and in Argentina. The great modern business units deal, not with political boundaries, but with economic areas. They seek out, as the field for their operations, abundant resources, cheap labor, attractive markets.

The present economic system has made great strides toward the world organization of economic life in a comparatively short time. Australia, Canada and the United States furnish excellent illustrations of the way in which continents have been surveyed, spanned with steel, populated and exploited in three or four generations. So completely has the economic system been altered that the seventeenth century world would not recognize its infant great-grandson of the twentieth century.

5. Limitations on Capitalism

Important changes have been made in the structure of society since the inauguration of the present economic system, but these changes have not been radical enough to keep pace with the still more radical changes that have occurred in the mechanism of economic production and exchange. The chief failure of the present order is its failure to readjust social machinery in conformity with the economic changes that have occurred in society, and this failure is due, in large measure, to the limitations contained within the capitalist system.

Like all social systems which attain to positions of consequence, the capitalist system has played an important role in the development of society, and like all such systems, it has had its day. The needs of the community have advanced to a point at which they cannot be met under capitalism, whose chief failure to function more effectively in the present crisis may be traced to:

1. Excessive centralization of the determining control of industry in the hands of financial manipulators, who do not even enjoy the advantage of owning the industries which they dominate.

Through shrewd financial dealing they have maneuvered themselves into positions of importance, which they hold because of their ability to manipulate, a political rather than an industrial virtue. The necessary result of this concentration of authority is a denial of local self-determination and a corresponding loss of local initiative. The less local initiative there is, the more centralization is required to keep the machinery running, until a point is reached where all power and authority are exercised from the centre, and the local group is as devoid of spontaneity as it is of authority. At somewhere about this point, the friction involved in administration becomes so great that the whole of the social energy is consumed in the routine of keeping the social machinery running, and there is no surplus, either for leisure or improvement. This was the outcome of a similar centralization of authority under Feudalism, and it shows itself in any organization that permits itself to drift into the danger-zone of bureaucracy.

2. A second obstacle to the further development of the present economic system is nationalism.

The political state has become an adjunct to the capitalist economic system. It relies for one of its sources of driving power upon a concept of nationalism which places the political boundary lines that happen to surround a people first among the public limitations on conduct. "My country, right or wrong," becomes a catch phrase on the lips of school children. Whatever transpires inside these political boundary lines is sanctified by its association with the fatherland, while events having their origin outside of the country must be correspondingly discounted.

Since the middle of the nineteenth century the business men of every great industrial nation have been compelled to go abroad for raw materials, for markets and for investment opportunities. In order to obtain these economic advantages, the citizens of the civilized nations have not hesitated to plunder the natives, and if they resisted, to murder them—as Britain has done in India, as Belgium has done in the Congo, as Japan has done in Korea, as the United States has done in the Philippines and Hayti. This robbing and murdering is sanctified by the fact that "our interests were in danger" or that "our flag was fired upon" or that "our citizens have lost lives and property." But during the past few decades the exploiting nations have found more than natives to deal with. In almost every instance there have been at least two claimants for each choice economic morsel, and a conflict has frequently resulted, like that between Russia and Japan for the control of Eastern Asia or between Germany and France for the control of the iron and coal deposits of Western Europe. In such cases the wars are justified to the home populations as necessary defensive measures.

The justification may or may not be complete, but the bills must be paid, and they have proved to be inordinately high. The cost of killing African natives or unarmed Haytians is comparatively low, but the cost of killing Frenchmen and Germans is enormous. If, as some experts have estimated, the direct cost of the Great War was 250 billions of dollars, and if only 10 millions were killed, it cost something like $25,000 to kill each of the ten millions. It is at this point that nationalism breaks down because of the sheer inability of the peoples to foot the bills that have been contracted in destroying their "enemies"—namely, the citizens of other nations.

When this point is reached—when the costs of expansion beyond boundary lines of a nation are so great that the people who do the country's work cannot or will not meet them, the end of the system that depends upon expansion is already in sight. That point has been reached and passed in capitalist society.

While the costs of expansion were merely the cost of subduing naked savages, the business was a remunerative one; but when, to these ordinary costs must be added the stupendous price of capturing trenches protected by barbed wire entanglements, of bombing whole countrysides, of desolating states and wiping out industries, not to mention the cost of building forty million dollar ships that can be sunk in six or seven minutes with one well aimed torpedo, the limit has been reached, and bankruptcy sooner or later ensues. Capitalism is now paying that price throughout most of Europe.

3. A third obstacle to the continuance of the capitalist system lies in the fact that it has fallen into the hands of profiteers (bankers and absentee owners) whose chief purposes are to control economic machinery for the money there is in it, and to guarantee their clients (investors) an opportunity to live without working on the labor of others.

By the very nature of their connections the managers of industry are denied the right to think in economic terms. Their function is to "make money" by exploiting nature and men. They are therefore profiteers rather than producers, and no economic system can hope to survive unless it is based on production rather than profiteering.

4. The present economic system is in the hands of those who are responsible to wealth (stockholders) and not to the masses of the people.

A small fraction of the people in a modern industrial community—one in 30 or 40 or 50—holds the controlling vote in the strategic industrial enterprises, and says the final word on all questions of industrial policy. Their interest is a property interest. Automatically they are precluded and prevented from thinking or acting in the interest of the general welfare, since their clientele, which is seeking to live on the labor of the masses of their fellow citizens, is only a minute part of the general public.

5. There is another limitation arising out of the third and fourth, just enumerated—the limitation imposed upon the whole of society by the incessant struggle between the owners of industry and the workers in industry.

While the owning class continues, without labor, to derive an income from the labor of the workers, the former will grip their privileges, while the latter will oppose, obstruct, attack and ultimately deny the rights of the owners.

These five limitations: centralization, nationalism, profiteering, the handling of economic affairs in the name of property rather than in that of human welfare, and the class struggle—make it difficult or impossible for the directors of the present economic system to extend it in response to the pressing demand for expansion. Like other social systems that have prevailed in historic times, the capitalist system of economic control has its limitations, and like many another system, it seems to have reached them.

6. The Growth of Capitalism

The existing economic order has grown to its present proportions competitively and nationalistically, without any centralized supervisory control (without any board of strategy) just as one of the Canadian cities out upon the plains has grown, or rather sprawled over the prairie—each man building how and when and where he liked, each industry choosing its own location, stores, schools, churches, theatres, squatting at those points that seemed to be the centres of the crowd life. Mines have been opened, factories established, railroads built, electric plants constructed, by some individual or corporation interested in making a profit on the investment, and with little or no relation to the well-being of the community. There has been no recognized intelligent guidance behind the development of the industrial system.

In so far as the present economic life was planned, it was planned locally, by the directors of one industry, by the chamber of commerce of some city, by a far-sighted banker or financier who insisted upon thinking in terms of the coming business generation. For the most part the system grew, however, like stalks of corn in a field, each stalk drawing its own nourishment from the soil and making what progress it could along its own path toward the zenith.

Another serious drawback in the growth of the present economic system is that much of it was developed as an underground organization. Even had they decided to do so, individual business men have not been free to plan ahead and work out a business policy in the light of day. On the one side were the jealous competitors, watching every move and eager to profit by any bit of information that they could secure with regard to the plans of their rivals. On the other side was the government, with its conspiracy laws and its anti-trust laws, ready to swoop down on the business director who planned too broadly or thought too far into the future. Then, too, there was an ever-growing force in a public opinion that was suspicious of profiteers, no matter what their professions. With competitors on the watch here, and government officials yonder, there was nothing for it but to work in secret, to shadow the new policies in mystery and to get as far as possible without being found out.

Far-reaching changes have taken place, of late, in the type of men who have held the reins of control over industry. During its early years the economic machinery was constructed by men who had worked at their trades; men who had begun at the bottom and climbed into a place of authority; men who had a first-hand knowledge of the processes underlying their industries. Latterly, however, with bankers and other professional manipulators in control of economic life, the engineers, with their intimate knowledge of forces and processes have been pushed into the background, and the actual work of direction has been shifted from producers to money makers.

Again, the present economic system, built for the profit of the builder rather than for the welfare of the community, represents, not the science of organization for production and use, but the science of organization for exploitation and profiteering.

These are some of the reasons why the economic life of the modern world has grown at haphazard. Each industrial director put his own ideas into his business, and as it grew in response to them, the various businesses differed as much in shape, size and character as did the early factory buildings.

The time seems to have arrived when a new working plan of economic life may be adopted. The faults and failures of the old are glaring and the clamor for the new is reasonable and insistent.

The construction of factory buildings has been evolved into a science. Why cannot the same thing be done with the whole scheme of economic organization? Men no longer erect factory buildings according to personal whim or to the chance ideas of some budding architect. Instead they consult scientists in factory construction who have devoted years to the study and to the practical supervision of the detail of factory building. Can less be demanded of the community which hopes to build its economic life soundly and solidly?

A modern steel plant, like that at Gary, Indiana, is carefully planned before a sod is turned. The organization of the works is thought out, sketched, drawn in detail, blue-printed, so that each group of workers that participates in the construction is given a blue print that specifies what is to be done, and where and how. When all of the tasks are completed a steel plant has been called into being. But suppose that each of the eighty gangs of workers, busy on the plant, had followed the lines of its fancy or of its own special interest! The result would resemble the helter-skelter of modern economic society.

7. Effective Economic Units

Economic life has been haphazard in the past. In the future it will be one of the most scientifically built of all human institutions. It is so vital a part of the social life, and it yields itself so readily to structural co-ordination that the best structural minds will turn to it perforce, as the logical field for their activities.

The economic structure of the future, to be sound, must be built of effective working units. It is as impossible to build a live social system with dead component elements as it is to build a live body with dead cells.

At least for the time being, an intricate and complicated structure is needed to handle the problem of livelihood. As time goes on, the nature of the economic system may be greatly modified, and its structure simplified correspondingly. While the complicated economic structure remains, however, the problem will be one of co-relating the activities of vast numbers of economic units, and of prevailing on them to function with less friction and greater harmony.

Like every social structure, the economic system will be built up of lesser social groups, beginning with the simplest local body of farmers, miners or mill workers, and continuing on, by successive stages of organization to the largest and most highly complex groups in the community.

The nature of each of the units that enters into the economic structure must vary with the locality, with the industry, and so on, hence it will prove to be impossible to lay down any arbitrary rules concerning their organization. It is possible, however, to suggest certain characteristics that must be present in effective working units:

1. The economic unit, which is to be built into the new society as stones are built into a wall, must bear a very close relation to the present working forms of economic life.

Ultimately, the economic units of which society is composed will differ completely from those now existing. It is quite out of the question, however, to build a new economic structure and new economic units at the same time. Habit and convention are too strong. Innovation is too terrifying and too problematical. The life of local economic units will be carried on to-morrow very much as it is carried on to-day by the masses of the people. The most workable economic superstructure, for a new society, will be built upon an answer to the question: "How is work done now?" This method of approach takes the basic economic activities of the masses of the people for granted and seeks to build them into a sounder type of super-organization than that now existing.

2. The economic unit, whatever its size and function, must be sufficiently homogeneous and coherent so that it will retain its unity even in the face of severe stresses and strains. That is, it must be in a state of relatively stable equilibrium.

3. The economic unit must be autonomous—self-governing, self-motivating, and in a sense, self-sufficing.

4. The organization and management of the unit must make possible an efficiency in production that will supply human needs and furnish the means of providing some comforts for the population.

5. Units must be so organized that they will work effectively with other units in the same industry and in related industries.

Whether plans are being made for the rebuilding of existing economic institutions or for the establishment of new ones, these general rules hold good. They have as their objective, a workable social system that will turn the wealth of nature's storehouse into usable forms, and that will procure the distribution of the good things of life, in an equitable manner, among the groups that have assisted in their production.

8. Classes of Economic Units

Those who are concerned with the establishment of a working basis for economic society must bear constantly in mind the purpose of economic organization—to provide livelihood on the most effective possible terms. The economic system is not called on to perform any other function.

Economic function would seem to be most effectively aided by some organization of the economic units that would provide a structurally sound skeleton for the whole economic mechanism. The needs of particular localities, the requirements of larger groups within one industry, the economic relations of continental areas, and finally the world organization of industries must be provided for. In order to meet this situation, it would seem desirable to think in terms of several different grades or classes of economic units. As a working basis, four are suggested:

1. The local unit, which would be some particular phase of the economic process that normally functions as a whole.

This unit is now a working part of the present economic order, and whether it is a colliery in Wales, a division of the P.L.M. Railroad in France, a mill in Bombay, or a farming community in Saskatchewan, it would continue the process of turning out goods and services under the new economic regime as it does under the present one.

2. District units composed of a number of neighboring local units in the same industry or in closely related and co-operative industries.

The district is an aggregation of conveniently situated local units, and is organized as a ready means of increasing the efficiency of the groups concerned. It might cover the tobacco factories of Havana, the coal mining industry of the Pennsylvania anthracite fields or the dock working activities of Belfast.

3. The divisional units which would be designed to cover a convenient geographic area, and to include all of the economic activities in a particular major industry within that area.

The boundaries of the districts would vary from one industry to another. The boundaries of the divisions would be uniform for all industries. The whole world would therefore be partitioned into a number of divisions, such, for example, as: North America, South America, South Africa, the Mediterranean Basin, Northern Europe, Northern Asia, Eastern Asia, Southern Asia and Australia. In setting the boundary lines of these divisions, economic homogeneity, geographic unity, the distribution of the world population and the character of existing civilization would all be called into question. Under such a grouping would fall the agricultural workers of Southern Asia, the transport workers of North Europe, the manufacturing workers of North America.

4. World industrial units, so designed as to include within their scope all of the producers of the world classified in accordance with their occupations.

To-day, the outstanding method of classifying the people of the world is to take them in relation to their political affiliations. The new grouping would arrange all of the peoples in accordance with their economic activities. A simple form of classification would include: agriculture, the extractive industries, manufacturing, transport, trade, housekeeping, and general (miscellaneous) trades. The classification might be made far more elaborate, but for clarity of discussion a simple classification is of great assistance. Every person in the world who performed a useful service would belong to one of these great industrial or occupational groups, and the aggregate of the membership of the groups would equal the aggregate of all the producers of the world.

Under this plan, therefore, each individual would have a series of economic affiliations. He might, for example, be a docker on the French Line at Le Havre (local affiliation); a dock worker in the Le Havre district (district affiliation); a transport worker of North Europe (divisional affiliation); a worker in the transport industries of the world (industrial affiliation).

Since each of the producers in the world would have this series of relations, all of the producers would be grouped together in local, in district, in divisional and in world industrial groups, so that the economic life of the world would present the picture of a completed economic structure very similar to the political structure that has been evolving for many centuries, and which has reached its highest forms of development in such new countries as Australia and the United States, where each person is a citizen in a borough, city or town, in a county, in a state and in the whole nation or federation of states.

While political life has been thus organized about the administration of certain public affairs, economic life has remained disorganized, or has been organized largely with an eye to owners' profits. The producers society will be organized in economic terms very much as the present society is organized in political terms. Each producer will be a participant in the life of economic units, graduated from the local economic unit to the world industry.

9. The Ideal and the Real

This is, of course, an idealized picture, subject to an infinitude of modifications, just as an architect's plan for "a bungalow in the woods" or a city planner's scheme for a model town is idealized and subject to modifications. It is not a working drawing, but a general design which is intended to place the whole subject of economic reorganization on a plane where it can be discussed as a matter of practical social science.

The plan presented here is simplified as far as possible in order that attention may be concentrated on the essential issues that the world faces. Too much time and energy have already gone into contentions over details, when there was no general plan in view. Let no man deceive himself with the delusion that the solution of the world's economic problem is a simple matter, but at the same time, each one who is striving toward a better world may rest with the assurance that there are certain simple and fundamental principles that underlie world economic organization.

Society is structural, and as a structure it must function; the economic world is built up of working units that are compelled, by the nature of modern industry to work co-operatively, but the very nature of the political structure of modern society hampers this co-operative work in many essential directions; federation seems to be the logical answer to the enigma of effective social organization, and it only remains to organize a workable series of economic units and to build them into a world structure—a world structure in terms of production rather than of politics.

The world is sadly muddled. Millions pay for this muddling with their lives; tens of millions pay with bitter suffering. The owners have had their day. The opportunity for the producers has well-nigh come.

The men and women who are responsible for the work that is involved in the economic reorganization of the world must see the whole plan as well as the multiplicity of detail, and must work with the whole plan vividly before their eyes if they are not to be blinded and led astray by the multitude of will-o'-the-wisps that flit across the path.



IV. ECONOMIC SELF-GOVERNMENT

1. Maximum Advantage

Economic society consists of unit groups or organs which are established for the performance of certain functions. Mines and other extractive units take nature's stores from their age-old resting place and prepare them for the railroad, the factory or the home; the transport units convey goods and people; the merchandising units bring together many varieties of goods, and act as a distributing agency for those who will consume the products of mine and factory. The existence of a unit of economic organization is therefore a proof of the presence of some economic function. The whole structure of economic society has developed in response to the economic needs and in accordance with the economic activities of the community in which it exists.

When a part of the economic structure is built, it is expected to function. Mines, when opened, must produce coal; railroads, when completed, must provide transportation. Side by side with the problems involved in the kind of groupings that make up economic society, there is the question of the handling and direction of these groups. No economic institution is of value unless it will perform some useful service by turning out an economic good or by affording a benefit that corresponds to some human need.

Each rational person, and every self-directing social group seeks to get the largest possible return in the form of satisfaction for the time and the energy invested in any given enterprise. This law of maximum advantage—which applies with double force to social enterprises, underlies all intelligently directed effort.

Unintelligent effort concerns itself with the principle of minimum outlay—seeking to ascertain the least possible expenditure of energy that will yield a subsistence. This is one of the essential distinctions between the present day society and most of those that have proceeded it. Likewise it is the difference between the more and the less highly civilized portions of the earth at the present time. The individual or the group—operating on a very narrow margin, or on a deficit that involves constant misery and that may at any time spell disaster, tends to slip by with the least possible misery or suffering, or, to put it more technically, tends to expend the least possible amount of energy that is required for survival. The moment the tables are turned, and the individual or the group operates on a surplus which permits the enjoyment of more than the bare necessaries, the law of minimum outlay is supplanted by the law of maximum returns.

The truth of this principle is strikingly illustrated in Canada, Australia, Argentina, and other relatively new societies where resources are abundant and surplus is large. The same men and women who, under European conditions of narrow marginal living, were satisfied to survive with the least possible expenditure of effort, are transformed into creatures operating on another economic plane. In these new and fertile countries, where the individual, and indeed, the entire group is able to live above the line of bare subsistence, and where surplus is so easily accumulated, the individual devotes himself untiringly to the economic struggle. It is not because they are poor, but because they have a chance to get rich that these people are willing to expend unusual effort.

Just as the individual, working on a basis of economic surplus, directs his energies to the task of insuring and of increasing the surplus, so the group, which has a similar economic advantage, devotes itself to the task of building up a surplus as soon as it realizes the possibility of increasing its returns through an increase in the energy and intelligence devoted to group purposes.

The personal comfort and the industrial prosperity of temperate zone civilizations depend, at the present moment, in great measure upon the supply of coal which is available. Certain parts of the earth, such as Wales, the Saar Basin and Newfoundland contain coal deposits upon which the entire industrial society is dependent for its survival. It is, then, a matter of the gravest importance to secure a maximum coal output, at least to the point of satisfying the minimum demands of the community. Whatever men and machinery are required to produce the ration of coal upon which industrial efficiency depends must be directed toward that goal. At the same time, waste, inefficiency and dis-employment, whether of men or of machines must be reduced to a minimum.

What volume of production constitutes a maximum of return under a given set of circumstances, experiment alone will decide, but the individual and the social effort to secure this return must be unremitting.

Such maximum returns will be obtained by society when each productive unit is operating at maximum efficiency. The efficiency of the human body depends upon the efficient operation of the digestive system, the respiratory system, the circulatory system, and so on. The stomach, the lungs, the heart must all function smoothly to maintain bodily health. The body cannot function as a body. It functions through the aggregate activities of its various organs. The same thing is true of a society. It is impossible for the economic system to secure its maximum returns as a system. It will work only through the co-operative functioning of its various constituent elements. If the efficiency (health) of the economic system is to be preserved, it will be accomplished through the effective working of the mines and other extractive units; the mills, and the other fabricating units; the railroads and other transport units. Each one of these constituent elements of the whole economic society must be self-efficient, in order that there may be a high standard of efficiency in the entire economic system.

The units of which the economic system is composed must therefore be self-motivating and self-acting. They must be "alive." If one part of the economic body is dead, the whole will eventually disintegrate and decay.

2. The Essentials for Maximum Returns

The efficiency of the economic unit—the mine, the factory, the railroad division—depends upon the attitude of the individual human beings of which the unit is composed. Just as the entire economic system is made up of an aggregate of functioning units, so each unit is made up of functioning individuals. What would a coal mine be without its pick miners, road men, drivers, door-men, dumpers? The efficiency of the economic unit cannot be maintained unless the individuals who compose it are self-acting, intelligent beings, who know what they want and why they want it; who know the ends they desire to attain and how to reach them. Without this beginning there can be no lasting efficiency in a society that is dependent for its success upon the self-generated activity of autonomous groups.

In order that society may enjoy a maximum of return for its outlay of labor and machinery, therefore:

1. The human values present in each economic unit must be maintained at a high level through an appeal to the finest qualities of the individual human being.

That appeal must be strong enough and constant enough, when coupled with the economic appeal, to provide a reason or incentive for continued activity.

2. The integrity and permanence of the unit must be preserved.

The economic unit is one of the tools with which society does its work, and is the means relied upon for the production of livelihood. Like the axe of the woodsman or the lathe of the mechanic, the social tools and machinery must be kept in effective working order if society is to receive a return for its outlay of labor and materials. Three items enter into the maintenance of this efficiency: (a) current repairs, (b) periodic rebuilding, and (c) ultimate replacement. This is as true of any part of the social structure as it is of mechanical devices. The more complicated the structure the more necessary are rebuilding and replacement.

3. The productivity of the unit must be kept up to a high level of efficiency.

This is the purpose for which the unit exists. Efficiency is the product of the individual activity of the group members, and of the working effectiveness of the mechanism with which they accomplish their tasks. Thus both are essential to efficiency in production.

4. Self-motivation and co-operation are the two fundamentally important requirements in the working of all economic units.

The former is the best guarantee of the continuous functioning of the unit. The latter links together the different units, making them working parts of the whole economic system.

Here are four indispensable requirements—the maintenance of human values, the preservation of group integrity and permanence, productive efficiency and self-generated activity—for the building and successful continuance of economically sound unit groups. If society is to secure maximum returns, if the economic mechanism is to yield its largest quota of goods and services to mankind, the units out of which society is built must meet these requirements which constitute four of the essential pre-requisites to the success of any economic experiment.

3. Centralized Authority

Granted the desirability of efficiency in economic organization, the question at once arises as to how this efficiency is to be guaranteed. Up to this point the means adopted to secure such an end have consisted in concentrating economic authority in the hands of a small owning and managing class, and in leaving with the members of this class the determination of policy and of methods of procedure.

The concentration of administrative authority at one point has proved impracticable, first because of the great amount of red tape involved in the handling of the endless detail, and second because of the resulting destruction of initiative and enterprise. Such a centralization of social function would be just as cumbersome as a like centralization of all bodily functions in the higher brain centres. If men were compelled to reason about and to direct each step, each movement of eyes or hands, each breath, each heart-beat, the attention would never pass beyond the boundaries of such pressing and never-ending routine. Many bodily organs, like the stomach, function involuntarily. Walking becomes habitual. It is only when the stomach and the legs fail to work properly that they become the objects of attention. The same thing should be true of a well-directed economic system. Each local unit should function locally and autonomously, and the problems of local function should never come to the attention of a more central authority until there is some failure to work on the part of the local unit.

Those who despair of the future of society, and who feel that effective co-operation between social groups is impossible, should remember that the organs of the human body have been gaming experience in co-operative and harmonious function for hundreds of thousands or for millions of years, while the organization of society is an art that is still in its extreme infancy. The astonishing thing about the various social groups is not that they work so badly together, but that they work so well.

As the centralization of authority increases, the amount of red-tape piles up until more social energy is consumed in overcoming social inertia and the friction that is the result of social function, than is produced by the function in question. When this point is reached, the social machinery operates at a constant loss, and it is only a question of time when it will cease to operate altogether, and the social machinery will begin to disintegrate into its constituent elements. The greater the degree, therefore, of localization, provided the mechanism can be held together and kept in working order, the less the loss in social energy.

4. An Ideal Economic Unit

The social group thus faces two problems: One is the development of sufficient energy to keep the social machinery going. This problem is tied up with the stimulation of human wants, as it is only from the aroused energies of men and women that the social energy is derived. The other is the reduction of social friction and other forms of social waste to a minimum, in order that the largest possible amount of social energy may be devoted to the work of driving society.

The present social order relies, in part, for its driving power on man's desire for personal economic advantage. Where the rewards have been considerable, large amounts of energy and ingenuity have been developed as the result of this stimulus. The worker, the manager, the whole producing unit strove to excel, both because failure carried with it the penalty of destruction (bankruptcy or unemployment) and because success carried with it the probability of large economic rewards (profits). The result was an outpouring of social energy in the various independent local groups.

The real difficulty inherent in the earlier stages of the present order was not its failure to secure abundant human exertion, but its failure to provide any means of co-operation between individuals and between groups. The same set of social principles which decreed local rewards and local punishments for initiative and enterprise, or for the lack of them, was built upon the theory that "competition is the life of trade." Thus, while the present economic system, in its earlier stages tended to stimulate initiative, its form made co-operation difficult or impossible.

The ideal economic unit would be one capable of generating its own driving power, and given a legitimate exchange of commodities and services with other units, one that could maintain its own energy and efficiency. A society composed of such units would have great vitality because its energy would be generated in a large number of more or less independent localities. A study of the agricultural village of Central Europe or of the Mexican Indians shows how workable and how stable such a form of society really is.

The only practicable method of maintaining efficiency and of reducing the friction incident to social function is to erect a form of local self-government that will make possible both the stimulation of initiative and effective co-operation between groups.

5. Rewarding Energy

The issue of economic self-government resolves itself into two questions, which the average human being will sooner or later ask:

1. What do I get out of it?

2. Who is to be the boss?

The intelligent man or woman cannot be expected to exert himself freely for the building of a palace at Versailles, on whose grounds he can never set foot, or for the maintenance of a Palm Beach that he sees only on the screen. The economic necessities are too immediate and the economic urge is too strong.

Before the individual will expend his maximum energy upon the economic process, he must see tangible results such as bread, shoes, schools, and holidays. One of the strongest arguments that the present economic system advances in favor of its continuance is the showing of large tangible returns in the form of economic goods. To be sure these results have not been secured by everyone, but there is neighbor Pitt who started as a stable boy, and who now owns the largest garage in the city; there is neighbor Wallace who began life as a grocery clerk and to-day is master of many acres of coal and timber. Besides, yonder store is filled with the good things of life, ready for anyone who has the money to buy them. Many persons, under the present system, make enough to buy all of them and others beside. So the argument runs, and those who advance it can give a wealth of instances to prove the point.

The huge rewards of the present system even though they have gone to the very few, have been turned over to those who could survive in the struggle. Everyone knows that the winners in a lottery are few and the losers many, yet each buys a ticket because he hopes and expects to be one of the winners.

Society, as reconstructed, must be less of a gambling venture and more of an established certainty, with the material rewards going to those who are responsible for producing them. And each person who thus shares in the economic rewards of society must see the connection between the energy expended and the share received. Only while such a connection apparently exists will economic effort be expended by the normal individual.

6. The Ownership of the Economic Machinery

The individual cannot be expected to exert himself where there is no apparent connection between the effort expended and the return for his effort. Neither can he be expected to exert himself in the interest of economic machinery that belongs to someone else. His interest can be maintained only by the hope of a return for the effort that he expends, and by a sense of control over the job on which he works. Among the various experiments that society has tried, in an effort to attain these ends, none has been more successful than self-government.

The application of the principle of self-government to the economic world involves the control of economic machinery and economic policy in each unit by those who compose the unit. The members of each economic group must be supreme in their own field, except in so far as their decisions affect the welfare of other units. In such cases the decision must rest with that larger economic group to which the involved economic units belong. Thus the aim of economic self-government is to keep the responsibility centered upon those who would normally be the most concerned in getting results.

All matters of policy will therefore be decided by those individuals or groups that are directly involved. Where possible such decisions should be reached in open meetings corresponding to the tribal council or the town meeting. Such meetings may always be held in local economic units, such as collieries, departments of factories and the like. Where it proves impossible to get the members of an economic group all into one meeting place, their affairs must necessarily be transacted by representatives, chosen as directly as possible.

7. Economic Leadership

The decisions having been made with regard to matters of policy, the next and equally important question arises: "Who shall be entrusted with the duty of seeing that policies once decided upon are carried out? Who shall be entrusted with leadership in economic affairs?"

Those who are entrusted with the carrying out of economic policy in a producers' society may be divided, roughly, into two classes: the executive and the expert. The executive is the director of general policy. The expert is the specialist, selected to do a particular piece of work. For example, the representatives of District 2, United Mine Workers of America decide that, as a matter of general policy, they will advocate the nationalization of the coal mines, and they instruct their president and their executive board accordingly. The executives of District 2 are therefore charged with the duty of organizing a propaganda, which, to be effective, must consist of a well-ordered summary of facts about the coal mining industry, put in a form that can be easily understood by the average man, and distributed in such a manner that it will reach the people responsible for coal mine nationalization. Here, then, are three distinct tasks: (1) an investigation of the facts; (2) a plan for nationalization; and (3) an advertising campaign. The first two of these tasks, to be well done, must be placed in the hands of engineers, statisticians and mine experts. The third will fall to the lot of an advertising or publicity man. The president of District 2 is an executive, charged with the duty of seeing that a program of mine nationalization is carried forward. The engineers, statisticians and advertising men that he secures to do the work in their respective fields are experts. These distinctions have been well established in the world of government and of business, and they are rapidly finding their way into the world of labor.

There can be no great difference of opinion about the expert. He is a technically trained man, and as a chemist, an electrician, or as an auditor of accounts he has a special field in which he is supposed to be a master craftsman. The selection of such an expert, therefore, is a question of finding men with the knowledge and experience necessary for the doing of a certain piece of work.

8. The Selection of Leaders

The situation is far more complicated when it comes to the selection, of the executive. He is the keystone of the social arch—the binding force that holds the various parts of the group apart and together. Upon his decisions may depend the success or the failure of an entire enterprise, because, tie him with red tape as you will, he still has a margin of free choice in which he registers his success or failure as an executive.

The executive is put in office to do the will of a constituency and to carry out a certain policy. But what is the will of the constituency, and which one of a half dozen lines of action will most completely and effectively carry out the policy in question? The executive must find an answer to those questions, and he must find it hour after hour and day after day.

Society has striven for ages to devise a successful method of picking executives, and of keeping a watchful eye on them after they assume the reins of government. There are three general ways in which the selection may be made:

1. Through heredity—the leadership descending from one generation to the next in the line of blood relationship.

This is the method practiced in all countries that have kings, aristocrats, plutocrats or others who automatically inherit power from their ancestors.

2. Through self-selection—the leadership being assumed by those who are the quickest to seize it.

Primitive, disorganized or unorganized societies or associations pick their leaders in this way. The strongest, the most courageous, the most cunning, press to the front in an emergency, and their leadership is accepted as a matter of course by those who are less strong or courageous or cunning. The leaders of a miscellaneous mob are apt to be thus self-selected. The leaders of new activities, like the organized business of the United States and Canada, have been, for the most part, self-selected. Seeing opportunities for economic advantage, they have grasped them before their fellows realized what was happening. The great accumulations of economic power that were made in this way during the past generation are now being passed from father to son, and the leadership in American economic life is therefore tending to fall into an hereditary caste or class. There is still, however, a considerable margin of self-selection of American economic leadership.

3. Through social selection—the right and duty of leadership being assigned by the group, after some form of deliberation to a designated individual.

This is the method common to all highly organized and self-conscious societies that are not dominated by a system of hereditary caste rule. Public officials in most of the countries of the world, officials of trade unions and other voluntary associations are usually selected in this manner.

The selection of executive leadership in any organized society must be through heredity or through group choice. Self-selection is necessarily confined to new or temporary or loosely organized groups.

9. The Details of Organization

These general principles of economic self-government may be applied to local, district, divisional and to world economic groupings. To be sure the application, in each instance, will be varied in accordance with the peculiar needs in question, but a general scheme of procedure may be suggested somewhat as follows:

1. SUGGESTIONS FOR THE ORGANIZATION OF A LOCAL ECONOMIC UNIT IN A GIVEN INDUSTRY—A MINE, FACTORY, STORE—

a. The entire working force would meet at regular intervals, in a shop meeting, or colliery meeting, or store meeting, to transact general business.

b. At such a meeting a shop committee selected by those present, would be charged with the responsibility of directing affairs in the shop that had selected it. The shop committee would consist of a small group, varying in size with the size of shop, under the chairmanship of a person selected by the workers at the same time they elected the committee.

c. This chairman of the shop committee would be called the shop chairman. His duties would correspond roughly with those of the present-day foreman, or with those of the shop-steward or shop chairman in some of the more advanced of the British industries. In reality this shop chairman would be the shop executive, holding office while he could retain the good will of his shop-mates, and while he could give a satisfactory account of his shop in the way of production and discipline.

d. Where there were a number of departments in a large factory, store or other establishment, there would be a plant committee made up of the chairmen of all shop committees in the plant.

e. Where plant committees were organized, it would be their duty to designate one of their members as chairman. This plant committee chairman would therefore be what, under present conditions, is the general manager of the plant, with his fellow committeemen as his executive committee or board of managers.

f. Each economic unit, whether shop or plant, would have its engineers or experts, picked, like other workers, by the shop committee or the plant committee, and responsible to that committee for the particular tasks assigned to them.

All participation in the activities of this basic economic unit—hiring and firing as it is called—would be determined by the shop committees and by the plant committee, each with final local jurisdiction, subject, of course, to a referendum of the workers in the department or the plant concerned. By this means, the members of each basic economic group would be made the sole judges as to those with whom they should work. Each group would therefore have an opportunity to set its own group standards and to build up its own group spirit.

The individual worker, in order to secure a job, or work place, must therefore subject himself to the scrutiny of his prospective shop-mates, perhaps even to work for a time on probation, and this to prove his fitness to join the group and thus to participate in its activities.

Such a plan would provide a self-governing and self-directing economic unit, capable of adaptation to the various phases of economic life, and at the same time capable of generating its own social steam, and thus driving itself forward on the path of its own activities.

Farming, hand-craft industries, and other occupations in which the worker owns his own tools, and is worker, manager and business-man combined, would be forced to organize a local unit more nearly approximating the medieval guild or some of the modern organizations for producers' co-operation. The general principles of organization would be the same in the one case as in the other, power and control being held locally by self-directing, autonomous groups.

This plan for the organization of a local self-governing economic unit represents an attempt to apply the best principles of economic and political science to the working out of an intelligently directed society.

2. SUGGESTIONS FOR THE ORGANIZATION OF AN ECONOMIC DISTRICT IN A GIVEN INDUSTRY.

a. The district would consist of a number of economic units in the same or in an immediately related field of industry. For example, it might be formed of steel mills alone, or of machine shops and steel mills, or of machine shops, steel mills, and foundries. The decision on the matter of membership in the district would rest, first with the local economic units that united to form the district, and second, with the industries immediately concerned. The purpose of the organization would be to link together those economic units that were most dependent upon one another, and that therefore had the most interests in common.

b. When formed, the organization would apply for recognition to the divisional organization of its particular industry. If the district comprised manufacturing industries, it would apply to the divisional organization of the manufacturing industries; if the district comprised coal mines, it would apply to the divisional organization of the extractive industries. It would be to the interest of the divisional organization to recognize only such district organizations as did not involve the divisional organization in jurisdictional disputes.

c. After securing recognition from the divisional organization, the district organization would be the judge of its own membership, and would be in a position to add such local economic units as were to its advantage in pursuit of its general policy.

d. The control over the affairs of the district would be in the hands of a district committee, elected directly by the workers of the district, each group of workers voting by ballot in its own shop.

A. When the elections for membership of the district committee were held, the members of the plant committees, or of the shop committees where there were no plant committees, would be the candidates. By this means, only those of recognized standing in a local group could become candidates for the higher offices. At the same time, the local group, when it elected to local office would be nominating for higher office.

B. When a plant committeeman was elected to the district committee, his position in the plant committee would be filled by special election.

e. The district committee would be a large body, consisting of at least one representative from each of the plants or shops in the district.

f. The routine work of the district committee would be handled by the district executive committee, picked by the district committee from its own membership, and responsible to it as a board of managers.

g. Each district would have its staff of engineers, experts or inspectors, whose duty it would be to check up on the technical side of the activities in the district, very much as a county agricultural agent or a district sales manager checks up on the work of those who come within his jurisdiction. These experts would be selected by the district executive committee, subject to the approval of the district committee.

h. Where possible, important issues confronting the district would be brought to the attention of the workers in the district through one or a series of mass meetings. Where this proved to be impossible, newspapers, leaflets, and other forms of printed information must suffice.

i. The district would therefore be a self-governing group of economic units, engaged in activities that fell within one of the main divisions of industry. It would be the judge of its own economic affairs and would be autonomous in all matters affecting only the district.

3. SUGGESTIONS FOR THE ORGANIZATION OF A GEOGRAPHIC DIVISION WITHIN A GIVEN INDUSTRIAL OR OCCUPATIONAL GROUP.

a. The division would consist of a convenient geographic area, in so far as possible contiguous and closely bound together by transport facilities, related economic interests, etc. North America, South America, South Africa, and Mediterranean Basin, Northern Europe, Northern Asia, Eastern Asia, Southern Asia, and Australia might be agreed upon as such divisions.

b. The organization of the division is, in the main, a replica of the organization of the district, with two exceptions:

A. The scope of the organization is limited geographically to the division in question, and covers all of this division, whereas the district organization includes a group of local economic units, which are not necessarily contiguous, and are in no particular geographic relation to one another. While the district organization is strictly industrial, the divisional organization is industrial and geographic.

B. The organization is definitely limited to the major occupational groups, each of the groups covering the whole of the division. Hence there would be, in each division, a division organization of transport workers, a division organization of agricultural workers, a division organization of those engaged in manufacturing and so on, making a divisional organization for each of the major industrial groups. A district might comprise only one branch of an industry such as textile manufacturing or electric transport. All of these districts would be included, however, in the particular divisional organization with which they would logically affiliate. Thus there might be a district organization for the textile workers of Lyons and vicinity, and another district organization for the metal workers of St. Etienne and vicinity. Both districts would be included in the divisional organization of the manufacturing industries of the Mediterranean Basin.

c. The control of each industry within a division would be vested in a divisional congress, elected directly by all of the workers in the division who were engaged in that industry.

A. The members of this congress would be elected by districts, with a minimum of at least one member from each district, and an additional member from each district for each additional quota of workers over a specified minimum. The details would necessarily vary with the division, but if there were 100 districts in a division, with a million workers in all of the districts, each district might be allowed a minimum of two members in the divisional congress, with one additional member for each 5,000 workers in excess of 10,000. Under such an arrangement, a district with 25,000 workers would have five representatives in the congress, and so on.

B. The members of the district committees are the candidates for election to the divisional congresses.

d. The divisional congress meets at least once in each year, and within thirty days of its election.

e. The divisional congress picks from its own membership a divisional executive committee, which meets at intervals through the year, and is responsible for the affairs of the division when the divisional congress is not in session.

f. The divisional congress selects from its membership a divisional executive board which sits constantly. Its members are members of the division executive committee, and it is responsible to the division executive committee when the division congress is not in session.

g. Each divisional executive board picks a staff of experts or engineers, who are approved by the divisional executive committee, and who constitute the technical general staff of the division.

4. SUGGESTIONS FOR THE ORGANIZATION OF A GENERAL INDUSTRIAL GROUP ON A WORLD BASIS.

a. The general industrial group, or general occupational group, would be a major subdivision of the world's industrial life. All of those producers who were engaged in like activities would be classed together, and the number of these world industrial groups would be determined as a matter of administrative convenience. The producers of the world might, for example, be divided into the following major industrial groups: agriculture, the extractive industries, manufacturing, transport, trade, housekeeping, and general (miscellaneous) workers. Some such economic grouping of producers would include all who are employed in producing goods and services and would provide the basis for an alignment of the world's population in terms of what the producers did rather than in terms of where they lived.

b. Thus far, in the detailed statement of local, district and divisional organization, only the barest outline has been given, first because it was the intention to discuss the world economic problem rather than the local problem, and second because the internal structure of each industry would be determined largely by that industry, and would, of necessity, vary considerably with the varying industrial conditions. The organized world industries, however, are the economic framework of the producers' society, and their organization becomes a matter of the most supreme concern to producers everywhere.

c. The control of affairs in each of the major industrial groups would be vested in a congress of from 500 to 1000 members, meeting at least as often as once in each January.

A. The members of the divisional congresses, within these same industrial groups, are the candidates for election to the world congress. They are voted for directly by the workers in each division, and if they are elected to the industrial congress, the places thus made vacant in the divisional congress are filled by special election.

B. Each division would send a minimum of twenty members to the industrial congress, and an additional member for each specified quota of workers.

d. The industrial congress would pick an executive committee from its own membership. This committee would meet at regular intervals, and would be responsible for the conduct of the industry when the industrial congress was not in session.

e. The congress would pick a number of additional committees to deal with the various problems arising within each industry. These committees might be called policy committees. In practice, and for the sake of greater effectiveness, it might be desirable for the industrial congress to select a chairman, permit him to pick his committee from the membership of the congress, and then endorse the whole committee, very much as a minister in a responsible government picks his cabinet. Since these committees would be concerned with problems of policy on one side and with problems of administration on the other, such a method would develop a far more harmonious working group.

f. The chairmen of these various policy committees together with the chairman of the executive committee would constitute the board of managers of the industry, which would be the responsible directing authority for the world industrial group.

g. Connected with each of these committees, and selected by them, there would be a board of engineers and experts, responsible for the technical side of the industry.

A diagram may help to visualize the relations existing between the various parts of the world organization. (p. 98.)

10. The Progress of Self-government

This outline of the organization of one of the major world economic units is tentative and suggestive rather than arbitrary or final. The details of the plan would necessarily vary from one industry to another and from one district and one division to another. All such matters of detail would be subject to the decisions made by the district committees, by the divisional congresses and by the world congress of each industrial group.

The aim of the plan is to build up an economic structure that will be efficient and at the same time sufficiently elastic to meet the changing needs of the times. Production is always necessary, but the methods vary from one age to another. The changes which occur in the economic activities of a population must find their counterpart in the changing economic structure of that community, otherwise disorganization and chaos will inevitably result.

The means best calculated to preserve the efficiency and to guarantee the mobility of the economic life of the world is self-government. No other known means of directing and controlling social affairs will secure permanent results, either of efficiency or of mobility.

PLAN FOR THE WORLD ORGANIZATION OF ONE INDUSTRIAL OR OCCUPATIONAL GROUP

Industrial Board of Managers, Sits composed of committee chairmen Continually / / Each division / represented on / each committee / - - Policy Industrial Policy Committee Executive Committee Committee - - / / / / / - Industrial Congress consisting of Meets in January, representatives from each of the no division less world divisions than twenty members. - / / / / / / - - The producers of each Australian Mediterranean North of the world divisions Division Division American are the qualified Division electors for each industry in each - - division.

Self-government is present to some degree in every form of society of which there is a record. Under some circumstances it is confined to one caste or class. Again it is the right of the whole society. In one place it is confined to political affairs alone. In others it is present in all public activities. Everywhere, however, there is self-government of some kind.

Recent generations have devoted their attention to the fostering of political self-government, and to the organization of a multitude of voluntary associations based on the self-governing principle. Generation by generation the peoples have been prepared to assume an ever-increasing authority over the complicated mechanism of public affairs. Self-government in the clan or in the agricultural village was a simple matter compared with the management of public affairs in a modern economic society. It is this task, however, that confronts the present generation. The principle of self-direction, extended into the complex field of economic relationships, must be relied upon to pull together the scattering threads of economic activities. That this task involves an immense amount of propaganda and educational activity, goes without saying. That it is the only sound basis for social procedure seems to be the conclusion inevitably arising out of a careful examination of the premises.

The organization of sound economic groups is a problem in the field of social engineering. The preparation of the industrial populations for economic self-government is a problem in the field of education. Both of these problems lie at the root of any effective reorganization of the world's economic affairs.



V. A WORLD PRODUCERS' FEDERATION

1. World Outlook

An organization of producers into groups corresponding with their occupations lays the basis for world thinking and world federation. Each active member of society would then be directly associated with a group that was world wide in its scope, so that transport workers, miners, farmers and other producers would be in constant touch with similarly occupied men and women on every continent.

One of the principal disadvantages of the present organization of society is the sectionalism arising out of the political divisions established by national boundary lines. In a world where all of the producers were organized along lines corresponding with their occupations, sectionalism would have much less chance to play a role in the lives of the people. To be sure issues would arise between the various economic groups, but each individual would be affiliated with a world organization, and the scope of his interests and of his thinking would therefore be much broader than it is under the present system of political divisions. World thoughts and world views on a hitherto unknown scale would be the logical outcome of world economic affiliations in producer groups.

The organization of society along the lines of production will therefore necessarily broaden the outlook of those whose visions are now limited by the confines of a political state, and the present ties of loyalty which bind the individual within a geographic area would then attach him to a world organization and would compel him to think in world terms. That there are limitations imposed by the affiliation of the individual with an economic group cannot be denied, but such limitations are far less drastic than those prescribed by restricted geographic areas.

2. The Need of Organization

The organization of society in terms of economic activity, building up through intimate local units, through district and divisional units to world organization within the major industrial groups does not provide any basis for effective co-operation between the individual groups. The metal workers of the world might produce machinery and the farmers wheat, but by what means are they to exchange their product and regulate their output in a way to secure the maximum of advantage on both sides?

There are two outstanding characteristics of present-day economic life. One is its world scope. The other is the intimate and constant inter-working of the various parts of the economic machine so well described by J.A. Hobson in his book on "The Industrial System." Agriculture, mining, transportation, manufacturing and so on are all linked into one functioning mechanism. To be sure there are times when the machine does not work very well—as after a great economic depression, but the purpose is there, the intermittent working harmony of the mechanism is unquestioned, the experience in world economic activity is a permanent part of the heritage of the race, and there remains only the task of making world economic relations more effective and more permanent than they have been in the past. The ice has been broken in the sea of world economic life and the human race has already taken many a plunge in its waters.

Under any form of society that can be foreseen in the immediate future, the need of close co-operation between the various parts of the world economic mechanism will tend to increase rather than to diminish, and it is therefore of great importance to have at hand a means of maintaining and facilitating the contacts between the different economic groups.

The present system has given economic life an exceptional opportunity to grow within the boundaries of single nations, and to co-operate within those areas that are not sacred to competition. Meanwhile the need for world co-operative organization has grown steadily with the evolution of economic life on a world plane, fostered by some of the clearest visioned among the men who are responsible for the direction of the economic world.

3. Present-day Economic Authority

Under the present system of society the linking together of the various parts of the economic world is a private matter. Mines, factories and mills use the railroads as a means of transporting their products. The intermediary in this as in other transactions between the various branches of the economic world is the bank. Thus the banker, who provides the credit, and through whose private institution financial transactions take place, becomes the arbiter of economic destiny, rendering decisions upon which the well-being of the masses or producers depends, yet wholly irresponsible for the results that follow on these decisions. Using the people's money, possessed of vast authority over the jobs and the property of the producers, the banker is answerable only to other financiers who have a similar power and who enjoy a similar freedom from social restraint. Within the scope of the law prohibiting fraud and theft, and subject to the limitations of conscience the bankers and their confreres follow the dictates of their own inclinations. Quite naturally, under the circumstances, they have grown rich, and powerful far beyond the extent of their riches, since their control of the credit—upon which the whole business community depends—and their easy access to other people's money in the form of insurance premiums and savings bank deposits, place them in a strategic position which permits them to dominate and to dictate outside the boundaries of their ownership.

The power now exercised by the bankers will, in a producers' society, be under the control of public servants whose business it will be to link up the various lines of activity within the economic machine.

At one stage in the development of the world's economic life it was necessary to take out of the hands of private individuals the right to issue money, and to make of money issue a public function. To-day no one questions the desirability of having money issued by public authority, and the right to issue money is recognized as one of the important attributes of sovereignty.

Meanwhile there has been a change in the character of the medium of exchange. Credit and not money is employed to adjust most of the relations between economic groups. In 1920, for example, the total amount of money in circulation in the United States, including gold, silver, and all forms of paper money was only 6,088 millions of dollars, while the bank-clearings—that is, the exchange of checks between banks—totaled 462,920 millions of dollars. If to these figures are added the volume of checks drawn and accepted on the same bank, the amount of commercial paper discounted, etc., some idea may be obtained of the importance of credit transactions as compared with the use of cash under the present system. Nevertheless, while the right to issue money has become a public function, the right to issue credit remains in the hands of private bankers.

Under a producers' society, the relation between the various groups of producers will be maintained through a system of book-keeping that will charge against each economic group what it uses in the form of raw materials, machinery and the like, and will credit each group with the value of its product. Such a system is in vogue in any large industrial plant, where each department keeps its own accounts, charges the other departments with what they get from it and credits them with what they receive. The whole is handled through a central book-keeping system. The principle of social book-keeping is not new, therefore, but is an essential link in any large and complex economic organization. It merely remains to apply the principle to producers' groups instead of to the affairs of a private banker or to the book-keeping system of some great industrial trust.

How shall a joint control be exercised by all of the producers' groups over those economic activities, such as the handling of credit, or social book-keeping, that affect more than one of them? The obvious answer is that they can be transacted through some organization in which all of the groups participate on a footing of economic equality.

Common, interests will sooner or later compel common action, or action through a joint board. The point has been reached in the economic history of the world where some such common action of the producing groups is vitally essential to their continued well-being. The logic of economic development is compelling men to turn from the owners' society of the present day to a producers' society, organized by the producing groups and functioning in those cases where the single group of producers finds effective function impossible.

4. Federation as a Way Out

Experience has shown that the best way to secure co-operation among a number of groups having more or less divergent interests is through a federated or federal system of organization, under which each of the constituent groups retains control over those matters which relate exclusively to the affairs of that group, while all matters affecting the well-being of two or more groups are handled through the central organization or federation.

The United States of America is an association of sovereign states, each of which retains the right to decide those matters which are of importance to that state alone, while all questions of interstate concern are automatically referred to the Federal Government. At the same time, matters of common concern to all of the states such as the coinage of money, relations with foreign governments, the regulation of commerce with other nations and between the states, and the like, are also under exclusively federal jurisdiction. By this means, those questions which are of local moment may be settled within the state in which they arise, while all questions affecting the interests of more than one state, and those having to do with the common interests of all the states, fall within the jurisdiction of the Federal Government.

The organization of business has followed similar lines of federation. During the early years of capitalism there was a strong tendency to concentrate all of the power of a given business at one point, and in the hands of one man. With the growth of large enterprises, however, such centralization became unworkable. Instead of a single generalissimo, business organized the general staff. The corporation with its board of directors (executive committee) helped to make the transition, and when the United States Steel Corporation was formed, at the peak of the period of American trust organization, its constituent companies were given large scope for individual initiative and activity. The tendency toward departmental autonomy in large businesses is also very marked. Bitter experience with "one man" concerns and top-heavy organizations convinced business men that the road to success lay along the path of federated autonomous units rather than of highly centralized bureaucracies.

The labor movement has had the same experience in many of the more advanced countries of the world. There has been almost a century of local, independent groups, each one acting on its own initiative. The failure of such a divide-and-perish course was predicted from the beginning. Then there have been highly centralized organizations of considerable extent and power, like the American Knights of Labor, which flourished for a time and then dried up and blew away. But out of the hundred years experience, the labor movement, as at present organized in Germany, Britain, Belgium, the United States, etc., is an exponent of the social principle that local autonomy must be preserved in all local matters, while questions of general concern must be referred to some general body which represents the general interest.

One of the most insuperable difficulties before the world at the present time is the lack of any central authority to which may be referred those matters of general and vital concern that affect the peoples of more than one nation. The peoples feel this lack. They are aware of the fact that industry, science, commerce, art, literature have all leaped the national boundary fence. This is particularly true of Western Europe, whose economic life is closely interwoven, and dependent on certain centers of coal and iron production, and whose political boundaries were determined before the present economic system was dreamed of. The importing of food and of raw materials, the development of markets and of investment opportunities, the organization of means for the transport and the exchange of commodities are matters of common concern to all of the important countries of Western Europe. Before the outbreak of the world war, Europe was an economic net-work of transport, finance and trade, and as a matter of course, communication and travel were common between all of the industrial countries. But while there were so many matters of common concern to Britain, France, Germany, Russia, Austria, Belgium, there was no central authority to which these questions could be referred for decision when the threads of mutual interest became tangled. Instead, secret and competitive statecraft made the tangle worse. The mass of conflicting jurisdictions and of petty jealousies that have grown up among the two score of independent and sovereign states of Europe made a conflict almost inevitable.

Under a federated system of the European states, civil war would be possible, but the chances of a conflict would be greatly lessened by the presence of a central authority before whom questions of divergent interests could be publicly threshed out. For when issues arise between organizations of equal and parallel jurisdiction, a conflict can frequently be avoided if there is some commonly recognized and superior authority before whom the points in dispute may be laid, and whose decision will prove binding on both parties.

What is so obviously true of Europe is also true of the remainder of the Western world, though to a lesser degree. The economic, social and cultural life of civilization has passed beyond national boundaries. Until this fact is recognized, and until some organization is created with a jurisdiction as wide as the problems at issue, misunderstanding, conflict and catastrophe will continue to occur.

5. Building a Producers' Federation

The first step in economic reorganization is the recognition or establishment of local district, divisional and world groups of producers affiliated along the lines of their economic activities. This is a simple acceptance, in social terms, of the economic forms that have been evolving since the industrial revolution.

The second step in economic reorganization is the recognition or establishment of local, district, divisional and world federations of the local, district, divisional and world industrial groups. This second step must be taken in order that there may be some authority competent to deal with those problems which are common to two or more of the groups in question.

There are two general types of problems that the federations of industrial groups will be called upon to handle:

1. Those problems involving inter-relations between the various producing groups, such as the factory workers, transport workers, agricultural workers and the like, that must exchange their products and receive from one another the materials upon which existence depends.

2. Those problems which are common to all producing groups simply because they are common to men and women who are trying to live and to function together. The water-supply, roads, education, are questions of this type.

Problems of the second sort, and the issues raised by them, cannot be entered upon at this point. The same federal authority that is charged with the control over inter-industrial problems will likewise charge itself, in each instance, with these common questions not immediately related to industry.

This is not an attempt to under-estimate the importance of non-industrial problems, but to confine attention, for the moment, to matters directly related to production, with the conviction that when a mechanism is developed capable of handling the industrial problems there will be less difficulty in taking care of those not so closely related to industry.

6. Four Groups of Federations

The issues arising between industrial groups, and those problems common to all groups, will best be handled by federations having a jurisdictional scope parallel to that of the separate groups of which the federations are composed. If these component groups are local economic units, the federation will be local in character. If they are district economic units, the federation will have a district as its sphere, and so on. By this means, there will be created a series of federations or joint organizations, beginning with the federation of local economic units, and ending with a federation of world industries. Throughout this enlarging series of federations the principle of local autonomy will be maintained in all of its rigor, and no matter will be referred to a federation that can be handled by a local group. At the same time, the principle of federal authority will be asserted, and those matters that concern the welfare of more than one group of parallel jurisdiction, will be referred automatically to the federal authority under whose control the group in question falls.

The most elemental of the federations would be the local producers' federation, which would correspond, quite accurately, to the town or the city of the present day, save that its size and character would of necessity be much better regulated than the character and size of the present-day town or city. The modern city has been built as a profiteer's paradise. From the construction of houses to the erection of office buildings, the one foremost question: "What per cent will it yield?" has been the guiding principle behind city construction. The local industrial federation will have, as its chief task, the provision of a living and working place for people, hence the character of the industrial community will be determined with a view to the well-being of the inhabitants rather than to the profit of landlords.

The local federation would be under the control of a local council, the members of which would be elected by the producing units or groups composing the local federation, very much as the modern city is managed by a council elected by wards or aldermanic districts. Except for the choice of representatives on the council by occupational groups, rather than by geographic divisions, the local federation would closely resemble the municipal government of the present day. In addition to its present functions, however, it would assume the task of dealing with issues arising between two or more of the local producing groups. That is, it would have economic as well as political functions, although it would not necessarily carry on any more productive enterprises (gas, water, house-construction, abbatoirs) than do municipalities at the present time.

The local producers' federation would be responsible for two chief lines of activity. On the one hand, it would seek to maintain working relations between the various local economic groups by adjudicating those local questions that affected two or more of the groups. On the other hand, it would take charge of, and administer, those matters of common concern, such as the water supply, the local educational institutions, and so on. This second group of functions would be similar to those now performed by the city council, the board of health, the board of education.

There would be a local producers' federation wherever a number of local industrial units agreed to function together. Counties, cities, boroughs, and school districts are, at the present time, organized very much in that way.