The Project Gutenberg eBook, The Next Step, by Scott Nearing This eBook is for the use of anyone anywhere at no cost and with almost no restrictions whatsoever. You may copy it, give it away or re-use it under the terms of the Project Gutenberg License included with this eBook or online at www.gutenberg.org Title: The Next Step A Plan for Economic World Federation Author: Scott Nearing Release Date: May 29, 2009 [eBook #28991] Language: English Character set encoding: ISO-8859-1 ***START OF THE PROJECT GUTENBERG EBOOK THE NEXT STEP*** E-text prepared by Peter Vachuska, Graeme Mackreth, and the Project Gutenberg Online Distributed Proofreading Team (http://www.pgdp.net) THE NEXT STEP A Plan for Economic World Federation By SCOTT NEARING Author of "The American Empire" Ridgewood, New Jersey NELLIE SEEDS NEARING 1922 By the same author Wages in the United States. Financing the Wage Earner Family. Reducing the Cost of Living. Anthracite. Poverty and Riches. Social Adjustment. Social Religion. Women and Social Progress. (Collaboration with Nellie Nearing) The Super Race. Elements of Economics. The New Education. Economics. Community Civics. (Collaboration with Jessie Field) Solution of the Child Labor Problem. Social Sanity. The American Empire. Copyright, 1922 All Rights Reserved Printed in the United States of America This book is dedicated to the task of emancipating the human race from economic servitude "The community needs service first, regardless of who gets the profits, because its life depends on the service it gets." "Organizing for Work." H.L. Gantt. "It is not common language, literature and tradition alone, nor yet clearly defined or strategic frontiers, that will in the future give stability to the boundary lines of Europe, but rather such distribution of its supplies of coal and iron as will prevent any of the great nations of Europe becoming strong enough to dominate or absorb all the others." "The Economic Basis of an Enduring Peace." C.W. MacFarlane. [Pg 6] "Men cannot exist in their present numbers on the earth without world co-operation." "Our Social Heritage." Graham Wallas. "The real way, surely, in which to organize the interests of producers is by working out a delimitation of industry, and confiding the care of its problems to those most concerned with them. This is, in fact, a kind of federalism in which the powers represented are not areas but functions." "Foundations of Sovereignty." H.J. Laski. SUMMARY OF THE ARGUMENT Men progress in proportion as they are able to fit themselves for life, and to fit life to themselves. Both processes go on unceasingly. Recent economic changes have brought the remotest parts of the world into close contact with "civilization" at the same time that they have increased the dependence of one part of the world upon another part. Oddly enough, this interdependence has been intensified under a system of society that deified competition. The conflicts, inevitably resulting from such a contradiction, have taken a terrible toll in life and well-being, and have left Europe in chaos. The successful organization of the life of the world is impossible without the organization of its economic affairs. For the present plan of competition between groups, classes and nations there must be substituted a means of co-operative living. The organization of a producers society will provide that means. Local initiative must be preserved; self- government in economic affairs must be assured, and the economic activities of the world must be federated in such a way that all economic problems of world concern will be brought under some central authority which is representative of the various interests involved at the same time that it controls the disposition of economic life. A world parliament composed of representatives elected by the workers in the various producing groups would provide such a central authority, and would furnish the means of directing the economic experiments of the race. Economic emancipation is the objective. The means for its attainment is a society organized in terms of producers groups, and living in accordance with the highest known standards of intelligent social direction. TABLE OF CONTENTS CHAPTER HEADINGS 1. A World Economic Program Chapter I. The New Economic Life Chapter II. The Economic Muddle 2. World Economic Organization III. Economic Foundations IV. Economic Self-Government V. A World Producers' Federation VI. World Administration 3. Economic Progress Chapter VII. Trial and Error in Economic Organization VIII. Economic Liberation What to Read SECTION HEADINGS Chapter I. The New Economic Life 1. The Historic Present. 2. Economic Needs. [Pg 7] 3. Worldizing Economic Activity. 4. The Basis of a World Program. 5. The League of Nations Failure. 6. Axioms of Economic Reorganization. Chapter II. The Economic Muddle 1. Bankruptcy and Chaos. 2. Localized Problems. 3. World Problems. 4. Competition for Economic Advantage. 5. Distribution of the World's Wealth. 6. The Livelihood Struggle. 7. Guaranteeing Livelihood. 8. Distribution and the Social Revolution. 9. A New Order. 10. The Basis of World Reconstruction. Chapter III. Economic Foundations 1. The Social Structure. 2. Specialization, Association, Co-operation. 3. Three Lines of Economic Organization. 4. Economic Forms. 5. Limitations on Capitalism. 6. The Growth of Capitalism. 7. Effective Economic Units. 8. Classes of Economic Units. 9. The Ideal and the Real. Chapter IV. Economic Self-Government 1. Maximum Advantage. 2. The Essentials for Maximum Returns. 3. Centralized Authority. 4. An Ideal Economic Unit. 5. Rewarding Energy. 6. The Ownership of the Economic Machinery. 7. Economic Leadership. 8. The Selection of Leaders. 9. The Detail of Organization. 10. The Progress of Self-Government. Chapter V. A World Producers' Federation 1. World Outlook. 2. The Need of Organization. 3. Present-day Economic Authority. 4. Federation as a Way Out. 5. Building a Producers' Federation. 6. Four Groups of Federations. 7. The Form of Organization. 8. All Power to the Producers! Chapter VI. World Administration 1. The Basis for World Administration. 2. The Field of World Administration. 3. Five World Problems. 4. Work of the Administrative Boards. 5. The Resources and Raw Materials Board. 6. The Transport and Communication Board. 7. The Exchange, Credit and Investment Board. 8. The Budget Board. 9. The Adjudication of Disputes Board. 10. The Detail of World Administration. Chapter VII. Trial and Error In Economic Organization 1. Trying Things Out. 2. The Capitalist Experiment. [Pg 10] [Pg 11] 3. The Cost of Experience. 4. Education. 5. Pacing the Future. 6. Accumulating Social Knowledge. 7. Conscious Social Improvement. 8. The Barriers to Progress. 9. Next Steps. 10. The Success Qualities. Chapter VIII. Economic Liberation 1. Why Organize? 2. Freedom from Primitive Struggle. 3. Freedom from Servility. 4. Wisdom in Consumption. 5. Leisure for Effective Expression. 6. Culture and Human Aspiration. What to Read THE NEXT STEP I. THE NEW ECONOMIC LIFE 1. The Historic Present The knell of a dying order is tolling. Its keynote is despair. Gaunt hunger pulls at the bell-rope, while dazed humanity listens, bewildered and afraid. Uncertainty and a sense of futility have gripped the world. They are manifesting themselves in unrest, disillusionment, the abandonment of ideals, opportunism, and a tragic concentration on the life of the moment, which alone seems sure. The future promises so little that even the most hopeful pause on its threshold, hesitant, and scarce daring to penetrate its mystery. The war showed the impotence of the present order to assure even a reasonable measure of human happiness and well- being. Of what profit the material benefits of a civilization that takes a toll of thirty-five millions of lives and that wrecks the economic machinery of a continent in four short years? Yet the failure of the revolutionary forces to avail themselves of the opportunity presented by the war proved the unreadiness of the masses to throw off the yoke of the old régime and to lay the foundations of a new order. The world rulers painted a picture of liberated humanity that led tens of millions to fight with the assurance that victory would make that hope a reality. The workers yearned for the social revolution and for the establishment of the co-operative commonwealth with its promise of equality and fraternity. But the events that staggered the world between 1914 and 1920 shattered both ideals. Now that the terrible conflict has ceased, we pause and reflect. Millions are weary, millions are old, millions are broken, millions are disappointed, and the weary ones, the old ones, the broken ones and the disappointed ones have lost their vision and have abandoned their faith. Yet life sweeps on—its unity unimpaired, its continuity unbroken, its force unchecked, its vigor unabated. Multitudes have been born since the end of the Great War, and other multitudes, who were babes in arms when the Great War began, are growing into young manhood and womanhood. The war, with its hardships and its fearful losses, is history. The present, merging endlessly with the future, makes of each day a to- morrow in which hundreds of millions of those who now inhabit the earth will live. How? That is the question which the world to-day faces. The answer is in our hands. 2. Economic Needs Humanity has always been face to face with the bread and butter problem because people must have food and clothing and a roof over their heads or pay the penalty in physical suffering. Under the present world order, for lack of these simple economic requirements, millions of poverty-stricken workers perish each year, of slow starvation and exposure in Paris, London, Chicago, Tokyo; of famine in China, Egypt and India. Some issues present themselves for consideration only occasionally. The demand for economic necessaries each day recurs with tireless insistence in the life of every individual. Men have learned this fact through frightful experiences, and [Pg 13] [Pg 14] they look forward with hope or with dread to the comfort of plenty or to the disaster of want. So effectually have these forces entered into everyday life that they color all aspects of human existence, and people continually think and act in terms of economic hardship or of economic well-being. This simple fact of economic determinism—the influence of the livelihood struggle upon the conduct of individuals and of societies—plays a fateful part in shaping both biography and history. The economic issues before primitive society were comparatively simple ones. The producer—the hunter, herder, farmer—snared his game and cooked it, tended his goats and lived on their milk and flesh, planted and reaped his crops, and used them to sustain life. Later, the baker, the saddler, the tailor and the carpenter spent their energies in producing the articles of their trade and in disposing of them. The herdsman could live on his hills, the farmer in his valleys and the artisans in their towns, content and at peace with the remainder of the world, neither knowing nor caring what was happening to their fellow dwellers on the planet. Confined within its narrow bounds, primitive thought was as local as primitive life. But such isolation is no longer possible. The currents of economic life, like most other phases of human activity, have swept beyond the local forests, the grass lands, the tilled fields, the oven and the carpenter's bench, and gaining momentum in their ever-widening course, they have circled the world. 3. Worldizing Economic Activity The past hundred years have witnessed a speedy worldizing of human affairs built upon a transformation in the ways of making a living. These changes have been effected by the industrial revolution, which, toward the end of the eighteenth century began to make itself felt in Great Britain. Its influence spread over Europe, America and Australia during the last three-quarters of the nineteenth century, but it did not reach Japan until 1860. Almost within the memory of the present generation, therefore, the scope of trade, manufacture and finance, the search for markets, the organization and unification of labor and of popular thinking about economic problems, have passed from a local into a world field. The inventions and discoveries which were the immediate cause of the industrial revolution succeeded one another with a bewildering rapidity that is well illustrated in the case of communication. The steamboat, first made practicable in 1807, and the locomotive, invented about 1815, provided the means of rapid transportation of goods, people and messages. The power press (1814) and the manufacture of paper from wood-pulp (begun in 1854) made possible cheap and abundant reading matter. The telegraph, invented about 1837, laid the basis for instantaneous communication. The first trans-Atlantic cable (1858) annihilated the water barrier to thought. The telephone (1876) and the wireless (1896) brought the more remote parts of each country and of the world within easy reach of the centers of civilization, while the radio-phone (1921) enables millions to sit around a common table for thought, instruction or enjoyment. The camera (1802) supplemented by the moving picture process (1890) has enabled those who do not read to secure information that was formerly reserved for the learned and the cultured. Thus steam, electricity, and a number of other discoveries and inventions in the realm of natural science have brought the minds of the world in as close touch as were the inhabitants of a fifteenth century Italian city. The effects of industrialism date only from history's yesterday, yet its results have already been momentous and far- reaching. This is particularly true of the close dependence of industries upon supplies of raw materials and fuels, of the volume and the variety of the goods produced and transported, of the speed with which communications are sent, of the widened opportunities for travel, and of the immense amount of information on the printed page and the film that goes, each day, from one part of the world to another. Nature has not scattered coal, iron, copper and sugarland over the earth in the same lavish way that she has distributed air and sunshine. On the contrary, the important resources from which industry derives its raw materials and its fuels are found within very limited areas to which the remainder of the world must go for the commodities that supply its basic industries. Within each country raw materials are produced at one point and shipped elsewhere. Ore, coal, grain and meat-animals make up the bulk of the freight tonnage in Europe, in America and in Australia. A similar economic relation exists between the various countries, some of which produce far more than their proportionate share of minerals and fuels. Thus, in 1913, the United States, with but 7 per cent of the world's population, produced 36 per cent and consumed 37 per cent of the world's iron ore supply. The figures for the other important nations were: ("World Atlas of Commercial Geology," Dept. of the Interior, Washington, 1921, p. 27) Per Cent Produced Per Cent Consumed Germany 20 27 Britain 9 14 France 12 7 Russia 5 5 Belgium 0 4 Spain 6 1 [Pg 15] [Pg 16] [Pg 17] Only in France and Spain did production exceed consumption. Four of the remaining countries used more iron ore than they produced, which meant that they were forced to depend upon some other country for their supply. Belgium, with her many industries, imported practically all of the iron ore that she used. Coal furnishes an even more striking illustration of the economic dependence of one part of the world upon another. The production and consumption of coal, for 1913, in millions of tons, were as follows: Tons Produced Tons Consumed United States 517 495 Britain 292 217 Germany 191 167 France 40 60 Italy 1 10 Austria-Hungary 17 30 The United States, Britain and Germany produced, in this one year, 121 millions of tons of coal that were either stored or exported. France, Italy and Austria, together with many of the smaller industrial countries of Europe were forced to depend upon their neighbors for coal. In the case of Italy, practically all of the coal used was imported. Again, the United States and Spain are alone among the principal countries producing a surplus of copper. Out of a consumption (1913) of 127,000 tons, Britain imported 126,572; France imported 91,437 of the 91,486 tons consumed, and Germany, out of 259,300 tons consumed, imported 234,000 tons. These figures of the production and consumption of iron, coal and copper tell the story of an economic interdependence that makes isolated industrial life virtually impossible. Manufacturing and transport depend for their maintenance upon minerals and fuels, and those countries that propose to manufacture and to transport must either produce minerals themselves or depend upon some other country that does produce them. In practice, a few countries are enabled to produce more of the minerals and fuels than they themselves use, and to sell the surplus to their needy neighbors. With the spread of the industrial system, this dependence will increase rather than diminish because of the way in which the reserve supplies of minerals and fuels are distributed. The principal deposits of iron, coal, copper and petroleum are apparently in the Western Hemisphere, and particularly in North America. In so far as this is true, the remainder of the world will be compelled to look to the Americas for these basic commodities. Out of a total world product of iron ore (1913) of 177 millions of tons, the United States produced 63 millions (over a third) because that country is far better supplied with available iron ore deposits than is any other country. Since the war, France holds the second largest deposits, but the third largest are in Newfoundland, the fourth largest in Cuba, and the fifth largest in Brazil, whose "enormous deposits are almost untouched" ("Atlas," p. 26). As for coal, about three-fourths of the world's known reserves are in North America. The largest known reserves of copper are in North and South America—those of Canada and Mexico are comparatively important; those of Chili probably greater than any other country except the United States. Petroleum is also highly localized. Between 1857 and 1918 the world's production of petroleum was 1,005 millions of tons. Of this total, three-fifths came from the United States, while seventeen-twentieths came from the United States and Russia. Indeed, resources are limited and localized to such a point that the economic survival of many parts of the industrial world depends upon the continued importation of raw materials from other countries or from other continents. This localization of resources has resulted in a corresponding localization of many of the basic industries. Germany thus became a manufacturing center and Argentina a producer of food. Necessarily these two countries exchange their products, the Germans eating Argentinian wheat reaped by German machinery. So complete has this specialization become, that industrial communities, and even industrial countries, like Britain and Germany, have ceased to produce sufficient food for their maintenance, and have relied, instead, on the American, African and Australian grain fields.[1] In order to buy wheat, these countries must sell manufactured goods. In order to manufacture, they are compelled to import the raw materials and fuels—cotton, copper, rubber, petroleum, coal, iron. The countries with highly developed industries have therefore ceased to be self-sufficient. Their whole economic life has become a part and parcel of the life of the world. This world interdependence is reflected in the growth of world commerce from a total value of 1,659 millions of dollars in 1820, 4,049 millions in 1850, and 20,105 millions in 1900, to 75,311 millions in 1919. Meanwhile, the nominal tonnage of steam and sailing vessels increased from 5.8 millions of tons in 1820 to 12.3 millions of tons in 1850, to 20.5 millions in 1900, and to 32.2 millions in 1919. Resources are sought after, raw materials are transported and manufactured into usable products, manufactured products are exchanged for food and raw materials, and the cycle is thus completed. In its course, all of the principal countries and all of the continents are drawn upon for the means of maintaining economic life. While the industrial revolution broke the spell of isolation that lay so heavily upon the remote parts of the world, the driving power of the economic forces that followed in its wake, has battered down the geographic barriers that separate [Pg 18] [Pg 19] [Pg 20] men, almost to the vanishing point. Peoples work together, exchange the products of their labor, travel, accumulate and spread news, broadcast ideas and organize and co-ordinate business ventures and labor unions, without any great consideration for geography, and despite the political boundary lines that separate nations. A century of rapid economic development has brought the world into a physical unity the like of which it has never before experienced. Through the ages, human brotherhood has been the theme of philosophers and poets. Recent economic changes have established a world fellowship, not, to be sure, of the kind about which utopists had dreamed, but one growing out of the exigencies of world interdependence. Tens of millions are to-day co-operating in production and exchange, not because of any sweet reasonableness but because the pre-emptory demands of existence leave them no choice. Of necessity, therefore, since they are in constant touch with one another, they begin to learn one another's little ways; to inquire into the personalities of the "foreigners" that pass them on the street, work with them elbow to elbow in the shops, and eat with them at the same restaurant tables. This new brotherhood is an outgrowth of day-to-day relations in an industrial community. Old time questions were of a kind that divided men. "Are you a Christian?" "Where were you born?" "Can you speak Spanish?" No matter how a man answered these questions he got himself into difficulty. If he was a Christian, he found two-thirds of the world confronting him with different religious beliefs. If he was born in France, he was compelled to assume all of the enmities, hatreds and antagonisms felt by Frenchmen for their rivals. If he spoke anything except Spanish, he was a "foreigner" in Spain. The old world was a separatist world, lined with walls, fences, boundary stakes and frontiers. Modern questions bring men into touch with one another. "Can you repair a locomotive?" "Do you understand coal mining?" "Can you carry us safely to Japan?" "Will you take shoes in exchange for petroleum?" "Are you able to get along with people?" "Have you any surplus wheat?" "How do you suppose we can get rid of the boll-weevil?" "Let us show you a new style tractor." If a man can repair an engine, he is wanted in an engine shop. If he can dig coal, he is needed in a coal mine. If he has shoes to exchange for fuel, he finds a ready customer. If he can get along with an odd assortment of his fellows, he is in demand everywhere. The new world is a co-operative world in which people are working together, living together, thinking together; and a test of man's capacity to take part in its activities lies in his ability to be an effective, co-operating member of a world group. Before the war Great Britain imported about half of her food. By 1920 she was importing about three- quarters of it. On the basis of the 1919-1920 harvests, British wheat sufficed for less than a third of the British population. See "The Fruits of Victory," Norman Angell, Glasgow. Collins, 1921, p. 9. 4. The Basis of a World Program With economic life established on a world scale, it is inevitable that the range of men's thoughts and the lines of their social groupings should assume the same general scope. The late war made it quite apparent that war means world war, and that a real peace is impossible unless it is a world peace. The post-war experience has shown with equal clearness, that prosperity means world prosperity, and that it is impossible to destroy the economic well-being of an integral part of the world without destroying the well-being of the whole world. These things were suspected before the war, when they formed the themes of moral dissertations and scholarly essays, of syndicalist pamphlets, socialist programs and revolutionary appeals. But it required the hard knocks of the past eight years to lift them so far out of the realm of theory into that of reality, that any thinking human being who faces the facts must admit their truth.[2] The economics of the modern world make it inevitable that thinkers on public questions, particularly on economic questions, should frame their thoughts in world terms, and that the practical plans for the organization and direction of human affairs should be built around an idea which includes these three elements: 1. Any workable plan for the organization of the world must have an economic foundation. 2. Such a plan must include all of the economically essential portions of the world. It will be ineffective if it is confined to any one nation, to any one group of nations, or to any one continent. 3. Such a plan must rely, for its fulfillment, on world thinking and world organization. These propositions do not imply that economic forces and world organization must become the centers of exclusive attention. There are potent forces, other than economic ones, and there are forms of local organization that must be developed or perpetuated as a matter of course. But for the moment the economic forces and the world phases of organization have assumed a position of primary importance. The Manchester Guardian Commercial, Supplement for April 20, 1922, page IV, carries an advertisement signed by Sir Charles W. Macara, Chairman and Managing Director of Henry Bannerman and Sons, Ltd., Chairman of the Manchester Cotton Employers Association, etc., which contains a very forceful presentation of this point. "It is impossible for any country to expect to win economic success at the expense or in total indifference to the success of others.... The good of one country is bound up with the good of another, and it is only by studying what will be mutually advantageous that we shall find the key to our good fortune.... The whole world is interdependent, and you cannot injure one member of the international body without injuring all the rest." 5. The League of Nations Failure [Pg 21] [Pg 22] [1] [Pg 23] [2] The principal scheme recently advanced as a means of co-ordinating the life of the world—the League of Nations Covenant—violates all three of these essential principles. In the first place, the League Covenant, with certain minor exceptions, is a political and not an economic document, devoting its attention to territorial integrity and the preservation of sovereignty, and passing over such economic problems as resource control, and the competition for raw materials, markets and investment opportunities as though they were non-existent. In the second place instead of concerning itself with all of the integral parts of the world, it treats nations other than the "big five" (Britain, France, Italy, Japan and the United States) as though they were of second or of third rate importance. China, India, Germany, Russia and Latin America, with considerably more than half of the world's population, and with at least half of the world's essential resources, were slighted or ignored. In the third place, the League Covenant is not based on world thinking. On the contrary, it was designed to set up one part of the world, the victorious Allies, against four other parts of the world: the enemy countries, Soviet Russia, the undeveloped (unexploited) countries, and the small and powerless countries. Political, sectional and provincial in its point of view, the League, as a means of world organization, was destined, from its inception, to pathetic failure. World economic life is an established fact of such moment that it must be reckoned with in any scheme for social rebuilding. A capacity for organization and for conscious improvement distinguishes man from most of the animals. In the past, men have organized the army, the church, the city, the nation, the school. The events surrounding the industrial revolution have placed a new task on their shoulders—the task of organizing world economic life. Without doubt this is the largest and the most intricate problem in organization that the human race has ever faced. On the other hand, the interdependence of economic life invites co-ordination, while the advances in organization methods, particularly among the masses of the people, render the transition from local to world organization quite logical and relatively easy—far easier, certainly, than the first hesitating steps that the race took in the direction of co-operative activities. Even though the task were far more difficult than it is, the race must perform it or pay an immense price in hardship, suffering and decimation. The work is already begun. Private capitalists have built world systems of trade, transport and banking. Soviet Russia has made an heroic attempt to organize one portion of the earth's surface along economic lines. For the most part, however, the task of co-ordinating the world's economic life awaits the courage and the genius of a generation that shall add this triumph to the achievements of the race. 6. Axioms of Economic Reorganization Certain well-defined and widely understood principles, that might almost be called axioms of social procedure, are to be reckoned with in any effort at world economic reorganization. For convenience of discussion, they may be summarized thus: 1. The wheels of industry must be kept turning smoothly, regularly and efficiently. A country like Russia, consisting, for the most part of agricultural villages, can survive, even though machine industries practically cease to function, while such countries as Germany and Britain, built of Bremens, Hamburgs, Essens, Glasgows and Manchesters are dependent for their food supply as well as for their supply of raw materials upon the continued production and transport of commodities. The State of Rhode Island, with its 97.5 per cent of city and town dwellers, typifies this dependence. Given such concentrated populations engaged in specialized industries, and the cessation of production means speedy starvation for those that cannot migrate. 2. Provision must be made for improvements and betterments. The increase of population and the normal advances in science and industry both demand a volume of product adequate to cover the necessary increases in equipment. 3. The people who do the work must dispose of the products they turn out. They may consume them all, or they may reserve a portion of them for new roads, for additional rolling stock, for the advancement of art and learning. Whatever the character of the decision, the right and power to make it rests with those who produce the goods of which a disposition is being made. 4. Justice and fair dealing must be embodied in the scheme of production and distribution. This does not mean absolute justice, but as much justice as the collective intelligence and will of the community are able to put into force. For the attainment of such a result, the forms of social life must be constantly altered to keep pace with economic change. 5. The foregoing principles must apply, not to one man, or class, or people, but to all men, all classes and all peoples. Recent events have shown that an injury to one is an injury to all. Reasoning, foresight and experience will convince the people of the world that a benefit to one is a benefit to all. While men continue to live together, their livelihood problems must be thought about collectively, and the solutions that are determined upon must be applied to all, without discrimination. [Pg 24] [Pg 25] [Pg 26] How shall such results be obtained? By what means is it possible to lead men to a world vision? Who can persuade them to work toward the building of a sounder society than that with which the world is now laboring? Of all the issues that confront the teachers of men, this is one of the most pressing and most insistent. Those who have taken upon themselves the task of seeking out and of expounding ideas have seldom faced a graver responsibility than that with which they are at the moment confronted. World facts demand world thoughts and world acts, before the human race can adopt saner, wiser and more enlightened economic policies. World thoughts and acts are impossible without world understanding. Therefore it is world understanding that is most imperatively needed in this critical hour. The people of the world have many things in common—economic interests, science, art, ideas, ideals. Ranged against these common interests there are the traditions, prejudices, hatreds, national barriers, sectarian differences, language obstacles and racial conflicts that have proved so effective in keeping the peoples separated. The common interests are the vital means of social advancement, and it is upon them that the emphasis of constructive thinking must be laid in an effort to promote world understanding. There is no need to apologize, then, for adding to groaning library shelves a book dealing with world economics, the purpose of which is to propose a plan that will pull together the scattered threads of world economic life. The time is so ripe for an examination of these problems that no man may consider himself informed who has not pondered them deeply, and no man may consider that he has done his duty as a member of this generation, who has not helped, at least in some degree, to unify the world's economic activities. Most particularly does this apply both to the statesmen and other public men who are striving to rejuvenate a dying order, and to the organizers and leaders of the new order that is even now pressing across the threshold of the western world. II. THE ECONOMIC MUDDLE 1. Bankruptcy and Chaos World economic affairs are in a muddle. Famine has gripped Central Europe since 1918; unemployment is rife in Japan, Argentina, Britain, and the United States; business depression is felt in all of the principal industrial countries; producer and consumer alike find the world's economic machinery sadly out of gear. There have been innumerable predictions of "better times ahead," but among those who are closely connected with industry, there is serious concern over the future of the present economic system, while a formidable array of students and investigators agree with Bass and Moulton that: "It is not at all beyond the bounds of possibility that all of continental Europe might in the course of the next twenty-five years, or even sooner, go the way that Russia has already gone. It would not necessarily be through the instrumentality of Bolshevism; it might easily go in the Austrian way." ("America and the Balance Sheet of Europe." New York. Ronald Press. 1921. p. 138-9.) The cause for such gloomy utterances may be found in those superficial indications of chaos such as the breakdown of exchange and of international trade; the severe business depression; the waste and inefficiency of industry; the prevalence of unrest and sabotage, and the preparations for future wars. Traditionally, the old institutions still exist and are cherished by those who believe that they will be rehabilitated and re- established. But as the months succeed one another and lengthen into years, without any evidence that "things will right themselves as soon as the war is over," it becomes increasingly apparent, even to the conservative that the situation is far from what they had promised themselves it would be. Europe's day-to-day experience between 1919 and 1922 has convinced millions that some disaster impends. For the most part, however, they fail to realize that the "disaster" is already upon them. The disorganization of the world's financial structure, following on the drains of the war and the debauches and exactions of the peace, has been the object of much comment, with the emphasis laid on the aspects rather than on the essential characteristics of the breakdown. One of the basic assumptions of the present economic order is that promises to pay must be redeemed at par. Failing in this redemption, the promisor is declared bankrupt, and beyond the pale of reputable business society. During the past eight years, most of the leading countries of Europe have become bankrupt. Before the World War, the sixteen principal belligerents had total debts of 28,660 millions of dollars, with a total note circulation of 5,000 millions, making a total of promises to pay amounting to something more than 33 billions of dollars. When the Treaty of Paris was signed, these sixteen countries reported debts of 171,633 millions of dollars and paper money issues of 77,954 millions, making a total of promises to pay about eight times the volume of 1913. Since the signing of the Treaty, most of the European countries, belligerents and neutrals alike, have continued to pile up obligations. According to the estimates of O.P. Austin, of the National City Bank of New York, world indebtedness was 43 billions of dollars in 1913, 205 billions in 1918 and 400 billions in 1921. ("Our Eleven Billions," R. Mountsier. Seltzer. 1922. p. 43.) A point has now been reached where the French, Russian, Italian, German, Austrian and Hungarian debts are equal to at least half of the total estimated national wealth. When it is remembered that most of this wealth is in private hands, and [Pg 27] [Pg 28] [Pg 29] [Pg 30] heavily encumbered with private mortgages; that the cities have issued enormous numbers of bonds against the same wealth, and that even though the wealth were in public hands it could not be liquidated for anything like its estimated value, it must be apparent that the capitalist world—particularly that part lying in Central Europe—has put itself into a position where its governments cannot meet their promises to pay. Nor is this the worst. The war experience taught European government officials that it was possible to make money and pay debts with the aid of printing presses. The rapid increase in prices, and the unwillingness of the owning classes to pay for the war by means of a capital levy, placed the governments in a position where the ordinary expenses, plus the costs of the war, the interest on the war bonds, the costs of reparations and other extraordinary expenses amounted to far more than the total government revenue. As lately as 1920, all of the European belligerents, with the exception of Great Britain, all of the European neutrals, except Sweden, and all of the other principal countries of the world except Peru and the United States, reported expenditures in excess of receipts. The deficit for Austria amounted to 38 per cent of its expenditures. In other principal countries the ratio of deficit to expenditure was: Belgium 69 per cent France 57 " " Germany 46 per cent Italy 21 per cent Japan 17 per cent ("Our Eleven Billions," p. 40-41). These events led inevitably to a demoralization of the foreign exchange market, which reflects the measure of confidence felt by the business men of one community in the promises to pay made by the government of another community. The exchange values of the non-warring countries remained generally near to par during the entire war and post war period. Japanese exchange fluctuated very little; British pounds, which up to the time of the war were recognized the world over as the standard of value, fell to about three fifths of their par value as expressed in dollars; the French franc and the Italian lira fell to a quarter of their par values, while the Russian ruble, the German mark, the Austrian and the Polish crowns fell to less than one-tenth of one per cent of par. In addition to the serious depreciation of these various currencies, their values fluctuated from day to day and hour to hour, making business transactions difficult or impossible. Coupled with the disorganization of exchange has been the economic depression which, beginning in March, 1920, spread like a tidal wave, bringing disaster and hardship to workers, farmers and business men. With abundant crops, with industries united into great combinations, with the banks more efficiently organized than ever before in modern times, there should have been no crisis according to the accepted economic philosophy, or, if there was a temporary set-back following the strain of the war, it should have been a regulated panic. But despite the predictions the depression came, and proved to be one of the most severe that the modern world has experienced. The thoughtful man noting these facts, and then learning that, beginning with the hard times of 1814, there have been seventeen of these breakdowns in the economic machinery of the United States, with corresponding derangements in France, Britain, Germany and the other industrial countries; and learning further that there is a tendency for such catastrophes to become more, rather than less severe, begins to wonder whether the difficulty is not very much more deep-seated than many public men would have him believe. Even the most stalwart supporters of the present order must agree that the system does not function smoothly. There are many bumps, jars and hitches, and considerable friction. Another evidence of economic chaos is furnished by the extent of industrial waste. Studies in industrial efficiency have led recently to the publication of a number of reports, the most ambitious of which, "Waste in Industry," issued by the Committee on the Elimination of Waste in Industry of the Federated Engineering Societies of the United States, describes waste under four aspects: 1. Low production caused by faulty management of materials, plant, equipment and men. 2. Interrupted production, caused by idle men, idle materials, idle plant and idle equipment. 3. Restricted production, intentionally caused by owners, management or labor. 4. Lost production, caused by ill health, physical defects and industrial accidents. (Page 8.) With these various kinds of waste in mind the committee made a survey of some of the leading industries in the United States, and drew up a table showing the percentage of waste found in each industry. The figures were as follows: Men's Clothing Manufacturing 63.78 per cent Building Industry 53.00 " " Printing 57.61 " " Boot and Shoe Manufacturing 40.93 " " Metal Trades 28.66 " " Textile Manufacturing 49.20 " " [Pg 31] [Pg 32] The bulk of the responsibility for this waste is placed on "management,"—the lowest percentage (50 per cent) in Textile Manufacturing, and the highest (81 per cent) in the Metal Trades. The remainder of the responsibility is shared by labor, with a minimum of 9 per cent in the Metal Trades and a maximum of 28 per cent in Printing, and by miscellaneous causes, with a minimum of 9 per cent in Men's Clothing and Printing and a maximum of 40 per cent in Textile Manufacturing. (Page 9.) There are a number of angles from which this result may be viewed. Waste may be looked upon merely as the index of industrial inefficiency due to the failure of the industrial mechanism to adjust itself to the demands made upon it. In that case the remedy for the waste is superior adjustment of the present system to itself. On the other hand, if the waste is the result of friction generated within the system, there must be some change in the system before it can be eliminated. The latter explanation seems to tally with the facts more thoroughly than does the former. Certainly, the unrest, bitterness and general sabotage which are encountered throughout the industrial order would point to the conclusion that the economic system is generating its own condition of chaos. Sabotage, or "go slow," is becoming the dominant note of the entire economic system. "Get the most you can out and put the least possible in," is the theory upon which both workers and owners are operating. There has been much comment upon the tendency of the workers to use the go slow tactics. The real withholding of productive effort, however, takes place among the owners and managers of industry. Industrial leaders are well versed in the law of monopoly profit: "Minimum product at maximum price." The railroad men have rephrased the law thus: "All that the traffic will bear." Industry has been organized and capitalized and is now owned by a group whose interests lie, not in the extent of production, but in the volume of profit. When profit is no longer forthcoming, the owners practice the conscious withholding of efficiency. In accordance with this general policy the control of industry is shifting from the hands of engineers into the hands of financial experts "who are unremittingly engaged in a routine of acquisition, in which they habitually reach their ends by a shrewd restriction of output; and yet they continue to be entrusted with the community industrial welfare, which calls for maximum production." ("The Engineers and the Price System," Thorstein Veblen. Huebsch. 1921. p. 40-41.) The recent cry of the American farmer: "Produce only what you need for your own keep," is a crude effort to imitate the successful tactics of the business world in limiting production to the volume that will yield the greatest possible profit to the owner. War-menace constitutes another indication of the chaos existing in modern economic society. The purpose of economic activity is to produce wealth. The purpose of war is to destroy it. The two are therefore in direct antagonism; yet the greatest war machines are maintained by the greatest industrial nations. To reply that they have the big war machines because they can afford to pay for them, is no conclusive answer. The organizing of nations for war came into present- day society with the present industrial system. Industrial leaders have engaged in a great competitive struggle from which the final appeal was always the appeal to arms. Furthermore, one of the most profitable businesses has been that of making the munitions and supplies required for the prosecution of war. Nor is there wanting evidence that modern wars have been made for profits—that they have been "commercial wars," as President Wilson put it. There is no longer any question but that the forces behind the world war were in the main economic. The war was fought by capitalist empires, for the furtherance of capitalist enterprises. The publication of the secret treaties entered into by the Allies in 1916 gives conclusive proof of the land grabbing character of the Allies' intentions. There can scarcely be any question of the existence of similar intentions on the side of the Central Empires. The forces that constituted the war menace in 1914 were the economic forces arising out of the competitive economic régime that dominated the European world at that time. Since the ending of the war, these forces have been augmented rather than abated. To them there must be added the other element of danger that threatens to throw Europe again into turmoil. Soviet Russia is and for a time must remain a source of international bitterness among the great capitalist nations, while the struggle for the control of the Near East is fraught with consequences as momentous as was the pre-war German dream of a railroad from Berlin to Baghdad. Unrest in Egypt, India, Korea, and the other countries held in subjection by the power of the bayonet; the contest between Japan, Britain and the United States for the control of the Pacific and the exploitation of China; the unrest and revolution that are stirring in China; the keen intensity of the struggle for foreign markets and for such strategic resources as the supply of petroleum, are all suggestive of a situation resembling an open gasoline can surrounded by lighted matches. And to add the last, and the most realistic touch to the picture, there are a million more men under arms in Europe than there were in 1913, while the military and naval authorities in all of the leading countries are busy planning how and where the next war is to be fought. (See "The Next War," Will Erwin. Dutton, 1921; "The Coming War with America," John MacLean. British Socialist Party, 1920; "War in the Future," F. von Bernbardi. Berlin, 1920; "The Inevitable War between Japan and America," F. Wencker. Stuttgart, 1921; "Coal, Iron and War," E.C. Eckel. New York, Holt, 1920, etc.) Before the grass was green over the graves where lies the flower of Europe's manhood, leaders of the present order were busy with the blueprints of another carnage. The facts speak for themselves. The existence of such chaos is a matter of every day comment and experience. Though its nature and its causes are little understood, there is no issue of more immediate concern to the western world than the intelligent solution of the vexing questions arising out of the production and distribution of wealth. Until the Russian Revolution of 1917, the entire western world was so organized that one group or class owned the land, the machines and the...