The Acquisitive Society

by R. H. Tawney

As far as the specific case of the Coal Industry is concerned the question of security and salaries need hardly be discussed. The greatest admirer of the present system would not argue that security of status is among the advantages which it offers to its employees. It is notorious that in some districts, at least, managers are liable to be dismissed, however professionally competent they may be, if they express in public views which are not approved by the directors of their company. Indeed, the criticism which is normally made on the public services, and made not wholly without reason, is that the security which they offer is excessive. On the question of salaries rather more than one-half of the colliery companies of Great Britain themselves supplied figures to the Coal Industry Commission.[[1]] If their returns may be trusted, it would appear that mine-managers are paid, as a class, salaries the parsimony of which is the more surprising in view of the emphasis laid, and quite properly laid, by the mine-owners on the managers' responsibilities. The service of the State does not normally offer, and ought not to offer, financial prizes comparable with those of private industry. But it is improbable, had the mines been its property during the last ten years, that more than one-half the managers would have been in receipt of salaries of under £301 per year, and of less than £500 in 1919, by which time prices had more than doubled, and the aggregate profits of the mine-owners (of which the greater part was, however, taken by the State in taxation) had amounted in five years to £160,000,000. It would be misleading to suggest that the salaries paid to mine-managers are typical of private industry, nor need it be denied that the probable effect of turning an industry into a public service would be to reduce the size of the largest prizes at present offered. What is to be expected is that the lower and medium salaries would be raised, and the largest somewhat diminished. It is hardly to be denied, at any rate, that the majority of brain workers in industry have nothing to fear on financial grounds from such a change as is proposed by Mr. Justice Sankey. Under the normal organization of industry, profits, it cannot be too often insisted, do not go to them but to shareholders. There does not appear to be any reason to suppose that the salaries of managers in the mines making more than 5/- profit a ton were any larger than those making under 3/-.

The financial aspect of the change is not, however, the only point which a group of managers or technicians have to consider. They have also to weigh its effect on their professional status. Will they have as much freedom, initiative and authority in the service of the community as under private ownership? How that question is answered depends upon the form given to the administrative system through which a public service is conducted. It is possible to conceive an arrangement under which the life of a mine-manager would be made a burden to him by perpetual recalcitrance on the part of the men at the pit for which he is responsible. It is possible to conceive one under which he would be hampered to the point of paralysis by irritating interference from a bureaucracy at headquarters. In the past some managers of "co-operative workshops" suffered, it would seem, from the former: many officers of Employment Exchanges are the victims, unless common rumor is misleading, of the latter. It is quite legitimate, indeed it is indispensable, that these dangers should be emphasized. The problem of reorganizing industry is, as has been said above, a problem of constitution making. It is likely to be handled successfully only if the defects to which different types of constitutional machinery are likely to be liable are pointed out in advance. Once, however, these dangers are realized, to devise precautions against them appears to be a comparatively simple matter. If Mr. Justice Sankey's proposals be taken as a concrete example of the position which would be occupied by the managers in a nationalized industry, it will be seen that they do not involve either of the two dangers which are pointed out above. The manager will, it is true, work with a Local Mining Council or pit committee, which is to "meet fortnightly, or oftener if need be, to advise the manager on all questions concerning the direction and safety of the mine," and "if the manager refuses to take the advice of the Local Mining Council on any question concerning the safety and health of the mine, such question shall be referred to the District Mining Council." It is true also that, once such a Local Mining Council is formally established, the manager will find it necessary to win its confidence, to lead by persuasion, not by mere driving, to establish, in short, the same relationships of comradeship and good will as ought to exist between the colleagues in any common undertaking. But in all this there is nothing to undermine his authority, unless "authority" be understood to mean an arbitrary power which no man is fit to exercise, and which few men, in their sober moments, would claim. The manager will be appointed by, and responsible to, not the men whose work he supervises, but the District Mining Council, which controls all the pits in a district, and on that council he will be represented. Nor will he be at the mercy of a distant "clerkocracy," overwhelming him with circulars and overriding his expert knowledge with impracticable mandates devised in London. The very kernel of the schemes advanced both by Justice Sankey and by the Miners' Federation is decentralized administration within the framework of a national system. There is no question of "managing the industry from Whitehall." The characteristics of different coal-fields vary so widely that reliance on local knowledge and experience are essential, and it is to local knowledge and experience that it is proposed to intrust the administration of the industry. The constitution which is recommended is, in short, not "Unitary" but "Federal." There will be a division of functions and power between central authorities and district authorities. The former will lay down general rules as to those matters which must necessarily be dealt with on a national basis. The latter will administer the industry within their own districts, and, as long as they comply with those rules and provide their quota of coal, will possess local autonomy and will follow the method of working the pits which they think best suited to local conditions.

Thus interpreted, public ownership does not appear to confront the brain worker with the danger of unintelligent interference with his special technique, of which he is, quite naturally, apprehensive. It offers him, indeed, far larger opportunities of professional development than are open to all but a favored few to-day, when the considerations of productive efficiency, which it is his special métier to promote, are liable to be overridden by short-sighted financial interests operating through the pressure of a Board of Directors who desire to show an immediate profit to their shareholders, and who, to obtain it, will "cream" the pit, or work it in a way other than considerations of technical efficiency would dictate. And the interest of the community in securing that the manager's professional skill is liberated for the service of the public, is as great as his own. For the economic developments of the last thirty years have made the managerial and technical personnel of industry the repositories of public responsibilities of quite incalculable importance, which, with the best will in the world, they can hardly at present discharge. The most salient characteristic of modern industrial organization is that production is carried on under the general direction of business men, who do not themselves necessarily know anything of productive processes. "Business" and "industry" tend to an increasing extent to form two compartments, which, though united within the same economic system, employ different types of personnel, evoke different qualities and recognize different standards of efficiency and workmanship. The technical and managerial staff of industry is, of course, as amenable as other men to economic incentives. But their special work is production, not finance; and, provided they are not smarting under a sense of economic injustice, they want, like most workmen, to "see the job done properly." The business men who ultimately control industry are concerned with the promotion and capitalization of companies, with competitive selling and the advertisement of wares, the control of markets, the securing of special advantages, and the arrangement of pools, combines and monopolies. They are preoccupied, in fact, with financial results, and are interested in the actual making of goods only in so far as financial results accrue from it.

The change in organization which has, to a considerable degree, specialized the spheres of business and management is comparable in its importance to that which separated business and labor a century and a half ago. It is specially momentous for the consumer. As long as the functions of manager, technician and capitalist were combined, as in the classical era of the factory system, in the single person of "the employer," it was not unreasonable to assume that profits and productive efficiency ran similarly together. In such circumstances the ingenuity with which economists proved that, in obedience to "the law of substitution," he would choose the most economical process, machine, or type of organization, wore a certain plausibility. True, the employer might, even so, adulterate his goods or exploit the labor of a helpless class of workers. But as long as the person directing industry was himself primarily a manager, he could hardly have the training, ability or time, even if he had the inclination, to concentrate special attention on financial gains unconnected with, or opposed to, progress in the arts of production, and there was some justification for the conventional picture which represented "the manufacturer" as the guardian of the interests of the consumer. With the drawing apart of the financial and technical departments of industry—with the separation of "business" from "production"—the link which bound profits to productive efficiency is tending to be snapped. There are more ways than formerly of securing the former without achieving the latter; and when it is pleaded that the interests of the captain of industry stimulate the adoption of the most "economical" methods and thus secure industrial progress, it is necessary to ask "economical for whom"? Though the organization of industry which is most efficient, in the sense of offering the consumer the best service at the lowest real cost, may be that which is most profitable to the firm, it is also true that profits are constantly made in ways which have nothing to do with efficient production, and which sometimes, indeed, impede it.

The manner in which "business" may find that the methods which pay itself best are those which a truly scientific "management" would condemn may be illustrated by three examples. In the first place, the whole mass of profits which are obtained by the adroit capitalization of a new business, or the reconstruction of one which already exists, have hardly any connection with production at all. When, for instance, a Lancashire cotton mill capitalized at £100,000 is bought by a London syndicate which re-floats it with a capital of £500,000—not at all an extravagant case—what exactly has happened? In many cases the equipment of the mill for production remains, after the process, what it was before it. It is, however, valued at a different figure, because it is anticipated that the product of the mill will sell at a price which will pay a reasonable profit not only upon the lower, but upon the higher, capitalization. If the apparent state of the market and prospects of the industry are such that the public can be induced to believe this, the promoters of the reconstruction find it worth while to recapitalize the mill on the new basis. They make their profit not as manufacturers, but as financiers. They do not in any way add to the productive efficiency of the firm, but they acquire shares which will entitle them to an increased return. Normally, if the market is favorable, they part with the greater number of them as soon as they are acquired. But, whether they do so or not, what has occurred is a process by which the business element in industry obtains the right to a larger share of the product, without in any way increasing the efficiency of the service which is offered to the consumer.

Other examples of the manner in which the control of production by "business" cuts across the line of economic progress are the wastes of competitive industry and the profits of monopoly. It is well known that the price paid by the consumer includes marketing costs, which to a varying, but to a large, extent are expenses not of supplying the goods, but of supplying them under conditions involving the expenses of advertisement and competitive distribution. For the individual firm such expenses, which enable it to absorb part of a rival's trade, may be an economy: to the consumer of milk or coal—to take two flagrant instances—they are pure loss. Nor, as is sometimes assumed, are such wastes confined to distribution. Technical reasons are stated by railway managers to make desirable a unification of railway administration and by mining experts of mines. But, up to the war, business considerations maintained the expensive system under which each railway company was operated as a separate system, and still prevent collieries, even collieries in the same district, from being administered as parts of a single organization. Pits are drowned out by water, because companies cannot agree to apportion between them the costs of a common drainage system; materials are bought, and products sold, separately, because collieries will not combine; small coal is left in to the amount of millions of tons because the most economical and technically efficient working of the seams is not necessarily that which yields the largest profit to the business men who control production. In this instance the wide differences in economic strength which exist between different mines discourage the unification which is economically desirable; naturally the directors of a company which owns "a good thing" do not desire to merge interests with a company working coal that is poor in quality or expensive to mine. When, as increasingly happens in other industries, competitive wastes, or some of them, are eliminated by combination, there is a genuine advance in technical efficiency, which must be set to the credit of business motives. In that event, however, the divergence between business interests and those of the consumers is merely pushed one stage further forward; it arises, of course, over the question of prices. If any one is disposed to think that this picture of the economic waste which accompanies the domination of production by business interests is overdrawn, he may be invited to consider the criticisms upon the system passed by the "efficiency engineers," who are increasingly being called upon to advise as to industrial organization and equipment. "The higher officers of the corporation," writes Mr. H. L. Gantt of a Public Utility Company established in America during the war, "have all without exception been men of the 'business' type of mind, who have made their success through financiering, buying, selling, etc.... As a matter of fact it is well known that our industrial system has not measured up as we had expected.... The reason for its falling short is undoubtedly that the men directing it had been trained in a business system operated for profits, and did not understand one operated solely for production. This is no criticism of the men as individuals; they simply did not know the job, and, what is worse, they did not know that they did not know it."

In so far, then, as "Business" and "Management" are separated, the latter being employed under the direction of the former, it cannot be assumed that the direction of industry is in the hands of persons whose primary concern is productive efficiency. That a considerable degree of efficiency will result incidentally from the pursuit of business profits is not, of course, denied. What seems to be true, however, is that the main interest of those directing an industry which has reached this stage of development is given to financial strategy and the control of markets, because the gains which these activities offer are normally so much larger than those accruing from the mere improvement of the processes of production. It is evident, however, that it is precisely that improvement which is the main interest of the consumer. He may tolerate large profits as long as they are thought to be the symbol of efficient production. But what he is concerned with is the supply of goods, not the value of shares, and when profits appear to be made, not by efficient production, but by skilful financiering or shrewd commercial tactics, they no longer appear meritorious. If, in disgust at what he has learned to call "profiteering," the consumer seeks an alternative to a system under which product is controlled by "Business," he can hardly find it except by making an ally of the managerial and technical personnel of industry. They organize the service which he requires; they are relatively little implicated, either by material interest or by psychological bias, in the financial methods which he distrusts; they often find the control of their professions by business men who are primarily financiers irritating in the obstruction which it offers to technical efficiency, as well as sharp and close-fisted in the treatment of salaries. Both on public and professional grounds they belong to a group which ought to take the initiative in promoting a partnership between the producers and the public. They can offer the community the scientific knowledge and specialized ability which is the most important condition of progress in the arts of production. It can offer them a more secure and dignified status, larger opportunities for the exercise of their special talents, and the consciousness that they are giving the best of their work and their lives, not to enriching a handful of uninspiring, if innocuous, shareholders, but to the service of the great body of their fellow-countrymen. If the last advantage be dismissed as a phrase—if medical officers of health, directors of education, directors of the co-operative wholesale be assumed to be quite uninfluenced by any consciousness of social service—the first two, at any rate, remain. And they are considerable.

It is this gradual disengagement of managerial technique from financial interests which would appear the probable line along which "the employer" of the future will develop. The substitution throughout industry of fixed salaries for fluctuating profits would, in itself, deprive his position of half the humiliating atmosphere of predatory enterprise which embarrasses to-day any man of honor who finds himself, when he has been paid for his services, in possession of a surplus for which there is no assignable reason. Nor, once large incomes from profits have been extinguished, need his salary be large, as incomes are reckoned to-day. It is said that among the barbarians, where wealth is still measured by cattle, great chiefs are described as hundred-cow men. The manager of a great enterprise who is paid $400,000 a year, might similarly be described as a hundred-family man, since he receives the income of a hundred families. It is true that special talent is worth any price, and that a payment of $400,000 a year to the head of a business with a turnover of millions is economically a bagatelle. But economic considerations are not the only considerations. There is also "the point of honor." And the truth is that these hundred-family salaries are ungentlemanly.

When really important issues are at stake every one realizes that no decent man can stand out for his price. A general does not haggle with his government for the precise pecuniary equivalent of his contribution to victory. A sentry who gives the alarm to a sleeping battalion does not spend next day collecting the capital value of the lives he has saved; he is paid 1/- a day and is lucky if he gets it. The commander of a ship does not cram himself and his belongings into the boats and leave the crew to scramble out of the wreck as best they can; by the tradition of the service he is the last man to leave. There is no reason why the public should insult manufacturers and men of business by treating them as though they were more thick-skinned than generals and more extravagant than privates. To say that they are worth a good deal more than even the exorbitant salaries which a few of them get is often true. But it is beside the point. No one has any business to expect to be paid "what he is worth," for what he is worth is a matter between his own soul and God. What he has a right to demand, and what it concerns his fellow-men to see that he gets, is enough to enable him to perform his work. When industry is organized on a basis of function, that, and no more than that, is what he will be paid. To do the managers of industry justice, this whining for more money is a vice to which they (as distinct from their shareholders) are not particularly prone. There is no reason why they should be. If a man has important work, and enough leisure and income to enable him to do it properly, he is in possession of as much happiness as is good for any of the children of Adam.