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.