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.
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.