The fashioning of hammers and saws, the construction of railways, and the manufacture of machinery, all these operations create capital. The systematic creation and use of capital is one of the distinguishing features of modern civilization. The laborer alone can produce little; aided by capital he can produce much. Capital is not important if one is willing to live like a savage; on the other hand, it is indispensable if one wishes to enjoy the benefits of civilization.
71. COÍRDINATION A FOURTH FACTOR IN PRODUCTION.—Land, labor, and capital are factors in production. Two hundred years ago nothing else was essential to production. The average individual had his own land, produced his own tools or capital, and relied chiefly or entirely upon his own labor.
But the Industrial Revolution enlarged and complicated production. It created an industrial system in which the individual is generally a specialist, producing a surplus of his one product, but dependent upon numerous other persons for most of the things which he personally consumes. To-day, for example, there are numerous individuals raising cattle, the hides of which are to be made into shoes; other individuals are perfecting means of transportation so that those hides may be carried to market; still other persons concern themselves only with the building of factories or with the manufacture of machines with which to work those hides into shoes. These various individuals and groups may never see each other, nevertheless they aid one another.
The secret of this often unseen and unconscious co÷peration is that there are individuals who specialize in the work of connecting up, or co÷rdinating, the other factors which are necessary to the production of shoes. These individuals, about whom we shall have more to say in the next chapter, constitute an important economic group. They co÷rdinate, in the example given above, the cattle grower, the railroad manager, the tanner, the factory builder, and the manufacturer, and thus make possible a kind of national or even international co÷peration which would otherwise be impossible. Those whose function it is to promote this co÷peration are, therefore, indispensable factors in modern production.
72. GOVERNMENT A FIFTH FACTOR IN PRODUCTION.—A cursory examination of modern industry would convince the observer that land, labor, capital, and co÷rdination are important factors in production. There is, in addition, a factor which is so fundamental, and of such essential value, that it is sometimes overlooked altogether. This is the work of the government in protecting productive enterprises. Government aids in production by suppressing theft, violence, and fraud; by allowing individuals to engage in helpful businesses; by enforcing contracts entered into legally; and by punishing many kinds of monopolistic abuses. [Footnote: We shall take up the problem of monopoly in Chapters XXVII and XXVIII.] The whole fabric of American prosperity is built upon the foundation of law and order.
73. SUMMARY AND FORECAST.—Production in the economic sense consists in doing that which will satisfy human wants. Modern production is a vast and complicated process, involving the co÷peration of five factors: land, labor, capital, co÷rdination, and government. In a later chapter we shall find that there are wide differences of opinion as to the relative importance of some of these factors. We shall find, indeed, that the most vital economic problems which confront American democracy depend for their solution upon a clear understanding of the facts stated or implied in this chapter. The student ought not, therefore, to accept hastily the statement that land, labor, capital, co÷rdination, and government are necessary in production, but ought rather to reason out just how and why each is actually helpful in American industry.
QUESTIONS ON THE TEXT
1. What are the chief reasons why men work?
2. Describe the "old way of getting a living."
3. Just what is meant by the "new way of getting a living"?