It is always conceivable, though it may scarcely seem probable, that these incidents of increased pressure of competition in business traffic might eventually take up all the slack, and leave no net margin of product over what is available under the less favorable conditions of industry that prevail today; more particularly when this increased competition for business gains is backed by an increased pressure of competitive spending for purposes of a reputable appearance. All this applies in retail trade and in such lines of industry and public service as partakes of the nature of retail trade, in the respect that salesmanship and the costs of salesmanship enter into their case in an appreciable measure; this is an extensive field, it is true, and incontinently growing more extensive with the later changes in the customary methods of marketing products; but it is by no means anything like the whole domain of industrial business, and by no means a field in which business is carried on without interference of a higher control from outside its own immediate limits.
All this generously large and highly expensive and profitable field of trade and of trade-like industry, in which the businessmen in charge deal somewhat directly with a large body of customers, is always subject to limitations imposed by the condition of the market; and the condition of the market is in part not under the control of these businessmen, but is also in part controlled by large concerns in the background; which in their turn are after all also not precisely free agents; in fact not much more so than their cousins in the retail trade, being confined in all their motions by the constraint of the price-system that dominates the whole and gathers them all in its impersonal and inexorable net.
There is a colloquial saying among businessmen, that they are not doing business for their health; which being interpreted means that they are doing business for a price. It is out of a discrepancy in price, between purchase and sale, or between transactions which come to the same result as purchase and sale, that the gains of business are drawn; and it is in terms of price that these gains are rated, amassed and funded. It is necessary, for a business concern to achieve a favorable balance in terms of price; and the larger the balance in terms of price the more successful the enterprise. Such a balance can not be achieved except by due regard to the conditions of the market, to the effect that dealings must not go on beyond what will yield a favorable balance in terms of price between income and outgo. As has already been remarked above, the prescriptive and indispensable recourse in all this conduct of business is sabotage, limitation of supply to bring a remunerative price result.
The new dispensation offers two new factors bearing on this businesslike need of a sagacious sabotage, or rather it brings a change of coefficients in two factors already familiar in business management: a greater need, for gainful business, of resorting to such limitation of traffic; and a greater facility of ways and means for enforcing the needed restriction. So, it is confidently to be expected that in the prospective piping time of peace the advance in the industrial arts will continue at an accelerated rate; which may confidently be expected to affect the practicable increased production of merchantable goods; from which it follows that it will act to depress the prices of these goods; from which it follows that if a profitable business is to be done in the conduct
of productive industry a greater degree of continence than before will have to be exercised in order not to let prices fall to an unprofitable figure; that is to say, the permissible output must be held short of the productive capacity of such industry by a wider margin than before. On the other hand, it is well known out of the experience of the past few decades that a larger coalition of invested capital, controlling a larger proportion of the output, can more effectually limit the supply to a salutary maximum, such as will afford reasonable profits. And with the new dispensation affording a freer scope for business enterprise on conditions of greater security, larger coalitions than before are due to come into bearing. So that the means will be at hand competently to meet this more urgent need of a stricter limitation of the output, in spite of any increased productive capacity conferred on the industrial community by any conceivable advance in the industrial arts. The outcome to be looked for should apparently be such an effectual recourse to capitalistic sabotage as will neutralise any added advantage that might otherwise accrue to the community from its continued improvements in technology.
In spite of this singularly untoward conjuncture of circumstances to be looked for, there need be no serious apprehension that capitalistic sabotage, with a view to maintaining prices and the rate of profits, will go all the way, to the result indicated, at least not on the grounds so indicated alone. There is in the modern development of technology, and confidently to be counted on, a continued flow of new contrivances and expedients designed to supersede the old; and these are in fact successful, in greater or less measure, in finding their way into profitable use, on such terms as to displace older appliances,
underbid them in the market, and render them obsolete or subject to recapitalisation on a lowered earning-capacity. So far as this unremitting flow of innovations has its effect, that is to say so far as it can not be hindered from having an effect, it acts to lower the effectual cost of products to the consumer. This effect is but a partial and somewhat uncertain one, but it is always to be counted in as a persistent factor, of uncertain magnitude, that will affect the results in the long run.
As has just been spoken of above, large coalitions of invested wealth are more competent to maintain, or if need be to advance, prices than smaller coalitions acting in severalty, or even when acting in collusion. This state of the case has been well illustrated by the very successful conduct of such large business organisations during the past few decades; successful, that is, in earning large returns on the investments engaged. Under the new dispensation, as has already been remarked, coalitions should reasonably be expected to grow to a larger size and achieve a greater efficiency for the same purpose.
The large gains of the large corporate coalitions are commonly ascribed by their promoters, and by sympathetic theoreticians of the ancient line, to economies of production made practicable by a larger scale of production; an explanation which is disingenuous only so far as it needs be. What is more visibly true on looking into the workings of these coalitions in detail is that they are enabled to maintain prices at a profitable, indeed at a strikingly profitable, level by such a control of the output as would be called sabotage if it were put in practice by interested workmen with a view to maintain wages. The effects of this sagacious sabotage become visible in the large earnings of these investments and the large gains
which, now and again, accrue to their managers. Large fortunes commonly are of this derivation.