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The course of mutations that has brought on this modern technological episode may be conceived to have run somewhat in the following manner. For lack of sufficient training in predatory habits of thought (as shown, e. g., in the incomplete patriarchalism of the north-Europeans) the predatory culture failed to reach what may be called a normal maturity in the feudal system of Europe, particularly in the North and West, where the blond admixture is stronger; by “normal” being here intended that sequence of growth, institutionalisation, and decay shown typically by the great dynastic civilisations erected by Semitic invaders in the East. In the full-charged predatory culture, in its earlier phases, there appear typically to be present two somewhat divergent economic principles (habits of thought) both of which have something of an institutional force: (a) The warrant of seizure by prowess,[114] which commonly comes to vest in the dynastic head in case a despotic state is established; and (b) the prescriptive tenure of whatever one has acquired. These two institutional factors are at variance, and according as one or the other of the two finally takes precedence and rules out or masters its rival postulate, the predatory culture continues on lines of coercive exploitation, as in these Asiatic monarchies; or it passes into the quasi-peaceable phase marked by secure prescriptive tenure of property and a settled nobility, and presently into a commercialised industrial situation. Either line of development may, of course, be broken off without having reached a consummation.
Within the region of the Western Civilisation, both in north Europe and repeatedly in the Ægean, the course of events has fallen out in the line of the latter alternative; the growth of institutions has shifted from the footing of prowess to that of prescriptive ownership. So soon as this shift has securely been made, the development of trade, industry and a technological system has come into the foreground, and these habitual interests have then reacted on the character of the institutions in force, thereby accelerating the growth of conditions favourable to their own further advance. There is, of course, no marked point of conjuncture in the cultural sequence at which this transition may definitely be said to have been effected, but in a general way it may be held that the point of transition has been passed so soon as the current political and economic speculations uncritically give precedence to the “commonweal” as against the fiscal interests of the crown or the “state,” whereby the crown and its officers come, in theory and public pronouncement, to be rated as guardians of the community’s material welfare rather than autocratic exploiters of the community’s productive capacity. Roughly from the same period there will duly set in something of an acceleration in rate of improvement in the state of the mechanic arts. This movement seems plainly to come on the initiative of the lower or industrial classes and to be carried by their genius, rather than by that of the ruling classes, whether secular or spiritual. It shows itself, typically, in a growth of handicraft and petty trade.
So the sense of workmanship and its associated sentiments again come, by insensible degrees, to take the first place among the factors that determine the run of habituation and therefore the character of the resulting culture,—so making the transition from barbarism to civilisation, in the narrower sense of the term; which is accordingly to be characterised, in contrast with the predatory barbarian culture, as a qualified or mitigated (sophisticated) return to the spirit of savagery, or at least as a spiritual reversion looking in that direction, though by no means abruptly reaching the savage plane. The new phase has this in common with the typical savage culture that workmanship rather than prowess again becomes the chief or primary norm of habituation, and therefore of the growth of institutions; and that there results, therefore, a peaceable bent in the ideals and endeavours of the community. But it is workmanship combined and compounded with ownership; that is to say workmanship coupled with an invidious emulation and consequently with a system of institutions embodying a range of prescriptive differential benefits.
II. The Competitive System
Dominated by the tradition handed down from the beginning of the nineteenth century, current economic theory has habitually made much of accumulated goods as the prime requisite of industry. In industrial enterprise as it was then carried on the prevailing unit of organisation was the private firm, with partnership concerns making up a secondary and less commonplace element in the business community. Ordinarily and typically these private firms and partnerships owned a certain material equipment employed in industry, and they took the initiative in industrial enterprise on the ground of this ownership; hiring the workmen, buying materials and supplies, and selling the products of the establishment. Credit relations, such as go to the creation and conduct of a modern corporation, were still of secondary consequence, being resorted to rather as an expedient in emergencies than as the initial move and the substantial ground of business organisation; the measure of the concern’s magnitude and consequence was still (typically) its unencumbered ownership of the material equipment, the size of the plant and the numbers of its hired workmen. It follows by easy consequence that in the practical business conceptions of that time the equipment of material means, which embodies the concern’s assets and affords the ground of its initiative and its rating in the business community, should commonly be rated as the prime mover in industry and the chief productive factor. So, also, the theoretical speculation that drew on that business traffic for its working concepts came unavoidably to accept these tangible assets, the community’s material equipment,—implements, livestock, raw materials, means of subsistence,—as the prime agency in the community’s economic life. As is true for the working conceptions and principles of industrial business, so also in the theoretical formulations of the economists, the community’s immaterial equipment of technological proficiency is taken for granted as a circumstance of the environment conditioning the community’s economic life,—the state of the industrial arts and the current workmanlike aptitudes and efficiency. As the phrase runs, “given the state of the industrial arts.”
This is good, homely, traditional common sense; it reflects the habitual practical run of affairs in the industrial community of that recent past. Such was the attitude of practical men toward industrial matters at the time when the current economic situation took its rise. But such a conception is no longer so true to the practical exigencies of the immediate present, nor do the men of affairs today habitually see these matters in just this light; although the principles of the law that govern industrial enterprise still continue to embody these time-worn conceptions, to which the economists also continue to yield allegiance. Like other elements of habitual knowledge this conception of things is drawn from past experience—chiefly from a past not too remote for ready comprehension—and it carries over the frame of mind out of which it arose.
In the earlier days of the machine industry, then,—say, in the closing quarter of the eighteenth century,—the conduct of industrial affairs was in the hands of business men who owned the material equipment and who directed the use of this equipment and turned it to account for their own gain, on the prescriptive ground of such ownership. Discretion and initiative vested in the capitalist-employer, who at that time, (typically) combined ownership of the plant with a somewhat immediate supervision and control of the industrial processes. The directive control of industry, covering both the volume and the character of the processes and output, was in the typical case directly bound up with the ownership of the material equipment as such,—as tangible assets, not as corporation stock-holdings. Since then changes have come over the business situation, particularly through an extensive recourse to credit, such that this time-worn conception will no longer answer the run of current business practice, particularly not as touches that large-scale enterprise that now rules industrial affairs and that is currently accepted as the type of modern business enterprise.
Among the assumptions of a hundred years ago was the premise, self-evident to that generation of thoughtful men, that the phase of commercialised economic life then prevailing was the immutably normal order of things. And the assumptions surrounding that preconception were good and competent for a formulation of economic theory that takes such an institutional situation for granted and assumes it to be unchanging, or to be a terminus ad quem. But for anything like a genetic account of economic life, early or late, capitalistic or otherwise, such assumptions and the theoretical propositions and analyses that follow from them are defective in that they take for granted what requires to be accounted for. Theoretical speculation that presupposes the (somewhat old-fashioned) institutions formerly governing ownership and business traffic, and assumes them to have the immutable character and indefeasible force de facto which is assigned them de jure, and that likewise assumes as immutable a passing phase in the “state of the industrial arts,” may serve passably for a theory of how business affairs should properly arrange themselves to fit the conditions so assumed; and such, indeed, has commonly been the character of theoretical formulations touching industry and business. And as should fairly be expected, in the speculations of the economists, these theoretical formulations have also commonly been accompanied by a parallel line of remedial advice designed to show what preventive measures should be applied to prevent the run of business practice from doing violence to these assumed conditions that are held to be immutably normal and indefeasibly right.
Now, since in the received theories the accumulated “productive goods” are conceived to be the most consequential factor in industry, and therefore in the community’s material welfare and in the fortunes of individuals, it logically follows that the discretionary ownership of them has come to be accounted the most important relation in which men may stand to the production of wealth and to the community’s livelihood; and the pecuniary transactions whereby this ownership is arranged, manipulated and redistributed are held to be industrially the most productive of all human activities. It is only during the nineteenth century that this doctrine of pecuniary productivity has been worked out into finished shape and has found secure lodgment in the systematic structure of economic theory—in the current theory of “the Function of the Entrepreneur;”[115] but it is also only during this period that business enterprise (pecuniary management) has come to dominate the economic situation in a substantially unmitigated degree, so that the material fortunes of the community have come to depend on these pecuniary negotiations into which its “captains of industry” enter for their own gain.[116] In the sense that no other line of activity stands in anything like an equally decisive relation of initiative or discretion to the industrial process, or bears with a like weight on the material welfare of the community, these business negotiations in ownership are unquestionably the prime factor in modern industry. But that such is the case is due to the peculiar institutions of modern times and to the peculiar current state of the industrial arts; and the former of these peculiar circumstances is conditioned by the latter.