The Vested Interests 
 
 AND THE STATE OF THE 
 INDUSTRIAL ARTS by 
 
 Thor stein Veblen 
 
 NEW YORK: B. W. HUEBSCH
 
 THE VESTED INTERESTS
 
 OTHER BOOKS BY THORSTE1N VEBLEN 
 
 THE HIGHER LEARNING IN AMERICA 
 THE NATURE OF PEACE 
 THE THEORY OF THE LEISURE CLASS 
 THE INSTINCT OF WORKMANSHIP 
 IMPERIAL GERMANY A!ND THE 
 INDUSTRIAL REVOLUTION 
 
 Each $2.00 
 PUBLISHED BY B. W. HUEBSCH NEW YORK
 
 THE VESTED INTERESTS 
 
 AND THE STATE OF 
 THE INDUSTRIAL ARTS 
 
 ("The Modern Point of View 
 and the New Order") 
 
 BY 
 THORSTEIN VEBLEN 
 
 NEW YORK B. W. HUEBSCH MCMXIX
 
 COPYRIGHT, 1919, 
 BY B. W. HUEBSCH 
 
 PEINTKD IN THB rNITID 8TATI8 OT AMKBICA
 
 PREFACE 
 
 These papers have already appeared, in a slightly 
 abridged form, in the Dial; running from the igth 
 October, 1918, to the 25th January, 1919, under the 
 general caption: The Modern Point of View and 
 the New Order. They are here reprinted in a col- 
 lected form in response to requests which have come 
 to hand. Except for a more detailed description at 
 one point and another this text does not differ ma- 
 terially from the papers in the Dial. In point of 
 scope and logical content this discussion resumes the 
 argument of a course of lectures before students in 
 Amherst College in May, 1918. 
 
 The aim of these papers is to show how and, as 
 far as may be, why a discrepancy has arisen in the 
 course of time between those accepted principles of 
 law and custom that underlie business enterprise and 
 the businesslike management of industry, on the one 
 hand, and the material conditions which have now 
 been engendered by that new order of industry that 
 took its rise in the late i8th century, on the other 
 hand; together with some speculations on the civil 
 and political difficulties set afoot by this discrepancy 
 between business and industry. 
 
 March, 1919.
 
 CONTENTS 
 
 CHAPTER 
 
 I THE INSTABILITY OF KNOWLEDGE AND BELIEF, i 
 
 II THE STABILITY OF LAW AND CUSTOM, 17 
 
 III THE STATE OF THE INDUSTRIAL ARTS, 35 
 
 IV FREE INCOME, 63 
 
 V THE VESTED INTERESTS, 85 
 VI THE DIVINE RIGHT OF NATIONS, 114 
 VII LIVE AND LET LIVE, 138 
 
 VIII THE VESTED INTERESTS AND THE COMMON 
 MAN, 158
 
 THE INSTABILITY OF KNOWLEDGE AND BELIEF 
 
 As is true of any other point of view that may be 
 characteristic of any other period of history, so also 
 the modern point of view is a matter of habit. It 
 is common to the modern civilised peoples only in so 
 far as these peoples have come through substantially 
 the same historical experience and have thereby ac- 
 quired substantially the same habits of thought and 
 have fallen into somewhat the same prevalent frame 
 of mind. This modern point of view, therefore, is 
 limited both in time and space. It is characteristic 
 of the modern historical era and of such peoples as 
 lie within the range of that peculiar civilisation 
 which marks off the modern world from what has 
 gone before and from what still prevails outside of 
 its range. In other words, it is a trait of modern 
 Christendom, of Occidental civilisation as it has run 
 within the past few centuries. This general state- 
 ment is not vitiated by the fact that there has been 
 some slight diffusion of these modern and Western 
 ideas outside of this range in recent times. 
 
 By historical accident it happens that the modern 
 point of view has reached its maturest formulation 
 and prevails with the least faltering among the 
 French and English-speaking peoples; so that these 
 peoples may be said to constitute the center of diffu- 
 
 i
 
 2 THE VESTED INTERESTS 
 
 sion for that system of ideas which is called the mod- 
 ern point of view. Outward from this broad center 
 the same range of ideas prevail throughout Chris- 
 tendom, but they prevail with less singleness of con- 
 *viction among the peoples who are culturally more 
 remote from this center; increasingly so with each 
 farther remove. These others have carried over a 
 larger remainder of the habits of thought of an 
 earlier age, and have carried them over in a better 
 state of preservation. It may also be that these 
 others, or some of them, have acquired habits of 
 thought of a new order which do not altogether fit 
 into that system of ideas that is commonly spoken of 
 as the modern point of view. That such is the case 
 need imply neither praise nor blame. It is only that, 
 by common usage, these remainders of ancient habits 
 of thought and these newer preconceptions that do 
 not fit into the framework of West-European con- 
 ventional thinking are not ordinarily rated as intrin- 
 sic to the modern point of view. They need not 
 therefore be less to the purpose as a guide and crite- 
 rion of human living; it is only that they are alien 
 to those purposes which are considered to be of 
 prime consequence in civilised life as it is guided and 
 tested by the constituent principles of the modern 
 point of view. 
 
 What is spoken of as a point of view is always a 
 composite affair; some sort of a rounded and bal- 
 anced system of principles and standards, which are 
 taken for granted, at least provisionally, and which 
 serve as a base of reference and legitimation in all 
 questions of deliberate opinion. So when any given 
 usage or any line of conduct or belief is seen and
 
 KNOWLEDGE AND BELIEF 3 
 
 approved from the modern point of view, it comes 
 to the same as saying that these things are seen and 
 accepted in the light of those principles which mod- 
 ern men habitually consider to be final and sufficient. 
 They are principles of right, equity, propriety, duty, 
 perhaps of knowledge, belief, and taste. 
 
 It is evident that these principles and standards 
 of what is right, good, true, and beautiful, will vary 
 from one age to another and from one people to 
 another, in response to the varying conditions of 
 life; inasmuch as these principles are always of the 
 nature of habit; although the variation will of 
 course range only within the limits of that human na- 
 ture that finds expression in these same principles of 
 right, good, truth, and beauty. So also, it will be 
 found that something in the way of a common meas- 
 ure of truth and sufficiency runs through any such 
 body of principles that are accepted as final and self- 
 evident at any given time and place, in case this 
 habitual body of principles has reached such a degree 
 of poise and consistency that they can fairly be said 
 to constitute a stable point of view. It is only be- 
 cause there is such a degree of consistency and such 
 a common measure of validity among the commonly 
 accepted principles of conduct and belief today, that 
 it is possible to speak intelligently of the modern 
 point of view, and to contrast it with any other point 
 of view which may have prevailed earlier or else- 
 where, as, e. g., in the Middle Ages or in Pagan 
 Antiquity. 
 
 The Romans were given to saying, Tempora mu- 
 tantur, and the Spanish have learned to speak indul- 
 gently in the name of Costumbres del pais. The
 
 4 THE VESTED INTERESTS 
 
 common law of the English-speaking peoples does 
 not coincide at all points with what was indefeasibly 
 right and good in the eyes of the Romans; and still 
 less do its principles countenance all the vagaries of 
 the Mosaic code. Yet, each and several, in their 
 due time and institutional setting, these have all been 
 tried and found valid and have approved themselves 
 as securely and eternally right and good in princi- 
 ple. 
 
 Evidently these principles, which so are made to 
 serve as standards of validity in law and custom, 
 knowledge and belief, are of the nature of canons, 
 established rules, and have the authority of prece- 
 dent, prescription. They have been defined by the 
 attrition of use and wont and disputation, and they 
 are accepted in a somewhat deliberate manner by 
 common consent, and are upheld by a deliberate 
 public opinion as to what is right and seemly. In 
 the popular apprehension, and indeed in the appre- 
 hension of the trained jurists and scholars for the 
 time being, these constituent principles of the ac- 
 cepted point of view are " fundamentally and eter- 
 nally right and good." But this perpetuity with 
 which they so are habitually invested in the popular 
 apprehension, in their time, is evidently such a qual- 
 ified perpetuity only as belongs to any settled out- 
 growth of use and wont. They are of an institu- 
 tional character and they are endowed with that de- 
 gree of perpetuity only that belongs to any institu- 
 tion. So soon as a marked change of circumstances 
 comes on, a change of a sufficiently profound, en- 
 during and comprehensive character, such as per- 
 sistently to cross or to go beyond those lines of use
 
 and wont out of which these settled principles have 
 emerged, then these principles and their standards 
 of validity and finality must presently undergo a re- 
 vision, such as to bring on a new balance of princi- 
 ples, embodying the habits of thought enforced by a 
 new situation, and expressing itself in a revised 
 scheme of authoritative use and wont, law and cus- 
 tom. In the transition from the medieval to the 
 modern point of view, e. g., there is to be seen such 
 a pervasive change in men's habitual outlook, an- 
 swering" to the compulsion of a new range of circum- 
 stances which then came to condition the daily life of 
 the peoples of Christendom. 
 
 In this mutation of the habitual outlook, between 
 medieval and modern times, the contrast is perhaps 
 most neatly shown in the altered standards of knowl- 
 edge and belief, rather than in the settled domain 
 of law and morals. Not that the mutation of hab- 
 its which then overtook the Western world need 
 have been less wide or less effectual in matters of 
 conduct; but the change which has taken effect in 
 science and philosophy, between the fourteenth cen- 
 tury and the nineteenth, e. g., appears to have been 
 of a more recognizable character, more easily de- 
 fined in succinct and convincing terms. It has also 
 quite generally attracted the attention of those men 
 who have interested themselves in the course of his- 
 torical events, and it has therefore become some- 
 thing of a commonplace in any standard historical 
 survey of modern civilisation to say that the scheme 
 of knowledge and belief underwent a visible change 
 between the Middle Ages and modern times. 
 
 It will also be found true that the canons of knowl-
 
 6 THE VESTED INTERESTS 
 
 edge and belief, the principles governing what is fact 
 and what is credible, are more intimately and intrin- 
 sically involved in the habitual behavior of the hu- 
 man spirit than any factors of human habit in other 
 bearings. Such is necessarily the case, because the 
 principles which guide and limit knowledge and be- 
 lief are the ways and means by which men take stock 
 of what is to be done and by which they take thought 
 of how it is to be done. It is by the use of their 
 habitual canons of knowledge and belief, that men 
 construct those canons of conduct which serve as 
 guide and standards in practical life. Men do not 
 [pass appraisal on matters which lie beyond the 
 reach of their knowledge and belief, nor do they 
 formulate rules to govern the game of life beyond 
 that limit. 
 
 So, congenitally blind persons do not build color 
 schemes; nor will a man without an "ear for 
 music " become a master of musical composition. 
 So also, " the medieval mind " took no thought and 
 made no provision for those later-arisen exigencies 
 of life and those later-known facts of material sci- 
 ence which lay yet beyond the bounds of its medieval 
 knowledge and belief; but this "medieval mind" 
 at the same time spent much thought and took many 
 excellent precautions about things which have now 
 come to be accounted altogether fanciful, things 
 which the maturer insight, or perhaps the less fertile 
 conceit, of a more experienced age has disowned 
 as being palpably not in accord with fact. 
 
 That is to say, things which once were convinc- 
 ingly substantial and demonstrable, according to the 
 best knowledge and belief of the medieval mind,
 
 KNOWLEDGE AND BELIEF 7 
 
 can now no longer be discerned as facts, according 
 to those canons of knowledge and belief that are 
 now doing duty among modern men as conclusive 
 standards of reality. Not that all persons who are 
 born within modern times are thereby rendered un- 
 able to know and to believe in such medieval facts, 
 e. g., as horoscopes, or witchcraft, or gentle birth, 
 or the efficacy of prayer, or the divine right of kings; 
 but, taken by and large, and in so far as it falls un- 
 der the control of the modern point of view, the 
 deliberate consensus of knowledge and belief now 
 runs to the effect that these and other imponderables 
 like them no longer belong among ascertained or as- 
 certainable facts; but that they are on the other 
 hand wholly illusory conceits, traceable to a mis- 
 taken point of view prevalent in that earlier and 
 cruder age. 
 
 The principles governing knowledge and be- 
 lief at any given time are primary and pervasive, be- 
 yond any others, in that they underlie all human de- 
 liberation and comprise the necessary elements of 
 all human logic. But it is also to be noted that these 
 canons of knowledge and belief are more imme- 
 diately exposed to revision and correction by expe- 
 rience than the principles of law and morals. So 
 soon as the conditions of life shift and change in any 
 appreciable degree, experience will enforce a revi- 
 sion of the habitual standards of actuality and credi- 
 bility, because of the habitual and increasingly ob- 
 vious failure of what has before habitually been re- 
 garded as an ascertained fact. Things which, un- 
 der the ancient canons of knowledge, have habitually 
 been regarded as known facts, as, e. g., witchcrafv,
 
 8 THE VESTED INTERESTS 
 
 or the action of bodies at a distance, will under 
 altered circumstances prove themselves by , t 
 rience to have only a supposititious reality. 
 
 Any knowledge that runs in such out-worn terms 
 turns out to be futile, misleading, meaningless; ar^ 
 the habit of imputing qualities and behavior of . 
 kind to everyday facts will then fall into disuse, p'rc 
 gressively as experience continues to bring home the 
 futility of all that kind of imputation. And pres- 
 ently the habit of perceiving that class of qualities 
 and behavior in the known facts is therefore grad- 
 ually lost. So also, in due time the observances and 
 the precautions and provisions embodied in law and 
 custom for the preservation or the control of these 
 lost imponderables will also fall into disuse and dis- 
 appear out of the scheme of institutions, by way of 
 becoming dead letter or by abrogation. Partic- 
 ularly will such a loss of belief and insight, and the 
 consequent loss of those imponderables whose 
 ground has thereby gone out from under them, take 
 effect with the passing of generations. 
 
 An Imponderable is an article of make-believe 
 which has become axiomatic by force of settled habit. 
 It can accordingly cease to be an Imponderable by 
 a course of unsettling habit. Those elders in whom 
 the ancient habits of faith and insight have been in- 
 grained, and in whose knowledge and belief the im- 
 ponderables in question have therefore had a vital 
 reality, will presently fall away; and the new gen- 
 eration whose experience has run on other lines are 
 in a fair way to lose these articles of faith and in- 
 sight, by disuse. It is a case of obsolescence by ha- 
 bitual disuse. And the habitual disuse which so al-
 
 KNOWLEDGE AND BELIEF 9 
 
 1^- - *- ne ancient canons of knowledge and belief to 
 laWvvay, and which thereby cuts the ground from 
 under the traditional system of law and custom, is 
 reenforced by the advancing discipline of a new or- 
 of experience, which exacts an habitual appre- 
 
 fl '!ion of workday facts in terms of a different kind 
 and thereby brings on a revaluation and revision of 
 the traditional rules governing human relations. 
 The new terms of workday knowledge and belief, 
 which do not conform to the ancient canons, go to 
 enforce and stabilise new canons and standards, of 
 a character alien to the traditional point of view. 
 It is, in other words, a case of obsolescence by dis- 
 placement as well as by habitual disuse. 
 
 This unsettling discipline that is brought to bear 
 by workday experience is chiefly and most imme- 
 diately the discipline exercised by the material con- 
 ditions of life, the exigencies that beset men in their 
 everyday dealings with the material means of life; 
 inasmuch as these material facts are insistent and 
 uncompromising. And the scope and method of 
 knowledge and belief which is forced on men in their 
 everyday material concerns will unavoidably, by ha- 
 bitual use, extend to other matters as well; so as also 
 to affect the scope and method of knowledge and be- 
 lief in all that concerns those imponderable facts 
 which lie outside the immediate range of material ex- 
 perience. It results that, in the further course of 
 changing habituation, those imponderable relations, 
 conventions, claims and perquisites, that make up 
 the time-worn system of law and custom will una- 
 voidably also be brought under review and will be 
 revised and reorganised in the light of the same
 
 io THE VESTED INTERESTS 
 
 new principles of validity that are found to be suf- 
 ficient in dealing with material facts. 
 
 Given time and a sufficiently exacting run of ex- 
 perience, and it will follow necessarily that much the 
 same standards of truth and finality will come to 
 govern men's knowledge and valuation of facts 
 throughout; whether the facts in question lie in the 
 domain of material things or in the domain of those 
 imponderable conventions and preconceptions that 
 decide what is right and proper in human intercourse. 
 It follows necessarily, because the same persons, 
 bent by the same discipline and habituation, take 
 stock of both and are required to get along with 
 both during the same lifetime. More or less rigor- 
 ously the same scope and method of knowledge and 
 valuation will control the thinking of the same in- 
 dividuals throughout; at least to the extent that any 
 given article of faith and usage which is palpably at 
 cross purposes with this main intellectual bent will 
 soon begin to seem immaterial and irrelevant and 
 will tend to become obsolete by neglect. 
 
 Such has always been the fate which overtakes any 
 notable articles of faith and usage that belong to a 
 bygone point of view. Any established system of 
 law and order will remain securely stable only on 
 condition that it be kept in line or brought into line 
 to conform with those canons of validity that have 
 the vogue for the time being; and the vogue is a mat- 
 ter of habits of thought ingrained by everyday ex- 
 perience. And the moral is that any established 
 system of law and custom is due to undergo a revi- 
 sion of its constituent principles so soon as a new 
 order of economic life has had time materially to
 
 KNOWLEDGE AND BELIEF n 
 
 affect the community's habits of thought. But all 
 the while the changeless native proclivities of the 
 race will assert themselves in some measure in any 
 eventual revision of the received institutional sys- 
 tem; and always they will stand ready eventually to 
 break the ordered scheme of things into a paralytic 
 mass of confusion if it can not be bent into some 
 passable degree of congruity with the paramount na- 
 tive needs of life. 
 
 What is likely to arrest the attention of any stu- 
 dent of the modern era from the outset is the pecul- 
 iar character of its industry and of its intellectual 
 outlook; particularly the scope and method of mod- 
 ern science and technology. The intellectual life of 
 modern Europe and its cultural dependencies differs 
 notably from what has gone before. There is all 
 about it an air of matter-of-fact both in its technol- 
 ogy and in its science; which culminates in a " mech- 
 anistic conception " of all those things with which 
 scientific inquiry is concerned and in the light of 
 which many of the dread realities of the Middle 
 Ages look like superfluous make-believe. 
 
 But it has been only during the later decades of 
 the modern era during that time interval that 
 might fairly be called the post-modern era that 
 this mechanistic conception of things has begun se- 
 riously to affect the current system of knowledge and 
 belief; and it has not hitherto seriously taken effect 
 except in technology and in the material sciences. 
 So that it has not hitherto seriously invaded the es- 
 tablished scheme of institutional arrangements, the 
 system of law and custom, which governs the rela-
 
 12 THE VESTED INTERESTS 
 
 tions of men to one another and defines their mutual 
 rights, obligations, advantages and disabilities. 
 But it should reasonably be expected that this estab- 
 lished system of rights, duties, proprieties and disa- 
 bilities will also in due time come in for something in 
 the way of a revision, to bring it all more nearly into 
 congruity with that matter-of-fact conception of 
 things that lies at the root of the late-modern civil- 
 isation. 
 
 The constituent principles of the established sys- 
 tem of law and custom are of the nature of impon- 
 derables, of course; but they are imponderables 
 which have been conceived and formulated in terms 
 of a different order from those that are convincing 
 to the twentieth-century scientists and engineers. 
 Whereas the line of advance of the scientists and en- 
 gineers, dominated by their mechanistic conception of 
 things, appears to be the main line of march for 
 modern civilisation. It should seem reasonable to 
 expect, therefore, that the scheme of law and custom 
 will also fall into line with this mechanistic concep- 
 tion that appears to mark the apex of growth in 
 modern intellectual life. But hitherto the "due 
 time " needed for the adjustment has apparently not 
 been had, or perhaps the experience which drives 
 men in the direction of a mechanistic conception of 
 all things has not hitherto been driving them hard 
 enough or unremittingly enough to carry such a re- 
 vision of ideas out in the system of law and custom. 
 The modern point of view in matters of law and cus- 
 tom appears to be somewhat in arrears, as measured 
 by the later advance in science and technology. 
 
 But just now the attention of thoughtful men cen-
 
 KNOWLEDGE AND BELIEF 13 
 
 ters on questions of practical concern, questions of 
 law and usage, brought to a focus by the flagrant 
 miscarriage of that organisation of Christendom 
 that has brought the War upon the civilised nations. 
 The paramount question just now is, what to do to 
 save the civilised nations from irretrievable disaster, 
 and what further may be accomplished by taking 
 thought so that no similar epoch of calamities shall 
 be put in train for the next generation. It is real- 
 ised that there must be something in the way of a 
 " reconstruction " of the scheme of things; and it is 
 also realised, though more dimly, that the recon- 
 struction must be carried out with a view to the 
 security of life under such conditions as men will 
 put up with, rather than with a view to the impecca- 
 ble preservation of the received scheme of law and 
 custom. All of which is only saying that the con- 
 stituent principles of the modern point of view are to 
 be taken under advisement, reviewed and con- 
 ceivably revised and brought into line, in so far 
 as these principles are constituent elements of that 
 received scheme of law and custom that is spoken of 
 as the status quo. It is the status quo in respect of 
 law and custom, not in respect of science and tech- 
 nology or of knowledge and belief, that is to be 
 brought under review. Law and custom, it is be- 
 lieved, may be revised to meet the requirements of 
 civilised men's knowledge and belief; but no man 
 of sound mind hopes to revise the modern system 
 of knowledge and belief so as to bring it all into con- 
 formity with the time-worn scheme of law and cus- 
 tom of the status quo. 
 
 Therefore the bearing of this stabilised modern
 
 i 4 THE VESTED INTERESTS 
 
 point of view, stabilised in the eighteenth century, 
 on these questions of practical concern is of present 
 interest, its practical value as ground for a rea- 
 sonably hopeful reconstruction of the war-shattered 
 scheme of use and wont; its possible serviceability 
 as a basis of enduring settlement; as well as the 
 share which its constituent principles have had in the 
 creation of that status quo out of which this epoch 
 of calamities has been precipitated. The status quo 
 ante, in which the roots of this growth of misfor- 
 tunes and impossibilities are to be found, lies within 
 the modern era, of course, and it is nowise to be 
 decried as an alien, or even as an unforeseen, out- 
 growth of this modern era. By and large, this 
 eighteenth-century stabilised modern point of view 
 has governed men's dealings within this era, and its 
 constituent principles of right and honest living must 
 therefore, presumptively, be held answerable for 
 the disastrous event of it all, at least to the extent 
 that they have permissively countenanced the growth 
 of those sinister conditions which have now ripened 
 into a state of world-wide shame and confusion. 
 
 How and how far is this modern point of view, 
 this body of legal and moral principles established 
 in the eighteenth century, to be accounted an acces- 
 sory to this crime? And if it be argued that this 
 complication of atrocities has come on, not because 
 of these principles of conduct which are so dear to 
 civilised men and so blameless in their sight, but only 
 in spite of them; then, what is the particular weak- 
 ness or shortcoming inherent in this body of princi- 
 ples which has allowed such a growth of malignant 
 conditions to go on and gather head? If the mod-
 
 KNOWLEDGE AND BELIEF 15 
 
 ern point of view, these settled principles of conduct 
 by which modern men collectively are actuated in 
 what they will do and in what they will permit, if 
 these canons and standards of clean and honest liv- 
 ing have proved to be a fatal snare; then it becomes 
 an urgent question : Is it safe, or sane to go into 
 the future by the light of these same established can- 
 ons of right, equity, and propriety that so have been 
 tried and found wanting? 
 
 Perhaps the question should rather take the less 
 didactic form : Will the present experience of calam- 
 ities induce men to revise these established princi- 
 ples of conduct, and the specifications of the code 
 based on them, so effectually as to guard against any 
 chance of return to the same desperate situation in 
 the calculable future? Can the discipline of recent 
 experience and the insight bred by the new order of 
 knowledge and belief, reenforced by the shock of 
 the present miscarriage, be counted on to bring such 
 a revision of these principles of law and custom as 
 will preclude a return to that status quo ante from 
 which this miscarriage of civilisation has resulted? 
 The latter question is more to the point. History 
 teaches that men, taken collectively, learn by habit- 
 uation rather than by precept and reflection; par- 
 ticularly as touches those underlying principles of 
 truth and validity on which the effectual scheme of 
 law and custom finally rests. 
 
 In the last analysis it resolves itself into a ques- 
 tion as to how and how far the habituation of the 
 recent past, mobilised by the shock of the present 
 conjuncture, will have affected the frame of mind 
 of the common man in these civilised countries; for
 
 1 6 THE VESTED INTERESTS 
 
 in the last analysis and with due allowance for a 
 margin of tolerance it is the frame of mind of the 
 common man that makes the foundation of society 
 in the modern world; even though the elder states- 
 men continue to direct its motions from day to day 
 by the light of those principles that were found good 
 some time before yesterday. And the fortunes of 
 the civilised world, for good or ill, have come to 
 turn on the deeds of commission and of omission of 
 these advanced peoples among whom the frame of 
 mind of the common man is the finally conditioning 
 circumstance in what may safely be done or left un- 
 done. The advice and consent of the common run 
 has latterly come to be indispensable to the conduct 
 of affairs among civilised men, somewhat in the same 
 degree in which the community is to be accounted 
 a civilised people. It is indispensable at least in a 
 permissive way, at least to the extent that no line of 
 policy can long be pursued successfully without the 
 permissive tolerance of the common run; and the 
 margin of tolerance in the case appears to be nar- 
 rower the more alert and the more matter-of-fact 
 the frame of mind of the common man.
 
 II 
 
 THE STABILITY OF LAW AND CUSTOM 
 
 IN so far as concerns the present question, that is to 
 say as regards those standards and principles which 
 underlie the established system of law and custom, 
 the modern point of view was stabilised and given a 
 definitive formulation in the eighteenth century; and 
 in so far as concerns the subsequent conduct of prac- 
 tical affairs, its constituent principles have stood over 
 without material change or revision since that time. 
 So that for practical purposes it is fair to say that 
 the modern point of view is now some one hundred 
 and fifty years old. 
 
 It will not do to say that it is that much behind 
 the times; because its time-worn standards of truth 
 and validity are a very material factor in the make- 
 up of " our time." That such is the case is due in 
 great part to the fact that this body of principles 
 was stabilised at that time and that they have there- 
 fore stood over intact, in spite of other changes that 
 have taken place. It is only that the principles 
 which had been tested and found good under the con- 
 ditions of life in the modern era up to that time 
 were at that time held fast, canvassed, defined, ap- 
 proved, and stabilised by being reduced to documen- 
 tary form. In some sense they were then written 
 
 17.
 
 1 8 THE VESTED INTERESTS 
 
 into the constitution of civilised society, and they 
 have continued to make up the nucleus of the doc- 
 ument from that time forth; and so they have be- 
 come inflexible, after the fashion of written consti- 
 tutions. 
 
 In the sight of those generations who so achieved 
 the definite acceptance of these enlightened modern 
 principles, and who finally made good their formal 
 installation in law and usage as self-balanced canons 
 of human conduct, the principles which they so ar- 
 rived at had all the sanction of Natural Law, im- 
 personal, dispassionate, indefeasible and immutable; 
 fundamentally and eternally right and good. That 
 generation of men held " these truths to be self-evi- 
 dent " ; and they have continued so to be held since 
 that epoch by all those peoples who make up the 
 effectual body of modern civilisation. And the 
 backward peoples, those others who have since then 
 been coming into line and making their claim to a 
 place in the scheme of modern civilised life, have 
 also successively been accepting and (passably) as- 
 similating the same enlightened principles of clean 
 and honest living. Christendom, as a going concern 
 of civilised peoples, has continued to regulate its af- 
 fairs by the help of these principles, which are still 
 held to be a competent formulation of the aspira- 
 tions of civilised mankind. So that these modern 
 principles of the eighteenth century, stabilised in doc- 
 umentary form a hundred and fifty years ago, have 
 stood over in immutable perfection until our time, 
 a monument more enduring than brass. 
 
 These principles are of the nature of habits of 
 thought, of course; and it is the nature of habits of
 
 LAW AND CUSTOM 19 
 
 thought forever to shift and change in response to 
 the changing impact of experience, since they are 
 creatures of habituation. But inasmuch as they 
 have once been stabilised in a thoroughly competent 
 fashion in the eighteenth century, and have been 
 drafted into finished documentary form, they have 
 been enabled to stand over unimpaired into the pres- 
 ent with all that weight <and stability that a well-de- 
 vised documentary formulation will give. It is true, 
 so far as regards the conditions of civilised life dur- 
 ing the interval that has passed since these modern 
 principles of law and custom took on their settled 
 shape in the eighteenth century, it has been a period 
 of unexampled change, swift, varied, profound 
 and extensive beyond example. And it follows of 
 necessity that the principles of conduct which were 
 approved and stabilised in the eighteenth century, un- 
 der the driving exigencies of that age, have not alto- 
 gether escaped the complications of changing circum- 
 stances. They have at least come in for some 
 shrewd interpretation in the course of the nineteenth 
 century. There have been refinements of definition, 
 extensions of application, scrutiny and exposition of 
 implications, as new exigencies have arisen and the 
 established canons have been required to cover un- 
 foreseen contingencies; but it has all been done with 
 the explicit reservation that no material innovation 
 shall be allowed to touch the legacy of modern prin- 
 ciples handed down from the eighteenth century, and 
 that the vital system of Natural Rights installed in 
 the eighteenth century must not be deranged at any 
 point or at any cost.
 
 20 THE VESTED INTERESTS 
 
 It is scarcely necessary to describe this modern 
 system of principles that still continues to govern hu- 
 man intercourse among the civilised peoples, or to 
 attempt an exposition of its constituent articles. It 
 is all to be had in exemplary form, ably incorporated 
 in such familiar documents as the American Declara- 
 tion of Independence, the French Declaration of the 
 Rights of Man, and the American Constitution; and 
 it is all to be found set forth with all the circum- 
 stance of philosophical and juristic scholarship in the 
 best work of such writers as John Locke, Montes- 
 quieu, Adam Smith, or Blackstone. It has all been 
 sufficiently canvassed, through all its dips, spurs and 
 angles, by the most competent authorities, who have 
 brought their best will and their best abilities to 
 bear on its elucidation at every point, with full doc- 
 umentation. Besides which, there is no need of re- 
 condite exposition for the present purpose; since all 
 that is required by the present argument is such a de- 
 gree of information on these matters as is familiar 
 to English-speaking persons by common notoriety. 
 
 At the same time it may be to the purpose to call 
 to mind that this secular profession of faith enters 
 creatively into that established order of things which 
 has now fallen into a state of havoc because it does 
 not meet the requirements of the new order. This 
 eighteenth-century modern plan specifically makes 
 provision for certain untoward rights, perquisites 
 and disabilities which have, in the course of time and 
 shifting circumstance, become incompatible with con- 
 tinued peace on earth and good-will among men. 
 
 There are two main counts included in this mod- 
 ern eighteenth-century plan, which appear un-
 
 LAW AND CUSTOM 21 
 
 remittingly to make for discomfort and dissension 
 under the conditions offered by the New Order of 
 things : National Ambition, and the Vested Rights 
 of ownership. Neither of the two need be con- 
 demned as being intrinsically mischievous. Indeed, 
 it may be true, as has often been argued, that both 
 have served a good purpose in their due time and 
 place; at least there is no need of arguing the con- 
 trary. Both belong in the settled order of civilised 
 life; and both alike are countenanced by those prin- 
 ciples of truth, equity and validity that go to make 
 up the modern point of view. It is only that now, 
 as things have been turning during the later one hun- 
 dred years, both of these immemorially modern 
 rights of man have come to yield a net return of 
 hardship and ill-will for all those peoples who have 
 bound up their fortunes with that kind of enterprise. 
 The case might be stated to this effect, that the fault 
 lies not in the nature of these untoward institutions 
 of national sovereignty and vested rights, nor in 
 those principles of self-help which underlie them, but 
 only in those latterday facts which stubbornly refuse 
 to fall into such lines as these forms of human enter- 
 prise require for their perfect and beneficent work- 
 ing. The facts, particularly the facts of industry 
 and science, have outrun these provisions of law 
 and custom; and so the scheme of things has got out 
 of joint by that much, through no inherent weakness 
 in the underlying principles of law and custom. The 
 ancient and honorable principles of self-help are as 
 sound as ever; it is only that the facts have quite 
 unwarrantably not remained the same. The fault 
 lies in the latterday facts, which have not continued
 
 22 THE VESTED INTERESTS 
 
 in suitable shape. Such, in effect, has been the view 
 habitually spoken for by many thoughtful persons 
 of a conservative turn, who take an interest in con- 
 certing measures for holding fast that which once 
 was good, in the face of distasteful facts. 
 
 The vested right of ownership in all kinds of prop- 
 erty has the sanction of the time-honored principles 
 of individual self-direction, equal opportunity, free 
 contract, security of earnings and belongings, 
 self-help, in the simple and honest meaning of the 
 word. It would be quite bootless to find fault with 
 these reasonable principles of tolerance and security. 
 Their definitive acceptance and stabilisation in the 
 eighteenth century are among the illustrious achieve- 
 ments of Western civilisation; and their roots lie 
 deep in the native wisdom of mankind. They are 
 obvious corollaries under the rule of Live and let 
 live, an Occidental version of the Golden Rule. 
 Yet in practical effect those vested rights which rest 
 blamelessly on these reasonable canons of tolerance 
 and good faith have today become the focus of vex- 
 ation and misery in the life of the civilised peoples. 
 Circumstances have changed to such effect that pro- 
 visions which were once framed to uphold a system 
 of neighborly good-will have now begun to run coun- 
 ter to one another and are working mischief to the 
 common good. 
 
 Any impartial survey of the past one-hundred-fifty 
 years will show that the constituent principles of this 
 modern point of view governing the mutual rights 
 and obligations of men within the civilised nations 
 have held their ground, on the whole, without ma- 
 terial net gain or net loss. It is the ground of Nat-
 
 LAW AND CUSTOM 23 
 
 ural Rights, of self-help and free bargaining. Civil 
 rights and the perquisites and obligations of owner- 
 ship have remained substantially intact over this in- 
 terval of a hundred and fifty years, but with some 
 slight advance in the way of Live and let live at cer- 
 tain points, and some slight retrenchment at other 
 points. So far as regards the formal stipulations, 
 in law and custom, the balance of class interests 
 within these countries has, on the whole, not been se- 
 riously disturbed. In this system of Natural Rights, 
 as it has worked out in practice, the rights of owner- 
 ship are paramount; largely because the other per- 
 sonal rights in the case have come to be a matter of 
 course and so have ceased to hold men's attention. 
 
 So, in the matter of the franchise, e. g., the legal 
 provisions more nearly meet the popular ideals of 
 the modern point of view today than ever before. 
 On the other hand the guiding principles in the case 
 at certain other points have undergone a certain re- 
 finement of interpretation with a view to greater 
 ease and security for trade and investment; and 
 there has, in effect, been some slight abridgement of 
 the freedom of combination and concerted action at 
 any point where an unguarded exercise of such free- 
 dom would hamper trade or curtail the profits of 
 business, for the modern era has turned out to be 
 an era of business enterprise, dominated by the par- 
 amount claims of trade and investment. In point of 
 formal requirements, these restrictions imposed on 
 concerted action " in restraint of trade " fall in equal 
 measure on the vested interests engaged in business 
 and on the working population engaged in industry. 
 So that the measures taken to safeguard the natural
 
 24 THE VESTED INTERESTS 
 
 rights of ownership apply with equal force to those 
 who own and those who do not. ' The majestic 
 equality of the law forbids the rich as well as the 
 poor to sleep under bridges or to beg on the street 
 corners." But it has turned out on trial that the 
 vested interests of business are not seriously ham- 
 pered by these restrictions; inasmuch as any formal 
 restriction on any concerted action between the own- 
 ers of such vested interests can always be got around 
 by a formal coalition of ownership in the shape of a 
 corporation. The extensive resort to corporate 
 combination of ownership, which is so marked a fea- 
 ture of the nineteenth century, was not foreseen and 
 was not taken into account in the eighteenth century, 
 when the constituent principles of the modern point 
 of view found their way into the common law. The 
 system of Natural Rights is a system of personal 
 rights, among which the rights of ownership are 
 paramount; and among the rights of ownership is 
 the right of free disposal and security of ownership 
 and of credit obligations. 
 
 The same line of evasion is not available in the 
 same degree for concerted action between persons 
 who own nothing. Still, in neither case, neither as 
 regards the owners of the country's wealth nor as 
 regards the common man, can these restrictions on 
 personal freedom of action be said to be a serious 
 burden. And any slight mutilation or abridgement 
 of the rule of self-help in their economic relations 
 has been offset by an increasingly broad and liberal 
 construction of the principles of self-direction and 
 equality among men in their civil capacity and their 
 personal relations. Indeed, the increasingly exact-
 
 LAW AND CUSTOM 25 
 
 ing temper of the common man in these countries 
 during this period has made such an outcome una- 
 voidable. By and large, in its formal vindication of 
 personal liberty and equality before the law, the 
 modern point of view has with singular consistency 
 remained intact in the shape in which its principles 
 were stabilised in the eighteenth century, in spite of 
 changing circumstances. In point of formal compli- 
 ance with their demands, the enlightened ideals of 
 the eighteenth century are, no doubt, more com- 
 monly realised in practice today than at any earlier 
 period. So that the modern civilised countries are 
 now, in point of legal form and perhaps also in prac- 
 tical effect, more nearly a body of ungraded and 
 masterless men than any earlier generation has 
 known how to be. 
 
 In this modern era, as well as elsewhere and in 
 other times, the circumstances that make for change 
 and reconstruction have been chiefly the material cir- 
 cumstances of everyday life, circumstances affect- 
 ing the ordinary state of industry and ordinary in- 
 tercourse. These material circumstances have 
 changed notably during the modern era. There has 
 been a progressive change in the state of the indus- 
 trial arts, which has materially altered the scope an3 
 method of industry and the conditions under which 
 men live in all the civilised countries. Accordingly, 
 as a point of comparison, it will be to the purpose to 
 call to mind what were the material circumstances, 
 and more particularly the state of the industrial arts, 
 which underlay and gave character to the modern 
 point of view at the period when its constituent prin-
 
 26 THE VESTED INTERESTS 
 
 ciples were found good and worked out as a stable 
 and articulate system, in the shape in which they 
 have continued to be held since then. 
 
 The material conditions of industry, trade and 
 daily life during the period of transition and ap- 
 proach to this modern ground created that frame of 
 mind which we call the modern point of view and 
 dictated that reconstruction of institutional arrange- 
 ments which has been worked out under its guidance. 
 Therefore the economic situation which so underlay 
 and conditioned this modern point of view at the per- 
 iod when it was given its stable form becomes the 
 necessary point of departure for any argument bear- 
 ing on the changes that have been going forward 
 since then, or on any prospective reconstruction that 
 may be due to follow from these changed conditions 
 in the calculable future. 
 
 On this head, the students of history are in a sin- 
 gularly fortunate position. The whole case is set 
 forth in the works of Adam Smith, with a compre- 
 hension and lucidity which no longer calls for praise. 
 Beyond all other men Adam Smith is the approved 
 and faithful spokesman of this modern point of view 
 in all that concerns the economic situation which it 
 assumes as its material ground; and his description 
 of the state of civilised society, trade and industry, 
 as he saw it in his time and as he wished it to stand 
 over into the future, is to be taken without abate- 
 ment as a competent exposition of those material 
 conditions which were then conceived to underlie civ- 
 ilised society and to dictate the only sound recon- 
 struction of civil and economic institutions according 
 to the modern plan.
 
 LAW AND CUSTOM 27 
 
 But like other men, Adam Smith was a creature of 
 his own time, and what he has to say applies to the 
 state of things as he saw them. What he describes 
 and inquires into is that state of things which was 
 to him the "historical present"; which always sig- 
 nifies the recent past, that is to say, the past as it 
 had come under his observation and as it had shaped 
 his outlook. 
 
 As it is conventionally dated, the Industrial Revo- 
 lution took effect within Adam Smith's active life- 
 time, and some of its more significant beginnings 
 passed immediately under his eyes; indeed, it is re- 
 lated that he took an active personal interest in at 
 least one of the epoch-making mechanical inventions 
 from which the era of the machine industry takes its 
 date. Yet the Industrial Revolution does not lie 
 within Adam Smith's " historical present," nor does 
 his system of economic doctrines make provision for 
 any of its peculiar issues. What he has to say on 
 the mechanics of industry is conceived in terms de- 
 rived from an older order of things than that ma- 
 chine industry which was beginning to get under 
 way in his own life-time; and all his illustrative in- 
 stances and arguments on trade and industry are also 
 such as would apply to the state of things that was 
 passing, but they are not drawn with any view to that 
 new order which was then coming on in the world 
 of business enterprise. 
 
 The economic situation contemplated by Adam 
 Smith as the natural (and ultimate) state of industry 
 and trade in any enlightened society, conducted on 
 sane and sound lines according to the natural order 
 of human relations, was of a simple structure and
 
 28 THE VESTED INTERESTS 
 
 may be drawn in few lines, neglecting such minor 
 extensions and exceptions as would properly be taken 
 account of in any exhaustive description. Industry 
 is conceived to be of the nature of handicraft; not 
 of the nature of mechanical engineering, such as it 
 has in effect and progressively come to be since his 
 time. It is described as a matter of workmanlike 
 labor, " and of the skill, dexterity and judgment with 
 which it is commonly applied." It is a question of 
 the skilled workman and his use of tools. Mechan- 
 ical inventions are " labor-saving devices," which 
 " facilitate and abridge labor." The material 
 equipment is the ways and means by manipulation of 
 which the workman gets his work done. " Capital 
 stock " is spoken of as savings parsimoniously ac- 
 cumulated out of the past industry of its owner, or 
 out of the industry of those persons from whom he 
 has legally acquired it by inheritance or in exchange 
 for the products of his own labor. Business is of 
 the nature of " petty trade" and the business man is 
 a " middle man " who is employed for a livelihood 
 in the distribution of goods to the consumers. 
 Trade is subsidiary to industry, and money is a ve- 
 hicle designed to be used for the distribution of 
 goods. Credit is an expedient of the needy; a du- 
 bious expedient. Profits (including interest) are 
 justified as a reasonable remuneration for productive 
 work done, and for the labor-saving use of property 
 derived from the owner's past labor. The efforts 
 of masters and workmen alike are conceived to be 
 bent on turning out the largest and most serviceable 
 output of goods; and prices are competitively deter- 
 mined by the labor-cost of the goods.
 
 LAW AND CUSTOM 29 
 
 Like other men Adam Smith did not see into the 
 future beyond what was calculable on the data given 
 by his own historical present; and in his time that 
 later and greater era of investment and financial en- 
 terprise which has made industry subsidiary to bus- 
 iness was only beginning to get under way and only 
 obscurely so. So that he was still able to think of 
 commercial enterprise as a middle-man's traffic in 
 merchandise, subsidiary to a small-scale industry on 
 the order of handicraft, and due to an assumed pro- 
 pensity in men " to truck, barter, and exchange one 
 thing for another." And so much as he could not 
 help seeing of the new order of business enterprise 
 which was coming in was not rated by him as a sane 
 outgrowth of that system of Natural Liberty for 
 which he spoke and about which his best affections 
 gathered. In all this he was at one with his thought- 
 ful contemporaries. 
 
 That generation of public-spirited men went, per- 
 force, on the scant data afforded by their own his- 
 torical present, the economic situation as they saw 
 it in the perspective and with the preconceptions of 
 their own time; and to them it was accordingly plain 
 that when all unreasonable restrictions are taken 
 away, " the obvious and simple system of natural lib- 
 erty establishes itself of its own accord." To this 
 " natural " plan of free workmanship and free trade 
 all restraint or retardation by collusion among bus- 
 iness men was wholly obnoxious, and all collusive 
 control of industry or of the market was accordingly 
 execrated as unnatural and subversive. It is true, 
 there were even then some appreciable beginnings of 
 coercion and retardation lowering of wages and
 
 30 THE VESTED INTERESTS 
 
 limitation of output by collusion between owners 
 and employers who should by nature have been com- 
 petitive producers of an unrestrained output of 
 goods and services according to the principles of that 
 modern point of view which animated Adam Smith 
 and his generation; but coercion and unearned gain 
 by a combination of ownership, of the now familiar 
 corporate type, was virtually unknown in his time. 
 So Adam Smith saw and denounced the dangers of 
 unfair combination between " masters " for the ex- 
 ploitation of their workmen, but the modern use of 
 credit and corporation finance for the collective con- 
 trol of the labor market and the goods market of 
 course does not come within his horizon and does 
 not engage his attention. 
 
 So also Adam Smith knows and denounces the use 
 of protective tariffs for private gain. That means 
 of pilfering was familiar enough in his time. But 
 he spends little indignation on the equally nefarious 
 use of the national establishment for safeguarding 
 and augmenting the profits of traders, concession- 
 aires, investors and creditors in foreign parts at the 
 cost of the home community. That method of tax- 
 ing the common man for the benefit of the vested 
 interests has also grown to more formidable propor- 
 tions since his time. The constituent principles of 
 the modern point of view, as accepted advisedly or 
 by oversight by Adam Smith and his generation, 
 supply all the legitimation required for this larce- 
 nous use of the national establishment; but the means 
 of communication were still too scant, and the larger 
 use of credit was too nearly untried, as contrasted 
 with what has at a later date gone to make the com-
 
 LAW AND CUSTOM 31 
 
 mercial ground and incentive of imperialist politics. 
 Therefore the imperialist policies of public enter- 
 prise for private gain also do not come greatly 
 within the range of Adam Smith's vision of the fu- 
 ture, nor does the " obvious and simple system " on 
 which he and his generation of thoughtful men take 
 their stand comprise anything like explicit declara- 
 tions for or against this later-matured chicane of the 
 gentlemen-investors who have been managing the 
 affairs of the civilised nations. 
 
 Adam Smith's work and life-time falls in with the 
 high tide of eighteenth-century insight and under- 
 standing, and it marks an epoch of spiritual achieve- 
 ment and stabilisation in civil institutions, as well 
 as in those principles of conduct that have governed 
 economic rights and relations since that date. But 
 it marks also the beginning of a new order in the 
 state of the industrial arts as well as in those mate- 
 rial sciences which come directly in touch with the 
 industrial arts and which take their logical bent from 
 the same range of tangible experience. So it hap- 
 pens that this modern point of view reached a stable 
 and symmetrical finality about the same date when 
 the New Order of experience and insight was be- 
 ginning to bend men's habits of thought into lines 
 that run at cross purposes with this same stabilised 
 point of view. It is in the ways and means of in- 
 dustry and in the material sciences that the new 
 order of knowledge and belief first comes into evi- 
 dence; because it is in this domain of workday facts 
 that men's experience began about that time to take 
 a decisive turn" at variance with the received canons.
 
 32 THE VESTED INTERESTS 
 
 A mechanistic conception of things began to displace 
 those essentially romantic notions of untrammeled 
 initiative and rationality that governed the intellec- 
 tual life of the era of enlightenment which was then 
 drawing to a close. 
 
 It is logically due to follow that the same general 
 principles of knowledge and validity will presently 
 undergo a revision of the same character where they 
 have to do with those imponderable facts of human 
 conduct and those conventions of law and custom 
 that govern the duties and obligations of men in so- 
 ciety. Here and now as elsewhere and in other 
 times the stubborn teaching that comes of men's ex- 
 perience with the tangible facts of industry should 
 confidently be counted on to make the outcome, so 
 as to bring on a corresponding revision of what is 
 right and good in that world of make-believe that 
 always underlies any established system of law and 
 custom. The material exigencies of the state of in- 
 dustry are unavoidable, and in great part unbending; 
 and the economic conditions which follow imme- 
 diately from these exigencies imposed by the ways 
 and means of industry are only less uncompromising 
 than the mechanical facts of industry itself. And 
 the men who live under the rule of these economic 
 exigencies are constrained to make their peace with 
 them, to enter into such working arrangements with 
 one another as these unbending conditions of the 
 state of the industrial arts will tolerate, and to cast 
 their system of imponderables on lines which can be 
 understood by the same men who understand the in- 
 dustrial arts and the system of material science which 
 underlies the industrial arts. So that, in due course,
 
 LAW AND CUSTOM 33 
 
 the accredited schedule of legal and moral rights, 
 perquisites and obligations will also presently be 
 brought into passable consistency with the ways and 
 means whereby the community gets its living. 
 
 But it is also logically to be expected that any re- 
 vision of the established rights, obligations, perqui- 
 sites and vested interests will trail along behind the 
 change which has taken effect in the material circum- 
 stances of the community and in the community's 
 knowledge and belief with regard to these material 
 circumstances; since any such revision of ancient 
 rights and perquisites will necessarily be consequent 
 upon and conditioned by that change, and since the 
 axioms of law and custom that underlie any estab- 
 lished schedule of rights and perquisites are always 
 of the nature of make-believe; and the make-believe 
 is necessarily built up out of conceptions derived 
 from the accustomed range of knowledge and be- 
 lief. 
 
 Out-worn axioms of this make-believe order be- 
 come superstitions when the scope and method of 
 workday knowledge has outgrown that particular 
 range of preconceptions out of which these make- 
 believe axioms are constructed; which comes to say- 
 ing that the underlying principles of the system of 
 law and morals are therewith caught in a process of 
 obsolescence, u depreciation by supersession and 
 disuse." By a figure of speech it might be said that 
 the community's intangible assets embodied in this 
 particular range of imponderables have shrunk by 
 that much, through the decay of these impondera- 
 bles that are no longer seasonable, and through their 
 displacement by other figments of the human brain,
 
 34 THE VESTED INTERESTS 
 
 a consensus of brains trained into closer conso- 
 nance with the latterday material conditions of life. 
 Something of this kind, something in the way of de- 
 preciation by displacement, appears now to be over- 
 taking that system of imponderables that has been 
 handed down into current law and custom out of 
 that range of ideas and ideals that had the vogue be- 
 fore the coming of the machine industry and the ma- 
 terial sciences. 
 
 Since the underlying principles of the established 
 order are of this make-believe character, that is to 
 say, since they are built up out of the range of con- 
 ceptions that have habitually been doing duty as the 
 substance of knowledge and belief in the past, it fol- 
 lows in the nature of the case that any reconstruction 
 of institutions will be made only tardily, reluctantly, 
 and sparingly; inasmuch as settled habits of thought 
 are given up tardily, reluctantly and sparingly. And 
 this will particularly be true when the reconstruction 
 of unseasonable institutions runs counter to a set- 
 tled and honorable code of ancient principles and a 
 stubborn array of vested interests, as in this instance. 
 Such is the promise of the present situation, and such 
 is also the record of the shift that was once before 
 made from medieval to modern times. It should be 
 a case of break or bend.
 
 Ill 
 
 THE STATE OF THE INDUSTRIAL ARTS 
 
 THE modern point of view, with its constituent prin- 
 ciples of equal opportunity, self-help, and free bar- 
 gaining, was given its definitive formulation in the 
 eighteenth century, as a balanced system of Natural 
 Rights; and it has stood over intact since that time, 
 and has served as the unquestioned and immutable 
 ground of public morals and expediency, on which 
 the advocates of enlightened and liberal policies have 
 always been content to rest in their case. The truths 
 which it holds to be self-evident and indefeasible are 
 conceived to be intrinsically bound up in an over-rul- 
 ing Order of Nature; in which thoughtful men ha- 
 bitually believed at that time and in which less 
 thoughtful men have continued to believe since then. 
 This eighteenth-century order of nature, in the magic 
 name of which Adam Smith was in the habit of 
 speaking, was conceived on lines of personal initia- 
 tive and activity. It is an order of things in which 
 men were conceived to be effectually equal in all 
 those respects that are of any decided consequence, 
 in intelligence, working capacity, initiative, op- 
 portunity, and personal worth; in which the creative 
 factor engaged in industry was the workman, with 
 his personal skill, dexterity and judgment; in which, 
 it was believed, the employer ("master") served 
 
 35
 
 36 
 
 his own ends and sought his own gain by consistently 
 serving the needs of creative labor, and thereby 
 serving the common good; in which the traders 
 ("middle-men") made an honest living by supply- 
 ing goods to consumers at a price determined by 
 labor cost, and so serving the common good. 
 
 This characterisation of the " obvious and sim- 
 ple system " that lies at the root of the liberal ideals 
 may seem too much of a dream to any person who 
 shuns "the scientific use of the imagination"; its 
 imponderables may seem to lack that axiomatic self- 
 sufficiency which one would like to find in the spirit- 
 ual foundations of a working system of law and cus- 
 tom. Indeed, the best of its imponderables are in 
 a fair way now to drop back into the discard of uncer- 
 tified make-believe. But in point of historical fact 
 it appears to have stood the test of time and use, 
 so far as appears formally on the face of law and 
 custom. For a hundred years and more it has con- 
 tinued to stand as a familiar article of faith and as- 
 piration among the advocates of a Liberal policy in 
 civil and economic affairs; and Adam Smith's follow- 
 ers the economists and publicists of the Liberal 
 movement have spoken for it as being the normal 
 system of economic life, the " natural state of man," 
 from which the course of events has been conceived 
 to depart only under pressure of " disturbing 
 causes," and to which the course of events must be 
 pruned back at all hazards in the event of any threat- 
 ened advance or departure beyond the " natural " 
 bounds set by this working ideal. 
 
 However, the subsequent course of events has 
 shown no indisposition to depart from this normal
 
 INDUSTRIAL ARTS 37 
 
 system of economic life, this " natural state of 
 man," on the effectual reality of which the modern 
 point of view rests its inviolate principles of law 
 and morals and economic expediency. A new order 
 of things has been taking effect in the state of the in- 
 dustrial arts and in the material sciences that lie 
 nearest to that tangible body of experience out of 
 which the state of the industrial arts is framed. 
 And the new order of industrial ways and means has 
 been progressively going out of touch with the es- 
 sential requirements of this established scheme of 
 individual self-help and personal initiative, on the 
 realisation and maintenance of which the best en- 
 deavors of the Liberals have habitually been spent. 
 Under the new order the first requisite of ordi- 
 nary productive industry is no longer the work- 
 man and his manual skill, but rather the mechan- 
 ical equipment and the standardised processes in 
 which the mechanical equipment is engaged. And 
 this latterday industrial equipment and process 
 embodies not the manual skill, dexterity and judg- 
 ment of an individual workman, but rather the ac- 
 cumulated technological wisdom of the community. 
 Under the new order of things the mechanical equip- 
 ment the " industrial plant " takes the initia- 
 tive, sets the pace, and turns the workman to account 
 in the carrying-on of those standardised processes 
 of production that embody this mechanistic state of 
 the industrial arts ; very much as the individual crafts- 
 man in his time held the initiative in industry, set 
 the pace, and made use of his tools according to his 
 own discretion in the exercise of his personal skill, 
 dexterity and judgment, under that now obsoles-
 
 3 8 THE VESTED INTERESTS 
 
 cent industrial order which underlies the eighteenth- 
 century modern point of view, and which still colors 
 the aspirations of Liberal statesmen and economists, 
 as well as the standard economic theories. 
 
 The workman and indeed it is still the skilled 
 workman is always indispensable to the due work- 
 ing of this mechanistic industrial process, of course; 
 very much as the craftsman's tools, in his time, were 
 indispensable to the work which he had in hand. 
 But the unit of industrial organization and proce- 
 dure, what may be called the " going concern " in pro- 
 duction, is now the outfit of industrial equipment, a 
 works, engaged in a given standardised mechanical 
 process designed to turn out a given output of stand- 
 ardised product; it is the plant, or the shop. And 
 under this new order of industrial methods and val- 
 ues it has already come to be a commonplace of 
 popular " knowledge and belief " that the mechani- 
 cal equipment is the creative factor in industry, and 
 the " production " of the output is credited to the 
 plant's working capacity and set down to its account 
 as a going concern; whereas the other factors en- 
 gaged, as e. g., workmen and materials, are counted 
 in as auxiliary factors which are indispensable but 
 subsidiary, items of production-cost which are in- 
 corporated in the running expenses of the plant and 
 its productive process. 
 
 Under the new order the going concern in pro- 
 duction is the plant or shop, the works, not the 
 individual workman. The plant embodies a 
 standardised industrial process. The workman is 
 made use of according as the needs of the given me- 
 chanical process may require. The time, place,
 
 INDUSTRIAL ARTS 39 
 
 rate, and material conditions of the work in hand 
 are determined immediately by the mechanically 
 standardised process in which the given plant is en- 
 gaged; and beyond that all these matters are de- 
 pendent on the exigencies and manoeuvres of busi- 
 ness, largely by way of moderating the rate of pro- 
 duction and keeping the output reasonably short of 
 maximum capacity. The workman has become sub- 
 sidiary to the mechanical equipment, and productive 
 industry has become subservient to business, in all 
 those countries which have come in for the latterday 
 state of the industrial arts, and which so have fallen 
 under the domination of the price system. 
 
 Such is the state of things throughout in those 
 greater industries that are characteristic of the New 
 Order; and these greater industries now set -the pace 
 and make the standards of management and valua- 
 tion for the rest. At the same time these greater 
 industries of the machine era extend their domina- 
 tion beyond their own immediate work, and enforce 
 a standardisation of much the same mechanical char- 
 acter in the community at large; in the ways and 
 means of living as well as in the ways and means 
 of work. The effects of their mechanically stand- 
 ardised production, in the way of goods and services 
 as well as in the similarly standardised traffic 
 through which these goods and services are dis- 
 tributed to the consumers, reach out into the every- 
 day life of all classes; but most immediately and im- 
 peratively they reach the working class of the in- 
 dustrial centers. So they largely set the pace for 
 the ordinary occupations of the common man even 
 apart from any employment in the greater mechani-
 
 40 THE VESTED INTERESTS 
 
 cal industries. It is especially the latterday sys- 
 tem of transport and communication as it works out 
 under the new order highly mechanical and exact- 
 ingly scheduled for time, rate and place that so 
 controls and standardises the ordinary life of the 
 common man on mechanical lines. 
 
 The training enforced by this mechanical stand- 
 ardisation, therefore, is of much the same order 
 throughout the community as it is within tKe me- 
 chanical industries proper, and it drives to the same 
 outcome, submergence of the personal equation. 
 So that the workday information and the reasoning 
 by use of which all men carry on their daily life 
 under the new order is of the same general char- 
 acter as that information and reasoning which 
 guides the mechanical engineers; and the unremit- 
 ting habituation to its scope and method, its princi- 
 ples of knowledge and belief, leads headlong to a 
 mechanistic conception of things, ways, means, ends, 
 and values, whether it is called by that name or not. 
 The resulting frame of mind is often spoken of as 
 Materialism. This impersonal character of work- 
 day habituation is particularly to be counted on to 
 take decisive effect wherever the latterday scheme of 
 mechanical standardisation takes effect with all that 
 wide sweep and massive drift with which it now 
 dominates the larger centers of population. 
 
 Since the modern era began, the state of the in- 
 dustrial arts has been undergoing a change of type, 
 such as the followers of Mendel would call a " mu- 
 tation." And in the course of this mutation the 
 workman and his part in the conduct of industry
 
 INDUSTRIAL ARTS 41 
 
 have suffered as great a dislocation as any of the 
 other factors involved. But it is also to be ad- 
 mitted that the typical owner-employer of the earlier 
 modern time, such as he stood in the mind's eye of 
 the eighteenth-century doctrinaires, this tradi- 
 tional owner-employer has also come through the 
 period of the mutation in a scarcely better state of 
 preservation. At the period of this stabilisation of 
 principles in the eighteenth century, he could still 
 truthfully be spoken of as a " master," a foreman 
 of the shop, and he was then still invested with a 
 large reminiscence of the master-craftsman, as 
 known in the time of the craft-gilds. He stood forth 
 in the eighteenth-century argument on the Natural 
 Order of things as the wise and workmanlike de- 
 signer and guide of his workmen's handiwork, and 
 he was then still presumed to be living in workday 
 contact and communion with them and to deal with 
 them on an equitable footing of personal interest. 
 
 Such a characterisation of the capitalist-employer 
 who was doing business at the time of the Industrial 
 Revolution may seem over-drawn; and there is no 
 need of insisting on its precise accuracy as a descrip- 
 tion of eighteenth-century facts. But it should not 
 be extremely difficult to show that substantially such 
 a figure of an employer-owner was had in mind by 
 those who then argued the questions of wages and 
 employment and laid down the lines on which the 
 employment of labor would be expected to arrange 
 itself under the untroubled system of natural lib- 
 erty. But what is more to the point is that which is 
 beyond question. In practical fact, almost as fully 
 as in the speculations of the doctrinaires, the em-
 
 42 THE VESTED INTERESTS 
 
 ployer of labor in the staple industries of that time 
 was, in his own person, commonly also the owner of 
 the establishment in which his hired workmen were 
 employed; and also again in passable accord with 
 the facts he was presumed personally to come to 
 terms with -his workmen about wages and conditions 
 of work. Employment was considered to be a re- 
 lation of man to man. That much is explicit in the 
 writings which bear the date-mark of this modern 
 Liberal point of view; and the same assumption has 
 continued to stand over as a self-sufficient premise 
 among the defenders of the free competitive system 
 in industry, for three or four generations after that 
 period. 
 
 But the course of events has gone its own way, 
 and about that time somewhere along in the mid- 
 dle half of the eighteenth century that type of 
 employer began to be displaced in those staple indus- 
 tries which have since then set the pace and made the 
 outcome for wages and conditions of work. So 
 soon as the machine industry began to make head- 
 way, the industrial plant increased in size, and the 
 number of workmen employed in each establishment 
 grew continually larger; until in the course of time 
 the large scale of organisation in industry has put 
 any relation of man to man out of the question be- 
 tween employers and workmen in the leading in- 
 dustries. Indeed, it is not unusual to find that in 
 an industrial plant of a large or middling size, a 
 factory, mill, works, mine, shipyard or railway of 
 the ordinary sort, very few of the workmen would 
 be able, under oath, to identify their owner. At the 
 same time, and owing to the same requirements of
 
 INDUSTRIAL ARTS 43 
 
 large-scale and mechanical organisation, the owner- 
 ship of the works has also progressively been chang- 
 ing character; so that today, in the large and leading 
 industries, the place of the personal employer-owner 
 is taken by a composite business concern which rep- 
 resents a combination of owners, no one of whom is 
 individually responsible for the concern's transac- 
 tions. So true is this, that even where the ownership 
 of a given industrial establishment still vests wholly 
 or mainly in a single person, it has commonly been 
 found expedient to throw the ownership into the 
 corporate form, with limited liability. 
 
 The personal employer-owner has virtually disap- 
 peared from the great industries. His place is now 
 filled by a list of corporation securities and a staff of 
 corporation officials and employees who exercise a 
 limited discretion. The personal note is no longer 
 to be had in the wage relation, except in those back- 
 ward, obscure and subsidiary industries in which the 
 mechanical reorganisation of the new order has not 
 taken effect. So, even that contractual arrangement 
 which defines the workman's relation to the estab- 
 lishment in which he is employed, and to the anony- 
 mous corporate ownership by which he is employed, 
 now takes the shape of a statistical reckoning, in 
 which virtually no trace of the relation of man to 
 man is to be found. Yet the principles of the mod- 
 ern point of view governing this contractual rela- 
 tion, in current law and custom, are drawn on the 
 assumption that wages and conditions of work are 
 arranged for by free bargaining between man and 
 man on a footing of personal understanding and 
 equal opportunity.
 
 44 THE VESTED INTERESTS 
 
 That the facts of the New Order have in this way 
 departed from the ground on which the constituent 
 principles of the modern point of view are based, 
 and on which therefore the votaries of the estab- 
 lished system take their stand, this state of 
 things can not be charged to anyone's personal ac- 
 count and made a subject of recrimination. In fact, 
 it is not a case for personal discretion and responsi- 
 bility in detail, but rather for concerted action look- 
 ing to some practicable working arrangement. 
 
 The personal equation is no longer a material 
 factor in the situation. Ownership, too, has been 
 caught in the net of the New Order and has been 
 depersonalised to a degree beyond what would have 
 been conceivable a hundred years ago, especially so 
 far as it has to do with the use of material resources 
 and man power in the greater industries. Owner- 
 ship has been " denatured " by the course of events; 
 so that it no longer carries its earlier duties and re- 
 sponsibilities. It used to be true that personally re- 
 sponsible discretion in all details was the chief and 
 abiding power conferred by ownership; but wher- 
 ever it has to do with the machine industry and 
 large-scale organisation, ownership now has virtu- 
 ally lost this essential part of its ordinary functions. 
 It has taken the shape of an absentee ownership of 
 anonymous corporate capital, and in the ordinary 
 management of this corporate capital the greater 
 proportion of the owners have no voice. 
 
 This impersonal corporate capital, which is tak- 
 ing the place of the personal employer-owner of 
 earlier times, is the outcome of a mutation of the 
 scheme of things in business enterprise, scarcely less
 
 INDUSTRIAL ARTS 45 
 
 profound than the change which has overtaken the 
 material equipment in the shift from handicraft 
 methods to the machine technology. In practical 
 fact today, corporate capital is the capitalised earn- 
 ing capacity of the corporation considered as a go- 
 ing business concern; and the ownership of this capi- 
 tal therefore foots up to a claim on the earnings of 
 the corporation. 
 
 Corporate capital of this kind is impersonal in 
 more than one sense: it may be transferred piece- 
 meal from one owner to another without visibly af- 
 fecting the management or the rating of the con- 
 cern whose securities change hands in this way; and 
 the personal identity of the owner of any given block 
 of this capital need not be known even to the con- 
 cern itself, to its administrative officers, or to those 
 persons whose daily work and needs are bound up 
 with the daily transactions of the concern. For 
 most purposes and as regards the greater proportion 
 of the investors who in this way own the corpora- 
 tion's capital, these owners are, in effect, anonymous 
 creditors, whose sole effectual relation to the enter- 
 prise is that of a fixed " overhead charge " on its op- 
 erations. Such is the case even in point of form as 
 regards the investors in corporate bonds and pre- 
 ferred stock. The ordinary investor is, in effect, an 
 anonymous pensioner on the enterprise; his relation 
 to industry is in the nature of a liability, and his 
 share in the conduct of this industry is much like the 
 share which the Old Man of the Sea once had in the 
 promenades of Sinbad. 
 
 No doubt, any reasonably skilful economist 
 any certified accountant of economic theory could
 
 4 6 
 
 successfully question the goodness of this characteri- 
 sation of corporate capital. It is, in fact, not such 
 a description as is commonly met with in those 
 theories of ownership and investment that trace back 
 to the formal definitions of Ricardo and Adam 
 Smith. Nor is this description of latterday facts 
 here set down as a formal definition of corporate 
 capital and its uses ; nor is it designed to fit into that 
 traditional scheme of conceptions that still holds the 
 attention of the certified economists. Its aim is the 
 less ambitious one of describing, in a loose and in- 
 formal way, what is the nature and uses of this 
 corporate capital and its ownership, in the appre- 
 hension of the common man out of doors. He is 
 not so familiar with the recondite wisdom of the 
 past, or with subtle definitions, other than the latter- 
 day subtleties of the market, the crop season, the 
 blast-furnace and refinery, the internal-combustion 
 engine, and such like hard and fast matters with 
 which he is required to get along from day to day. 
 The purpose here is only to bring out, without un- 
 due precision, what these interesting phenonema of 
 capital, investment, fixed charges, and the like, may 
 be expected to foot up to in terms of tangible per- 
 formance, in the unschooled reflections of the com- 
 mon man, who always comes in as " the party of the 
 second part " in all these manoeuvres of corporation 
 finance. He commonly has no more than a slender 
 and sliding grasp of those honorable principles of 
 certified make-believe that distinguish the modern 
 point of view in all that relates to property and its 
 uses; but he has had the benefit of some exacting 
 experience in the ways of the new order and its
 
 INDUSTRIAL ARTS 47 
 
 standards of reckoning. By consequence of much 
 untempered experience the common man is begin- 
 ning to see these things in the glaring though fitful 
 light of that mechanistic conception that rates men 
 and things on grounds of tangible performance, 
 without much afterthought. As seen in this light, 
 and without much afterthought, very much of the 
 established system of obligations, earnings, per- 
 quisites and emoluments, appears to rest on a net- 
 work of make-believe. 
 
 Now, it may be deplorable, perhaps inexcusable, 
 that the New Order in industry should engender 
 habits of thought of this unprofitable kind; but then, 
 after all, regrets and excuses do not make the out- 
 come, and with sufficient reason attention today 
 centers on the outcome. 
 
 To the common man who has taken to reckoning 
 in terms of tangible performance, in terms of man 
 power and material resources, these returns on in- 
 vestment that rest on productive enterprise as an 
 overhead charge are beginning to look like unearned 
 income. Indeed, the same unsympathetic precon- 
 ception has lately come in for a degree of official 
 recognition. High officials who are presumed to 
 speak with authority, discretion and an unbiassed 
 mind have lately spoken of incomes from invest- 
 ments as u unearned incomes," and have even en- 
 tertained a project for subjecting such incomes to a 
 differential rate of taxation above what should fairly 
 be imposed on " earned incomes." All this may, of 
 course, be nothing more than an unseasonable lapse 
 of circumspection on the part of the officials, who
 
 48 THE VESTED INTERESTS 
 
 have otherwise, on the whole, consistently lived up 
 to the best traditions of commercial sagacity; and a 
 safe and sane legislature has also canvassed the mat- 
 ter and solemnly disallowed any such invidious dis- 
 tinction between earned and unearned incomes. 
 Still, this passing recognition of unearned incomes 
 is scarcely less significant for being unguarded; and 
 the occurrence lends a certain timeliness to any in- 
 quiry into the source and nature of that net pro- 
 duct of industry out of which any fixed overhead 
 charges of this kind are drawn. 
 
 To come to an understanding of the source and 
 origin of this margin of disposable revenue that goes 
 to the earnings of corporate capital, it is necessary 
 to come to an understanding of the industrial system 
 out of which the disposable margin of revenue 
 arises. Productive industry yields a margin of net 
 product over cost, counting cost in terms of man 
 power and material resources; and under the es- 
 tablished rule of self-help and free bargaining as it 
 works out in corporation finance, this margin of net 
 product has come to rest upon productive industry 
 as an overhead charge payable to anonymous out- 
 siders who own the corporation securities. 
 
 There need be no question of the equity of this ar- 
 rangement, as between the men at work in the in- 
 dustries and the beneficiaries to whom the overhead 
 charge is payable. At least there is no intention 
 here to question the equity of it, or to defend the 
 arrangement against any question that may be 
 brought. It is also to be remarked that the whole 
 arrangement has this appearance of gratuitous hand-
 
 INDUSTRIAL ARTS 49 
 
 leap and hardship only when it is looked at from 
 the crude ground level of tangible performance. 
 When seen in the dry light of the old and honest 
 principles of self-help and equal opportunity, as un- 
 derstood by the substantial and well-meaning citi- 
 zens, it all casts no shadow of iniquity or inexpedi- 
 ency. 
 
 So, without prejudice to .any ulterior question 
 which may be harbored by one and another, the 
 question which is here had in mind is quite simply 
 as to the production of this disposable margin of 
 net product over human cost. And to pass muster 
 today, any attempted answer will be required to meet 
 that exacting and often inconvenient insistence on 
 palpable fact which is of the essence of the new 
 order of knowledge and belief. It is necessary to 
 reach an understanding of these things in terms of 
 tangible performance, in such terms as are germane 
 to that new order of knowledge and belief out of 
 which the perplexity arises, rather than in those 
 terms of equitable imputation that lie at the root of 
 the certified economic doctrines and of corporation 
 finance. 
 
 These relevant facts are neither particularly ob- 
 scure nor particularly elusive; only, they have had 
 little attention in the argument of economists and 
 politicians. Still less in the speculations of the cap- 
 tains of finance. The partition of incomes has al- 
 ways been more easily understood by these practi- 
 cally-minded persons, and it is also a more engross- 
 ing subject of argumentation than the production of 
 goods. This would be particularly true for these
 
 50 THE VESTED INTERESTS 
 
 economists and politicians, who are imbued with 
 that legalistic spirit which pervades the modern 
 point of view and all its votaries. 
 
 But it is known to all, even to the most safely 
 guarded persons who do not come in contact with 
 industry or production, or even with the products 
 of the staple industries, that industry at large will 
 always turn out something in the way of a net 
 margin of product over human cost, over human 
 effort and necessary consumption. It holds true as 
 far back as the records have anything to say. It 
 is evidently a question of the productivity of the in- 
 dustrial arts. Men at work turn out a net product 
 because they know how and are interested in doing 
 it; and their output is limited by the industrial meth- 
 ods which they have the use of. But the output is 
 limited in such a way that it always exceeds the cost 
 by more or less, barring accident. By and large, 
 throughout past time the industrial arts have been 
 gaining in efficiency, and the ordinary margin of net 
 product over cost has consequently gone on widen- 
 ing. This is much of the meaning of " an advance 
 in the industrial arts." 
 
 In an earlier time, by law and custom, the net 
 margin of product habitually went to a master class, 
 so-called, as the " earnings " or the due emoluments 
 of their mastery over those industrious classes who 
 carried forward and gave effect to the state of the 
 industrial arts as known in their time. By virtue of 
 their mastery and its incorporation in the institu- 
 tions of the time, they had an equitable, and effect- 
 ual, vested interest in the net product of the com- 
 munity's industry; and by virtue of the same settled
 
 INDUSTRIAL ARTS 51 
 
 principles of law and custom it was for them to see 
 to the due consumption of any such net product 
 above cost. In later times, and particularly in mod- 
 ern times and in the civilised countries, those im- 
 memorial principles of privilege equitably vested in 
 the master class have fallen into discredit as being 
 not sufficiently grounded in fact; so that mastery 
 and servitude are disallowed and have disappeared 
 from the range of legitimate institutions. The en- 
 lightened principles of self-help and personal equal- 
 ity do not tolerate these things. However, they do 
 tolerate free income from investments. Indeed, the 
 most consistent and most reputable votaries of the 
 modern point of view commonly subsist on such in- 
 come. 
 
 Ever since these enlightened principles of the 
 modern point of view were first installed in the 
 eighteenth century as the self-evident rule of reason 
 in civilised life, the industrial arts have also con- 
 tinued to gain in productive efficiency, at an ever- 
 accelerated rate of gain; so that today the industrial 
 methods of the machine era are highly productive, 
 beyond any earlier state of the industrial arts or 
 anything that is known outside the range of this 
 new order of industry. The output of this indus- 
 trial system yields a wider margin of net product 
 over cost than has ever been obtainable by any other 
 or earlier known method of work. It consequently 
 affords ground for an uncommonly substantial 
 vested interest in this disposable net margin. 
 
 But the industrial system of the new order will 
 work at the high rate of efficiency of which it is ca- 
 pable, only under suitable conditions. It is a com-
 
 52 THE VESTED INTERESTS 
 
 prehensive system of interdependent working parts, 
 organised on a large scale and with an exacting ar- 
 ticulation of parts, works, mills, railways, ship- 
 ping, groups and lines of industrial establishments, 
 all working together on a somewhat delicately bal- 
 anced plan of mutual give and take. No one mem- 
 ber or section of this system is a self-sufficient indus- 
 trial enterprise, even if it is true that no one member 
 is strictly dependent on any other one. Indeed, no 
 one member or section, group or line of industrial 
 establishments, in this industrial universe of the new 
 order, is a productive factor at all, except as it fits 
 into and duly gives and takes its share in the work 
 of the system as a whole. Such exceptions to this 
 rule of interlocking processes as may appear on first 
 examination, are likely to prove exceptions in ap- 
 pearance only. They are chiefly the backward 
 trades and occupations which have not had the 
 benefit of the Industrial Revolution and do not be- 
 long under the new, mechanistic order of industry; 
 or they are trades, occupations and works devoted 
 to the consumption of goods or to the maintenance 
 of the rules governing the distribution and consump- 
 tion of wealth, as, for instance, banking, menial 
 service, police service and the apparatus of the law, 
 the learned professions and the fine arts. 
 
 It is also of the essence of this industrial system 
 and its technology that it necessarily involves the in- 
 dustrial community as a whole, its working popula- 
 tion and its material resources; and the measure of 
 its successful operation is determined by the effectual 
 team-work of its constituent parts. And the indus- 
 trial system of the new order is drawn on a large
 
 INDUSTRIAL ARTS 53 
 
 scale and rests on a comprehensive specialisation of 
 processes and standardisation of output; so that the 
 " community " which is required for the necessary 
 team-work is necessarily a large community; larger 
 than the total population and resources that would 
 have served the like purpose under any earlier state 
 of the industrial arts, at the same time that the 
 needed coordination of processes is also wider and 
 more delicately balanced than ever before. Indeed, 
 the " industrial community " of the new order is al- 
 ways and necessarily larger than any existing na- 
 tional unit. The ramification of give and take under 
 the new industrial system invariably overlaps the 
 national frontiers, among all those peoples who oc- 
 cupy what would be called an " advanced " place in 
 industry. The system, and therefore the industrial 
 community engaged in team-work under this system, 
 is drawn on cosmopolitan or international lines, both 
 in respect of the body of technological knowledge 
 which is turned to account and in respect of the 
 range and volume of materials necessary to be used 
 according to this new order in productive industry. 
 Evidently the total output of product turned out 
 under this industrial system, the " annual produc- 
 tion," to use Adam Smith's phrase, or the " annual 
 dividend," to use a phrase taken from later 
 usage, this total output is the output of the total 
 community working together as a balanced organisa- 
 tion of industrial forces engaged in a moving equi- 
 librium of production. No part or fraction of the 
 community is a productive factor in its own right 
 and taken by itself, since no work can be done by 
 any segment of the community in isolation from the
 
 54 THE VESTED INTERESTS 
 
 rest; no one plant or works would be a producer in 
 the absence of all the rest. The total product is the 
 product of the total community's work; or rather it 
 is the product of the work of that fraction of the 
 people who are employed in productive work, - 
 which is not quite the same thing, since there is 
 much work spent on the consumption of goods, and 
 on ways and means for such consumption, as well as 
 on their production. 
 
 Indeed, it is by no means certain that there is not 
 more time, strain and ingenuity spent on the con- 
 sumption of goods than on their production. Apart 
 from sports, menial service, fashionable dress and 
 equipage, pet animals and mandatory social 
 amenities, there would also have to be included un- 
 der the ways and means of consumption virtually 
 all that goes into salesmanship and advertising. 
 Virtually all of these things have to do with the 
 organised consumption of goods; and virtually all 
 are therefore to be written off as waste motion, so 
 far as regards their effect on the net productive ef- 
 ficiency of the industrial community, or of the in- 
 dustrial system whose tissues are consumed in en- 
 terprise of that kind. The amount which is to be 
 written off as consumptive waste in this way is ap- 
 proximately the same as the net margin of product 
 over cost; and according to the enlightened prin- 
 ciples of self-help and equal opportunity, as these 
 principles work out under the new order of industry, 
 it is for the investors to take care of this consump- 
 tive waste and to see that no unconsumed residue is 
 left over to cumber the market and produce a glut.
 
 INDUSTRIAL ARTS 55 
 
 Evidently, too, the amount of the annual produc- 
 tion depends on the state of the industrial arts which 
 the working population has the use of for the time 
 being; which is in the main a matter of technological 
 knowledge and popular education. So that the 
 question of productivity and net productivity may be 
 stated in general terms to the following effect : The 
 possible or potential productive capacity of any 
 given community, having the disposal of a given 
 complement of man power and material resources, 
 is a matter of the state of the industrial arts, the 
 technological knowledge, which the community has 
 the use of; this sets the limit, determines the 
 " maximum " production of which the community is 
 capable. The actual production in such a commun- 
 ity will then be determined by the extent to which the 
 available technological efficiency is turned to ac- 
 count; which is regulated in part by the intelligence, 
 or " education," of the working population, and in 
 greater part by market conditions which decide how 
 large a product it will be profitable for the business 
 men to turn out. The net product is the amount by 
 which this actual production exceeds its own cost, 
 as counted in terms of subsistence, and including the 
 cost of the necessary mechanical equipment; this 
 net product will then approximately coincide with 
 the annual keep, the cost of maintenance and re- 
 placement, of the investors or owners of capitalised 
 property who are not engaged in productive indus- 
 try; and who are on this account sometimes spoken 
 of as the " kept classes." Indeed, it would seem 
 that the number and average cost per capita of the
 
 56 THE VESTED INTERESTS 
 
 kept classes, communlbus annis, affords something 
 of a rough measure of the net product habitually 
 derived from the community's annual production. 
 
 The state of the industrial arts, therefore, is the 
 indispensable conditioning circumstance which de- 
 termines the productive capacity of any given com- 
 munity; and this is true in a peculiar degree under 
 this new order of industry, in which the industrial 
 arts have reached an unexampled development. 
 The same decisive factor may also be described as 
 " the community's joint stock of technological 
 knowledge." This common stock of technological 
 knowledge decides what will be the ordinary ways 
 and means of industry, and so it decides what will 
 be the character and volume of the output of product 
 which a given man power is capable of turning out. 
 Evidently no man power and no working population 
 can turn out any annual product without the use of 
 something in the way of technological knowledge, 
 that is to say some state of the industrial arts. The 
 working community is a productive factor only by 
 virtue of, and only up to the limit set by, the state 
 of the industrial arts which it has the use of. The 
 contrast of industrial Japan or of industrial Ger- 
 many before the middle of the nineteenth century 
 and after the close of the century will serve for il- 
 lustration; that is to say before and after those 
 peoples had come in for the use of the technology of 
 the machine era. The disposable excess of the 
 yearly product over cost is a matter of the efficiency 
 of the available state of technological knowledge, 
 and of the measure in which the working popula- 
 tion is put in a position to make use of it. These, of
 
 INDUSTRIAL ARTS 57 
 
 course, are obvious facts, which it should scarcely be 
 necessary to recite, except that they are habitually 
 overlooked, perhaps because they are obvious. 
 
 The Industrial Revolution of the eighteenth cen- 
 tury was a revolution in the state of the industrial 
 arts, of course ; it was a mutation of character in the 
 common stock of technological knowledge held and 
 used by the industrial population of the civilised 
 countries from that time f6rward. The shift from 
 the older to the new order of industry was of such a 
 nature as to call for the use of an extensive equip- 
 ment of mechanical apparatus, progressively more 
 and more extensive as the change to the machine 
 technology went on; and at the same time the dis- 
 posable margin of product above cost also progres- 
 sively went on increasing with each further increase 
 of the community's joint stock of technological 
 knowledge. 
 
 This body of technological knowledge, the state 
 of the industrial arts, of course has always contin- 
 ued to be held as a joint stock. Indeed this joint 
 stock of technology is the substance of the commun- 
 ity's civilisation on the industrial side, and therefore 
 it constitutes the substantial core of that civilisation. 
 Like any other phase or element of the cultural heri- 
 tage, it is a joint possession of the community, so 
 far as concerns its custody, exercise, increase and 
 transmission; but it has turned out, under the pe- 
 culiar circumstances that condition the use of this 
 technology among these civilised peoples, that its 
 ownership or usufruct has come to be effectually 
 vested in a relatively small number of persons. 
 Unforeseen and undesigned, the mechanical circum-
 
 58 THE VESTED INTERESTS 
 
 stances of the new order in industry have reversed 
 the practical effects of the common law in respect 
 of self-help, equal opportunity and free bargaining. 
 The mechanics of the case has worked out this re- 
 sult by cutting away the ground on which those prin- 
 ciples were based at the time of their acceptance 
 and installation. 
 
 The machine technology requires for its working 
 a large and specialised mechanical apparatus, an 
 ever increasingly large and increasingly elaborate 
 material equipment. So also it requires a large and 
 diversified supply of material resources, both in raw 
 materials and in the way of motive power. It is 
 only on condition that these requirements are met 
 in some passable fashion that this industrial system 
 will work at all, and it is only as these requirements 
 are freely met that the machine industry will work 
 at a high efficiency. At the same time the settled 
 principles of law and usage and public policy handed 
 down from the eighteenth century have in effect de- 
 cided, and continue to decide, that all material 
 wealth is, rightly, to be held in private ownership, 
 and is to be made use of only subject to the un- 
 hampered discretion of the legally rightful owner. 
 Meantime the highly productive state of the indus- 
 trial arts embodied in the technological knowledge 
 of the new order can be turned to account only by 
 use of this material equipment and these natural 
 resources which continue to be held in private owner- 
 ship. From which it follows that these material 
 means of industry, and the state of the industrial 
 arts which these material means are to serve, can be 
 turned to productive use only so far and on such
 
 INDUSTRIAL ARTS 59 
 
 conditions as the rightful owners of the material 
 equipment and resources may choose to impose; 
 which enables the owners of this indispensable ma- 
 terial wealth, in effect, to take over the use of these 
 industrial arts for their own sole profit. So that 
 the usufruct of the community's technological knowl- 
 edge has come to vest in the owners of such material 
 wealth as is held in sufficiently large blocks for the 
 purpose. 
 
 Therefore, by award of the settled principles of 
 equity and self-help embodied in the modern point 
 of view, as stabilised in the eighteenth century, the 
 owners of the community's material resources 
 that is to say the investors in industrial business 
 have in effect become " seized and possessed of " 
 the community's joint stock of technological knowl- 
 edge and efficiency. Not that this accumulated 
 knowledge of industrial forces and processes has 
 passed into the intellectual keeping of the investors 
 and been assimilated into their mentality, even to the 
 extent of a reasonably scanty modicum. It remains 
 true, of course, that the investors, owners, kept 
 classes, or whatever designation is preferred, are 
 quite exceptionally ignorant of all that mechanics of 
 industry whose usufruct is vested in them; they are, 
 in effect, fully occupied with other things, and their 
 knowledge of industry ordinarily does not, and need 
 not, extend to any rudiments of technology or in- 
 dustrial process. It is not as intelligent persons, but 
 only as owners of material ways and means, as 
 vested interests, that they come into the case. The 
 exceptions to this rule are only sufficiently numerous 
 to call attention to themselves as exceptions.
 
 60 THE VESTED INTERESTS 
 
 As an intellectual achievement and as a working 
 force the state of the industrial arts continues, of 
 course, to be held jointly in and by the community at 
 large; but equitable title to its usufruct has, in effect, 
 passed to the owners of the indispensable material 
 means of industry. Though not hitherto by formal 
 specification and legal provision, their assets include, 
 in effect, the state of the industrial arts as well as 
 the mechanical appliances and the materials without 
 which these industrial arts are of no effect. It is 
 true, a little something, and indeed more than a 
 little, has been done toward the due legal recogni- 
 tion of the investor's usufruct of the community's 
 technological efficiency, in the recognition of vested 
 interests and intangible assets as articles of private 
 property defensible at law. But on the whole, and 
 until a relatively recent date, the investors' tenure of 
 this usufruct has been allowed to rest informally on 
 their control of the community's material assets. 
 Still, the outlook now appears to be that something 
 further may presently be done toward a more secure 
 and unambiguous tenure of this usufruct, by suitable 
 legal decisions bearing on the inviolability of vested 
 interests and intangible assets. The outcome is, in 
 effect, that these owners have equitably become the 
 sole legitimate beneficiaries of the community's dis- 
 posable margin of product above cost. 
 
 These are also simple facts and patent, and they 
 should seem sufficiently obvious without argument. 
 They have also been explained at some length else- 
 where. But this recital of what should already be 
 commonplace information seems necessary here for 
 the sake of a more perspicuous continuity in the
 
 INDUSTRIAL ARTS 61 
 
 present argument. To many persons, perhaps to 
 the greater proportion of those unpropertied per- 
 sons that are often spoken of collectively as " the 
 common man," the state of things which has just 
 been outlined may seem untoward. And further re- 
 flection on the character and prospective conse- 
 quences of this arrangement is likely to add some- 
 thing more to the common man's apprehension of 
 hardship and insecurity to come. Therefore it may 
 be well to recall that this state of things has been 
 brought to pass not by the failure of those principles 
 of equity and self-help that lie at the root of it all, 
 but rather by the eminently unyielding stability and 
 sufficiency of these principles under new conditions. 
 It is not due to any inherent weakness or shiftiness 
 in these principles of law and custom; which have 
 faithfully remained the same as ever, and which 
 all men admit were good and sound at the period 
 of their installation. But it is beginning to appear 
 now, after the event, that the inclusion of unre- 
 stricted ownership among those rights and perqui- 
 sites which were allowed to stand over when the 
 transition was made to the modern point of view is 
 likely to prove inexpedient in the further course of 
 growth and change. 
 
 Unrestricted ownership of property, with inherit- 
 ance, free contract, and self-help, is believed to 
 have been highly expedient as well as eminently 
 equitable under the circumstances which conditioned 
 civilised life at the period when the civilised world 
 made up its mind to that effect. And the discrep- 
 ancy which has come in evidence in .this later time 
 is traceable to the fact that other things have not
 
 62 THE VESTED INTERESTS 
 
 remained the same. The odious outcome has been 
 made by disturbing causes, not by these enlightened 
 principles of honest living. Security and unlimited 
 discretion in the rights of ownership were once 
 rightly made much of as a simple and obvious safe- 
 guard of self-direction and self-help for the common 
 man; whereas, in the event, under a new order of 
 circumstances, it all promises to be nothing better 
 than a means of assured defeat and vexation for 
 the common man.
 
 IV 
 
 FREE INCOME 
 
 INDUSTRY of the modern sort mechanical, spe- 
 cialised, standardised, drawn on a large scale is 
 highly productive. When this industrial system of 
 the new order is not hindered by outside control it 
 will yield a very large net return of output over 
 cost, counting cost in terms of man power and 
 necessary consumption; so large, indeed, that the 
 cost of what is necessarily consumed in productive 
 work, in the way of materials, mechanical appliances, 
 and subsistence of the workmen, is inconsiderable by 
 comparison. The same thing may be described by 
 saying that the necessary consumption of subsistence 
 and industrial plant amounts to but an inconsider- 
 able deduction from the gross output of industry at 
 any time. So inordinately productive is this fa- 
 miliar new order of industry that in ordinary times 
 it is forever in danger of running into excesses and 
 turning out an output in excess of what the 
 market that is to say the business situation will 
 tolerate. There is constant danger of " overpro- 
 duction." So that there is commonly a large vol- 
 ume of man power unemployed and an appreciable 
 proportion of the industrial plant lying idle or half 
 idle. It is quite unusual, perhaps altogether out of 
 the question, to let all or nearly all the available 
 
 63
 
 64 THE VESTED INTERESTS 
 
 plant and man power run at full capacity even for 
 a limited time. 
 
 It is, of course, impossible to say how large the 
 net aggregate product over cost would be count- 
 ing the product in percentages of the necessary 
 cost in case this industrial system were allowed 
 to work at full capacity and with free use of all the 
 available technological knowledge. There is no 
 safe ground for an estimate, for such a thing has 
 never been tried, and no near approach to such a 
 state of things is to be looked for under the existing 
 circumstances of ownership and control. Even un- 
 der the most favorable conditions of brisk times the 
 business situation will not permit it. There will 
 at least always be an indefinitely large allowance to 
 be reckoned for work and substance expended on 
 salesmanship, advertising, and competitive manage- 
 ment designed to increase sales. This line of ex- 
 penditures is a necessary part of businesslike man- 
 agement, although it contributes nothing to the out- 
 put of goods, and in that sense it is to be counted 
 as a necessary deduction from the net productive 
 capacity of the industrial system as it runs. It would 
 also be extremely difficult to make allowance for 
 this deduction, since much of it is not recognised as 
 such by the men in charge and does not appear on 
 their books under any special descriptive heading. 
 In one way and another, and for divers and various 
 reasons, the net production of goods serviceable for 
 human use falls considerably short of the gross out- 
 put, and the gross output is always short of the 
 productive capacity of the available plant and man 
 power.
 
 FREE INCOME 65 
 
 Still, taken as it goes, with whatever handicap of 
 these various kinds is to be allowed for, it remains 
 patently true that the net product greatly exceeds 
 the cost. So much so that whatever is required for 
 the replacement of the material equipment consumed 
 in production, plus " reasonable returns " on this 
 equipment, commonly amounts to no more than a 
 fraction of the total output. The resulting margin 
 of excess product over cost plus reasonable returns 
 on the material equipment is due to the high pro- 
 ductive efficiency of the current state of the indus- 
 trial arts and is the source of that free income which 
 gives rise to intangible assets. The distinction be- 
 tween tangible assets and intangible is not a hard 
 and fast one, of course, but the difference is suffi- 
 ciently broad and sufficiently well understood for use 
 in the present connection, so long as no pains is 
 taken to confuse these terms with needless technical 
 verbiage. 
 
 To avoid 'debate and digression, it may be re- 
 marked that " reasonable returns " is also here used 
 in the ordinary sense of the expression, without fur- 
 ther definition, as being sufficiently understood and 
 precise enough for the argument. The play of mo- 
 tives and transactions by which a rough common 
 measure of reasonable returns has been arrived at 
 is taken for granted. A detailed examination of all 
 that matter would involve an extended digression, 
 and nothing would be gained for the argument. 
 
 According to the traditional view, which was 
 handed on from the period before the coming of 
 corporation finance, and which still stands over as 
 an article of common belief in the certified economic
 
 66 THE VESTED INTERESTS 
 
 theories, " capital " represents the material equip- 
 ment, valued at its cost, together with funds in hand 
 required as a " working capital " to provide ma- 
 terials and a labor force. On this view, corpora- 
 tion securities are taken to cover ownership of the 
 plant and the needed working capital; and there has 
 been a slow-dying prejudice against admitting that 
 anything less tangible than these items should prop- 
 erly be included in the corporate capitalisation and 
 made a basis on which to issue corporate securities. 
 Hence that stubborn popular prejudice against 
 *' watered stock" which corporation finance had to 
 contend with all through the latter half of the nine- 
 teenth century. " Watered stock " is now virtually 
 a forgotten issue. Corporation finance has dis- 
 posed of the quarrel by discontinuing the relevant 
 facts. 
 
 There is still a recognised distinction between 
 tangible assets and intangible; but it has come to 
 be recognised in corporation practice that the only 
 reasonable basis of capitalisation for any assets, tan- 
 gible or intangible, is the earning-capacity which 
 they represent. And the amount of capital is a 
 question of capitalisation of the available assets. 
 So that, if the material equipment, e. g., is duly capi- 
 talised on its earning-capacity, any question as to its 
 being " watered " is no longer worth pursuing; since 
 stock can be said to be " watered " only by compari- 
 son with the cost of the assets which it covers, not in 
 relation to its earning-capacity. The latter point is 
 taken care of by the stock quotations of the market. 
 On the other hand, intangible assets neither have 
 now nor ever have had any other basis than capitali-
 
 FREE INCOME 67 
 
 sation of earning capacity, and any question of 
 " water " in their case is consequently quite idle. 
 Intangible assets will not hold water. 
 
 Corporation finance is one of the outgrowths of 
 the New Order. And one of the effects wrought by 
 corporation finance is a blurring of the distinction 
 between tangible assets and intangible; inasmuch as 
 both are now habitually determined by a capitalisa- 
 tion of earning-capacity, rather than by their ascer- 
 tained cost, and it is difficult, if not impossible, to 
 draw a hard and fast line between that part of a 
 concern's earning-capacity which is properly to be as- 
 signed to its plant and that which is due to its con- 
 trol of the market. Still, an intelligible distinction 
 is maintained in common usage, between tangible as- 
 sets and intangible, even if the distinction is some- 
 what uncertain in detail; and such a distinction is 
 convenient, so long as too sharp a contrast between 
 the two is not insisted on. 
 
 The earning-capacity of the tangible assets is pre- 
 sumed to represent the productive capacity of the 
 plant, considered as a mechanical apparatus en- 
 gaged in an industrial process for the production of 
 goods or services; it is presumed to rest on the mar- 
 ket value of the mechanical output of the plant. 
 The plant is a productive factor because and in so 
 far as it turns to practical account the state of the 
 industrial arts now in use, the community's joint 
 stock of technological knowledge. So soon, or so 
 far, as the plant and its management falls short of 
 meeting the ordinary requirements of this current 
 state of the industrial arts, and fails to make use of 
 such technological knowledge as is commonly em-
 
 68 THE VESTED INTERESTS 
 
 ployed, the whole works ceases by that much to be 
 a productive factor. The productive efficiency, 
 and the productive value, of any given item of 
 industrial equipment is measured by its effective 
 use of the technological knowledge current in the 
 community for the time being. So also, the produc- 
 tive value of any given body of natural resources 
 land, raw materials, motive power is strictly de- 
 pendent on the degree in which it fits into the indus- 
 trial system as it runs. 
 
 This dependence of productive value on conform- 
 ity to and use of the state of the industrial arts is 
 constantly shown in the case of land and similar nat- 
 ural resources, by the fluctuation of rental values. 
 Land and other resources will be more valuable the 
 more suitable they are for present and prospective 
 use. The like is true for the mechanical equipment, 
 perhaps in a more pronounced degree. Industrial 
 plant, e. g., is always liable to depreciation by obso- 
 lescence in case the state of the industrial arts 
 changes in such a way that the method of work em- 
 bodied in the particular article of equipment is dis- 
 placed by new and more suitable methods, more suit- 
 able under the altered circumstances. In such a 
 case, which is of very frequent occurrence under the 
 new order of industry, any given plant, machine, or 
 similar contrivance may lose all its value as a means 
 of production. And so also, on the other hand, a 
 given plant, as, for instance, a given railway system 
 or dock, may acquire additional productive value 
 through changes in the industrial system which make 
 it more suitable for present use. 
 
 Evidently the chief, or at least the indispensable,
 
 FREE INCOME 69 
 
 element of productive efficiency in any item of indus- 
 trial equipment or resources is the use which it makes 
 of the available technological knowledge; and evi- 
 dently, too, its earning-capacity as a productive fac- 
 tor depends strictly on the same fact, the usufruct 
 of the state of the industrial arts. And all the 
 while the state of the industrial arts, which the in- 
 dustrial equipment so turns to account for the bene- 
 fit of its owner, continues to be a joint stock of in- 
 dustrial knowledge and proficiency accumulated, 
 held, exercised, increased and transmitted by the 
 community at large; and all the while the owner of 
 the equipment is some person who has contributed 
 no more than his per-capita quota to this state of the 
 industrial arts out of which his earnings arise. In- 
 deed the chances are that the owner has contributed 
 less than his per-capita quota, if anything, to that 
 common fund of knowledge on the product of which 
 he draws by virtue of his ownership, because he is 
 likely to be fully occupied with other things, such 
 things as lucrative business transactions, e. g., or the 
 decent consumption of superfluities. 
 
 And at this point the difference Between tangible 
 assets and intangible comes in sight, or at least the 
 ground of the habitual distinction between the two. 
 Tangible assets, it appears, are such assets as repre- 
 sent the earning-capacity of any mechanically pro- 
 ductive property; whereas intangible assets represent 
 assured income which can not be assigned to any spe- 
 cific material factor as its productive source. In- 
 tangible assets are the capitalised value of income 
 not otherwise accounted for. Such income arises 
 out of business relations rather than out of industry;
 
 7 o THE VESTED INTERESTS 
 
 it is derived from advantages of salesmanship, ra- 
 ther than from productive work; it represents no 
 contribution to the output of goods and services, but 
 only an effectual claim to a share in the " annual div- 
 idend," on grounds which appear to be legally 
 honest, but which can not be stated in terms of me- 
 chanical cause and effect, or of productive efficiency, 
 or indeed in any terms that involve notions of 
 physical dimensions or of mechanical action. 
 
 When the theoreticians explain and justify these 
 returns that go to adroit salesmanship, or " mana- 
 gerial ability," as it is also called, it invariably turns 
 but that the grounds assigned for it are of the na- 
 ture of figures of speech metaphor or analogy. 
 Not that these standard theoretical explanations are 
 to be set aside as faulty, inadequate or incomplete; 
 their great volume and sincerity forbids that. It is 
 rather that they are to be accepted as a faithful ac- 
 count of an insubstantial fact in insubstantial terms. 
 And they are probably as good an account of the 
 equitable distribution of free income as the princi- 
 ples of the modern point of view will tolerate. 
 
 But while intangible assets represent income 
 which accrues out of certain immaterial relations be- 
 tween their owners and the industrial system, and 
 while this income is accordingly not a return for me- 
 chanically productive work done, it still remains true, 
 of course, that such income is drawn from the annual 
 product of industry, and that its productive source 
 is therefore the same as that of the returns on tan- 
 gible assets. The material source of both is the 
 same; and it is only that the basis on which -the in- 
 come is claimed is not the same for both. It is not
 
 FREE INCOME 71 
 
 a difference in respect of the ways and means by 
 which they are created, but only in respect of the 
 ways and means by which these two classes of income 
 are intercepted and secured by the beneficiaries to 
 whom they accrue. The returns on tangible assets 
 are assumed to be a return for the productive use of 
 the plant; returns on intangible assets are a return 
 for the exercise of certain immaterial relations in- 
 volved in the ownership and control of industry and 
 trade. 
 
 Best known by name among intangible assets is 
 the ancient rubric of " good-will," technically so 
 called; which has stood over from before the coming 
 of the new order in business enterprise. This has 
 long been considered the original type-form of intan- 
 gible assets as a class. By ancient usage the term 
 denotes a customary preferential advantage in trade; 
 it is not designed to describe a body of benevolent 
 sentiments. Good-will has long been known, dis- 
 cussed and allowed for as a legitimate, ordinary and 
 valuable immaterial possession of men engaged in 
 mercantile enterprise of all kinds. It has been held 
 to be a product of exemplary courtesy and fair deal- 
 ing with customers, due to turning out goods or 
 services of an invariably sound quality and honest 
 measure, and indeed due to the conspicuous practice 
 of the ordinary Christian virtues, but chiefly to com- 
 mon honesty. Similarly valuable, and of a similarly 
 immaterial nature, is the possession of a trade-secret, 
 a trade-mark, a patent-right, a franchise, any statu- 
 tory monopoly, or a monopoly secured by effectually 
 cornering the supply or the market for any given
 
 72 THE VESTED INTERESTS 
 
 line of goods or services. From any one of these 
 a profitable advantage may be derived, and they 
 have therefore a market value. They afford their 
 possessor a preferential gain, as against his compet- 
 itors or as against the general body of customers 
 which the state of the industrial arts and the organi- 
 sation of business throws in his way. After the an- 
 alogy of good-will, it has been usual to trace any 
 such special run of free income to the profitable use 
 of a special advantage in the market, which is then 
 appraised as a valuable means of gain and comes to 
 figure as an asset of its possessor. But all this goes 
 to explain how these benefits go to these beneficiar- 
 ies; it does not account for the fact that there is pro- 
 duced a net output of product available for free dis- 
 tribution to these persons. 
 
 These supernumerary and preferential gains, " ex- 
 cess profits," or whatever words may best describe 
 this class of free income, may be well deserved by 
 these beneficiaries, or they may not. The income in 
 question is, in any case, not created by the good de- 
 serts of the beneficiaries, however meritorious their 
 conduct may be. Honesty may conceivably be the 
 best policy in mercantile pursuits, and it may also 
 greatly serve the convenience of any community in 
 which an honest merchant is found; yet honest deal- 
 ing, strictly speaking, is an agency of conservation 
 rather than of creation. A trade-secret may also 
 be profitable to the concern which has the use of it, 
 and the special process which it covers may be es- 
 pecially productive; but the same article of techno- 
 logical knowledge would doubtless contribute more 
 to the total productivity of industry if it were shared
 
 FREE INCOME 73 
 
 freely by the industrial community at large. Such 
 technological knowledge is an agency of production, 
 but it is the monopoly of it that is profitable to its 
 possessor as a special source of gain. The like ap- 
 plies to patent-rights, of course. Whereas monop- 
 olies of the usual kind, which control any given line 
 of industry by charter, conspiracy, or combination 
 of ownership, derive their special gains from their 
 ability to restrain trade, limit the output of goods or 
 services, and so " maintain prices." 
 
 Intangible assets of this familiar kind are very 
 common among the business concerns of the new 
 order, particularly among the larger and more pros- 
 perous of them, and they afford a rough measure of 
 the ability of these concerns profitably to restrict 
 production. The very large aggregate value of 
 such assets indicates how imperative it is for the con- 
 duct of industrial business under the new order to 
 restrict output within reasonable limits, and at the 
 same time how profitable it is to be able to prevent 
 the excessively high productive capacity of modern 
 industry from outrunning the needs of profitable bus- 
 iness. For the prosperity of business it is necessary 
 to keep the output within reasonable limits ; that is to 
 say, within such limits as will serve to maintain rea- 
 sonably profitable prices; that is to say, such prices 
 as will yield the largest obtainable net return to the 
 concerns engaged in the business. In this connec- 
 tion, and under the existing conditions of investment 
 and credit, " reasonable returns " means the same 
 thing as " the largest practicable net returns." It 
 all foots up to an application of the familiar princi- 
 ple of " charging what the traffic will bear "; for in
 
 74 THE VESTED INTERESTS 
 
 the matter of profitable business there is no reasona- 
 ble limit short of the maximum. In business, the 
 best price is always good enough; but, so also, noth- 
 ing short of the best price is good enough. Buy 
 cheap and sell dear. 
 
 Intangibles of this kind, which represent a " con- 
 scientious withdrawal of efficiency," an effectual con- 
 trol of the rate or volume of output, are altogether 
 the most common of immaterial assets, and they 
 make up altogether the largest class of intangibles 
 and the most considerable body of immaterial wealth 
 owned. Land values are of much the same nature 
 as these corporate assets which represent capitalised 
 restriction of output, in that the land values, too, rest 
 mostly on the owner's ability to withhold his prop- 
 erty from productive use, and so to drive a profitable 
 bargain. Rent is also a case of charging what the 
 traffic will bear; and rental values should properly 
 be classed with these intangible assets of the larger 
 corporations, which are due to their effectual control 
 of the rate and volume of production. And apart 
 from the rental values of land, which are also in the 
 nature of monopoly values, it is doubtful if the total 
 material wealth in any of the civilised countries will 
 nearly equal the total amount of this immaterial 
 wealth that is owned by the country's business men 
 and the investors for whom they do business. 
 Which evidently comes to much the same as saying 
 that something more than one-half of the net prod- 
 uct of the country's industry goes to those persons 
 in whom the existing state of law and custom vests 
 a plenary power to hinder production. 
 
 It is doubtful if the total of this immaterial wealth
 
 FREE INCOME 75 
 
 exceeds the total material wealth in the advanced 
 industrial countries; although it is at least highly 
 probable that such is the case, particularly in the 
 richer and more enlightened of these countries; as, 
 e. g., in America or the United Kingdom, where the 
 principles of self-help and free bargain have con- 
 sistently had the benefit of a liberal that is a 
 broad construction and an unbending applica- 
 tion. The evidence in the case is not to be had 
 in such unambiguous shape as to carry conviction, 
 for the distinction between tangible assets and intan- 
 gible is not consistently maintained or made a mat- 
 ter of record. So, e. g., it is not unusual to find that 
 corporation bonds railroad or industrial which 
 secure their owner a free income and are carried as 
 an overhead charge by the corporation, are at the 
 same time a lien on the corporation's real property; 
 which in turn is likely to be of less value than the 
 corporation's total liabilities. Evidently the case is 
 sufficiently confusing, considered as a problem in the 
 economic theory of capital, but it offers no particular 
 difficulty when considered as a proposition in corpor- 
 ation finance. 
 
 There is another curious question that will also 
 have to be left as a moot question, in the absence of 
 more specific information than that which is yet avail- 
 able; more a question of idle curiosity, perhaps, than 
 of substantial consequence. How nearly is it likely 
 that the total gains which accrue to these prosperous 
 business concerns and their investors from their con- 
 scientious withdrawal of efficiency will equal the to- 
 tal loss suffered by the community as a whole from 
 the incidental reduction of the output? Net pro-
 
 76 THE VESTED INTERESTS 
 
 duction is kept down in order to get a profitable 
 price for the output; but it is not certain whether the 
 net production has to be lowered by as much or more 
 than the resulting increased gain which this business- 
 like strategy brings to the businesslike strategists. 
 The strategic curtailment of net production below 
 productive capacity is net loss to the community as a 
 whole, including both the business men and their 
 customers; the gains which go to these business con- 
 cerns in this way are net loss to the community as a 
 whole, exclusive of the business concerns and their 
 investors. The resulting question is, therefore, not 
 whether the rest of the community loses as much as 
 the business men gain, that goes without saying, 
 since the gains of the business men in the case are 
 paid over to them by the rest of the community in 
 the enhanced (or maintained) price of the prod- 
 ucts; but rather it is a question whether the rest of 
 the community, the common man, loses twice as much 
 as the business concerns and their investors gain. 
 
 The whole case has some analogy with the phe- 
 nomena of blackmail, ransom, and any similar enter- 
 prise that aims to get something for nothing; al- 
 though it is carefully to be noted that its analogy 
 with these illegitimate forms of gainful enterprise 
 must, of course, not be taken to cast any shadow of 
 suspicion on the legitimacy of all the businesslike sa- 
 botage that underlies this immaterial corporate cap- 
 ital and its earning-capacity. In the case of black- 
 mail, ransom, and such like illegal traffic in extor- 
 tion, it is known that the net loss suffered by the loser 
 and the gainer together exceeds the net gain which 
 accrues to the beneficiary, by as much as the cost of
 
 FREE INCOME 77 
 
 enforcement plus the incidental inconvenience to 
 both parties to the transaction. At the same time, 
 the beneficiary's subsequent employment and con- 
 sumption of his " ill-gotten gains," as they are some- 
 times called, whether he consumes them in riotous 
 living or in the further pursuit of the same profitable 
 line of traffic, all this, it is believed, does not in 
 any degree benefit the rest of the community. As 
 seen in the perspective of the common good, such 
 enterprise in extortion is believed to be quite waste- 
 fully disserviceable. 
 
 Now, this analogy may be taken for what it is 
 worth; "Analogies do not run on all-fours." But 
 when seen in the same perspective, the question of 
 loss and gain involved in the case of these intangible 
 assets and their earning-capacity falls into something 
 like this shape : Does the total net loss suffered by 
 the community at large, exclusive of the owners of 
 these intangibles, exceed two-hundred percent of the 
 returns which go to these owners? or, Do these 
 intangibles cost the community more than twice what 
 they are worth to the owners? the loss to the com- 
 munity being represented by the sum of the overhead 
 burden carried on account of these intangibles plus 
 the necessary curtailment of production involved in 
 maintaining profitable prices. The overhead bur- 
 den is paid out of the net annual production, after 
 the net annual production has been reduced by so 
 much as may be necessary to " maintain prices at a 
 reasonably profitable figure." 
 
 A few years ago any ordinarily observant person 
 would doubtless have answered this question in the 
 negative, probably without hesitation. So also, any
 
 7 8 THE VESTED INTERESTS 
 
 ordinarily intelligent votary of the established order, 
 as, e. g., a corporation lawyer, a commercial trade 
 journal, or a trade-union official, would doubtless, at 
 that period, have talked down such a question out of 
 hand, as being fantastically preposterous. That 
 would have been before the war experience began to 
 throw light into the dark places of business enter- 
 prise as conducted under the new order of industry. 
 Today (October, 1918) it is to be admitted with 
 such emotion as may come to hand this question 
 is one which can be entertained quite seriously, in 
 the light of experience. In the recent past, as mat- 
 ters have stood up to the outbreak of the war, the 
 ordinary rate of production in the essential indus- 
 tries under businesslike management has habitually 
 and by deliberate contrivance fallen greatly short of 
 productive capacity. This is an article of informa- 
 tion which the experience of the war has shifted from 
 the rubric of " Interesting if True " to that of 
 " Common Notoriety." 
 
 The question as to how much this " incapacity by 
 advisement " has commonly amounted to may be at- 
 tempted somewhat after this fashion. Today, under 
 compulsion of patriotic devotion, fear, shame and 
 bitter need, and under the unprecedentedly shrewd 
 surveillance of public officers bent on maximum pro- 
 duction, the great essential industries controlled by 
 the vested interests may, one with another, be consid- 
 ered to approach perhaps even conceivably to ex- 
 ceed a fifty-percent efficiency; as counted on the 
 basis of what should ordinarily be accomplished by 
 use of an equally costly equipment having the dis- 
 posal of an equally large and efficient labor force and
 
 FREE INCOME 79 
 
 equally good natural resources, in case the organisa- 
 tion were designed and managed with an eye single 
 to turning out a serviceable product, instead of, as 
 usual, being managed with an eye single to private 
 gain in terms of price. 
 
 To the spokesmen of " business as usual " this 
 rating of current production under the pressure of 
 war needs may seem extravagantly low; whereas, to 
 the experts in industrial engineering, who are in the 
 habit of arguing in terms of material cost and me- 
 chanical output, it will seem extravagantly high. 
 Publicly, and concessively, this latter class will speak 
 of a 25 percent efficiency; in private and confiden- 
 tially they appear disposed to say that the rating 
 should be nearer to 10 percent than 25. To avoid 
 any appearance of an ungenerous bias, then, present 
 actual production in these essential industries may be 
 placed at something approaching 50 percent of what 
 should be their normal productive capacity in the ab- 
 sence of a businesslike control looking to " reason- 
 able profits." It is necessary at this point to call to 
 mind that the state of the industrial arts under the 
 new order is highly productive, beyond example. 
 
 This state of the case, that production in the es- 
 sential industries presumably does not exceed 50 per- 
 cent of the normal productive capacity, even when 
 driven under the jealous eye of public officers vested 
 with power to act, is presumably due in great part to 
 the fact that these officers, too, are capable business 
 men; that their past training and present bent is such 
 as has been given them by long, exacting and suc- 
 cessful experience in the businesslike management of 
 industry; that their horizon and perspective in all
 
 8o THE VESTED INTERESTS 
 
 that concerns industry are limited by the frame of 
 mind that is native to the countinghouse. They, 
 too, have learned how to think of industry and its 
 administration in terms of profit on investment, and, 
 indeed, in no other terms; that being as near as their 
 daily work has allowed them to take stock of the 
 ways and means of industry. So that they are still 
 guided, in some considerable part, by considerations 
 of what is decent, equitable and prudent in the sight 
 of conservative business men; and this bias neces- 
 sarily goes with them in their dealings with those 
 ubiquitous, intricate and systematic dislocations of 
 the industrial system which have been found profita- 
 ble in the management of industry on a footing of 
 competitive sabotage. They still find it reasonable 
 to avoid any derangement of those vested interests 
 that live on this margin of intangible assets that rep- 
 resents capitalised withdrawal of efficiency. 
 
 In so characterising the situation there is, of 
 course, no inclination to impute blame to these bus- 
 inesslike officials who are patriotically giving their 
 best abilities and endeavors to this work of enforc- 
 ing an increased production in the essential indus- 
 tries and diverting needed labor and materials from 
 the channels of waste; nor is it intended to cast as- 
 persions on the good faith or the honorable motives 
 of those grave captains of industry whom the offi- 
 cials find it so difficult to divert from the business 
 man's straight and narrow path of charging what 
 the traffic will bear. " They are all honorable 
 men." But like other men they are creatures of 
 habit; and their habit of mind is the outcome of ex- 
 perience in that class of large, responsible and re-
 
 FREE INCOME 81 
 
 munerative business affairs that He somewhat remote 
 from the domain of technology, from that field where 
 the mechanistic logic of the industrial arts has some- 
 thing to say. It is only that the situation as here 
 spoken of rests on settled usage, and that the usage 
 is such as the businesslike frame of mind is suited to; 
 at the same time that this businesslike usage, of fixed 
 charges, vested interests and reasonable profits, does 
 not fully comport with the free swing of the indus- 
 trial arts as they run under the new order of tech- 
 nology. Nor is there much chance of getting away 
 from this situation of " incapacity by advisement," 
 even under pressure of patriotic devotion, fear, 
 shame and need, inasmuch as the effectual public 
 opinion has learned the same bias and will scarcely 
 entrust the conduct of its serious interests to any 
 other than business men and business methods. 
 
 To return to the argument. It may be conceded 
 that production in the essential industries, under pres- 
 sure of the war needs, rises to something like a 50 
 percent efficiency. At the same time it is presum- 
 ably well within the mark to say that this current 
 output in these essential industries will amount to 
 something like twice their ordinary output in time 
 of peace and business as usual. One-half of 50 per- 
 cent is 25 percent; and so one comes in sight of the 
 provisional conclusion that under ordinary condi- 
 tions of businesslike management the habitual net 
 production is fairly to be rated at something like 
 one-fourth of the industrial community's productive 
 capacity; presumably under that figure rather than 
 over. 
 
 In the absence of all reflection this crude es-
 
 82 THE VESTED INTERESTS 
 
 timate may seem recklessly hasty, perhaps it may 
 even be thought scandalously unflattering to our sub- 
 stantial citizens who have the keeping of the com- 
 munity's material welfare; but a degree of observa- 
 tion and reflection will quickly ease any feeling of an- 
 noyance on that score. So, e. g., if the account as 
 presented above does not appear to foot up to as 
 much as the conclusion would seem to require, fur- 
 ther account may be taken of that side-line of bus- 
 iness enterprise that spends work and materials in an 
 effort to increase the work to be done, and to in- 
 crease the cost per unit of the increased work; all 
 for the benefit of the earnings of the concern for 
 whose profit it is arranged. It may be called to 
 mind that there still are half-a-dozen railway pas- 
 senger stations in such a town as Chicago, especially 
 designed to work at cross purposes and hinder the 
 traffic of competing railway corporations; that on 
 the basis of this ingeniously contrived retardation of 
 traffic there has been erected a highly prosperous 
 monopoly in the transfer of baggage and passengers, 
 employing a large equipment and labor force and 
 costing the traveling public some millions of useless 
 outlay yearly; with nothing better to show for it 
 than delay, confusion, wear and tear, casualties and 
 wrangles, twenty-four hours a day; and that this ar- 
 rangement is, quite profitably, duplicated through- 
 out the country as often and on as large a scale as 
 there are towns in which to install it. So again, 
 there is an exemplary weekly periodical of the most 
 widely reputable and most profitable class, with a 
 circulation of more than two million, which habit- 
 ually carries some 60 to 80 large pages of competi-
 
 FREE INCOME 83 
 
 tive advertising matter, at a time when the most ex- 
 acting economy of work and materials is a matter 
 of urgent and acknowledged public need; with noth- 
 ing better to show for it than an increased cost of all 
 the goods advertised, most of which are superfluities. 
 This, too, is only a typical case, duplicated by the 
 thousand, as nearly as the businesslike management 
 of the other magazines and newspapers can achieve 
 the same result. These are familiar instances of 
 business as usual under the new order of industry. 
 They are neither extreme nor extraordinary. In- 
 deed the whole business community is run through 
 with enterprise of this kind so thoroughly that this 
 may fairly be said to be the warp of the fabric. In 
 effect, of course, it is an enterprise in subreption; but 
 in point of moral sentiment and conscious motive it 
 is nothing of the kind. 
 
 All these intricate arrangements for doing those 
 things that we ought not to have done and leaving 
 undone those things that we ought to have done are 
 by no means maliciously intended. They are only 
 the ways and means of diverting a sufficient share of 
 the annual product to the benefit of the legitimate 
 beneficiaries, the kept classes. But this apparatus 
 and procedure for capturing and dividing this share 
 of the community's annual dividend is costly one 
 is tempted to say unduly costly. It foots up to, per- 
 haps, something like one-half of the work done, and 
 it is occupied with taking over something like one-half 
 of the output produced by the remaining one-half of 
 the year's work. And yet, as a business proposi- 
 tion it seems sound enough, inasmuch as the income 
 which it brings to the beneficiaries will presumably
 
 84 THE VESTED INTERESTS 
 
 foot up to something like one-half of the country's 
 annual production. 
 
 There is nothing gained by finding fault with any 
 of this businesslike enterprise that is bent on getting 
 something for nothing, at any cost. After all, it is 
 safe and sane business, sound and legitimate, and 
 carried on blamelessly within the rules of the game. 
 One may also dutifully believe that there is really 
 no harm done, or at least that it might have been 
 worse. It is reassuring to note that at least hith- 
 erto the burden of this overhead charge of 50 per- 
 cent plus has not broken the back of the industrial 
 community. It also serves to bring under a strong 
 light the fact that the state of the industrial arts as it 
 runs under the new order is highly productive, inor- 
 dinately productive. And, finally, there should be 
 some gain of serenity in realising how singularly 
 consistent has been the run of economic law through 
 the ages, and recalling once more the reflection 
 which John Stuart Mill arrived at some half-a-cen- 
 tury ago, that, " Hitherto it is questionable if all the 
 mechanical inventions yet made have lightened the 
 day's toil of any human being."
 
 V 
 
 THE VESTED INTERESTS 
 
 THERE are certain saving clauses in common use 
 among persons who speak for that well-known order 
 of pecuniary rights and obligations which the mod- 
 ern point of view assumes as " the natural state of 
 man." Among them are these : " Given the state 
 of the industrial arts"; "Other things remaining 
 the same "; " In the long run "; " In the absence of 
 disturbing causes." It has been the praiseworthy 
 endeavor of the votaries of this established law and 
 custom to hold fast the good old plan on a strategic 
 line of interpretation resting on these provisos. 
 There have been painstaking elucidations of what is 
 fundamental and intrinsic in the way of human insti- 
 tutions, of what essentially ought to be, and of what 
 must eventually come to pass in the natural course 
 of time and change as it is believed to run along un- 
 der the guidance of those indefeasible principles that 
 make up the modern point of view. And the dis- 
 quieting incursions of the New Order have been dis- 
 allowed as not being of the essence of Nature's con- 
 tract with mankind, within the constituent principles 
 of the modern point of view stabilised in the eight- 
 eenth century. 
 
 Now, as has already been remarked in an earlier 
 passage, the state of the industrial arts has at no
 
 86 THE VESTED INTERESTS 
 
 time continued unchanged during the modern era; 
 consequently other things have never remained the 
 same; and in the long run the outcome has always 
 been shaped by the disturbing causes. All this re- 
 flects no discredit on the economists and publicists 
 who so have sketched out the natural run of the pres- 
 ent and future in the dry light of the eighteenth-cen- 
 tury principles, since their reservations have not been 
 observed. The arguments have been as good as the 
 premises on which they proceed, and the premises 
 have once been good enough to command unques- 
 tioning assent; although that is now some time ago. 
 The fault appears to lie in the unexampled shifty 
 behavior of the latterday facts. Yet however 
 shifty, these facts, too, are as stubborn as others of 
 their kind. 
 
 The system of free competition, self-help, equal 
 opportunity and free bargaining which is contem- 
 plated by the modern point of view, assumes an in- 
 dustrial situation in which the work and trading of 
 any given individual or group can go on freely by it- 
 self, without materially helping or hindering the 
 equally untrammeled working of the rest. It has, 
 of course, always been recognised that the coun- 
 try's industry makes up something of a connected 
 system; so that there would necessarily be some de- 
 gree of mutual adjustment and accommodation 
 among the many self-sufficient working units which 
 together make up the industrial community; but these 
 working units have been conceived to be so nearly 
 independent of one another that the slight measure 
 of running adjustment needed could be sufficiently
 
 THE VESTED INTERESTS 87 
 
 taken care of by free competition in the market. 
 This assumption has, of course, never been altogether 
 sound at any stage in the industrial advance; but it 
 has at least been within speaking distance of facts 
 so late as the eighteenth century. It was a possible 
 method of keeping the balance in the industrial sys- 
 tem before the coming of the machine industry. 
 Quite evidently it commended itself to the enlight- 
 ened common sense of that time as a sufficiently 
 workable ideal. So much so that it then appeared 
 to be the most practical solution of the industrial and 
 social difficulties which beset that generation. It is 
 fairly to be presumed that the plan would still be 
 workable in some fashion today if the conditions 
 which then prevailed had continued unchanged 
 through the intervening one hundred and fifty years, 
 if other things had remained the same. All that 
 was, in effect, before the coming of the machine tech- 
 nology and the later growth of population. 
 
 But as it runs today, according to the new indus- 
 trial order set afoot by the machine technology, the 
 carrying-on of the community's industry is not well 
 taken care of by the loose corrective control which 
 is exercised by a competitive market. That method 
 is too slow, at the best, and too disjointed. The in- 
 dustrial system is now a wide-reaching organisation 
 of mechanical processes which work together on a 
 comprehensive interlocking plan of give and take, 
 in which no one section, group, or individual unit is 
 free to work out its own industrial salvation except 
 in active copartnership with the rest; and the whole 
 of which runs on as a moving equilibrium of forces 
 in action. This system of interlocking processes
 
 88 THE VESTED INTERESTS 
 
 and mutually dependent working units is a more or 
 less delicately balanced affair. Evidently the sys- 
 tem has to be taken as a whole, and evidently it will 
 work at its full productive capacity only on condition 
 that the coordination of its interlocking processes be 
 maintained at a faultless equilibrium, and only when 
 its constituent working units are allowed to run full 
 and smooth. But a moderate derangement will not 
 put it out of commission. It will work at a lower 
 efficiency, and continue running, in spite of a very 
 considerable amount of dislocation; as is habitually 
 the case today. 
 
 At the same time any reasonably good working 
 efficiency of the industrial system is conditioned on a 
 reasonably good coordination of these working 
 forces; such as will allow each and several of the 
 working units to carry on at the fullest working ca- 
 pacity that will comport with the unhampered work- 
 ing of the system as a balanced whole. But evi- 
 dently, too, any dislocation, derangement or retarda- 
 tion of the work at any critical point which comes 
 near saying at any point in this balanced system of 
 work will cause a disproportionately large derange- 
 ment of the whole. The working units of the indus- 
 trial system are no longer independent of one an- 
 other under the new order. 
 
 It is, perhaps, necessary to add that the industrial 
 system has not yet reached anything like the last 
 degree of development along this line; it is at least 
 not yet a perfected automatic mechanism. But it 
 should also be added that with each successive ad- 
 vance into the new order of industry created by the 
 machine technology, and at a continually accelerated
 
 THE VESTED INTERESTS 89 
 
 rate of advance, the processes of industry are being 
 more thoroughly standardised, the working units 
 of the system as a whole demand a more undeviating 
 maintenance of its moving equilibrium, a more ex- 
 acting mechanical correlation of industrial opera- 
 tions and equipment. And it seems reasonable to ex- 
 pect that things are due to move forward along this 
 line still farther in the calculable future, rather than 
 the reverse. 
 
 This state of things would reasonably suggest that 
 the control of the industrial system had best be en- 
 trusted to men skilled in these matters of technology. 
 The industrial system does its work in terms of me- 
 chanical efficiency, not in terms of price. It should 
 accordingly seem reasonable to expect that its con- 
 trol would be entrusted to men experienced in the 
 ways and means of technology, men who are in the 
 habit of thinking about these matters in such terms 
 as are intelligible to the engineers. The material 
 welfare of the community is bound up with the due 
 working of this industrial system, which depends on 
 the expert knowledge, insight, and disinterested 
 judgment with which it is administered. It should 
 accordingly have seemed expedient to entrust its ad- 
 ministration to the industrial engineers, rather than 
 to the captains of finance. The former have to do 
 with productive efficiency, the latter with the higgling 
 of the market. 
 
 However, by historical necessity the discretionary 
 control in all that concerns this highly technological 
 system of industry has come to vest in those persons 
 who are highly skilled in the higgling of the market, 
 the masters of financial intrigue. And so great is
 
 90 THE VESTED INTERESTS 
 
 the stability of that system of law and custom by 
 grace of which these persons claim this power, that 
 any disallowance of their plenary control over the 
 material fortunes of the community is scarcely within 
 reason. All the while the progressive shifting of 
 ground in the direction of a more thoroughly mech- 
 anistic organisation of industry goes on and works 
 out into a more and more searching standardisation 
 of works and methods and a more exacting correla- 
 tion of industries, in an ever increasingly large and 
 increasingly sensitive industrial system. All the 
 while the whole of it grows less and less manageable 
 by business methods; and with every successive move 
 the control exercised by the business men in charge 
 grows wider, more arbitrary, and more incompatible 
 with the common good. 
 
 Business affairs, in the narrow sense of the ex- 
 pression, have in time necessarily come in for an 
 increasing share of the attention of those who exer- 
 cise the control. The businesslike manager's atten- 
 tion is continually more taken up with " the financial 
 end " of the concern's interests; so that by enforced 
 neglect he is necessarily leaving more of the details 
 of shop management and supervision of the works 
 to subordinates, largely to subordinates who are pre- 
 sumed to have some knowledge of technological 
 matters and no immediate interest in the run of the 
 market. They are in fact persons who are pre- 
 sumed to have this knowledge by the business men 
 who have none of it. But the larger and final dis- 
 cretion, which affects the working of the industrial 
 system as a whole, or the orderly management of 
 any considerable group of industries within the gen-
 
 THE VESTED INTERESTS 91 
 
 eral system, all that is still under the immediate 
 control of the businesslike managers, each of whom 
 works for his own concern's gain without much after- 
 thought. The final discretion still rests with the 
 businesslike directorate of each concern the 
 owner or the board even in all questions of phys- 
 ical organisation and technical management; al- 
 though this businesslike control of the details of pro- 
 duction necessarily comes to little else than accep- 
 tance, rejection, or revision of measures proposed 
 by the men immediately in charge of the works; to- 
 gether with a constant check on the rate and volume 
 of output, with a view to the market. 
 
 In very great part the directorate's control of the 
 industry has practically taken the shape of a veto on 
 such measures of production as are not approved by 
 the directorate for businesslike reasons, that is to 
 say for purposes of private gain. Business is a pur- 
 suit of profits, and profits are to be had from profit- 
 able sales, and profitable sales can be made only if 
 prices are maintained at a profitable level, and prices 
 can be maintained only if the volume of marketable 
 output is kept within reasonable limits; so that the 
 paramount consideration in such business as has to 
 do with the staple industries is a reasonable limita- 
 tion of the output. " Reasonable " means " what 
 the traffic will bear " ; that is to say, " what will yield 
 the largest net return." 
 
 Hence in the larger mechanical industries, which 
 set the pace for the rest and which are organised on 
 a standardised and more or less automatic plan, the 
 current oversight of production by their businesslike 
 directorate does not effectually extend much beyond
 
 92 THE VESTED INTERESTS 
 
 the regulation of the output with a view to what 
 the traffic will bear; and in this connection there is 
 very little that the business men in charge can do ex- 
 cept to keep the output short of productive capacity 
 by so much as the state of the market seems to re- 
 quire; it does not lie within their competence to in- 
 crease the output beyond that point, or to increase 
 the productive capacity of their works, except by 
 way of giving the technical men permission to go 
 ahead and do it. 
 
 The business man's place in the economy of na- 
 ture is to " make money," not to produce goods. 
 The production of goods is a mechanical process, in- 
 cidental to the making of money; whereas the mak- 
 ing of money is a pecuniary operation, carried on by 
 bargain and sale, not by mechanical appliances and 
 powers. The business men make use of the me- 
 chanical appliances and powers of the industrial sys- 
 tem, but they make a pecuniary use of them. And 
 in point of fact the less use a business man can make 
 of the mechanical appliances and powers under his 
 charge, and the smaller a product he can contrive to 
 turn out for a given return in terms of price, the 
 better it suits his purpose. The highest achieve- 
 ment in business is the nearest approach to getting 
 something for nothing. What any given business 
 concern gains must come out of the total output of 
 productive industry, of course; and to that extent 
 any given business concern has an interest in the con- 
 tinued production of goods. But the less any given 
 business concern can contrive to give for what it 
 gets, the more profitable its own traffic will be.
 
 THE VESTED INTERESTS 93 
 
 Business success means " getting the best of the bar- 
 gain." 
 
 The common good, so far as it is a question of 
 material welfare, is evidently best served by an un- 
 hampered working of the industrial system at its full 
 capacity, without interruption or dislocation. But it 
 is equally evident that the owner or manager of any 
 given concern or section of this industrial system 
 may be in a position to gain something for himself 
 at the cost of the rest by obstructing, retarding or 
 dislocating this working system at some critical point 
 in such a way as will enable him to get the best of 
 the bargain in his dealings with the rest. This ap- 
 pears constantly in the altogether usual, and alto- 
 gether legitimate, practice of holding out for a bet- 
 ter price. So also in the scarcely less usual, and no 
 less legitimate, practice of withholding needed 
 ground or right of way, or needed materials or in- 
 formation, from a business rival. Indeed it has 
 been rumored that one of the usual incentives which 
 drew the patriotic one-dollar-a-year men from their 
 usual occupations to the service of their country was 
 the chance of controlling information by means of 
 which to " put it over " their business rivals. All 
 these things are usual and a matter of course, be- 
 cause business management under the conditions cre- 
 ated by the new order of industry is in great part 
 made up of these things. Sabotage of this kind is 
 indispensable to any large success in industrial bus- 
 iness. 
 
 But it is also evident that the private gain which 
 the business concerns come in for by this manage-
 
 94 THE VESTED INTERESTS 
 
 ment entails a loss on the rest of the community, and 
 that the loss suffered by the rest of the community is 
 necessarily larger than the total gains which these 
 manoeuvres bring to the business concerns; inasmuch 
 as the friction, obstruction and retardation of the 
 moving equilibrium of production involved in this 
 businesslike sabotage necessarily entails a dispropor- 
 tionate curtailment of output. 
 
 However, it is well to call to mind that the com- 
 munity will still be able to get along, perhaps even 
 to get along very tolerably, in spite of a very ap- 
 preciable volume of sabotage of this kind; even 
 though it does reduce the net productive capacity 
 to a fraction of what it would be in the absence of 
 all this interference and retardation; for the current 
 state of the industrial arts is highly productive. So 
 much so that in spite of all this deliberate waste and 
 confusion that is set afoot in this way for private 
 gain, there still is left over an absolutely large res- 
 idue of net production over cost. The community 
 still has something to go on. The available margin 
 of free income that is to say, the margin of pro- 
 duction over cost is still wide; so that it allows 
 a large latitude for playing fast and loose with the 
 community's livelihood. 
 
 Now, these businesslike manoeuvres of deviation 
 and delay are by no means to be denounced as being 
 iniquitous or unfair, although they may have an un- 
 fortunate effect on the conditions of life for the com- 
 mon man. That is his misfortune, which law and 
 custom count on his bearing with becoming fortitude. 
 These are the ordinary and approved means of car- 
 rying on business according to the liberal principles
 
 THE VESTED INTERESTS 95 
 
 of free bargain and self-help as established in the 
 eighteenth century; and they are in the main still 
 looked on as a meritorious exercise of thrift and sa- 
 gacity duly so looked on, it is to be presumed. 
 At least such is the prevailing view among the sub- 
 stantial citizens, who are in a position to speak from 
 first-hand knowledge. It is only that the exercise 
 of these homely virtues on the large scale on which 
 business is now conducted, and when dealing with 
 the wide-reaching articulations of the industrial sys- 
 tem under the new order of technology, under 
 these uncalled-for circumstances the unguarded ex- 
 ercise of these virtues entails business disturbances 
 which are necessarily large, and which bring on mis- 
 chievous consequences in industry which are dispro- 
 portionately larger still. 
 
 It is also true, the businesslike managers of indus- 
 trial enterprise have also other things to do, besides 
 holding the marketable supply of goods and serv- 
 ices down to such an amount as is expected to bring 
 the most profitable prices, or diverting credulous 
 customers from one seller to another by competi- 
 tive advertising. But it should also be noted that 
 there is next to no business enterprise, if any, whose 
 chief end is not profitable sales, or profitable bar- 
 gains which mean the same thing as profitable sales. 
 They are therefore engaged unremittingly in one or 
 another of the approved lines of competitive man- 
 agement with a view to profitable traffic for them- 
 selves, and to creating an advantage for themselves 
 in the market. It is a poor-spirited concern that 
 does not constantly aim to create for itself such a po- 
 sition of advantage as will give it something of a
 
 96 THE VESTED INTERESTS 
 
 vested interest in the traffic. Such a concern is 
 scarcely fit to survive ; nor is it likely to. 
 
 It is not that business enterprise is wholly taken 
 up with such like manoeuvres of restraint, obstruc- 
 tion and competitive selling. This is only part of 
 the business men's everyday work, although it is not 
 a minor part. In any competitive business commun- 
 ity this line of duties will take up a large share of the 
 business men's attention and will engage their best 
 and most businesslike abilities. More particularly 
 in the management of the greater industrial enter- 
 prises of the present day, the larger as well as the 
 more lucrative part of the duties of those who direct 
 affairs appears commonly to be of this nature. That 
 such should be the case lies in the nature of things 
 under the circumstances which now prevail. It 
 would not be far out of the way to say that any oc- 
 cupations in which this rule does not apply are occu- 
 pations which have not, or have not yet, come into 
 line as members in good standing in that new order 
 of business enterprise which is based on the machine 
 industry governed by the liberal principles of the 
 eighteenth century. 
 
 " Our people, moreover, do not wait to be coached 
 and led. They know their own business, are quick 
 and resourceful at every readjustment, definite in 
 purpose, and self-reliant in action. . . . The Ameri- 
 can business man is of quick initiative. The ordinary 
 and normal processes of private initiative will not, 
 however, provide immediate employment for all of 
 the men of our returning armies." Such is the es- 
 teem in which American business men are held by 
 American popular opinion and such is also the view
 
 THE VESTED INTERESTS 97 
 
 which American business men are inclined to take 
 of their own place and value in the community. 
 There need be no quarrel with it. But it will be in 
 place to call attention to the statement that " The or- 
 dinary and normal processes of private initiative will 
 not, however, provide immediate employment for all 
 the men." It should be added, as is plain to all men, 
 that these ordinary and normal processes of private 
 initiative never do provide employment for all the 
 men available. In fact, unemployment is an ordi- 
 nary and normal phenomenon. So that even in the 
 present emergency, when the peoples of Christen- 
 dom are suffering privation together for want of 
 goods needed for immediate use, the ordinary and 
 normal processes of private initiative are not to be 
 depended on to employ all the available man power 
 for productive industry. The reason is well known 
 to all men; so well known as to be uniformly taken 
 for granted as a circumstance which is beyond hu- 
 man remedy. It is the simple and obvious fact that 
 the ordinary and normal processes of private initia- 
 tive are the same thing as " business as usual," which 
 controls industry with a view to private gain in 
 terms of price; and the largest private gain in terms 
 of price can not be had by employing all the availa- 
 ble man power and speeding up the industries to 
 their highest productivity, even when all the peoples 
 of Christendom are suffering privation together 
 for want of the ordinary necessaries of life. Pri- 
 vate initiative means business enterprise, not indus- 
 try. 
 
 But all the same, the profits of business come out 
 of the product of industry; and industry is con-
 
 98 THE VESTED INTERESTS 
 
 trolled, accelerated and slowed down with a view to 
 business profits; and one outcome of this arrange- 
 ment so far, in America, has been the complacent 
 estimate of this business enterprise formulated in 
 the passage quoted above. The result of a business- 
 like management of industry for private gain in 
 America has on the whole been a fairly high level of 
 prosperity. For this there are two main reasons: 
 (a) the exceptionally great natural resources of the 
 country; and (b) the continued growth and spread 
 of population, (a) Business enterprise, that is to 
 say private ownership, has taken over these re- 
 sources, by a process of legalised seizure, and has 
 used them up as rapidly as may be, with a view to 
 private gain; all of which has gone to make private 
 business profitable to that extent, although it has im- 
 poverished the underlying community by using up its 
 natural resources, (b) The continued growth and 
 spread of population, by natural increase and by im- 
 migration, has furnished the business men of this 
 country a continually expanding market for goods; 
 both for goods to be used in production and trans- 
 portation and for finished articles of consumption. 
 Hence the American business men have been in the 
 fortunate position of not having to curtail the out- 
 put of industry harshly and persistently at all points. 
 It is, in effect, for this continued growth of their mar- 
 ket, caused by the growth of population, that the 
 business men claim credit when they " point with 
 pride " to the resourcefulness and quick initiative 
 with which they have " developed the country." To 
 their credit be it said, they have on the whole not 
 hindered the country's prosperity beyond what the
 
 THE VESTED INTERESTS 99 
 
 traffic would bear; and the peculiar situation of this 
 country hitherto has been such that the traffic of 
 business would bear a nearly uninterrupted expansion 
 of industry at perhaps something like one-half of 
 its possible rate of expansion. To their own gain, 
 and to the relief of the underlying community, they 
 have been enabled profitably to let the country's in- 
 dustry run on a moderately high level of efficiency, 
 with more or less, but always a very appreciable 
 amount, of unemployment, idle plant, and waste of 
 resources. 
 
 All that industry which comes in under the dom- 
 inant machine technology that is to say all that 
 fairly belongs in the new order of industry is now 
 governed by business men for business ends, in what 
 is to be done and what is to be left undone. And 
 wherever business enterprise has taken over the di- 
 rection of things the management is directed in part 
 to the production of a marketable supply, and in 
 part to arranging for a profitable sale of the supply; 
 and the strategy available for this latter, and indis- 
 pensable, work lies almost wholly within the lines of 
 competitive management already spoken of. In 
 case these manoeuvres of businesslike deviation and 
 defeat are successful and fall into an orderly system 
 whose operation may be continued at will, or in so 
 far as this management creates an assured strategic 
 advantage for any given business concern, the result 
 is a vested interest. This may then eventually be 
 capitalised in due form, as a body of intangible as- 
 sets. As such it goes to augment the business com- 
 munity's accumulated wealth. And the country is 
 statistically richer per capita.
 
 ioo THE VESTED INTERESTS 
 
 A vested interest is a marketable right to get 
 something for nothing. This does not mean that 
 the vested interests cost nothing. They may even 
 come high. Particularly may their cost seem high 
 if the cost to the community is taken into account, as 
 well as the expenditure incurred by their owners for 
 their production and up-keep. Vested interests are 
 immaterial wealth, intangible assets. As regards 
 their nature and origin, they are the outgrowth of 
 three main lines of businesslike management: (a) 
 Limitation of supply, with a view to profitable sales; 
 (b) Obstruction of traffic, with a view to profitable 
 sales; and (c) Meretricious publicity, with a view 
 to profitable sales. It will be remarked that these 
 are matters of business, in the strict sense. They 
 are devices of salesmanship, not of workmanship; 
 they are ways and means of driving a bargain, not 
 ways and means of producing goods or services. 
 The residue which stands over as a product of these 
 endeavors is in the nature of an intangible asset, an 
 article of immaterial wealth; not an increase of the 
 tangible equipment or the material resources in 
 hand. The enterprising owners of the concern may 
 be richer by that much, and so perhaps may the bus- 
 iness community as a whole though that is a pre- 
 cariously dubious point but the community at 
 large is no better off in any material respect. 
 
 This account, of course, assumes that all this busi- 
 ness is conducted strictly within the lines of commer- 
 cial honesty. It would only be tedious and mislead- 
 ing to follow up and take account of that scattering 
 recourse to force or fraud that will never wholly be 
 got rid of in the pursuit of gain, whether by way of
 
 THE VESTED INTERESTS ioi 
 
 business traffic or by more direct methods. Still, it 
 may well be in place to recall that the code of com- 
 mercial honesty applies only between the parties to 
 a bargain, and takes no account of the interests of 
 any third party, except by express injunction of the 
 law; still less does it imply any degree of regard for 
 the common good. Commercial honesty, of course, 
 is the honesty of self-help, or caveat emptor, which 
 is Latin for the same thing. 
 
 In the ordinary course of management some con- 
 siderable amount of means and effort is spent in the 
 pursuit of profitable sales and in creating or acquir- 
 ing an advantage in their further pursuit. The en- 
 during result, if any, is a body of intangible assets 
 in the nature of what is called good-will. The or- 
 dinary expenditure incurred for this purpose is so 
 considerable, in fact, that the " selling cost " will not 
 infrequently be far and away the larger part of those 
 costs that are to be covered by the price of adver- 
 tised goods or advertised traffic. This necessary 
 consumption of work and means with a view to in- 
 crease sales and to create a prospective increase of 
 profits is to be counted as net waste, of course; in 
 the sense that it contributes nothing to the total out- 
 put of serviceable goods, present or prospective. 
 The net aggregate result is to lay equipment idle, 
 hinder traffic, and induce credulous persons now and 
 again to change their mind about what things they 
 will buy. 
 
 Roughly, any business concern which so comes in 
 for an habitual run of free income comes to have a 
 vested right in this " income stream," and this pre- 
 ferred standing of the concern in this respect is
 
 102 THE VESTED INTERESTS 
 
 recognised by calling such a concern a " vested 
 interest," or a " special interest." Free income of 
 this kind, not otherwise accounted for, may be cap- 
 italised if it promises to continue, and it can then be 
 entered on the books as an item of immaterial 
 wealth, a prospective source of gain. So long as it 
 has not been embodied in a marketable legal instru- 
 ment, any such item of intangible assets will be noth- 
 ing more than a method of notation, a book-keeper's 
 expedient. But it can readily be covered with some 
 form of corporation security, as, e. g., preferred 
 stock or bonds, and it then becomes an asset in due 
 standing and a vested interest endowed with legal 
 tenure. 
 
 Ordinarily any reasonably uniform and permanent 
 run of free income of this kind will be covered by 
 an issue of corporate securities with a fixed rate of 
 interest or dividends; whereupon the free income in 
 question becomes a fixed overhead charge on the 
 concern's business, to be carried as an item of or- 
 dinary and unavoidable outlay and included in the 
 necessary cost of production of the concern's output 
 of goods or services. But whether it is covered by 
 an issue of vendible securities or carried in a less 
 formal manner as a source of income not otherwise 
 accounted for, such a vested right to get something 
 for nothing will rightly be valued and defended 
 against infraction from outside as a proprietary 
 right, an item of immaterial but very substantial 
 wealth. 
 
 There is nothing illegitimate or doubtful about 
 this incorporation of unearned income into the or- 
 dinary costs of production on which " reasonable
 
 THE VESTED INTERESTS 103 
 
 profits " are computed. " The law allows it and 
 the court awards it." To indicate how utterly con- 
 gruous it all is with the new order of business enter- 
 prise it may be called to mind that not only do the 
 captains of corporation finance habitually handle the 
 matter in that way, but the same view is accepted by 
 those public authorities who are called in to review 
 and regulate the traffic of the business concerns gov- 
 erned by these captains of finance. The later find- 
 ings are apparently unequivocal, to the effect that 
 when once a run of free income has been capitalised 
 and docketed as an asset it becomes a legitimate 
 overhead charge, and it is then justly to be counted 
 among necessary costs and covered by the price 
 which consumers should reasonably pay for the con- 
 cern's offering of goods or services. 
 
 Such a finding has come to be a fairly well settled 
 matter of course both among the officials and among 
 the law-abiding investors, so far as regards those 
 intangible assets that are covered by vendible se- 
 curities carrying a fixed rate; and the logic of this 
 finding is doubtless sound according to the principles 
 of the modern point of view, which were put into 
 stable form before the coming of corporation 
 finance. There may still be a doubt or a question 
 whether valuable perquisites of the same nature, 
 which continue to be held loosely as an informal 
 vested interest, as, e. g., merchantable good-will, are 
 similarly entitled to the benefit of the common law 
 which secures any owner in the usufruct of his prop- 
 erty. To such effect have commonly been the find- 
 ings of courts and boards of inquiry, of Public 
 Utility Commissions, of such bodies as the Inter-
 
 io 4 THE VESTED INTERESTS 
 
 state Commerce Commission, the Federal Trade 
 Commission, and latterly of divers recently installed 
 agencies for the control of prices and output in be- 
 half of the public interest; so, for instance, right 
 lately, certain decisions and recommendations of the 
 War Labor Board. 
 
 Any person with a taste for curiosities of human 
 behavior might well pursue this question of capital- 
 ised free income into its further convolutions, and 
 might find reasonable entertainment in so doing. 
 The topic also has merits as a subject for economic 
 theory. But for the present argument it may suf- 
 fice to note that this free income and the businesslike 
 contrivances by which it is made secure and legiti- 
 mate are of the essence of this new order of business 
 enterprise; that the abiding incentive to such enter- 
 prise lies in this unearned income; and that the in- 
 tangible assets which are framed to cover this line 
 of " earnings," therefore, constitute the substantial 
 core of corporate capital under the new order. In 
 passing, it may also be noted that there is room for a 
 division of sentiment as regards this disposal of the 
 community's net production, and that peremptory 
 questions of class interest and public policy touch- 
 ing these matters may presently be due to come to 
 a hearing. 
 
 To some, this manner of presenting the case may 
 seem unfamiliar, and it may therefore be to the pur- 
 pose to restate the upshot of this account in the 
 briefest fashion: Capital at least under the new 
 order of business enterprise is capitalised pros- 
 pective gain. From this arises one of the singu-
 
 THE VESTED INTERESTS 105 
 
 larities of the current situation in business and its 
 control of industry; viz., that the total face value, or 
 even the total market value of the vendible securities 
 which cover any given block of industrial equipment 
 and material resources, and which give title to its 
 ownership, always and greatly exceeds the total mar- 
 ket value of the equipment and resources to which 
 the securities give title of ownership, and to which 
 alone in the last resort they do give title. The mar- 
 gin by which the capitalised value of the going con- 
 cern exceeds the value of its material properties is 
 commonly quite wide. Only in the case of small and 
 feeble corporations, or such concerns as are balanc- 
 ing along the edge of bankruptcy, does this margin of 
 intangible values narrow down and tend to disap- 
 pear. Any industrial business concern which does 
 not enjoy such a margin of capitalised free earning- 
 capacity has fallen short of ordinary business suc- 
 cess and is possessed of no vested interest. 
 
 This margin of free income which is capitalised in 
 the value of the going concern comes out of the net 
 product of industry over cost. It is secured by suc- 
 cessful bargaining and an advantageous position in 
 the market; which involves some derangement and 
 retardation of the industrial system, so much so 
 as greatly to reduce the net margin of production 
 over cost. Approximately the whole of this remain- 
 ing margin of free income goes to the business men 
 in charge, or to the business concerns for whom this 
 management is carried on. In case the free income 
 which is gained in this way promises to continue, it 
 presently becomes a vested right. It may then be 
 formally capitalised as an immaterial asset having a
 
 io6 THE VESTED INTERESTS 
 
 recognised earning-capacity equal to this prospective 
 free income. That is to say, the outcome is a cap- 
 italised claim to get something for nothing; which 
 constitutes a vested interest. The total gains which 
 hereby accrue to the owners of these vested rights 
 amount to something less than the total loss suffered 
 by the community at large through that delay of 
 production and derangement of industry that is in- 
 volved in the due exercise of these rights. In other 
 words, and as seen from the other side, this free in- 
 come which the community allows its kept classes in 
 the way of returns on these vested rights and in- 
 tangible assets is the price which the community is 
 paying to the owners of this imponderable wealth 
 for material damage greatly exceeding that amount. 
 But it should be kept in mind and should be duly 
 credited to the good intentions of these businesslike 
 managers, that the ulterior object sought by all this 
 management is not the 100 per cent of mischief to 
 the community but only the 10 per cent of private 
 gain for themselves and their clients. 
 
 So far as they bear immediately on the argument 
 at this point the main facts are substantially as set 
 forth. But to avoid any appearance of undue nov- 
 elty, as well as to avoid the appearance of neglect- 
 ing relevant facts, something more is to be said in 
 the same connection. It is particularly to be noted 
 that credit for certain material benefits should be 
 given to this same business enterprise whose chief 
 aim and effect is the creation of these vested rights 
 to unearned income. It will be apparent to anyone 
 who is at all familiar with the situation, that much
 
 THE VESTED INTERESTS 107 
 
 of the intangible assets included in the corporate cap- 
 ital of this country, e. g., does not represent de- 
 rangement which is actually inflicted on the indus- 
 trial system from day to day, but rather the price of 
 delivery from derangement which the businesslike 
 managers of industry have taken measures to dis- 
 continue and disallow. 
 
 A concrete illustration will show what is intended. 
 For some time past, and very noticeably during the 
 past quarter-century, the ownership of the large in- 
 dustrial concerns has constantly been drawing to- 
 gether into larger and larger aggregations, with a 
 more centralised control. The case of the steel in- 
 dustry is typical. For a considerable period, be- 
 ginning in the early nineties, there went on a process 
 of combination and recombination of corporations 
 in this industry, resulting in larger and larger ag- 
 gregations of corporate ownership. Commonly, 
 though perhaps not invariably, some of the unprofit- 
 able duplication and work at cross purposes that was 
 necessarily involved in the earlier parcelment of 
 ownership was got rid of in this way, gradually with 
 each successive move in this concentration of own- 
 ership and control. Perhaps also invariably there 
 was a substantial saving made in the aggregate vol- 
 ume of business dealings that would necessarily be 
 involved in carrying on the industry. Under the 
 management of many concerns each intent on its 
 own pecuniary interest, the details of business trans- 
 actions would be voluminous and intricate, in the 
 way of contracts, orders, running accounts, working 
 arrangements, as well as the necessary financial op- 
 erations, properly so called. Much of this would
 
 io8 THE VESTED INTERESTS 
 
 be obviated by taking over the ownership of these 
 concerns into the hands of a centralised control; and 
 there would be a consequent lessening of that delay 
 and uncertainty that always is to be counted on 
 wherever the industrial operations have to wait on 
 the completion of various business arrangements, as 
 they habitually do. There is circumstantial evi- 
 dence that very material gains in economy and ex- 
 pedition commonly resulted from these successive 
 moves of consolidation in the steel business. And 
 this discontinuance of businesslike delay and calcu- 
 lated maladjustment was at each successive move 
 brought to a secure footing and capitalised in an in- 
 creased issue of negotiable corporation securities. 
 
 It will also be recalled that, as a matter of routine, 
 each successive consolidation of ownership involved 
 a recapitalization of the concerns so brought together 
 under a common head, and that commonly if not in- 
 variably the resulting recapitalisation would be 
 larger than the aggregate earlier capital of the un- 
 derlying corporations. Even where, as sometimes 
 has happened, there was no increase made in the 
 nominal capitalisation, there would still result an 
 effectual increase; in that the market value of the 
 securities outstanding would be larger after the op- 
 eration than the value of the aggregate capital of the 
 underlying corporations had been before. There 
 has commonly been some gain in aggregate capital- 
 isation, and the resulting increased capitalisation has 
 also commonly proved to be valid. The market 
 value of the larger and more stable capitalisation 
 has presently proved to be larger and more stable 
 than the capitalisation of the same properties under
 
 THE VESTED INTERESTS 109 
 
 the earlier regime of divided ownership and control. 
 What has so been added to the aggregate capitalisa- 
 tion has in the main been the relative absence of 
 work at cross purposes, which has resulted from the 
 consolidation of ownership; and it is to be accounted 
 a typical instance of intangible assets. The new and 
 larger capitalisation has commonly made good; and 
 this is particularly true for those later, larger and 
 more conclusive recombinations of corporate owner- 
 ship with which the so-called era of trust-making in 
 the steel business came to a provisional conclusion. 
 The U. S. Steel Corporation has vindicated the wis- 
 dom of an unreserved advance on lines of consolida- 
 tion and recapitalisation in the financing of the large 
 and technical industries. 
 
 For reasons well understood by those who are ac- 
 quainted with these things, no one can offer a 
 confident estimate, or even a particularly intelligent 
 opinion, as to the aggregate amount of overhead 
 burden and intangible assets which has been written 
 into the corporate capital of the steel business in 
 the course of a few years of consolidation. For 
 reasons of depreciation, disuse, replacement, exten- 
 sion, renewal, changes in market conditions and in 
 technical requirements, the case is too intricate to 
 admit anything like a clear-cut identification of the 
 immaterial items included in the capitalisation. But 
 there is no chance to doubt that in the aggregate 
 these immaterial items foot up to a very formidable 
 proportion of the total capital. 
 
 And what is true for the steel business in this re- 
 spect will doubtless apply even more unreservedly in 
 transportation, or in such a case as the oil business.
 
 no THE VESTED INTERESTS 
 
 The latter may be taken as a typical case, differing 
 from steel in some of the circumstances which condi- 
 tion its business organisation, but comparable with 
 steel in respect of the necessity for a centralised con- 
 trol. In the oil business a rough classification of 
 assets would take some such shape as this: (a) 
 Monopolisation of natural resources, (b) Control 
 of markets by limitation of the supply, (c) Plant. 
 Of these three, the last named, the material equip- 
 ment, would unquestionably be found to be altogether 
 the slightest and least valuable. What is not doubt- 
 ful, in the steel business or in any of the other in- 
 dustrial enterprises that run on a similar scale and 
 a similar level of technology, is that the owners of 
 the corporate capital have come in for a very sub- 
 stantial body of intangible assets of this kind, and 
 that these assets of capitalised free income will foot 
 up to several times the total value of the material 
 assets which underlie them. 
 
 It is evident that the businesslike management of 
 industry under these conditions need not involve de- 
 rangement and cross purposes at every turn. It 
 should always be likely that the business men in 
 charge will find it to their profit to combine forces, 
 eliminate wasteful traffic, allow a reasonably free 
 and economical working of the country's productive 
 powers within the limits of a profitable price, and so 
 come in for a larger total of free income to be di- 
 vided amicably among themselves on a concerted 
 plan. This can be done by means of a combination 
 of ownership, such as the corporations of the pres- 
 ent time. But there is a difficulty of principle in- 
 volved in this use of incorporation as a method of
 
 THE VESTED INTERESTS in 
 
 combining forces. Such a consolidation of owner- 
 ship and control on a large scale appears to be, in 
 effect, a combination of forces against the rest of the 
 community or in contravention of the principles of 
 free competition. In effect it foots up to the same 
 thing as a combination in restraint of trade; in form 
 it is a concentration of ownership. Combination of 
 owners in restraint of trade is obnoxious to the lib- 
 eral principles of free bargaining and self-help; 
 consolidation of ownership by purchase or incorpora- 
 tion appears to be a reasonable exercise of the right 
 of free bargaining and self-help. There is accord- 
 ingly some chance of a difference of opinion at this 
 point and some risk of playing fast and loose with 
 these liberal principles that disallow conspiracy in 
 restraint of trade. This difficulty .of principle has 
 been sought to be got over by believing that a com- 
 bination of ownership in restraint of trade does not 
 amount to a conspiracy in restraint of trade, within 
 the purport of these liberal principles. There is a 
 great and pressing need of such a construction of 
 these principles, which would greatly facilitate the 
 work of corporation finance; but it is to be admitted 
 that some slight cloud still rests on this manner of 
 disposing of ownership. It involves abdication or 
 delegation of that discretionary exercise of property 
 rights which has been held to be of the essence of 
 ownership. 
 
 The new state of things brought about by such a 
 consolidation is capitalised as a permanent source 
 of free income. And if it proves to be a sound busi- 
 ness proposition the new capitalisation will measure 
 the increase of income which goes to its promoter or
 
 ii,2 THE VESTED INTERESTS 
 
 to the corporation in whose name the move has been 
 made; and if the work is well and neatly done, no 
 one else will get any gain from it or be in any way 
 benefited by the arrangement. It is a business 
 proposition, not a fanciful project of public utility. 
 The capitalised value of such a coalition of owner- 
 ship is not measured by any heightened production 
 or any retrenchment of waste that may come in its 
 train, nor need the new move bring any saving or 
 any addition to the community's net productive re- 
 sources in any respect. Indeed, it happens not in- 
 frequently that such a waste-conserving coalition of 
 ownership leads directly to a restriction of output, 
 according to the familiar run of monopoly rule. So 
 frequently will restriction, enhanced prices, unem- 
 ployment, and hardship follow in such a case, that it 
 has come to be an article of popular knowledge and 
 belief that this is the logical aim and outcome of 
 any successful manoeuvre of the kind. 
 
 So also, though its output of marketable goods or 
 services may be got on easier terms, the new and 
 larger business concern which results from the co- 
 alition need be no more open-handed or humane in 
 its dealings with its workmen. There will, in fact, 
 be some provocation to the contrary. A more pow- 
 erful corporation is in a position to make its own 
 terms with greater freedom, which it then is for the 
 workmen to take or leave, but ordinarily to take; for 
 the universal rule of businesslike management to 
 charge what the traffic will bear continues to hold 
 unbroken for any business concern, irrespective of 
 its size or its facilities. As has already been noted 
 in an earlier passage, charging what the traffic will
 
 THE VESTED INTERESTS 113 
 
 bear is the same as charging what will yield the 
 largest net profit. 
 
 There stand over two main questions touching the 
 nature and uses of these vested interests : Why 
 do not these powerful business concerns exercise 
 their autocratic powers to drive the industrial system 
 at its full productive capacity, seeing that they are 
 in a position to claim any increase of net production 
 over cost? and, What use is made of the free income 
 which goes to them as the perquisite of their 
 vested interest? The answer to the former ques- 
 tion is to be found in the fact that the great busi- 
 ness concerns as well as the smaller ones are all 
 bound by the limitations of the price system, which 
 holds them to the pursuit of a profitable price, not 
 to the pursuit of gain in terms of material goods. 
 Their vested rights are for the most part carried as 
 an overhead charge in terms of price and have to be 
 met in those terms, which will not allow an increase 
 of net production regardless of price. The latter 
 question will find its answer in the well-known 
 formula of the economists, that " human wants are 
 indefinitely extensible," particularly as regards the 
 consumption of superfluities. The free income 
 which is capitalised in the intangible assets of the 
 vested interests goes to support the well-to-do in- 
 vestors, who are for this reason called the kept 
 classes, and whose keep consists in an indefinitely 
 extensible consumption of superfluities.
 
 VI 
 
 THE DIVINE RIGHT OF NATIONS 
 
 THIS sinister fact is patent, that the great war has 
 arisen out of a fateful entanglement of national pre- 
 tensions. And it is a fact scarcely less patent that 
 this fateful status quo ante arose out of the ordinary 
 run of that system of law and custom which has 
 governed human intercourse among civilised nations 
 in our time. The underlying principles of this sys- 
 tem of law and custom have continued to govern hu- 
 man intercourse under a new order of material cir- 
 cumstances which has come into effect since these prin- 
 ciples were first installed. These enlightened prin- 
 ciples that go to make up the modern point of view 
 as regards law and morals are of the eighteenth 
 century, whereas the new order in industry is of the 
 twentieth, and between these two dates lies an in- 
 terval of unexampled change in the material condi- 
 tions of life. 
 
 To all this it will be said, of course, that warfare 
 is not a new invention, and that the national ambi- 
 tions and animosities out of which wars have always 
 arisen are of older date than the modern point of 
 view and the machine industry; but it will also not 
 be denied that the great war which is now coming to 
 a provisional close is the largest and most atrocious 
 epoch of warfare known to history, and that it has, 
 in point of fact, arisen out of this status quo which 
 
 114
 
 THE DIVINE RIGHT OF NATIONS 115 
 
 has been created by these enlightened principles of 
 the modern point of view in working out their con- 
 sequences on the ground of the new order of in- 
 dustry. 
 
 The great war arose within that group of nations 
 which have the full use of the industrial arts, which 
 conduct their business and control their industries 
 on the lines of these enlightened principles of the 
 eighteenth century, and whose national ambitions 
 and policies are guided by the preconceptions of 
 national self-determination and self-assertion which 
 these modern civilised peoples have habitually found 
 to be good and valid. The group of belligerents 
 has included primarily the great industrial nations, 
 and the outcome of the war is being decided by the 
 industrial superiority of the advanced industrial peo- 
 ples. A host of slightly backward peoples back- 
 ward in the industrial respect have been drawn 
 into this contest of the great powers, but these have 
 taken part only as interested outliers and as auxil- 
 iaries to be drawn on at the discretion of the chief 
 belligerents. It has been a contest of technological 
 superiority and industrial resources, and in the end 
 the decision of it rests with the greater aggregation 
 of industrial forces. Frightfulness and warlike 
 abandon and all the beastly devices of the heathen 
 have proved to be unavailing against the great in- 
 dustrial powers; partly because these things do not 
 enduringly serve the technological needs of the con- 
 test, partly because they have run counter to that 
 massive drift of sentiment which animates the great 
 industrial peoples.
 
 n6 THE VESTED INTERESTS 
 
 The center of the warlike disturbance has been 
 the same as the center of growth and diffusion of the 
 new order of industry. And in both respects, both 
 as regards participation in the war and as regards 
 their share in the new order of industry, it is not a 
 question of geographical nearness to a geographical 
 center, but of industrial affiliation and technological 
 maturity. The center of disturbance and participa- 
 tion is a center in the technological respect; and in 
 the end the battle goes to those few great industrial 
 peoples who are nearest, technologically speaking, 
 to the apex of growth of the new order. These 
 need be superior in no other respect; the contest is 
 decided on the merits of the industrial arts. And 
 in this connection it may be in place to call to mind 
 again that the state of the industrial arts is always 
 a joint stock of knowledge and proficiency held, ex- 
 ercised, augmented and carried forward by the in- 
 dustrial community at large as a going concern. 
 What the war has vindicated, hitherto, is the great 
 efficiency of the mechanical industry. 
 
 But the ambitions and animosities which precipi- 
 tated this contest, and which now stand ready to 
 bring on a renewal of it in due time, are not of the 
 industrial order, and eminently not of the new order 
 of technology. They have been more nearly bound 
 up with those principles of self-help that have stood 
 over from the recent past, from the time before the 
 new order of industry came into bearing. And there 
 is a curious parallel between the consequences worked 
 out by these principles in the economic system within 
 each of these nations, on the one hand, and in the 
 concert of nations, on the other hand. Within the
 
 THE DIVINE RIGHT OF NATIONS 117 
 
 nation the enlightened principles of self-help and 
 free contract have given rise to vested interests 
 which control the industrial system for their own 
 use and thereby come in for a legal right to the 
 community's net output of product over cost. Each 
 of these vested interests habitually aims to take over 
 as much as it can of the lucrative traffic that goes on 
 and to get as much as it can out of the traffic, at the 
 cost of the rest of the community. After the same 
 analogy, and by sanction of the same liberal prin- 
 ciples, the civilised nations, each and several, are 
 vested with an inalienable right of " self-determina- 
 tion"; which being interpreted means the self-ag- 
 grandisement of each and several at the cost of the 
 rest, by a reasonable use of force and fraud. And 
 there has been, on the whole, no sense of shame or 
 of moral obliquity attaching to the use of so much 
 force and fraud as the traffic would bear, in this 
 national enterprise of self-aggrandisement. Such 
 has been use and wont among the civilised nations. 
 Meantime the new order of industry has come into 
 bearing, with the result that any disturbance which 
 is set afoot by any one of these self-determining na- 
 tions in pursuing its own ends is sure to derange 
 the conditions of life for all the others, just so far as 
 these others are bound up in the same comprehen- 
 sive organization of trade and industry. Full and 
 free self-determination runs counter to the rule of 
 Live and let live. After the same fashion the busi- 
 nesslike manoeuvres of the vested interests within 
 the nations, each managing its own affairs with an 
 eye single to its own advantage, deranges the or- 
 dinary conditions of life for the common man, and
 
 ii8 THE VESTED INTERESTS 
 
 violates the rule of Live and let live by that much. 
 Self-determination, full and free, necessarily en- 
 croaches on the conditions of life for all the others. 
 
 So, just now there is talk of disallowing or abridg- 
 ing the inalienable right of free nations by so much 
 as is imperatively demanded for reasonably secure 
 conditions of life among these civilised peoples, and 
 especially so far as is required for the orderly pur- 
 suit of profitable business by the many vested inter- 
 ests domiciled in these civilised countries. The pro- 
 ject has much in common with the measures which 
 have been entertained for the restraint of any in- 
 sufferably extortionate vested interests within the 
 national frontiers. 
 
 In both cases alike, both in the proposed regula- 
 tion of businesslike excesses at home and in the pro- 
 posed league of pacific nations, the projected meas- 
 ures of sobriety and tolerance appear to be an infrac- 
 tion of that inalienable right of self-direction that 
 makes up the substantial core of law and custom ac- 
 cording to the modern point of view. There is 
 much alarm felt by the demagogues at the danger 
 which is said to threaten the national " sover- 
 eignty "; just as the vested interests are volubly ap- 
 prehensive of the " sacred rights of property." 
 And in both cases alike the projected measure of 
 sobriety, tolerance and incidental infraction are de- 
 signed to go no farther than is unequivocally de- 
 manded by the imperative needs of continued life on 
 earth; leaving the benefit of the doubt always on the 
 side of the insufferable vested interests or the mis- 
 chievous national ambitions, as the case may be; 
 and leaving the impression that it all is a concessive
 
 THE DIVINE RIGHT OF NATIONS 119 
 
 surrender of principles under compulsion of circum- 
 stances that will not wait. There is also in both 
 cases alike a well-assured likelihood that the tenta- 
 tive revision of vested interests and of national pre- 
 tensions is to be no more than an incompetent re- 
 medial precaution, a makeshift shelter from the 
 wrath to come. 
 
 It is evident that in both cases alike we have to 
 do with an incursion of ideas and considerations that 
 are alien to the established liberal principles of hu- 
 man intercourse; but it is also evident that these 
 ideas and considerations have the sanction of that 
 new order of things that runs in terms of tangible 
 performance and enforces its requisitions with cruel 
 and unusual punishments. It is these punishments 
 that are to be evaded or suspended, and immunity is 
 sought by diplomatic measures of formality and de- 
 lay rather than by tangible performance. In such a 
 case the keepers of the established order will always 
 look to evasion and entertain a hope of avoiding 
 casualties and holding the line by the use of a clev- 
 erly designed masquerade. 
 
 It is the express purpose of the projected league of 
 pacific nations to keep the sovereign rights of na- 
 tional self-determination intact for all comers; it is 
 to be a league of nations, not a league of peoples. 
 But it should be sufficiently obvious, whether it is 
 avowed or not, that these sovereign rights can be 
 maintained by these means only in a mutilated form. 
 Within the framework of any such league or com- 
 mon understanding the nations, each and several, 
 can continue to exercise these rights only on the 
 basis of a mutual agreement to give up so much of
 
 120 THE VESTED INTERESTS 
 
 their national pretensions as are patently incom- 
 patible with the common good. It involves a con- 
 cessive surrender of the sovereign right of self-ag- 
 grandisement, and perhaps also an extension of the 
 rule of Live and let live to cover minor nationalities 
 within the national frontiers; a mutual agreement to 
 play fair under the new rules that are to govern the 
 conduct of national enterprise. Any injunction to 
 play fair is an infraction of national sovereignty. 
 Hitherto no liberal statesman has been so audacious 
 as to " imagine the king's death " and lay profane 
 hands on the divine right of nations to seek their 
 own advantage at the cost of the rejst by such means 
 as the rule of reason shall decide to be permissible. 
 It is only that licence is to be hedged about, and all 
 insufferable superfluity d naughtiness is provision- 
 ally to be disallowed. 
 
 There is this evident resemblance and kinship be- 
 tween the vested interests of business and the sov- 
 ereign rights of nations, but it does not amount to 
 identity. There is always something more to the 
 national sovereignty and the national pretensions; 
 although these precautionary measures that are now 
 under advisement as touches the legitimate bounds 
 of both do fun on singularly similar lines and are of 
 a similarly tentative and equivocal nature. In the 
 prudent measures by which statesmen have set them- 
 selves to curb the excesses of the greater vested in- 
 terests within the nation their aim has quite con- 
 sistently been to guard the free income of the lesser 
 vested interests against the unseasonable rapacity of 
 the greater ones; all the while that the underlying 
 community has come into the case only as a fair field
 
 THE DIVINE RIGHT OF NATIONS 121 
 
 of business enterprise at large, within which there 
 is to be maintained a reasonable degree of equal op- 
 portunity among these interests, big and little, in 
 whom, one with another, vests the effectual usufruct 
 of the underlying community. 
 
 It may be necessary to remark, by way of paren- 
 thesis, that while this description of these corrective 
 measures may seem to hint at a fault, that is by no 
 means its purpose. The fault may be there, of 
 course, but if so it has no bearing on the argument 
 at this point. It should also be remarked in the 
 same connection that this description of facts does 
 not overlook the well-conceived verbal reservations 
 and preambles with which cautious statesmen habitu- 
 ally surround the common good in the face of any 
 unseasonable rapacity on the part of the greater 
 vested interests; it is only that the run of the facts 
 has been quite patently to the effect so indicated. In 
 the same connection it may also not be out of place 
 to recall that a vested interest is a prescriptive right 
 to get something for nothing; in which again the 
 kinship and resemblance between vested interests in 
 business and the sovereign rights of nations comes 
 into view. 
 
 So, on the other hand, the great war has brought 
 into a strong light the obvious fact that, given the 
 existing state of the industrial arts, any unseasonable 
 rapacity on the part of the great Powers in exer- 
 cising their inalienable right of national self-deter- 
 mination will effectually suppress the similarly in- 
 alienable right of self-determination in any minor 
 nationality that gets in the way. All of which is 
 obnoxious to the liberal principle of self-help or to
 
 122 THE VESTED INTERESTS 
 
 that of equal opportunity. Unhappily, these two 
 guiding principles of the modern point of view 
 self-help and equal opportunity have proved to 
 be incompatible with one another under the circum- 
 stances of the new order of things. So there has 
 come into view this project of a league, by which it 
 is proposed to play fast and loose with the inalien- 
 able right of national self-help by setting up some 
 sort of a collusive arrangement between the Powers, 
 a conspiracy in restraint of national intrigue, look- 
 ing to a reasonable disallowance of force and fraud 
 in the pursuit of national ambitions. 
 
 Under the material circumstances of the new or- 
 der those correctives that were once counted on to 
 keep the run of things within the margin of toler- 
 ance have ceased to be a sufficient safeguard. By 
 use and wont, in the Liberal scheme of statecraft as 
 well as in the scheme of freely competitive business, 
 implicit faith has hitherto been given to the re- 
 medial effect of punitive competition and the punitive 
 correction of excesses by law and custom. It has 
 been a system of adjustment by punitive after- 
 thought. All of which may once have been well 
 enough in its time, so long as the rate and scale of 
 the movement of things were slow enough and small 
 enough to be effectually overtaken and set to rights 
 by afterthought. The modern eighteenth-century 
 point of view presumes an order of things which 
 is amenable to remedial adjustment after the event. 
 But the new order of industry, and that sweeping 
 equilibrium of material forces that embodies the new 
 order, is not amenable to afterthought. Where hu- 
 man life and human fortunes are exposed to the
 
 THE DIVINE RIGHT OF NATIONS 123 
 
 swing of the machine system, or to the onset of na- 
 tional ambitions that are served by the machine in- 
 dustry, it is safety first or none. However, ripe 
 statesmen and over-ripe captains of finance have so 
 secure a grasp of first principles that they are still 
 able to believe quite sincerely in the good old plan 
 of remedial afterthought, and it still commands the 
 affectionate service of the jurists and the diplomatic 
 corps. Meantime the far-reaching, swift-moving, 
 wide-sweeping machine technology has been drawn 
 into the service of national pretensions, as well as of 
 the vested interests that find shelter under the na- 
 tional pretensions, and both the remedial diplomats 
 and the self-determination of nations are on the way 
 to become a tale that was told. 
 
 The divine right of nations appears to be a 
 blurred after-image of the divine rights of kings. 
 It rests on ground more archaic and less open to 
 scrutiny than the Natural Right of self-direction as 
 it applies in the case of individual persons. It is a 
 highly prized national asset, in the nature of an im- 
 ponderable; and, very much as is true of the divine 
 right of kings, any spoken doubt of its paramount 
 validity comes near being a sin against the Holy 
 Ghost. It can not safely be scrutinised or defined in 
 matter-of-fact words. As is true of the divine right 
 of kings, so also as regards the divine right of na- 
 tions, it is extremely difficult to show that it serves 
 the common good in any material way, in any way 
 that can be formulated or verified in terms of tan- 
 gible performance. Evidently it does not come in 
 under that mechanistic conception that rules the
 
 124 THE VESTED INTERESTS 
 
 scheme of knowledge and belief wherever and so 
 far as material science and the machine technology 
 have reshaped men's habits of thought. Indeed, it 
 is not a technological conception, late or early. It 
 is not statable in terms of mechanical efficiency, or 
 even in terms of price. Hence it is spoken of, often 
 and eloquently, as being " beyond price." It is more 
 nearly akin to magic and religion. It should per- 
 haps best be conceived as an end in itself, or a thing- 
 in-itself again in close analogy with the divine 
 right of kings. But there is no question of its sub- 
 stantial reality and its paramount efficacy for good 
 and ill. 
 
 The divine that is to say inscrutable and irre- 
 sponsible right of kings reached its best estate 
 and put on divinity in the stirring times of the Era 
 of State-making; when the princes and prelates " tore 
 each other in the slime." It was of a proprietary 
 nature, a vested interest, something in the nature of 
 intangible assets which embodied the usufruct of the 
 realm, including its population and resources, and 
 which could be turned to account in the pursuit of 
 princely or dynastic advantages at home and abroad. 
 This divine right of princes was disallowed among 
 the more civilised peoples on the transition to mod- 
 ern ways of thinking, and the sovereign rights of the 
 prince were then taken over at "least in form and 
 principle by the people at large, and they have 
 continued to be held by them as some sort of im- 
 ponderable " community property," at least in 
 point of form and profession. The vested interest 
 of the prince or the dynasty in the usufruct of the 
 underlying community is thereby presumed to have
 
 THE DIVINE RIGHT OF NATIONS 125 
 
 become a collective interest vested in the people 
 of the nations and giving them a " right of user " 
 in their own persons, knowledge, skill and resources. 
 
 The mantle of princely sovereignty has fallen on 
 the common man formally and according to the 
 letter of the legal instruments. In practical effect, 
 as " democratic sovereignty " it has been converted 
 into a cloak to cover the nakedness of a government 
 which does business for the kept classes. In prac- 
 tical effect, the shift from the dynastic politics of the 
 era of state-making to the Liberal policies based on 
 the enlightened principles of the eighteenth century 
 has been a shift from the pursuit of princely domin- 
 ion to an imperialistic enterprise for the protection 
 and furtherance of those vested interests that are 
 domiciled within the national frontiers. That such 
 has been the practical outcome is due to the fact that 
 these enlightened principles of the eighteenth cen- 
 tury comprise as their chief article the " natural " 
 right of ownership. The later course of events has 
 decided that the ownership of property in sufficiently 
 large blocks will control the country's industrial sys- 
 tem and thereby take over the disposal of the com- 
 munity's net output of product over cost; on which 
 the vested interests live and on which, therefore, the 
 kept classes feed. Hence the chief concern of those 
 gentlemanly national governments that have dis- 
 placed the dynastic states is always and consistently 
 the maintenance of the rights of ownership and in- 
 vestment. 
 
 However, these pecuniary interests of investment 
 and free income are not all that is covered by the 
 mantle of democratic sovereignty. Nor will it hold
 
 126 THE VESTED INTERESTS 
 
 true that the common man has no share in the legacy 
 of sovereignty and national enterprise which the en- 
 lightened democratic commonwealth has taken over 
 from the departed dynastic regime. The divine 
 right of the prince included certain imponderables, as 
 well as the usufruct of the material resources of the 
 realm. There were the princely dignity and honor, 
 which were no less substantial an object of value and 
 ambition and were no less tenaciously held by the 
 princes of the dynastic regime than the revenues and 
 material " sinews of war " on which the prestige 
 and honor rested. And the common man of the 
 democratic commonwealth has at least come in for 
 a ratable share in these imponderables of prestige 
 and honor that so are comprised under the divine 
 right of the nation. He has an undivided interest 
 in the glamour of national achievement, and he can 
 swell with just pride in contemplating the triumphs 
 of his gentlemanly government over the vested in- 
 terests domiciled in any foreign land, or with just 
 indignation at any diplomatic setback suffered by the 
 vested interests domiciled in his own. 
 
 There is also a more tangible, though more petty, 
 advantage gained for the common man in having 
 formally taken over the sovereignty from the dead 
 hand of the dynastic prince. The common man be- 
 ing now vested with the divine right of national sov- 
 ereignty, held in undivided community ownership, it 
 is ceremonially necessary for the gentlemanly stew- 
 ards of the kept classes to consult the wishes of this 
 their sovereign on any matters of policy that can not 
 wholly be carried through in a diplomatic corner 
 and under cover of night and cloud. He, collect-
 
 THE DIVINE RIGHT OF NATIONS 127 
 
 ively, holds an eventual power of veto. And this 
 power of veto has in practice been found to be some- 
 thing of a safeguard against any universal and en- 
 during increase of hardship at the hands of the gen- 
 tlemen-investors to whom the conduct of the nation's 
 affairs has been " entrusted; " a very modest safe- 
 guard, it is true, but always of some eventual con- 
 sequence. There is the difference that in the demo- 
 cratic commonwealth the common man has to be 
 managed rather than driven, except for minor 
 groups of common men who live on the lower-com- 
 mon levels, and except for recurrent periods of legis- 
 lative hysteria and judiciary blind-staggers. And it 
 is pleasanter to be managed than to be driven. 
 Chicane is a more humane art than corporal pun- 
 ishment. Imperial England is, after all, a milder- 
 mannered stepmother than Imperial Germany. 
 And always the common man comes in for his rat- 
 able share in the glamour of national achievement, 
 in war and peace; and this imponderable gain of the 
 spirit is also something. The value of these col- 
 lective imponderables of national prestige and col- 
 lective honor is not to be made light of. These 
 count for very much in the drift and set of national 
 sentiment, and moral issues of national moment are 
 wont to arise out of them. Indeed, they constitute 
 the chief incentive which holds the common man to 
 an unrepining constancy in the service of the " na- 
 tional interests." So that, while the tangible shell 
 of material gain appears to have fallen to the demo- 
 cratic community's kept classes, yet the " psychic 
 income " that springs from national enterprise, the 
 spiritual kernel of national elation they share with
 
 128 THE VESTED INTERESTS 
 
 the common man on an equitable footing of com- 
 munity interest. 
 
 The vested rights of the nation are of the essence 
 of that order of things which enjoys the unqualified 
 sanction of the modern point of view. Like any 
 other vested interest, these rights are conceived in 
 other terms than those which are native to the new 
 order of material science and technology. They 
 are of an older and more spiritual order, so far as 
 regards the principles of knowledge and belief on 
 which they rest. But whatever may be their re- 
 moter pedigree, they have the sanction of that body 
 of principles that is called the modern point of view, 
 and they belong in the scheme of things handed on 
 by the S5beral movement of the eighteenth and nine- 
 teenth century. Apart from the imponderable val- 
 ues which fall under the head of national prestige, 
 these vested rights of the nation can be defined as 
 an extension to the commonwealth of the same 
 natural rights of self-direction and personal security 
 free contract and self-help that are secured to 
 the individual citizen under the common law. 
 
 Yet, while the national policies of the democratic 
 commonwealths are managed by Liberal statesmen 
 in behalf of the vested interests, they still run on 
 the ancient lines of dynastic statecraft, as worked 
 out by the statesmen of the ancient regime; and the 
 common man is still passably content to see the traf- 
 fic run along on those lines. The things which are 
 considered desirable to be done in the way of na- 
 tional enterprise, as well as the sufficient reasons 
 for doing them, still have much of the medieval 
 color. National pretensions, enterprise, rivalry, in-
 
 THE DIVINE RIGHT OF NATIONS 129 
 
 trigue and dissensions among the democratic com- 
 monwealths are still such as would have been in- 
 telligible to Macchiavelli, Frederick the Great, Met- 
 ternich, Bismarck, or the Elder Statesmen of Japan. 
 Diplomatic intercourse still runs in the same terms 
 of systematised prevarication, and still turns about 
 the same schedule of national pretensions that con- 
 tented the medieval spirit of these masters of dynas- 
 tic intrigue. As a matter of course and of common 
 sense the nations still conceive themselves to be 
 rivals, whose national interests are incompatible, 
 and whose divine right it is to gain something at one 
 another's cost, after the fashion of rival bandits or 
 business concerns. They still seek dominion and 
 still conceive themselves to have extra-territorial in- 
 terests of a proprietary sort. They still hold and 
 still seek vested rights in colonial possessions and in 
 extra-territorial priorities and concessions of divers 
 and dubious kinds. There still are conferences, 
 stipulations and guarantees between the Powers, 
 touching the " Open Door " in China, or the equi- 
 table partition of Africa, which read like a chapter 
 on Honor among Thieves. 
 
 All this run of national pretensions, wrangles, do- 
 minion, aggrandisement, chicane, and ill-will, is noth- 
 ing more than the old familiar trading stock of the 
 diplomatic brokers who do business in dynastic force 
 and fraud also called Realpolitik. The demo- 
 cratic nations have taken over in bulk the whole 
 job-lot of vested interests and divine rights that 
 once made the monarch of the old order an unfail- 
 ing source of outrage and desolation. In the hands 
 of those " Elder Statesmen " who once did business
 
 130 THE VESTED INTERESTS 
 
 under the signature of the dynasty, the traffic in state- 
 craft yielded nothing better than a mess of superflu- 
 ous affliction; and there is no reason to apprehend 
 that a continuation of the same traffic under the man- 
 agement of the younger statesmen who now do busi- 
 ness in the name of the democratic commonwealth 
 is likely to bring anything more comfortable, even 
 though the legal instruments in the case may carry 
 the rubber-stamp O. K. of the common man. The 
 same items will foot up to the same sum; and in 
 either case the net gain is always something appre- 
 ciably less than nothing. 
 
 These national interests are part of the medieval 
 system of ends, ways and means, as it stood, complete 
 and useless, at that juncture when the democratic 
 commonwealth took over the divine rights of the 
 crown. It should not be extremely difficult to un- 
 derstand why they have stood over, or why they 
 still command the dutiful approval of the common 
 man. It is a case of aimless survival, on the whole, 
 due partly to the inertia of habit and tradition, partly 
 to the solicitous advocacy of these assumed national 
 interests by those classes the trading and office- 
 holding classes who stand to gain something by 
 the pursuit of them at the cost of the rest. By ten- 
 acious tradition out of the barbarian past these peo- 
 ples have continued to be rival nations living in a 
 state of habitual enmity and distrust, for no better 
 reason than that they have not taken thought and 
 changed their mind. 
 
 After some slackening of national animosities and 
 some disposition to neglect national pretensions dur- 
 ing the earlier decades of the great era of Liberal-
 
 THE DIVINE RIGHT OF NATIONS 131 
 
 ism, the democratic nations have been gradually 
 shifting back to a more truculent attitude and a 
 more crafty and more rapacious management in all 
 international relations. This aggressive chauvinis- 
 tic policy has been called Imperialism. The move- 
 ment has visibly kept pace, more or less closely, with 
 the increasing range and volume of commerce and 
 foreign investments during the same period. And 
 to further this business enterprise there has been an 
 ever increasing resort to military power. It is rea- 
 sonably believed that traders and investors in for- 
 eign parts are able to derive a larger profit from 
 their business when they have the backing of a pow- 
 erful and aggressive national government; particu- 
 larly in their dealings with helpless and backward 
 peoples, and more particularly if their own national 
 government is sufficiently unscrupulous and over- 
 bearing, which may confidently be counted on so 
 long as these governments continue to be adminis- 
 tered by the gentlemanly delegates of the vested in- 
 terests and the kept classes. 
 
 As regards the intrinsic value which is popularly 
 attached to the imponderable national possessions, 
 in the way of honor and prestige, there is little to be 
 said, beyond the stale reflection that there is no dis- 
 puting about tastes. It all is at least a profitable 
 illusion, for the use of those who are in a position 
 to profit by it. Such as the crown and the office- 
 holders. But the people of the civilised nations be- 
 lieve themselves to have also a material interest of 
 some sort in enlarging the national dominions and 
 in extending the foreign trade of their business men 
 and safeguarding the foreign claims of their vested
 
 132 THE VESTED INTERESTS 
 
 interests. And the Americans, like many others, 
 harbor the singular delusion that they can derive a 
 collective benefit from obstructing the country's 
 trade at the national frontiers by means of a tariff 
 barrier, and so defeating their own industry by that 
 much. It is a survival out of the barbarian past, out 
 of the time when the dynastic politicians were oc- 
 cupied with isolating the nation and making it self- 
 sufficient, as an engine of warlike enterprise for the 
 pursuit of dynastic ambitions and the greater dis- 
 comfort of their neighbors. In an increasing degree 
 as the new order of industry has come into bearing, 
 any such policy of industrial isolation and self-suf- 
 ficiency has become more difficult and more injuri- 
 ous; for a free range and unhindered specialisation 
 is of the essence of the new industrial order. 
 
 The experience of the war has shown conclu- 
 sively that no one country can hereafter supply its 
 own needs either in raw materials or in finished 
 goods. Both the winning and the losing side have 
 shown that. The new industrial order necessarily 
 overlaps the national frontiers, even in the case of 
 a nation possessed of so extensive and varied natural 
 resources as America. So that in spite of all the 
 singularly ingenious obstruction of the American 
 tariff the Americans still continue to draw on for- 
 eign sources for most or all of their tea, coffee, 
 sugar, tropical and semi-tropical fruits, vegetable 
 oils, vegetable gums and pigments, cordage fibers, 
 silks, rubber, and a bewildering multitude of minor 
 articles of daily use. Even so peculiarly American 
 an industry as chewing-gum is wholly dependent on 
 foreign raw material, and quite unavoidably so.
 
 133 
 
 The most that can be accomplished by any tariff un- 
 der these circumstances is more or less obstruction. 
 Isolation and self-sufficiency are already far out of 
 the question. 
 
 But there are certain vested interests which find 
 their profit in maintaining a tariff barrier as a means 
 of keeping the price up and keeping the supply down; 
 and the common man still faithfully believes that 
 the profits which these vested interests derive in this 
 way from increasing the cost of his livelihood and 
 decreasing the net productivity of his industry will 
 benefit him in some mysterious way. He is per- 
 suaded that high prices and a scant supply of goods 
 at a high labor cost is a desirable state of things. 
 This is incredible, but there is no denying the fact. 
 He knows, of course, that the profits of business 
 go to the business men, the vested interests, and to 
 no one else; but he is still beset with the picturesque 
 hallucination that any unearned income which goes 
 to those vested Interests whose central office is in 
 New Jersey is paid to himself in some underhand 
 way, while the gains of those vested interests that 
 are domiciled in Canada are obviously a grievous 
 net loss to him. The tariff moves in a mysterious 
 way, its wonders to perform. 
 
 To all adult persons of sound mind, and not un- 
 duly clouded with the superstitions of the price sys- 
 tem, it is an obvious matter of fact that any pro- 
 tective tariff is an obstruction to industry and a 
 means of impoverishment, just so far as it is ef- 
 fective. The arguments to the contrary invariably 
 turn out to be pettifogger's special pleading for some 
 vested interest or for a warlike national policy, and
 
 134 THE VESTED INTERESTS 
 
 these arguments convince only those persons who 
 are able to believe that a part is greater than the 
 whole. It also lies in the nature of protective 
 tariffs that they always cost the nation dispropor- 
 tionately much more than they are worth to those 
 vested interests which profit by them. In this re- 
 spect they are like any other method of businesslike 
 sabotage. Their aim, and presumably their effect, 
 is to keep the price up by keeping the supply down, 
 to hinder competitors and retard production. As 
 in other instances of businesslike sabotage, there- 
 fore, the net margin of advantage to those who profit 
 by it is greatly less than what it costs the community. 
 Yet it is to be noted that the Americans have 
 prospered, on the whole, under protective tariffs 
 which have been as ingeniously and comprehensively 
 foolish as could well be contrived. There is even 
 some color of reason in the contentions of the pro- 
 tectionists that the more reasonable tariffs have com- 
 monly been more depressing to industry than the 
 most imbecile of them. All of which should be 
 disquieting to the advocates of free trade. The 
 defect of the free-trade argument, and the disappoint- 
 ment of free-trade policies, lies in overlooking the 
 fact that in the absence of an obstructive tariff sub- 
 stantially the same amount of obstruction has to be 
 accomplished by other means, if business is to pros- 
 per. And business prosperity is the only manner 
 of prosperity known or provided for among the 
 civilised nations. It is the only manner of pros- 
 perity on which the divine right of the nation gives 
 it a claim. A protective tariff is only an alterna- 
 tive method of businesslike sabotage. If and so
 
 THE DIVINE RIGHT OF NATIONS 135 
 
 far as this method of keeping the supply of goods 
 within salutary bounds is not resorted to, other 
 means of accomplishing the same result must be em- 
 ployed. For so long as investment continues to 
 control industry the welfare of the community is 
 bound up with the prosperity of its business; and 
 business can not be carried on without reasonably 
 profitable prices; and reasonably profitable prices 
 can not be maintained without a salutary limitation 
 of the supply; which means slowing down production 
 to such a rate and volume as the traffic will bear. 
 
 A protective tariff is only one means of crippling 
 the country's industrial forces, for the good of busi- 
 ness. In its absence all that matter will be taken 
 care of by other means. The tariff may perhaps 
 be a little the most flagrant method of sabotage by 
 which the vested interests are enabled to do a rea- 
 sonably profitable business; but there is nothing 
 more than a difference of degree, and not a large 
 difference at that. So long as industry is managed 
 with a view to a profitable price it is quite indis- 
 pensable to guard against an excessive rate and vol- 
 ume of output. In the absence of all businesslike 
 sabotage the productive capacity of the industrial 
 system would very shortly pass all reasonable 
 bounds, prices would decline disastrously and over- 
 head charges would not be covered, fixed charges on 
 corporation securities and other credit instruments 
 could not be met, and the whole structure of busi- 
 ness enterprise would collapse, as it occasionally has 
 done in times of " over-production." There is no 
 doing business without a fair price, since the net 
 price over cost is the motive of business. A pro-
 
 136 THE VESTED INTERESTS 
 
 tective tariff is, in effect, an auxiliary safeguard 
 against overproduction. Incidentally the fact that 
 its imposition does not result in insufferable hard- 
 ship serves also to show that the new order of in- 
 dustry is highly productive, quite inordinately pro- 
 ductive in fact. And it is a divine right of the 
 nation to use its discretion and offset this inordinate 
 efficiency of its common stock of knowledge by 
 adroitly crippling its own commerce and the com- 
 merce of its neighbors, for the benefit of those 
 vested interests that are domiciled within the na- 
 tional frontiers. 
 
 But the divine right of national self-direction also 
 covers much else of the same description, besides 
 the privilege of setting up a tariff in restraint of 
 trade. There are many channels of such discrim- 
 ination, of divers kinds, but always it will be found 
 that these channels are channels of sabotage and 
 that they serve the advantage of some group of 
 vested interests which do business under the shelter 
 of the national pretensions. There are foreign in- 
 vestments and concessions to be procured and safe- 
 guarded for the nation's business men by moral 
 suasion backed with warlike force, and the common 
 man pays the cost; there is discrimination to be 
 exercised and perhaps subsidies and credits to be 
 accorded those of the nation's business men who de- 
 rive a profit from shipping, for the discomfiture of 
 alien competitors, and the common man pays the 
 cost; there are colonies to be procured and admin- 
 istered at the public expense for the private gain of 
 certain traders, concessionaires and administrative 
 office-holders, and the common man pays the cost.
 
 THE DIVINE RIGHT OF NATIONS 137 
 
 Back of it all is the nation's divine right to carry 
 arms, to support a competitive military and naval 
 establishment, which has ceased, under the new or- 
 der, to have any other material use than to enforce 
 or defend the businesslike right of particular vested 
 interests to get something for nothing in some par- 
 ticular place and in some particular way, and the 
 common man pays the cost and swells with pride.
 
 VII 
 
 LIVE AND LET LIVE 
 
 THE Nation's inalienable right of self-direction and 
 self-help is of the same nature and derivation as the 
 like inalienable right of self-help vested in an irre- 
 sponsible king by the grace of God. In both cases 
 alike it is a divine right, in the sense that it is irre- 
 sponsible and will not bear scrutiny, being an arbi- 
 trary right of self-help at the cost of any whom it 
 may concern. There is the further parallel that in 
 both cases alike the ordinary exercise of these rights 
 confers no material benefit on the underlying com- 
 munity. In practical effect the exercise of such di- 
 vine rights, whether by a sovereign monarch or by 
 the officials of a sovereign nation, works damage 
 and discomfort to one and another, within the na- 
 tional frontiers or beyond them, with nothing better 
 to show for it than some relatively slight gain in 
 prestige or in wealth for some relatively small group 
 of privileged persons or vested interests. And the 
 gain of those who profit by this means is always got 
 at the cost of the common man at home and abroad. 
 These inalienable rights are an abundant source of 
 grievances to be redressed at the cost of the common 
 man. 
 
 It has long been a stale commonplace that the 
 quarrels of competitive kings in pursuit of their di- 
 vine rights have brought nothing but damage and 
 
 138
 
 LIVE AND LET LIVE 139 
 
 discomfort to the underlying peoples whose mate- 
 rial wealth and man power have been made use of 
 for national enterprise of this kind. And it is no 
 less evident, though perhaps less notorious, that the 
 pursuit of national advantages by competitive na- 
 tions by use of the same material wealth and man 
 power unavoidably brings nothing better than the 
 same net output of damage and discomfort to all the 
 peoples concerned. There is of course the reserva- 
 tion that in the one case the kings and their accom- 
 plices and pensioners have come in for some gain 
 in prestige and in perquisites, while in the case of 
 the competitive nations certain vested interests and 
 certain groups of the kept classes stand to gain 
 something in the way of perquisites and free income; 
 but always and in the nature of the case the total 
 gain is less than the cost; and always the gain goes 
 to the kept classes and the cost falls on the common 
 man. So much is notorious, particularly so far as 
 it is a question of material gain and loss. So far 
 as it is an immaterial question of jealousy and pres- 
 tige, the line of division runs between nations, but 
 as regards material gain and loss it is always a di- 
 vision between the kept classes and the common man; 
 and always the common man has more to lose than 
 the kept classes stand to gain. 
 
 The war is now concluded, provisionally, and 
 peace is in prospect for the immediate future, also 
 provisionally. As is true between individuals, so 
 also among the nations, peace means the same thing 
 as Live and Let Live, which also means the same 
 thing as a world made safe for democracy. And 
 the rule of Live and Let Live means the discontinu-
 
 i 4 o THE VESTED INTERESTS 
 
 ance of animosity and discrimination between the na- 
 tions. Therefore it involves the disallowance of 
 such incompatible national pretensions as are likely 
 to afford ground for international grievances, 
 which comes near involving the disallowance of all 
 those claims and perquisites that habitually go in 
 under the captions of " national self-determination " 
 and " national integrity," as these phrases are em- 
 ployed in diplomatic intercourse. At the same time 
 it involves the disallowance of all those class pre- 
 tensions and vested interests that make for dissension 
 within the nation. Ill-will is not a practicable basis 
 of peace, whether within the nation or between the 
 nations. So much is plain matter of course. What 
 may be the chances of peace and war, at home and 
 abroad, in the light of these blunt and obvious prin- 
 ciples taken in conjunction with the diplomatic ne- 
 gotiations now going forward at home and abroad, 
 all that is sufficiently perplexing. 
 
 At home in America for the transient time being, 
 the war administration has under pressure of neces- 
 sity somewhat loosened the strangle-hold of the 
 vested interests on the country's industry; and in so 
 doing it has shocked the safe and sane business men 
 into a state of indignant trepidation and has at the 
 same time doubled the country's industrial output. 
 But all that has avowedly been only for the transient 
 time being, " for the period of the war," as a dis- 
 tasteful concession to demands that would not wait. 
 So that the country now faces a return to the pre- 
 carious conditions of a provisional peace on the lines 
 of the status quo ante. Already the vested inter- 
 ests are again tightening their hold and are busily
 
 LIVE AND LET LIVE 141 
 
 arranging for a return to business as usual; which 
 means working at cross-purposes as usual, waste of 
 work and materials as usual, restriction of output as 
 usual, unemployment as usual, labor quarrels as 
 usual, competitive selling as usual, mendacious ad- 
 vertising as usual, waste of superfluities as usual by 
 the kept classes, and privation as usual for the com- 
 mon man. All of which may conceivably be put up 
 with by this people " lest a worse evil befall." All 
 this runs blamelessly in under the rule of Live and 
 Let Live as interpreted in the light of those en- 
 lightened principles of self-help that have come 
 down from the eighteenth century and that go to 
 make up the established scheme of law and order, 
 although it does not meet the needs of the same rule 
 as it would be enforced by the exigencies of the new 
 order in industry. 
 
 Meanwhile, abroad, the gentlemen of the old 
 school who direct the affairs of the nations are laying 
 down the lines on which peace is to be established 
 and maintained, with a painstaking regard for all 
 those national pretensions and discriminations that 
 have always made for international embroilment, 
 and with an equally painstaking disregard for all 
 those exigencies of the new order that call for a 
 de facto observance of the rule of Live and Let Live. 
 It is notorious beyond need of specification that the 
 new order in industry, even more insistently than 
 any industrial situation that has gone before, calls 
 for a wide and free intercourse in trade and in- 
 dustry, regardless of national frontiers and national 
 jealousies. In this connection a national frontier, 
 as it is commonly made use of in current state-
 
 142 THE VESTED INTERESTS 
 
 craft, is a line of demarkation for working at cross- 
 purposes, for mutual obstruction and distrust. It 
 is only necessary to recall that the erection of a new 
 national frontier across any community which has 
 previously enjoyed the privilege of free intercourse 
 unburdened with customs frontiers will be felt to 
 be a grievous burden; and that the erection of such 
 a line of demarkation for other diplomatic work at 
 mutual cross-purposes is likewise an unmistakable 
 nuisance. 
 
 Yet, in the peace negotiations now going for- 
 ward the gentlemen of the old school to whom the 
 affairs of the nations have been "entrusted" by 
 shrewd management on their own part continue 
 to safeguard all this apparatus of mutual defeat and 
 distrust, and indeed this is the chief or sole object 
 of their solicitude, as it also is the chief or sole ob- 
 ject of those vested interests for whose benefit the 
 diplomatic gentlemen of the old school continue to 
 manage the affairs of the nations. 
 
 The state of the case is plainly to be seen in the 
 proposals of those nationalities that are now coming 
 forward with a new claim to national self-determina- 
 tion. Invariably any examination of the bill of 
 particulars set up by the spokesmen of these pro- 
 posed new national establishments will show that the 
 material point of it all is an endeavor to set up a 
 national apparatus for working at mutual cross- 
 purposes with their neighbors, to add something to 
 the waste and confusion caused by the national dis- 
 criminations already in force, to violate the rule of 
 Live and Let Live at some new point and by some 
 further apparatus of discomfort.
 
 LIVE AND LET LIVE 143 
 
 There are nationalities that get along well enough, 
 to all appearance, without being " nations " in that 
 militant and obstructive fashion that is aimed at in 
 these projected creations of the diplomatic nation- 
 makers. Such are the Welsh and the Scotch, for 
 instance. But it is not the object-lesson of Welsh 
 or Scottish experience that guides the new projects. 
 The nationalities which are now escaping from a 
 rapacious imperialism of the old order are being 
 organized and managed by the safe and sane gentle- 
 men of the old school, who have got their notions 
 of safety and sanity from the diplomatic intrigue 
 of that outworn imperialism out of which these op- 
 pressed nationalities aim to escape. And these 
 gentlemen of the old school are making no move in 
 the direction of tolerance and good will as how 
 should they when all their conceptions of what is 
 right and expedient are the diplomatic preconcep- 
 tions of the old regime. They, being gentlemen of 
 the old school, will have none of that amicable and 
 unassuming nationality which contents the Welsh and 
 the Scotch who have tried out this matter and have in 
 the end come to hold fast only so much of their 
 national pretensions as will do no material harm. 
 What is aimed at is not a disallowance of bootless 
 national jealousies, but only a shift from an intoler- 
 able imperialism on a large scale to an ersatz-im- 
 perialism drawn on a smaller scale, conducted on 
 the same general lines of competitive diplomacy and 
 serving interests of the same general kind vested 
 interests of business or of privilege. 
 
 The projected new nations are not patterned on 
 the Welsh or the Scottish model, but for all that
 
 144 THE VESTED INTERESTS 
 
 there is nothing novel in their design; and how 
 should there be when they are the offspring of the 
 imagination of these safe and sane gentlemen of 
 the old school fertilised with the ancient conceptions 
 of imperialistic diplomacy and national prestige? 
 In effect it is all drawn to the scale and pattern al- 
 ready made notorious by the Balkan states. It 
 should also be safe to presume that the place and 
 value of these newly emerging nations in the comity 
 of peoples under the prospective regime of pro- 
 visional peace will be something not notably different 
 from what the Balkan states have habitually placed 
 on view; which may be deprecated by many well- 
 meaning persons, but which is scarcely to be undone 
 by well-wishing. The chances of war and politics 
 have thrown the fortunes of these projected new 
 nations into the hands of these politic gentlemen of 
 the old school, and by force of inveterate habit these 
 very practical persons are unable to conceive that 
 anything else than a Balkan state is fit to take the 
 place of that imperial rule that has now fallen into 
 decay. So Balkan-state national establishments ap- 
 pear to be the best there is in prospect in the new 
 world of safe democracy. 
 
 So true is this, that even in those instances, such 
 as the Finns and other fragments of the Russian im- 
 perial dominions, where a newly emerging nation has 
 set out to go on its way without taking pains to 
 safeguard the grievances of the old order, even in 
 these instances that should seem to concern no one 
 but themselves, the gentlemen of the old school who 
 guard the political institutions of the old order in 
 the world at large find it impossible to keep their
 
 LIVE AND LET LIVE 145 
 
 hands off and to let these adventurous pilgrims of 
 hope go about their own business in their own way. 
 Self-determination proves to be insufferable if it 
 partakes of the new order rather than of the old, 
 at least so long as the safe and sane gentlemen of 
 the old school can hinder it by any means at their 
 command. It is felt that the vested interests which 
 underlie the gentlemen of the old school would not 
 be sufficiently secure in the keeping of these unshorn 
 and unshaven pilgrims of hope, and the doubt may 
 be well taken. So that, within the intellectual hori- 
 zon of the practical statesmen, the only safe, sane, 
 and profitable manner of national establishment and 
 national policy for these newcomers is something 
 after the familiar fashion of the Balkan states; and 
 it may also be admitted quite broadly that these 
 newly arriving peoples commonly are content to seek 
 their national fortunes along precisely these Balkan- 
 state lines; although the Finns and their like are per- 
 haps to be counted as an unruly exception to the rule. 
 These Balkan states, whose spirit, aims, and ways 
 are so admirable in the eyes of the gentlemanly 
 keepers of the old political and economic order, are 
 simply a case of imperialism in the raw. They are 
 all and several still in the pickpocket stage of dynas- 
 tic statemaking, comparable with the state of Prus- 
 sia before Frederick the Great Pickpocket came to 
 the throne. And now, with much sage counsel from 
 the safe and sane statesmen of the status quo ante, 
 Czechs, Slovaks, Slovenes, Ruthenians, Ukrainians, 
 Croats, Poles and Polaks are breathlessly elbowing 
 their way into line with these minuscular Michiavel- 
 lians. Quite unchastened by their age-long experi-
 
 146 THE VESTED INTERESTS 
 
 ence in adversity they are all alike clamoring for 
 national establishments stocked up with all the 
 time-tried contrivances for discomfort and defeat. 
 With one hand they are making frantic gestures of 
 distress for an " outlet to the sea " by means of 
 which to escape insufferable obstruction of their over- 
 seas trade by their nationally minded neighbors, 
 while with the other hand they are feverishly at 
 work to contrive a customs frontier of their own, to- 
 gether with other standard devices for obstructing 
 their neighbors' trade and their own, so soon as they 
 shall have any trade to obstruct. Such is the force 
 of habit and tradition. In other words, these peo- 
 ples are aiming to become self-determining nations 
 in good standing. 
 
 And all the while it is plain to all men that a 
 national " outlet to the sea " has no meaning in time 
 of peace and in the absence of national governments 
 working at cross-purposes. Which comes near to 
 saying that the sole material object of these new 
 projects in nation-making is to work at cross-pur- 
 poses with their neighbors across the new-found 
 national frontiers. So also it is plain that this mu- 
 tual working at cross-purposes between the nations 
 hinders the keeping of the peace, even when it is all 
 mitigated with all the approved apparatus of dip- 
 lomatic make-believe, compromise, and intrigue. 
 Just as it is plain that the peace is not to be kept by 
 use of armaments, but all the while national arma- 
 ments are also included as an indispensable adjunct 
 of national life, in all the projects of these new na- 
 tions of the Balkan pattern. The right to carry 
 arms is an inalienable right of national self-deter-
 
 LIVE AND LET LIVE 147 
 
 mination and an indispensable means of self-help, 
 as understood by these nation-makers of the old 
 school. So also it is plain that national pretensions 
 in the field of foreign trade and investment, and all 
 the diversified expedients for furthering and pro- 
 tecting the profitable enterprise of the vested inter- 
 ests in foreign parts, run consistently at cross-pur- 
 poses with the keeping of the peace. 
 
 And all the while the rule of Live and Let Live, 
 as it works out within the framework of the new 
 industrial order, will not tolerate these things. But 
 the rule of Live and Let Live, which embodies the 
 world's hope of peace on earth and a practicable 
 modicum of good will among men, is not of the 
 essence of that time-worn statesmanship which is 
 now busily making the world safe for the vested 
 interests. Neglect and disallowance of those things 
 that make for embroilment does not enter into the 
 counsels of the nation-makers or of those stupendous 
 figures of veiled statecraft that now move in the 
 background and are shaping the destinies of these 
 and other nations with a view to the status quo ante. 
 
 All these peoples that now hope to be nations have 
 long been nationalities. A nation is an organisation 
 for collective offence and defence, in peace and war, 
 essentially based on hate and fear of other na- 
 tions; a nationality is a cultural group, bound to- 
 gether by home-bred affinities of language, tradition, 
 use and wont, and commonly also by a supposed 
 community race, essentially based on sympathies 
 and sentiments of self-complacency within itself. 
 The Welsh and the Scotch are nationalities, more
 
 148 THE VESTED INTERESTS 
 
 or less well defined, although they are not nations 
 in the ordinary meaning of the word; so also are the 
 Irish, with a difference, and such others as the Finns 
 and the Armenians. The American republic is a 
 nation, but not a nationality in any full measure. 
 The Welsh and the Scotch have learned the wisdom 
 of Live and Let Live, within the peace of the Em- 
 pire, and they are not moving to break bounds and 
 set up a national integrity after the Balkan pattern. 
 The case of the Irish is peculiar; at least so they 
 say. They, that is to say the Irish by sentiment 
 rather than by domicile, the Irish people as con- 
 trasted with the vested interests of Ulster, of the 
 landlords, of the Church, and of the bureaucracy, 
 these Irish have long been a nationality and are now 
 mobilising all their force to set up a Balkan state, 
 autonomous and defensible, within the formal 
 bounds of the Empire or without. Their case is 
 peculiar and instructive. It throws a light on the 
 margin of tolerance, of what the traffic will bear, 
 beyond which an increased pressure on a subject 
 population will bring no added profit to the vested 
 interests for whose benefit the pressure is brought 
 to bear. It is a case of the Common Man hard 
 ridden in due legal form by the vested interests of 
 the Island, and of the neighboring island, which 
 are duly backed by an alien and biased bureaucracy 
 aided and abetted by the priestly pickpockets of the 
 poor. So caught in this way between the devil and 
 the deep sea, it is small wonder if they have chosen 
 in the end to follow counsels of desperation and are 
 moving to throw their lot into the deep sea of na- 
 tional self-help and international intrigue. They
 
 LIVE AND LET LIVE 149 
 
 have reached the point where they have ceased to 
 say: "It might have been worse." The case of 
 the Finns, Jews, and Armenians is not greatly differ- 
 ent in general effect. 
 
 It is easy to fall into a state of perturbation about 
 the evil case of the submerged, exploited, and op- 
 pressed minor nationalities; and it is not unusual to 
 jump to the conclusion that national self-determina- 
 tion will surely mend their evil case. National self- 
 determination and national integrity are words to 
 conjure with, and there is no denying that very sub- 
 stantial results have been known to follow from 
 such conjuring. But self-determination is not a 
 sovereign remedy, particularly not as regards the 
 material conditions of life for the common man, for 
 that somewhat more than nine-tenths of the popula- 
 tion who always finally have to bear the cost of any 
 national establishment. It has been tried, and the 
 point is left in doubt. So the case of Belgium or of 
 Serbia during the past four years has been scarcely 
 less evil than that of the Armenians or the Poles. 
 Belgium and Serbia were nations, in due form, very 
 much after the pattern aimed at in the new pro- 
 jected nations already spoken of, whereas the Ar- 
 menians and the Poles have been subject minor na- 
 tionalities. Belgium, Serbia, and Poland have been 
 subject to the ravages of an imperial power which 
 claims rank as a civilised people, whereas the Ar- 
 menians have been manhandled by the Turks. So, 
 again, the Irish are a subject minor nationality, 
 whereas the Roumanians are a nation in due form. 
 In fact the Roumanians are just such a Balkan state 
 as the Irish aspire to become. But no doubt the
 
 150 THE VESTED INTERESTS 
 
 common man is appreciably worse off in his material 
 circumstances in Roumania than in Ireland. Japan, 
 too, is not only a self-determining nation with a full 
 charge of national integrity, but it is a Great Power; 
 yet the common man the somewhat more than 
 nine-tenths of the population is doubtless worse 
 off in point of hard usage and privation in Japan 
 than in Ireland. 
 
 In further illustration of this doubt and perplex- 
 ity with regard to the material value of national 
 self-determination, the case of the three Scandinavian 
 countries may be worth citing. They are all and 
 several self-determining nations, in that Pickwickian 
 sense in which any country which is not a Great 
 Power may be self-determining in the twentieth cen- 
 tury. But they differ in size, population, wealth, 
 power, and political consequence. In these respects 
 the sequence runs: Sweden, Denmark, Norway, the 
 latter being the smallest, poorest, least self-determin- 
 ing, and in point of self-determining nationalism al- 
 together the most spectacularly foolish of the lot. 
 But so far as concerns the material conditions of life 
 for the common man, they are unmistakably the most 
 favorable, or the most nearly tolerable, in Norway, 
 and the least so in Sweden. The upshot of evidence 
 from these, and from other instances that might be 
 cited, is to leave the point in doubt. It is not evi- 
 dent that the common man has anything to gain by 
 national self-determination, so far as regards his 
 material conditions of life; nor does it appear, on 
 the evidence of these instances, that he has much to 
 lose by that means. 
 
 These Scandinavians differ from the Balkan states
 
 LIVE AND LET LIVE 151 
 
 in that they perforce have no imperialistic ambitions. 
 There may of course be a question on this head so 
 far as concerns the frame of mind of the royal es- 
 tablishment in the greater one of the Scandinavian 
 kingdoms; there is not much that is worth saying 
 about that matter, and the less that is said, the less 
 annoyance. It is a matter of no significance, any- 
 way. The Scandinavians are in effect not imperial- 
 istic, perforce. Which means that in their interna- 
 tional relations they formally adhere to the rule of 
 Live and Let Live. Not so in their domestic policy, 
 however. They have all endowed themselves with 
 all the encumbrances of national pretensions and 
 discrimination which their circumstances will admit. 
 Apart from a court and church which foot up to 
 nothing more comfortable than a gratuitous bill of 
 expense, they are also content to carry the burden of 
 a national armament, a protective tariff, a national 
 consular service, and a diplomatic service which 
 takes care of a moderately burdensome series of 
 treaty agreements governing the trade relations of 
 the Scandinavian business community; all designed 
 for the benefit of the vested interests and the kept 
 classes of the nation, and all at the cost of the com- 
 mon man. 
 
 The case of these relatively free, relatively unas- 
 suming, and relatively equitable national establish- 
 ments is also instructive. They come as near the 
 rule of Live and Let Live as any national establish- 
 ment well can and still remain a national establish- 
 ment actuated by notions of competitive self-help. 
 But all the while the national administration runs 
 along, with nothing better to show to any impar-
 
 152 THE VESTED INTERESTS 
 
 tial scrutiny than a considerable fiscal burden and a 
 moderate volume of hindrance to the country's indus- 
 try, together with some incidental benefit to the vested 
 interests and the kept classes at the cost of the under- 
 lying community. These Scandinavians occupy a pe- 
 culiar position in the industrial world. They are 
 each and several too small to make up anything like 
 a self-contained industrial community, even under 
 the most unreserved pressure of national exclusive- 
 ness. Their industries necessarily are part and par- 
 cel of the industrial system at large, with which they 
 are bound in relations of give and take at every 
 point. Yet they are content to carry a customs tar- 
 iff of fairly grotesque dimensions and a national con- 
 sular service of more grotesque dimensions still. 
 This situation is heightened by their relatively sterile 
 soil, their somewhat special and narrow range of nat- 
 ural resources, and their high latitude, which pre- 
 cludes any home growth of many of the indispensa- 
 ble materials of industry under the new order. Yet 
 they are content to carry their customs tariff, their 
 special commercial treaties, and their consular serv- 
 ice for the benefit of their vested interests. 
 
 It should seem that this elaborate superfluity of 
 national outlay and obstruction should work great 
 hardship to the underlying community whose in- 
 dustry is called on to carry this burden of lag, leak, 
 and friction. And doubtless the burden is suffi- 
 ciently real. It amounts, of course, to the nation's 
 working at cross-purposes with itself, for the benefit 
 of those special interests that stand to gain a little 
 something by it all. But in this as in other works 
 of sabotage there are compensating effects, and these
 
 LIVE AND LET LIVE 153 
 
 should not be overlooked; particularly since the case 
 is fairly typical of what commonly happens. The 
 waste and sabotage of the national establishment 
 and its obstructive policy works no intolerable hard- 
 ship, because it all runs its course and eats its fill 
 within that margin of sabotage and wasteful con- 
 sumption that would have to be taken care of by 
 some other agency in the absence of this one. That 
 is to say, something like the same volume of sabot- 
 age and waste is indispensable to the prosperity of 
 business under the conditions of the new order, so 
 long as business and industry are managed under the 
 conditions imposed by the price system. By one 
 means or another prices must be maintained at a 
 profitable level for reasons of business; therefore the 
 output must be restricted to a reasonable rate and 
 volume, and wasteful consumption must be provided 
 for, on pain of a failing market. And all this may 
 as well be taken care of by use of a princely court, 
 an otiose church, a picturesque army, a well-fed dip- 
 lomatic and consular service, and a customs frontier. 
 In the absence of all this national apparatus of sa- 
 botage substantially the same results would have to 
 be got at by the less seemly means of a furtive con- 
 spiracy in restraint of trade among the vested inter- 
 ests. There is always something to be said for the 
 national integrity. 
 
 The case of these Scandinavian nations, taken in 
 connection and comparison with what is to be seen 
 elsewhere, appears to say that a national establish- 
 ment which has no pretensions to power and no im- 
 perialistic ambitions is preferable, in point of econ- 
 omy and peaceable behavior, to an establishment
 
 154 THE VESTED INTERESTS 
 
 which carries these attributes of self-determination 
 and self-help. The more nearly the national in- 
 tegrity and self-determination approaches to make- 
 believe the less mischief is it likely to work at home 
 and the more nearly will it be compatible with the 
 rule of Live and Let Live in dealing with its neigh- 
 bors. And the further implication is plain without 
 argument, that the most beneficent change that can 
 conceivably overtake any national establishment 
 would be to let it fall into " innocuous desuetude." 
 Apparently, the less of it the better, with no appar- 
 ent limit short of the vanishing point. 
 
 Such appears to be the object-lesson enforced by 
 recent and current events, in so far as concerns the 
 material fortunes of the underlying community at 
 large as well as the keeping of the peace. But it 
 does not therefore follow that all men and classes 
 will have the same interest in so neutralising the 
 nation's powers and disallowing the national pre- 
 tensions. The existing nations are not of a homo- 
 geneous make-up within themselves perhaps less 
 so in proportion as they have progressively come un- 
 der the rule of the new order in industry arid in busi- 
 ness. There is an increasingly evident cleavage of 
 interest between industry and business, or between 
 production and ownership, or between tangible per- 
 formance and free income, one phrase may serve 
 as well as another, and neither is quite satisfactory to. 
 mark the contrast of interest between the common 
 man on the one hand and the vested interests and 
 kept classes on the other hand. But it should be' 
 sufficiently plain that the national establishment and 
 its control of affairs has a value for the vested in-
 
 LIVE AND LET LIVE 155 
 
 terests different from what it has for the underlying 
 community. 
 
 Quite plainly the new order in industry has no 
 use or place for national discrimination or national 
 pretensions of any kind; and quite plainly such a 
 phrase as " national integrity " has no shadow of 
 meaning for this new industrial order which over- 
 runs national frontiers and overcomes national dis- 
 crimination as best it can, in all directions and all 
 the time. For industry as carried on under the new 
 order, the overcoming of national discrimination is 
 part of the ordinary day's work. But it is otherwise 
 with the new order of business enterprise, large- 
 scale, corporate, resting on intangible assets, and 
 turning on free income which flows from managerial 
 sabotage. The business community has urgent need 
 of an efficient national establishment both at home 
 and abroad. A settled government, duly equipped 
 with national pretensions, and with legal and mili- 
 tary power to maintain the sacredness of contracts 
 at home and to enforce the claims of its business men 
 abroad, such an establishment is invaluable for the 
 conduct of business, though its industrial value may 
 not unusually be less than nothing. 
 
 Industry is a matter of tangible performance in 
 the way of producing goods and services. And in 
 this connection it is well to recall that a vested in- 
 terest is a prescriptive right to get something for 
 nothing. Now, any project of reconstruction, the 
 scope and method of which are governed by consid- 
 erations of tangible performance, is likely to allow 
 only a subsidiary consideration or something less to 
 the legitimate claims of the vested interests, whether
 
 156 THE VESTED INTERESTS 
 
 they are vested interests of business or of privilege. 
 It is more than probable that in such a case national 
 pretensions in the way of preferential concessions in 
 commerce and investment will be allowed to fall into 
 neglect, so far as to lose all value to any vested in- 
 terest whose fortunes they touch. These things have 
 no effect in the way of net tangible performance. 
 They only afford ground for preferential pecuniary 
 rights, always at the cost of someone else; but they 
 are of the essence of things in that pecuniary order 
 within which the vested interests of business live 
 and move. 1 So also such a matter-of-fact project of 
 reconstruction will be likely materially to revise out- 
 standing credit obligations, including corporation 
 securities, or perhaps even bluntly to disallow claims 
 of this character to free income on the part of bene- 
 ficiaries who can show no claim on grounds of cur- 
 rent tangible performance. All of which is inimical 
 to the best good of the vested interests and the kept 
 classes. 
 
 Reconstruction which partakes of this character 
 in any sensible degree will necessarily be viewed with 
 the liveliest apprehension by the gentlemanly states- 
 men of the old school, by the kept classes, and by the 
 captains of finance. It will be deplored as a sub- 
 version of the economic order, a destruction of the 
 country's wealth, a disorganisation of industry, and 
 a sure way to poverty, bloodshed, and pestilence. 
 In point of fact, of course, what such a project may 
 be counted on to subvert is that dominion of owner- 
 ship by which the vested interests control and retard 
 the rate and volume of production. The destruction 
 of wealth in such a case will touch, directly, only the
 
 LIVE AND LET LIVE 157 
 
 value of the securities, not the material objects to 
 which these securities have given title of ownership; 
 it would be a disallowance of ownership, not a de- 
 struction of useful goods. Nor need any disorgani- 
 sation or disability of productive industry follow 
 from such a move; indeed, the apprehended cancel- 
 ment of the claims to income covered by negotiable 
 securities would by that much cancel the fixed over- 
 head charges resting on industrial enterprise, and so 
 further production by that much. But for those 
 persons and classes whose keep is drawn from pre- 
 scriptive rights of ownership or of privilege the con- 
 sequences of such a shifting of ground from vested 
 interest to tangible performance would doubtless be 
 deplorable. In short, "Bolshevism is a menace"; 
 and the wayfaring man out of Armenia will be likely 
 to ask: A menace to whom?
 
 VIII 
 
 THE VESTED INTERESTS AND THE 
 COMMON MAN 
 
 IN the eighteenth century certain principles of en- 
 lightened common sense were thrown into formal 
 shape and adopted by the civilised peoples of that 
 time to govern the system of law and order, use 
 and wont, under which they chose to live. So far 
 as concerns economic relations the principles which 
 so became incorporated into the system of civilised 
 law and custom at that time were the principles of 
 equal opportunity, self-determination, and self-help. 
 Chief among the specific rights by which this civil- 
 ised scheme of equal opportunity and self-help were 
 to be safeguarded were the rights of free contract 
 and security of property. These make up the sub- 
 stantial core of that system of principles which is 
 called the modern point of view, in so far as con- 
 cerns trade, industry, investment, credit obligations, 
 and whatever else may properly be spoken of as 
 economic institutions. And these still stand over 
 today, paramount among the inalienable rights 
 of all free citizens in all free countries; they are 
 the groundwork of the economic system as it runs 
 today, and this existing system can undergo no ma- 
 terial change of character so long as these paramount 
 rights of civilised men continue to be inalienable. 
 
 158
 
 THE COMMON MAN 159 
 
 Any move to set these rights aside would be subver- 
 sive of the modern economic order; whereas no re- 
 vision or alteration of established rights and usages 
 will amount to a revolutionary move, so long as it 
 does not disallow these paramount economic rights. 
 
 When the constituent principles of the modern 
 point of view were accepted and the modern scheme 
 of civilised life was therewith endorsed by the civ- 
 ilised peoples, in the eighteenth century, these rights 
 of self-direction and self-help were counted on as 
 the particular and sufficient safeguard of equity 
 and industry in any civilised country. They were 
 counted on to establish equality among men in all 
 their economic relations and to maintain the indus- 
 trial system at the highest practicable degree of pro- 
 ductive efficiency. They were counted on to give 
 enduring effect to the rule of Live and Let Live. 
 And such is still the value ascribed to these rights 
 in the esteem of modern men. The maintenance 
 of law and order still means primarily and chiefly 
 the maintenance of these rights of ownership and pe- 
 cuniary obligation. 
 
 But things have changed since that time in such 
 a way that the rule of Live and Let Live is no 
 longer completely safeguarded by maintaining these 
 rights in the shape given them in the eighteenth cen- 
 tury, or at least there are large sections of the 
 people in these civilised countries who are beginning 
 to think so, which is just as good for practical pur- 
 poses. Things have changed in such a way since 
 that time, that the ownership of property in large 
 holdings now controls the nation's industry, and 
 therefore it controls the conditions of life for those
 
 160 THE VESTED INTERESTS 
 
 who are or wish to be engaged in industry; at the 
 same time that the same ownership of large wealth 
 controls the markets and thereby controls the con- 
 ditions of life for those who have to resort to the 
 markets to sell or to buy. In other words, it has 
 come to pass with the change of circumstances that 
 the rule of Live and Let Live now waits on the dis- 
 cretion of the owners of large wealth. In fact, those 
 thoughtful men in the eighteenth century who made 
 so much of these constituent principles of the mod- 
 ern point of view did not contemplate anything like 
 the system of large wealth, large-scale industry, and 
 large-scale commerce and credit which prevails to- 
 day. They did not foresee the new order in in- 
 dustry and business, and the system of rights and 
 obligations which they installed, therefore, made 
 no provision for the new order of things that has 
 come on since their time. 
 
 The new order has brought the machine industry, 
 corporation finance, big business, and the world mar- 
 ket. Under this new order in business and indus- 
 try, business controls industry. Invested wealth in 
 large holdings controls the country's industrial sys- 
 tem, directly by ownership of the plant, as in the 
 mechanical industries, or indirectly through the mar- 
 ket, as in farming. So that the population of these 
 civilised countries now falls into two main classes: 
 those who own wealth invested in large holdings 
 and who thereby control the conditions of life for 
 the rest; and those who do not own wealth in suffi- 
 ciently large holdings, and whose conditions of life 
 are therefore controlled by these others. It is a di- 
 vision, not between those who have something and
 
 THE COMMON MAN 161 
 
 those who have nothing as many socialists would 
 be inclined to describe it but between those who 
 own wealth enough to make it count, and those who 
 do not. 
 
 And all the while the scale on which the control 
 of industry and the market is exercised goes on in- 
 creasing; from which it follows that what was large 
 enough for assured independence yesterday is no 
 longer large enough for tomorrow. Seen from an- 
 other direction, it is at the same time a division be- 
 tween those who live on free income and those who 
 live by work, a division between the kept classes 
 and the underlying community from which their 
 keep is drawn. It is sometimes spoken of in this 
 bearing particularly by certain socialists as a 
 division between those who do no useful work and 
 those who do; but this would be a hasty generalisa- 
 tion, since not a few of those persons who have no 
 assured free income also do no work that is of ma- 
 terial use, as e. g., menial servants. But the gravest 
 significance of this cleavage that so runs through the 
 population of the advanced industrial countries lies 
 in the fact that it is a division between the vested in- 
 terests and the common man. It is a division be- 
 tween those who control the conditions of work and 
 the rate and volume of output and to whom the net 
 output of industry goes as free income, on the one 
 hand, and those others who have the work to do and 
 to whom a livelihood is allowed by these persons in 
 control, on the other hand. In point of numbers it 
 is a very uneven division, of course. 
 
 A vested interest is a legitimate right to get some- 
 thing for nothing, usually a prescriptive right to an
 
 1 62 THE VESTED INTERESTS 
 
 income which is secured by controlling the traffic at 
 one point or another. The owners of such a pre- 
 scriptive right are also spoken of as a vested in- 
 terest Such persons make up what are called the 
 kept classes. But the kept classes also comprise 
 many persons who are entitled to a free income on 
 other grounds than their ownership and control of 
 industry or the market, as, e. g., landlords and other 
 persons classed as " gentry," the clergy, the Crown 
 where there is a Crown and its agents, civil 
 and military. Contrasted with these classes who 
 make up the vested interests, and who derive an in- 
 come from the established order of ownership and 
 privilege, is the common man. He is common in 
 the respect that he is not vested with such a pre- 
 scriptive right to get something for nothing. And 
 he is called common because such is the common lot 
 of men under the new order of business and indus- 
 try; and such will continue (increasingly) to be the 
 common lot so long as the enlightened principles of 
 secure ownership and self-help handed down from 
 the eighteenth century continue to rule human affairs 
 by help of the new order of industry. 
 
 The kept classes, whose free income is secured to 
 them by the legitimate rights of the vested interests, 
 are less numerous than the common man less nu- 
 merous by some ninety-five per cent or thereabouts 
 and less serviceable to the community at large in 
 perhaps the same proportion, so far as regards any 
 conceivable use for any material purpose. In this 
 sense they are uncommon. But it is not usual to 
 speak of the kept classes as the uncommon classes, 
 inasmuch they personally differ from the common run
 
 THE COMMON MAN 163 
 
 of mankind in no sensible respect. It is more usual 
 to. speak of them as "the better classes," because 
 they are in better circumstances and are better able 
 to do as they like. Their place in the economic 
 scheme of the civilised world is to consume the net 
 product of the country's industry over cost, and so 
 prevent a glut of the market. 
 
 But this broad distinction between the kept classes 
 and their vested interests on the one side and the 
 common man on the other side is by no means hard 
 and fast. There are many doubtful cases, and a 
 shifting across the line occurs now and again, but 
 the broad distinction is not doubtful for all that. 
 The great distinguishing mark of the common man 
 is that he is helpless within the rules of the game as 
 it is played in the twentieth century under the en- 
 lightened principles of the eighteenth century. 
 
 There are all degrees of this helplessness that 
 characterises the common lot. So much so that cer- 
 tain classes, professions, and occupations such as 
 the clergy, the military, the courts, police, and legal 
 profession are perhaps to be classed as belonging 
 primarily with the vested interests, although they 
 can scarcely be counted as vested interests in their 
 own right, but rather as outlying and subsidiary 
 vested interests whose tenure is conditioned on their 
 serving the purposes of those principal and self-direct- 
 ing vested interests whose tenure rests immediately 
 on large holdings of invested wealth. The income 
 which goes to these subsidiary or dependent vested 
 interests is of the nature of free income, in so far 
 that it is drawn from the yearly product of the un-
 
 1 64 THE VESTED INTERESTS 
 
 derlying community; but in another sense it is 
 scarcely to be counted as " free " income, in that its 
 continuance depends on the good will of those con- 
 trolling vested interests whose power rests on the 
 ownership of large invested wealth. Still it will be 
 found that on any test vote these subsidiary or aux- 
 iliary vested interests uniformly range themselves 
 with their superiors in the same class, rather than 
 with the common man. By sentiment and habitual 
 outlook they belong with the kept classes, in that 
 they are staunch defenders of that established order 
 of law and custom which secures the great vested in- 
 terests in power and insures the free income of the 
 kept classes. In any twofold division of the popu- 
 lation these are therefore, on the whole, to be ranged 
 on the side of the old order, the vested interests, and 
 the kept classes, both in sentiment and as regards the 
 circumstances which condition their life and comfort. 
 Beyond these, whose life-interests are, after all, 
 closely bound up with the kept classes, there are 
 other vested interests of a more doubtful and per- 
 plexing kind; classes and occupations which would 
 seem to belong with the common lot, but which range 
 themselves at least provisionally with the vested in- 
 terests and can scarcely be denied standing as such. 
 Such, as an illustrative instance, is the A. F. of L. 
 Not that the constituency of the A. F. of L. can 
 be said to live on free income, and is therefore to be 
 counted in with the kept classes the only reserva- 
 tion on that head would conceivably be the corps of 
 officials in the A. F. of L., who dominate the policies 
 of that organisation and exercise a prescriptive right 
 to dispose of its forces, at the same time that they
 
 THE COMMON MAN 165 
 
 habitually come in for an income drawn from the 
 underlying organisation. The rank and file assur- 
 edly are not of the kept classes, nor do they visibly 
 come in for a free income. Yet they stand on the 
 defensive in maintaining a vested interest in the per- 
 rogatives and perquisites of their organisation. 
 They are apparently moved by a feeling that so long 
 as the established arrangements are maintained they 
 will come in for a little something over and above 
 what would come to them if they were to make com- 
 mon cause with the undistinguished common lot. In 
 other words, they have a vested interest in a narrow 
 margin of preference over and above what goes to 
 the common man. But this narrow margin of net 
 gain over the common lot, this vested right to get 
 a narrow margin of something for nothing, has hith- 
 erto been sufficient to shape their sentiments and out- 
 look in such a way as, in effect, to keep them loyal to 
 the large business interests with whom they nego- 
 tiate for this narrow margin of preference. As is 
 true of the vested interests in business, so in the case 
 of the A. F. of L., the ordinary ways and means of 
 enforcing their claim to a little something over and 
 above is the use of a reasonable sabotage, in the 
 way of restriction, retardation, and unemployment. 
 Yet the constituency of the A. F. of L., taken man 
 for man, is not readily to be distinguished from the 
 common sort so far as regards their conditions of 
 life. The spirit of vested interest which animates 
 them may, in fact, be nothing more to the point than 
 an aimless survival. 
 
 Farther along the same line, larger and even more 
 perplexing, is the case of the American farmers, who
 
 1 66 THE VESTED INTERESTS 
 
 also are in the habit of ranging themselves, on the 
 whole, with the vested interests rather than with the 
 common man. By sentiment and outlook the farm- 
 ers are, commonly, steady votaries of that established 
 order which enables the vested interests to do a " big 
 business " at their expense. Such is the tradition 
 which still binds the farmers, however unequivocally 
 their material circumstances under the new order of 
 business and industry might seem to drive the other 
 way. In the ordinary case the American farmer is 
 now as helpless to control his own conditions of life 
 as the commonest of the common run. He is caught 
 between the vested interests who buy cheap and the 
 vested interests who sell dear, and it is for him to 
 take or leave what is offered, but ordinarily to 
 take it, on pain of " getting left." 
 
 There is still afloat among the rural population 
 a slow-dying tradition of the " Independent Far- 
 mer," who is reputed once upon a time to have lived 
 his own life and done his own work as good him 
 seemed, and who was content to let the world wag. 
 But all that has gone by now as completely as the 
 other things that are told in tales which begin with 
 " Once upon a time." It has gone by into the same 
 waste of regrets with the like independence which 
 the country-town retailer is believed to have enjoyed 
 once upon a time. But the country-town retailer, 
 too, still stands stiffly on the vested rights of the 
 trade and of the town; he is by sentiment and habit- 
 ual outlook a business man who guides, or would 
 like to guide, his enterprise by the principle of charg- 
 ing what the traffic will bear, of buying cheap and 
 selling dear. He still manages to sell dear, but he
 
 THE COMMON MAN 167 
 
 does not commonly buy cheap, except what he buys 
 of the farmer, for the massive vested interests in 
 the background now decide for him, in the main, 
 how much his traffic will bear. He is not placed so 
 very differently from the farmer in this respect, ex- 
 cept that, being a middleman, he can in some appre- 
 ciable degree shift the burden to a third party. The 
 third party in the case is the farmer; the massive 
 vested interests who move in the background of the 
 market do not lend themselves to that purpose. 
 
 Except for the increasing number of tenant farm- 
 ers, the American farmers of the large agricultural 
 sections still are owners who cultivate their own 
 ground. They are owners of property, who might 
 be said to have an investment in their own farms, 
 and therefore they fancy that they have a vested in- 
 terest in the farm and its earning-capacity. They 
 have carried over out of the past and its old order of 
 things a delusion to the effect that they have some- 
 thing to lose. It is quite a natural and rather an 
 engaging delusion, since, barring incumbrances, they 
 are seized of a good and valid title at law, to a very 
 tangible and useful form of property. And by due 
 provision of law and custom they are quite free to 
 use or abuse their holdings in the land, to buy and 
 sell it and its produce altogether at their own pleas- 
 ure. It is small wonder if the farmers, with the 
 genial traditions of the day before yesterday still 
 running full and free in their sophisticated brains, 
 are given to consider themselves typical holders of a 
 legitimate vested interest of a very substantial kind. 
 In all of which they count without their host; their 
 host, under the new order of business, being those
 
 i68 
 
 massive vested interests that move obscurely in the 
 background of the market, and whose rule of life it 
 is to buy cheap and sell dear. 
 
 In the ordinary case the farmers of the great 
 American farming regions are owners of the land 
 and improvements, except for an increasing propor- 
 tion of tenant farmers. But it is the farmer-owner 
 that is commonly had in mind in speaking of the 
 American farmers as a class. Barring incum- 
 brances, these farmer-owners have a good and valid 
 title to their land and improvements; but their title 
 remains good only so long as the run of the market 
 for what they need and for what they have to sell does 
 not take such a turn that the title will pass by process 
 of liquidation into other hands, as may always hap- 
 pen. And the run of the market which conditions 
 the farmer's work and livelihood has now come to 
 depend on the highly impersonal manoeuvres of 
 those massive interests that move in the background 
 and find a profit in buying cheap and selling dear. 
 In point of law and custom there is, of course, noth- 
 ing to hinder the American farmer from considering 
 himself to be possessed of a vested interest in his 
 farm and its working, if that pleases his fancy. The 
 circumstances which decide what he may do with 
 his farm and its equipment, however, are prescribed 
 for him quite deliberately and quite narrowly by 
 those other vested interests in the background, which 
 are massive enough to regulate the course of things 
 in business and industry at large. He is caught in 
 the system, and he does not govern the set and mo- 
 tions of the system. So that the question of his 
 effectual standing as a vested interest becomes a
 
 THE COMMON MAN 169 
 
 question of fact, not of preference and genial 
 tradition. 
 
 A vested interest is a legitimate right to get some- 
 thing for nothing. The American farmer say, 
 the ordinary farmer of the grain-growing Middle 
 West can be said to be possessed of such a vested 
 interest if he habitually and securely gets some- 
 thing in the way of free income above cost, counting 
 as cost the ordinary rate of wages for work done on 
 the farm plus ordinary returns on the replacement 
 value of the means of production which he employs. 
 Now it is notorious that, except for quite exceptional 
 cases, there are no intangible assets in farming; and 
 intangible assets are the chief and ordinary indica- 
 tion of free income, that is to say, of getting some- 
 thing for nothing. Any concern that can claim no 
 intangible assets, in the way of valuable good-will, 
 monopoly rights, or outstanding corporation securi- 
 ties, has no substantial claim to be rated as a vested 
 interest. What constitutes a valid claim to stand- 
 ing as a vested interest is the assured customary abil- 
 ity to get something more in the way of income than 
 a full equivalent for tangible performance in the 
 way of productive work. 
 
 The returns which these farmers are in the habit 
 of getting from their own work and from the work 
 of their household and hired help do not ordinarily 
 include anything that can be called free or unearned 
 income, unless one should go so far as to declare 
 that income reckoned at ordinary rates on the tangi- 
 ble assets engaged in this industry is to be classed 
 as unearned income, which is not the usual meaning 
 of the expression. It may be that popular opinion
 
 170 THE VESTED INTERESTS 
 
 on these matters will take such a turn some time 
 that men will come to consider that income which is 
 derived from the use of land and equipment is 
 rightly to be counted as unearned income, because it 
 does not correspond to any tangible performance in 
 the way of productive work on the part of the per- 
 son to whom it goes. But for the present that is not 
 the popular sense of the matter, and that is not the 
 meaning of the words in popular usage. For the 
 present, at least, reasonable returns on the replace- 
 ment value of tangible assets are not considered to 
 be unearned income. 
 
 It is true, the habits of thought engendered by the 
 machine system in industry and by the mechanically 
 standardised organisation of daily life under this 
 new order, as well as by the material sciences, are 
 of such a character as would incline the common 
 man to rate all men and things in terms of tangible 
 performance rather than in terms of legal title and 
 ancient usage. And it may well come to pass, in 
 time, that men will consider any income unearned 
 which exceeds a fair return for tangible performance 
 in the way of productive work on the part of the 
 person to whom the income goes. The mechanistic 
 logic of the new order of industry drives in that 
 direction, and it may well be that the frame of mind 
 engendered by this training in matter-of-fact ways 
 of thinking will presently so shape popular sentiment 
 that all income from property, simply on the basis 
 of ownership, will be disallowed, whether the prop- 
 erty is tangible or intangible. All that is a specula- 
 tive question running into the future. It is to be 
 recognised and taken account of that the immutable
 
 THE COMMON MAN 171 
 
 principles of law and equity, in matters of owner- 
 ship and income as well as in other connections, are 
 products of habit, and that habits are always liable 
 to change in response to altered circumstances, and 
 the drift of circumstances is now apparently setting 
 in that direction. But popular sentiment has not 
 yet reached that degree of emancipation from those 
 good old principles of self-help and secure ownership 
 that go to make up the modern (eighteenth-century) 
 point of view in law and custojn. The equity of 
 income derived from the use of tangible property 
 may presently become a moot question; but it is not 
 so today, outside of certain classes in the population 
 whom the law and the courts are endeavoring to 
 discourage. It is the business of the law and the 
 courts to discourage any change of insight or opinion. 
 It appears, therefore, that his conditions of life 
 should throw the American farmer in with the com- 
 mon man who has substantially nothing to lose, be- 
 yond what the vested interests of business can al- 
 ways take over at their own discretion and in their 
 own good time. In point of material fact he has 
 ceased to be a self-directing agent; and self-help 
 has for him come substantially to be a make-believe; 
 although, of course, in point of legal formality he 
 still continues to enjoy all the ancient rights and 
 immunities of secure ownership and self-help. Yet 
 it is no less patent a fact of current history that 
 the American farmer continues, on the whole, to 
 stand fast by those principles of self-help and free 
 bargaining which enable the vested interests to play 
 fast and loose with him and all his works. Such 
 is the force of habit and tradition.
 
 172 THE VESTED INTERESTS 
 
 The reason, or at least the preconception, by force 
 of which the American farmers have been led, in 
 effect, to side with the vested interests rather than 
 with the common man, comes of the fact that the 
 farmers are not only farmers but also owners of 
 speculative real estate. And it is as speculators in 
 land-values that they find themselves on the side of 
 unearned income. As land-owners they aim and 
 confidently hope to get something for nothing in the 
 unearned increase of land-values. But all the while 
 they overlook the fact that the future increase of 
 land-values, on which they pin their hopes, is already 
 discounted in the present price of the land, except 
 for exceptional and fortuitous cases. As is known 
 to all persons who are at all informed on this topic, 
 farmland holdings in the typical American farming 
 regions are overcapitalised, in the sense that the cur- 
 rent market value of these farm-lands is considerably 
 greater than the capitalised value of the" income to 
 be derived from their current use as farmlands. 
 This excess value of the farmlands is a speculative 
 value due to discounting the future increased value 
 which these lands are expected to gain with the fur- 
 ther growth of population and with increasing facil- 
 ities for marketing the farm products of the locality. 
 It is therefore as a land speculator holding his land 
 for a rise, not as a husbandman cultivating the soil 
 for a livelihood, that the prairie farmer, e. g., comes 
 in for an excess value and an overcapitalisation of 
 his holdings. All of which has much in common 
 with the intangible assets of the vested interests, and 
 all of which persuades the prairie farmer that he
 
 THE COMMON MAN 173 
 
 is of a class apart from the common man who has 
 nothing to lose. 
 
 But he can come in for this unearned gain only 
 by the eventual sale of his holdings, not in their cur- 
 rent use as a means of production in farming. As 
 a business man doing a speculative business in farm- 
 lands the American farmer, in a small way, runs true 
 to form and so is entitled to a modest place among 
 that class of substantial citizens who get something 
 for nothing by cornering the supply and " sitting 
 tight." And all the while the massive interests that 
 move obscurely in the background of the market are 
 increasingly in a position, in their own good time, to 
 disallow the farmer just so much of this still-born 
 gain as they may dispassionately consider to be con- 
 venient for their own ends. And so the farmer-spec- 
 ulator of the prairie continues to stand fast by the 
 principles of equity which entitle these vested inter- 
 ests to play fast and loose with him and all his works. 
 
 The facts of the case stand somewhat different 
 as regards the American farmer's gains from his 
 work as a husbandman, or from the use which he 
 makes of his land and stock in farming. His re- 
 turns from his work are notably scant. So much 
 s.o that it is still an open question whether, taken 
 one with another, the American farmer's assets in 
 land and other equipment enable him, one year with 
 another, to earn more than what would count as 
 ordinary wages for the labor which these assets 
 enable him to put into his product. But it is be- 
 yond question that the common run of those Amer- 
 ican farmers who " work their own land " get at
 
 174 THE VESTED INTERESTS 
 
 the best a very modest return for the use of their 
 land and stock, so scant, indeed, that if usage 
 admitted such an expression, it would be fair to 
 say that the farmer, considered as a going concern, 
 should be credited with an appreciable item of " neg- 
 ative intangible assets," such as habitually to reduce 
 the net average return on his total active assets ap- 
 preciably below the ordinary rate of discount. His 
 case, in other words, is the reverse of the typical bus- 
 iness concern of the larger sort, which comes in for 
 a net excess over ordinary rates of discount on its 
 tangible assets, and which is thereby enabled to 
 write into its accounts a certain amount of intangi- 
 ble assets, and so come into line as a vested interest. 
 The farmer, too, is caught in the net of the new or- 
 der; but his occupation does not belong to that new 
 order of business enterprise in which earning-capac- 
 ity habitually outruns the capitalised value of the 
 underlying physical property. 
 
 Evidently the cleavage due to be brought on by 
 the new order in business and industry, between the 
 vested interests and the common man, has not yet 
 fallen into clear lines, at least not in America. The 
 common man does not know himself as such, at least 
 not yet, and the sections of the population which go 
 to make up the common lot as contrasted with the 
 vested interests have not yet learned to make com- 
 mon cause. The American tradition stands in the 
 way. This tradition says that the people of the 
 republic are made up of ungraded masterless men 
 who enjoy all the rights and immunities of self-di- 
 rection, self-help, free bargaining, and equal oppor-
 
 THE COMMON MAN 175 
 
 tunity, quite after the fashion that was sketched into 
 the great constituent documents of the eighteenth 
 century. 
 
 Much doubt and some discontent is afoot. It is 
 becoming increasingly evident that the facts of ev- 
 eryday life under the new order do not fall in with 
 the inherited principles of law and custom; but the 
 farmers, farm laborers, factory hands, mine work- 
 men, lumber hands, and retail tradesmen have not 
 come to anything like a realisation of that new order 
 of economic life which throws them in together on 
 one side of a line of division, on the other side of 
 which stand the vested interests and the kept classes. 
 They have not yet come to realise that all of them 
 together have nothing to lose except such things as 
 the vested interests can quite legally and legitimately 
 deprive them of, with full sanction of law and cus- 
 tom as it runs, so soon and so far as it shall suit 
 the convenience of the vested interests to make such 
 a move. These people of the variegated mass have 
 no safeguard, in fact, against the control of their 
 conditions of life exercised by those massive inter- 
 ests that move obscurely in the background of the 
 market, except such considerations of expediency as 
 may govern the manoeuvres of those massive ones 
 who so move obscurely in the background. That 
 .is to say, the conditions of life for the variegated 
 mass are determined by what the traffic will bear, 
 according to the calculations of self-help which guide 
 the vested interests, all the while that the farmers, 
 workmen, consumers, the common lot, are still ani- 
 mated with the fancy that they have themselves 
 something to say in these premises.
 
 176 THE VESTED INTERESTS 
 
 It is otherwise with the vested interests, on the 
 whole. They take a more perspicuous view of their 
 own case and of the predicament of the common 
 man, the party of the second part. Whereas the 
 variegated mass that makes up the common lot have 
 not hitherto deliberately taken sides together or de- 
 fined their own attitude toward the established sys- 
 tem of law and order and its continuance, and so are 
 neither in the right nor in the wrong as regards this 
 matter, the vested interests and the kept classes, on 
 the other hand, have reached insight and definition 
 of what they need, want, and are entitled to. They 
 have deliberated and chosen their part in the divi- 
 sion, partly by interest and partly by ingrained ha- 
 bitual bent, no doubt, and they are always in the 
 right. They owe their position and the blessings 
 that come of it free income and social preroga- 
 tive to the continued enforcement of these eight- 
 eenth-century principles of law and order under con- 
 ditions created by the twentieth-century state of the 
 industrial arts. Therefore, it is incumbent on them, 
 in point of expediency, to stand strongly for the es- 
 tablished order of inalienable eighteenth-century 
 rights; and they are at the same time in the right, 
 in point of law and morals, in so doing, since what 
 is right in law and morals is always a question of set- 
 tled habit, and settled habit is always a legacy out 
 of the past. To take their own part, therefore, the 
 vested interests and the kept classes have nothing 
 more perplexing to do than simply to follow the 
 leadings of their settled code in all questions of law 
 and order and thereby to fall neatly in with the lead- 
 ing of their own pecuniary advantage, and always
 
 THE COMMON MAN 177 
 
 and on both counts to keep their poise as safe and 
 sound citizens intelligently abiding by the good old 
 principles of right and honest living which safeguard 
 their vested rights. 
 
 The common man is not so fortunate. He can- 
 not effectually take his own part in this difficult con- 
 juncture of circumstances without getting on the 
 wrong side of the established run of law and morals. 
 Unless he is content to go on as the party of the 
 second part in a traffic that is controlled by the mas- 
 sive interests on the footing of what they consider 
 that the traffic will bear, he will find himself in the 
 wrong and may even come in for the comfortless 
 attention of the courts. Whereas if he makes his 
 peace with the established run of law and custom, 
 and so continues to be rated as a good man and true, 
 he will find that his livelihood falls into a dubious 
 and increasingly precarious case. It is not for noth- 
 ing that he is a common man. 
 
 So caught in a quandary, it is small wonder if the 
 common man is somewhat irresponsible and un- 
 steady in his aims and conduct, so far as touches 
 industrial affairs. A pious regard for the received 
 code of right and honest living holds him to a sub- 
 missive quietism, a make-believe of self-help and fair 
 dealings; whereas the material and pecuniary cir- 
 cumstances that condition his livelihood under this 
 new order drive him to fall back on the underlying 
 rule of Live and Let Live, and to revise the estab- 
 lished code of law and custom to such purpose that 
 this underlying rule of life shall be brought into bear- 
 ing in point of fact as well as in point of legal for- 
 mality. And the training to which the hard matter-
 
 178 THE VESTED INTERESTS 
 
 of-fact logic of the machine industry and the mechan- 
 ical organisation of life now subjects him, constantly 
 bends him to a matter-of-fact outlook, to a rating of 
 men and things in terms of tangible performance, 
 and to an ever slighter respect for the traditional 
 principles that have come down from the eighteenth 
 century. The common man is constantly and in- 
 creasingly exposed to the risk of becoming an unde- 
 sirable citizen in the eyes of the votaries of law and 
 order. In other words, vested rights to free income 
 are no longer felt to be secure in case the common 
 man should take over the direction of affairs. 
 
 Such a vested right to free income, that is to say 
 this legitimate right of the kept classes to their keep 
 at the cost of the underlying community, does not 
 fall in with the lines of that mechanistic outlook and 
 mechanistic logic which is forever gaining ground 
 as the new order of industry goes forward. Such 
 free income, which measures neither the investor's 
 personal contribution to the production of goods nor 
 his necessary consumption while engaged in industry, 
 does not fit in with that mechanistic reckoning that 
 runs in terms of tangible performance, and that 
 grows ever increasingly habitual and convincing with 
 every further habituation to the new order of things 
 in the industrial world. Vested perquisites have no 
 place in the new scheme of things; hence the new 
 scheme is a menace. It is true, the well stabilised 
 principles of the eighteenth century still continue to 
 rate the investor as a producer of goods; but it is 
 equally true that such a rating is palpable nonsense 
 according to the mechanistic calculus of the new or- 
 der, brought into bearing by the mechanical industry
 
 THE COMMON MAN 179 
 
 and material science. This may all be an untoward 
 and distasteful turn of circumstances, but there is no 
 gain of tranquillity to be got from ignoring it. 
 
 So it comes about that, increasingly, throughout 
 broad classes in these industrial countries there is 
 coming to be visible a lack of respect and affection 
 for the vested interests, whether of business or of 
 privilege; and it rises to the pitch of distrust and 
 plain disallowance among those peoples on whom the 
 preconceptions of the eighteenth century sit more 
 lightly and loosely. It still is all vague and shifty. 
 So much so that the guardians of law and order are 
 still persuaded that they " have the situation in 
 hand." But the popular feeling of incongruity and 
 uselessness in the current run of law and custom un- 
 der the rule of these timeworn preconceptions is vis- 
 ibly gaining ground and gathering consistency, even 
 in so well ordered a republic as America. A cleav- 
 age of sentiment is beginning to run between the 
 vested interests and the variegated mass of the com- 
 mon lot; and increasingly the common man is grow- 
 ing apathetic, or even impervious, to appeals 
 grounded on these timeworn preconceptions of 
 equity and good usage. 
 
 The fact of such a cleavage, as well as the exist- 
 ence of any ground for it, is painstakingly denied by 
 the spokesmen of the vested interests; and in sup- 
 port of that comfortable delusion they will cite the 
 exemplary fashion in which certain monopolistic 
 labor organisations " stand pat." It is true, such a 
 quasi-vested interest of the A. F. of L., which unbid- 
 den assumes to speak for the common man, can. 
 doubtless be counted on to " stand pat " on that sys-
 
 i8o THE VESTED INTERESTS 
 
 tern of imponderables in which its vested perquisites 
 reside. So also the kept classes, and their stewards 
 among the keepers of law and custom, are inflexibly 
 content to let well enough alone. They can be 
 counted on to see nothing more to the point than a 
 stupidly subversive rapacity in that loosening of the 
 bonds of convention that so makes light of the sacred 
 rights of vested interest. Interested motives may 
 count for something on both sides, but it is also true 
 that the kept classes and the businesslike managers of 
 the vested interests, whose place in the economy of 
 nature it is to make money by conforming to the 
 received law and custom, have not in the same de- 
 gree undergone the shattering discipline of the New 
 Order. They are, therefore, still to be found stand- 
 ing blamelessly on the stable principles of the Mod- 
 ern Point of View. 
 
 But a large fraction of the people in the indus- 
 trial countries is visibly growing uneasy under these 
 principles as they work out under existing circum- 
 stances. So, e. g., it is evident that the common 
 man within the United Kingdom, in so far as the 
 Labor Party is his accredited spokesman, is increas- 
 ingly restive under the state of " things as they are," 
 and it is scarcely less evident that he finds his abid- 
 ing grievance in the Vested Interests and that system 
 of law and custom which cherishes them. And 
 these men, as well as their like in other countries, 
 are still in an unsettled state of advance to positions 
 more definitely at variance with the received law and 
 custom. In some instances, and indeed in more or 
 less massive formation, this movement of dissent
 
 THE COMMON MAN 181 
 
 has already reached the limit of tolerance and has 
 found itself sharply checked by the constituted keep- 
 ers of law and custom. 
 
 It is perhaps not unwarranted to count the I. W. 
 W. as such a vanguard of dissent, in spite of the 
 slight consistency and the exuberance of its move- 
 ments. After all, these and their like, here and in 
 other countries are an element of appreciable weight 
 in the population. They are also increasingly nu- 
 merous, in spite of well-conceived repressive meas- 
 ures, and they appear to grow increasingly sure. And 
 it will not do to lose sight of the presumption that, 
 while they may be gravely in the wrong, they are 
 likely not to be far out of touch with the undistin- 
 guished mass of the common sort who still continue 
 to live within the law. It should seem likely that 
 the peculiar moral and intellectual bent which marks 
 them as " undesirable citizens " will, all the while, 
 be found to run closer to that of the common man 
 than the corresponding bent of the law-abiding bene- 
 ficiaries under the existing system. 
 
 Vaguely, perhaps, and with a picturesque irre- 
 sponsibility, these and their like are talking and 
 thinking at cross-purposes with the principles of free 
 bargain and self-help. There is reason to believe 
 that to their own thinking, when cast in the terms 
 in which they conceive these things, their notions of 
 reasonable human intercourse are not equally fan- 
 tastic and inconclusive. So, there is the dread word, 
 Syndicalism, which is quite properly unintelligible 
 to the kept classes and the adepts of corporation fi- 
 nance, and which has no definable meaning within
 
 1 82 THE VESTED INTERESTS 
 
 the constituent principles of the eighteenth century. 
 But the notion of it seems to come easy, by mere 
 lapse of habit, to these others in whom the discipline 
 of the New Order has begun to displace the precon- 
 ceptions of the eighteenth century. 
 
 Then there are, in this country, the agrarian syn- 
 dicalists, in the shape of the Nonpartisan League, 
 large, loose, animated, and untidy, but sure of itself 
 in its settled disallowance of the Vested Interests, 
 and fast passing the limit of tolerance in its inatten- 
 tion to the timeworn principles of equity. How se- 
 rious is the moral dereliction and the subversive 
 stupidity of these agrarian syndicalists, in the eyes 
 of those who still hold fast to the eighteenth century, 
 may be gathered from the animation of the business 
 community, the commercial clubs, the Rotarians, and 
 the traveling salesmen, in any place where the 
 League raises its untidy head. And as if advisedly 
 to complete the case, these agrarians, as well as their 
 running-mates in the industrial centers and along the 
 open road, are found to be slack in respect of their 
 national spirit. So, at least, it is said by those who 
 are interested to, know. 
 
 It is not that these and their like are ready with 
 " a satisfactory constructive program," such as the 
 people of the uplift require to be shown before they 
 will believe that things are due to change. It is 
 something of the simpler and cruder sort, such as his- 
 tory is full of, to the effect that whenever and so far 
 as the timeworn rules no longer fit the new material 
 circumstances they presently fail to carry conviction 
 as they once did. Such wear and tear of institu-
 
 THE COMMON MAN 183 
 
 tions is unavoidable where circumstances change; 
 and it is through the altered personal equation of 
 those elements of the population which are most di- 
 rectly exposed to the changing circumstances that 
 the wear and tear of institutions may be expected to 
 take effect. To these untidy creatures of the New 
 Order common honesty appears to mean vaguely 
 something else, perhaps something more exacting, 
 than what was " nominated in the bond " at the 
 time when the free bargain and self-help were writ- 
 ten into the moral constitution of Christendom by 
 the handicraft industry and the petty trade. And 
 why should it not ? 
 
 THE END
 
 000675 196 
 
 
 HENRY GOLDMAN 
 "NC BOOKS 
 t-a W TM ST