THE SKETCHER.

Otago Witness, Issue 3489, 25 January 1921, Page 59

THE SKETCHER.

WHAT DOES BUSINESS WANT FROM THE GOVERNMENT? By Cuaki.es M. Schwab, Chairman Bethlehem Steel Corporation. The "crimes ot big business” have never to my knowledge new; exactly set forth. They are supposed always to be with us, and the people are warned to be watehtul just as children are told, by foolish paieuts, to look out lor the bogey man. it is simply taken for granted that interests and combinations in the form ol “big business'’ exist and that they want to prey oil tile American people, that there is a moral difference between large business and small business, that tno larger industrial concerns are banded togetiier to wring from the American public something which the public should retain, that large business lives and grows great by chicanery, that it wants from the legislators and the Government something tnat it should not have, and that the large corporation is essentially an enemy ol the nation. Now, 1 do not propose to make out a case in defence of “the interests” or of ‘‘Big Business” because 1 have never discovered those sinister institutions. Never among the really large, successful industrial enterprises of this country have 1 met with tnese monsters. Neither is it my intention to defend dishonest wealthy men as agamst dishonest poor men. I am not going to assume the negative in an argument which is essentially that all men wearing larger than No. 8 shoes are malefactors. I am interested only in uncovering what big business, as I know it, is, and what was its beginning and what are its aspirations. I cannot speak for every man who has large business interests, fn can tell only what I know out of my own business life —as a worker, as a foreman, as a manager, as president of the Carnegie Steel Corporation, then one of the greatest corporations in the world; as president of the United States Steel Corporation, the greatest corporation in the world ; and as chairman, oi the board of the Bethlehem Steel Corporation, which is, of its kind, the largest enterprise in the world. These corporations should fill every specification laid down by the demagogue. —-Men Who Work for Money Alone. —■ Let us find out if these corporations have any interests that differ from the interests oi the nation. When a man makes money for me I advance him and give him a chance to make more money. If, on the other hand, he is dishonest and tries to advance only his personal interest I want to get rid of him as soon as possible. I do not want to harass an honest worker or to coddle a crook. Does large business make money for the nation or only for itself! 1 want to apply the rule of employer and employee to the relation between the nation and big business enterprises, and I think that I can do so from a detached standpoint in spite of my personal intimacy and interest in the subject matter. For this question, whether large business benefits the nation and therefore ought to be retained, or whether it is bad for the nation and therefore ought to be rejeced, is not with me at all personal, and it is in no sense bound up with money. Personal greed is a very transient factor in large business. After one lias satisfied his own needs, money becomes only a means of doing greater things; income becomes tile score of success —not success itself. We have had among us those who have worked for money alone, but they have been merely beach combers who, when wreckage was scarce, connived at or brought about wrecks. They have never headed large constructive enterprises; and they have been very unhappy men. The satisfaction of creating something and seeing it grow is infinitely greater than any satisfaction that will ever come from having made a vast fortune out of it. That which drives men on to great enterprise is not the money that comes from it but the thrill of great accomplishment. American industry is built on doing. Whenever I see a man who is after mere wealth I say to myself, as the brakeman said of the little dog who was chasing a train : “What the devil will he do with it when he gets it?” Do not imagine for a moment that T am one of those who affect to despise money. On the contrary, I want to keep what is justly mine as long as possible. I mean that the merely rich man will have no credit in the community if he is of no use to the world. I am not a socialist. T believe in aristocracy; but onlv because I believe that the aristocracv of this country is the aristocracy of men and women who do things—the aristocracv of accomplishment. There is no real accomplishment achieved without real pleasure in the achievement of it. If I am not, as a head of a large business, contributing any lasting service to the community, I should like to know it. So. T think, would the other men who have large interests. For then we might turn to something that is useful. Take the origin of largo business Take steel. Country Built on Steel. -- Before the organisation of the United States Steel Corporation individual con corns owned individual mines. No company was sufficiently largo to own groups of mine:-, of different charao teristics end qualities. The best- steel rc-ailt • e rr obtained by scientific mixture:-' < f diffo: "it sort: of ores. Bv the ore iiiterst-s o* all of the steel com) re able to give eacli individual company the .deal mixtures ' • prodiicin-.r tin na -i economical and the best results. That, was an enormous advantage. The transportation of materials offered equal opportunities to economise.

Ships did not have to wait until a particular cargo could be loaded for a particular works, but they could be kept j steadily moving and assigned to this or that works while in transit. Mills that formerly had to make a great variety of articles were, by reason of consolidation, I enabled to run steadily on one line, thus | producing a greater tonnage and at a j very much lower cost. The arrangement ! made possible equally great economies in ! distribution; selling forces were consoli- ! dated, and every one of the inevitable I wastes of small business was lopped off. j This consolidation did not produce a monopoly. It did not try to attain a monopoly. Since its foundation a number of other very large and powerful steel companies have been founded and have prospered and grown. The industry has increased from a production of less than 1,000,000 tons in 1879, when I entered the business, to more than 40,000,000 tons during the big war years. This production of steel lias enabled us to build our country; we have had cheap steel and plenty of it. * A number of small concerns with duplicated expenses could not have brought about cheap and plentiful steel. Thhy would have lost money at prices that earn satisfactory profits for the large companies. More than that, they could not have commanded the resources first to discover the most efficient and economical processes and then to build to take advantage of the discoveries. The same story will apply to any welldeveloped line of business. I am taking steel because I know most about it, and also because it is the most highly developed business in the country and employs the largest amount of capital. Has this progression towards large business been useful? Who has benefited from it—a few men or a great many men? Three years ago a survey of 280 leading railway and industrial corporations disclosed that their securities were owned by more than a million and a-half people. With the large purchasing pf securities since the close of the war a Census taken to-day would, 1 believe, show that at least two and a-half million people own, as investors, rights in the profits of what is called "big business.” if, therefore, big business is in conspiracy against the people, quite a number of people seem to be involved in it! Some of these people are very wealthy. But who gets the benefit of their accumulations of wealth? A few people imagine that this wealth is in the form of currency or in jewels or in landed estates or somehow so managed that only the owner benefits. This is not true. The very rich man has only a tiny portion of his wealth in real estate, and a negligible portion in finery. His wealth is in stocks and bonds of corporations, and the surplus part of his income is, immediately on receipt, put back into other stocks and bonds, which is only another way of saving that it gfees back into the means of providing work for men. One cannot invest capital if there is nothing in which to invest it. Capital must have for its development the services of men, and the more capital we have in our industry the more men it requires to make that capital profitable, and the greater must be the bidding for the- services of men. The presence of large amounts of capital invested in industry does not crush the working-man. On the contrary, only by large investments can the prosperity of the working-man be furthered. The relation is a very simple one, and the only marvel is that it is not more generally comprehended. We see it every day about ns. ' When the factories are running, men are employed, and there is a general prosperity ; when the factories are not running ‘ it means that capital is not being employed. The more factories that are running at full time the more men will be required and the higher will be thenwages. As enterprises extend—that is, as °more and more capital is invested —- the more keenly does this capital have to bid for the 'services of men, whether they be presidents, managers, or watercarriers. The life of the big corporation depends upon paying the highest possible wages in return for the highest possible production and then the sale of this production at the lowest remunerative price. Without high wages we cannot have a home market of high purchasing power, and in a great and wealthy country such as ours we must have a market with the power to purchase. Big busbies.-- or any ether kind of business in the United States cannot be prosperous unless the country itself is prosperous. There seems to be a further impression, however, that large business is built up at the expense of someone, and we have the theory advanced from various quarters that if only we were to break up large business into small units everyone would have more. Break it up; confiscate all the profits, and, of course, take no account of the losses. Distribute these profits. Each person in the country would get about lOOclol. and that would be the end, for. as in Russia, the organisation for production would then be destroyed and there would be nothing more for anyone. Instead of having merely destroyed the monster called “big business,” the people would then discover that they had made a fair job of destroying themselves. Big business is able to sell goods and • must sell goods at low prices, and it is ! able to nay and must pay high wages, | because it is organised for production. It ■ is a consolidation of the brains of those who arc for ever trying to do things better. Take Mr Cnrnegie, who was one of the founders of big business. Time and again I went to him and said with pride that we had made four or five hundred thousand dollars for the month, and invariably his reply would run something like tins : “Show me your cost sheelu. It is more interesting, to know how cheaply and how wei' you have don • this thing than how much money you have made, because the one is a temporal -, result due possibly to special condition; of tr : hut the other means a permanency that will go on

with the works as long as they last.” That is the principle on which the great steel business of this country has been founded. Is it not a good principle? It has so increased production and wealth that we are now able to use about 30 times as much steel per capita as we did 40 years ago, when the industry was only beginning. We could not use this great quantity of steel had not the prosperity of the country increased correspondingly. Tlie consolidations, which we know as “big business,” have in like tremendous measure increased the wealth and. prosperity of the people because they have grown out of what would otherwise be waste. When there is waste in small business then big business supplants it, and it is desirable by every law of nature notwithstanding individual objections at the time, that this should be so. But all kinds of small business are not wasteful, and where there is no waste they are not supplanted by big business. They remain because they have economic functions. And so we find that in addition t-o the great corporations of this country there are now also more small businesses in proportion to the population than there were twentyyears ago.

Consolidations in business, like consolidations in nature, are inevitable. A notable example is the Government of the United States. Our forefathers consolidated these colonies in order that each unit might have greater strength than if it existed alone. In the beginning not everyone agreed that consolidated government was the best government. We now know that the strength and prosperity of the United States would be impossible without unity. Consolidation in business is likewise a joining together in order to be able to do things better. First we had the partnership and then the larger partnership known as a corporation. The corporation became a necessity because the partnership form is too cumbersome to join a great number of proprietors. It is •‘Scientific and inevitable. In the progress toward consolidation of interests, various promoters from time to time conceived t&at size alone made strength and that they could create solid, substantial, profitable business by driving others out of business —byacquiring a monopoly and forcing prices upward. That was the idea of the trust. No man has a clearer appreciation than myself of the evil that lurked in the trust scheme. I say “lurked,” not “lurks.” It was founded on misconception and promoted along lines of self-destruction. Its fundamental principles were the restriction of trade, the increase of price, and the throttling of competition, a trinity that would wreck any proposition, business, political, or social. The big corporation of to-day has for its guidance exactly the opposite principles; instead of restricting trade it expands trade by creating new markets through the reduction in price of the commodities which it produces. Monopoly Kills Itself. —- Where has lai’ge business any intrinsic antagonism to' thy welfare of t-iie country and its citizens? It has had its lessons ; foolish men have tried to form monopolies and to go forward on some basis other than, that formed by the association of constructive brains. The idea of monopolydies hard; first governments had it, then business had it; now labour is threatened with it. But monopoly kills itself—no one need bother much about assisting in the death; it remains true that if you kill the goose that lays the golden eggs the supply of eggs will he considerably curtailed. In the same class and almost as a part of monopoly is the desire for special privilege in the way of special laws exempting from taxation or permitting rebates or otherwise gaining an advantage except bybrains and organisation. Wise men have given up all these ideas ; they- know that the most exact and scrupulous honesty is the sole fundation of big business and that for this foundation no substitute can be found. Of such, then is big business; it has no interest whatsoever against that of the public. The modern merchant knows that he cannot long serve and make money- out of a customer whom he cheats. The customer of big business is the public. Therefore, as far as I am concerned, I know of nothing that I want from the Government excepting the right to do business most efficiently—that is, the right to attain uninterrupted and increasing production which, as I have explained, holds within itself the necessity of lowering prices and increasing wages that are based on work. The real enemy of the people is the man in business who does not know how to get the most out of what he produces—who is careless and wasteful and sells at a high price. Yet most governmental regulations seem to proceed on the theory that there is some special virtue in not knowing how to do business I The legislators glorify the inefficient man, and would, while telling about their solicitude for the people, wreck big business, destroy high wages, and bring about the highest possible instead of the lowest possible prices. If T took the short instead of the long view of industry, I should advocate prices fixed by the Government —which seem to be regarded in the way of panaceas in spite of the experience of the whole world in war time. I should advocate them because a fixed price must be based upon the costs of the man who has the least knowledge of business. The figure would have to be one which would enable him to earn a living. Such a price would yield an enormous profit to big business because business is big only- as it is efficient. These prices would yield great profits for a time, but the high prices would retard the progre:-• of the country and turn ns from the upward to the downward path. The prosperity of the country would end. ---<’ t Together and Get to Work. livery- kind of law which guarantees wages or leisure without a corresponding j increase in production tends to impoverish the country-, for if we produce less we

must have less to distribute. Wages and profits can come only out of production. Therefore all governmental panaceas which promise more money for 'less work and at the same time prevent added production to take up the slack are not in the interest- of the nation, for they tend to subtract from and not add to the wealth of the people. I do not want to see the power of this country lessened and its people made poorer by- the acceptance of theories which when reduced to their elements simply involve a pledge of something for nothing. There is but one way I can see to decrease the cost of living, and that is for everybody- to get together and get to work. Greater production is, as I see it, the key, and the only key, to open the doors of real progress for the world. The world has certain wants that must be fulfilled. It has created enormous amounts of paper money. The nominal circulation per capita in every one of the important countries is far greater than it was prior to the war. At the same time the existing amount of supplies is very much less pier capita than it was at the beginning of the war. Ordinarily the world each year consumes a large part of what it produces, and in addition saves a substantial amount, which is usually put into the form of new buildings and permanent investments of every kind to serve as a basis for greater productivity in the years following. During the period of tlie war, however, the world consumed practically everything it produced, with the result that to-day there is not enough of many of the necessities of life to. go around. There is just one way to meet the situation —produce more and save more. We in this country are blessed by- Providence with an abundance of many things. If every man gets to work and does his part the best he knows how we shall see a very rapid improvement in the whole situation. The extent to which this improvement will be deyaled will be precisely the measure of our lack of appreciation of the condition. If we appreciate the condition and meet it in this the onlyway- that it can be met promptly, the restoration of tlie world to a sound position of prosperity- and progress will be prompt and gratifying. Greater productivity is, above all else, in the interest of the poor man. Considerable factors in ordinary times in the high cost of living are (1) the export of raw products instead of the export of labour and (2) the evil which is known as seasonal production. We were just beginning to realise this when the war began, and we shall shortly be again faced with the problem unless constructive legislation comes to our aid. A government cannot find employment for its citizens. Only productive industry can find employment. Therefore every pound of raw material that we ship out of this country is a potential loss of employment because, if rightly organised, instead of shipping out raw material we should ship the finished product—that is, we should sell the fruits of labour instead of the bare fruit of the soil. In return for exported raw material we have to import the finished product of the labour of other countries—to import that which we ought to do for ourselves.. A developed country is on a sound basis only when it exports its surplus in the form of labour -that is, finished products—and receives payment in raw material that gives further employment. The productive resources of the United States are somewhat in excess of home consumption. It is right that such should be the case. If. however, we cannot export this surplus, we must limit the production of our factories whenever a surplus begins to appear. Any factory working at less than capacity is working at less than its highest efficiency and therefore its product costs more than it should. Our productive capacity is fully capable of supplying the home markets and giving a considerable volume for export overseas it’ we have the means for overseas transport. If we can export our surplus, we can keep practically every factory in the country running at full time twelve months in the year. Germany did so. Full-time production means more money in wages and in profits as well as lower prices for all commodities. Instead of only a single group being affected by our export trade, every man, woman, and child in tlie country is affected. I can point to no better proof than the condition in 1915-1916, when a period of extreme domestic depression was ended by the orders given by the Allied governments to a comparatively small section of American industry. Those orders in the course of time started the wheels going everywhere. Can We Make Our Ships Pay?— We have now built ourselves a great merchant fleet, but tire ships will have no value unless we follow up their construction by the devising of ways and means for their operation. The successful operation of American ships is absolutely dependent on their ability to carry a« cheaply as foreign ships. If the wage item alone —under American registry—continues to cost, as it does now, under ordinary conditions, in the neighbourhood of 40 per cent, more than British or Norwegian-owned vessels, it is easy to see the outcome of this competition. Congress has passed and the President has signed a measure which may or may not meet the emergency. But we shall be unable to determine the adequacy of this, the Jones Bill, until the President of the United States takes the necessary steps to abrogate such treaties as must be redrawn if the law is to have a trial. And in tlie meantime we are losing the advantage of that foreign trade for which the world is striving. I am not personally committed to anyone form of merchant marine operation—• I want the one !hat operates. I do not care in v. hat form the people pay the bill. If the Government itself operates the ships and operates them at a loss, the people pay the bill: if the ships are operated bv private concerns and a loss

accrues, which is made up in some form of subsidy, the people likewise pay the bill. file thing is to operate the ships, and then successful operation is dependent win*'ly on the ability of American registered ships to compete- with foreign uottoms. Legislation to promote our oversea trade is not for the benefit of a class but for tile benefit of the mass. Bat as it is, our ships are not only in effect penalised bystatute, but they iiave not even the single advantage of trie free use oi one of tne greatest oi all our Government enterprises —that is, the Panama Lanai. An English slap can actually go through the canal at a lower rate than an American ship, and I suggest as one step forward to the maintenance of a merchant marine that ships flying the American flag be permitted to go tnrough the Panama Cana l , if not free, then at least at lower toils than are charged to foreign ships. The commerce between the east and the west coast of this continent is bound to increase. The Panama Canal is destined to play a larger and larger part in American commerce, and low or mj tolls would assist American ships to maintain the American standard of wages and be better able to take care of themselves in world competition. YYe built the Panama Canal. Why not let American trade benefit by it? i bus far I. have not discovered any-, thing that big business wants that the American people guided by- reason do not also want. 1 have not discovered anything that is opposed to the interests of the American people. However, I have not mentioned taxes. At the present timo we have very high taxes on corporate profits and on personal incomes. These taxes were imposed under, I think, the sincere belief that thereby the wealthy could be made to support the Government. It is exceedingly difficult for a rich man to talk about taxation, for immediately it is thought that lie is raising a wail about parting with money. On the face of things it would seem that taxing away wealth puts the burdens of government where they- belong, but if we go back to looking at how profit in the form of capital investment increases the real wealth of the whole country we shall be to conclude that excessive taxation for governmental purposes, while it takes away income from the rich, also takes away the means of increasing the wealth of the nation. Excessive taxes tend toward levelling, but it is a levelling downward, not upward, because the supply of free capital arising from profits, instead of being turned back into industry, is turned into tlie coffers of the Government and there is mostly wasted. Under the exceptional conditions of war time it does not matter 1 much what happens, but I am very frank to say- that under the present taxes the United States Steel Corporation could never have been formed, neither could any of our other large corporations have been created, asd I know personally I should never have made my venture in Betide--hem. Therefore those who believe thal business should be small, wages low, and goods high-priced, those who believe tha United States should turn around and start down the hill, should be wholly satisfied with the present system of taxation. What big business wants is only what! every man wants—the opportunity honestly to make a living, to advance himself and our country.—Collier’s Weekly.,