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BY THORSTEIN VEBLEN 

THE HIGHER LEARNING IN AMERICA 
THE NATURE OF PEACE 
THE THEORY OF THE LEISURE CLASS 
THE INSTINCT OF WORKMANSHIP 
IMPERIAL GERMANY AND THE 
INDUSTRIAL REVOLUTION 

Each $2joo 
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 

PREFACE 

TJhese papers have already appeared, in a slightly 
abridged form, in the Dial; running from the I9th 
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. 

SEP 3 US 

FEINTED IN THE UNITED STATES OF AMERICA 

 i 

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- 

LIBRARY 

sPf GEORO^ 

 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 pats. The 

•i 

: * 

 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- 
pie- 

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 

KNOWLEDGE AND BELIEF 5 

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., witchcraft, 

I 

 8 

THE VESTED INTERESTS 

or the action of bodies at a distance,— will under 
altered circumstances prove themselves by expe 
rience to have only a supposititious reality*! 

Any knowledge that runs in such out-worn terms 
turns out to be futile, misleading, meaningless; and 
the habit of imputing qualities and behavior of this 
kind to everyday facts will then fall into disuse, pro 
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. P^HJc- 
ularly will such a loss of belief and insight, ana me 
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 • ^j.," 
reality, will presently fall away; and the new q^p 
operation whose experience has run on other lines .»:_ 
in a fair way to lose these articles of faith and ii 
sight, by disuse. It is a case of obsolescence by ha 
bitual disuse. And the habitual disuse which so al- 

I 

KNOWLEDGE AND BELIEF 9 

lows the ancient canons of knowledge and belief to 
fall away, 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 
der of experience, which exacts an habitual appre 
hension 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- 
JpeHence. It results that, in the further course of 

(ttKtfuiging 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 

KNOWLEDGE AND BELIEF 

ii 

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 

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 
t 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 

 i4 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 

 i6 

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. 

THE STABILITY OF LAW AND CUSTOM 

( IN so far as concerns the present question, that is to 
; j 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 

 i8 

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 ov in immutable perfection until our time,— 

'mon nt more enduring than brass. 
"' Th rinciples are of the nature of habits of 
thpu' f course; and it is the nature of habits of 

l 

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 ce wy, ard 
that the vital system of Natural Rights i lied 
the eighteenth century must not be derai it ar y 
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- 

I 

LAW AND CUSTOM 

21 

i 

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- 

li 

I 

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- 

I 

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- 

 Ill 

26 

THE VESTED INTERESTS 

LAW AND CUSTOM 

27 

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. 

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 

LAW AND CUSTOM 

29 

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. 

i 

I 

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 

IT 

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,—" 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. 

III 

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 THE VESTED INTERESTS 

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- 

 38 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- 

 4o 

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 th~e 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 

I 

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. 

I 

 44 

THE VESTED INTERESTS 

INDUSTRIAL ARTS 

45 

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 

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 

 46 THE VESTED INTERESTS 

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 " 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 

icap 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 ea-rlier 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 

INDUSTRIAL ARTS 

55 

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. 

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, communibus 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 forward. 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- 

 .li 

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 

fi 

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. 

 6o 

THE VESTED INTERESTS 

INDUSTRIAL ARTS 

61 

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 

I 

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. 

i 

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, tfie 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. 

I 

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 

FREE INCOME 

67 

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- 

I 

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; 

 70 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 
If 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 

I 

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 

 78 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 

muneratlve business affairs that lie 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 rime 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 tike 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." 

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 

85 

 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 

'I' 

 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 

 9o 

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. AH 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 a.nd 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 

101 

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 emftor, 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 ofd^—tj^cern in this respect is 

 IO2 

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- 

 io4 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 

 11.2 

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 

 n8 

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 

 I2O 

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 re_st 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 of 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; al] 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 
cprrectios 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 djnastic 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 Liberal 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 st;ill 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 Realpolltik. 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 

'I 

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 raind. 

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. 

THE DIVINE RIGHT OF NATIONS 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 

1 

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- 

 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 

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- 

 140 

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- 

 I42 

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 

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 HVE 

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- 

 i46 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- 

l 

I 

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 sliould 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 and 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 

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. 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 

r57 

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 
todav, 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 

 162 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- 

 164 

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 

 166 

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 

THE VESTED INTERESTS 

THE COMMON MAN 

169 

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 

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 

N 

 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 custom. 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 

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 
so 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-f act 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 

 182 

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