at times would like to think we are principally engaged in being served, is back of a good deal of the misconception of the relation of the human element in business. When we speak of the human element we are apt to think only of the men who work for wages and of their pay. This gets us into trouble right at the outset, for, although executives and managing directors do not commonly strike and march around the place bearing placards, they are just as much a part of the problem of the human element in industry as are those men who work strictly for wages. For where the wage earners are chronically dissatisfied and sullen you will nearly always discover that the executives do not know their jobs any too well.

The Necessity for Leadership

Th

HE idea that labor works for capital has resulted in a growing dislike for work and a growing disregard for the leadership which makes the ownership of capital possible. The agitators are fond of talking about inherited wealth and its evils, and probably it has an undue mixture of evils, but inherited wealth does not play a very important part in the ownership of capital. In this country a large share of the ownership of the means of production is usually gained by the exhibition of large qualities of leadership. And if that wealth happens to descend to owners who do not have leadership or do not have sense enough to drop out and put some one in who does have leadership enough to manage their affairs, then their wealth very rapidly disappears.

But this is all aside from my point. Ownership of capital is not nearly so important as the distribution of its production, and there we have to have leadership else there will be no production to distribute.

Service is not trivial; it is large and comprehensive. It comprises the deriving of the greatest possible benefit to society out of an industrial unit. This means that the owners of the capital invested, the managers of the capital, the workmen, and the public that buys must all be the better off for its existence. There is no altruism in this large view, for, unless all parties concerned are benefited by the existence of the unit, it cannot continue to exist. More than that, its prosperity is in direct proportion to the equality in which these benefits are distributed.

The organization of the human element is possibly the largest part of the whole organization of business. But, however important, it is only a part, also it is something different from what we call the labor problem. For it comprehends both those who work with their hands and those who work with their heads-those who fabricate and those who direct-the worker, the technician, and the executive.

One thing, however, we have learned. It is this: While the restriction of production at certain times may bring advantage either to the employer who shuts down to sell off his stock at a high price. or to the employees who make a group demand for increased wages at a moment when large production offers a big profit to the employer, yet in the end neither side really benefits. The permanent benefits come from an always larger and larger production at a decreasing cost-that is, with a minimum of waste.

TH

The Danger of Prosperity

HE prosperity of any particular industrial institution depends upon how well it produces and thereafter sells. Therefore any labor policy which attempts to consider labor as apart from production, as a commodity, is bound to fail. One of the troubles with the average trade union is that, while asserting that labor not a commodity, it insists that the service of men should be bought in bulk and at a market price fixed by the union. That is, the union really insists that labor be considered as a commodity and have its price fixed.

I am inclined to view the whole question of unionism as one dependent wholly upon the circumstances. Any individual case can be decided by putting down what the business wants to be and then endeavoring to discover whether its legitimate objects, which include the good of all concerned, can best be achieved by an agreement with a union, by an agreement with the employees, or by proceeding under no agreement whatsoever.

An organization is nothing of itself. When you hear a man speak of the automatic, smooth-running machinery of big business, be sure he is talking nonsense. The wheels do not go around of themselves-they must be propelled by leadership. There is more danger, we are just beginning to realize, from overorganization than from underorganization, because the former discourages leadership.

That, then, is business-the making and selling of things that people want, and at such a price that they can buy. We already know how to make and to sell-all the larger companies are fairly well developed on these sides. But that does not answer the question of why we cannot have continuously good business and avoid labor and other troubles.

The answer is to be found in the fact that, the moment business starts to be good, the principles of business disappear. Here is exactly what happens. A business has been going along for a time with a very small margin of profit. Then a good crop year or some other force creates a buying power. The orders are filled; the demand for goods becomes heavier. The raw-material markets start their prices upward; the manufacturer sees that if he buys his raw materials ahead and at a low price he may be able to sell them at more than a manufacturing profit. For instance, let us say he usually makes an article of which the raw-material cost is $1, the labor and other charges $1, and the normal profit 25 cents. Material is advancing; he stands to make a large profit if he can buy a big stock of raw material at the $1 figure and then sell his article on the basis of the raw material costing $2. He can make $1.25 instead of 25 cents by this little speculation. He starts to buy ahead; others start to buy ahead, and, of course, the demand for the raw material thus increasing, its price soars to $2. He gets his extra profit and his appetite is whetted.

TH

The Balloon Goes Up

HERE is nothing wrong in this speculation, but it is not good business, for this reason: The price advances force advances in wages because living costs become higher. That puts a still further advance in selling prices. The retailer, too, buys ahead in the hope that he can buy low and sell high. The whole level of prices is forced forward, not so much by the natural demand as by the speculative demand. Eventually all the principles of business are abandoned, and the idea grows that anything can be sold at any price.

But all wages and incomes have not gone up; as the prices rise a great many people drop out of buying. The worker tries to keep his wages ahead of prices, but he cannot do that, and all at once we strike a point where what is asked for goods exceeds what people can pay for them. The manufacturers and retailers are left with great stocks of goods-for the trouble with speculation is that no one has ever yet discovered where to stop. The factories close in the hope that their stocks can be sold off at high prices. By closing they still further reduce the buying power, for no wages are distributed. The retailers do not buy because they too have high-priced goods that they hope to sell. None of them do sell their goods at the prices they ask; they finally have to cut and slash and sell at a loss. They commonly lose all the money they have made out of speculation, and the whole business life has to be rebuilt with new wage and price scales. We have

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The PATH OF GOLD

By WILLIAM ALMON WOLFF

just seen all this happen. It has hapIn pened many, many times before. fact, most of the dangers in business arise out of putting the speculative side above the fabricating or merchandising. It is just as dangerous for a corporation to speculate in goods as to speculate in the stock market; in many ways it is more dangerous because very few staple markets are nearly so well organized as is the stock market, and hence one cannot often get so quickly out of goods as out of stocks.

The Temptation to Gamble

HE divorce of manufacture and

would go toward the

stabilization of industry. The present policy is unscientific. A manufacturer will commonly offer his wares for future delivery at a price which he arrived at by guessing the course of the raw-material market. If, at the time of delivery, the price of the raw stuff has gone down, then he will try, by curtailing production, to keep up the market price on the finished product so that both he and the customer may get out at the price quoted. Curtailing production further depresses raw-material prices and opens wide the door of disaster to the man who has bought far ahead of his actual needs.

The mixing of manufacturing and selling with speculation is the greatest of all deterrents to sound business practice and organization. It is the function of a manufacturer to manufacture, of a merchandiser to merchandise. They should look for their recompense to the results of the skill with which they perform their functions. Their profits per dollar must necessarily be small-and arduously earned. They cannot expect to become millionaires overnight. It is hard for men pursuing this conservative course to see others come into the market and, without manufacturing or merchandising stupendous merely by buying low and selling high. If a market during a considerable period continues to rise, one will find very few business men who are able to keep their heads and to remember that a day of reckoning is bound to come. Almost without exception they will cast aside the principles upon which they built business and engage in a mad scramble of speculation.

It is this business of speculation that is at the bottom of nearly all of our industrial trouble. The demand of the country for goods is fairly normal. The charts show that "good times" give a bulge in the normal line of business volume of only about 15 per cent, while very "bad times" will not go 15 per cent below the line. A break in business may go from 15 per cent above to the same distance below and thus be serious, but the small increase or decrease in actual demand that spells prosperity or adversity is much smaller than the price range between good and bad times.

BUT

They Kept Their Heads

OUT what can be done about it? It is noteworthy that the concerns which came through the recent depression without serious loss were those that did not change their way of taking profits. They bought raw materials or goods according to their needs and sold them at the raw-material cost plus a fee for merchandising or manufacturing. They kept their heads, and although they suffered with all the rest from lack of business, they did not have to take losses in addition. They did not speculate.

Now, therefore, if this principle, of buying only according to planned needs and then selling at the price paid for raw material and labor plus a service

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does not matter. What does matter is divorcing business from speculation. For then, with speculative buying out, we cannot have that marking up of prices that eventually gets ahead of the power of the people to buy and brings depression and unemployment. If the finished price of goods were only the raw-material price plus the charge for manufacturing, then there would not be the frenzied buying ahead on speculation, and there would be no inducement for raw-material speculation. And thus the price of goods and the buying power of the people would remain fairly in operation.

This shutting down and opening up is the curse of business. Every worker is afraid of unemployment. He wants to get "his" while the work is on, and in that he cannot be blamed, for, although he may be paid by the week, he has to live by the year. Therefore some of them try to hold down their jobs by doing the least instead of the largest amount of work. The owner too, on his side, is always afraid of "overproducticn." That means to him what unemployment means to the worker.

Take away the fear of unemployment and the fear of overproduction. and we shall rid ourselves of most of the troubles of industry, and hence of most of the troubles of our whole social life. For everything that happens in industry is reflected in life. Without going into the technical details, a good share of our troubles is to be traced to the fact that we use only about one-half of our industrial facilities year in and year out-that is, we use scarcely more than one-half of all our opportunities to produce goods that people need. Industry does not commonly function to more than 50 per cent of its capacity. And it does not because it is not planned.

T

Things That Will Help

come difficulties. Anybody can accept things as they are. Unscientific business-that is, unplanned business-accepts things as they are. The unscientific business man accepts good times with perhaps a tendency to give full credit to himself for bringing them on, but, anyhow, he is glad. Also, and eventually, he accepts bad times as an excuse for lack of forethought, and he is sorry.

The principle that a manufacturer shall contribute a service and simply add the cost of that service to the value of the raw material, thus keeping his prices consonant with the buying power of the public, will have little force if somewhere, in the processes before him or in the processes after him, the speculative element so controls the situation that he cannot.

The very large business can have this control of the product from the rawmaterial stage right through to the consumer, but the smaller man alone, and with less capital, cannot have such control. What he can have is the control through buying and selling associations, through cooperation with his fellows. And that is what is coming about in a number of trades.

Now, all of this sounds complex. But really it is very simple. It is exactly the course which some of the large and intelligent corporations pursue. It is more or less what Germany did before the war. The Krupps, for instance. did not have a day of unemployment and never laid off a man in all their years before the armistice, and that was not because they made munitions, for making munitions, excepting in war time, has never been their largest engagement.

Don't you see really how little to do with the subject have most of the legislative and other cure-alls that are brought out from time to time? We have, in effect, been treating smallpox as a skin disease. We have now the opportunity for the Government to help in the curing of business. The Government cannot make business, but it can teach business. It can teach that much that we hold to be incurable is easily curable.

ASUDDEN storm darkens the city sky. Thou

sands of lamp switches snap on in homes and offices and factories. At once the city twinkles in light. In the electric power house, machinery and men leap to the task.

Or midnight. A suspicious noise. A button is pressed. A flood of light gives protection and confidence to the householder, putting the intruder to flight.

Again. War. A nation needs everything-And at once. A thousand factories demand more power. Silently over the wires the electric energy flows to meet the emergency.

Four Billions More Will Be Needed

`LECTRIC light, heat and power have be

EL

come commonplace facts in your life; you seldom think of the four-billion-dollar industry behind the electric button. The fact is that the equipment behind the button is not being expanded fast enough to meet the demand.

Figures compiled by Electrical World show that the electric plants must have double their equipment in the next four years if the United States is not to be halted in its progress by a serious shortage of power and light. And doubled equipment means an investment of not millions but of approximately four billions of dollars.

Not a Gift But an Opportunity

LECTRICAL WORLD is not owned by the

E electric-light and power companies. It is an

independent property, one of the eleven journals of service published by the McGraw-Hill Com⚫pany, Inc., New York. It is in a position to speak

ELECTRICAL WORLD, ELECTRICAL MERCHANDISING and JOURNAL OF ELECTRICITY AND WESTERN INDUSTRY are read by 42,000 men of the electrical industry. OTHER McGraw-Hill publications are: Power, Coal Age, American Machinist, Engineering and Mining Journal, Chemical and Metallurgical Engineering, Electric Railway Journal, Engineering News-Record, and Ingenieria Internacional (Spanish.)

The companies need no subsidy or gift; they can pay a fair return on the money they ask, given a chance to earn. For a doubled business is ahead of them. It will come as fast as they can handle itfaster unless they begin their expansion now.

Helping to Build a Better America

HERE are five million unwired homes in the United acres to United States; thousands of acres to be irrigated by electricity; hundreds of factories needing light and power. The future demands for electric service will be tremendous-these are the assurance of a greater and greater business for electric-lighting companies.

It will pay you to use your savings to help finance this increased business. The man who invests in a bigger, more powerful, better lighted America, is bound to be investing well for himself.

ELECTRICAL WORLD

"James M. Mo Grad

President

Entered as second-class matter, July 28, 1918. at the Post Office at New York, N. Y., under the Act of March 3. 1879, and at the Price: 5 cents a copy, $2.50 a year; 10 cents a covy, $5.00 a year in Canada and Foreign Countries