The Theory of Business Enterprise
by Thorstein Veblen
1904

Chapter 8

Business Principles in Law and Politics


    Popular welfare is bound up with the conduct of business;
because industry is managed for business ends, and also because
there prevails throughout modern communities a settled habit of
rating the means of livelihood and the amenities of life in
pecuniary terms. But apart from their effect in controlling the
terms of livelihood from day to day, these principles are also in
great measure decisive in the larger affairs of life, both for
the individual in his civil relations and for the community at
large in its political concerns. Modern (civilized) institutions
rest, in great part, on business principles. This is the meaning,
as applied to the modern situation, of the current phrases about
the Economic Interpretation of History, or the Materialistic
Theory of History.
    Because of this settled habit of seeing all the conjunctures
of life from the business point of view, in terms of profit and
loss, the management of the affairs of the community at large
falls by common consent into the hands of business men and is
guided by business considerations. Hence modern politics is
business politics, even apart from the sinister application of
the phrase to what is invidiously called corrupt politics. This
is true both of foreign and domestic policy. Legislation, police
surveillance, the administration of justice, the military and
diplomatic service, all are chiefly concerned with business
relations, pecuniary interests, and they have little more than an
incidental bearing on other human interests. All this apparatus
is also charged with the protection of life and personal liberty,
but its work in this bearing has much of a pecuniary color.

    Legislation and legal decisions are based on the dogma of
Natural Liberty. This is peculiarly true as regards the
English-speaking peoples, the foundation of whose jurisprudence
is the common law, and it holds true in an especial degree of
America. In other European communities the sway of natural rights
preconceptions is not so unmitigated, but even with them there is
a visibly growing predilection for the natural-rights standpoint
in all matters touching business relations. The dogma of natural
liberty is peculiarly conducive to an expeditious business
traffic and peculiarly consonant with the habits of thought which
necessarily prevail in any business community.
    The current body of natural-rights preconceptions antedates
the modern business situation. The scheme of natural rights grew
up and found secure lodgement in the common sense of the
community, as well as with its lawgivers and courts, under the
discipline of the small industry and petty trade ("domestic
industry") whose development culminated in the eighteenth
century.(1*) In industrial matters the efficient and autonomous
factor in the days of the small industry was the individual
workman, his personal force, dexterity, and diligence; similarly
in the petty trade of the precapitalistic English situation the
decisive factor was the discretion and sagacity of the small
merchant and petty employer, who stood in the direct personal
relations with their customers and their employees. In so far as
trade and industry was not restrained by conventional
regulations, statutory or customary, both trade and industry was
in effect an open field of free competition, in which man met man
on a somewhat equable footing. While the competitors were not on
a footing of material equality, the industrial system was
sufficiently loose-jointed, of a sufficiently diffuse growth, to
make competition effective in the absence of mandatory
restrictions. The like will hold of the business organization
associated with the small industry. Both trade and industry were
matters of personal efficiency rather than comprehensively
organized processes of an impersonal character.(2*)
    Natural rights, as they found their way into the conceptions
of law and equity, were in effect the assumed equal rights of men
so situated on a plane of at least constructive equality that the
individuals concerned would be left in a position of effectively
free choice if conventional restrictions were done away. The
organization was not, mechanically, a close-knit one, in the
sense that the concatenation of industrial processes or of
business transactions was not rigorous either in point of time
relations or of the quantity and character of the output or the
work. Neither were the place, pace, circumstances, means, or
hours of work closely determined for the workman or his employer
by mechanical circumstances of the industrial process or of the
market. The standardization of life under the old regime was of a
conventional character, not of a mechanical kind such as is
visible in the more recent development. And this conventional
standardization was gradually losing force.
    The movement of opinion on natural-rights ground converged to
an insistence on the system of natural liberty, so called. But
this insistence on natural liberty did not contemplate the
abrogation of all conventional prescription. "The simple and
obvious system of natural liberty" meant freedom from restraint
on any other prescriptive ground than that afforded by the rights
of ownership. In its economic bearing the system of natural
liberty meant a system of free pecuniary contract. "Liberty does
not mean license;" which in economic terms would be transcribed.
"The natural freedom of the individual must not traverse the
prescriptive rights of property." Property rights being included
among natural rights, they had the indefeasibility which attaches
to natural rights. Natural liberty prescribes freedom to buy and
sell, limited only by the equal freedom of others to buy and
sell; with the obvious corollary that there must be no
interference with others' buying and selling, except by means of
buying and selling.
    This principle of natural (pecuniary) liberty has found its
most unmitigated acceptance in America, and has here taken the
firmest hold on the legal mind. Nowhere else has the sacredness
of pecuniary obligations so permeated the common sense of the
community, and nowhere does pecuniary obligation come so near
being the only form of obligation that has the unqualified
sanction of current common sense. Here, as nowhere else, do
obligations and claims of the most diverse kinds, domestic,
social, and civil, tend to take the pecuniary form and admit of
being fully discharged on a monetary valuation. To a greater
extent than elsewhere public esteem is awarded to artists,
actors, preachers, writers, scientists, officials, in some rough
proportion to the sums paid for their work.
    American civil rights have taken an extreme form, with
relatively great stress on the inviolability of pecuniary
relations, due to the peculiar circumstances under which the
American community has grown up. The pioneers, especially in that
North-Atlantic seaboard community that has been chiefly effective
in shaping American traditions, brought with them a somewhat
high-wrought variant of the English preconception in favor of
individual discretion, and this tradition they put in practice
under circumstances peculiarly favorable to a bold development.
They brought little of the remnants of that prescriptive code
that once bound the handicraft system, and the conditions of life
in the colonies did not foster a new growth of conventional
regulations circumscribing private initiative. America is the
native habitat of the self-made man, and the self-made man is a
pecuniary organism.(3*)
    Presently, when occasion arose, the metaphysics of natural
liberty, pecuniary and other, was embodied in set form in
constitutional enactments. It is therefore involved in a more
authentic form and with more incisive force in the legal
structure of this community than in that of any other. Freedom of
contract is the fundamental tenet of the legal creed, so to
speak, inviolable and inalienable; and within the province of law
and equity no one has competence to penetrate behind this first
premise or to question the merits of the natural rights
metaphysics on which it rests. The only principle (attested habit
of thought) which may contest its primacy in civil matters is a
vague "general welfare" clause; and even this can effectively
contest its claims only under exceptional circumstances. Under
the application of any general welfare clause the presumption is
and always must be that the principle of free contract be left
intact so far as the circumstances of the case permit. The
citizen may not be deprived of life, liberty, or property without
due process of law, and the due process proceeds on the premise
that property rights are inviolable. In its bearing upon the
economic relations between individuals this comes to mean, in
effect, not only that one individual or group of individuals may
not legally bring any other than pecuniary pressure to bear upon
another individual or group, but also that pecuniary pressure
cannot be barred.
    Now, through gradual change of the economic situation, this
conventional principle of unmitigated and inalienable freedom of
contract began to grow obsolete from about the time when it was
fairly installed; obsolescent, of course, not in point of law,
but in point of fact. Since about the time when this new
conventional standardization of the scheme of economic life in
terms of free contract reached its mature development, in the
eighteenth century,(4*) a new standardizing force, that of the
machine process, has invaded the field.(5*) The standardization
and the constraint of the system of machine industry differs from
what went before it in that it has had no conventional
recognition, no metaphysical authentication. It has not become a
legal fact. Therefore it neither need nor can be taken account of
by the legal mind. It is a new fact which fits into the framework
neither of the ancient system of prescriptive usage nor of the
later system of free personal initiative. It does not exist de
jure, but only de facto. Belonging neither to the defunct system
nor to the current legal system, since it neither institutes nor
traverses a "natural right," it is, as within the cognizance of
the law, non-existent. It is, perhaps, actual, with a gross,
material actuality; but it is not real, with a legal,
metaphysically competent reality. Such coercion as it may exert,
or as may be exercised through its means, therefore, is, in point
of legal reality, no coercion.
    Where physical impossibility to fulfil the terms of a
contract arises out of the concatenation of industrial processes,
this physical impossibility may be pleaded as invalidating the
terms of the contract. But the pecuniary pressure of price or
subsistence which the sequence and interdependence of industrial
processes may bring to bear has no standing as such in law or
equity; it can reach the cognizance of the law only indirectly,
through gross defection of one of the contracting parties, in
those cases where the pressure is severe enough to result in
insolvency, sickness, or death. The material necessities of a
group of workmen or consumers, enforced by the specialization and
concatenation of industrial processes, is, therefore, not
competent to set aside, or indeed to qualify, the natural freedom
of the owners of these processes to let work go on or not, as the
outlook for profits may decide. Profits is a business
proposition, livelihood is not.(6*)
    Under the current de facto standardization of economic life
enforced by the machine industry, it may frequently happen that
an individual or a group, e.g., of workmen, has not a de facto
power of free contract. A given workman's livelihood can perhaps,
practically, be found only on acceptance of one specific contract
offered, perhaps not at all. But the coercion which in this way
bears upon his choice through the standardization of industrial
procedure is neither assault and battery nor breach of contract,
and it is, therefore, not repugnant to the principles of natural
liberty. Through controlling the processes of industry in which
alone, practically, given workmen can find their livelihood, the
owners of these processes may bring pecuniary pressure to bear
upon the choice of the workmen; but since the rights of property
which enforce such pressure are not repugnant to the principles
of natural liberty, neither is such pecuniary pressure repugnant
to the law, the case is therefore outside the scope of the law.
The converse case, where the workmen take similar advantage of
their employers to bring them to terms, is similarly outside the
scope of the common law, - supposing, of course, that there has
in neither case been a surrender of individual liberty, a breach
of contract, theft, a resort to violence, or threats of violence.
So long as there is no overt attempt on life, liberty of the
person, or the liberty to buy and sell, the law cannot intervene,
unless it be in a precautionary way to prevent prospective
violation of personal or property rights.
    The "natural," conventional freedom of contract is sacred and
inalienable. De facto freedom of choice is a matter about which
the law and the courts are not competent to inquire. By force of
the concatenation of industrial processes and the dependence of
men's comfort or subsistence upon the orderly working of these
processes, the exercise of the rights of ownership in the
interests of business may traverse the de facto necessities of a
group or class; it may even traverse the needs of the community
at large, as, e.g., in the conceivable case of an advisedly
instituted coal famine; but since these necessities, of comfort
or of livelihood, cannot be formulated in terms of the natural
freedom of contract, they can, in the nature of the case, give
rise to no cognizable grievance and find no legal remedy.
    The discrepancy between law and fact in the matter of
industrial freedom has had repeated illustration in the court
decisions on disputes between bodies of workmen and their
employers or owners. These decisions commonly fall out in favor
of the employers or owners; that is to say, they go to uphold
property rights and the rights of free contract. The courts have
been somewhat broadly taken to task by a certain class of
observers for alleged partiality to the owners' side in this
class of litigation. It has also been pointed out by faultfinders
that the higher courts decide, on the whole, more uniformly in
favor of the employer-owner than the lower ones, and especially
more so than the juries in those cases where juries have found
occasion to pass on the law of the case. The like is true as
regards suits for damages arising out of injuries sustained by
workmen, and so involving the question of the employer's
liability. Even a casual scrutiny of the decisions, however, will
show that in most cases the decision of the court, whether on the
merits of the case or on the constitutionality of the legal
provisions involved,(7*) is well grounded on the metaphysical
basis of natural liberty. That is to say in other words, the
decisions will be found on the side of the maintenance of
fundamental law and order, "law and order" having, of course,
reference to the inalienable rights of ownership and contract. As
should fairly be expected, the higher courts, who are presumably
in more intimate touch with the principles of jurisprudence,
being more arduously trained and more thoroughly grounded in the
law at the same time that they have also presumably a larger
endowment of legal acumen, - these higher courts speak more
unequivocally for the metaphysical principles and apply them with
a surer and firmer touch. In the view of these higher adepts of
the law, free contract is so inalienable a natural right of man
that not even a statutory enactment will enable a workman to
forego its exercise and its responsibility. By metaphysical
necessity its exercise attaches to the individual so indefeasibly
that it cannot constitutionally be delegated to collective
action, whether legislative or corporate.(8*) This extreme
consequence of the principle of natural liberty has at times
aroused indignation in the vulgar; but their grasp of legal
principles is at fault. The more closely the logical sequence is
followed up, the more convincingly does the legitimacy of such a
decision stand out.
    In comparing the decisions of the higher courts with those of
the lower they contrast most signally with the decisions rendered
by juries in the lower tribunals. While this contrast has a
significance in another connection, it casts no shadow on the
legality of the decisions of the courts of higher instance. The
juries, in great measure, speak for the strained sympathies of
the vulgar, which are a matter somewhat apart from the
foundations of law and order.(9*)
    Popular sentiment, then, does not at all uniformly bear out
these decisions of the courts in disputes between property rights
and naked mankind, especially not in the more rigorous
enforcement of the principle of free contract. This discrepancy
serves to show that the vulgar, the laity, from whose numbers the
juries are drawn, have not an adequate sense of the principles
that lie at the root of the law; which may be due in part to
their not realizing how essential a foundation of law, order, and
common welfare these principles of natural liberty are. The
visible disparity in the distribution of property may make those
classes who have little property envious of the wealthy members,
and so make them lose interest in the maintenance of the rights
of property. But apart from this, the discipline of daily life,
from which the common-sense notions of the vulgar are in good
part derived, is no longer in full accord with the natural-rights
conceptions handed down from the eighteenth century. In other
words, the conceptions of natural rights on which the common law
rests embody a technically competent formulation of the
deliverances of that body of common sense which was inculcated by
the discipline of everyday life in the eighteenth century, before
the advent of the current situation; whereas the discipline of
everyday life under the current technological and business
situation inculcates a body of common-sense views somewhat at
variance with the received natural-rights notions.
    There is apparently something of a divergence between the
received notions on this head and the deliverances of latter-day
common sense. The divergence is neither well defined nor
consistent. The latter-day attitude toward questions of the kind
involved is vague, chiefly negative or critical, and apparently
fluctuating; but after all there is a somewhat persistent
divergence, which may even be said to have a systematic
character, so far as it goes. It runs in the direction of a
(partial and vacillating) disavowal or distrust of the
metaphysics of free contract, and even of natural liberty
generally. This uncertainty of allegiance to the received
foundations of law and order prevails in unequal degrees among
the various classes of the community, being apparently largest
and most outspoken among the workmen of the industrial towns, and
being, on the whole, less noticeable among the propertied and
professional classes and the rural population. The peculiar class
distribution of this disintegration of received convictions, as
well as its connection with modern industrial conditions, will be
taken up again presently in another connection.

    The state, that is to say, the government, was once an
organization for the control of affairs in the interest of
princely or dynastic ends. In internal affairs statecraft was
occupied with questions of the dynastic succession, the endeavors
and intrigues of the political magnates, fiscal administration
directed to finding adequate support for the princely power, and
the like. In external politics the objective end was dynastic
prestige and security, military success, and the like. Such is
still in part the end of political endeavor in those countries,
as, e.g., Germany, Austria, or Italy, where the transition to a
constitutional government has not been completed. But since the
advent of constitutional government and parliamentary
representation, business ends have taken the lead of dynastic
ends in statecraft, very much in the same measure as the
transition to constitutional methods has been effectually carried
through. A constitutional government is a business government. It
is particularly through the business expedient of parliamentary
voting on the budget that any constitutional executive, e.g., is
kept within constitutional bounds; and the budget is voted with a
main view to its expediency for business ends. The expediency of
business enterprise is not questioned, whereas the expediency of
an increase of princely power and dignity, with the incidental
costs, may be questioned.
    Modern governmental policies, looking as they do to the
furthering of business interests as their chief care, are of a
"mercantile" complexion. They aim to foster trade, as did the
mercantile policies of the sixteenth and seventeenth centuries,
although since "trade" has come to include much else than foreign
commerce, the modern policies look to business in the more
comprehensive sense which the term now necessarily has. But these
modern mercantile policies, with their tariffs, treaties,
interstate commerce regulations, and maxims prohibiting all
"restraint of trade," are after all not of the same nature as the
mercantile policies of the old French and German statesmen, which
they superficially resemble. The old "mercantile system," as it
prevailed on the Continent of Europe, was conceived in the
interest of the prince, the furthering of commercial advantage
being a means to princely power and dignity. (10*) The modern
mercantilism under constitutional rule, on the other hand, looks
to the prince or to the government as a means to the end of
commercial gain. With the transition to constitutional rule and
methods, the discretion and autonomy in the case has passed from
the hands of the prince into those of the business men, and the
interests of the business men have superseded those of the crown.
    Representative government means, chiefly, representation of
business interests. The government commonly works in the interest
of the business men with a fairly consistent singleness of
purpose. And in its solicitude for the business men's interests
it is borne out by current public sentiment, for there is a
naive, unquestioning persuasion abroad among the body of the
people to the effect that, in some occult way, the material
interests of the populace coincide with the pecuniary interests
of those business men who live within the scope of the same set
of governmental contrivances. This persuasion is an article of
popular metaphysics, in that it rests on an uncritically assumed
solidarity of interests, rather than on an insight into the
relation of business enterprise to the material welfare of those
classes who are not primarily business men. This persuasion is
particularly secure among the more conservative portion of the
community, the business men, superior and subordinate, together
with the professional classes, as contrasted with those vulgar
portions of the community who are tainted with socialistic or
anarchistic notions. But since the conservative element comprises
the citizens of substance and weight, and indeed the effective
majority of law-abiding citizens, it follows that, with the
sanction of the great body of the people, even including those
who have no pecuniary interests to serve in the matter,
constitutional government has, in the main, become a department
of the business organization and is guided by the advice of the
business men. The government has, of course, much else to do
besides administering the general affairs of the business
community; but in most of its work, even in what is not
ostensibly directed to business ends, it is under the
surveillance of the business interests. It seldom happens, if at
all, that the government of a civilized nation will persist in a
course of action detrimental or not ostensibly subservient to the
interests of the more conspicuous body of the community's
business men. The degree in which a government fails to adapt its
policy to these business exigencies is the measure of its
senility.
    The ground of sentiment on which rests the popular approval
of a government for business ends may be summed up under two
heads : patriotism and property. Both of these terms stand for
institutional facts that have come down out of a past which
differed substantially from the present situation. The substance
of both is of the nature of unreasoning sentiment, in the sense
that both are insisted on as a matter of course, as
self-legitimating grounds of action which, it is felt, not only
give expedient rules of conduct, but admit of no question as to
their ulterior consequences or their value for the life-purposes
of the community. The former of these fundamental institutional
habits of thought (perhaps better, habits of mind) runs back to
the discipline of early barbarism, through the feudal days of
fealty to the earlier days of clan life and clannish animosity.
It has therefore the deep-rooted strength given by an extremely
protracted discipline of predation and servitude. Under modern
conditions it is to be rated as essentially an institutional
survival, so ingrained in the populace as to make any appeal to
it secure of a response irrespective of the material merits of
the contention in whose behalf the appeal is made.(11*)
    By force of this happy knack of clannish fancy the common man
is enabled to feel that he has some sort of metaphysical share in
the gains which accrue to the business men who are citizens of
the same "commonwealth"; so that whatever policy furthers the
commercial gains of those business men whose domicile is within
the national boundaries is felt to be beneficial to all the rest
of the population.(12*)
    The second institutional support of business politics, viz.
property, is similarly an outgrowth of the discipline of the
past, and similarly, though perhaps in a less degree, out of
touch with the discipline of the more recent cultural situation.
In the form in which it prevails in the current popular animus,
the principle of ownership comes down from the days of handicraft
industry and petty trade, as pointed out above. As it is of less
ancient and less unbroken descent, so it seems also to be a less
secure cultural heritage than the sense of patriotic solidarity.
It says that the ownership of property is the material foundation
of human wellbeing, and that this natural right of ownership is
sacred, after the manner in which individual life, and more
especially national life, is sacred. The habits of life and
thought inculcated by joint work under the manorial system and by
joint rules under the handicraft system have apparently
contributed much to the notion of a solidarity of economic
interests, having given the notion such a degree of consistency
as has enabled it to persist in the face of a visible discrepancy
of interests in later, capitalistic times. Under this current,
business regime, business gains are the basis of individual
wealth, and the (pseudo) notion of joint acquisition has taken
the place of the manorial notion of joint work. The institutional
animus of ownership, as it took shape under the discipline of
early modern handicraft, awards the ownership of property to the
workman who has produced it. By a dialectical conversion of the
terms, this metaphysical dictum is made to fit the circumstances
of later competitive business by construing acquisition of
property to mean production of wealth; so that a business man is
looked upon as the putative producer of whatever wealth he
acquires. By force of this sophistication the acquisition of
property by any person is held to be, not only expedient for the
owner, but meritorious as an action serving the common good.
Failure to bargain shrewdly or to accumulate more goods than one
has produced by the work of one's own hands is looked upon with a
feeling of annoyance, as a neglect, not only of opportunity, but
of duty. The pecuniary conscience commonly does not, of course,
go to quixotic lengths in a public spirited insistence on
everybody's acquiring more than an aliquot part of the aggregate
wealth on hand, but it is felt that he best serves the common
good who, other things equal, diverts the larger share of the
aggregate wealth to his own possession. His acquiring a
defensible title to it makes him the putative producer of it.
    The natural-rights basis of ownership is by this paralogism
preserved intact, and the common man is enabled to feel that the
business men in the community add to the aggregate wealth at
least as much as they acquire a title to; and the successful
business men are at least as well persuaded that such is their
relation to the aggregate wealth and to the material well-being
of the community at large. So that both the business men whose
gains are sought to be enhanced by business politics and the
populace by whose means the business gains are secured work
together in good faith towards a well-advised business end, - the
accumulation of wealth in the hands of those men who are skilled
in pecuniary matters.(13*)
    The manner in which business interests work out in government
policy may be shown by following up their bearing upon one phase
of this policy. An extreme expression of business politics, and
at the same time a characteristic trait of the higher levels of
national life in Christendom, is the current policy of war and
armaments. Modern business is competitive, emulative, and the
direction of business enterprise is in the hands of men who are
single-minded in their competitive conduct of affairs. They
neither are inclined, nor will business competition permit them,
to neglect or overlook any expedient that may further their own
advantage or hinder the advantage of their rivals. Under the
modern situation, as it has taken shape since the industrial
revolution,(14*) business competition has become international,
covering the range of what is called the world market. In this
international competition the machinery and policy of the state
are in a peculiar degree drawn into the service of the larger
business interests; so that, both in commerce and industrial
enterprise, the business men of one nation are pitted against
those of another and swing the forces of the state, legislative,
diplomatic, and military, against one another in the strategic
game of pecuniary advantage. The business interests domiciled
within the scope of a given government fall into a loose
organization in the form of what might be called a tacit ring or
syndicate, proceeding on a general understanding that they will
stand together as against outside business interests. The nearest
approach to an explicit plan and organization of such a business
ring is the modern political party, with its platform, tacit and
avowed. Parties differ in their detail aims, but those parties
that have more than a transient existence and superficial effect
stand for different lines of business policy, agreeing all the
while in so far that they all aim to further what they each claim
to be the best, largest, most enduring business interests of the
community. The ring(15*) of business interests which secures the
broadest approval from popular sentiment is, under constitutional
methods, put in charge of the government establishment. This
popular approval may be secured on the ground of a sound business
platform or (in part) on some ground extraneous to business
policy proper, such as a wave of national animosity, a popular
candidate, a large grain crop, etc. But the only secure basis of
an enduring party tenure of the government machinery is a
business policy which falls in with the interests or the
prejudices of the effective majority.
    In international competition the ultima ratio is, as ever,
warlike force, whether the issue be between princes of the grace
of God or princes of ownership. It is a favorite maxim of modern
politics that trade follows the flag. This is the business man's
valuation of national policy and of the ends of national life. So
stated, the maxim probably inverts the sequence of facts, but it
is none the less a fair expression of the close relation there is
between business endeavor and the modern military policies.
Diplomacy, if it is to be effective for whatever end, must be
backed by a show of force and of a readiness to use it. The
definitive argument of those who speak for armaments (in England
and America) is that the maintenance of business interests
requires the backing of arms. On the Continent of Europe this
argument commonly comes second, while patriotic fancy and
animosity take the first place.
    Armaments serve trade not only in the making of general terms
of purchase and sale between the business men of civilized
countries, but they are similarly useful in extending and
maintaining business enterprise and privileges in the outlying
regions of the earth. The advanced nations of Christendom are
proselyters, and there are certain valuable perquisites that come
to the business men of those proselyting nations who advance the
frontiers of the pecuniary culture among the backward
populations. There is commonly a handsome margin of profit in
doing business with these, pecuniarily unregenerate, populations,
particularly when the traffic is adequately backed with force.
But, also commonly, these peoples do not enter willingly into
lasting business relations with civilized mankind. It is
therefore necessary, for the purposes of trade and culture, that
they be firmly held up to such civilized rules of conduct as will
make trade easy and lucrative. To this end armament is
indispensable.
    But in the portioning out of the trade perquisites that fall
to the proselyters any business community is in danger of being
overreached by alien civilizing powers. No recourse but force is
finally available in disputes of this kind, in which the aim of
the disputants is to take advantage of one another as far as they
can. A warlike front is therefore necessary, and armaments and
warlike demonstrations have come to be a part of the regular
apparatus of business, so far as business is concerned with the
world market.
    In so far as it is guided by the exigencies of trade, the
objective end of warlike endeavor is the peace and security
necessary to an orderly development of business. International
business relations, it is well said, make for peace; in the
sense, of course, that they enforce the pacification of
recalcitrant barbarians and lead to contention between civilized
nations for a revision of the peace terms. When a modern
government goes to war for trade purposes, it does so with a view
to reestablishing peace on terms more lucrative to its business
men.(16*)
    The above inquiry into the nature and causes of the wars of
nations has resulted in little else than a recital of
commonplaces; the facts and their connection are matters of
common notoriety, and probably no one would hazard a question of
the sight and obvious inferences drawn in the course of the
recital. The excuse for this discursive review of the motives and
aims of a war policy is that it gives a basis for an outlook on
the present and immediate future of business enterprise.(17*)
    The experience of Continental Europe in the matter of
armaments during the last half-century, and of all the greater
nations during the last two decades, argues that when warlike
emulation between states of somewhat comparable force has once
got under way it assumes a cumulative character; so that a scale
of expenditure for armaments which would at the outset have
seemed absurdly impossible comes presently to be accepted as a
matter of course. Hitherto the cumulative augmentation of war
expenditures and of war animus shows no sign of slackening. One
after another, the states that have offered some show of
peaceable inclinations have been drawn into the international
game of competitive armaments, as they have one after another
become ambitious to push the enterprises of their business men in
the international markets. An armament is serviceable only if it
is relatively large; its absolute magnitude is a matter of no
particular consequence for competitive politics. It is its
comparative size that counts. Hence the greater the several
armaments, the greater the political need of greater armaments,
and the prompter the resentment of injuries and the livelier the
felt need of offending and of taking offence. A progressively
larger proportion of the nation's forces are withdrawn from
industry and devoted to warlike ends. In this cumulative
diversion of effort to warlike ends a point is presently reached
beyond which the question of armament is no longer, What amount
of warlike expenditure is needed to extend or maintain business
traffic? but rather, What amount will the nation's resources
bear? But the progression does not stop at that point; witness
the case of Italy, France, and Germany, where the war drain has
visibly impaired the industrial efficiency of the several nations
concerned, but where the burden still goes on growing, with no
stopping-place in sight. England and, more particularly, America
are not so near exhaustion, because they have larger resources to
draw on as well as a culture and a population more efficient for
industrial work. But there is no evident reason why these two
should not likewise enter on a policy of emulative exhaustion,
and so sacrifice their aggregate industrial and business interest
to the furtherance of the "great game."

    The question may suggest itself, Why should not the business
community, who have a large discretion in international politics
and whose aggregate gains are cut into by excessive war
expenditures, call a halt when the critical point is reached?
There is more than one reason for their failure to do so. War and
preoccupation with warlike enterprise breed a warlike animus in
the community, as well as a habit of arbitrary, autocratic rule
on the part of those in authority and an unquestioning,
enthusiastic subservience on the part of the subjects. National
animosity and national pride demand more and more of military
standing, at the same time that the growing official class needs
increasing emoluments and a larger field of employment and
display. The cultural effects of the discipline of warfare and
armament are much the same whether it is undertaken for drastic
or for business ends; in either case it takes on a dynastic
complexion and breeds the temperament, ideals, and institutional
habits proper to a drastic system of politics. The farther it
goes the more it comes to make use of business interests as a
means rather than an end, as, e.g., in modern Germany, France,
and Italy, and in the Continental states of the sixteenth and
seventeenth centuries. The crown, court, bureaucracy, military
establishment, and nobility, under whatever designations,
gradually come to their own again in such a situation, and
affairs again come to turn on questions of the maintenance and
dignity of these superior elements of the population.(18*) The
objective end of protracted warlike endeavor necessarily shifts
from business advantage to dynastic ascendancy and courtly honor.
Business interests fall to the position of fiscal ways and means,
and business traffic becomes subservient to higher ends, with a
fair chance of ultimate exhaustion or collapse through the
bankruptcy of the state.
    Business enterprise is an individual matter, not a collective
one. So long as the individual business man sees a proximate gain
for himself in meeting the demands for war funds and materials to
maintain the courtly and official establishments that go with
military politics, it is not in the nature of the business man to
draw back. It is always his profits, not his livelihood, that is
involved; the question which touches his profits is the relative
gainfulness of alternative lines of investment open to him. So
long as the pecuniary inducements held out by the state, in
bidding for funds or supplies, overbalance the inducements
offered by alternative lines of employment, the business men will
supply these demands, regardless of what the ulterior substantial
outcome of such a course may be in the end. Funds and business
enterprise are now of so pronounced an international or
cosmopolitan character that any business man may, even without
fully appreciating the fact, lend his aid to the fisc of a
hostile power as readily as to a friendly power or to the home
government; whereby an equable and comprehensive exhaustion of
the several communities involved in the concert of nations is
greatly facilitated. Barring accidents and untoward cultural
agencies from outside of politics, business, or religion, there
is nothing in the logic of the modern situation that should stop
the cumulative war expenditures short of industrial collapse and
consequent national bankruptcy, such as terminated the carnival
of war and politics that ran its course on the Continent in the
sixteenth and seventeenth centuries.(19*)

NOTES:

1. Ashley, Economic History and Theory, bk. II, especially ch.
III.

2. See Chapter IV above.

3. Cf. e.g., Ashley, "The Economic Atmosphere of America" in
Surveys, Historical and Economic, pp. 405 et seq.

4. This date is true for England. For America the discipline
favorable to the growth of the natural-liberty dogma lasted
nearly a century longer. In America the new, modern,
technological and business era can scarcely be said to have set
in in good vigor until the period of the Civil War. Hence, with a
longer and later training, the preconceptions of natural liberty
are fresher and more tenacious in America. For the Continental
peoples the case is different again. With them the modern
technological and business situation is of approximately the same
date as in America, but their training up to the date of the
transition to the modern situation was in a much less degree a
training in individual initiative, free scattered industry, and
petty trade. The Continental peoples for the most part made a
somewhat abrupt transition after the middle of the nineteenth
century from a stale and dilapidated system of guild and
feudalistic prescriptions to the (for them) exotic system of
modern technology and business principles.

5. See Chapter II above and Chapter IX below.

6. Under the system of handicraft and petty trade the converse
was true. Livelihood was the fundamental norm of business
regulations; profits had but a secondary standing, if any.

7. E.g., as to employer's liability for accidents or unsanitary
premises, the safeguarding of machinery, age limit of labourers
or hour limit of working time, etc.

8. E.g. where a workman's accepting employment on machinery which
is not safeguarded as the law requires is construed as an
exercise of the indefeasible right of free contract on his part,
which thereby exempts the employer from liability for eventual
accidents. 
    In point of legal principle the reluctance to allow or
recognize limited liability in joint stock companies, in the
English practice prior to the Companies Acts, was of much the
same nature as the current reluctance to allow an alienation or
abridgment of a workman's individual reSpOnsibility for the terms
of his employment and the consequences following from it. It was
felt that a pecuniary liability was a personal matter, of which
the person was not competent to divest himself under that system
of mutual rights and duties in which the members of the community
were bound together. Impersonal, collective, and limited
liability won its way, as against the system of natural liberty,
in this field by sheer force of business expediency. In a
conflict of principles between the main proposition and one of
its corollaries, the corollary won because the facts had outgrown
the primary implication of the main proposition. 

9. The common law is of course a formulation of the deliverances
of common sense on the points which it touches. But common law,
as well as common sense, being a formulation of habits of
thought, is necessarily an outgrowth of past rather than of
present circumstances, - in this case the circumstances of the
eighteenth century, whereas the sympathies of the vulgar, as they
appear in jury decisions, are largely the outcome of those modern
experiences that are at increasing variance with the foundations
of the common law. 
    It may be remarked by the way that, while the charge of
partiality or corruption, often heard as against these higher
tribunals, may in a few scattering instances be founded, that is
after all not much to the point as regards practical
consequences. The greater number of the courts, indeed virtually
the entire judiciary, are no doubt above substantial suspicion in
the premises. And after all, if they were not incorruptible, - if
the common run of the tribunals were corruptly working in the
interest of the employers or owners, - that need not seriously
affect the outcome as regards the general tenor of the decisions
handed down. If they are corrupt or biassed, they will decide in
favor of the owners, who can afford to pay, and they will be
under the necessity of finding plausible reasons in law for so
doing. Such reason can be found only in the metaphysical natural
rights basis of the law; and if it can be found by the help of
such legal ratiocination, then it is a valid ground of decision,
that being the peculiar merit of metaphysical grounds of
decision. On the other hand, if the court is a "learned, upright
judge," he will look for the grounds of decision in the same
place and find them in the same shape. Necessarily so, since the
point in dispute is almost invariably a question of the legal
rights of property as against the material requirements of
comfort or of livelihood; and the rights of property are the
foundation of modern law and order, while the requirements of
comfort or livelihood passed out of the scope of the law on the
abrogation of the outworn system of mandatory prescriptions
governing industrial and trade relations in early modern times.
Since the disputes in question rarely if ever arise out of a
breach of contract on the part of the employer-owner, the
decision can ordinarily, in the nature of the case, not go
against him, inasmuch as the foundation of economic law and order
is the freedom and inviolability of pecuniary contracts. It
should, in fact, be nearly a matter of indifference to the
"popular" side of this class of litigation whether the courts are
corrupt or not. The question has little else than a speculative
interest. In the nature of the case the owner alone has,
ordinarily, any standing in court. All of which argues that there
are probably very few courts that are in any degree corrupt or
biassed, so far as touches litigation of this class. Efforts to
corrupt them would be a work of supererogation, besides being
immoral.

10. This is not true in nearly the same degree for the mercantile
policies of England, even in early modern times. In English
policy, under the inchoate constitutional system of the
mercantilist era, the ulterior (avowed) end is always the
(business) advantage of the "commonwealth." The prince comes in
rather as second than as first claimant on the solicitude of the
mercantilist statesman.

11. The line of descent of the preconception of patriotism or
chauvinism, as it finds expression in this lively sense of
pecuniary solidarity, may be outlined as follows: Under the clan
(gentile or tribal) system out of which the West-European peoples
passed into the regime of feudal Christendom, a given group stood
together in a union of offence and defence, warlike and economic,
on the basis of a putative blood relationship. When the manor or
the (essentially servile) mark came to replace the clan group as
the economic and civil unit, the bond of putative blood
relationship persisted in a slightly modified form and force, the
incidence of the sense of solidarity, the "consciousness of
kind," then shifting to the new group unit, with allegiance
centring on the feudal head of the group, instead of, as
formerly, on the senior line of putative descent. When the state
came forward in medieval and early modern times and took over the
powers and prerogatives of the head of the manor or the feudal
lord, it took over also the incidence of this sense of
allegiance, and the sense of solidarity came to cover the larger
group of the nation which had succeeded to the autonomy of the
manor. Where the line of institutional descent runs through the
industrial town, with guild, handicraft, and local government,
the transient features of the growth are superficially different
but in effect much the same. The discipline of warfare, which
kept up the practice of joint action and had the appearance of
joint enterprise, served to keep the sense of patriotic
solidarity firm and vigorous and enabled it to cover other
interests as well as the princely enterprise of warfare and
state-making. Wherever unbroken peace prevailed for an
appreciable period, so as to affect the growth of traditions, the
sense of national solidarity showed symptoms of slackening. For
purposes of economic solidarity the commonwealth is conceived
after the manner of an overgrown manor. It figures as such, e.g.,
in English mercantilist writings of the sixteenth to the
eighteenth century, as well as in the patriotic trade politics of
the present.

12. In passing it may be remarked that the fact of this sense of
solidarity being an anachronism must not be taken as implying
anything for or against the substantial merits of such a frame of
mind.

13. The two complementary sentiments-patriotism and pecuniary
solidarity - are found in unequal measure among the several
nations of Christendom. The disparity in this respect corresponds
roughly with a disparity in past national experience. The
Continental peoples, e.g., have, on the whole, a readier and
fuller, more unequivocal, patriotic conviction, as they have also
had a longer, more severe, and later discipline in the fealty
that goes with a system of dynastic warfare and graded servitude;
whereas the English-speaking peoples are animated with a more
secure conviction that money value is the chief end of serious
endeavor and that business solvency is the final attribute of
manhood. But in either case the outcome is the primacy of
business in the counsels of nations, and its empire is none the
less secure for its resting more on one or the other of these two
supports.

14. For England the last half of the eighteenth century, for
Continental Europe and America the last half of the nineteenth.
In colonial commerce the date for both England and the Continent
is much earlier.

15. "Ring" is here used as a designation of this loose
organization of business interests for the guidance of policy,
without implying criticism of the ring or of its aims and
methods.

16. Armaments and large military and naval establishments have
also a secondary attraction, of a more intimate kind, for
enterprising business men, in that they afford opportunities for
transactions of a peculiarly lucrative character. One of the
parties (the government official) concerned in such transactions
has less than the usual incentive to drive a close bargain. His
own private gain and loss is not immediately involved, so that he
is less given to petty huckstering and close surveillance of the
execution of the contracts made. What adds force to this
consideration is the fact that military and naval establishments
habitually are what the vulgar would call corrupt. The pecuniary
interest of the officials does not coincide with that of the
establishment There is an appreciable "margin of error" which a
sagacious business man may turn to account.
    The great business interests are the more inclined to look
kindly on an extension of warlike enterprise and armaments, since
the pecuniary advantages inure to them, while the pecuniary
burden falls chiefly on the rest of the community. It is, to say
the least, highly improbable that the business gains which accrue
from a well-conducted foreign policy ever, in modern times, equal
the cost at which they are secured; but that consideration
scarcely enters, since the costs are not paid out of business
gains, but out of the industry of the rest of the people. The
people, however, are animated with an uncritical persuasion that
they have some sort of a residuary share in these gains, and that
this residuary share in some manner exceeds the whole of the
gains secured. 

17. See Chapter X. above.

18. Cf. Hobson, Imperialism, pt. I, ch. VII, pt. II, ch. I, and
VII.

19. On the relation of business to warlike expenditure in the
sixteenth and seventeenth centuries, cf., Ehrenberg, Zeitalter
der Fugger.