CHAPTER VIII

BUSINESS PRINCIPLES IN LAW AND POLITICS

PopuLar welfare is bound up with the conduct
of business ; because industry is managed for busi-
ness ends, and also because there prevails through-
out 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 com-
munity at large im its political concerns. Modern
(civilized) institutions rest, in great part, on busi-
ness 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

268

BUSINESS IN LAW AND POLITICS 269

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 inter-
ests, and they have little more than an incidental
bearing on other human interests. All this appa-
ratus 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 foun-
dation 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 predilec-
tion 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 preconcep-

270 THE THEORY OF BUSINESS ENTERPRISE

tions 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 cul-
minated in the eighteenth century.’ In industrial
matters the efficient and autonomous factor in the
days of the small industry was the individual work-
man, his personal force, dexterity, and diligence ;
similarly in the petty trade of the precapitalistic
English situation the decisive factor was the dis-
cretion and sagacity of the small merchant and the
petty employer, who stood in direct personal rela-
tions 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

1Cf. Ashley, Economic History and Theory, bk. II., especially
ohh, JUL,

BUSINESS IN LAW AND POLITICS 271

rather than comprehensively organized processes of
an impersonal character.'

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 indi-
viduals concerned would be left in a position of
effectively free choice if conventional restrictions
were done away. The organization was not, me-
chanically, 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 régime was of a conventional character, not
of a mechanical kind such as is visible in the more
recent development. And this conventional stand-
ardization 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 abroga-
tion of all conventional prescription. “ The simple
and obvious system of natural liberty” meant

1See Chapter IV. above.

272 ‘THE THEORY OF BUSINESS ENTERPRISE

freedom from restraint on any other prescriptive
ground than that afforded by the rights of owner-
ship. 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 free-
dom 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 interfer-
ence 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 pecun-
lary obligations so permeated the common sense of
the community, and nowhere does pecuniary obli-
gation come so near being the only form of obli-
gation that has the unqualified sanction of current
common sense. Here, as nowhere else, do obliga-
tions 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 mone-
tary valuation. To a greater extent than else-

BUSINESS IN LAW AND POLITICS 273

where 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 inviola-
bility of pecuniary relations, due to the peculiar
circumstances under which the American commu-
nity has grown up. The pioneers, especially in
that North-Atlantic seaboard community that has
been chiefly effective in shaping American tradi-
tions, 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 conven-
tional regulations circumscribing private initiative.
America is the native habitat of the self-made man,
and the self-made man is a pecuniary organism."
Presently, when occasion arose, the metaphysics
of natural liberty, pecuniary and other, was em-
bodied 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.

1Cf., e.g., Ashley, ‘‘The Economic Atmosphere of America,’’ in
Surveys, Historic and Economic, pp. 405 et seq.

974 THE THEORY OF BUSINESS ENTERPRISE

Freedom of contract is the fundamental tenet of
the legal creed, so to speak, inviolable and inalien-
able ; 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
“ oeneral welfare” clause; and even this can effec-
tively 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 unmiti-
gated and inalienable freedom of contract began
to grow obsolete from about the time when it was
fairly installed ; obsolescent, of course, not in point

BUSINESS IN LAW AND POLITICS 275

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,’ a new standardizing force, that of the
machine process, has invaded the field.2 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 constitutes nor traverses a

1 This date is true for England. For America the discipline favor-
able 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 preconcep-
tions 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 tran-
sition 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,

2 See Chapter IJ. above and Chapter IX. below.

276 THE THEORY OF BUSINESS ENTERPRISE

“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 interdepen-
dence 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 con-
catenation 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, live-
hhood is not.'

1 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.

BUSINESS IN LAW AND POLITICS 277

Under the current de facto standardization of
economic life enforced by the machine industry,
it may frequently happen that an individual or a
group, ¢.g., of workmen, has not a de facto power
of free contract. A given workman’s livelihood
can perhaps, practically, be found only on accept-
ance 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 prop-
erty which enforce such pressure are not repug-
nant 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

278 THE THEORY OF BUSINESS ENTERPRISE

person, or the liberty to buy and sell, the law can-
not 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 busi-
ness 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 conceiv-
able case of an advisedly instituted coal famine ;
but since these necessities, of comfort or of liveli-
hood, 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

BUSINESS IN LAW AND POLITICS 279

broadly taken to task by a certain class of ob-
servers 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 aris-
ing 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, !
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 main-
tenance 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

1 £.g., as to employer’s liability for accidents or unsanitary prem-
ises, the safeguarding of machinery, age limit of laborers or hour limit
of working time, etc.

280 THE THEORY OF BUSINESS ENTERPRISE

courts speak more unequivocally for the meta-
physical 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 dele-
gated to collective action, whether legislative or
corporate. 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 logi-
cal sequence is followed up, the more convine-
ingly does the legitimacy of such a decision stand

out.

1 #.g. where a workman’s accepting employment on machinery
which is not safeguarded as the law requires is construed as an exer-
cise 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 indi-
vidual responsibility for the terms of his employment and the conse-
quences 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, col-
lective, 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.

BUSINESS IN LAW AND POLITICS 281

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 untrained sympathies of the vulgar, which are
a matter somewhat apart from the foundations of
law and order.’

1 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 circum-
stances, — 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 in-
creasing 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 cor-
ruptly 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 de-
cide 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 require-

982 THE THEORY OF BUSINESS ENTERPRISE

Popular sentiment, then, does not at all uni-
formly bear out these decisions of the courts in
disputes between property rights and naked man-
kind, especially not in the more rigorous enforce-
ment 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 founda-
tion of law, order, and common welfare these prin-
ciples 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,

ments of comfort or of livelihood ; and the rights of property are the
foundation of modern law and order, while the requirements of com-
fort or livelihood passed out of the scope of the law on the abroga-
tion of the outworn system of mandatory prescriptions governing
industrial and trade relations in early modern times. Since the dis-
putes 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 pecun-
iary 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.

BUSINESS IN LAW AND POLITICS 283

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 situa-
tion; whereas the discipline of everyday life under
the current technological and business situation
inculcates a body of common-sense views some-
what 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 meta-
physics of free contract, and even of natural lib-
erty generally. This uncertainty of allegiance to
the received foundations of law and order prevails

284 THE THEORY OF BUSINESS ENTERPRISE

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 dis-
tribution of this disintegration of received convic-
tions, as well as its connection with modern
industrial conditions, will be taken up again pres-
ently 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 ques-
tions of the dynastic succession, the endeavors and
intrigues of the political magnates, fiscal adminis-
tration 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 coun-
tries, as, é.g., Germany, Austria, or Italy, where the
transition to a constitutional government has not
been completed. But since the advent of constitu-
tional government and parliamentary representa-
tion, business ends have taken the lead of
dynastic ends in statecraft, very much in the
same measure as the transition to constitutional

BUSINESS IN LAW AND POLITICS 285

methods has been effectually carried through. A
constitutional government is a business govern-
ment. It is particularly through the business
expedient of parliamentary voting on the budget
that any constitutional executive, eg., is kept
within constitutional bounds; and the budget is
voted with a main view to its expediency for busi-
ness 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 busi-
ness in the more comprehensive sense which the term
now necessarily has. But these modern mercan-
tile 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 com-
mercial advantage being a means to princely power

286 THE THEORY OF BUSINESS ENTERPRISE

and dignity.! The modern mercantilism under con-
stitutional 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 con-
stitutional 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, repre-
sentation 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 busi-
ness 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 busi-

1 This is not true in nearly the same degree for the mercantile poli-
cies 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 ‘‘ common-
wealth.’? The prince comes in rather as second than as first claimant
on the solicitude of the mercantilist statesman.

BUSINESS IN LAW AND POLITICS 287

ness 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 sub-
stance and weight, and indeed the effective major-
ity of law-abiding citizens, it follows that, with the
sanction of the great body of the people, even in-
cluding 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 osten-
sibly 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.

288 THE THEORY OF BUSINESS ENTERPRISE

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 in-
stitutional facts that have come down out of a past
which differed substantially from the present situ-
ation. 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-legitimat-
ing 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 pro-
tracted discipline of predation and servitude. Under
modern conditions it is to be rated as essentially
an institutional survival, so ingrained in the pop-
ulace as to make any appeal to it secure of a re-
sponse irrespective of the material merits of the
contention in whose behalf the appeal is made.

1 The line of descent of the preconception of patriotism or chau-
vinism, as it finds expression in this lively sense of pecuniary soli-
darity, may be outlined as follows: Under the clan (gentile or tribal)

system out of which the West-European peoples passed into the régime
of feudal Christendom, a given group stood together in a union of

BUSINESS IN LAW AND POLITICS 289

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 boun-
daries is felt to be beneficial to all the rest of the
population.’

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 medieyal
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
coyer 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 over-
grown 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.

1 In passing it may be remarked that the fact of this sense of soli-
darity being an anachronism must not be taken as implying anything
for or against the substantial merits of such a frame of mind,

290 THE THEORY OF BUSINESS ENTERPRISE

The second institutional support of business poli-
tics, viz. property, is similarly an outgrowth of the
discipline of the past, and similarly, though per-
haps in a less degree, out of touch with the disci-
pline 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 dustry 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 well-
being, 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 in-
terests, 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, capital-
istic times. Under this current, business régime,
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

BUSINESS IN LAW AND POLITICS 291

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 meri-
torious 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 annoy-
ance, 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 suc-

292 THE THEORY OF BUSINESS ENTERPRISE

cessful 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 poli-
tics and the populace by whose means the busi-
ness gains are secured work together in good faith
towards a well-advised business end,—the accu-
mulation of wealth in the hands of those men who
are skilled in pecuniary matters.’

The manner in which business interests work
out in government policy may be shown by follow-
ing 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 cur-
rent policy of war and armaments. Modern busi-
ness 1s competitive, emulative, and the direction
of business enterprise is in the hands of men who
are single-minded in their competitive conduct of

1 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 dis-
cipline 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.

BUSINESS IN LAW AND POLITICS 293

affairs. They neither are inclined, nor will busi-
ness competition permit them, to neglect or over-
look 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,’ business competi-
tion has become international, covering the range
of what is called the world market. In this inter-
national 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, legis-
lative, diplomatic, and military, against one an-
other in the strategic game of pecuniary advantage.
The business interests domiciled within the scope
of a given government fall into a loose organiza-
tion in the form of what might be called a tacit
ring or syndicate, proceeding on a general under-
standing 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

1 For England the last half of the eighteenth century, for Conti-
nental Europe and America the last half of the nineteenth. In colo-
nial commerce the date for both England and the Continent is much
earlier.

994. THE THEORY OF BUSINESS ENTERPRISE

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! of business interests which secures the
broadest approval from popular sentiment is, under
constitutional methods, put in charge of the gov-
ernment 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 na-
tional animosity, a popular candidate, a large
grain crop, etc. But the only secure basis of an
enduring party tenure of the government machin-
ery 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 in-
verts the sequence of facts, but it is none the less
a fair expression of the close relation there is be-
tween business endeavor and the modern military

'“ Ring”? is here used as a designation of this loose organization
of business interests for the guidance of policy, without implying criti-
cis of the ring or of its aims and methods.

BUSINESS IN LAW AND POLITICS 295

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 argu-
ment of those who speak for armaments (in Eng-
land and America) is that the maintenance of
business interests requires the backing of arms.
On the Continent of Europe this argument com-
monly 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 fron-
tiers of the pecuniary culture among the backward
populations. There is commonly a handsome mar-
gin of profit in doing business with these, pecunia-
rily 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 civil-
ized rules of conduct as will make trade easy and
lucrative. To this end armament is indispensable.

296 THE THEORY OF BUSINESS ENTERPRISE

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 civiliz-
ing powers. No recourse but force is finally avail-
able 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 demonstra-
tions have come to be a part of the regular appara-
tus 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 develop-
ment of business. International business relations,
it is well said, make for peace; in the sense, of
course, that they enforce the pacification of recalci-
trant 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 reéstablishing
peace on terms more lucrative to its business men.'

1 Armaments and large military and naval establishments have also
a secondary attraction, of a more intimate kind, for enterprising busi-
ness men, in that they afford opportunities for transactions of a pecul-
iarly 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 immedi-
ately 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

BUSINESS IN LAW AND POLITICS 297

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
slight 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.

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 arma-
ments which would at the outset have seemed

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 pecun-
iary advantages inure to them, while the pecuniary burden falls chiefly
on the rest of the community. It is, to say the least, highly improb-
able 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.

1 See Chapter X. above.

298 THE THEORY OF BUSINESS ENTERPRISE

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 service-
able 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 arma-
ments, 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 pro-
portion 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 ques-
tion of armament is no longer, What amount of
warlike expenditure is needed to extend or main-
tain business traffic? but rather, What amount
will the nation’s resources bear? But the pro-
gression does not stop at that point; witness the
case of Italy, France, and Germany, where the war
drain has visibly impaired the industrial efficiency

BUSINESS IN LAW AND POLITICS 299

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 indus-
trial and business interest to the furtherance of the
“oreat 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 ex-
penditures, 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, auto-
cratic 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

300 THE THEORY OF BUSINESS ENTERPRISE

armament are much the same whether it is under-
taken for dynastic or for business ends; in either
case it takes on a dynastic complexion and breeds
the temperament, ideals, and institutional habits
proper to a dynastic 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, bureau-
cracy, 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 popu-
lation. The objective end of protracted warlike
endeavor necessarily shifts from business advan-
tage 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 exhaus-
tion or collapse through the bankruptcy of the state.

Business enterprise is an individual matter, not
a collective one. So long as the individual busi-
ness 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

1 Cf. Hobson, Imperialism, pt. I. ch. VIL, pt. Il. ch. I. and VIL,

BUSINESS IN LAW AND POLITICS 301

nature of the business man to draw back. It is
always his profits, not his livelihood, that is in-
volved; 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 interna-
tional 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 gov-
ernment; 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 Conti-
nent in the sixteenth and seventeenth centuries.’

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