CHAPTER I

INTRODUCTORY

THe material framework of modern civilization
is the industrial system, and the directing force
which animates this framework is business enter-
prise. To a greater extent than any other known
phase of culture, modern Christendom takes its
complexion from its economic organization. This
modern economic organization is the “ Capitalistic
System” or “Modern Industrial System,” so called.
Its characteristic features, and at the same time
the forces by virtue of which it dominates modern
culture, are the machine process and investment for
a profit.

The scope and method of modern industry are
given by the machine. This may not seem to
hold true for all industries, perhaps not for the
greater part of industry as rated by the bulk of
the output or by the aggregate volume of labor
expended. But it holds true to such an extent
and in such a pervasive manner that a modern
industrial community cannot go on except by
the help of the accepted mechanical appliances

1

2 THE THEORY OF BUSINESS ENTERPRISE

and processes. The machine industries — those
portions of the industrial system in which the
machine process is paramount — are in a dominant
position ; they set the pace for the rest of the
industrial system. In this sense the present is the
age of the machine process. This dominance of
the machine process in industry marks off the
present industrial situation from all else of its kind.

In a like sense the present is the age of business
enterprise. Not that all industrial activity is car-
ried on by the rule of investment for profits, but
an effective majority of the industrial forces are
organized on that basis. There are many items
of great volume and consequence that do not fall
within the immediate scope of these business prin-
ciples. The housewife’s work, e.g., as well as
some appreciable portion of the work on farms
and in some handicrafts, can scarcely be classed as
business enterprise. But those elements in the
industrial world that take the initiative and exert
a far-reaching coercive guidance in matters of in-
dustry go to their work with a view to profits on
investment, and are guided by the principles and
exigencies of business. The business man, espe-
cially the business man of wide and authoritative
discretion, has become a controlling force in indus-
try, because, through the mechanism of invest-
ments and markets, he controls the plants and
processes, and these set the pace and determine

INTRODUCTORY 3

the direction of movement for the rest. His con-
trol in those portions of the field that are not
immediately under his hand is, no doubt, some-
what loose and uncertain; but in the long run his
discretion is in great measure decisive even for
these outlying portions of the field, for he is the
only large self-directing economic factor. His con-
tro] of the motions of other men is not strict, for
they are not under coercion from him except
through the coercion exercised by the exigencies
of the situation in which their lives are cast; but
as near as it may be said of any human power in
modern times, the large business man controls the
exigencies of life under which the community
lives. Hence, upon him and his fortunes centres
the abiding interest of civilized mankind.

For a theoretical inquiry into the course of
civilized life as it runs in the immediate present,
therefore, and as it is running into the proximate
future, no single factor in the cultural situation
has an importance equal to that of the business
man and his work.’

1** Dem unbeteiligten Beobachter drangt sich die Erkentniss auf,
dass in dem Phainomen des Handels [here equivalent to ‘‘ business’? ]
ein entscheidender allgemeiner Gedanke enthalten und eine der mach-
tigsten Thatsachen der Geschichte gegeben ist, mit der jede Zeit ge-
zwungen wird, sich woh loder iibel abzufinden. . . . Der Handel ist in
folgerichtiger and unaufhaltsamer Entwicklung das fiihrende Gewerbe
geworden. Es ist fiir die anderen Gewerbe ein vollig aussichtsloser
Versuch, ihn zu hemmen und durch Zwangsmittel in seine ‘ dienende

Stellung’ zuruckzudrangen.’’— K. Th. Reinhold, Arbeit und Werk-
zeug, pp. ix, x.

4 THE THEORY OF BUSINESS ENTERPRISE

This of course applies with peculiar force to
an inquiry into the economic life of a modern
community. In so far as the theorist aims to
explain the specifically modern economic phenom-
ena, his line of approach must be from the business
man’s standpoint, since it is from that standpoint
that the course of these phenomena is directed.
A theory of the modern economic situation must
be primarily a theory of business traffic, with its
motives, aims, methods, and effects.