What Makes America Great?
THE SPARK THAT FIRES INITIATIVE
BY COLONEL WILLARD CHEVALIER, Publisher, "Business Week"
Delivered at Carrier Institute of Business, Syracuse, N. Y., September 13, 1943
Vital Speeches of the Day, Vol. X, pp. 17-23.
TECHNICAL Sergeant George of Clarkdale, Arizona recently wrote a letter to his wife from his post some place in North Africa. It found its way into public print. I want to read you two sentences from it, for I think he puts into a nut-shell the experience millions of our men, now fighting abroad, are having.
"The people over here," Sergeant George writes, "are very American conscious; most of them to whom I have talked have expressed the hope that they can some day visit America. It gives me a feeling of pride that I am a citizen of the U. S. and am fighting for her . . ."
Sergeant George is proud of America, because America is a great country. But just ask a dozen average people what, in their opinion, has made America great and you'll get a dozen different answers.
I suppose someone might argue that this difference of opinion is not important. "Who cares anyway what has made America great? That's water over the dam, isn't it, and not worth talking about?"
But I wonder if that isn't somewhat shortsighted. It seems to me that it is important—very important to all of us. If we can get a pretty clear idea of what has made our country great, we shall see more clearly just what it is we are fighting for in this war. And we shall be better able to plan for the peace to follow the war.
To understand the secret of our success as a nation will help each one of us to face the future with greater faith and confidence. And if we think carefully about it, it will help each one of us to improve his or her own position in life.
To find out what makes America great, let us first see just how great America IS. Now, a thing cannot be great all by itself. You have to compare it with something else. If we would understand how great America is, we must compare it with other countries—that is, with the rest of the world. But that is easier said than done. For comparisons like that are not always reliable. Some countries just cannot be compared with others. Some are extremely hot, as Brazil, others extremely cold, as Greenland; some have long histories, as Greece and Italy; others are young, as Australia and the United States; some are big and sparsely populated, like Australia, others are small and densely populated, like Japan. When you have natural differences like those any simple comparison would be misleading. You know the old saying that almost anything can be proved by statistics, or as some express it, figures don't lie; but liars will figure.
Only by comparison can we understand America's position among the world's nations. The land surface of the United States is about 6 per cent of the world's total land area. The American people are about 6 per cent of the world's population. 6 out of one hundred. That is easy to remember. If you were to look at the world from a distant Planet, that's all you might have to say about our America.
But let us take a closer look. We find that this 6 per cent of the world's people grow 54 per cent of the world's corn, 18 per cent of its wheat, 41 per cent of its cotton. We mine 30 per cent of the world's coal, 38 per cent of its iron ore. We produce 38 per cent of the world's steel, 44 per cent of its copper, 23 per cent of its aluminum, 67 per cent of its crude oil. Four years ago we produced 30 per cent of all the electric power. Our current production of some 200 billion kilowatts a year is equivalent to a thousand million laborers working 8 hours a day, every day of the year.
Has all this come about just because nature has endowed us with far more natural resources than other countries? Not necessarily. Take India and China, for example. With twice as much land, four times our population, and with a history going back thousands of years, their combined production of coal was but 1/12 and of iron but 1/25 of ours, although their resources of coal and iron are probably as great as ours. The natural oil deposits of Central and South America probably are as great as ours. But they produced only 1/4 of what we did and most of that with the aid of American engineers and American equipment.
The immediate reason for these differences, of course, is that America is more productive. A few weeks ago, Business Week ran a little article that compared the prewar productivity of American industry with that of England and Germany. It showed that our total output was about three times as large as that of either of these countries and that the productivity of each American industrial worker was, on the average, twice as large.
For instance, the productivity of an American coal miner was almost twice that of a German coal miner, more than 2 1/2 times that of a British. American blast furnace production per worker employed in the industry was 3 1/2 times that of Britain, 3 times that of Germany. In the production of steel products, including automobiles, the ratio was better than 4 to one; for radio sets it was 5 to one as compared with Britain, 7 to one as compared with Germany. In other words, the American, working in our plants with our equipment, could easily out-produce the workers of the other two industrially most advanced nations.
The obvious explanation is, of course, that the American worker has more and better tools and machines to work with. Before a man can get a job in a manufacturing industry, more than $5,500 must be invested in tools and equipment for htm to work with; ten mechanical horsepower must be ready and at hand to do his heavy work. In the metal working industry the necessary investment for each worker is $6,500 and in the Chemical industries almost $15,000. It is this investment in machinery and equipment that makes the American worker so efficient.
It becomes very important therefore in answering our question "What makes America great?" to know somethingabout the processes by which a country sets up the plants and machinery that are necessary to increase its productivity. To do that we'll stop right here long enough to take a quick look at some of the better known systems that have been devised to accomplish that purpose.
Let us, then, consider briefly the differences between our American system, commonly called capitalism, and the Communism of Russia, the Fascism of Italy and the National-Socialism, or Nazism of Germany.
Nazism is a form of Socialism that is supposed to be for the benefit of the Nation. In practice it is for the benefit of those who, at the moment, claim to represent the Nation—that is, the Government, the Nazi Party, the Dictator, or Leader. Now, socialism is the name we give to a theory which contends that the operation of commerce, industry and agriculture for private profit does not serve the common welfare. Accordingly, it asserts that control over all these should be in the hands of the government which should operate them not for profit, but "for use". In that way, we are told, it would be possible to arrange so that everyone can get as nearly as possible an equal share of income.
In Germany, Nazism, or National Socialism, has assumed supreme control over production. It has indeed succeeded in leveling incomes—although it has leveled them downward. But its goal was not so much to achieve pure socialism as to gain and maintain the total—or totalitarian—powers of the Leader and his party over the German people, its neighbors, and eventually over the whole world.
Fascism, according to its inventor, Mussolini, makes the government the end and purpose of national life. Labor, management, industry, and agriculture exist simply to make the government more powerful—more total. Hitler got many of his ideas from Mussolini. Both pretended to be concerned about the welfare of business and industry and used that pretense to destroy the independence of labor. Then they pretended to be concerned about the welfare of labor, and used that pretense to destroy the independence of business and industry.
Communism, on the other hand, never has pretended to be interested in anything except the welfare of the working class. Like socialism, from which it was derived, it is opposed to private profit, and to private property as well. Under it the government would own and control all the factories and farms; it would order what and how much is to be produced, and at what prices the goods would be sold in government-owned stores. It would fix wages and hours which, theoretically at least, are supposed to give everyone an equal income. All three of these systems—Nazism, Fascism and Communism—lead to permanent dictatorship by the one political party, which stays in power and which is the undisputed master of the lives of all the people. No opposing political party, such as we have in this country, in Great Britain, and in other democracies, is permitted to exist.
Capitalism, as distinguished from all these, is based on the right of the individual to acquire and own all kinds of property which he is free to use so as to make a profit for himself. This he can do either by working it himself, like an independent taxi operator, or by hiring people to work for him, like a store-keeper, or by putting his money either directly or through a savings bank or insurance company into some kind of a business, in the profits of which he hopes to share. Any person, therefore, who owns property, whether in the form of money invested or in a savings bank, a taxi-cab, or a department store is a capitalist—on either a small scale or a large one.
The theory of capitalism is that the desire to make a profit will lead the owners of property to keep it at work and thereby make jobs for many people producing things that people need. When the owner can make more profit thanhe actually needs to live on, he is supposed to invest his new savings, which makes possible the starting of new businesses and the progress and improvement of existing businesses.
Since everyone can use his property any way he sees fit—of course, within the law—capitalism encourages competition among individuals, either singly or in groups such as companies. This competition for the patronage of the public is supposed to bring about better goods or lower prices or both for the benefit of the consumers. It makes also for the freedom of the individual to work for whom he pleases and to change his job whenever he thinks he can get ahead by doing so.
Under capitalism, the government is supposed to act merely as a sort of policeman who sees that all the people have a voice in making the rules of the game as they want them and that everyone lives up to these rules.
To put it very briefly, the various forms of "collectivism", as the first three systems are called, assume that everyone will do his very best to plan, and think and work hard enough to produce an abundance of everything we need and puts its emphasis on distributing that abundance as evenly as possible. To do that, they put the government in a position of power over the production and distribution of everything. Any individual who wants to be sure of getting his share, therefore, had better do exactly as he is told by those who are running the government.
Capitalism, on the other hand, is more concerned with constantly increasing the efficiency of production so that we can manage to make more and more things with a given expenditure of labor. It leaves the share that each will get of what is produced to the individual's smartness, hard work, personal skill, and whatever other personal qualities enable people to get ahead. To do this, it keeps the government as the servant of all the people, making and enforcing the rules that they themselves decide they want to work under.
The collectivist systems sacrifice the individual's opportunity to get ahead in order to achieve security for the mass; the capitalist system leaves mass security to the working out of individual opportunity.
This, I know, is a somewhat rough and ready comparison. Big books have been written on the subject and we can't hope to exhaust it here. I am only trying to suggest the role that private property and profit have played in the development and growth of American industries and in the high living standards we have attained.
We all recognize, I am sure, that our system has certain shortcomings. Like most human institutions it is far from being 100 per cent.
But sometimes, in our zeal to correct those shortcomings we are inclined to wonder whether one of these other systems might not work better. Maybe it would. But the burden of proof always is on the fellow who wants to make the changes. He should be able to show up that his way is better.
After all, regardless of theories about what might be or should be, the American system, so far, has produced the highest standard of living for the largest number of people that has ever been known. Naturally, we should be trying to raise that standard and also pass on its benefits to more of the people. But in planning to do that we had better hold fast to what is good and try to improve it, rather than scrap it for something that has yet to be proved. When we compare systems that are to govern the lives of 135,000,000 people or more, we should compare performance and not theories. To achieve higher performance we should try to improve the best we have rather than scrap the best and start over with something that has yet to prove itself. And above all we should try to make sure that what we are doing will be the sort of thing that Americans will throw themselves into. What might be best for the Old-World peoples might not at all suit Americans.
In sizing up the performance of our system, two points of controversy frequently are raised. These are (1) the ownership of our wealth, and (2) the distribution of our income. Let's look at the matter of wealth first.
Away back in ancient Rome there was a "Share the Wealth" movement. Huey Long's "Every Man a King" and Dr. Townsend's pension scheme, all promised their followers a share in the country's wealth by taking it from the rich and dividing it among the poor. Russia went through a bloody revolution to carry out such a transfer, to place all wealth in the hands of the government representing all the people. Hitler has gone to war to share the wealth of Germany's neighbors after first taking some from her own citizens.
So there are different ways of looking at this question of a nation's wealth. Hitler, for instance, argued that Germany hasn't enough natural resources of her own, not enough coal, iron, farm-land and oil; and that she must therefore conquer and exploit the resources that belong to her neighbors. That is, he said, to be great, a country must own wealth in the form of natural resources, and must be willing to wage war to get them. Japan and Italy had similar ideas!
To put them into effect, Hitler, Mussolini and Tojo had first to get control of their own political and industrial organizations—their factories and farms, their labor and management so they would produce the "guns instead of butter" necessary to prepare for war. The freedom of the Germans, Japanese and Italian people must be suppressed before they were fit to rob and suppress their neighbors. And if they were to win this war, the only way they could enjoy the fruits of their victory would be to keep the conquered people suppressed and to force them to work—as the Czechs, the Dutch, and the Belgians are now forced—for the sole benefit of their masters. That is the Nazi philosophy of wealth which says: you can be wealthy only if you rob, suppress, and exploit your neighbors.
Russia's way is different. Starting out with abundance of natural wealth of her own, she started on the theory of Carl Marx, that a people can enjoy the full fruits of its labor only if it keeps control over the means of production, that is, over its factories and farms, mines and mills. When the Russian government took over this wealth, every factory worker, farmer, scientist and businessman became an employee of the government; they were no longer free people in our sense of the word. They had to work the hours and were paid the wages that government officials said were right. They could not change their jobs without official permission; hundreds of thousands of them were shipped to new places and into new jobs at the command of the government. They could buy only what the government allowed to be produced, and at fixed prices. They could own no property, such as a home and a garden or a share in a business. They could not go into business of their own. Moreover, their lives were not worth a kopek if they expressed any ideas on political or economic matters that differed from the official government views.
The goal of Russia's economy is, of course, to produce the highest possible living standard for her people. Over the last 25 years she has made real progress, now unhappily interrupted by the war. But to us it is interesting that that progress had been made largely with the aid of the engineers and technical equipment developed and provided by America and other established nations. At any rate, it is too soon for us to know whether communism will eventually accomplish its purpose and produce for the Russian people as high a living standard as capitalism has done for the American people.
There you have two ways of using the wealth of a nation. And by now it should be clear that when we talk about wealth, we are not talking about money, or gold, or diamond bracelets, or country estates. We are talking about all the resources of the nation—its farms, and timber, its mines and factories, its homes and stores, its railroads and machinery, its property of every sort, especially the kind of property that is used to produce new things that are wanted by the people, like factories, farms, mines, railroads and power houses.
Now we come to a third way of using such wealth, the American way. We don't believe in robbing our neighbors and we know from experience that we did not have to take property away from our citizens to become a great and wealthy nation. We don't really care whether Henry Ford owns his big factories all by himself, or whether a small group of bankers or a couple of hundred thousand individual stockholders own them. What we do care, however is whether Henry Ford or these other owners run the factories, or keep them idle. If they run them, we know they are producing not only new wealth in the form of a million automobiles and trucks a year, but also homes and clothing, food and all sorts of luxuries for the several hundred thousand Ford employees and for thousands of Ford suppliers and subcontractors.
That is the same as saying that we are interested in the income that is derived from the Ford wealth, both in terms of wages paid out and of goods produced. If tomorrow Henry Ford were to share his property with his employees,and it should turn out that they would not or could not run it as efficiently as he does, they would lose their jobsand their incomes and thus be poorer than they are today, even though they'd own a share of the big Ford wealth. And they and all the rest of the American people would be poorer by the cars that would not be produced, and the wages and salaries that would not be paid out.
The "Share the Wealth" slogan is therefore a very dangerous and deceptive device. It has been used a great deal by would-be dictators to fool the people. But the wise people are not worried about who owns the wealth. They want to be sure that it is in the hands of those who will use it most effectively to produce the largest possible income.
That's what measures the value of the wealth to them. Consider these figures: the entire productive wealth of America—all of our means of production, consisting of factories and mines, ships and farms, with all our land and machinery and equipment has been estimated to be worth around $1500 for every American, while the income per
head, produced in one year with that wealth was around $750. That is, every two years, we could, in theory reproduce all of our means of production if we wanted to. So we come to our second question: how is that incomedistributed? Who gets how much of it? The facts we canget from statistical information carefully collected for the 20-year period from 1919 to 1938. The total national income for that period amounted to some $1,300 billion.
Let's take that $1,300 billion at 100 per cent, or 100¢ and see how much, roughly, was collected by the different groups that had a hand in creating it. The biggest slice, 63¢, went to employees for wages and salaries; 17¢ went to individual farmers and small businessmen—those who run their own little shops, like butchers and grocers and pants-pressers; 6¢ was paid out for rents; 6¢ for dividends; 7¢ for interest to the people whose money is invested in various kinds of industry and about a penny was paid out by the government for gold and other purchases. There's your national dollar of income.
Now, we can break down this dollar another way. First of all, to produce a dollar's worth of income, we need 12¢ of machines and tools, buildings and equipment, that must be replaced because they wore out, broke down, or became obsolete. Now we have 88¢ left. About 81¢ of that is spent for food, shelter and comforts of all sorts, including your cars and refrigerators, radios, shoes and clothes. That is, we have only about 7¢ left over. Less than half of that, or about 3¢ goes to business; about 2 1/2¢ goes to governmental expenses; and the remaining to building new homes and for the payment of foreign debts.
In fact, the share of the national income that goes to what is generally called "capital" is much smaller than most people imagine. If over the past 100 years, you can imagine "labor" getting all of the investor's share in addition to its own, wages would not have been increased more than 10 per cent. During the thirties, for instance, wages would hardly have been raised at all.
The figures show another interesting fact. The proportion of their total receipts that manufacturers have been paying out in wages over the last 90 years has not changed more than 10 per cent one way or the other. Which goes a long way toward proving that the only way—or at least the surest way—all wages can be raised is by making every hour's work more productive, that is, to produce more dollar's worth of income per hour.
Now when it comes to distributing the income available for wages amongst the various kinds of workers, many methods might be devised. The usual American method has been to pay higher wages to those who, because of greater skill or harder work can turn out a higher production. Americans have felt that this is the surest way to make every hour's work for the whole factory most productive, and thereby to increase the amount of income that will be available for distribution.
It is true, of course, that we have set up by law minimum wage standards so that no one will be allowed to work, even if he wants to, for less than is considered necessary to maintain a minimum standard of living. This, however, is simply a means of averting the social evils that result from having too many people living on too low a scale. It does not change the American principle of paying, so far as possible, in accordance with the value of the work done.
Let me point out in passing that this method of fixing wages also provides an incentive for the management of a company to give its workers the most efficient equipment and machinery that it can provide. Obviously, if it is going to stay in business, the company must be able to make and sell its products at a price that will be no greater, and if possible, less than that of its competitors. And if it is going to keep the most competent workmen in its plant, it will have to pay them enough money, again in competition with other companies. In order, then, to pay higher wages to the best workmen, it must have also the most efficient machinery.
And since this combination of the most efficient machinery and the best workmen tends to raise the efficiency and therefore the income of the whole plant, everyone connected with it, from top to bottom is going to benefit from it.
I have said that other methods than this might be devised. For example, when Russia started its new economy 25 years ago, the theory was that wages would be equally distributed, and no worker would be allowed to have more than the others. In practice, however, it was found necessary to modify this theory. The experience of Russia soon convinced her government that this method could not increase the production of Russian industry. So, even before the war, they had given up that policy.
You may have read in a recent newspaper report that Premier Stalin publicly thanked a Kirghiz farmer for contributing more than 1,000,000 rubles to the Red Army fund. But you may ask how could a farmer accumulate so much money in the land of Communism?
The answer is that now even the collectivized farmers are being paid, not on the basis of numbers of hours worked, but on the basis of the amount of food produced. A similar change has taken place in the factories. Workmen are reported to earn from 300 rubles a month for the lower groups to 4,000 rubles for some of the highly productive workers. 8 to 10 per cent of the workers in those factories earn more than 1,200 rubles or some $60 a week, while the salaries of the technical staff vary from 1,000 to 6,000 rubles a month or $1,200 and more. That is, the need to have every man produce as much as possible has proved more important than maintenance of the old Marxian theory "from each according to his abilities, to each according to his needs." When the time came that Russia had to be efficient and productive, or else be destroyed, she turned to the system of compensation that had made us the most productive country on earth.
We might go on discussing this very interesting subject. It has many angles. But at any rate, I think we can forget the Axis-inspired idea that the present basis of distributing our wealth and income is something sinister or undesirable. This however still leaves an unanswered question, now it may be asked, what do the American people actually get out of the fact that they are part of the nation with the greatest wealth and income? In other words, the question "How great IS America?" may well come down to the proposition, "How well off are the American people as compared with the peoples of other countries."
Suppose we take a thousand average Americans, workers and salesmen, farmers, scientists and bankers, with their wives and children, and compare them with a thousand average Britons, Germans or Italians. Of this thousand. 240 Americans, or one out of four, will be enrolled in a school, college or university; only 156 British will be so enrolled, and only 112 Germans. 225 Americans will own an automobile—one out of every four—only one out of 20 Britons, one out of 43 Germans and only one out of 91 Italians will own a car. We, six per cent of the world's people, own 72 per cent of the world's automobiles, and we own 30 per cent of all the railroads.
Of our 1,000 Americans, 148 will have telephones—49 per cent of the world's total—as against 64 telephones, or less than half that number in England, 50, or one-third, in Germany, and 14, or less than one-tenth in Italy. 267 of us, or more than one in four, will own a radio receiving set, as against 211 in Germany (and they have that many only because Mr. Goebbels has wanted the people to listen to him and Hitler, but to no one else); in England there will be 188 out of 1,000 who have radios and in Italy only 23.
Name any other measure you will of the people's standards of living-—the quantity and quality of food consumed, of clothing, homes and home furnishing, support of the Red Cross and other philanthropic institutions, and of poor relatives in other countries——perhaps with the one exception of tiny New Zealand—the American people are on the average, better off than any other people on earth. That is if we disregard our wealth in natural resources, our tremendous productive capacity, and the superior productivity of the American worker, and take the people's welfare as the measure of a country's greatness—America is still the world's greatest country.
Now, what was it that has made us that great? As I said before, other countries were as rich as America in coal and iron deposits, but they did not use them. Others had rich deposits of copper and tin, fertile soil, rivers, and forest.
Our human resources, the men and women who settled here, were not different from the brothers and sisters they left behind in the old countries. But the British who settled New England and founded America's first industries, who built and sailed our first ships; the Germans who settled in Pennsylvania, the French in Louisiana and Rhode Island, the Poles of our coal fields and steel mills, once they were in this country, prospered and rose to positions they could never have reached at home.
Was it that we had more money for investment at our disposal than the old countries? On the contrary. We were desperately short of investment funds. To build our first factories, to sink our first mines, and to build the railroads that opened up the West, we had to borrow from British, French, and German sources. We remained in debt to them up until the last war. Not until after that war did we have a surplus of savings which we could, in turn, export to other countries by making foreign loans.
Was it, perhaps, that this system, which we call "capitalism" had a chance to develop here that it did not have in other countries? I think not. The history of capitalism goes back thousands of years. Ancient Babylon had large business organizations, banks and insurance companies. Capitalism functioned in ancient Greece and Rome, and in Germany and France in the Middle Ages.
Was it, then, that factory production could develop here faster and better than any place else? England had her industries long before we had ours, and so had France and Germany. As long as 4,000 years ago toys were produced by factory methods in the town of Chan-Darn on the Indus river.
Was it, finally, that Americans have had a greater urge to do things, to work hard, to build, and to trade? The slave that built the ancient pyramids of Egypt, the magnificent temples of Greece and Rome certainly worked as hard, as any Americans ever did. For thousands of years the whip of the slave driver gave people the incentive to work hard. The desire for profits—that too had functioned long before we used it. The incentive of trading profits led the ancient Phoenicians, 2,000 years before Christ, to sail their ships halfway around the world; it brought Columbus to America in 1492. The need to provide the necessities of life, the lust for power, the profit motive—all of them had given men incentive to work long before America was discovered.
Natural resources, human resources, funds for investment and strong incentives all played their parts in making America great. But they were nothing new in this world. The new factor that America had added is individual and personal opportunity; equal opportunity for every individual to shape his life, and to rise as high as he can through his own skill, ability, and willingness to work.
When Jefferson wrote the Declaration of Independence, he had in his mind the examples of European countries in which the freedom of the people was choked by the bureaucratic controls and regulations imposed on them by kings and princes. He knew that in those older countries the opportunities of the individual were limited also by an upper crust who enjoyed special privileges, monopolies, and other advantages. These conditions had been imposed on the Colonies, and for a long time threatened to hold back the economic development of America. But they were very common in Europe.
In France, for instance, governmental bureaucrats described how long a fishing boat might be, so that too many fish would not be brought to market. Rules prescribed how large a handkerchief could be, how wool should be mixed, how dyes should be made. The price of bread and the size of the loaf were fixed. Methods of manufacture with detailsas to the size, color and quality of manufactured articles were laid down in detail.
In his new book "Challenge to Freedom", Henry Wriston, president of Brown University explains "It was all done in the name of order, method, rational control and prosperity. Even more remarkable, it was done in the name of 'liberty'. In the name of liberty, liberty was destroyed; in the name of private initiative, private initiative was smothered." (p. 38-39.)
The American Revolution was a revolt against the powers of the king—of the government—over the individual. Its purpose was to secure the rights of the individual person, and to make the government the servant rather than the master of the people. That was the essence of our revolution. And that, as I see it, is the secret of what has made America great.
We may not appreciate today the revolutionary change that meant to millions of the world's people. For the first time in history, here was a country with a great future, where the rights and opportunities of the individual were more important than the powers of the government, where every one had an equal opportunity to build his own life; where every one could, for the first time, enjoy the rewards of his labor, intelligence and ingenuity. For the first time, those who, like the Puritans, were seeking religious freedom were free to live their lives as they saw fit; Germans in search of political freedom could enjoy the democracy and individual rights denied them at home; Italians, Poles, Scandinavians, Frenchmen, could attain a standard of living that was beyond their reach at home. Out of this equality of opportunity was born our system of individual opportunity, or as it is also called our free enterprise system. There was nothing "free" about it in the sense of getting something for nothing. On the contrary, it meant hard work—to produce food, a roof over one's head, clothes for the family. But work also meant the promise of success, of getting ahead, of comforts, luxuries and power.
Above all, it meant freedom from repressive interference by King or government, freedom to choose one's occupation, to go into farming, shipping, manufacturing, mining—whatever there seemed to be opportunity, and wherever one thought he could use his talents to his best advantage. No field was closed to newcomers.
The emphasis was on enterprise, on doing things, and doing them ever bigger and better. Here was the untapped wealth of a new Continent, here were men and women streaming in, anxious to work. Our national economic objective was to put our material and human resources to work, to make them ever more productive, and in this way provide ever more of the necessities and comforts of life for the largest possible number of the people.
In this way a premium was put on what Edgar Queeny in his recent book called the "Spirit of Enterprise", on the ability to organize our resources into companies and corporations through which, by way of cooperative effort every man became more productive and thus earned more than he could possibly have produced or earned single-handed. As some men had visions of larger production and greater expansion for their businesses, they had to call upon the services of thousands of other men especially skilled in certain arts and sciences. They had to build larger factories and install many machines. This complicated task called for a new kind of skill. We call it management. At first the owners of a business were their own managers. But as organizations grew in size, the money of outsiders was needed to build the giant factories and install the machinery that made possible mass production and low prices. Thenthe owners who put up the money became stockholders and hired experts to manage their enterprises.
That is how American business management developed. Today it runs most of our business and industry. Its function has always been to make our human and material resources—our labor, raw materials, machines and money—more productive. These managers are hired by the 7 million individual stockholders who own our 500,000 corporations, to do an efficient job. And the efficiency of the managers is always being put to the test by the competition of similar managers employed by other corporations, as well as by independent businessmen in the same field. And as you look into the operations of most successful business corporations you will find that their managements have succeeded by the same "spirit of enterprise", the same equality of opportunity offered to its own employees, which has been the basis of America's growth.
Now, all this is very interesting, say the skeptics. But the times have changed, their argument runs. The country has been opened up. The government has no more free land to give away to settlers. Our deposits of copper and iron and coal and oil are developed. Our gold mines have been discovered. Our factories are built. We have all the railroads and highways, power dams and shipyards we'll need after the war. Our individual opportunity system may be wonderful in theory, they continue, and no one would deny that it was responsible for the country's growth in the past. But wasn't it responsible also for the depression in the thirties? And isn't it true that the machine age, with its concentration of wealth and employment requires more government controls than our simple economy of 167 years ago.
Let's think a little about these questions. First of all, as I have said already, our American system is not perfect. All we can say, and what the record shows, is that it still is superior to any other system any country of comparable size has ever had. Of course, we've had and still do have slums; we've had sweat shops, slavery, persecution, big business monopolies and financial and other sorts of racketeering. And we have had depressions.
But when we admit that, we are but admitting that the record of our economic system is no more perfect than the record of our political system. The faults of both are the faults of democracy and individual initiative. But should we have abandoned democracy because we have had political bosses and ward heelers, machine dictatorship, graft and corruption? The way to correct the faults in our political system, we believe, is to get rid of each weakness as it shows up—and that process is far from finished even today.
Likewise, the way to correct the faults of our economic system is to crack down on each weakness as it appears. That too, is still unfinished business in many respects. But over the years we have made progress. Out of the abuses of monopolies and trusts at the beginning of this century came the Sherman Anti-Trust Act; the collapses of the banking system from time to time gave us first the Federal Reserve Act, and later Federal Deposit Insurance; that mass unemployment and the impoverishment of the aged in the thirties gave us unemployment and social security legislation.
Such step by step reform as it is needed makes it unnecessary to change the fundamental character of our system with its reliance upon the individual opportunity. This is an important thing to remember especially when enthusiasts for some other system point out the defects in the one we have and offer theirs instead. It is one thing to recognize weaknesses in our economic system and correct them. It is another thing to jump to the conclusion that because it has defects our whole economic system should be scrapped.
Which brings me finally to the most disquieting of the questions I have just cited. That is the doubt that we cannot make our system of individual opportunity work today, because there aren't any opportunities. Hitler, you remember, bet his countrymen's destiny on the similar idea that we had lost our aggressive spirit and would not fight his supermen. Now, while our boys are busy answering him on that one, I think we here at home might put down this old bugaboo of "no opportunities"—at least for a while.
For it is an old argument. Every time something goes wrong with our economy, some one rises to tell us that the trouble is we have grown as much as we can ever hope to; that we have, in fact, too many factories and farms which have overproduced everything, and for that simple reason we can never again hope to employ all our people. From now on, they say, the task is not to produce still more, but to redistribute somehow the things we already have.
For instance, here is one such statement, quoted from a government report during a depression: "Industry has been enormously developed, cities have been transformed, distances covered, and a new set of economic tools have been given in profusion to rich countries, and in a more reasonable amount to poorer ones. What is strictly necessary has been done oftentimes to superfluity. This full supply of economic tools to meet the wants of nearly all branches of commerce and industry is the most important factor in the present industrial depression. . . . There will be no room for a marked extension, such as has been witnessed during the last fifty years, or afford a remunerative employment of the vast amount of capital which has been created during that period. The day of large profits is probably past. There may be room for further intensive, but not extensive development of industry in the present area of civilization." That statement was made in 1886, 57 years ago by Carroll D. Wright, our first U. S. Commissioner of Labor.
Which merely goes to show that it is human to be mistaken and that you are likely to be mistaken when you sell America short. Let me call the roll of some of the goods we did not even know of, far less produced, back in 1886. Cream separators, diesel engines, pipe lines, electric stoves, washing machines, motion pictures, airplanes, automobiles, farm combines, tractors, fuel oil burners, radios, air conditioning and mechanical refrigeration; we had no rubber industry, no chemical industry to speak of, no plastics and no electronics.
Now think of the new opportunities these new industries provided to men with mechanical skills, for engineers and salesmen, for people with money to invest, and for enterprisers and managers with ability. Yes, there has been some technological unemployment as machines took the places of men, as new industries replaced old ones. But the 75,000 workers who lost their jobs in the carriage, wagon and sleigh industries because of the automobile, found half a million new opportunities in the automobile factories; the 15,000 who lost their jobs in the piano industries found more than 40,000 new openings in the radio and phonograph factories. And those who today predict that we've reached the end of our growth probably are again all wrong. At any rate, those who saw their opportunities 57 years ago, succeeded; and those who felt there was no longer a chance for them, did not. And it isn't any different today.
Those who today see clearly that the thing that makes America great is in fact equality of opportunity, will have taken the first step forward to their own success; for they will have learned the first rule of the game in which they hope to succeed.
Rule two of that game has always been to do a better job, produce a better article, render a superior service, atlower cost. It has meant that the better worker, the smarter businessman, the more intelligent scientist and engineer have had their chances to rise, because the public valued the better services they gave.
Let me show you how this rule works in practice. We have some 2 million independent businessmen who employ one or more people. We have a million who are their own bosses, and some 6 million farmers who run their own businesses. Not one of these nine million independent enterprisers can hope to stay in business any length of time if he cannot keep up with his competitors.
On the average, one out of five of our commercial and industrial enterprises have failed every year—year in, year out, for the past 40 years; and for each one that failed, another one started out new. That has meant some three to four hundred thousand failures a year; and that many new enterprises. This seems to indicate very clearly the vitality of our system in getting rid of the less efficient on the one hand; and in giving an opportunity to those who can prove that they are more efficient, on the other.
Rule two shows also where today's opportunities lie. Once upon a time they were found in the vast unsettled areas to the West, in the great stands of timber, in the minerals buried in the ground, in the water-powers running to waste. Those opportunities in the United States may be no more. But there still are untold opportunities to be found in the new discoveries of science and technology.
A chemist, working in his laboratory, discovers the equivalent of a new gold mine in a process for making better and cheaper plastics. A businessman who figured out that he could sell groceries cheaper in a super-market carves out the 20th Century equivalent of his homestead, farm or ranch; the little mechanic who invents a better and cheaper fastening device for airplane parts and built a million dollar manufacturing business, even before the war, created the technical equivalent of a newly-discovered water power. Each one of these prospered by developing some new opportunity to be of greater service to the American people.
But how about the employees of large corporations? Do they have the same chances? Must the industrial corporations play the game according to these rules, or do they, instead make their own?
The figures I just mentioned to you of business births, and failures, include the corporations. Each one of them is subject to the same competition from other corporations, as is an individual businessman. A corporation too can get ahead only by furnishing a better product, a better service, at lower cost.
But the only way it can do this is through its employees. That is, the corporation has a very vital selfish interest to bring out the best that is in each one of its employees. And the only way it can do that is to give adequate encouragement and reward to those employees who do better work. There is the major secret of successful management; to pick out those who do a better job; to give them greater responsibilities; and as they prove their ability to carry the load to make them a part of management.
That is, as I mentioned before, to apply in every organization the rules that make America great: To give each one an equal start; to let each one get ahead as far and as fast as he can, by giving a better service to his organization, and through that organization to the public and to the people of America. To these simple rules, which have worked so well in the past the American people as a whole and each one of us in our jobs may safely trust the future.
I have enjoyed this chance to meet you all and to tell you what I think it is that makes America great. I have enjoyed it for two reasons. The first is that the story itself is one of intense interest and thrilling significance to those who ponder its meaning. The second is that in meeting with you I know that I am in the company of kindred souls who too, sense the opportunities that still are offered by our country and its institutions.
Your very presence here shows that you believe in them and, what is just as important, that you understand how necessary it is to be prepared to take advantage of them. The word "opportunity" is derived from a Latin word that means "facing a door or a gate." I know that there are some people who expect to be carried through the gate on someone else's back. But I'm very sure that you who are attending these sessions of the Carrier Institute are expecting to pass through the gates the future may open to you, heads up, hearts high, and on your own two feet.
The best of luck to you all.