International Competition For Industrial And Commercial Supremacy
( Originally Published 1918 )
Summary of preceding sections. In the preceding parts of this book our attention has been turned to the basic factors of American industrial development, namely, our natural productive areas and greatly diversified natural resources, and the qualities of the men who have been present to utilize what nature provided. Then we have followed out the development of the leading industries created by our people and the wide-flung transportation system which has been called into being for the support and service of our industries.
The stimulation of industrial life. We have said something in the preceding chapter about the importance of the transportation system, but as yet we have not made a business of describing the general policy adopted by the nation for the promotion or stimulation of its industrial life. However, it is clear enough to anyone who has kept his eyes open that there is such a thing as promoting, by the use of political, financial, and educational means, the chances of success of any particular industry or of all industries taken as a whole. In this, the last section of our book, we shall attempt to outline some of the most important ways in which our industries and commerce have been helped along and stimulated. In so doing we shall be dealing with the present rather than the past, for until recent years no great amount of organized effort, directed along various lines to a common end, has been put forth in the promotion of our industries. In fact, we shall be dealing rather with enterprises whose outcome is not yet thoroughly known than with past events whose history is closed with that which we can do in the future rather than with that which we have done in the past.
Earlier trade rivalries. All development, industrial or other, has always implied a struggle between competitors. If we controlled all the markets of the world, and there was nobody standing by ready to take advantage of us, we should have very little incitement to improve our system. As a matter of fact no nation has ever attained superiority, let alone supremacy, in industry and commerce without the hardest kind of a struggle. In their small way the ancient nations struggled just as hard as the modern ones for whatever advantages they aimed at or attained. The first great scene of conflict for western nations was on and about the Mediterranean Sea. This is the period of commerce which is sometimes called the Mediterranean, because the market for the control of which the various competitors struggled depended upon commercial supremacy over the Mediterranean Sea. Until the Discoveries Period of the early sixteenth century that which corresponded to the present world market was relatively small, but after discovery and colonization had begun, there came into being a real world-wide market and a rivalry for the first place in producing goods for that market.
Rivalry for the world market. The first rivals in the world market were Portugal and Spain, but their competition was commercial rather than industrial ; they did not attempt to produce goods for the world market, but were largely engrossed in exploiting their colonies and in the spice trade. In the seventeenth century the competition was between Holland, France, and England, but even then this competition was mainly along commercial rather than industrial lines. That is, there did not exist in each of the competing countries a body of domestic industries which threw its output into the world market in competition with the products of the other nations, but there was simply trade in commodities irrespective of their origin. However, such a body of industries gradually developed, especially in England, which emerged from the struggle holding first place. Her grip upon this supremacy was so strong that during the latter part of the eighteenth century, and until well along into the nineteenth, she stood with-out any serious rivals in industry, especially manufacturing and mining, and remained in command of the world's markets.
The strength of Great Britain. It is instructive to note the causes of this supremacy, for the study of England's case throws considerable light upon our own opportunities and destiny along these lines. Briefly, the great economic strength and commercial development of the British Isles is largely a matter' of favorable geographical environment and of a marked capacity for adjustment shown by an industrious and intelligent population. Climate and other elements of the environment combined to stimulate a development of industries ; the location of the islands, the fact that they were islands and were thus separated from the rest of Europe, though in proximity to it, and the broken nature of the coast line which formed many and adequate harbors a multitude of such factors favored the struggle for industrial and commercial supremacy. Then the character of the people, combining as it did much of common sense and practical insight with independence and other solid qualities of disposition, was supplemented by the superiority of certain individual English-men in the matter of mechanical invention. These inventions were such as to revolutionize industry, place it upon a modern basis, and thus give to Great Britain the impetus of an early start along lines of development that were to characterize the modern world. We do not need to go into great detail concerning the industrial virtues and successes of the British, for they are commonly known.
The challenge of Germany and of the United States. In the light of history, however, the country which holds first place in industry and commerce is always likely to be challenged ; and the supremacy of Great Britain has been challenged by two other nations. She still remains the " commercial heart " of the world, but she has encountered two new competitors, Germany and the United States, which have been coming rapidly into the fore-ground. At the time preceding the Great War both of these nations were going through an industrial and commercial expansion through which Great Britain had earlier passed. The evidence for this statement is to be found in the statistics of German and American industry and trade in the decades preceding the war.
The chief rivals. Of the $40,000,000,000 worth of goods exchanged annually, in normal times, in foreign trade, about one half can be credited to five countries : the United Kingdom, Germany, the United States, France, and Holland. But the real struggle was between the first three of these nations ; and the industrial and commercial strength of the foremost rivals becomes apparent when it is realized that the foreign commerce of any one of them, just before the outbreak of the Great War, was larger than that of the whole world sixty years before. Each of the three had been exerting itself to expand its industries and commerce, and lesser rivals had been putting forth similar efforts. In contrast with the rather disjointed and hit-or-miss methods of former centuries, the most modern times have shown all of the industrial and commercial countries of the world taking deliberate steps toward placing their industries upon a scientific basis and toward so organizing their domestic and foreign trade that they might resist the industrial and commercial attacks of rivals. It is of this topic of scientific organization of industry and commerce, to which nations have been incited by the stress of competition in the world market, that we wish to give a more detailed account.
Scientific organization of industry. Science as applied to industry means, for one thing, that industrial plants shall be located where they are best adapted to environmental conditions ; that is, where they can profit by the easiest methods and practice the greatest economies. Agriculture, for example, must be so organized that the various crops are grown where conditions are most favorable. This demands a sort of territorial division of labor by which is attained the most scientific utilization of natural resources. To take a simple illustration : if the cattle rangers, through ignorance or otherwise, stubbornly insisted that their ranges must be in Minnesota or the Dakotas, rather than in those regions which science has demonstrated to be the best adapted for cattle-raising, not only would the cattle industry suffer but a serious check would be given to the raising of wheat, for which Minnesota and the Dakotas are especially well adapted. Of course. an industry naturally tends to settle in a region favor-able to its development, and this seems to take place without very much conscious study or planning on the part of anybody. But the way in which an industry has become thus located is by repeated trial and failure on the part of persons whose knowledge was not very extensive ; there has been failure after failure, which we do not hear about, in finally reaching success.
The need of special knowledge. It is clear enough that most of these failures could have been avoided if there had been sufficient knowledge available concerning the conditions of an industry so that it could have been rightly located the first time. Well, .this is what science proposes to doso thoroughly to investigate the conditions surrounding each industry that there may not be a loss of time and effort in finding out by sad experience. It is a question of using foresight instead of hindsight.
The margin of superiority. In the modern world the cost of trial and failure is much higher than it used to be. There are so many competitors in the field that often a small margin of superiority is what determines the question of success or nonsuccess. It takes only a slight superiority to win and only a slight inferiority to lose. The whole situation is like that of a foot race: if there are only a few competitors the victor is likely to win easily and by a good margin ; but if there are thousands entered in the race, there will be many bunched at the finish and the victor will be likely to win by a very slight margin. Now the application of study and science to .industry has been necessary in order to secure that margin over near competitors. All the conditions surrounding a business are carefully figured out the location, physical situation, nearness to raw material, nearness to markets, availability of labor supply, and so on indefinitely.
Expert management. In addition, the matter of management has been reduced to a science, and there are experts who instruct the owners of industries in methods of accounting and other scientific devices whose application has appeared only in the most recent years. Scientific study of the industrial situation leads also to the decision not to carry on certain industries to which the country or locality in question is not well adapted. The establishment of certain industries within a country, if the costs of production in that country are heavier than those in competing countries, is a bad business proposition ; yet, in the days before the study of these matters had become a science, countries at-tempted over and over again to develop industries to which they were thus unfitted. If, on the other hand, the various countries apply themselves to industries to which they are fitted, and then trade freely with other countries adapted to the production of other articles, the whole group of producers is thereby benefited, for each is securing the highest profit from its efforts. Taking the great industrial countries of the world into consideration, there is in the twentieth century a much better adaptation of industry to conditions than existed a few decades ago, together with a much wider prevalence of scientific management than at any other period of the world's history.
Government action British. In later years it has also become the common mode for the government to oversee all the industries of a country and try to render them encouragement and sup-port by the diffusion of scientific information and advice, and even by direct control. The English business man of a former age was largely unaided by his government, and the English method of trading abroad has been described as " every man for himself." But in more recent times, fearing the organized competition of Germany and America, the English government has come in various ways to the rescue. The consular service, the Board of Trade (notably through its Intelligence Bureau), the wider British Trade Commission, the British Imperial Council of Commerce all these agencies, whose functions we cannot describe here, are engaged in investigating the industrial and commercial questions and conditions, at home and throughout the world, which must be scientifically solved or met in order to retain the supremacy of the past.
Government action German. The Germans have been almost the opposite of the British, for their system has been typically paternal ; the promotion of foreign commerce has been carried on in a thoroughly practical and systematic manner, but always with close cooperation between the government and the business interests. There has been an Imperial Department of Commerce and an Imperial Consultative Board for the Elaboration of Commercial Measures ; the German consulates have generally been occupied by experts of various kinds, including commercial, forestry, and agricultural experts ; immense amounts of literature, containing carefully collected and sifted information, have been widely distributed to those engaged in foreign commerce ; railroad rates have been manipulated to favor the export trade ; the banking system has been adapted to the same end in fact, Germany has applied to commercial competition all the science she had. These facts concerning the British and German methods give us some idea of the prowess of our rivals for the world's trade.
Growth of American interest in, foreign commerce. In this country but little attention was given until recently to the development of foreign commerce. Our tremendous home market, right before our eyes, shut out the view of the foreign market. But of late our industries have somewhat outgrown the former, and we have been forced to look abroad and to enter the lists as competitors for the world's trade. Within the last half century, as preceding chapters have shown, our industries have exhibited an enormous growth and our foreign, trade has increased to large size. Likewise this trade has shown a notable change. Formerly our leading exports, for which there was a ready market in Europe, were agricultural and other raw products, notably cereals and cotton. Here we had very little competition. But at present our exports of manufactures have come to form about half of our total exports, as against one fifth twenty-five years ago ; and in disposing of these abroad the American merchant has met the keen competition of Europeans, who were seasoned traders long before we entered the world's market at all.
Government action American. This new situation has forced us to organize our trade along modern scientific lines. Among other things we have reformed the consular service a service which is a well-recognized factor in trade extension. There was a time when the consul was not thought of as a commercial helper, but now he devotes much of his effort to smoothing the way for American salesmen by minimizing prejudices and maintaining cordial relations between American and other nationalities. Daily reports are issued by the government which contain all sorts of information valuable to the trader. When our business men realized the great advantages derived by other nations from their consular service, and became aware that the American service contained many poor and inefficient consuls and so was not in good standing, they clamored for its reform, and finally got it in 1906. The system, which had been " in politics," was removed from that predicament, and the quality of the consuls was much improved. Entrance to the service was made through a rigid examination, many of the subjects of which bear directly upon commerce and practical business. The merit system for promotion was put into effect, so that we now have a reputable consular service capable of rendering powerful aid in securing foreign trade. The Department of Commerce has been separated from the Department of Labor and includes an effective Bureau of Foreign and Domestic Commerce.
Business men's organizations. Within recent years, also, numerous business men's organizations, both local and national, have been working on the enlargement of our markets ; it is realized that there are many problems of policy that are worthy of united effort. The National Association of Manufacturers, organized in 1895, has built up a foreign department which covers practically all aspects of the export business. A younger body, with somewhat the same purposes, is the American Manufacturers' Export Association ; and another important trade-promoter is the Foreign Trade Bureau of the Philadelphia Commercial Museum.
The national Chamber of Commerce. The Chamber of Commerce of the United States of America came into existence in 1912. It is not a government organization, but was created to serve as a connecting link between the Federal government and the American business world. Its three important functions are (1) that it acts as a national clearing house for business opinion and business methods ; (2) that it furnishes close relationship between the public and the national government ; (3) that it tests the business sentiment of the country from time to time by a referendum vote. Through this referendum it is able to take the pulse of the American business world when commercial or business legislation is pending, so that Congress may be enlightened as to the appropriateness of the legislation.
The need of efficiency. These are illustrations of what is meant by the scientific promotion of industry and trade. They are, of course, only the most important of many enterprises launched with that end in view. As the world grows older and there are more people who must live from its resources, it is necessary that more and more knowledge shall be gathered and disseminated, so that the most successful methods may be employed. Once producers and exchangers managed to get on with rule-of-thumb methods derived from a process of trial and failure, but now the question of living has become so much more pressing and complicated that it will not do to be content with anything less than the most thorough knowledge and efficiency.