Whence Cometh Prosperity?
[Reprinted from Land and Freedom, May-June
The business world is in an uncertain frame of mind regarding the
immediate outlook, undecided as to whether the prosperity of the last
few years is to continue or not. Judge Gary, who has some reputation
in the business world as a forecaster of the turn of events, said last
October that "There is no necessity for any important slump in
business in this country at any time," and was equally as hopeful
in a recent address to the stockholders of his corporation, but so far
as the writer can remember Judge Gary never did prophesy hard times.
Most of the business soothsayers at present are uttering comforting
assurances that whatever of recession appears in the business tide is
seasonal and things will come around all right in the fall, but at the
same time they express wonderment at the astonishing longevity of the
building boom long after some of them have detected signs that the
building shortage resulting from the war had been caught up with. And
building activity is the mainspring of an astonishing number and
variety of our industries.
It has been said of prosperity, as of the wind, that "Thou
hearest the sound thereof, but can'st not tell whence it cometh or
whither it goeth." Judge Gary's remark that there is no necessity
for a serious business slump at any time, and another remark made more
recently by another forecaster that " there will be no business
depression unless it is man-made " are very important indeed,
indicating as they do that these men may know how business depressions
may be averted. To be sure, they have not told, and to some the idea
may seem visionary, yet it seems reasonable to believe that the
preventing of business depressions awaits only the knowledge of how to
prevent them, and the application of that knowledge, even as the steam
engine, the telegraph, telephone, radio, the flying machine and no end
of other things with which we are familiar became practicable with
the advance of knowledge. It does seem queer, when we contemplate the
marvelous achievements of the human mind, that that mind should be
unequal to the task of maintaining a fairly even and equitable degree
of prosperity for all. Yet the biblical remark about the wind seems to
be equally applicable to prosperity.
Our business prophets have of late years been giving considerable
attention to the genesis and maintenance of prosperity, and have
assigned some twenty reasons or conditions for its rise and
continuance. They may be ennumerated somewhat as follows:
1. Our vast, rich and varied resources.
2. Our system of free trade over this great area.
3. The technical skill with which these resources have been
developed and utilized; our extensive and increasing use of
time-saving machinery and of power to drive it, which has enormously
4. Elimination of waste, both of material and effort, in production
5. Collection and use of business data for the better balancing of
production and consumption; the adoption of scientific budgetary
control in business management; the cooperative exchange of
experience and information by business executives, both by personal
communication and through trade journals.
6. Hand-to-mouth buying, that has prevented the accumulation of
surplus or dead stocks of goods.
7. Installment selling, that has opened markets heretofore
8. Advertising that has also opened new markets by awakening
dormant wants of the people.
9. Home decoration and equipment mania, child of skilful
advertising; our unwillingness to live in obsolete
10. Transportation efficiency, pre-eminently the child of our
untrammeled freedom of trade between the states.
11. Unity of language, currency and transportation, which unifies
business customs, simplifies the transaction of business and irons
out misunderstandings and friction.
12. Our public education system, the great kindler of individual
13. Better state of public health, due to better control of disease
by sanitary measures, which has aided in maintaining the general
14. Reversal of the doctrine that good labor conditions depend on
good business, to read that good business depends on good labor
15. The high productivity of labor, which makes high wages
16. Organization of labor, unions, and the high wages they obtain
for labor, insuring a high public buying power.
17. The Federal Reserve System, which by scientific mobilization
and distribution of credit has made impossible the sudden
transitions from confidence to panic that formerly shook the
business world periodically and will avert the severer aspect of
18. Prohibition, that has made the people more industrious and
added to their earning power, besides diverting their spending into
19. The Protective Tariff, by which we protect ourselves from the
competition of less favored peoples and keep our prosperity to
20. A vague idea, of uncertain origin and basis, that we are just
naturally a great people, smarter and more capable and resourceful
than the people of other nations.
The first reason assigned seems fundamental. However, there are other
nations with resources as great and varied as ours which remain poor
because they have not developed and utilized them as we have, for the
reason that in none of them has individual initiative been left so
free to direct its activities along lines that seemed to it most
profitable. Industry, efficiency, resourcefulness, inventiveness, good
management, etc., have in all lands and times had their reward as they
have had opportunity for their exercise, and they have had this
opportunity in larger measure in the United States than elsewhere.
But for the freedom of our internal trade none of the excellent but
secondary reasons given as explaining our prosperity could have
developed far beyond their development in other countries. To it we
owe the open door for the exercise of the industry, efficiency and
good management by which our resources have been utilized the greatest
transportation system on earth, our wide market, the most efficient
banking system in the world, the more thorough education of our people
to play their part in the world. Freedom of exchange is dynamic.
The Federal Reserve System, however excellent it may be, cannot
really be called either fundamental or dynamic. It is doing its work
well, but we had seasons of prosperity before it was thought of and
have had one severe depression since it was instituted. Nevertheless,
it has been a wonderful lubricant for exchange and is proving a very
good stabilizer for business today.
There have been indications that Prohibition may be somewhat of an
accelerator of business activity, but it may be doubted if its effect
can be more permanent than that of any other stimulant. The making of
crimes out of acts that are not even sins seems to be developing a
growing disrespect for law in general which is not healthful, even in
an economic sense.
The Tariff is believed by most Americans to be the most important if
not the basic factor in our prosperity, and that the country would go
to the bow-wows without it. But other nations have tariffs quite as
scientifically constructed as ours, yet no such prosperity as ours has
accompanied them. European nations are choking themselves to death
economically by tariffs, trying to attain prosperity in the same way
they believe we have attained it. Seeing the prosperity that has come
with our continent-wide freedom of trade, Europe would better wipe out
her tariffs and she would if she could see far enough.
However, the tariff stands convicted as a deceiver here as well as in
Europe, for it even now fails to make some of our most highly
protected industries prosperous. Its existence here is singularly
inconsistent with that other superstition that we are a singularly
gifted and superior people.
Thus we find the basic reasons for our prosperity to be the
possession of rich and varied resources and the extent to which,
thanks to the freedom of trade between our states, we have developed
and utilized these resources.
We have, however, not explained the recurrence of seasons of
depressions. There have been times when, despite the possession of
these same resources and the same freedom of internal trade, the
utilization of our resources ceased to a marked degree, when capital
and labor could find little employment, interest and wages fell
together and distress was felt by large masses of our people. What was
it which at such times prevented the use of these resources?
Business men are complaining even now that in spite of a large volume
of business done, profits are small, small. Bradstreets and Dun's
reports of business conditions in various parts of the country have
been telling for months of poor and slow collections in an unduly
large proportion of these sections. Bankers assure us that "money
is easy" and the Federal Reserve Board looks askance at our
possession of more than half the world's monetary gold. Wages still
rule high, but the Department of Labor tells of an increasing amount
of unemploy ment -not yet great, but growing and somewhat
disconcerting. Hand-to-mouth buying, the sixth reason assigned for our
prosperity, persists and increases to such a degree that manufacturers
are finding increasing difficulty in disposing of their products and
something seems to be undermining the high purchasing power of the
Does it not seem reasonable to believe that, if we can determine just
what it is that eats into business profits when business is being done
in large volume, and subtracts from the public buying power while
wages remain high, we shall determine at the same time the cause of
It is really high time the business community looked into this
question. The past ten years or so has seen a doubling of money wages,
a near doubling of the general price level, and a more than doubling
of rents. Is there any reason for suppposing that rent, the great item
of business overhead, has absorbed more than its share of the
As is well known, business rents have advanced enormously. There are
chains of lunch counters in New York City whose rent outlay exceeds
their wage payments, and in all lines that the writer knows anything
about rent is taking an unduly large share of the proceeds of
productive business. Residential rents have advanced in less degree,
but they have advanced enormously, and the man whose rent is raised
has less to spend on his "standard of living."
It was all explained by Henry George nearly half a century ago in
Progress and Poverty.
Is it not time the business world picked up some of Henry George's
brains and utilized them?