The Theory of Business Enterprise/Chapter 1
THE THEORY OF BUSINESS ENTERPRISE
The material framework of modern civilization is the industrial system, and the directing force which animates this framework is business enterprise. 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 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 carried 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 score of these business principles. 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 industry go to their work with a view to profits on investment, and are guided by the principles and exigencies of business. The business man, especially the business man of wide and authoritative discretion, has become a controlling force in industry, because, through the mechanism of investments and markets, he controls the plants and processes, and these set the pace and determine the direction of movement for the rest. His control in those portions of the field that are not immediately under his hand is, no doubt, somewhat 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 control 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.
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 phenomena, his line of approach must be from the businessman'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.
- "Dem unbeteiligten Beobachter drängt sich die Erkentniss auf, dass in dem Phänomen des Handels [here equivalent to "business"] ein entscheidender allgemeiner Gedanke enthalten und eine der mächtigsten Thatsachen der Geschichte gegeben ist, mit der jede Zeit gezwungen wird, sich woh loder übel abzufinden. . . . Der Handel ist in folgerichtiger und unaufhaltsamer Entwicklung das führende Gewerbe geworden. Es ist für die anderen Gewerbe ain völlig aussichtsloser Versuch, ihn zu hemmen und durch Zwangsmittel in seine 'dienende Stellung' zuruckzudrängen."—K. Th. Reinhold, Arbeit und Werkzeug, pp. ix, x.