Wharton Assembly Addresses, 1938 9781512820973

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WHARTON ASSEMBLY ADDRESSES

WHARTON ASSEMBLY Addresses

!93 8 BY B. S E E B O H M C. A.

ROWNTREE

DYKSTRA

GEORGE W.

SHEPHERD

H A R O L D J. WILLIAM

LASKI

ALLEN

WHITE

UNIVERSITY OF PENNSYLVANIA PRESS Philadelphia »938

Copyright 1938 UNIVERSITY OF PENNSYLVANIA PRESS

Manufactured

in the United

States of

America

FOREWORD

T

HE academic year 1937-38 marks the fifth year of the Wharton Assemblies, which are sponsored by the Faculty of the Wharton School and the Wharton Association in an effort to bring before the student body of the School distinguished speakers on current topics of economic or political interest. T h e Wharton School continues to be indebted to the courtesy and interest of an intelligent and interested donor for the financial support which makes these addresses possible. This is the third year that the series has been published. Three persons discussed international problems of current interest, and three others considered the modern labor problem, the free press, and city managership. It is with regret that the excellent address by Señor de Madariaga, on "Can Democracy Survive in Europe," is not included, but this is in accordance with Señor de Madariaga's request. We are deeply grateful to the persons who were our guest speakers and to the donor who has made these addresses and their publication possible. JOSEPH H. June

1j

1938

Philadelphia,

Pennsylvania

wiLLrrs, Dean

CONTENTS T H E MODERN LABOR PROBLEM, by B. Seebohm Rowntree MANAGING OUR CITIES, by C. A. Dykstra T H E SINO-JAPANESE SITUATION INSIDE, by George W. Shepherd

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THE

T H E PROSPECTS FOR PEACE IN EUROPE, by Harold J . Laski

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A F R E E PRESS IN A MACHINE AGE, by William Allen White 57 SCHEDULE OF W H A R T O N ASSEMBLIES, 1937-38

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THE MODERN LABOR PROBLEM by B. Seebohm Rowntree

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AM glad to have this opportunity to address you on the modern labor problem. It confronts industry everywhere, and it is very important that ways of solving it should be found. For many years now I have made a practice in our factory of addressing the young people when they join us—not in large numbers, but usually about forty or fifty at a time. I talk to them somewhat on these lines: "Why," I ask them, "have you come here to work?" Usually they answer, " T o earn money." I reply, "Is that really all you came for? Now just imagine that instead of being charming young people you were husky agricultural laborers and I an old farmer, and I ask you why you have come to work and you reply 'Just to earn some money.' I say, 'Well, if that is all you have come for, I have got a bag of gold here which I don't know what to do with. You just come along; I'll give you each an armchair, a pot of beer, a big pipe and plenty of tobacco, and you can sit in your armchair all day long, taking a sip of beer now and then, and on Friday night when you come for your wages, I'll pay you out of the bag of gold.' " I then go on to say to those young people, "Suppose those laborers accepted my offer, and suppose all the agricultural laborers in the world did the same, then when harvest time came around there would be no harvest to gather." I point out

i Chairman of the Board, Rowntree Chocolate Company, Ltd., York, England. An address delivered before the Wharton Assembly of the Wharton School of Finance and Commerce, University of Pennsylvania, October 14, >9371

2 WHARTON ASSEMBLY ADDRESSES that what those agricultural laborers really did when they took on the job of working on a farm, was to help to keep the world alive; to provide absolutely essential foodstuffs. Then I go on to tell these young people that although in our factory they will not be producing absolutely essential foodstuffs, they will be helping to produce things of value; they will be rendering a service to the community. That is what those of us engaged in industry so often forget. Ask any hundred business men why they are in business, and I'll guarantee that ninety-nine of them will say, "What do you think I am in business for—my health? I am in business to make money." And the workers will say that they are working to earn wages. We forget that, whatever may be the motive which induces us to engage in industry, which I take to include commerce and agriculture, the real purpose of industry is communal service. In a primitive society industry might take the form of hunting or fishing or agriculture; but whatever it was, people engaged in it just in order to live. Then they found that if they worked a little harder or a bit more intelligently they could live more comfortably, and from that start modern industry developed. If all industrial workers were to cease work, everyone would be dead in a few weeks. In a city like this—in any industrial city—if we were not supplied with water, with gas and electricity, with coal and transport, with milk for the children, and so on, we should very quickly die of starvation or disease. Therefore, the real purpose of industry is communal service. It is immensely important to remember that. We forget it; we think of the reward that we personally get for the part we play in industry, and regard that as its objective, whereas it is, in fact, merely a by-product. It is not altogether surprising that we forget the real purpose of industry. Many of us who are directing industries are handling enormous sums of other peoples' money—millions and mil-

MODERN LABOR PROBLEM 3 lions of dollars—and our first duty to them is to see that their money is kept intact; that they are not going to lose by having invested money in our business. And because of the heavy responsibilities that we incur, it is not surprising that we are inclined to give too much thought to the balance sheet and forget industry's true purpose. Also, we forget our relation to the community. Take for example a man in a textile mill. He is making some pretty colored cloth. The man who makes it has not the faintest idea what is done with it. He does not know whether it is going to Labrador, China, Honolulu, or where. If he could see what really is done with that piece of cloth; if he could see, perhaps in China, a little girl going with her mother into a bazaar, and then, when the mother buys the piece of cloth in order to make a dress for the little girl, could see the child's face light up with pleasure, then he would realize the true significance of his work. But in modern large-scale industry we do not see the person we are serving, and that renders industry impersonal. Then in large-scale industry often we do not even see our own employees. My firm has hundreds of working people in factories in different parts of the world whom we never see—some in Australia, some in South Africa, and so on. In a day or two I am going to our plant in Toronto, and I shall see large numbers of our employees for the first time. So you see the relation of employer to employee is rendered impersonal in large-scale industry. It is immensely important to keep in mind the fundamental thought of industry as being communal service, and never to forget the responsibility we have to those we employ. Because these thoughts have not been kept in mind, because employers have been thinking too much about balance sheets and too little of those they serve, and of the workers, a spirit of contention has grown up between manufacturer and consumer and between Capital and Labor. Labor is convinced that it has had a "raw deal." The work-

4 WHARTON ASSEMBLY ADDRESSES ingman all over the world, especially since the War, is becoming determined that he is going to have a better time. He thinks that in this impersonal contest which has been going on between employer and employee he has come out second best, and he is not having a fair share of the good things of life. And all over the world, especially since the World War, the dissatisfaction of the workers with their lot has been growing. I have been made aware of this in Japan and in India, where I have talked with labor leaders. Everywhere the workers are determined at all costs to improve their conditions, both their material position and their status in industry. They are no longer prepared to work for what they regard as inadequate wages, nor are they prepared any longer to be merely cogs in a machine, and this has created an extremely difficult state of things. In Russia the dissatisfaction of the workers—most of whom were engaged in agriculture—gave rise to the revolution. The civil war in Spain found its origin really in the deep dissatisfaction of the workers with the conditions under which they were working. If you go to France, where the conditions of the workers were very poor, you see how, as soon as they got into power through the ballot, they forced the Government to enact a lot of hurriedly thoughtout legislation, for shorter hours, holidays with pay, higher wages, and so on. Industry was not able suddenly to meet the heavy charges which this legislation imposed upon it, and a serious economic crisis has resulted. We want to avoid that kind of thing. We want to establish a relation between Capital and Labor, and between Capital and the community, which is satisfactory. I think you may say that Labor today is quite definitely challenging the capitalist system. It says, "We do not think we are getting a fair deal under this capitalist system; therefore we are looking at the example of Russia and seeing what is going on there; we are watching it carefully, and we are sending our delegates over there to study it for us. And we are listening

MODERN LABOR PROBLEM

5

very carefully to the socialist orators, who tell us that we are wage slaves, and that all industry ought to be nationalized and controlled by the workers." Now personally, I think it would be a bad thing for the country if it were to become communistic or socialistic. I think that the community can be better served if we retain individual initiative and the profit motive in business. I think the consumer will be better served, and I think the worker in the long run could be better off. What I am really afraid of in communism and socialism is the destruction of personality. Go to Russia; there you find personality destroyed; everyone is merely a servant of the State; a cog in a large machine, if ever there was one! People cannot exercise their initiative, and they have very little power to do as they like; they must obey the orders of the bureaucrats or starve. Many of you may think I am wrong; you may think that communism or socialism would be better than the system under which you live in America. I should like to remind you of a saying I once heard, that if a man is not a socialist when he is twenty there is something wrong with his heart, and if he is a socialist when he is forty, there is something wrong with his headl I think there is an element of truth in that, because socialism is such a fine ideal; it is just a question of whether it will work out well in practice. Now the workers are putting tremendous pressure upon employers to give them better conditions, and they are exercising their pressure through the trade unions. In England we have been dealing with trade unions for a great many years; they became powerful there long before they became a power here. What should be our attitude toward them? First of all in England we made it a criminal offense to form a trade union. This disability was removed, in the early part of last century, but employers resented them; they held them at arm's length; they refused to recognize them. Gradually we passed through that stage, and now employers there recognize the unions; they regard

6 WHARTON ASSEMBLY ADDRESSES it as a perfectly fit and proper thing for the secretary of a national trade union to come and discuss with them the conditions under which their employees are working. After all, it is nothing more than you do when you employ a lawyer. If you have a civil suit with some other person, or with another firm, you do not yourself plead your case in court; you employ a lawyer to do it for you. That is all that the trade union secretary does; he is an advocate appointed by the workers to come and put their case to you and try to get the matter under discussion settled. It has always seemed to me that it is a most extraordinarily illogical thing to refuse to recognize a trade union. We got into terrible trouble in England through doing it, because where a trade union is not recognized, and has to fight for its very existence, it is going to put up a fighting man as its leader, and it is going to adopt methods of warfare. On the other hand, if employers are prepared to recognize the unions, if they are prepared to discuss quietly over the table any questions the unions wish to raise, the unions soon learn that if they want to succeed in these negotiations, they must appoint clever diplomats as their negotiators and not blustering bullies. In sending an ambassador to a country, we do not send a fighting man; we send a gentlemanly, clever, courteous diplomat. Now in England clever diplomats who can see both sides of a question are being appointed as trade union leaders, and most employers are willing to discuss things quietly with them. For myself, I would far rather deal with a trade union secretary than with a delegation of our own men. because our own men are less logical; they are not used to negotiating; they are not so quick at understanding a point. A trade union secretary, however, who has been doing nothing but negotiating for years, is quick to grasp the salient points in a discussion, and you can come to a settlement much more quickly with him than with a group of workers. I have engaged in negotiations with trade unions for

MODERN LABOR PROBLEM 7 thirty years. I have crossed swords with some of the biggest trade union leaders. I have never quarreled with them. There is no animosity at all between us; we are quite friendly and we sit down together and discuss matters in that spirit. Only a few weeks ago, I received a letter saying that the unions were starting a social club in London, and asking me to become a member. I have my ticket of membership in my pocket now. Now the trade union is merely the instrument through which this determined body of people—the workers throughout the world—is pressing for what it considers to be its rights. I say that today capitalism is definitely challenged. In the old days it was accepted without question; today it is not. I think we capitalists have got to ask ourselves three questions: first, can we give good service to the consumer? second, can we give to the workers conditions as good as any reasonable man might expect to get under any other known system of industry? and finally, can we, having done these things, make industry pay? T h e future character of our industrial system depends upon the answers that can be given to those three questions. I am quite sure of that. I do not mean we are going to have a revolution in an English-speaking country—the dissatisfied workers will use the ballot in order to change the system of industry. If we are unable to do those things, or if they could be done better under some other system, then there is no justification for maintaining the present system, and it ought to be changed. After all, if industry is fundamentally service to the community, then we must produce an industrial system that will best serve the community. Let us look at those three questions. As regards the first, I think there is no doubt that under the capitalist system better service can be given to the consumer than under a communist or socialist or any other system, because competition is constantly forcing employers to improve their goods and keep their prices down in order to secure trade.

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WHARTON ASSEMBLY ADDRESSES There is, of course, some measure of agreement among employers in certain trades to keep prices up, but by and large, there is no doubt about it, the consumer gets very well served under the present system. With regard to the conditions that capitalism can give to the worker, this is really the crucial point and the one, of course, with which the workers are primarily concerned. What does the worker want? He wants, first of all, a reasonable wage. In many instances he does not think that he is getting enough. It is one of the duties of an employer to know what is a living wage. If you were to ask any hundred employers what constitutes a living wage, I doubt if five of them could tell you. T h e fact is they have never given any thought to the matter. They say, "Well, the market rate for bricklayers is so much, or for an unskilled laborer it is so much," and that is all they know about it; or, "The trade union rate is so much." But what he ought to know is whether that wage is a living wage. I would define a living wage as one that would enable a man to marry, to live in a decent house, to bring up a family of normal size in a state of physical efficiency, leaving over a reasonable margin for contingencies and recreation. How much money is necessary for that? An employer ought to know. Then he should make that his minimum wage. He may find at first that he cannot afford it. Very well, then let him get his workers together and tell them what he is trying to do. Tell them that he is going to distribute no dividends beyond those really necessary in order to keep the business financially sound—no unnecessary dividends—until he pays that minimum wage. He should say, "Now boys, come along, let's work together to increase the efficiency of this business to such a point that we can afford to pay that wagel" Well, that is the first thing, but I think I must here interpose a word. What claim can capital make upon the profits of the business? I suggest to you that capital can justly make

MODERN LABOR PROBLEM 9 this claim—it can demand as a reward for the service it renders a rate of interest equal to that paid on gilt-edge securities, and in addition it can demand a premium for insurance against risks. If the capital is to be invested in an enterprise where the risk is very great, such for instance as a new gold mine, then the insurance risk will be high. If, on the other hand, it is to be invested in a public utility or some old established industry, the insurance risk will be low. When capital has received the rate of interest that is payable upon gilt-edge securities and an insurance premium commensurate with the risk run, it has, in equity, no further claim, and if there are any profits after those two liabilities have been met, then they are "surplus" profits, and are available for other purposes. They are available for lowering the price of the goods to the consumer, or for increasing the remuneration of the workers. I do not say that they should necessarily all go to the workers, but what I do say is that they should be regarded as surplus profits, and no surplus profits should be paid to the capitalist until the worker is getting at least a fair minimum wage. That is the first thing. The second is, the worker demands greater economic security. There are various reasons why a man's position is insecure—ill health, old age, and so forth; but the most important from the worker's standpoint is unemployment. You have in this country (and we have in our country) adopted national unemployment insurance. That goes only part of the way. The first duty of an employer is to do all he possibly can to prevent his people from becoming unemployed. A great deal can be done. For instance, he can put on a new line, even if there is no profit on it, or he can work to stock, and so on. He should take a real interest in keeping every man employed if it is humanly possible to do so. Suppose a man working in one of the shops was his own son, and there was a question of his being laid off. The employer knew that he had one or two children, and that he was buying his little house, and

10 WHARTON ASSEMBLY ADDRESSES perhaps had bought furniture on the instalment system; he would say, "It would be terrible if he were to become unemployed," and I am sure he would make every effort to keep him working. Very well. It is just as hard for children of other parents if they are unemployed. Let all of us employers remember this, and we should do a good deal more to prevent them from losing their jobs than most of us do now. T h e third matter which is agitating the minds of the workers is very important. I believe that the workers are making a really conscious demand for an improved status in industry. They say :"What are we? we are just cogs in a machine. We have no status in industry. We are servants, and have just got to do what we are told; if we do not do it we are sacked. That has got to be altered." They are looking at Russia and they are seeing the Soviet system there; they are looking at socialism, and they are told that in a socialist state everything belongs to the people, and they determine the way in which all industries should be run, and so forth. There will not be any capitalists dictating to them what shall be done. Can we, under capitalism, give the workers a status in industry as good as they could get under sovietism or under socialism? I think we can. May I just tell you of the experience I have had in the last fifteen years in our own factory in York. We said to ourselves, "These men are talking about democracy in industry. How far can we go in that direction without interfering with the efficiency of the industry?" Now what are the attributes of democracy? First of all, in a democracy the people make their own laws. Secondly, they elect the individuals who are to administer those laws, and thirdly, they are protected by impartial courts of justice against any unjust administration of the laws. This is what we did. We looked up all the works rules and tabulated them. They had been drawn up over a number of

MODERN LABOR PROBLEM n years by the directors and posted on the bulletin boards. Anyone who broke these rules was liable to be punished. Then we asked the workers to elect four of their people to go through the rules, which they did; and the directors appointed four administrative officers to go through the rules with them. So we had four administrative officers and four workers. I remember very well that it was said at the time that if a committee was created with equal numbers of workers and administrative officers a deadlock would ensue, but we said "Let's wait until that difficulty arises." That was fifteen years ago, and we are still waiting! This committee went through all the rules, many of which dealt with matters fundamentally affecting the lives of the workers; such, for instance, as that everyone had to be examined by the doctor before he could be engaged; that every man had to retire at sixty-five and every woman at fifty-five. Then there were various disciplinary rules. The committee of eight agreed unanimously to modify some of the rules, and then they submitted the revised list of rules for approval to our Central Council, a body consisting of an equal number of administrative officers and workers. After full discussion they were agreed, and after being signed by a representative of the workers and by one of the administrative staff, the rules became the law under which all the people in the factory should work. So we have got at the present time a set of rules drawn up on democratic principles, which can be altered or added to only by mutual agreement. That policy of democratically made laws has been in force for fifteen years. Then there is the appointment of those who are to administer the laws. In this country you elect your President; you elect your Senate, and so forth. We came to this conclusion: The only people regarding whose appointment the workers really want to have a say are the foremen, with whom they are in

12 WHARTON ASSEMBLY ADDRESSES daily contact. A foreman can make a man's life happy or unhappy. We asked ourselves, "Can we allow the workers to have a say in the appointment of the foreman?" We agreed again to try an experiment and see how it worked. So we arranged that when a foreman is to be appointed in a department, we would ask the workers to elect two representatives to discuss the appointment with the manager of the department. In this case we did retain the final veto, for we were afraid they might want to appoint a man who was genial and popular, but not a good workman or organizer; but, as a matter of fact, we have never had to exercise that right. We now have all foremen appointed after discussion, by mutual agreement. Thirdly, we have the impartial courts of justice. What we did was to arrange for the workers to appoint two members to sit on an appeal committee along with two members appointed by the management. These four agreed upon a chairman, who would have a vote. If a man is dismissed, suspended, demoted, or punished in any other way for a breach of works rules, he can appeal to this committee, whose decision is final. I remember one case where a man had been dismissed and thought he had not received fair treatment. The case came up to the board of directors who, by a majority vote, decided that the dismissal should stand. The man appealed to the committee, and was reinstated, although the board of directors had previously decided that he should be dismissed. When I have told some of my fellow employers in England of this incident, they have said to me, "You're crazy; you'll never have any authority; discipline will be gone." I have replied, "Not on your life. Our discipline now is better than it ever was, because the only discipline that is really lasting is one which is based upon justice, and if the directors have made a mistake, they lose nothing by frankly admitting it. I think we are in a strong position when we can say, 'Very well, we have made a mistake, we admit it.' "

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So there you have it. Works rules are made democratically, foremen are appointed democratically, and the workers are protected by an impartial court of justice against maladministration of the rules. That has entirely altered the status of the workers. It is really a very simple arrangement and is working perfectly. If it works in one factory, there is no reason why it should not work in another. No one can talk about wage slavery under such conditions. Only one other question remains to be discussed before I sit down. It is whether, having given good service to the consumers, and conditions such as I have described to the workers, you can make business pay. Some people say that if you are going to have these high wages and all these trade unions with their complaints and their requests and so forth, it is going to cost so much that you will never make any profit. I know it is quite impossible to show in a balance sheet, in figures which one can prove, how much benefit one gets from a spirit of cordial cooperation between employers and employed, but I am quite sure it is worth an enormous amount. In big business it is worth a colossal amount. I believe that the sort of thing about which I have been talking is not only good citizenship, but good business. Those hard-headed business men who call what I have been talking about "soft-headed idealism" are, I believe, thoroughly stupid. I do not mind saying so; I think they are stupid and I think they are short-sighted, and I think they are riding for a fall. If they continue to say, "This is all nonsense. I am not going to have any of that bunk in my factory; I am going to go on in my good old hardboiled way —the way my father did and his father before him," then I think the whole of our present system will be upset, and rightly upset. T h e only excuse for the continuance of the capitalist system is that it is serving the community better than any other system, and if it cannot do that, the sooner it goes the better. I would urge all of you who are going into business to

14 WHARTON ASSEMBLY ADDRESSES remember that, whether you like it or not, the workers are determined to have improved material conditions and improved status. The day before yesterday, I was dining high up in the tower at the Waldorf-Astoria. The building is so high that it sways quite noticeably in the wind. A visitor once said, "I do not like this swaying. Is it safe?" to which a builder replied, "If the building did not sway, it would break." Now that is true of the relationship between employer and employee. If the employer is going to be rigid he will breakl If he will sway, if he will meet the situation, then he is safe and you will get constantly improving conditions for society and for the workers, and for all concerned in industry. Those of you who are going into industry have a great responsibility to face. Face it with warm hearts and broad vision 1

MANAGING OUR CITIES by C. A. Dykstra 1

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to talk quite informally to you as a student of government to students of government. Those who become interested in this field never cease being students of government. Those in universities today must perforce become, if they are not now, students of this great field opening before us on ever widening horizons. Whether we quite believe in it or not we are developing, perhaps with a bit more acceleration in the last decade than before, what we call in the field of economics the "intervening state." I do not use the word "interfering state" because I think "intervening" is somewhat closer to the fact. This is not a new thing in American life; it is an old thing, as old as the presidency itself. T h e process began when we had an Alexander Hamilton and a Thomas Jefferson. It was continued by the Whigs—Henry Clay and his friends —who said that we must develop in the United States a system of internal improvements at Federal expense. Mr. Lincoln and the Republican Party, newly formed, intervened rather considerably in what was known as a property right in his day—the whole slavery system. T h e Government intervened in connection with the development of the railroads; it came back intervening for railroad bondholders in 1930 with the Reconstruction Finance Corporation, as many of you will recall. It came along WANT

1 Stenotypist'j report of address by Dr. C. A. Dykstra, President, University of Wisconsin, and former City Manager of Cincinnati, Ohio. This address was delivered before the Wharton Assembly of the Wharton School of Finance and Commerce, University of Pennsylvania, November 15, 1937.

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W H A R T O N ASSEMBLY ADDRESSES

a little bit further with the Interstate Commerce Commission and the Federal Trade Commission. During the twenties and since, a good deal of intervention has come into the field of our common family life by government agencies of one kind or another. And so, wherever we happen to be, in whatever communities we may be living, we find ourselves more and more mixed up with public things. W e are not less private individuals; we are just more public persons. If we do not recognize this change, this slowly changing scene in American public life and this acceleration of the last few years in public performance, we are not being the intelligent folks that university people should be. Therefore, I am calling your attention, most briefly, to the fact that we have to be public persons as well as private individuals, as voters and participators, as makers of policy, as administrators. For a hundred or a hundred and fifty years our school systems have been preparing young men and women to enter life on a private plane, to become people who can make their way in the world, to make their living. More and more we have to give attention to the making of public folks out of private folks. T h a t is why I take it that the University of Pennsylvania has for many years emphasized this field of government, of public economics, of society and social acts, and that is why I take it that some new emphasis is now being given under a new organization to this great field. T h i s is a recognition of the fact that the students of today, those who are in universities and those who are leaving universities, should familiarize themselves with the processes and the procedures of public action and of the agency which represents to us public action. More and more we are going to be affected by one form or another of public action. W e should understand the processes, we should help

MANAGING OUR CITIES 17 guide the policies, and we should anticipate some of the results that may flow from that action. There is opportunity, then, in this great field for men of courage and capacity. We have not taken advantage of our opportunities for leadership in public affairs on the local plane. We have been too much concerned with what we supposed were our own local and private interests; but our local and private interests have become expanded into great public interests of more than local importance. We look out today to a national program—something larger than state and local—to a world in which men and women increasingly are coming not only into contact with national government processes but into immediate intimate relations with public processes. Remember also that more and more of us are taking part in the administrative field. One would have only to give the statistics to see what proportion of the young men and women of America today have positions in the public service as contrasted with the days when I was in college or when Dean Willits was in college. T h e fundamental reason for this is the fact of this intervening state. Now, let me discuss another phase of the subject, and bring the discussion on public questions back to our local and city plane. One of the new phenomena in the United States is the development of urban population as contrasted with rural. A hundred years has made a great difference in American life as between these two groups of population. T h e first census of the United States set up six cities as worthy of being called cities under the statistical analysis used in that year, and the last one showed more than three thousand. Some three or four per cent of the American people lived under urban conditions in the day of that first census, and now some sixty per cent live in incorporated urban places, to say nothing of the great groups of families that live just outside of the corporate areas of the American

i8 WHARTON ASSEMBLY ADDRESSES city, particularly in these ninety-six metropolitan areas of the United States. These ninety-six metropolitan areas, such as Philadelphia and its environs, have forty-five per cent of our population. It is a rather challenging fact. Not only in population but in influence, the city has become of paramount influence. Is it unusual that in 1790 or in 1800 or in 1810 the men who were drafting constitutions, who were setting up city charters, who were asking state legislatures to give them some articles under which to operate, would have chosen as institutions those that they were operating under, those that they knew? These men had in fact rural conceptions. Naturally we were doing things by rural methods, pastoral ones, agricultural ones, if you will. Thus the pattern of American charter life in our cities, of political institutions in our cities, took on the quality and character of all government institutions of the early day, the day when it was assumed that we did not need much in the way of governmental machinery. That is all very familiar ground to you. That was the day when cities did little—they raised little money because they did not need it. I remember looking over some of the early municipal ordinances of the city of Cincinnati in which I lived for seven years, to discover that the first lighting of the city was provided for by an ordinance requiring every seventh householder along the streets to set out a lantern at sundown and keep it trimmed and burning until midnight. The next day another seven did it, so that by a revolving process every householder set out a lantern every seventh day in order to provide a public lighting system for the streets of the city of Cincinnati. We did things for ourselves, whether in the collection of waste, whether in the pumping of water, whether in the fighting of fire, whether in setting up watchmen to look after us during the night hours. It is only a hundred years since we had a professional police force in England—the

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ones now called bobbies or peelers, as you know—and it was considerably later than that before we had any professional police services in the United States. These services have accumulated and grown, because the American people discovered that they could do certain things better and cheaper cooperatively than they could do them individually. That brings me to another suggestion. When the people of Cincinnati or the people of Philadelphia decided that they were going to undertake a new enterprise in the city, do it cooperatively, they cast about for an agency on which to place such responsibility. There was only one public agency, and they called it their government. In the early days such city organization as we had was actually a government. But when the people of Philadelphia added to those original services, did it add to the governing process in any sense at all? Of course you will say "No," but we called it by that name because we turned over the job to an agency we called "government." And so we have thrown upon an institution called "municipal government" this great burden of public service—a few that year, a few the next year, and some more ten years later until today you would discover, if you should analyze what may be known as the public service of Philadelphia, that there are four or five hundred things being done for the people of Philadelphia which were not being done a hundred years ago. I am rather sorry that we continued to use that term "government" for these services, because it has given us the wrong slant on the whole problem. We did not believe much in government; we rather hated government. Thomas Payne, Thomas Jefferson, and the rest of them were attacking governniiental establishments, and that put into the background of our minds the feeling that governments were oppressive institutions, and the less we had of them the better off we should be. We wanted to be left alone in those pioneer days. Today

so WHARTON ASSEMBLY ADDRESSES we do not want to be left alone. We want our water brought into our houses; we want our streets cleaned; we want the sanitary conveniences that a city with a city-wide point of view can give us. We want our waste collection; we want parks, we want recreation; we want markets; we want a police force—do I need to name the myriad things we want? T h u s our attitude toward the public service has changed, although our attitude toward the fundamental idea of government has not changed. We have a clash of attitudes because we use that kind of terminology. If we could think of the things that cities do cooperatively as systems of public services which we have committed to a public agency we begin to look at it a little more sensibly. Thus we should be led into another line of thought and argument. We should say that as our cities become operators for our citizens we may have to reconsider the type of organization which was once fitted for governing but which is not quite fitted for operating. As cities have become less and less governors and more and more operators, the emphasis in the establishment of the fundamental rules by which we operate in cities should be on the operating side rather than on the governing side. Once we get the notion that the thing we call city government—and remember I do not like that phrase particularly—is an operating service, we approach our whole problem from a different point of view —more realistically, more sure-footedly. And what, pray, do you need for good operation in a city? Just what you need anywhere in business; just what you need in your household. There are certain definite things which are part and parcel of a program of sound management and good operation; these are the things we ought to be discussing when we are talking about creating new instruments of city government. Any people, any city, any bureau, has to be properly implemented to do a good job of operating. And so it would seem to me that as students, approaching the

MANAGING OUR CITIES ft l problem of local government, so called, realistically, we ought to ask ourselves a few questions. First of all, what is the institution about which we are talking expected to do? What are we going to ask of it? How big, how large, are its responsibilities to be? Lay them all out before you; put them on the table, and discover what a wide range of operating opportunities and responsibilities are going to be placed upon your so-called local government. Then ask yourself, "Well, since we still call it governing what governing is this institution going to do? What settling of public policy? What determination as to the future of the lives of the people of the city? What part will the city play in determining on a national scale a program for the American people?" You discover, after all, very little that is going to be done, that is not done by the state legislature or on a nationwide scale by a national government—perhaps not always a national government located in one place—perhaps a national government dispersed somewhat, but certainly on a national scale. For business and industry and the things that have to do with our lives have become national in character, perforce, and cannot be separated into the small units represented by cities. Thus we discover that there is not very much in this business of running our cities. That is the reason, I take it, that I was given this topic of "Managing Our Cities"— this business of the city as an operator of the public service. What then do you want from an operator? What do you want from a governor? Manifestly, two things are before us. On the one hand you want that local instrument which is going to do business for you to be representative of the people of the community. You want it to speak its will soundly. It is a great undertaking, as your professor of psychology has doubtless told you, to discover what public opinion is and how it can be expressed, but that is the quest on which we are embarked. That is the reason we are discussing all over the United States methods of voting and

as WHARTON ASSEMBLY ADDRESSES methods of election. We have not yet assured ourselves that we have discovered the way to register public opinion at the polls. There are devices of various kinds for doing it. We have depended, in the United States, on the notion of majority rule and majority representation. We have thought very little about minority representation. So on the political side you will begin to discuss the set-up for elections, the methods of balloting, the kind of ballot that we must have in order to try to get broadly conceived public opinion put into action. But that is not my assignment. I am supposed to be talking about this other thing, management. Assuming then that we have set up democratic instruments for the determination of public policy, our problem becomes: How are you going to get a set-up for the operation of those functions which we have turned over to the city government? Shall we take a lesson from the political and governing experience of America, or shall we take a lesson from the operating experience of America? As illustration, you have a great picture of American enterprise struggling through a hundred years, first for selfexpression and then for a method of operation which we call effective, economical, and universally approved. That is why a great many cities in the United States—some four hundred and fifty of them—have said, "Perhaps we had better take the lessons of business and industry so far as operations are concerned, and put them into effect for the running of the day-to-day services, twenty-four hours a day." There are not political ways of doing the separate things that we want to do in American cities unless we make them political. There is no particularly democratic way of distributing water over a city. Oh, yes, there isl We had one in Cincinnati; it covered us all over; that was the most democratic distribution I have seen in a long time! Perhaps there is a democratic way of cleaning streets—have everybody clean his own. But that is not the way we are set up,

MANAGING OUR CITIES »3 and the question whether the street cleaner in front of your house happens to hold one political opinion or one religious opinion or another makes no difference so far as operating is concerned. The assumption is, therefore, in a great many places, in the establishment of many charters, that you can separate those things that have to do with the determination of public policy and those things that have to do with operating an enterprise such as a city government. It makes very little difference what you call these things, what officers are denominated to perform certain services. A mayor may be the head of an operating force if he is operating as an administrative officer; a director may; a manager may; a governor may. What we are striving for is a line of action or a principle which underlies a method of action. Curiously, or perhaps naturally, many of our cities have said, "So far as we are operating, we are going to use the terminology of American industry and business." That is where the term "city manager" came from, invented by a business man because he was used to a general manager in his operations. So in one city after another, we began calling a chief administrative officer, so far as the operations of a city are concerned, the manager of the city. Thus there has been an attempt to set up in American public life in this thing we call city government, the analogy of business enterprise and business undertaking. The terms are being used here in Philadelphia at the present time. I think it is a splendid thing for a student body to sit as close as you can in daily contact, through the newspapers, with the operation of a Charter Commission that is going through some of the discussion and analysis that I am presenting to you here. I assume that your Commission, which is in operation in Philadelphia today and tomorrow and for the next few weeks or months, is asking the kind of questions that I have been asking here. The questions that are being asked have to do with the

84 WHARTON ASSEMBLY ADDRESSES best experience that America can produce in the field of managing our cities. I have had a little experience in that field, seven years of it in fact. I had no notion that I was to be a city manager seven years ago. I was just asked to be and I felt, "No, I did not care to be," but the folks who asked me said, "Well, you have been talking about this; you think it won't work, don't you? You're just a little bit afraid." And then of course I said "Yes." You cannot do anything else under the circumstances. So after discussing problems in public administration and city government for a number of years I was actually catapulted into the position of trying to operate a city of half a million people along certain lines and in accordance with a charter that had been set up. Here was a council chosen by a method of election which you know about, and here was a city manager's office opposite the mayor's office. His business was to see to it that the city ran, that it ran twenty-four hours of every day. T h a t is one of the interesting things about municipal operation. T h a t is true, of course, of certain kinds of private operation. This public body, these public services, have to go on all day long, every day, through holidays and all the rest. If, for instance, you should dismiss a police force after eight hours' service and say, "Now, you have done your trick for today," or if you should dismiss the firemen after their eight hours or the waterworks people or the folks who fix breaks in mains or those who watch sewers or any of the rest of the things, you would be in immediate difficulties. So here is an operation which in a large degree is a twenty-four-hour operation. As I have come from that experience some of you might be interested to ask, "Well, how in the world do you keep two things separate which have been so completely involved in American history for a hundred and fifty years? How do you keep politics, the determination of what we are going to do, political pa-

MANAGING OUR CITIES 85 tronage, which is a part of the American system, out of the operating side of a city government? Is it possible to do that kind of thing?" I have said "Yes" to a great many roving reporters and magazine writers, only to have the local press in City Hall come and see me later and say, "These men have been in to the press office to check u p on the manager of the city who said he is not interferred with by politics. Of course he is just talking to hear himself talk, isn't he?" But the newspaper boys have said, "No, he is doubtless right about that." Well, in seven years it is fair to tell you young folks who have these questions in your minds, that politics and administration can be separated, and after a while people really like it. T h e housewife likes to know that she can telephone to City Hall, get a central number and be switched to an operating department to lodge a complaint and have it taken care of then and there, instead of having to call u p a ward chairman or a member of council and have him try to do the things that our citizen wants done. It is entirely possible to conceive of public operations as regular everyday services which the people of a community demand and need, and have them done on that basis without any involvements whatsoever. It is possible to award contracts without any politics being involved. It is possible to buy pencils for a city, or ink or paper or tractors or trucks or automobiles or radio equipment, without going through any political processes whatsoever. I have seen it done. And if once the determination or the choice of personnel and the determination of who is to have a contract and from whom we are going to buy as a city is made, and that responsibility is thrown upon the management or upon an operator, you have no idea how simplified municipal government becomes. T h e n members of the council and the mayor have all their time to give to the determination of public policy, to the meeting of constituents, to the reporting to the people of a

26 WHARTON ASSEMBLY ADDRESSES city upon what is going on. The administration, the operation, must be responsive finally to public opinion through the elective branches of the city government. So I testify to you here that such operations as I have been describing are entirely possible and, as a matter of fact, are going on in city after city in the United States. I would not say that in 450 manager cities this line of distinction is kept religiously and carefully. It probably is not. We never do attain a hundred per cent either in numbers or in performance. But there is an approximation of such performance in most places; certainly in a great number, no difficulties whatsoever appear as between the operation of these two groups of functions. The problem that comes to us as students of municipal government is one that is before us very effectively at the moment, i. e., can we have representative and democratic political institutions in the United States nationally, on a state basis, locally, and at the same time can we have effective action? Why have the democracies wobbled and in many cases gone to pieces on the face of the earth today? Because the processes of democracy were pretty slow, because we did not get action, because people were disappointed at constant discussion, constant attempts to solve problems without anything happening; and in discontent, in despair, in discouragement, they threw overboard democratic institutions in order to get effective administration. As I see it, the choice is not that, even if that is what happened. We face the same problem; we are facing it on a national scale as well as on a local scale. Fundamentally the question is whether democratic representative institutions can be retained in a world in which we expect to have so much done by our governing officers and still have an effective administrative machinery. I happen to be one of those who believe we can. I believe the American people are sound enough, sane enough, intelligent enough, to work out a method of public service which will always be

MANAGING OUR CITIES 87 representative of the great mass of the voters, and at the same time that they can develop devices of an administrative nature which will give us effective action without our having to go over the falls, or to give up our freedom in order to get such effective action. T h a t is not the counsel of perfection. I think we are working it out. It is being shown in a number of states; it is being shown in a number of cities. Attempts are being made on a national plane to forge the instruments of action which will still be representative and democratic and be effective at the same time.' I give you that as a final word and as a challenge to students in a modern American university, knowing your responsibilities for what is going to happen on the American front during the generation that is coming along. I give you the proposal that we strive to maintain representative institutions on this continent, that we do not despair of action by democratic arrangement, that at the same time we discover those implements or instruments of responsible and effective administrative action which will give us the results for which we are asking in our various governments and at the same time not take away our personal freedom, or the elements of individual enterprise and initiative. T h a t is a real challenge for any generation, and it just happens that this is the generation—the one coming on now —which is going to have that problem put into its laps. Those of us who have gone on a little bit before have not had to deal with it. We had our great resources; we could enter into ownership and be a part and parcel of an owning, governing class by just going west, by just getting some of the earth's surface in which to work. That is no longer true. T h e frontier has gone. We have mechanized the processes of life. We are living in an age of technology, of rapid and accelerating change. Whether the instrumentalities by which we live—our social and political agencies—can move fast enough to meet the challenges that come in this tech-

28 WHARTON ASSEMBLY ADDRESSES nological and mechanical and industrial world, nobody can quite say. They have not in some places on this earth. I lay in your laps this problem of thinking through whether we can maintain democratic, responsible, representative government in the United States and at the same time get effective action where we need it. If we can do that we can maintain the American democracy and continue to dream the American dream.

THE SINO-JAPANESE SITUATION FROM THE INSIDE by George W. Shepherd

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I

T is a great privilege that has been mine to have some

part in a fifty-year-old program in China of training Chinese men and women to do one thing—to build a new China. That has not been an easy task the past twenty years, for, while Japan has been orderly and making progress in all lines of national development, in China we have been living in confusion. We are now glad to announce that during the past four years China has been pulling herself together and building a new nation on her own social foundations. Less than five years ago General Chiang Kai-Shek, the leader of the Chinese Government, was faced with the problem of doing something about reorganizing the nation and remolding the life of the people. He had to choose between selecting the fundamental principles upon which Chinese civilization has been built and accepting some one of the newer economic and social theories of our day. Because he is truly Chinese, with the accumulated experience of four thousand years behind him, he decided to go deep down into the history of his own race, find the principles of Chinese civilization, and reorganize the people around those, rather than accept any of our modern untried theories. In search of these fundamental principles he discovered

i Adviser to General Chiang Kai-Shek on the New Life Movement in China. An address delivered before the Wharton Assembly of the Wharton School of Finance and Commerce, University of Pennsylvania, March 4, 1938*9

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four which have since been universally accepted by all classes of people in China—intelligentsia, the middle class, farmers, and workers—as being without doubt the four cornerstones upon which Chinese civilization for four thousand years has been developing. I will run rapidly through them because they have been the driving force in the building of the new China that has been so much in evidence the past four years. T h e first, the Chinese call Li, which means behavior. T h e Chinese believe that much of life is made up of the way in which we human beings behave one toward the other. T h i s term covers all that we mean by the integration of the individual into the community. During various dynasties China has developed methods of behavior, but only some of them meet the needs of our modern day. T h e old principle of Li remains, and China is faced with the problem of making Li fit into a modern world. During the past four years the Chinese people have been performing what look like miracles, as under the New Life Movement they have been given an opportunity to reconstruct their country. Fifty years of passing on to them the discoveries that we in the West have been making have had much to do with their remarkable progress. During these four years of reconstruction, tens of thousands of miles of motor roads have been built so that on journeys where we once used sedan chairs or walked, we now travel rapidly by car, railroad, steamer, or airplane. Suddenly four hundred million people have found it possible to begin going places. Things are bad enough in America, but you can imagine what they must be like in China. Coming out of their villages with their age-old provincialisms and set ways of thinking, the multitudes have been thrown together in a rapidly modernizing world. Beginning with small habits and moving right on into the deeper relationships of life, the adjustments that have had to be made have been tremendous.

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They have had to take Li, this old principle of behavior, and think it through very carefully, not merely in matters of courtesy while riding busses and trains, but in vastly more important matters concerning social relationships. I like to think of the success that New Life Movement weddings have had in China as an outstanding example of how they have tackled their real problems. For centuries young people in the villages have been spending about $200 on a wedding. They borrowed that money at two per cent per month compound interest, mortgaged the farm, somebody foreclosed the mortgage, and then we had agitators shouting about landlords, land tenure, moneylenders, etc. T h e New Life Movement decided to have less expensive weddings and thus put the moneylenders out of business. With modern roads have come all the influences from Hollywood, and they have had to enter into the picture if the needs of the young people are to be met. It was no use talking about cheaper weddings; they had at least to be modern. New Life weddings began in the City Hall, with the mayor and city fathers on the platform, and the middlemen and relatives occupying reserved seats in the auditorium. In South China, palms, bamboo, and flowers are available at all seasons for simple impressive decoration. A modern orchestra played the wedding march as fifty brides and fifty grooms came down the aisle. And the main problem was one of making sure that they did not get mixed up too much. Each couple came ceremoniously to the platform to be married by the mayor. Frjends who have visited these New Life weddings tell me it is one of the most attractive pieces of pageantry they have seen anywhere. They are successful, however, not because they are good pageantry and quite modern, but because they cost each couple $20 instead of $200. Young China is thus given an opportunity to begin married life free from debt. T h e second principle is I, which means Justice. Justice, in the eyes of the Chinese, has been an education to me and

3» WHARTON ASSEMBLY ADDRESSES I am sure to many others, because once again they have the advantage of four thousand years of accumulated experience. It is very difficult to prove to the Chinese people that justice which brings improved living conditions to one class of people and injustice to another class is really justice. They have another name for that. We met our biggest problem in the reorganization of the government-owned China Merchants Steamship Company, with vessels on the Yangtze and the China coast. As you travel from Shanghai to Hankow you pay $60 for very comfortable accommodations. Our farmers and workers, who earn forty cents a day, pay $1.50 for a passage below decks and have to add a hundred per cent tip in payment to the steward in order to be assigned to a berth and to be supplied with hot rice. The New Life Movement asked the steamship company why it did not clean up those quarters and received the reply, "They are just farmers and coolies and maybe they like it that way." Young men from the New Life Movement went on board those boats and shoveled off literally inches of dirt. They found two hundred stewards where they needed only eighty. T h e extra men were given a course of training on shore and told, "If you turn out to be clean, courteous, efficient stewards, we have a job for you, but if not, 'Mo Kuei'—don't blame us." All these men were members of a Seaman's Union, and the unions in China are largely run by the gangsters. The New Life Movement discovered, to its amazement, that the head of the gangsters is called the Chairman of the Civic Association, so several of the staff from the New Life Movement decided to call on the Chairman and see what he had to say. He said he was very much interested and the New Life Movement could rely on his cooperation. T h e next day while the steamship company was selling tickets at the usual price of $1.50 and numbering the tickets so that passengers were able to go straight to their assigned

SINO-JAPANESE SITUATION 33 berths without having to bribe the stewards one hundred per cent of the fare, the Chairman of the Civic Association had his runners down at the wharves explaining to the passengers that there were various things the matter with the China Merchants Steamship boats and they would be wise to ride on other steamers. T e n per cent tip instead of one hundred per cent tip was economically sound and the reform had come to stay. After two months of difficulty the steamers had more passengers than they could accommodate. The tip was paid on the completion of the journey as an appreciation of service given by the steward and not as a tax upon the traveling public imposed by the gangsters. We discovered farmers and workers wanted to travel on the China Merchants line because they found better conditions on these boats. The stewards were rescued from the clutches of the gangsters into whose pockets had been going the profits, and the shipping company showed us their books after one year of operation where they cleared $1,000,000 profit. They needed it as they were government-owned and had gone $10,000,000 into debt. The Chinese call that justice, and if the New Life Movement is to meet the needs of the people of China it must be very careful that it brings justice to all classes of people within China's social order. That is absolutely necessary if you are to have the support of all classes of people in China, unless you are prepared to bring in an entirely new social order, and that is quite another question. In working out justice for all the people of China, we of course have had our biggest task with the eighty per cent of the population who live in the villages. The magistrates who control the counties, or Hsien, in China, have a great deal of administrative authority over the two hundred thousand or five hundred thousand people that live in the Hsien. These magistrates can make or break the people under their control, so the New Life Movement has had to work for the appointment of technically trained men deeply in-

34 WHARTON ASSEMBLY ADDRESSES terested in raising the economic level of the people. For centuries government in China has existed for the benefit of those who rule, not for the benefit of the people. General Chiang called these various magistrates in from the provinces in groups of one hundred for a month's training at Nanking. They were being given some work in economics, training in self-defense, and instruction in administration, but General Chiang made it clear that every magistrate, if he wished to hold his job, must work for the economic and social improvement of that vast population that lives by honest toil in the villages. Herein lies the real success of the New Life Movement in that it has honestly tried, during four years, against tremendous opposition, to improve the livelihood of the people. If you have traveled in China you know what has been accomplished by these many technically trained, hard-working young men and women who are determined to make their New Life Movement a success. T h e New Life Movement is the most Chinese thing in China. I am the only "foreign devil" connected with it, and I am there merely in an advisory capacity. T h e third principle is Lien, honesty. This has brought us more fun and more trouble than all the other principles put together, because people have had various ideas about honesty. One of my good friends came to me early in our campaign and said, "Of course you are a foreigner and you are not expected to understand everything in China, but you know public funds are public funds, and private funds are private funds. There is a difference between the two, and this standard of Lien, honesty, may not apply equally to private and public funds." In one of our large cities the people were taking up a public subscription and asked the young men of the New Life Movement to take charge of the funds. While auditing the books, they came to me and said, "There is something wrong. We have found a lot of false receipts. We are $8,000

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short." T h e Chairman of the Chamber of Commerce had taken $5,000 "cumshaw," and a military secretary $3,000, following the supposition that public funds are public funds. T h a t night at dinner I asked the President of the New Life Movement if he had any instructions on this matter. He is a man of very few words and replied, "Within twenty-four hours bring me a documented report." Y o u will be interested to know that before that report was ready, while we were still writing it, without anybody saying anything about it, the money came back from somewhere and we put that in the report, too. General Chiang made it very clear that Lien, honesty, in the history of the Chinese people and in common usage today means just plain honesty —whether applied to public or to private funds. Many friends of the Movement were worried and said, "Look here, if you young fellows keep up this program, you are going to need a bodyguard." When I was younger I was very much afraid of making enemies; now I am worried in this kind of world if I do not have a few somewhere. W e have discovered that the men who pilfer public funds are yellow. T h e y are the easiest men in the world to deal with. All you have to do is bring their misdeeds to light and they become jittery overnight. T h e y do not like fresh air and they are worried tremendously when they discover that public opinion is solidly against them. T h e great commercial center, Canton, paid the Movement the highest compliment that it has been paid in the four years of its existence. A delegation came to our headquarters to say, " Y o u can water down this New Life business in Canton or we'll put you out of business." O u r young men said, "You can have our answer now. Put us out of business." With public opinion everywhere solidly and whole-heartedly for Lien, it is impossible for organized corruption and vice to flourish. Honesty in the handling of public funds, and honesty in private relationships, as one of the outstanding needs of reconstruction, you do not have

36 WHARTON ASSEMBLY ADDRESSES to prove to the Chinese; Lien means just that, and all you have to do is stand up for it. One important official negotiated a loan for reconstruction purposes, which is essentially the business of the New Life Movement, and demanded twenty-eight per cent commission. He made a personal fortune out of one loan for reconstruction purposes. General Chiang Kai-Shek, through the New Life Movement, has made it very plain that that kind of dishonesty cannot live any longer in China. Not so long ago he built an airdrome at a cost of one million dollars. We were highly amused because there was a ten per cent commission hanging around for two years and nobody would dare touch it. Honesty had come to mean honesty, and promised to bring about a new day for all classes of people in China. The fourth principle is Chih, which means self-respect. You do not do the things that bring disrespect to yourself as an individual, to your home, or to your country. Chih means there are still a few things that you blush about. Following their four principles of New Life, the Chinese are building a new nation, not around some of our modern theories, but on the foundations laid by their forefathers. Into the midst of reconstruction has come the great tragedy of our day—war. If you have lived in Japan, as I have, for brief periods of time, and have had occasion to live in the villages among the people, you probably have discovered that they have one of the most picturesque countries in the world, truly a delightful place to be. The people are courteous and friendly, and particularly so if you do not speak the language. You can always find assistance and friendliness anywhere in Japan. They have a very efficient government and their country is well run. I amuse my friends by saying that you can leave your suitcase anywhere without fear of its being stolen. If you do

SINO-JAPANESE SITUATION 37 lose it, the first policeman you meet will return it to you, as the police know where everybody's suitcase is. This real spirit of the people, as I like to speak of it, has been embodied during the past ten years in a government by men who truly represent the spirit of Japan. These men have been worried because right next door to Japan is the greatest market in the world for Japanese goods. There is no pressure of population in Japan so that her people must migrate to other countries, but there is tremendous pressure for her population, not employed in agriculture, to find employment in industry. The products of her industry must be sold to other countries, so Japan today is economically aggressive. When the American ships sailed into Tokio Bay, Japan gave up forever her isolation. She knows that she cannot live in isolation. If you have studied the figures for the past three years, you have noticed that Japan has sold more of her manufactured articles to Manchuria, or Manchukuo, only one of the provinces of China, than to all the other provinces put together. There is no official boycott of Japanese goods, but no Chinese buys Japanese goods, so that the products of her industry cannot be sold in this vast and growing market. The men in power in Japan have been worried and rightly so, because China is the logical market for her manufactured goods. During the past ten years I have noticed delegation after delegation coming from Japan to China—bankers, industrialists, business men, monks, Christians, students, women's clubs—all coming over to China, fraternizing and hoping to build cooperation. But those were the days of the warlords with all their confusion and lack of cooperation. Not so long ago, you opened your newspaper one morning to discover that the young army hot-heads of Japan had shot to death some of those fine old leaders of their nation. They were destroyed in their own homes and gardens, be-

38

WHARTON ASSEMBLY ADDRESSES fore the eyes of their families, and the militarists took control of the government. They sent Mr. Kawagoe as Japanese ambassador to China, and when he had visited in China for three months he returned to Japan to say: "Gentlemen, you are wrong, I find a new China; the China of the New Life Movement. There is still much hatred of Japan, still much that we call Communism, and opposition to trading with Japan, but I believe that can be overcome. Don't strike." But the young military hot-heads of Japan said, "You are wrong. Go back to your post." In July they struck, and that is the tragedy, for when we had good will in Japan we did not have it in China, and now that we are building it in China and emerging from our years of confusion, we have a war party in Japan. There is nothing more important that I have to pass on to you than this—that if we are to have cooperation, we must have cooperation on both sides of the line at the same time. It means cooperation and independence for both nations. There are two arms of good will reaching out from America to the world of today. One is the missionary or cultural movement, of which I am a member, and the other is American business. I want to give you this unfashionable idea, for two years from now you will be thinking in these terms. Americans in the Orient, in company with many other foreigners, have in years past engaged in considerable exploitation. We have been thinking in terms of "get-rich-quick." During the past two or three years in China that psychology has been changing. We realize now that we can do business with China, with Japan, with other foreign nations, on the basis of cooperation. If we make profits then we must at least, to an equal extent, benefit those people in whose territories we work or with whom we do business, and that is what I call business on the basis of good will. Any other kind of American business abroad today is doomed. It must be give and take; it must be based on the same

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spirit of good will that we have in our cultural institutions abroad, and the only thing we need is more of that kind of business and less of the other kind. More of that kind of business will bring peace and understanding not merely between America and other nations, but between other nations themselves. Here is one of the greatest contributions that we can make to the world as we go out into it and find it war-torn. We can build our commercial relationships on the foundations of American civilization which are peace and fair play—prosperity for others as well as for ourselves. When Americans were ordered out of China, General Chiang Kai-shek sent for me and said, "What does this mean?" Sometimes you can do a lot of talking but very little explaining, and I said: "General, the people of America believe in peace." He said, "You believe in standing up for what you know to be right, don't you?" He asked, "Will the business men go? Will you missionaries go? Must you all leave?" I replied, " T h e business men in every war find it difficult to carry on; they may be bankrupt and have to go home, but the missionaries will stay. The emblem of the church is still a cross and a shield, not a yellow streak. We stay no matter what happens. Our business is the building of good will in China and Japan." That is the reason why many Americans have refused to leave China. Our flag flies in war as in peace. We cannot say to General Chiang: "We will work with you in times of peace, but now that you are in trouble and bombs are bursting we are going home." You will be interested to know that I am returning to China on the China Clipper at the end of this month. We have sixteen Americans in Nanking who have stayed right through, and I wish you could read the letters of some of those men. They have sent out a long tale of violence and brutality, but not one of them has indicated that he wishes he were safe at home. As Japan adopts the war method, and the young hot-

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WHARTON ASSEMBLY ADDRESSES heads in the army of Japan say they will open that market of four hundred million people with bombs and bayonets, just exactly what is happening? Who is going to win this war? General Chiang held a conference on the first of July 1937 to which he called all the intellectual leaders of China —presidents of colleges, writers, leaders of life and thought. At that conference he said this: "Gentlemen, you have been accusing me of being pro-Japanese. You say that I will not go to war with Japan." This was before the war. "You are not military men. You are members of the intelligentsia and you are not supposed to understand military affairs, but I want to tell you four things. First, China is not prepared to fight Japan. You see some planes, tanks, and modern equipment, but you do not know what Japan has. I must take millions of men and throw them against a highly mechanized army only to be mown down. There is only one end to a declaration of war upon Japan, as far as we are concerned. "In the second place, remember that if we go to war, every one of you must suffer. You must all pay the price of this struggle. This will not be a war in which we can hire coolies to tote rifles and do our fighting for us. We must all pay the price. "In the third place, you must remember that no foreign soldiers will come to Chinese soil to fight our battles. This will be a war of the men of Asia. "In the fourth place, remember that there can be no peace halfway. There can be no peace until the last Chinese has shed his last drop of blood, or until the last invader has left our shores. "Now," he said, "gentlemen, do you still want me to go to war with Japan?" Seven days later I was at his headquarters when he said, " T h e Japanese army has struck at Marco Polo Bridge near Peking," and immediately divisioas were sent to the front. I said, "General, is there no other way?" He said, " N o other way. China must fight to

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save her own soul. W e must resist to the last." A n d you know how his army of two hundred thousand men, the only real army in China, was smashed to pieces by Japanese artillery at Shanghai. T h e r e has been no real resistance since, and there can be no resistance as far as China is concerned outside of guerilla tactics. By the summer of this year Japan can control everything from Peking to Canton. She can win almost every battle in which she engages, and the Chinese must retreat, but as they retreat the Japanese army finds nothing but ashes. Remember that the Japanese army promised the business men of Japan that it would open a market of four hundred million people, and today it is destroying that market. Bombs and bayonets do not open markets; they destroy them. T h e young Chinese capable of restoring order in these devastated areas have all gone with Chiang Kai-shek into the wilderness, and they will stay there. T h e y will offer the supreme sacrifice and die rather than serve the invaders. T h a t is all they can do. So in setting up their autonomous governments in Shanghai, Peking, and other areas in China, the Japanese find nothing but warlords—a few of the old men who fought the principle of Lien, the men who took twenty-eight per cent commission on loans, the men who have run China into the ditch. T h e technically trained men who have been in preparation these fifty years cannot serve the invaders. Japan can find no Chinese to cooperate with her in restoring prosperity. It took four years to build a steel railway bridge over the Chien-tang River so that we could have a through train service from Shanghai to Canton, and month by month we watched that steel structure being erected. It was barely completed when the invaders came and the Chinese put sticks of dynamite under it. In a few minutes the work of four years was completely destroyed. China will leave nothing of value for the invaders, and the Japanese army is the most worried army on earth, be-

42 WHARTON ASSEMBLY ADDRESSES cause it cannot fulfill its promises to the reasonable men of Japan. There is another reason why Japan is worried. The destruction of Chinese property, and no men to cooperate with her in setting up a new government, seem tragic enough, but in order to reconstruct China, Japan must have not only men but money. That money must come from New York or from London. You will be interested to know that the men of New York and London are not in the least interested in loaning one red cent to Japan for the reconstruction of territory that she has stolen from the Chinese people. They will not loan money to the Japanese army. They will not make aggression profitable, and if they do not make aggression profitable the day may come when the Japanese army will have to return to the real men of Japan and say, "We are sorry. We were wrong. We cannot open that market by pressure, but maybe your old-fashioned idea of cooperation that you talked about some time ago will win the approval of New York and London." That is true. We can do business with the real men of Japan, but we cannot do business with the army, which uses the pressure method in order to open a market for its goods. If aggression can be made unprofitable, we shall be a step farther forward not only in the Far East, but throughout the world, for we will have found an alternative to war. It would be futile for us to use the pressure method or any form of armed intervention in order to bring about peace in the Orient. We know that the only answer is complete cooperation between Japan and China, and that means an independent China and a strong Japan. Our relationship must be with the real people of Japan and the real people of China, so that there can be a market for Japanese products, and tranquillity and prosperity throughout the Orient. In this undoubtedly America will share, for we have much to contribute to the Orient. Our heavy industries are in a position to deliver what the Orient needs. Today they need transportation. In the

SINO-JAPANESE SITUATION 43 days of reconstruction they will need all kinds of machinery for which we are in a position to give them credit. They will need money to reconstruct the country, and our problem is that we have too much money, that is, you and I are not bothered that way, but the problem of America generally is that we have billions of dollars lying idle, and if that money can be set to work so that we can attain our objective of having an independent China, an independent Japan, a strong China, a strong Japan, then we will have peace in this front garden of the Pacific, and that is the only road that we can afford to follow—cooperation with both Japan and China. And now we still have two questions. First, as the Japanese army drives into China, will Chinese morale hold? Will China sell out to the Japanese? Let me give you your answer. Chinese morale will hold. The Chinese will not surrender. They will not give in. Now, I want to ask you this question: Will our morale hold? In the months and the years that lie ahead, for this will not be a short war, you must answer that question. The future of Japan and China hangs upon the answer that we give to that question. If our morale holds, in course of time we can restore to Japan her former glory; we can restore the reasonable men of Japan to their rightful place in the government, and we can have an independent and strong China, erected upon the experience of her own race, her own principles, as worked out by the New Life Movement. With some assistance from America, China's own young men and women will be able to finish the task that they have so nobly begun. There is another factor in the Orient that I have not time to discuss, but I want to at least mention it here since you will be reading it in the newspapers. Any discussion of Far Eastern problems should not ignore the influence of Soviet Russia. Today in China Russia has tremendous influence. In the years that lie ahead she may have an increas-

44 WHARTON ASSEMBLY ADDRESSES ing influence, and that is bothering Japan. It is bothering men in America; it is bothering men in Britain and in other parts of the world, that Soviet Russia should have so much influence in China. Let me tell you, out of close association with General Chiang Kai-shek, that he has told me many times privately that he does not believe that any foreigner or any foreign movement can eventually dominate China. China for the Chinese is the true destiny of China. Russia may gain some influence through aiding China in her struggle, but if she hopes to dominate China she is doomed to disappointment. In our work in China, covering fifty years, we have given China the best of our culture, and have said, "You take this, place it alongside the best that your forefathers have given you, and then build the kind of China that you ought to have." We believe in China for the Chinese and we have played that game. We have made some mistakes, but we have honestly attempted to give China an opportunity to remold her nation in her own way. "Hands off" is still the best policy. Now do not be surprised if you find that there are other nations who wish to work otherwise, who desire to dominate the Chinese. The Chinese can never be dominated from the outside; they will always remain Chinese. So far as America is concerned we must see that China retains an independent place in the world in which she has played so long and honorable a part, and to which she has contributed so richly.

THE PROSPECTS OF PEACE IN EUROPE by Harold J . L a s k i 1

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ago I was in Barcelona. I was sitting with some of my colleagues of the British Labor Party at a conference with Señor Pietro, the Loyalist Minister of War. As we sat there we heard the hiss of arriving airplanes and almost immediately bombs began to fall. Opposite the Ministry of War where we were sitting, there was an orphan asylum in which were perhaps some six hundred children. Within seven minutes of the arrival of the Franco planes, in the building opposite there were four hundred and eighty dead. That gave me, and it may be that it will give you, a sense of the imminence of disaster in the civilization to which I belong. What are the roots of this situation? What lies behind the immediacies of this day-to-day defense? What are the prospects that are inherent in those immediacies? All over Western Europe we have a governing class that has lost confidence in itself. We have there also a system of social values that has gone into the melting pot. All the traditions by which up to 1914 men were able, as it seemed, to guide themselves with stability, are now questioned. T h e uneasy marriage between capitalism and democracy seems to be drawing to its close. England, France, and the Scandinavian countries are, as FORTNIGHT

1 Stenotypist's report of an address by Dr. Harold J . Laski, Professor of Political Science, London School of Economics. This address was delivered before the Wharton Assembly of the Wharton School of Finance and Commerce, University of Pennsylvania, March si, 1938,

45

46 WHARTON ASSEMBLY ADDRESSES it were, an oasis of freedom in a Europe that is being transformed into one gigantic concentration camp. From the Vistula to the borders of France all the ideals that were the commonplaces of my generation are now challenged. And if we mean by civilization an unwillingness to inflict unnecessary pain, then those standards of civilization in which I was brought up are now challenged at their foundations. What is to happen? Why is what is occurring, to every one of us in Western Europe, something that makes not only the immediate, but even the remote prospects so dark? It is easy to say that in 1918 the statesmen of the Allied Powers made an evil peace; that the coercive imposition of that evil peace upon Germany has now at long last brought its own revenge, and that because in 1918 we acted with some measure of injustice we are having to pay the penalty of that injustice. Let us be clear that there is no one among the common people of Western Europe who desires war. Moreover, let us be clear that there is no one among the statesmen of Western Europe, no less in Germany than in my own country, who wants war. But let us be clear also that there are objectives aimed at by statesmen in Western Europe that are incompatible with the maintenance of peace. As far as I can see, no adjustments can be made here or there in this detail or in that detail that will, in any fundamental fashion, alter the large perspective of events. We have reached one of those periods in history, like the beginning of the Reformation, like the epoch of the French Revolution, like the end of the Western Roman Empire, in which the relations of production must be readjusted fundamentally to the forces of production. That can be done in one of two ways. It can be done by voluntary cooperation between classes, or it can be done in terms of force. And what we are watching now is the struggle between great empires for that adjustment, watching it with a sense that in either of these issues reason is to prevail, or out of the irrationalities of conflict,

EUROPEAN PEACE PROSPECTS 47 slowly, painfully, miserably, we shall have to begin again the adventure of civilization. T o me, and I think to most of those who share the kind of views that I hold, we seem to stand upon the threshold of a dark age. It is easy to talk of the decline of democracy. One has to ask why the decline. When I left Oxford in 1914 no one doubted that the triumph of parliamentary democracy was the hope of western civilization. Mussolini talks of "the stinking corpse of liberty." Herr Hitler explains that parliamentary government is the apotheosis of inefficiency, and clearly enough all over Western Europe there are millions to whom an announcement of this character carries an intimate conviction. There is nothing wrong with democratic government as a principle. The right of a people to affirm its own essence, the right of the common man to have an equal share in the gain as in the toil of living—these are principles that as matters of social justice are beyond discussion. What is there in a situation like this one that persuades the common man to part with those traditions for which he has fought so long and for which again he may have to go out to battle? Let me speak of English history, since I can make myself more intelligible than if I speak of history elsewhere. We like to think, in Great Britain, that we are not like those "lesser breeds without the law" that dwell upon the continent of Europe. For two hundred and fifty years we have enjoyed social peace, and we can make oration about the genius of the British people for compromise, and their ability in the hour of crisis to adjust their differences, that find their way into the anthologies of parliamentary eloquence, and yet the reason for the triumph of parliamentary democracy in Great Britain is a very simple reason. During the nineteenth century we had an economic supremacy that was unchallenged in the world. Out of the abiding wealth of that economic supremacy we were able to distribute to the working classes of Great Britain, welfare, concessions,

48 WHARTON ASSEMBLY ADDRESSES call them what you will, that reconciled them to the maintenance of the system. So long as our system, our supremacy, was unchallenged, so long also there was confidence and parties could afford safely to quarrel because, upon the fundamental contours of the system, parties were in essential agreement. But about the nineties of the last century the relative position of Great Britain began to change. There came first the competition of Germany, then that of the United States, and, in more recent times, that of the Far East, and above all the competition of Japan, so that the ability to continue that policy of concession was by no means as easy as it was in the earlier periods. In a society based upon universal suffrage certain things are clear and unmistakable. The workers will want higher wages; shorter hours of labor; better houses to live in; better education for their children; industrial security. So long as the economic system can give them these things on an increasing scale they will accept the system and, in so doing, accept also the political expression in which it finds its institutional form. But as the system becomes less able to satisfy their legitimate expectations, then the ultimate contradictions of the society come more and more clearly into view. Great Britain is fighting to maintain its place in the markets of the world, and its trade routes, its colonies, its protectorates, its spheres of influence, its spheres of legitimate aspirations. We have to arm, but our arms, of course, are not a challenge to anyone. They are merely a defense of the rights of Great Britain. Similarly Germany, with the need for overseas markets, arms, and while our arms seem to her a threat, her arms seem to us an offensive measure for which there can be no sort of justification, and therefore we rearm against the armament of Germany, which is clearly a provocative measure from their angle, and therefore they rearm against our rearmament lest, between both of us, demands might be made that are incompatible with

EUROPEAN PEACE PROSPECTS 49 that curious thing called national prestige. Out of all this comes insecurity, and from insecurity there comes a lack of confidence, and from a lack of confidence there comes intolerance, because when men are afraid they are not prepared to reason, and where they are not prepared to reason, in the long run they are bound to move to conflict. If men cannot argue, then there arises between them what Carlyle called the ultimate question between two human beings— "Can I kill thee or canst thou kill me?" If you will look at the spectacle in those terms, what is happening appears clear. The Fascism of Western Europe is the necessary protective armament of an economic system that can produce only upon a restricted scale and which is unable to solve the problems of distribution. It is therefore bound to pass into its imperialist phase in order that thereby it may continue to satisfy its logical implications. It uses the power of the state in order to push to their conclusions those logical implications. Then it finds lying across its path the shadow of another state with ambitions kindred to its own, so that the immovable force meets the impenetrable rock, out of which disaster inevitably supervenes. At the stage in the history of society where an economic system moves from its phase of expansion into its phase of contraction, there must be a readjustment of the relations of production to the forces of production. Translated into contemporary terms: where capitalist democracy passes into its phase of contraction, then either the democracy must transform the capitalism or the capitalism will suppress the democracy. That is what has happened in Italy. That is what has happened in Germany. That is what is being decided in Spain. I ask you to realize that when the last word has been said about the psychological complexities of Fascism, and I do not doubt that they are intricate and profound, what remains as its fundamental deposit is the suppression of the essential defensive instrument of the working class. The free trade unions go; the liberal and

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WHARTON ASSEMBLY ADDRESSES socialist parties go; the cooperative movement goes, and the working class is left in a society which is dependent upon that supreme coercive power we call the State, which has always been the servant of those who own the instruments of production. A dictatorship, no less than a democracy, must live by its ability to satisfy the material wants of its people; it must therefore search for the means of economic expansion in order that it may continue the policy of concessions. I have so far deliberately refrained from any word that implies explicit condemnation of the relationship between the dictators and the democracies, but here let me say this, that while I believe it to be the duty of European statesmen in the democracies to make every sacrifice that can legitimately be made for peace, there are some sacrifices that it is illegitimate to make. It is illegitimate in Europe, as we know, to allow the overthrow of free institutions, to allow changes in the territorial distribution of Europe, when those changes are made by the technique of aggression. If that is to be the technique, and England or France is presented with the alternative "Will you abdicate or will you fight?" on the ground of justice and moral obligation I believe it to be the business of the democracy to fight. There are certain values in our civilization too precious to be put to the hazard, the value that is represented by the fact that in England today, in France today, whatever be our weaknesses or our demerits, the people will take an effective and continuing share in the determination of their own destiny. That seems to me fundamental and upon that I think most Englishmen, in the last analysis, would take a stand. Is it possible for us to find terms of accommodation with the dictators? I find that a difficult question to answer. Austria is gone. That is a closed chapter in history. The grim issue of Czechoslovakia remains. You will have observed that the Prime Minister of Great Britain has not spoken upon our relations to the Czechoslovakian issue with

EUROPEAN PEACE PROSPECTS 51 that clarity that ought to be the attribute of prime ministers. There is a great resemblance between the dubiety of this position and those days of the twenty-fifth of July to the first of August 1914. Of this I am certain, that if Great Britain chooses to abdicate from the obligation to stand by the principles of collective security, the flames of Fascism will sweep over Europe. If Spain goes, France goes; if France goes, Belgium goes, and you then have Europe as a concentration camp from the Channel ports to the Vistula. No nation can acquiesce in the suppression of freedom abroad without becoming inured to its suppression at home. And therefore those with whom I am associated in the politics of my country have no doubt whatever of the policies that should be pursued. We should join with France; we should join with the Soviet Union, within the framework of the League of Nations, to say to the dictatorial countries, "Where you seek to alter the map of Europe by violence, there we shall be found ranked against you. If you choose the issue of war, it is your choice. If you choose peace there are, as we think, ways of accommodation." My party will be prepared, and I believe that in the test of a general election the British people will be prepared to take the colonial possessions of Great Britain and to place them under international mandate, with equal access for all European people in their economic development upon two fundamental conditions; first of the return of Germany and Italy to the League; second, that accompanying their return to the League there be a measure of disarmament that makes possible once more (which is impossible upon the present scale of rearmament) the resumption of the policy of social reform in Western Europe. It is not a Socialist like myself, evil minded of course and bitter, but the Prime Minister of Great Britain who has said that the rearmament program of Great Britain postpones all major social reforms for at least a generation. T o postpone major social reform is to make certain internal

5« WHARTON ASSEMBLY ADDRESSES conflict, and if internal conflict comes, no man knows what will be standing at its close. We at least are prepared to make that offer. Would the British Government be prepared, given its character, to cooperate in an offer of that kind? I do not know. The British Government is a conservative government. A conservative government believes, let me add with a sincerity that I appreciate even if I deprecate the principles upon which it is built, that the British Empire is and has been in its present form a force for permanent good in the world. That we know. Our Empire to them is different from all other empires; a view that, because I am a historian, I have never been able so easily to share. The British Government in its present form looks at the spectacle of Western Europe and it says two things—one of them intelligible and one of them, as I think, extraordinarily dangerous. It says, as Sir Robert Walpole said in 1742, "There have been ten thousand men killed this year in Europe and not a single Englishman." The longer we can maintain peace, the more isolated we are from these European conflicts, the better for ourselves. And it says, secondly, that the price of war may well be universal upheaval, and that with the coming of universal upheaval there may be a reconstitution of the economic foundations of western society. It is true of Englishmen, as Machiavelli said it was true of the Italians in the fifteenth century, that they will rather forgive the death of their relatives than the confiscation of their relatives' property. They look at the changes that have occurred in the Soviet Union, and the notion of an alliance between Great Britain with its purposes and the Soviet Union with its purposes, seems to them, as it were, an alliance between the lamb and the wolf, although the lamblike character of Mr. Neville Chamberlain has never been to gentlemen of the opposition one of his outstanding characteristics. Therefore, the building of the one high road that we can see, to the maintenance of peace, seems a difficult and perhaps an impossible adventure. We can negoti-

EUROPEAN PEACE PROSPECTS 53 ate. The negotiations that are taking place between Mr. Chamberlain and Signor Mussolini may succeed, but succeed for what? T o postpone the issue for a half a year, a year, perhaps two years? Negotiations with Herr Hitler may for a moment postpone the ultimate decision; but do let me say here, with all the force and the emphasis that I can, that between these ideologies there is no ultimate prospect of peace. Where a nation is prepared by means of war to realize its purposes; where a nation declares, as Mussolini in Abyssinia; as Japan with Manchuria and China; as Herr Hitler with Austria, that there are rights that transcend free consent and the claims of international law, there can be no prospect of ultimate accommodations. One by one the lamps in Europe are going out. I do not know whether they will be lighted again in my lifetime. There is a way, as I think, to peace, but the price of that peace is an overwhelming price. It was a great Englishman who in this city at least is entitled to respect—I mean Edmund Burke—who said, "Magnanimity in politics is seldom the truest wisdom, and . . . a great empire and little minds go ill together." If we want peace in Western Europe, then the price of peace is the reconstitution of the economic foundations of our society. There is no other way, and that means the cooperation between those who own and those who live by the sale of their labor power, a cooperation that so far has been grimly wanting. It is wanting in Germany because the price of despotism is always the same—the necessity of drawing attention away from domestic discontent by what is called a spirited foreign policy abroad. It is because that spirited foreign policy is taking place in a Europe that is full of dynamite that I look upon the spectacle of Western Europe with forebodings and with dismay. A year; two years; three years? It may well be that for this period we can evade the conflict that impends, but if men maintain the principles upon which Europe is now divided, the

54 WHARTON ASSEMBLY ADDRESSES prospect of maintaining peace seems to me a prospect that fades day by day. If I may, there is one other thing that I would wish to say concerning the part of America in world affairs. It is neither my right nor my business to speak; but because I love America, to whom my debt here as a student and teacher over long years is great, may I say this to Americans. A large part of the disasters of Europe has been the outcome of the very simple fact that men have preferred power to justice. You are a people who still have what is in large part denied to ourselves. You are a people who still can fulfill the dream with which you started. You are an experimental civilization. Your resources are still magnificent and unexhausted. You shatter those grim traditions that make the relationship of classes as static and as stereotyped as they are with ourselves. No Englishman who visits America but must feel that with you there is a certain spaciousness, and a certain exhilaration, a certain leeway for your citizens to find an opportunity of fulfilment that in England, in France, and even more in the dictatorship countries, is now little by little moving away. I wish I could convey to America my sense of the immense opportunity that exists, as well as the responsibility that it involves. In 1805 the then Prime Minister of Great Britain, William Pitt, on the morrow of the battle of Trafalgar, made a speech in the Guild Hall in London of which one sentence remains constantly in my mind. "England," said Pitt, "has saved herself by her energy, and will, I trust, save Europe by her example." If you in the United States in these next years, in terms of social peace and by the processes of democratic government, can realize the American dream, the impact that you will make spiritually and materially upon Western Europe is an impact of which the value would be impossible to overestimate. You have a citizen body who came to your country in large part to escape from a battle-scarred Europe. You owe

EUROPEAN PEACE PROSPECTS 55 to them and to us the translation into an actuality of the promise of American life. Were you to begin on a fundamental scale the fulfilment of that promise, you would alter the contours of things in Western civilization; to the imprisoned people of Germany and Italy you would bring new hope. I want every American in this hour of crisis to regard himself in the way that a great German, Heinrich Heine, spoke of himself in the Revolution of 1848. He said, " A laurel wreath upon my grave place or withhold, I care not; but lay upon my coffin a sword, for I have been a soldier in the Liberation War of Humanity." If Americans would regard themselves today as soldiers in the Liberation War of Humanity, they might alter the faith of the world. The shadows darken the world to which I belong—grow every day more grim. We look to you to call a new world into existence, that the balance of the old may be redressed.

A FREE PRESS IN A MACHINE AGE by William Allen White 1

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it does not seem strange today to the students of a school of business to see a newspaper man coming before them to discuss the problems of his profession. T o me my appearance here is most amazing. For now it is not at all significant that publishing a newspaper is a business, a legitimate business which in certain of its higher realms may be reasonably called big business. But I came into the newspaper business fifty years ago and more, when journalism was passing out of its status as a trade and becoming a profession. As a profession it lasted for a generation or two. In those generations what once ideally might have been called a noble calling was transformed into a fairly safe six per cent investment. Before the Civil War, back to Benjamin Franklin's time, an editor was generally an emeritus printer. The rules and traditions of his trade guided him, and the mechanical end of his day's work often interested the editor quite as much as his editorial policies. This was natural enough, for often his editorial policy was a nice compromise between blackmail and begging. In my day, that is to say, beginning with the middle 1880's, the newspaper business began to merge into what was called, in highfaluting terms, "Journalism." We reporters and editors fifty years ago scorned the term. But it prevailed over us. Journalism became a profession, ROBABLY

i Editor and Owner, Emporia (Kansai) Gazelle. An addres delivered before the Wharton Anembly of the Wharton School of Finance and Commerce, Univenity of Pennsylvania, May a, 1938. 57

WHARTON ASSEMBLY ADDRESSES 58 not exactly one of the learned professions, but a profession of sorts. It was still recruited even at the turn of the century, largely from the composing room of the printing office. Horace Greeley's festive phrase applied to college graduates as "other longhorn critters" still echoed in the American newspaper offices in McKinley's day. Fifty years ago a fast-talking printer could borrow money from his friends or from a politician banker and could establish a newspaper in a town for a sum that might be roughly estimated as a dollar for each five of the town's population. His annual income, if he was successful and after he had beaten down his competition, might be safely estimated at fifty cents a head for each voter in the town. The country editor in a town of from a thousand to fifty thousand made about as much money as the local lawyer, doctor, or grocer; not so much as the banker and the merchant prince of the dry goods store; and rather more but not much more than the preacher. The editor of McKinley's time belonged to the ruling class and took off his hat only to the town banker or maybe the men who owned the street cars and the waterworks. But he was a free man, this American editor of the last quarter of the old century. And being a free man, barring the tentacles of his mortgage, he ran a free press, restricted only by his courage, his honesty, and his intelligence. But no outside influence restrained his powers. With the turn of the century, something new appeared in the country newspaper business. It was the linotype, the mechanical typesetter, and the rotary press, both expensive contraptions, and both made necessary by expanding business which came to the editor's door. Common schools were increasing his subscription lists, and merchants found out that by advertising they could create wants where no wants normally existed. So under the impulse of more subscribers and bigger and better advertisers, in the first two decades of this century the costs of producing a newspaper slowly began to rise. No longer could a man go to a county seat

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town with fifteen hundred dollars in cash and a good line of talk and buy or start a newspaper. When the Armistice of the World W a r was signed, the business formula of the mechanical requirements of a country newspaper changed, and it required something like ten dollars for each head of population to buy the machinery, the typesetting machines, the press, the stereotyping equipment, and to provide the working capital necessary to start a competitor for the established newspaper in an American rural community, say a town of from one thousand to one hundred thousand population. Obviously the young man whose father had breezed into town with a good line of talk and had persuaded the country banker to put up from fifteen hundred to two thousand dollars to start a newspaper could not get into the newspaper business himself, as a proprietor, in the machine age. And the old itinerant printer of Horace Greeley's day who, according to the colloquialism of that ancient time, could start a newspaper with a shirttail full of type and a cheese press had gone to join the troubadours, the mound builders, and the gay dancers in the Dionysian revels. T h e trade which passed to a profession had graduated into business, and here it is today. And now an editor in a little country town, all of whose inhabitants could be herded into a good-sized Philadelphia skyscraper, comes before you as a small business man with a payroll of twelve hundred dollars a week. W h e n I bought the Emporia Gazette the payroll was forty-five dollars a week, and twenty years before that the payroll of the country newspaper in my town was less than twenty-five dollars a week. Behold a miracle of the machine age! Now I didn't cross the Mississippi Valley and the Alleghenies to tell you this story of the progress of my profession. I came to talk over the modern problem of merchandising the news which you must face as a group of young business men to be. For you inevitably will be confronted with some

60 WHARTON ASSEMBLY ADDRESSES kind of relations with what may be called "the press." In the next ten years the press may change. In your days of maturity the press may, indeed probably will, change its material aspect. Presses, linotypes, stereotyping machinery may join the crossbow, the neckyoke, and the portcullis upon the ash heap of forgotten gadgets. But the merchandising of the news will be affected in your day, as it is now, with a strong property interest. It will require machinery to assemble the news. It will require capital to distribute the news. And capital today or tomorrow always has a lively sense of its own advantage. Capital is instinctively, for all the noble intentions of us capitalists, class conscious. It is that class consciousness which is discrediting the press of the world today, particularly the press of the English-speaking democracies. Any newspaper in any American town represents a considerable lot of capital for the size of the town. The owners of newspaper investments, whether they be bankers, stockholders of a corporation, or individuals, feel a rather keen sense of financial responsibility, and they pass their anxiety along to newspaper operatives whether these operatives be superintendents known as managing editors, foremen known as city editors, or mere wage earners known as editorial writers, copy desk men, reporters, or what not. The sense of property goes thrilling down the line. It produces a slant and a bias that in time becomes unconscious, and probably in all honesty is a prejudice against any man or anything or any cause that seriously affects the right, title, and interest of any other capital, however invested. So we find the American press frankly backing by moral support whatever business has any reasonable right to a feesimple title. It is not the advertising department that controls the news. A paper may be scrupulously careful to print the news and scorn the demands of its more obvious sources of income, advertisers or even subscribers. Newspaper men may lean over backwards in their upright attitude toward the obviously unfair demands of advertisers and the moronic

A FREE PRESS 61 prejudices of subscribers and still may be poor miserable sinners when they discuss problems affecting the stability of institutions that are founded entirely upon the economic status quo. It is not the department store but the country club that has discredited the American newspaper in so far as it has lost caste with the American people. We editors realize that we have lost caste. We are on the bad books, not heavily in the red on the books, but teetering back and forth between the right and the wrong side of the ledger, of public esteem. Labor as a class distrusts us. It would not distrust us entirely without reason. The labor press, that is to say, these class-conscious newspapers that are circulated entirely in what is known as labor circles, of course are more or less class conscious. Also of course, they are vastly worse in their sins of bias and distortion than the larger newspapers of general circulation. But one discounts frankly labeled class papers. It is a shame that the public also has to discount certain areas of the plug-hat section of the newspaper gallery which is supposed to be impartial, high minded, absolutely dependable. One should quickly qualify this statement. It is not true of all papers nor of any paper at all times. Moreover in the last three years great improvement has been made by the metropolitan press as a whole. Trained reporters who know the implications of labor's struggle are now used by certain great newspapers to get at the exact truth. In major events, the stories of these newspaper specialists in labor disputes are printed as they are written. But these reporters trained to handle labor struggles are few and the struggles are many. Much remains for improvement in handling labor news by the American press. We forget that our journalistic spokesmen for the solid middle class are known as the "capitalist press" in certain labor circles. The deficiencies of the American press in handling the news of what we might as well frankly if regretfully call the class struggle in this country are found largely in uncon-

6? WHARTON ASSEMBLY ADDRESSES scious political attitudes. It is so easy to "policy" the news. Indeed it is so hard not to "policy" the news when the news is affected by a vital bread-and-butter interest to the capitalist who controls a newspaper great or small. And strangely and sadly enough, capital is so fluid that a threat to the safety in any investments, however shaky the moral title to those investments may be and wherever those investments may be located, seems to be a threat to all investments. Gold, which is the synonym for property, is proverbially timid. Therefore newspapers which represent definitely and inevitably fairly sizeable investments are tempted to shy off and shiver when in Congress, in the legislature, or in the City Hall, a man or a group threatens an investment in any kind of patent medicine, in any kind of holding company, in any kind of railroad securities, in any kind of banking affiliates, good or bad. It is no longer the advertiser who puts on the pressure. It is not even the boss back of the payroll who begins to quake and grow jittery. It is the whole upper and middle structure of society. It is more or less the middle class which at the first thrust against vested interests, good or bad, high or low, questions the challenge to privilege. Sooner or later the truth about any social abuse is gladly received by the middle class and by those who own and control newspaper investments. But off the bat, the newspapers representing the innate conservatism of property interests which crystallize middle-class psychology, are some times inclined to be unfair to any man or movement that threatens to disturb property in any form. This is only another way to say that every new day produces its new dangers, its own peculiar threats to liberty. The time was, a decade or so ago, when it seemed likely that the direct pressure of large advertisers, as for instance department stores, might affect the press with a bias. Probably that danger is decreasing. The newspaper publisher stands the economic equal of his largest advertiser, and today the average publisher is wise enough to know that in the news-

A FREE PRESS 63 paper business it pays to be honest. We publishers and owners of the more solidly prosperous papers realize our obligation to the public, the obligation to present the facts without fear. We realize that in our profession the quick, hot dollar is a dirty dollar, and that the dirty dollar in the long run is not profitable. So the immediate threat of the big department store advertiser may be discounted. But a changing environment produces a change of function in every form of life, and we are now faced with a possible new menace to our freedom. Perhaps I should say to your freedom as citizens. For after all the freedom of the press is not necessary to guarantee newspaper profits. The freedom of the press is necessary to guarantee human rights and human liberties apart from the newspaper man's prosperity. The new menace to the freedom of the press, a menace in this country vastly more acute than the menace from government, may come through the pressure not of one group of advertisers, but of a wide section of newspaper advertisers. Newspaper advertising is now placed somewhat, if not largely, through nation-wide newspaper advertising agencies. In recent years these agencies have become advisers of great industrial corporations who also advertise. These advertising agencies undertake to protect their clients from what the clients and their advertising agents may regard as real dangers from inimical social, political, or industrial influences. As advisers the advertising agencies may exercise unbelievable power of pressure upon newspapers. There is grave danger that in the coming decade, as social, industrial, and economic problems become more and more acute, this capacity for organized control of newspaper opinion through the advisers of national advertisers, who are paid in turn to control public opinion, may constitute a new threat to the freedom of the press. It is well to be warned in advance, it is well to be prepared for this attack. Ultimately the danger will pass. Sooner or later, when the American people realize the source of pressure, the pressure will be powerless. Its

64 WHARTON ASSEMBLY ADDRESSES energy will dissipate. But if and when the pressure comes from the powerful organized agencies which control millions of dollars' worth of advertising, the press and the people should know the truth. It is a part of any fair consideration of the newspaper in the machine age to raise a warning signal. These transitory dangers are the products of changing times. Fortunately a time will never arrive when the predatory social forces in our democracy will be eliminated. We shall never put the devil in chains, thank heaven. For when he is chained, man will lose the strength that comes from struggle. Utopia will be a dull place; and worse than that, Utopia will be a locked harbor wherein the wingless ships of man's adventurous spirit shall rust and rot. The problem of the American newspaper today is to open its channels of cordial reception to new social ideals, and to insure fair treatment for any reformer who is obviously honest, reasonably intelligent, and backed by any considerable minority of the public. How can this be done? How can the newspapers become open minded? I do not know. They might try to hire as door keepers in the house of the Lord on copy desks and in editorial chairs men who are free to make decisions about newspaper copy, guided by their own instincts, following their own hunches and not controlled by an itch to move to the next higher desk by pleasing his high potency who sits in the mahogany-paneled room in front of the front office. If owners would encourage a little chronic arthritis of the knee in the lower realms of reporting and copy reading, we might come out from the clouds of suspicion that envelop our noble profession at the moment. These are problems which you as young business men must face either as owners of newspaper securities, as owners of properties seeking to buy advertising, or as investment bankers who will play Providence to the little tin gods, or as leading citizens who will make public opinion. We are mem-

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bers one of another. T h e newspapers will broaden their sphere of influence, and will come out of the present shadow only when liberal, open-minded opinion in the middle class demands a really free press. N o law is restricting us now, no compulsion restrains us save that of social influence. But I suppose in the end newspapers cannot be free, absolutely free in the highest and best sense, until the whole social and economic structure of American life is open to reason, open to the free interplay of democratic processes. Good newspapers and bad newspapers we shall always have, high minded and dumb, venal and upright, careless and greedy. W e cannot hope for perfection in our profession until it has been attained in all other professions. But there is a reasonable and justifiable hope that the merchandising of the news in this country will continue to grow more and more intelligent, less and less restricted by self-interest, and will become to an appreciably greater extent a vehicle of truth. Publishers have an interest in a free press. But it is not a mercenary interest. Publishers can make money without freedom. A subsidized, state-controlled press still would be profitable to the men who own the newspapers. But how about the public? T h e r e is the rub. It is the readers, the people themselves who need sources of information, pure and undefiled, who lose most and suffer soonest and hardest when a free press passes. For after all, it is written that "ye shall know the truth and the truth shall make you free."

Schedule of the W H A R T O N ASSEMBLIES »937-3» October 14,

11 o'clock

B . SEEBOHM R O W N T R E E

Chairman of the Board, Rowntree Chocolate Co., Ltd., York, England

November 15,

T H E MODERN LABOR PROBLEM

12 o'clock MANAGING OUR CITIES

C . A . DYKSTRA

President, University of Wisconsin; former City Manager of Cincinnati, Ohio January 4, 19)8

12 o'clock

SEÑOR SALVADOR DE MADARIAGA

Formerly Spanish Ambassador to the United States and France; Chief of Disarmament Section, League of Nations; and Professor of Spanish Literature at Oxford University

March 4, 19)8 GEORGE W .

CAN DEMOCRACY SURVIVE IN EUROPE?

11 o'clock T H E SINO-JAPANESE SITUATION FROM T H E INSIDE

SHEPHERD

Adviser to General Chiang Kai-shek on the New Life Movement in China March 21, 1938

12 o'clock T H E PROSPECTS FOR PEACE IN EUROPE

HAROLD J . LASKI

Professor of Economics at London School of Economics May 2, ip}8 WILLIAM ALLEN

11 o'clock A FREE PRESS IN A MACHINE AGE

WHITE

Editor and Owner, Emporia (Kansas) Gazette

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