Sellers Take as Much as Buyers Will Pay
But is it not true that, under this system, profitmakers charge 'all that the traffic will bear'? Yes, as a rule. This, however, is merely to say again that they charge whatever consumers, competing for the same goods, allow them to charge; and there is no other way of determining who is to get the goods. But if this is what we mean by profiteering, who among us shall cast the first stone? We are all doing business daily in a society that is based on the expectation that every individual member will obtain whatever he can for whatever he has to sell. And he rarely disappoints us. Farmer, grocer, meat-packer, all our fellow workers in every career known to the census, including those who are loudest in their condemnation of profiteers, usually accept for the commodities they wish to sell as much as they can get. When any one declines to do so, his conduct is so exceptional that it catches the eye of the city editor and figures in the headlines.
All this applies as well to those who have services to sell -- lawyers, engineers, teachers, Congressmen, plumbers, and the rest. It is useless to find fault with the workers in any one industry for taking as high wages as they can get, or to plead with them to accept reductions in the interest of the general economic situation. It would be just as sensible to plead with the stockholders of a corporation to accept reduced dividends merely because the stockholders of other corporations had been obliged to do so. Both wage-earners and stockholders, as a rule, will acquiesce in reductions only if they have to. 'There is a fair and right adjustment between the various groups and classes,' says a monthly bank letter. 'Every group and class is interested, not in grabbing all it can, but in finding the right adjustment...
The stubborn resistance which labor is making to reductions from the abnormal wage rates that were established during the War is a mistaken policy, from the standpoint of labor's own interests.' It appears, on the contrary, that every group and class is actuated mainly by a desire to get as much as possible, and little can be gained in any one generation by trying to eradicate this fundamental human trait. It is probable that a better balance of the industries can be brought about by a better understanding, on the part of the managers of industry and finance, of the functioning of prices and profits; but it is doubtful if much can be achieved by blaming any group of wageearners for conditions for which no one group is largely responsible, or by urging electricians, or plasterers, or farmers, or any other workers, to accept, for the good of society, less than they can obtain. And it is a mistake to tell the workers in any one industry that, because of the general situation, they will gain in the end by agreeing to wage reductions.
This, as the workers know, is not necessarily true. No one group of producers -- cottonmill operators, for example, or automobile mechanics, or coal miners -- should be expected to accept wage reductions simply because somebody declares that such a sacrifice would help to bring about a balanced condition of industry. Each group obtains as high wages as possible; it does not consider itself responsible for general economic conditions. And it is not. As long as we have fluctuating price-levels and trade cycles, characterized by a flow of money into consumers' hands that is more than enough to buy the available goods at current prices, followed by a flow of money that is less than enough, we shall have marked fluctuations in the incomes of various groups of workers. And no one group will be responsible.
So with profit-seekers. It is easy to get the point of view of those who would like to abolish profits and all other material incentives to individual effort, even though it is impossible to see how such a scheme could work; but until we abolish private property and find a workable substitute for the profit incentive, it is not clear why we should condemn any one profit-seeker merely for doing in ordinary times what society, as a going concern, requires that virtually everybody must do. It is not clear, for example, on what grounds the Dearborn Independent indicts the New York landlord because he 'exacts all the rent which the traffic will bear,' when the owner of the paper, in pursuit of the same policy, appears to make larger profits than any other man.
To many business men, no doubt, as well as to many social reformers, all this taken by itself sounds crass and heartless. But any one who understands the functions of price and profit will see that this conception is consistent with the highest moral ideals. It is put bluntly as a shock to misguided social reformers. Much that they say about profiteering is not only economic nonsense, but moral nonsense as well. In the interest of a more equitable distribution of wealth, a higher standard of life, and human welfare generally, it is important for us all to understand that certain economic laws are neither moral nor immoral; they are inexorable. To accept them as such is the first business of any one who would serve his fellow men.
There are Many Exceptions to Economic Rules
Here, perhaps, we should emphasize the fact that we are speaking only of main tendencies. We are leaving out of consideration various exceptions that make it appear to some people as though there were no such general principles as those we are setting forth. Some sellers, for example, in deference to public opinion, or with a view to long-run profits, or both, do not always accept as much as they can get. Some sellers accept less in order that the field will not be too attractive to newcomers. And in the midst of war and war inflation, exceptions rule.
Furthermore, we have not discussed cases of monopoly and near-monopoly in which prices have unusual difficulties in fulfilling their economic functions. In the case of a monopoly, the competition of buyers does not meet the competition of producers. Therefore, the efforts of consumers to obtain goods, while they tend to drive up prices, do not have the compensating influence of stimulating increased production of these goods.
For it is true, ordinarily, that a producer who has no concern over the output of competitors can increase his profits by limiting his own output. Thus, competition among buyers of aluminum does not affect the supply, as does competition for a commodity like cotton cloth that can be freely produced. Consequently, prices of monopoly-controlled commodities may move goods, as Government-controlled railroad rates may move trains, but without the economic effects that follow when the volume of production is more effectively controlled by the competition of buyers. The investigations of the building industry by the Lockwood Committee of New York and the Daly Committee of Chicago show to what extent the consumers' desires concerning volume and quality are sometimes frustrated when groups of producers get together to eliminate competition.
Furthermore, however inexorable economic law may be, it does not take effect instantaneously. 'It is not a policeman who arrests a criminal the moment he finds him committing a crime. It is a potter gradually shaping a plastic material to his will.' The discussion that follows is sure to be misunderstood by any one who loses sight of the qualifications we have just made.