Production of Articles of Naturally Individual Consumption
Under this new order the national association, freely constituted, contracts with a firm or company to ensure its internal and external security; provincial and other local associations continue the analogy, contracting for the performance of naturally collective, though local, services. The particular contributions required under these contracts are levied directly upon all associates living within the localities served, and their payment relieves the contributors of all further obligations or services.
The individual, meanwhile, remains free to produce personally, or to procure by means of exchange, those far more numerous products and services which are the natural subjects for individual consumption. It seems scarcely necessary to insist on the manner in which individual production disappears as each step on the road of progress increases the economics obtainable by the specialisation and division of labour. These principles find their natural expression in determining the practical formation of commercial undertakings, which again multiply concurrently with the growth of markets, compete with each other, and consequently—always supposing that no natural or artificial obstacles intervene—tend to secure progressive economies in the cost of production. When a system of contribution displaces that of imposts, many artificial obstacles, inseparable from the collection of the latter, will disappear. These obstacles exist whether imposts are collected for the purposes of the State, province, community, or even of particular privileged individuals, and are little less noxious than the imposts themselves. (Imposts levied for the benefit of a certain class constitute a protectionist tariff.) Natural obstacles are already passing away before extended security and the multiplication and perfection of every kind of communication.
The most important and most fruitful of all the revolutions which came to pass during the nineteenth century, was the enlargement of markets and consequent extension of competition. A continuation of this process, with the accompanying unrestricted application of the competitive principle to its extreme limits of pressure and intensity, must reduce the costs of production to a minimum in every industry which is not fated to disappear. All industry will, then, be established and operated in the strictest attainable conformity with the law of the Economy of Power. It must employ the most perfect machinery and most skilled labour, but it must also adopt the most economical and most suitable organisation which can be devised. Modern industry is hampered at all these points by obstacles retarding, and acting as a drag upon, production, and the costs of all such disabilities are borne by the consumer of the product, or service, produced.
On markets, naturally restricted by the absence or imperfection of the means of communication and the guarantees of security, the multiplication and development of industrial undertakings have been hindered from the earliest times. The forces and resources of a family, often of a single individual, have sufficed to found a business, and even to carry it on. These businesses, or "firms"—as they were named on attaining any real importance —were directed by a proprietor possessed of the necessary capital. In certain cases he borrowed this capital at a fixed rate of interest, or on guaranteeing a certain share in prospective profits. The actual worker or labourer was usually remunerated according to a fixed, assured, and prepaid rate known as "wages." Private enterprises of this kind differed in no way from political associations or houses, in so far as the continuation or failure of both depended upon the more or less perfect conformity of their constitution and conduct to the law of the Economy of Power. Most industrial undertakings have been hitherto established on this basis. Competition has extended markets and improved machinery until this system proves inadequate to the needs of the more advanced industries. It is doomed to disappear, certainly to fill a quite secondary and progressively diminishing place in the mighty organism of Production. Private firms are already vanishing to make room for associations or companies, and we shall shortly see why this new system is destined to replace the former.
This readjustment would have been achieved long since but for the idea which prevailed, rightly or wrongly, that large agglomerations of powers or resources were a menace to the political establishment. "No State within the State" was a maxim of government, and governments continue to intervene in the matter of combinations, although the maxim has fallen into desuetude. In no single State is the constitution and organisation of associations entirely free. Laws of Association, limiting individual freedom in this respect, are universal, and co-operation of this kind is further burdened by protective and fiscal ordinances protecting the private house against the society or company by taxing income in the form of dividends, but exempting income in the shape of profits.
The action of governments in regulating and protecting associations for the purpose of production has hampered the formation of companies possessing greater powers and resources than those of the individual firm.
National and municipal administrations have first hindered the formation of such companies by imposing these onerous conditions, and then, for lack of the same companies, they have themselves undertaken to produce services lying outside their proper sphere. Producer and consumer consequently suffer together. Similar intervention postponed, where it did not prevent, the transformation of the firm into a company, partly by protecting the former, partly by laws and statutes impeding the formation of the latter. We have already remarked the great imperfections in the company system—imperfections often neutralising, if they do not outweight its undoubted advantages over the firm. Had the formation of either been equally free, competition would have long since perfected the company, and its indubitable economic superiority have become manifest.
But, once cease to obstruct markets by the artificial barriers of the customs—a system nullifying the reduction in the natural barriers of space now affected by improved means of of communication; grant absolute freedom in the formation and organisation of companies; and the company will become the usual, as one may say that it will be the necessary, form of almost every branch of industrial enterprise. It will be the usual form because of its ability to collect the necessary capital at less cost than is possible to a private firm; it will be the necessary form because it will solve the problem of balancing production and consumption on a market which has become practically unlimited in area.