Time Will Run Back (35 page)

His glance passed inquiringly to each of the nine faces around the table. There were no comments. The meeting was adjourned.

In this miraculous Freeworld market system, people knew at last whether and when they were wasting resources in making things that other people did not want, or in making too much of one thing and too little of another. They could tell by a comparison of exchange values, or prices—and by profit and loss. It was the reduction of the value of every commodity and service to a common denominator, to gold, to “money,” to money prices, that for the first time made all this possible.

A special group grew up, known as “enterprisers.” These consisted of the more adventurous persons who found that they could make large profits if they could devise or think of some object or commodity that would fill some want not already being filled, or if they could make some existing commodity in a more economical or efficient way than it was already being made. They found that whoever could serve the consumers best was most rewarded, and that his reward was in proportion to the degree in which he served the consumers.

So an enterpriser would borrow money (if he could find enough other people with faith in him), rent a factory, buy or hire machines, and bid against other enterprisers for the services of workers in turning out products.

An enterpriser was adding to production on net balance by the amount that the value of his input was exceeded by the value of his finished output. His input was measured by its quantity multiplied by the prices or rates he paid for it; his output was measured by its quantity multiplied by the prices for which he could sell it.

The amount by which his output exceeded his input belonged to him. It was called his “profit.” Sometimes it was very large. Whenever this happened a lot of people contended that the profit was “unfair,” “unreasonable,” or “exorbitant.” But what these same people seldom noticed was the great number of constant, daily failures. More than half of the enterprisers were losing money and not making it. When an enterpriser lost money he was usually through as an enterpriser. He had no funds to start another enterprise; he could seldom get anybody else to lend him any more.

But while nearly everybody with a smaller income would refer to an unusual profit as exorbitant, unreasonable or unfair, nobody (except the enterpriser directly involved) was ever known to refer to a business
loss
as exorbitant or unfair. The loss was simply ascribed to his incompetence. But only a comparatively few people seemed to have the consistency or generosity to admire the exceptional competence, ingenuity and adventurousness of the enterprisers who made big profits because they were exceptionally successful in meeting the wants of consumers.

All this, however, in Peter’s view, was beside the main point. Envy and jealousy, and the tendency of the unsuccessful to attribute all success to favoritism or luck, he decided, were simply a permanent element in human nature. Under the old communist system, he knew, the people who were not members of the Protectorate envied and often hated those who were, but dared not say so. But what fascinated Peter now was the wonderful way in which the market system had solved the problem of economic calculation.

This, he saw at last, was not only a vitally important economic problem; it was the central problem that an economic system had to solve.

Neither Peter nor the Freeworld Supreme Economic Council (which he had set up as the equivalent of the old Wonworld Central Planning Board) now had to decide exactly how much ought to be produced of each of hundreds of different commodities. Prices decided. Costs of production decided. The markets decided. In short, the consumers ultimately decided.

If too many hogs were being raised, their price would fall to a point where it no longer paid to feed them corn; and so fewer hogs would be raised. If too many shirts were being turned out, their price would fall below what it cost to buy the cotton cloth, to rent the factory and machinery and pay the labor that made them. Therefore the least efficient shirtmakers would be forced out of business, and the number of shirts produced would fall. If, on the other hand, there was an exceptionally big profit in raising cotton, more cotton would be planted in the next harvest. This would cause the price of cotton and the profit in raising it to fall back again to a level equivalent to that realized in raising other things. If there was a big profit in making shoes, more shoe factories would be set up, until the relative scarcity of shoes was relieved and their price fell. The cure for a low price was a low price. The cure for a high price was a high price. The cure for an excessive profit was an excessive profit.

And this was so because of the individual decisions of the enterprisers, each of whom was constantly seeking to stop his losses or to maximize his profits. He would halt or reduce the production of the things on which one lost money and begin or increase the production of the things on which one made money.

The enterprisers were constantly thinking up new inventions, devices, gadgets or products on which they might make money. The result was that instead of the few hundreds of drab, shabby, monotonous commodities turned out in Wonworld, there were now
thousands
of different commodities and services, constantly getting better and more varied.

And the result of the effort of each enterpriser to maximize his profits led to a constant tendency toward the equalization of profits. This meant, as Peter began to see, that there was a constant tendency toward a proper balance, as measured by consumers’ satisfactions, in the production of these thousands of different commodities. It meant, also, that productive resources could not for a long time be misdirected or wasted in making the wrong products. For when a needless product was made, nobody bought it. The particular enterpriser who turned it out quickly failed. And when too much was made even of a needed product, it did not repay its costs of production, so the volume made would quickly be reduced. This meant that there was a constant tendency for thousands of different goods to be produced just in those proportions in which they gave a uniform and therefore the overall maximum satisfaction of consumer needs. And it meant that there was a constant tendency for productive resources—raw materials, tools and labor—to be allocated among the production of thousands of different things just in those proportions in which they would produce the highest value.

And this was not all. This solution of the problem of economic calculation not only decided just how much should be produced of each of thousands of different commodities, but (and Peter thought this might be even more important) it also pointed out and measured which were the more economical ways of producing each of these goods. And it virtually forced the adoption of the most economical way of production upon everybody once it had been discovered by anybody.

One Freeworld enterpriser, for example, adopted a new type of machine and a new factory organization system that made cotton cloth at half the cost that anybody had made it before. The enterprisers already in the business did not want to change. They had their old machines—which still were good and strong and seemed to have a long life before them—and they were used to their old methods. But the enterpriser with the new machine kept increasing his production and underselling his competitors. The producers with the oldest machines and the least efficient organization were forced out of business by the increased supplies of cotton cloth and the lower price. And the other producers eventually had to install the new type of machine in order to stay in business.

The same sort of thing was happening every day, and in every line of production. New and more economical methods were constantly being superseded by newer and still more economical methods. Old products were constantly being displaced by new products.

“Nothing approaching this process ever went on under the old state socialism, Adams,” Peter said, “because the commissars and bureaucrats had no such pressure put on them. They had no competition. They didn’t even have a way of finding out what the preferences of consumers were, or what their real wants were. They turned out a stock, drab, ‘utility’ product, the way they had always turned it out, the way it had been turned out for generations, because the consumers either had to take what the State gave them—or nothing.”

But Peter had his difficulties even under the new system. For the owners and managers of the relatively inefficient firms kept sending delegations to the White House demanding “laws” to “protect” them from the “unfair competition” of the more efficient producers. Peter not only refused to give them any such “protection” but was constantly forced, both in his private talks and in his public speeches, to tell them why he was refusing it. In the long run, he repeatedly had to explain, penalizing the most efficient producers, the profit-making producers, doesn’t protect anybody; it merely impoverishes everybody.

Even Adams, for a time, was on the side of the inefficient producers. “But isn’t it wasteful, chief, for these people to have to scrap all those old textile machines that still have a good life in them?”

“No,” insisted Peter. “Because relative costs of production show that these machines are now worthless. They have been made obsolete. Far greater value—far greater worth—can be produced with the new machines.”

But a few weeks later Adams returned to the subject, this time with exactly the opposite criticism.

“Why doesn’t your private industry have
nothing but
these new model machines, chief? Why doesn’t it scrap,
immediately,
all the old machines? Why not let me issue an order, in the name of the Supreme Economic Council, forcing every enterpriser to change over immediately to the latest model machine?”

“You want to force upon private industry something that socialist industry never did and never thought of doing,” retorted Peter. “Under socialism the new machine would never have been invented in the first place, because no one would have recognized the need for it. If it had been invented, it would never have been adopted. You asked me only a few weeks ago whether it wasn’t wasteful to scrap the old machines.”

“But now I’ve changed my mind, chief.”

“And I’m afraid you are wrong both times, Adams. It seems to me that a market economy, the private enterprise system, adopts exactly the right in-between solution—the solution of
constant
but
gradual
advance. It replaces old machines with new ones, and old models with better models; but it can’t make the entire change-over instantaneously, and that would not be economical even if it could.”

“I don’t get your point, chief. Let’s put aside the question whether under our old socialist economy the new textile machine would ever have been invented. It now
has
been invented. It exists. It’s available. Surely you must admit that if it were now installed everywhere it would increase the production of cotton cloth, and cut the cost in half. Surely the latest technical improvement should be introduced immediately, everywhere. Surely we want to operate industry at the highest technical efficiency!”

“You don’t seem to be aware of all the assumptions you are making, Adams.
If
all these new machines could be produced and installed overnight, without using up huge amounts of labor and machine tools for their own production; and
if
the cost of the new machines to each producer did not exceed the economies in producing cotton cloth that they later brought about; and
if
the new machines in fact represented the last possible word in technical improvement, and we could be sure that they would not in a short time be superseded by still better models; and
if
the cotton textile industry were the only industry in Freeworld—
then
everybody ought immediately to install the new machine.”

“Do I understand you correctly, chief? Are you saying that the best technical method of production is not necessarily the method that brings the greatest profits for an individual producer or for an industry, and that therefore we shouldn’t use it but should retain technically inferior methods that bring more profits?”

“Maybe I
am
incidentally saying something like that, Adams. But I am saying something broader and much more important than that. I am saying that the best
technical
method of producing any single commodity is not necessarily the most
economical
method of producing it.”

“But aren’t you looking at the matter, chief, merely from the standpoint of the money-profit of the individual producer? And shouldn’t we look at it from the standpoint of the greatest productivity for the whole community?”

“It is precisely because I
am
looking at the matter from the standpoint of
all-around
productivity, Adams, that I make the statement I do. It is you who are looking at the matter from the narrow standpoint of a single industry. What we have to consider is
overall
productivity—not the productivity of a single branch of industry, not the mere production, say, of cotton cloth, but the combined productivity of all lines of industry. Therefore we have to compare
all
input with
all
output. In figuring what
net
economies the new textile machines really bring, we must figure the cost of making the new machines themselves. We must consider the amount of labor, machine tools and time that must be diverted to making these machines. For the productive resources used in making the new machines must be taken from making something else—something else that may possibly be even more urgent. And then we must further consider, not merely what happens in the cotton textile industry, but what happens in every other industry. If we were to turn the whole machine-tool industry over to making the new textile machines, then there would be no capacity left to make new machines for any other industry. Yet some other industry may need new machines even more urgently.”

“I think I begin to see your point, chief. Other things being equal, goods should be produced by the methods that are technically most efficient. But technical efficiency isn’t the
only
factor to be considered.”