Business & Economics Collection: Thorstein Veblen Edition (30+ Works in One Volume). Thorstein Veblen
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in the petty trade of the precapitalistic English situation the decisive factor was the discretion and sagacity of the small merchant and petty employer, who stood in the direct personal relations with their customers and their employees. In so far as trade and industry was not restrained by conventional regulations, statutory or customary, both trade and industry was in effect an open field of free competition, in which man met man on a somewhat equable footing. While the competitors were not on a footing of material equality, the industrial system was sufficiently loose-jointed, of a sufficiently diffuse growth, to make competition effective in the absence of mandatory restrictions. The like will hold of the business organization associated with the small industry. Both trade and industry were matters of personal efficiency rather than comprehensively organized processes of an impersonal character.
Natural rights, as they found their way into the conceptions of law and equity, were in effect the assumed equal rights of men so situated on a plane of at least constructive equality that the individuals concerned would be left in a position of effectively free choice if conventional restrictions were done away. The organization was not, mechanically, a close-knit one, in the sense that the concatenation of industrial processes or of business transactions was not rigorous either in point of time relations or of the quantity and character of the output or the work. Neither were the place, pace, circumstances, means, or hours of work closely determined for the workman or his employer by mechanical circumstances of the industrial process or of the market. The standardization of life under the old regime was of a conventional character, not of a mechanical kind such as is visible in the more recent development. And this conventional standardization was gradually losing force.
The movement of opinion on natural-rights ground converged to an insistence on the system of natural liberty, so called. But this insistence on natural liberty did not contemplate the abrogation of all conventional prescription. "The simple and obvious system of natural liberty" meant freedom from restraint on any other prescriptive ground than that afforded by the rights of ownership. In its economic bearing the system of natural liberty meant a system of free pecuniary contract. "Liberty does not mean license;" which in economic terms would be transcribed. "The natural freedom of the individual must not traverse the prescriptive rights of property." Property rights being included among natural rights, they had the indefeasibility which attaches to natural rights. Natural liberty prescribes freedom to buy and sell, limited only by the equal freedom of others to buy and sell; with the obvious corollary that there must be no interference with others' buying and selling, except by means of buying and selling.
This principle of natural (pecuniary) liberty has found its most unmitigated acceptance in America, and has here taken the firmest hold on the legal mind. Nowhere else has the sacredness of pecuniary obligations so permeated the common sense of the community, and nowhere does pecuniary obligation come so near being the only form of obligation that has the unqualified sanction of current common sense. Here, as nowhere else, do obligations and claims of the most diverse kinds, domestic, social, and civil, tend to take the pecuniary form and admit of being fully discharged on a monetary valuation. To a greater extent than elsewhere public esteem is awarded to artists, actors, preachers, writers, scientists, officials, in some rough proportion to the sums paid for their work.
American civil rights have taken an extreme form, with relatively great stress on the inviolability of pecuniary relations, due to the peculiar circumstances under which the American community has grown up. The pioneers, especially in that North-Atlantic seaboard community that has been chiefly effective in shaping American traditions, brought with them a somewhat high-wrought variant of the English preconception in favor of individual discretion, and this tradition they put in practice under circumstances peculiarly favorable to a bold development. They brought little of the remnants of that prescriptive code that once bound the handicraft system, and the conditions of life in the colonies did not foster a new growth of conventional regulations circumscribing private initiative. America is the native habitat of the self-made man, and the self-made man is a pecuniary organism.
Presently, when occasion arose, the metaphysics of natural liberty, pecuniary and other, was embodied in set form in constitutional enactments. It is therefore involved in a more authentic form and with more incisive force in the legal structure of this community than in that of any other. Freedom of contract is the fundamental tenet of the legal creed, so to speak, inviolable and inalienable; and within the province of law and equity no one has competence to penetrate behind this first premise or to question the merits of the natural rights metaphysics on which it rests. The only principle (attested habit of thought) which may contest its primacy in civil matters is a vague "general welfare" clause; and even this can effectively contest its claims only under exceptional circumstances. Under the application of any general welfare clause the presumption is and always must be that the principle of free contract be left intact so far as the circumstances of the case permit. The citizen may not be deprived of life, liberty, or property without due process of law, and the due process proceeds on the premise that property rights are inviolable. In its bearing upon the economic relations between individuals this comes to mean, in effect, not only that one individual or group of individuals may not legally bring any other than pecuniary pressure to bear upon another individual or group, but also that pecuniary pressure cannot be barred.
Now, through gradual change of the economic situation, this conventional principle of unmitigated and inalienable freedom of contract began to grow obsolete from about the time when it was fairly installed; obsolescent, of course, not in point of law, but in point of fact. Since about the time when this new conventional standardization of the scheme of economic life in terms of free contract reached its mature development, in the eighteenth century, a new standardizing force, that of the machine process, has invaded the field. The standardization and the constraint of the system of machine industry differs from what went before it in that it has had no conventional recognition, no metaphysical authentication. It has not become a legal fact. Therefore it neither need nor can be taken account of by the legal mind. It is a new fact which fits into the framework neither of the ancient system of prescriptive usage nor of the later system of free personal initiative. It does not exist de jure, but only de facto. Belonging neither to the defunct system nor to the current legal system, since it neither institutes nor traverses a "natural right," it is, as within the cognizance of the law, non-existent. It is, perhaps, actual, with a gross, material actuality; but it is not real, with a legal, metaphysically competent reality. Such coercion as it may exert, or as may be exercised through its means, therefore, is, in point of legal reality, no coercion.
Where physical impossibility to fulfil the terms of a contract arises out of the concatenation of industrial processes, this physical impossibility may be pleaded as invalidating the terms of the contract. But the pecuniary pressure of price or subsistence which the sequence and interdependence of industrial processes may bring to bear has no standing as such in law or equity; it can reach the cognizance of the law only indirectly, through gross defection of one of the contracting parties, in those cases where the pressure is severe enough to result in insolvency, sickness, or death. The material necessities of a group of workmen or consumers, enforced by the specialization and concatenation of industrial processes, is, therefore, not competent to set aside, or indeed to qualify, the natural freedom of the owners of these processes to let work go on or not, as the outlook for profits may decide. Profits is a business proposition, livelihood is not.
Under the current de facto standardization of economic life enforced by the machine industry, it may frequently happen that an individual or a group, e.g., of workmen, has not a de facto power of free contract. A given workman's livelihood can perhaps, practically, be found only on acceptance of one specific contract offered, perhaps not at all. But the coercion which in this way bears upon his choice through the standardization of industrial procedure is neither assault and battery nor breach of contract, and it is, therefore, not repugnant to the principles of natural liberty. Through controlling the processes of industry in which alone, practically, given workmen can find their livelihood, the owners of these processes may bring pecuniary pressure to bear upon the choice of the workmen; but since the rights of property which enforce such pressure are not repugnant to the principles of natural liberty, neither is such pecuniary pressure repugnant to the law, the case is therefore outside the scope of the law. The converse case, where the workmen take similar advantage of their employers to bring them to terms, is similarly