The record-union., 1894-02-26
UNIVERSITY EXTENSION LECTURE.
The Leader of Industry and His Profits
Therefrom.
Professor Plehn Discusses Plainly the
Relative Rights of the Employer
and His Employees.

the University Extension Association
was given at Forester Hall on Saturday
evening before large and intelligent
audience. The subject was: 1.-The Leader
of Industry and His Profits"
In the industrial organization OF mod
ern times, said the speaker, we find at
the top generally one man who is respon-
sible for the whole arrangement OF each
undertaking-who guides the whole OPP
Grafton and assumes the risk; who bor-
rows or himself furnishes the capital,
buys the raw materials, directs the other
workers and pays for their labor, and
thus obtains the product, from the sale of
which he reimburses himself and pays all
the expenses of the business.
This man, who assumes these impor-
tant functions, has been given various
names t "EntreDrenuer,n manager"
leader of industry" His functions,
while entirely the outcome of our modern
organization of industry, have grown to
be of vast importance. In fact, under our
modern competitive system it seems al
most impossible TO do without that man.
Even the great stock companies, which
apparently take his place. are but means
OF furnishing more easily and IN larger
quantities the capital necessary. Looked
at from another standpoint however,
these corporations seem to be but re-
sumption by society as whole OF It's old
COMMUNITY RIGHTS TO CAPITAL AND
LAND.
While this is to some extent true, yet a
closer examination reveals the fact that
in every successful stock company there
is one man, or a cOterle OF men. who
have, in high degree, the talents neces-
sary and who are actually the real head
of the business. Thus viewed the stock
company is but new way OF borrowing
the capital needed by these men.
The peculiar talents needed are not
common. Few men really possess that
business capacity which is necessary for
this position. Some OF these talents are
force of will and strength of purpose,
cool phlegmatic temperament, courage,
gift for organization and power TO IN
huence and manage other men. The
particular talent may differ in different
cases. Thrift, economy, attention to
business, sheer power OF prolonged ap-
plicatiOn sometimes decide.
In previous lecture it was hinted that
profits, the employers legitimate share
in the product, is determined by law
very similar to that Orient. How that is
we can best see after a consideration of
the general conditions of such under
takings. The first important consldera-
ton in that direction is
COMPETING GROUPS.
Competition does not pervade the in
dustriai world uniformly, but only
pervades the different groups and sub
groups according to occupation, ability
and training. Thus the Individual iron
industries compete one with another, and
within these again those producing the
ore, and then those making the simpler
11rOHnatz aOain loss nVTQD GiUalU the
product requires greater skill. But what
concerns US here is to notice that cOmpe-
titlon exists only between undertakerS
pursuing the same industry or prOduc-
ing The same line of goods. Only where
the principle of substitution acts freely
can competition pass those bounds.
PROFITS DEFINED.
Now we are in position to understand
profits. In any individual case the man
ager of an industry estimates that which
he has left over, after paying wages, in
terest and rent Tor in the case where he
uses his own capital, land and buildings,
making a fair deduction for interest and
rent, as his profit
This amount will be greater or smaller,
according as he has managed the business
we'll or ILL., as compared with the other
managers in the same line of business or
in the same competing group. In other
words, when competition is perfectly free,
Just as in rent, the demands Of the pOpu-
Iation or the demand Of the consumers
forces into or attracts into that line of
business enough men to produce all that
is needed, and fixes the price for all the
commodity.
Some of these men manage the business
so poorly that the expenses inyolt ed in
producing the goods equal very nearly
the price, and consequently there are no
profits for them; but the other managers,
who, by greater economy or better adj
dress, have been able to turn out the same
commodity at less cost, and who yet re-
ceiVe the same price which the demand of
the consumers makes it possible for the
other man to get. have a margin for
profits. If rent has been understood,
there will be no difficulty in understand
ing profits. Just as rent results from the
ownership of certain advantages con-
nected with land, so profits are the re-
suit OF the possession of native business
talent.
INDUSTRIAL EARNINGS.
Closely analogous to pure profits in
their origin, but not so justinable, are the
earnings Of monopoly OF any one line OF
industry. Ii competition is weeded out
of an industrial group and all control
centered in one place, there is nothing to
determine price at the highest cost of pro-
duction, as in the other case, and profits
may NC dA OlbA6Al4y L1AOiis
Ii the management Of such monopoly
were in the hands Of good manager,
that is, one who would make a large
profit ii there was competition, it is pos
sible that he may be content with mod
crate profit, and then the consumer gets
the benefit and prices Will be lower than
they otherwise would.
The vast savings in the cost of man
agement and supervision, and the possi-
bility of more complete utilization of the
whole plant, thus often accrue to the BEN
eft of the consumer, while the leader oi
the industry still has large share for
himself. The case of the Standard Oil
Company was cited as an illustration. On
the other hand, this monopoly organiZa-
ton puts into the hands of unscrupulous
men the power to abuse the interests OF
the consumers in many cases.
TWO CLASSES OF MANAGERS.
While there are, to be sure unnumbered
cases where the advantageous position OF
the entreprenuer has been used TO make
unjust gains and really rob employees and
consumers, yet pure profits, since they
consist of wealth due to good manage
ment, or are costs saved, can never enter
into the prices of the product, nor can
they lower or antagoniZe wages. Anger,
therefore. at the great leaders of industry
because of the profit which they make is
entirely groundless.
Blame should be meted out literally,
instead of the pity they generally re-
ceive, to the poor, stupid and unsuccess-
full managers, who not only gain no prof
its but raise the price of the goods by
their slovenly management, often losing
and wasting capital, and lowering wages.
DEFECTS IN OUR ECONOMIC SYSTEM.
The lecturer then went on to review the
attitude of economic science since the
French revolution toward the various
schemes and movements for reform
which have been directed against the
abuses of the power of the leader OF
Industry. The existence Of serious evils