LABOR'S NEW STATUS 273 
was impracticable, as the national income would not be suf- 
ficient to absorb the cost, has been thrown into the discard. 
The theory of the new industrial era is that wage-increases 
add to industrial demand and income. Under the new 
constructive policy, moreover, wage-increases may be in- 
definite in amount so long as costs are not increased or 
margins of profit reduced to an unreasonable level. Fur- 
thermore, the sanction of the productivity theory as the 
basis of compensation of labor, capital, and management, 
automatically carried with it the acceptance of the “living 
wage” theory—the subject of so much heated controversy 
and opposition in the immediate post-war reconstruction 
period. 
It is also a striking phase of the present situation that 
not only wage theories but other policies which were so 
strenuously opposed by the leaders of finance and industry 
as a proper basis for business revival after the breakdown 
of 1920-1922, have now become the fundamentals of the 
new order. In this connection it will be recalled that, in 
the unsettled and controversial period of 1921-1922, the 
majority of financiers and industrialists declared, without 
reservation, that wage-cuts were an essential preliminary 
to the return of even normal conditions of production. 
On the other hand, the representatives of organized labor 
as well as some of the more far-seeing leaders in industry 
and economic thinking took the position that wage rates 
should be at least undisturbed in order to maintain do- 
mestic purchasing power, and that production costs should 
be lowered and industry revived by seeking the cooperation 
of labor, the adoption of scientific methods, the elimination 
of waste, and by the investment of new capital in equip- 
ment and structures. The short-sighted point of view for a 
lime prevailed and demonstrated its own unsoundness. It 
was soon superseded. however, as has been shown, by the