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 It was soon superseded.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