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was impracticable, as the national income would not be sufficient
 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 indefinite
 in amount so long as costs are not increased or
margins of profit reduced to an unreasonable level. Furthermore,
 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 domestic
 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 equipment
 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was soon superseded.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