THEORY OF PRODUCTIVE EFFICIENCY 169

tioned by high authorities, however, it spread like wildfire
and soon became the basis of general industrial practise.

EXTENT oF THE SANCTION OF THE NEW THEORY
Under the stimulus of this new wage conception, the socalled
 productive efficiency of industry—as devcloped by
cooperation between workers and management, new inventions,
 processes, and methods, the installation of new machinery
 and other capital commitments—was generally accepted
 by American industry as a reasonable basis for
indeterminate advances in wages. Higher wages were further
 justified by the assumption that increased compensation
 of the workers resulted in constant gains in purchasing
power, which, in turn, permitted further industrial expansion
 and the maintenance of prosperity.
The extent to which industrial and financial leaders practically
 applied, sanctioned, and developed this new order in
industry may be gathered from the following typical statements
 *

NATIONAL INDUSTRIAL CONFERENCE BOARD!:
Another factor in the changed character of the wage problem
 is the modified attitude of employers toward wage adjustments.
 A stubborn and unresponsive market, sharp competition
 or a declining price level have always been taken as an
invitation to reduce costs, if possible. Until the last decade
the wage-cost seemed the most obvious point at which to
effect substantial savings, and consequently a reduction in
prices usually called for a reduction in wages. The depression
of 1920-21 brought home to many employers the doubtful
economic wisdom of cutting wages except as a last resort, because
 the general wage deflation at that time paralyzed the
domestic market. Consequently, tho wages were once the
first point of attack upon high costs, they have become practically
 the last, and savings have been effected instead through
the greater application of inventive genius and power to the
"1 Wages in the United States.” New York, 1914-1926: 0p. 3.4. 11.12.