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 so-
called productive efficiency of industry—as devcloped by
cooperation between workers and management, new inven-
tions, processes, and methods, the installation of new ma-
chinery and other capital commitments—was generally ac-
cepted by American industry as a reasonable basis for
indeterminate advances in wages. Higher wages were fur-
ther justified by the assumption that increased compensa-
tion of the workers resulted in constant gains in purchasing
power, which, in turn, permitted further industrial expan-
sion and the maintenance of prosperity.
The extent to which industrial and financial leaders prac-
tically applied, sanctioned, and developed this new order in
industry may be gathered from the following typical state-
ments *
NATIONAL INDUSTRIAL CONFERENCE BOARD!:
Another factor in the changed character of the wage prob-
lem is the modified attitude of employers toward wage adjust-
ments. A stubborn and unresponsive market, sharp competi-
tion 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, be-
cause 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 prac-
tically 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.
