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and the measure of its successful operation is determined by the
effectual team…work of its constituent parts。 And the industrial
system of the new order is drawn on a large scale and rests on a
comprehensive specialisation of processes and standardisation of
output； so that the 〃community〃 which is required for the
necessary team…work is necessarily a large community； larger than
the total population and resources that would have served the
like purpose under any earlier state of the industrial arts； at
the same time that the needed coordination of processes is also
wider and more delicately balanced than ever before。 Indeed； the
〃industrial community〃 of the new order is always and necessarily
larger than any existing national unit。 The ramification of give
and take under the new industrial system invariably overlaps the
national frontiers； among all those peoples who occupy what would
be called an 〃advanced〃 place in industry。 The system； and
therefore the industrial community engaged in team…work under
this system； is drawn on cosmopolitan or international lines；
both in respect of the body of technological knowledge which is
turned to account and in respect of the range and volume of
materials necessary to be used according to this new order in
productive industry。
Evidently the total output of product turned out under this
industrial system； the 〃annual production；〃 to use Adam Smith's
phrase； or the 〃annual dividend；〃 to use a phrase taken from
later usage； this total output is the output of the total
community working together as a balanced organisation of
industrial forces engaged in a moving equilibrium of production。
No part or fraction of the community is a productive factor in
its own right and taken by itself； since no work can be done by
any segment of the community in isolation from the rest； no one
plant or works would be a producer in the absence of all the
rest。 The total product is the product of the total community's
work； or rather it is the product of the work of that fraction of
the people who are employed in productive work； which is not
quite the same thing； since there is much work spent on the
consumption of goods； and on ways and means for such consumption；
as well as on their production。
Indeed； it is by no means certain that there is not more
time； strain and ingenuity spent on the consumption of goods than
on their production。 Apart from sports； menial service；
fashionable dress and equipage； pet animals and mandatory social
amenities； there would also have to be included under the ways
and means of consumption virtually all that goes into
salesmanship and advertising。 Virtually all of these things have
to do with the organised consumption of goods； and virtually all
are therefore to be written off as waste motion； so far as
regards their effect on the net productive efficiency of the
industrial community； or of the industrial system whose tissues
are consumed in enterprise of that kind。 The amount which is to
be written off as consumptive waste in this way is approximately
the same as the net margin of product over cost； and according to
the enlightened principles of self…help and equal opportunity； as
these principles work out under the new order of industry； it is
for the investors to take care of this consumptive waste and to
see that no unconsumed residue is left over to cumber the market
and produce a glut。
Evidently； too； the amount of the annual production depends
on the state of the industrial arts which the working population
has the use of for the time being； which is in the main a matter
of technological knowledge and popular education。 So that the
question of productivity and net productivity may be stated in
general terms to the following effect： The possible or potential
productive capacity of any given community； having the disposal
of a given complement of man power and material resources； is a
matter of the state of the industrial arts； the technological
knowledge； which the community has the use of。 This sets the
limit； determines the 〃maximum〃 production of which the community
is capable。 The actual production in such a community will then
be determined by the extent to which the available technological
efficiency is turned to account； which is regulated in part by
the intelligence； or 〃education；〃 of the working population； and
in greater part by market conditions which decide how large a
product it will be profitable for the business men to turn out。
The net product is the amount by which this actual production
exceeds its own cost； as counted in terms of subsistence； and
including the cost of the necessary mechanical equipment； this
net product will then approximately coincide with the annual
keep； the cost of maintenance and replacement； of the investors
or owners of capitalised property who are not engaged in
productive industry； and who are on this account sometimes spoken
of as the 〃kept classes；〃 Indeed； it would seem that the number
and average cost per capita of the kept classes； communibus
annis； affords something of a rough measure of the net product
habitually derived from the community's annual production。
The state of the industrial arts； therefore； is the
indispensable conditioning circumstance which determines the
productive capacity of any given community； and this is true in a
peculiar degree under this new order of industry； in which the
industrial arts have reached an unexampled development。 The same
decisive factor may also be described as 〃the community's joint
stock of technological knowledge。〃 This common stock of
technological knowledge decides what will be the ordinary ways
and means of industry； and so it decides what will be the
character and volume of the output of product which a given man
power is capable of turning out。 Evidently no man power and no
working population can turn out any annual product without the
use of something in the way of technological knowledge； that is
to say some state of the industrial arts。 The working community
is a productive factor only by virtue of； and only up to the
limit set by； the state of the industrial arts which it has the
use of。 The contrast of industrial Japan or of industrial Germany
before the middle of the nineteenth century and after the close
of the century will serve for illustration； that is to say before
and after those peoples had come in for the use of the technology
of the machine era。 The disposable excess of the yearly product
over cost is a matter of the efficiency of the available state of
technological knowledge； and of the measure in which the working
population is put in a position to make use of it。 These； of
course； are obvious facts； which it should scarcely be necessary
to recite； except that they are habitually overlooked； perhaps
because they are obvious。
The Industrial Revolution of the eighteenth century was a
revolution in the state of the industrial arts； of course； it was
a mutation of character in the common stock of technological
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