3. _Three Lines of Economic Organization_

So much, then, for the interdependence of the various economic groups
under the present forms of society. This interdependence runs throughout
the capitalist system. Farms depend on railroads, railroads on mines,
mines on factories, factories on farms, and so on.

This extreme specialization of the economic system is the product of the
past two hundred years, the outcome primarily of the industrial
revolution. The experience of society with these specialized economic
forms does not, therefore, extend over more than five or six
generations. This experience is sufficient, however, to indicate, that
there are three general lines along which economic organization may
develop:

1. _Economic "states rights" or individualism_--the theory upon which
the present day industry as well as the modern state was founded.
Under this theory each economic group must be free to go its way,
cutting a path for itself through the ranks of its competitors, and
making its triumphant advance over their prostrate remains.

2. _Economic bureaucracy_, involving the concentration of economic
authority in the hands of a centralized group which, knowing little
or nothing about the requirements of particular localities, is
nevertheless in a position to legislate for them and to enforce its
mandates.

3. _Economic federation or federalism_, with local groups enjoying
local autonomy in all local matters, and only so much centralized
control as is necessary for the unified direction of the entire
enterprise.

American industry has had considerable experience with the two first
forms of organization. Until the period of the Civil War, competition
was the generally accepted rule in all phases of economic life. With the
formation of the Standard Oil Company in 1870, a new principle was
demonstrated, and the idea of centralization was embodied in a form that
served as the model for the American trust movement. By the time of the
late nineties, this principle of centralization had been carried so far
that a reaction set in, and when the United States Steel Corporation
was organized in 1901 local autonomy was recognized as one of the
essential principles around which its structure was built.

Experience points to the system of local autonomy in local matters and
to the central control of general matters as the most workable in a
complex society.

In the first