The Technarchy and the Capital College
by Charles Ferguson 1924

Financial Politics

A movement to get possession of political power through the scientific control of capital.

FORWORD
FINANCIAL POLITICS

The old politics has passed away. It continues to exist merely as a state of mind that has no correspondence with reality.

We are not governed by legislature any more. It is impossible. The actual operative centers of social control are the consolidated agencies of news and credit.

You cannot run a fast train from New York to Chicago or get a big ship across the ocean on abstract principles of justice. You must center the control at focal points of instant information and common confidence - in train-dispatchers' offices and on the ship's bridge.

Modern society has committed its life to a complicated technical apparatus. The apparatus will be wrecked and life will cease to be civilized if we persist too long in our reluctance to bring our political intelligence up to date.

Complicated life-sustaining systems must be governed from central organs of truth and trust, fact and faith, news and credit. To think otherwise will not alter the case.

The actual political order - so far as we have any order at all - is fiduciary and financial. The Technarchy and the Capital College supply the mental categories necessary to meet the human situation. These categories are not invented; they are discovered. They are the natural forms of a Copernican politics, challenging and exposing our Ptolemaic illusions.

By all means go to the polls and vote for anybody who can possibly be modernized. But do not persist in the illusion that voting can for a moment be compared in importance to the least of your financial suffrages.

It is all very well to have mass meetings and nominate trustworthy men for legislative offices and offices that command the police. But it is much more important that citizens should unite in support of trustworthy institutions of finance and public information.

Is it not obvious?

Well then, the object of this writing is to show good ways of giving instant effect to your three potent financial franchises: (1) your earning power, (2) your investment power and (3) your buying power.

While electing a President we can modernize his mind also - and give him a refreshed America to deal with.

We can inaugurate within a short period, a contemporaneous politics - frankly facing the ordeal of reality.

Business has ceased to be private. It has become a public affair. It is the Republic.

Make the business system honest. And make it workable. Quit this oriental fatalism of "the business cycle." You can stabilize prosperity in any community - by the method set forth, perhaps with tedious iteration - in the following pages.

In your particular community your task is to centralize the control of fixed and fluent capital in the hands of those whom you and your fellow-citizens deem most trustworthy.

Pool your investment money and put it into income-yielding real estate, to be administered in bulk by a scientific and educational corporation operating in the spirit of the university and the public school.

Support this corporation with your service-ability and your buying-power - in its development of modern and automatic methods of capital-control.
It can adjust equipment to ability - and give every citizen a financial status according to the proved measure of his functional strength and earning-power.

Any considerable group of responsible men and women can, within a matter of months, take predominant control of the capital of their community - by the financial-political method herein set forth.

From an engineering point of view, business as we now have it is to the last possible degree, inefficient. It could not be worse without ceasing to function. We systematically waste capital and ability by a method that keeps the mass of workers at a mere subsistence-level, and that makes it difficult or impossible for the mass of business-directors to take any interest in the conservation of real values or the increase of concrete wealth.

A scientific business method applied in any community, can double both the volume and tile velocity of the capital-current in a year - and then go forward indefinitely with its geometrical ratios.

That is to say, the community can double the volume of its extant capital and at the same time double the rate of its livelihood expenditure. These vast gains will flow from mere financial health.

There is no call for supermen. What is necessary is a trusteeship that makes its living by helping workers in general to improve their functional usefulness - to do better work for better pay.

The whole secret lies in the professional civilizer-the Public MAN OF BUSINESS, bent upon the increase of real goods. Everything follows from the advent of this man.

It will be found that an administrator absorbed in the business of increasing the earning power of other men and caring primarily for nothing else, will draw capital as a magnet draws iron.

If you put your shops, houses and lands into his hands to be used in trust by him for the generating of creative power, he may not be much concerned that your rents shall grow to astonishing proportion, but they will so grow.

If you let him take care of your commercial goals also, you will gain greatly. He will eliminate selling costs, amid will show you that the best producers can afford to pay most for their capital goods.

Seize therefore upon this world-transforming truth, and make instant use of it in your own neighborhood - the truth namely, that a scientific trusteeship that depends for its own existence upon its success in expanding the creative capacities of a thousand workers, is an irresistible engine of finance. To such a trusteeship capital of every kind will flow inevitably for the sake of its own affluence and security. And in taking administrative possession of capital it will possess the land also.

We write on the door-post of the House of Care and Confusion that now gives us all such dubious shelter: THIS WAY OUT.

WHAT IS THE TECHNARCHY?

The name, for lack of a better, is used in certain financial and engineering circles in New York to describe an association that had its origin in the Engineer's Club, December, 1916. This association was originally called The New Machine - and later The Technic International and The General Organization of Productive Power. It maintained headquarters in the Singer Building for several years under the presidency of the late H. L. Gantt, an industrial engineer of international reputation. At Gantt's death the association ceased to have definitive existence. But the movement went on.

Today the Technarchy may be regarded as the "party of the left" in the government of business. It opposes the financial reactionaries. As in ecclesiology, so in finance, there are fundamentalists and modernists. The Technarchy is the movement of. the modernists. It has been embodied in a number of projects for the recuperation of Europe.

The Technarchy aims to create Capital Colleges, in many cities - and to maintain commercial relations and a community of interest among such institutions.

As financial Editor of American News - a weekly newspaper published by Eugene J. Deuth at Hamburg, Germany - Mr. Ferguson reaches partisans of the Technarchy in several countries of Continental Europe.

WHAT IS A CAPITAL COLLEGE?

YOU will understand the meaning of the Capital College when you grasp the most elementary truth of financial science: to wit, that all the available capital of the world is in the markets of the world - for sale or for rent. It is "eating its head off" - with selling-costs. It is a stream of perishable values. No item of it can find rest in anybody's hands.

Strictly speaking capital is not ownable. It cannot be controlled by massed "vested" interests or property-rights. The law of its motion is super-legal. It is vital or biologic.

In any community, capital can be pooled at a point of maximum security and reproductive power. If you can organize the service-ability of a thousand men in such manner that they can afford to pay more for capital - in market-prices, in investment-income and in interest on time purchases - than anybody else in the neighborhood can afford to pay, then your organization will expand indefinitely and absorb all the capital in sight.

The New Finance goes into the Civilization business. It makes city-building the direct object of business enterprise. Applied on a comparatively small scale in the midst of our ram-shackle cities as they exist, the capital-college plan may be regarded as a scientific method of real estate development.

All the cultural values of civilization register themselves as land-values. A system that exists to nurse land-values in a scientific manner, must therefore be a cultural system, centering in a college.

Our whole investment structure is risky and shaky because no city in the world has yet developed a business system that is a system to sustain life and increase the volume of human values:
This lack is now to be supplied.

We are about to enter into a new financial age.

Those who have money or property can realize unprecedented investment return upon it.

But that is not all.

It is not even the principal fact in the new civilizing program.

The principal fact is that workers of all kinds can double and quadruple their service-incomes.

And those whose ability fits them to serve as directors of the capital colleges will earn incomes such as existing business executives have no experience of.

Pursuant to the discovery that capital can be absorbed and controlled by high-powered productive ability, the Capital College comes into existence. It is a superior engine of finance. Its constitution is incomparably stronger than that of any existing bank.

PROSPECTUS OF THE CAPITAL COLLEGE OF THE CITY OF NEW YORK

WE contemplate the formation of a social and scientific institution incorporated under the laws of the State of New York relating to educational incorporations.

The Capital College has a civic and quasi-political character.

It is an institution of culture and faith.

It mediates financially and commercially between man and man - furnishing a reliable centre of clearance for news and commerce.

The purpose of the college is primarily to develop the service-ability and earning-power of any and all kinds of working organizations. These form the constituency of the college. The members of the several service-units are regarded as members of the college. The college undertakes to give them the fullest possible citizenship expressed in service to the community and in income derived from such service.

The college is supported by a voluntary income tax paid by its constituents.

It is a Public Trustee.

It is a depositary of capital-values - both fixed and fluent.
Any owner of real estate or fixed capital may transfer his title to the college and receive in return capital stock of the corporation.

The issues of this stock are uninflated. They represent substantial land-values acquired in perpetuity, to be administered as the physical estate of the college - furnishing the physical basis of its credit in New York and throughout the world.

The capital stock of the college draws as dividends the total annual rental-revenue of its real estate-reserving only such parts of the estate as are used for administrative purposes.

The principle of the college's operation is such that this rental-revenue accruing to those who have turned their real estate holdings into the college's capital stock, will so greatly exceed the rental-income they could otherwise obtain, that the physical estate of the college will rapidly expand, embracing an ever-widening area.

Consider the weight and portent of the business proposition; the property holders that throw the weight of their fortunes, and their personal abilities on the side of the New Finance, will not only greatly increase their investment incomes, but will also get service-incomes pitched to a new scale of earning-power, far surpassing the rates to which business executives are accustomed.

Their service-incomes as directors of the college, are wages of superintendence, earned by helping a multitude of workers increase their earning-power. The administration of the college's real estate and fixed capital, is incidental to this purpose. The estate is worked intensively. Legitimate rentals - adjusted to the general level in the neighborhood - attain the highest possible yield. Yet from the point of view of real estate revenue, this high-tensioned administrative service costs nothing.

A group of property-holders dedicating a hundred thousand dollars worth of fixed capital to a Capital College, can easily get control of a physical estate worth half a million.

As college directors they can superintend the merchandising, manufacturing or agricultural processes of a thousand workers.

This superintendence should yield them in service-income, even in the beginning an annual revenue of a quarter of a million. Their income as stockholders in the real estate operation, can hardly fall below thirty per cent annually - which is thirty thousand dollars.

Against the assured prospect of such unprecedented pay for the right use of ability and property, it is impossible for sensible people to persist in the wrong use.
The personnel of the college administration is constituted as follows:
An advisory council of four or more members.
An executive council of seven members under the head-ship of a chief executive.

Any responsible service-unit can become a constituent of the college.
The requirement is merely that it submit to the laws of the college, which are the laws of civilization and scientific finance.

Chiefly, it is required that working organizations shall be accountable for the capital-values passing through their hands; and that the capital charge shall have priority over any and all wages and salaries - all service-income. The Technarchy regards this rule as fundamental in economics and politics.

The strength of the Capital College is principally derived from its insistence upon the natural law that Capital should not be entrusted to other than reproductive hands. The whole policy of the college is summed up in a technique for the automatic adjustment of equipment to ability.

Education in the practical arts depends upon proper capitalization. As social intermediary, the college enables its constituents to get the tools and materials they require; it also enables them to market their products at their just valuation.

The college keeps the service-abilities of its constituents in continual and sensitive correlation with effectual market demands.

It also gives advice of a technological character - calling to its assistance the existing engineering societies and technical schools. But the emphasis of its function lies wholly in the field of social relationships.

The Capital College puts commerce - the interchange of human services - on a scientific basis. It thrusts aside all the barriers of private exploitation that keep the citizens of a commonwealth from focusing their abilities at the point of their real interest - the production of concrete wealth.

The Capital College of the City of New York undertakes to establish corresponding institutions in other cities - in Europe and America. Its principle holds a solution of the problem that now vexes international finance. Central Europe can be restored to the world's community-of-interest at short order, by establishing at Hamburg, Berlin, Warsaw, Prague, Budapest, Vienna and other cities, commanding scientific and fiduciary institutions such as is proposed for the City of New York.

The Capital College is a civilization-unit; it represents the social norm. It can generate an efficient and powerful life-sustaining system - a new city of health and happiness inside the body of an old city of disorder and distress.

Instead of laying new mortgages upon a disordered commonwealth, finance should put the commonwealth in order.

A city can achieve a perfect credit in the world-market by establishing a central institution for the development of life-sustaining Power - an institution based upon millions or billions of actual real estate values in terms of any gold currency.

Holders of real estate will make haste to translate their titles and equities into the dividend-bearing stock of a widely accredited financial institution directly devoted to the production of concrete wealth.

Americans willing to put money into Europe will find the stock of such institutions safer and more remunerative than any investment-security now anywhere to be found.

The dividend-yield from the rents of a physical estate supporting a population organized to do business on modern and scientific lines - will be something unprecedented. It may be 20 per cent; it may be 50 or 100. Certainly, it will far exceed the customary investment income rate. This fact - the extraordinary income yield - will be found to be determinative.

It settles the fate of the crude and unformed - or if you please, the old and decadent - finance to which we are accustomed.

The New Finance will gradually absorb the real estate values of the world. It will hold the land. It will therefore achieve political sovereignty.

We propose to apply the principle of the Capital College to large scale colonization projects. New and far more livable cities than we have known will rise out of the bare ground, in a thousand rich territories that are now calling loudly for population - while dislocated populations are clamoring for new lands.

In building a new city the mode of procedure is as follows:
The land of the proposed colonization area is deeded to the Capital College in exchange for its common stock. The college invites the investing public generally to put its money into the physical estate - in the form of dwellings, shops, machinery and so on. The estate of the colony instantly acquires a large increment of value when many families settle upon it to make their living there. The settlers may come with small capital to invest in the colony's estate, or with none at all. The college can afford to finance any competent service organization.

Its financial strength lies in the fact that it is a productive-power-generating institution - before it is anything else.

It takes possession of the land for that purpose.

It lives by income taxes or tithes paid by all the workers within its jurisdiction. The college income from these tithes is vastly greater than the sum of all the rentals that go to stock-holders. Therefore the dominant interest of the college administration is not a property interest, but a productive-power interest.

The function of the College is the scientific handling of fixed and mobile capital. Its attitude toward the rental values it commands is substantially the same as its attitude toward the commercial values that pass through its hands. It is concerned that both parties to every transaction shall get all the gains that come of market-enlightenment and the elimination of unfunctional middlemen.

The college gets no real estate brokerage and no commercial profits. Its financial power comes from cancellation of the cross-purposes that waste the strength of society.

Whether operating in new cities or old cities, the college's physical estate grows constantly by the investment of its constituents' earnings.

Its constitution requires that a tenth of the gains accruing from the joint efforts of the college-administration and each service-unit, shall be put into the physical estate as stock-holdings. These stand in the names of the several workers of the particular unit concerned - in proportions approved by the responsible head of the group.

How shall we sum up the economic truth that gives transforming significance to this new departure in finance?

Here is the summary.

Property-incomes can be raised to a maximum by making property the passive servant of organized productive power.

When property ceases to claim the right of initiative in business, it also ceases to bear the risks.

Since land-values reflect and register all property-values and since investors naturally seek the line of maximum income and minimum risk, the land will everywhere tend to pass into the control of central social institutions that rigorously subordinate property to productivity.

In a word, it pays to give creative ability the whip-hand.


DESCRIPTION OF A TYPICAL FORM OF THE CAPITAL COLLEGE

THE following statement proposes the creation of a Garment-Workers' College, or self-sustaining College Settlement for clothiers or dress-makers - a subsidiary to the central institution on Manhattan Island - to be located on semi-rural or suburban land within one of the other boroughs of the City of New York. The plan will serve as well for a College of General Craftsmanship or All-Arts-Club - and can be located anywhere. It can include many kinds of workers in their several organizations.

The financial outline here given describes an institutional unit of one hundred persons. This unit can be indefinitely reduplicated - by its own intrinsic growing-power - until the College attains a membership of a thousand, a hundred thousand - or even more.

The hundred-member college-unit may include ten different technic groups, each under the immediate direction of a shop-manager or master-workman. Month by month each group has a separate accounting with the college management. The college stands sponsor for the group in all its commercial relations with the community at large. They become members of a respected family.

The College underwrites the credit of each group. It certifies to the business community that tools and materials used in the group's productive processes, shall be paid for out of the product. The college furnishes advisory - but not mandatory - management. It commands agencies of salesmanship and publicity. It markets the goods.

The college "plant" or physical estate can be developed by taking over existing buildings and improving and remodeling them; but it is better to start afresh. The first colleges should be constituted of "bachelors"- men or women - who can be made comfortable in single room apartments, as in a club or hotel. The plant of the college-unit consists of a residential building and a "model-shop" building - each accommodating about a hundred persons, besides administrators and care-takers.

These buildings taken together cost about $140,000. They occupy about two acres of semi-suburban land, costing, say $10,000.

Thus an estate suitable for both the leisure and the livelihood of upwards of a hundred persons has an initial value of $150,000. The estate is paid for by the issuance of $50,000 - worth of stock, and by the negotiating of a $ 100,000 - mortgage at 6% or less.

Let us say it costs fully $6,000 to carry the mortgage. Then allowing $14,000 per annum for taxes, insurance and residential deterioration (shop-wear being included in the monthly capital-charge against the workers) the total annual carrying-charge amounts to $20,000.

This basic obligation is off-set completely - with $4,000 to spare - by the rentals the workers pay for their equipped shops - which may be fairly estimated at $20 per month or $240 annually for the average worker. In figuring the monthly accounts of working-units, it is to be understood that this shop-rent charge must be added to the charge for raw material and minor over-head items; and that the sum is to be deducted from the market-value of the monthly product, in order to arrive at net earnings. The earnings should far surpass current rates of wage and salary.

But assuming that the net earnings, achieved monthly by the joint service of the college-administration and the workers, amount on an average to $200 per man - this amount is apportioned as follows:

(1) The college-administration takes as "wages of superintendence," one-tenth = $20. This $20 per month, per man amounts to $24,000 per annum from the hundred workers.

(2) a second tenth - $24,000 - is applied to the extension or improvement of the college's physical estate. This is an investment credited to the workers, in proportion to their several personal contributions.

(3) The remaining eight-tenths of net earnings are paid directly to the several groups, and distributed in accordance with whatever agreement the shop-manager may have entered into with his associates.

Finally, it is to be noted that the largest item of the college-income is derived from the rental of living-apartments - including what may be regarded as club-dues. The rental may be set down at $30 per month per person - yielding annually $36,000. This sum added to the $4,000 - surplus from shop-rents, makes the net annual income of the college $40,000. Thus an 80 per cent dividened could be declared on the original stock-investment of $50,000.

But an obvious thing to do is to add this $40,000 to the $24,000 the workers have earned for investment, and thus to capitalize a second college-unit. Starting therefore, with a single unit, the financial vitality of this kind of business-institution is of such energy that the number of extant college-units could, without any infusion of fresh capital, double every year - increasing indefinitely by a geometrical ratio.

The investment and commercial security of such an institution surpasses anything extant in the business world. It is four-fold in character; first, the joint and several responsibilities of the workers in their personal estates, guaranteed by promissory notes or other written obligations if deemed necessary; second, supervision of both fixed capital and commercial goods by experts - with their own incomes at stake; third, the legal priority of the capital charge over all earned incomes; fourth, the income of the real estate of the college.


THE PROPOSED CRAFTS COLLEGE OF GREENWICH HILLS

It is intended that the family estate of Dr. Charles H. Jaeger of the faculty of Columbia University,. shall be the starting place for the development of a self-supporting educational establishment - a town that shall be a college, and a college that shall be a town. The business organization that sustains the life of a community shall be identical with the cultural organization that makes life worth while. No distinction will be made between a business system directed to the lowering of the cost of living and a cultural system that aims to raise the value of life.

In fine, what is intended is to exemplify a normal human society or civilization-unit - the best that civilized man can do for himself in the existing state of the arts.

The beautiful township of Greenwich, Connecticut is very rich. It has been chosen as the place of residence by many New Yorkers, who are able to get what they want - the best there is. You can go to Greenwich by motor-car, train, or trolley in an hour or two - from the heart of Manhattan.

Greenwich Hills, the site of the new development - embracing an area of about a quarter of one square mile - is within eight minutes walk of a wharf-site, from which salt water transportation through Long Island Sound can be carried on in all directions.

Mr. Charles R. Lamb belongs to the directorate of the Greenwich Hills Crafts College. The galleries of the ecclesiastical art works, I. & R. Lamb at 25 Sixth Avenue, are the New York headquarters of the project.


THE ART OF GETTING RICH: THREE PRECEPTS

The basis of finance is social credibility. We are all wrong in supposing that financial power begins with the possession of a lot of money. It begins with character and administrative capacity. Finance is the art of dealing with anybody's and everybody's fixed and fluent capital, in such manner that it shall have the highest reproductive value.

'We proceed to a brief characterization of the financial principles that rule in the development of local crafts colleges or civilization-units.

To those who look deeply into the science of finance, it becomes plain enough that the normal desire of an ambitious individual to expand his personal fortune, need not contradict - but on the contrary should further and facilitate - the development of the commonwealth. The art of getting rich is simply political economy in its personal aspect.

The social problems will be solved by people who know how to get rich by doing good. We undertake to prove in action that the art of getting rich is a spiritual, cultural and civilizing art.

Here are the basic precepts of the art:

PRECEPT No. 1.- Do not hire people; finance them. If you hire a man you subject his mind to your mind, and make the expansion of your income a contraction of his. If, on the other hand, you finance him - helping him get tools and materials to do his own work in his own way - you not only free his creative mind, but also free yourself from responsibility for his imperfect use of talents.

Thus you may have, as wages of superintendence, an increasing portion of joint-earnings, yours and his, whilst the remainder in his hands constantly increases. The most remunerative kind of business that can be imagined, is the business of developing the service-ability of a multitude of workers for a tithe of their net earnings.

PRECEPT No. 2. - The basis of all investment is land, and the various forms of fixed capital that go with the land. Do not try to monopolize land. Do the opposite thing; destroy land-monopoly by the following procedure: Create a corporation to administer all lands that may be deeded to it in exchange for its common stock. Let this corporation make use of the land-values or fixed capital thus put into its hands, with a single eye to the development of wealth-producing ability.

The corporation will rapidly extend its financial power, simply because its common stock can easily yield a revenue upward of 20 per cent. The revenue may rise to 100 per cent or more. It will continue at a high level as long as the main bulk of real estate holdings in the world at large continues to be administered in a spirit of narrow and self-destructive egotism.

The exceptional income rate is due to the exceptional treatment - a scientific method operating in the midst of surrounding confusion.

If your management is duly guided by Precept No.1, the common stock of your concern will pay higher dividends than any competing stock in the investment market. Consequently it will absorb investment capital without limit - and will rapidly extend its territorial jurisdiction.

Your management will support its administration, by collecting a voluntary income tax from the service-units that accept its financial and commercial support. The tax will be 10 per-cent more or less. Where ten thousand workers are concerned, your administration-revenue should amount to at least two and a half million dollars a year.

PRECEPT No. 3. - Avoid commercial profits as a plague. They dry up the springs of riches. If you would be richer than other men, declare war upon profiteering commerce. Act as a dynamic stimulator of earning power. Treat commerce as the art of capital-allocation - the placement of goods in the hands of those who can make the most reproductive use of them, and can therefore afford to pay the highest price. Give the producer of the goods the advantage of the high price. If he is outside your system, he will come into it. His goods will become in effect deposits in your bank - upon which you pay no interest.

Remember that your fortune lies always with those who create value. Eliminate all selling costs, save those that properly belong to the informative and value-creating service of good purveyors. By this means, you can command world markets. Your real estate developments will furnish a basis of inter-municipal and international credit. Streams of commercial goods will flow through your credit centres, on a three or six months clearance, without need for cash.

If you do these things, you will be very rich - for you will have broken down the leverages of stupidity and obstruction that waste the wealth of the world.

By following Precept No. 1, you break down the Time Leverage, which people with spot-cash are exerting over moneyless workers. You refuse to use this leverage against the worker. You set him free. Thereby you disburden yourself of business risks. He pledges his livelihood to the preservation of your capital - and shares with you the gains of his service-ability. You dry up the sources of usury by becoming super-usurer. Multitudes work for you - at their own risk.

By following Precept No. 2, you break down the Place Leverage, or space leverage - the arbitrary power of dispossession and impoverishment that comes of having a commanding physical placement and ample room. You give everybody access to the place and space he can fill. By abolishing land-monopoly you become the administrator of immense estates.

By following Precept No. 3, you break down the News Leverage, or knowledge leverage - the power of extortion that inheres in the possession of superior market-information. Short-sighted traders - meaning no harm for the most part - are using this leverage against the public. They do not yet understand that the gains of great commerce lie in the opposite direction, that a great merchant uses his knowledge as a physician does, for the generating of human strength. A reputable physician does not gain by the sale of prescriptions; he is paid for knowing what to prescribe. The great merchant knows the resources of the world-market, and brings them to a focus. Even so, by following Precept No. 3, you take command of the circle of commerce.