Members of the Association:
Sometimes it seems as though our generation fails to give the proper estimate and importance to the values of life. Results appear to be secured so easily that we look upon them with indifference. We take too many things as a matter of course, when in fact they have been obtained for us only as the result of ages of effort and sacrifice. We look at our economic condition upon which we are absolutely dependent for the comforts and even the necessaries of life, and forgetting that it all rests on industry, thrift, and management, dismiss it lightly as a matter that does not concern us. Occasionally our attention is directed to our political institutions, which have been secured for us through the disinterested exertion of generations of patriotism, and, going along oblivious to the fact that they are the sole guarantees of our rights to life and liberty, we turn away with the comforting thought that we can let some party committee attend to getting out the vote and that probably the government will run itself all right anyway. When perhaps we are attracted by the buildings erected for education, or the temples dedicated to religious worship, and without stopping to realize that these are the main source of the culture of society and the moral and spiritual life of the people we pass them by as the concern very largely of schoolmasters and clergymen. We have become so accustomed to the character of our whole, vast, and intricate system of existence that we do not ordinarily realize its enormous importance.
It seems to me probable that of all our economic life the element on which we are inclined to place too low an estimate is advertising. When we come in contact with our great manufacturing plants, our extensive systems of transportation, our enormous breadth of agriculture, or the imposing structures of commerce and finance, we are forced to gain a certain impression by their very magnitude, even though we do not stop to consider all their implications. By the very size and nature of their material form they make an appeal to the senses, even though their import does not reach the understanding. But as we turn through the pages of the press and the periodicals, as we catch the flash of billboards along the railroads and the highways, all of which have become enormous vehicles of the advertising art, I doubt if we realize at all the impressive part that these displays are coming more and more to play in modern life. Even the most casual observation, however, reveals to us that advertising has become a great business. It requires for its maintenance investments of great amounts of capital, the occupation of large areas of floor space, the employment of an enormous number of people, heavy shipments through the United States mails, wide service by telephone and telegraph, broad use of the printing and paper trades, and the utmost skill in direction and management. In its turnover it runs into hundreds of millions of dollars each year.
When we stop to consider the part which advertising plays in the modern life of production and trade we see that basically it is that of education. It informs its readers of the existence and nature of commodities by explaining the advantages to be derived from their use and creates for them a wider demand. It makes new thoughts, new desires, and new actions. By changing the attitude of mind it changes the material condition of the people. Somewhere I have seen ascribed to Abraham Lincoln the statement that "In this and like communities public sentiment is everything. With public sentiment nothing can fail; without it nothing can succeed; consequently he who holds public sentiment goes deeper than he who enacts statutes or pronounces decisions. He makes statutes and decisions possible or impossible to be executed." Advertising creates and changes this foundation of all popular action, public sentiment, or public opinion. It is the most potent influence in adopting and changing the habits and modes of life, affecting what we eat, what we wear, and the work and play of the whole Nation. Formerly it was an axiom that competition was the life of trade. Under the methods of the present day it would seem to be more appropriate to say that advertising is the life of trade.
Two examples of this influence have come to me in a casual way. While I can not vouch for the details, I believe in their outline they are substantially correct. One relates to an American industry that had rather phenomenal growth and prosperity in the late eighties and early nineties, being the foundation of one or two large fortunes. In its development it had been a most generous advertiser. A time came when various concerns engaged in this line of manufacturing were merged and consolidated. There being no longer any keen competition, it was felt that it was now no longer necessary to explain to the public the value of this product or the superiority of one make over another. In order to save the large expense that had been made for that purpose, advertising was substantially abandoned. The inevitable result followed, which all well-informed trade quarters now know would follow. But the value of advertising was not so well understood 25 or 30 years ago. This concern soon became almost a complete failure. As I recall, it had to be reorganized, entailing great losses. This line of trade was later revived under the direction and counsel of some of its old managers, and with the proper amount of publicity became a successful enterprise.
But let us turn from the unfortunate experience of the loss that occurred through lack of advertising to an example of gain that was made through the shrewd application of this principle. In a somewhat typical American community a concern was engaged in an industrial enterprise. Its employees were not required to be men of great skill. Oftentimes they were new arrivals in this country who had been brought up to be accustomed to the meager scale of living abroad. Their wants were not large, so that under the American rate of wages they found it possible to supply themselves and their families without working anywhere near full time. As a result, production was low compared with the number employed and was out of proportion to the overhead expense of management and capital costs. Some fertile mind conceived the idea of locating a good milliner in that community. The wares of this shop were generously advertised through window display, newspaper space, and circularization. I suppose that every head of a family knows that a new bonnet on the head of one of the women in the neighborhood is contagious. The result in that community almost at once was better wearing apparel for the women, which necessitated more steady employment for the men. The output of the plant was greatly increased, its cost units were reduced, its profits were enlarged, it could sell its product to its customers at a lower figure, and the whole industry was improved. More wealth was produced. But the reaction went even further. The whole standard of living in that locality was raised. All the people became better clothed, better fed, and better housed. They had aspirations, and the means to satisfy them, for the finer things of life. All of this came from the judicious application of the principle of advertising.
The system which brought about these results is well known to the members of this association. You have seen innumerable instances where concerns have failed through lack of advertising and innumerable others where they have made a success through the right kind and amount of publicity. Under its stimulation the country has gone from the old hand methods of production which were so slow and laborious with high unit costs and low wages to our present great factory system and its mass production with the astonishing result of low unit costs and high wages. The preeminence of America in industry, which has constantly brought about a reduction of costs, has come very largely through mass production. Mass production is only possible where there is mass demand. Mass demand has been created almost entirely through the development of advertising.
In former days goods were expected to sell themselves. Oftentimes they were carried about from door to door. Otherwise, they were displayed on the shelves and counters of the merchant. The public were supposed to know of these sources of supply and depend on themselves for their knowledge of what was to be sold. Modern business could neither have been created nor can it be maintained on any such system. It constantly requires publicity. It is not enough that goods are made; a demand for them must also be made. It is on this foundation of enlarging production through the demands created by advertising that very much of the success of the American industrial system rests.
It will at once occur to those who have given any thought to these subjects how important it is to the continuing success of the business which this gathering represents, and to the general welfare of the country, that the conditions under which these results have been secured should be maintained. It is our high rate of wages which brings about the greatest distribution of wealth that the world as ever seen and provides the enormous capacity for the consumption of all kinds of commodities which characterizes our country. With our improved machinery, with the great increase in power that has come from steam and electricity, with the application of engineering methods to production, the output of each individual engaged in our industrial and agricultural life is steadily increasing. The elimination of waste through standardization has been another most important factor in this direction. If we proceed under our present system, there would appear to be little reason to doubt that we can continue to maintain all of these high standards in wages, in output, and in consumption indefinitely, and with our home markets as a foundation increase our foreign commerce by a greater exchange of those commodities in which we are peculiarly favored for the commodities of other nations in which they have a special advantage. But nothing would appear to be plainer than that this all depends upon the maintenance of our American scale of wages, which is the main support of our home market.
It is to be seen that advertising is not an economic waste. It ministers to the true development of trade. It is no doubt possible to waste money through wrong methods of advertising, as it can be wasted through wrong methods in any department of industry. But rightfully applied, it is the method by which the desire is created for better things. When that once exists, new ambition is developed for the creation and use of wealth. The uncivilized make little progress because they have few desires. The inhabitants of our country are stimulated to new wants in all directions. In order to satisfy their constantly increasing desires they necessarily expand their productive power. They create more wealth because it is only by that method that they can satisfy their wants. It is this constantly enlarging circle that represents the increasing progress of civilization.
A great power has been placed in the hands of those who direct the advertising policies of our country, and power is always coupled with responsibilities. No occupation is charged with greater obligations than that which partakes of the nature of education. Those engaged in that effort are changing the trend of human thought. They are molding the human mind. Those who write upon that tablet write for all eternity. There can be no permanent basis for advertising except a representation of the exact truth. Whenever deception, falsehood, and fraud creep in they undermine the whole structure. They damage the whole art. The efforts of the Government to secure correct labels, fair trade practices, and equal opportunity for all our inhabitants is fundamentally an effort to get the truth into business. The Government can to much in this direction by setting up correct standards, but all its efforts will fail unless it as the loyal support of the business men of the Nation. If our commercial life is to be clean and wholesome and permanent in the last resort, it will be because those who are engaged in it are determined to make it so. The ultimate reformers of business must be the business men themselves. My conception of what advertising agencies want is a business world in which the standards are so high that it will only be necessary for them to tell the truth about it. It will never be possible to create a permanent desire for things which do not have a permanent worth. It is my belief that more and more the trade of our country is conforming to these principles.
The National Government has a large interest in all these problems, though many of them are confined in their jurisdiction to the States. The general welfare of the country, its progress and prosperity, are very intimately connected with the commerce that flows from agriculture and industry. Unless that be in a healthy condition, constantly expanding, securing reasonable profits, employment begins to fail, sooner or later wages begin to fall, markets are oversupplied, movements of freight decrease, factories are idle, and the results of all these are that want and distress creep into the home. You can easily draw the converse of this picture. It has been the almost universal experience in American life of late. Local conditions here and there have brought contrary results, probably unavoidable for a long time to come, but in the main the country has been and is prosperous. Perhaps the most creditable aspect of our present prosperity is that wages are high while profits have been moderate. That means that the results of prosperity are going more and more into the homes of the land and less into the enrichment of the few, more and more to the men and women and less and less to the capital which is engaged in our economic life. If this were not so, this country could not support 20,000,000 automobiles, purchase so many radios, and install so many telephones. From a recent fear of being exploited by large aggregations of wealth, the people of America are learning to make such great concerns their most faithful servants. This problem is not entirely solved yet. Here and there abuses occur, but business is gradually being taught that the only method of permanent success lies in an honest, faithful, conscientious service to the public.
You are familiar with the efforts which the Federal Government has been making to contribute to peace and prosperity during the recent reconstruction period. We are steadily reducing our national debt, cutting down the interest charges. We have released hundreds of thousands of people from the unproductive field of Government employment to the productive field of business life. The burdens of taxation have been so far removed that they are now for the most part lightly borne, and the disproportionate charges formerly made to supply the public revenues have been released to flow into the avenues of trade and investment. We have supplied large sums for the rehabilitation of Europe and the financing of South America to the advantage of our foreign commerce, which now stands at a peace-time record. Through international covenants limiting naval armaments we have reduced the cost of national defense and made large guarantees to the peace of the world. All of this has been a program of constructive economy, beneficial alike to ourselves and to other people. In making this economically possible, in spreading its benefits, in carrying its fruits into the homes of the land, advertising has supplied and will continue to supply a very important part. Without the advantages that accrue from that art these accomplishments would not have been possible.
But Americans are never satisfied with the past or present. They are always impatient in the future. Our history has been that of an increasing prosperity. There have always been fluctuations in trade, but with our present system of banking and our enormous capacity for consumption such fluctuations will apparently be much less violent and are unlikely to sink to the level of depression. We can not tell what a particular month or locality may develop, but over the broad face of our country seedtime will be followed by the harvest, the productive capacity will increase, and our people will become more prosperous.
These results, however, can not be considered as guaranteed by our material resources alone. They will accrue to us, not because of our fertile agricultural fields, our deposits of coal, iron, and precious metals, nor even from the present state of our development of trade with its accompanying supports of manufacturing, transportation, and finance. We can not rely on these alone. They could all be turned into instruments of destruction. Our chief warrant for faith in the future of America lies in the character of the American people. It is our belief in what they are going to do, rather than our knowledge of what they are going to have, that causes us to face the coming years with hope and confidence. The future of our country is not to be determined by the material resources, but by the spiritual life of the people. So long as our economic activities can be maintained on the standard of competition in service, we are safe. If they ever degenerate into a mere selfish scramble for rewards, we are lost. Our economic well-being depends on our integrity, our honor, our conscience. It is through these qualities that your profession makes its especial appeal. Advertising ministers to the spiritual side of trade. It is a great power that has been intrusted to your keeping which charges you with the high responsibility of inspiring and ennobling the commercial world. It is all part of the greater work of regeneration and redemption of mankind.