Perivale St. Andrews is a beautiful "smokeless town of white walls" lying between two Middlesex hills. Barbara sits on the firestep of a parapet, looking out at the town. Several mutilated dummy soldiers lie around a shed. Cusins arrives by the path from the town.
Cusins reports that everything is perfect, wonderful, and real. Barbara's father's city only requires a cathedral to be a heavenly rather than hellish one. The company has even found Peter Shirley work as a gate and timekeeper. Stephen and Sarah arrive and confirm Cusins' report, praising the town hall, libraries, insurance fund, and pension fund.
Undershaft appears with a sheaf of telegrams announcing good news. The aerial battleship has wiped out a fort with 300 soldiers on its first trial. Cusins and Barbara are stunned.
Stephen compliments his father's social engineering but expresses one misgiving. He wonders whether comfort saps the workers' independence and weakens their sense of responsibility. Undershaft explains that "when you are organizing civilization you have to make up your mind whether trouble and anxiety are good things or not." For Undershaft, the presence of explosives is anxiety enough.
Responding to further questioning, Undershaft reveals that the foundry's many sheds are for the production of explosives. Stephen moves away from the shed in fear. Lomax assures him there is no danger. Bilton, a foreman, emerges from the shed and reports ironically that Lomax just lit a cigarette in the shed. Undershaft takes Lomax's matches.
Lady Britomart arrives from town carrying a bouquet she receive from the men at the William Morris Labor Church. A cynical motto decorates the dome, saying that, "No man is good enough to be another man's master." Britomart chastises Andrew for keeping the foundry to himself for years. While the industry might belong to the Undershaft tradition, the furniture, houses, and gardens certainly belong to her. He questions why Adolphus should inherit the business. Undershaft reminds her that Cusins is no foundling.
Cusins then makes a shocking confession. When he met Barbara, she bought his soul for God but herself—or rather, "Dionysus and all the others" in herself. Only later did he realize that she was an aristocrat and thus had to lie about his birth. His parents' marriage is legal but in Australia, his mother being his father's deceased wife's sister. Britomart snorts in contempt.
Even though Cusins is still an educated man, Undershaft accepts him nonetheless. He will change his name and begin with a salary of a thousand pounds a year. Cusins demands five thousand and ten percent of the profits after his third year. His soul should be capital enough, and Undershaft agrees to three-fifths.
Sorrowfully Barbara asks if Cusins's soul now belongs to Undershaft. Undershaft insists that Cusins cannot simply sell arms. He must subscribe to the true faith of the Armorer: to give arms to all men who offer him an honest price, nationality, faith, and cause notwithstanding. He lists the mottos of the Undershafts before him, ending on his own: Unashamed. Cusins refuses and has more power than Undershaft, as Undershaft ultimately belongs to the foundry.
The latter part of Act III consists of the family visit to the Undershaft's ideal community. The family marvels at the success of his social engineering and they note the careful enumeration of all Perivale St. Andrew's amenities. Even Britomart is enchanted with the "civilized living" materialized in the houses, gardens, and furniture. We should observe that Perivale is imagined entirely from the perspective of the aristocrat family. Bilton, the only worker and town resident on the scene, appears as a sort of "straight man" for comic relief. Certainly the pleasure this visit lends the family and the audience partially lies in being on the inside of the experiment. For example, Lady Britomart can disapprove of the church motto as being cynical, whereas its congregation might not. Note also in this respect the patronizing, affectionate reference to Peter's embarrassment before the gate lodge.
In this section, Undershaft appears as social engineer par excellence. A certain rhetoric of "common sense"—a rhetoric typical among proponents of social engineering, whether at home or abroad in the empire—becomes especially apparent in his speech. For example, in responding to Stephen's concern that the social services of the community might make the workers lazy, Undershaft explains that "when you are organizing civilization you have to make up your mind whether trouble and anxiety are good things or not." Under the banner of common sense, Undershaft's plans appear logical, self-evident, obviously the right thing to do to create the greatest good. Suggestions to the contrary—such as those implied in questioning Undershaft's self-appointed change to "organize civilization"—are not admissible.
These scenes also continue the elaboration of Undershaft's gospel, which promises salvation to man by freeing him from a poverty that renders him inhuman or criminal. Undershaft's ideal community is not built by these working men, but through the mystical "will" of which Undershaft is a part. This "will" is the Undershaft tradition, the will of the arms industry which Cusins, as successor, must assume "unashamed." As Barbara will come to realize, it is the Undershaft will, rather than God's, which redeems the world.
Faith of the Armorer, with its dictums engraved on the ceiling of the Undershaft church, supplants Christianity, and serves as a new religion. Undershaft emerges as this faith's dark Messiah or Antichrist, acting like Jesus on behalf of a greater will that is also his own. In selling his soul to him and becoming his successor, Cusins must shed his identity and become Saint Andrew reborn, swearing to the creed that keeps the armory in business for eternity. Thus, Shaw binds salvation to the immortality of the arms industry and its sainted patrons.
As Undershaft's final volatile speech will make clear, this will is decidedly violent, relying on murder as the primary act by which it would exact its desires. The dummy soldiers and Undershaft's telegram underscore the murders that support this ideal community. It is not for nothing that the idyllic community has been erected in the shadow of death-bearing explosives.
Finally, we should note that Undershaft secures the firm's legacy at the expense of Lazarus, the absent partner Undershaft describes as "gentle romantic Jew" who cares for nothing but "string quartets and stalls at fashionable theaters." Apparently he serves as a screen, with Cusins and Undershaft both knowing that he can suffer the blame for their rapacity for money. This twist in the play exemplifies the cutthroat practices that make Undershaft's ideal community possible, and an insidious fantasy of how anti-Semitism might be deployed for man's salvation.