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Title: The Evolution of Modern Capitalism
       A Study of Machine Production

Author: John Atkinson Hobson

Release Date: March 9, 2009 [EBook #28284]

Language: English

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_THE CONTEMPORARY SCIENCE SERIES._
EDITED BY HAVELOCK ELLIS.




EVOLUTION
OF MODERN CAPITALISM.




THE EVOLUTION

OF

MODERN CAPITALISM

A STUDY OF MACHINE PRODUCTION.


BY
JOHN A. HOBSON, M.A.,
AUTHOR OF "PROBLEMS OF POVERTY."


THE WALTER SCOTT PUBLISHING CO., LTD.,
PATERNOSTER SQUARE, LONDON, E.C.
CHARLES SCRIBNER'S SONS,
153-157 FIFTH AVENUE, NEW YORK.
1902.




PREFACE.


In seeking to express and illustrate some of the laws of the
structural changes in modern industry, I have chosen a focus of study
between the wider philosophic survey of treatises on Social Evolution
and the special studies of modern machine-industry contained in such
works as Babbage's _Economy of Manufactures_ and Ure's _Philosophy of
Manufactures_, or more recently in Professor Schulze-Gaevernitz's
careful study of the cotton industry. By using the term "evolution" I
have designed to mark the study as one of a subject-matter in process
of organic change, and I have sought to trace in it some of those
large movements which are characteristic of all natural growth.

The sub-title, _A Study of Machine-Production_, indicates a further
narrowing of the investigation. Selecting the operation of modern
machinery and motors for special attention, I have sought to enforce a
clearer recognition of organic unity, by dwelling upon the more
material aspects of industrial change which mark off the last century
and a half from all former industrial epochs. The position of central
importance thus assigned to machinery as a factor in industrial
evolution may be--to some extent must be--deceptive, but in bringing
scientific analysis to bear upon phenomena so complex and so
imperfectly explored, it is essential to select some single clearly
appreciable standpoint, even at the risk of failing to present the
full complexity of forces in their just but bewildering interaction.

In tracing through the Business, the Trade, and the Industrial
Organism the chief structural and functional changes which accompany
machine-development, I have not attempted to follow out the numerous
branches of social investigation which diverge from the main line of
inquiry. Two studies, however, of "the competitive system" in its
modern working are presented; one examining the process of
restriction, by which competition of capitals gives way to different
forms of combination; the other tracing in periodic Trade Depressions
the natural outcome of unrestricted competition in private capitalist
production.

In some final chapters I have sought to indicate the chief bearings of
the changes of industrial structure upon a few of the deeper issues of
social life, in particular upon the problem of the Industrial Town,
and the position of woman as an industrial competitor.

A portion of Chapters VIII., IX., and X. have already appeared in the
_Contemporary Review_ and in the _Political Science Quarterly Review_,
and I am indebted to the courtesy of the editors for permission to use
them.

I have also to acknowledge most gratefully the valuable assistance
rendered by Dr. William Smart of Glasgow University, who was kind
enough to read through the proofs of a large portion of this book, and
to make many serviceable corrections and suggestions.

                                                  JOHN A. HOBSON.




CONTENTS.


CHAPTER I.

                                                                  PAGE
INTRODUCTION                                                         1

Section.
  1. Industrial Science, its Standpoint and Methods of Advance.
  2. Capital as Factor in Modern Industrial Changes.
  3. Place of Machinery in Evolution of Capitalism.
  4. The Monetary Aspect of Industry.
  5. The Literary Presentment of Organic Movement.


CHAPTER II.

THE STRUCTURE OF INDUSTRY BEFORE MACHINERY                          10

   1. Dimensions of International Commerce in early Eighteenth
      Century.
   2. Natural Barriers to International Trade.
   3. Political, Pseudo-economic, and Economic Barriers--
      Protective Theory and Practice.
   4. Nature of International Trade.
   5. Size, Structure, Relations of the several Industries.
   6. Slight Extent of Local Specialisation.
   7. Nature and Conditions of Specialised Industry.
   8. Structure of the Market.
   9. Combined Agriculture and Manufacture.
  10. Relations between Processes in a Manufacture.
  11. Structure of the Domestic Business: Early Stages of
      Transition.
  12. Beginnings of Concentrated Industry and the Factory.
  13. Limitations in Size and Application of Capital--Merchant
      Capitalism.


CHAPTER III.

THE ORDER OF DEVELOPMENT OF MACHINE INDUSTRY                        44

   1. A Machine differentiated from a Tool.
   2. Machinery in Relation to the Character of Human Labour.
   3. Contributions of Machinery to Productive Power.
   4. Main Factors in Development of Machine Industry.
   5. Importance of Cotton-trade in Machine Development.
   6. History refutes the "Heroic" Theory of Invention.
   7. Application of Machinery to other Textile Work.
   8. Reverse order of Development in Iron Trades.
   9. Leading Determinants in the General Application of
      Machinery and Steam-Motor.
  10. Order of Development of modern Industrial Methods in the
      several Countries--Natural, Racial, Political, Economic.


CHAPTER IV.

THE STRUCTURE OF MODERN INDUSTRY                                    88

   1. Growing Size of the Business-Unit.
   2. Relative Increase of Capital and Labour in the Business.
   3. Increased Complexity and Integration of Business
      Structure.
   4. Structure and Size of the Market for different
      Commodities.
   5. Machinery a direct Agent in expanding Market Areas.
   6. Expanded Time-area of the Market.
   7. Interdependency of Markets.
   8. Sympathetic and Antagonistic Relations between Trades.
   9. National and Local Specialisation in Industry.
  10. Influences determining Localisation of Industry under
      World-Competition.
  11. Impossibility of Final Settlement of Industry.
  12. Specialisation in Districts and Towns.
  13. Specialisation within the Town.


CHAPTER V.

THE FORMATION OF MONOPOLIES IN CAPITAL                             117

   1. Productive Economies of the Large Business.
   2. Competitive Economies of the Large Business.
   3. Intenser Competition of the few Large Businesses.
   4. Restraint of Competition and Limited Monopoly.
   5. Facilities for maintaining Price-Lists in different
      Industries.
   6. Logical Outcome of Large-Scale Competition.
   7. Different Species of "Combines."
   8. Legal and Economic Nature of the "Trust."
   9. Origin and _Modus Operandi_ of the Standard Oil Trust.
  10. The Economic Strength of other Trusts.
  11. Industrial Conditions favourable to "Monopoly"


CHAPTER VI.

ECONOMIC POWERS OF THE TRUST                                       143

   1. Power of a Monopoly over earlier or later Processes in
      Production of a Commodity.
   2. Power over Actual or Potential Competitors.
   3. Power over Employees of a Trust.
   4. Power over Consumers.
   5. Determinants of a Monopoly Price.
   6. The Possibility of low Monopoly Prices.
   7. Considerations of Elasticity of Demand limiting Prices.
   8. Final Summary of Monopoly Prices.


CHAPTER VII.

MACHINERY AND INDUSTRIAL DEPRESSION                                167

   1. The external phenomena of Trade Depression.
   2. Correctly described as Under-production and
      Over-production.
   3. Testimony to a general excess of Productive Power over the
      requirement for Consumption.
   4. The connection of modern Machine-production and Depression
      shown by statistics of price.
   5. Changing forms in which Over-supply of Capital is
      embodied.
   6. Summary of economic relation of Machinery to Depression.
   7. Under-consumption as the root-evil.
   8. Economic analysis of "Saving."
   9. Saving requires increased Consumption in the future.
  10. Quantitative relation of parts in the organism of
      Industry.
  11. Quantitative relation of Capital and Consumption.
  12. Economic limits of Saving for a Community.
  13. No limits to the possibility of individual Saving--Clash
      of individual and social interests in Saving.
  14. Objection that excess in forms of Capital would drive
      interests to zero not valid.
  15. Excess is in embodiments of Capital, not in real Capital.
  16. Uncontrolled Machinery a source of fluctuation.


CHAPTER VIII.

MACHINERY AND DEMAND FOR LABOUR                                    220

   1. The Influence of Machinery upon the number of Employed,
      dependent on "elasticity of demand."
   2. Measurement of direct effects on Employment in Staple
      Manufactures.
   3. Effects of Machinery in other Employments--The Evidence of
      French Statistics.
   4. Influence of Introduction of Machinery upon Regularity of
      Employment.
   5. Effects of "Unorganised" Machine-industry upon Regularity.
   6. Different Ways in which modern Industry causes
      Unemployment.
   7. Summary of General Conclusions.


CHAPTER IX.

MACHINERY AND THE QUALITY OF LABOUR                                244

   1. Kinds of Labour which Machinery supersedes.
   2. Influence of Machine-evolution upon intensity of physical
      work.
   3. Machinery and the length of the working day.
   4. The Education of Working with Machinery.
   5. The levelling tendency of Machinery--The subordination of
      individual capacity in work.


CHAPTER X.

THE ECONOMY OF HIGH WAGES                                          261

   1. The Economy of Low Wages.
   2. Modifications of the Early Doctrine--Sir T. Brassey's
      Evidence from Heavy Manual Work.
   3. Wages, Hours, and Product in Machine-industry.
   4. A General Application of the Economy of High Wages and
      Short Hours inadmissible.
   5. Mutual Determination of Conditions of Employment and
      Productivity.
   6. Compressibility of Labour and Intensification of Effort.
   7. Effective Consumption dependent upon Spare Energy of the
      Worker.
   8. Growth of Machinery in relation to Standard of Comfort.
   9. Economy of High Wages dependent upon Consumption.


CHAPTER XI.

SOME EFFECTS OF MODERN INDUSTRY UPON THE WORKERS AS CONSUMERS      285

   1. How far the different Working Classes gain from the Fall
      of Prices.
   2. Part of the Economy of Machine-production compensated by
      the growing Work of Distribution.
   3. The Lowest Class of Workers gains least from
      Machine-production.


CHAPTER XII.

WOMEN IN MODERN INDUSTRY                                           290

   1. Growing Employment of Women in Manufacture.
   2. Machinery favours Employment of Women.
   3. Wages of Women lower than of Men.
   4. Causes of Lower Wages for Women.
   5. Smaller Productivity or Efficiency of Women's Labour.
   6. Factors enlarging the scope of Women's Wage-work.
   7. "Minimum Wage" lower for Women--Her Labour often
      subsidised from other sources.
   8. Woman's Contribution to the Family Wages--Effect of
      Woman's Work upon Man's Wages.
   9. Tendency of Woman's Wage to low uniform level.
  10. Custom and Competition as determinants of Low Wages.
  11. Lack of Organisation among Women--Effect on Wages.
  12. Over-supply of Labour in Women's Employments the
      root-evil.
  13. Low Wages the chief cause of alleged Low "Value" of
      Woman's Work.
  14. Industrial Position of Woman analogous to that of
      Low-skilled Men.
  15. Damage to Home-life arising from Women's Wage-work.


CHAPTER XIII.

MACHINERY AND THE MODERN TOWN                                      324

   1. The Modern Industrial Town as a Machine-product.
   2. Growth of Town as compared with Rural Population in the
      Old and New Worlds.
   3. Limits imposed upon the Townward Movement by the Economic
      Conditions of World-industry.
   4. Effect of increasing Town-life upon Mortality.
   5. The impaired quality of Physical Life in Towns.
   6. The Intellectual Education of Town-life.
   7. The Moral Education of Town-life.
   8. Economic Forces making for Decentralisation.
   9. Desirability of Public Control of Transport Services to
      effect Decentralisation.
  10. Long Hours and Insecurity of Work as Obstacles to
      Reforms.
  11. The Principle of Internal Reform of Town-life.


CHAPTER XIV.

CIVILISATION AND INDUSTRIAL DEVELOPMENT                            350

   1. Imperfect Adjustment of Industrial Structure to its
      Environment.
   2. Reform upon the Basis of Private Enterprise and Free
      Trade.
   3. Freedom and Transparency of Industry powerless to cure the
      deeper Industrial Maladies.
   4. Beginnings of Public Control of Machine-production.
   5. Passage of Industries into a public Non-competitive
      Condition.
   6. The _raison d'être_ of Progressive Collectivism.
   7. Collectivism follows the line of Monopoly.
   8. Cases of "Arrested Development:" the Sweating Trades.
   9. Retardation of rate of Progress in Collective Industries.
  10. Will Official Machine-work absorb an Increasing
      Proportion of Energy?
  11. Improved Quality of Consumption the Condition of Social
      Progress.
  12. The Highest Division of Labour between Machinery and Art.
  13. Qualitative Consumption defeats the Law of Decreasing
      Returns.
  14. Freedom of Art from Limitations of Matter.
  15. Machinery and Art in production of Intellectual Wealth.
  16. Reformed Consumption abolishes Anti-Social Competition.
  17. Life itself must become Qualitative.
  18. Organic Relations between Production and Consumption.
  19. Summary of Progress towards a Coherent Industrial
      Organism.

INDEX                                                              385




THE EVOLUTION OF MODERN CAPITALISM.




THE EVOLUTION OF MODERN CAPITALISM.




CHAPTER I.

INTRODUCTION.

    § 1. _Industrial Science, its Standpoint and Methods of Advance._
    § 2. _Capital as Factor in Modern Industrial Changes._
    § 3. _Place of Machinery in Evolution of Capitalism._
    § 4. _The Monetary Aspect of Industry._
    § 5. _The Literary Presentment of Organic Movement._


§ 1. Science is ever becoming more and more historical in the sense
that it becomes more studiously anxious to show that the laws or
principles with whose exposition it is concerned not merely are
rightly derived from observation of phenomena but cover the whole
range of these phenomena in the explanation they afford. So likewise
History is ever becoming more scientific in the sense that facts or
phenomena are so ordered in their setting as to give prominence to the
ideas or principles which appear to relate them and of which they are
the outward expression. Thus the old sharp line, of distinction has
slipped away, and we see there is no ultimate barrier between a study
of facts and a study of the laws or principles which dominate these
facts. In this way the severance of History and Science becomes less
logically justifiable. Yet it is still convenient that we should say
of one branch of study that it is historical in the sense that it is
directly and consciously engaged in the collection and clear
expression of facts or phenomena as they stand objectively in place or
time without any conscious reference to the laws which relate or
explain them; of another branch of study that it is scientific because
it is engaged in the discovery, formulation, and correct expression of
the laws according to which facts are related, without affecting to
give a full presentment of those facts. The treatment in this book
belongs in this sense to economic science rather than to industrial
history as being an endeavour to discover and interpret the laws of
the movement of industrial forces during the period of the eighteenth
and nineteenth centuries.

It cannot, however, be pretended that any high degree of exactitude
can attach to such a scientific study.

Two chief difficulties beset any attempt to explain industrial
phenomena by tracing the laws of the action of the forces manifested
in them. The first is that only a limited proportion of the phenomena
which at any given time constitute Industry are clearly and definitely
ascertainable, and it may always be possible that the laws which
satisfactorily explain the statical and dynamical relations of these
may be subordinate or even counteracting forces of larger movements
whose dominance would appear if all parts of the industrial whole were
equally known.

The second difficulty, closely related to the first, is the inherent
complexity of Industry, the continual and close interaction of a
number of phenomena whose exact size and relative importance is
continually shifting and baffles the keenest observer.

These difficulties, common to all sciences, are enhanced in
sociological sciences by the impossibility of adequate experiment in
specially prepared environments.

The degree of exactitude attainable in industrial sciences may thus
appear to be limited by the development of statistical inquiry. Since
the collection of accurate statistics, even on those matters which are
most important, and which lend themselves most easily to statistical
description, is a modern acquirement which has not yet widely spread
over the whole world, while the capacity for classifying and making
right use of statistics is still rarer, it is held by some that in a
study where so much depends upon accurate statements of quantity
little advance is at present possible.

And it is, of course, true that until the advance of organised
curiosity has provided us with a complete measurement of industrial
phenomena over a wide area of commerce and over a considerable period
of time, the inductive science of Economics cannot approach
exactitude.

But a study which cannot claim this exactness may yet be a science,
and may have its value. A hypothesis which best explains the generally
apparent relation between certain known phenomena is not the less
science because it is liable to be succeeded by other hypotheses which
with equal relative accuracy explain a wider range of similar
phenomena. It is true that in studies where we know that there exists
a number of unascertained factors we shall expect a more fundamental
displacement of earlier and more speculative hypotheses than in
studies where we know, or think we know, that most of the phenomena
with which we are concerned are equally within our ken: but the
earlier scientific treatment, so far as it goes, is equally necessary
and equally scientific.

In modern industrial changes many different factors, material and
moral, are discernibly related to one another in many complex ways.
According as one or other of the leading factors is taken for a
scientific objective the study assumes a widely different character.

For example, since the end of Industry is wealth for consumption it
would be possible to group the industrial phenomena accordingly as
they served more fully and directly to satisfy human wants, or as they
affected quantitatively or qualitatively the standard of consumption,
and to consider the reflex actions of changed consumption upon modes
of industrial activity. Or again, considering Industry to consist
essentially of organised productive human effort, those factors most
closely related to changes in nature, conditions, and intensity of
work might form the centre of scientific interest; and we might group
our facts and forces according to their bearing upon this. These
points of view would give us different objective scientific studies.

Or, once more, taking a purely subjective standpoint, we might search
out the intellectual expression of these industrial changes in the
changing thought and feeling of the age, tracing the educative
influences of industrial development upon (1) the deliberate judgments
of the business world and of economic thinkers as reflected in
economic writings; (2) politics, literature, and art through the
changes of social environment, and the direct stimulation of new ideas
and sentiments. The deeper and more important human bearings of the
changes in industrial environment might thus be brought into
prominence as well as the reaction by which, through the various
social avenues of law, public opinion, and private organised activity,
these intellectual forces have operated in their turn upon the
industrial structure.

The crowning difficulty of an adequate scientific treatment consists in
the fact that each and all of these scientific objects ought to be
pursued simultaneously; that is to say, the whole of the
phenomena--industrial, intellectual, political, moral, æsthetic--should
be presented in their just but ever-changing proportions.

This larger philosophic treatment is only named in order that it may
be realised how narrow and incomplete would be even the amplest
fulfilment of the purpose indicated in the title of this book.

§ 2. Industrial science has not yet sufficiently advanced to enable a
full treatment of the objective phenomena to be attempted.

The method here adopted is to take for our intellectual objective one
important factor in modern industrial movements, to study the laws of
its development and activity, and by observing the relations which
subsist between it and other leading factors or forces in industry to
obtain some clearer appreciation and understanding of the structure of
industry as a whole and its relation to the evolution of human
society. This central factor is indicated by the descriptive title
peculiarly applied to modern industry, Capitalism. A clear view of the
phenomena grouped together under the head of the Industrial Revolution
cannot fail to give prominence to the changes that have taken place in
the structure and functional character of Capital. Whatever
transformations have taken place in the character of land, the raw
material of industrial wealth, and of labour, or those abilities and
faculties of man which operate upon the raw material, have occurred
chiefly and directly through the agency of the enlarged and more
complex use of those forms of material wealth which, while embodying
some element of human effort, are not directly serviceable in
satisfying human want.

Writers upon Political Economy have brought much metaphysical acumen
to bear upon definitions of Capital, and have reached very widely
divergent conclusions as to what the term ought to mean, ignoring the
clear and fairly consistent meaning the term actually possesses in the
business world around them. The business world has indeed two views of
Capital, but they are consistent with one another. Abstractly, money
or the control of money, sometimes called credit, is Capital.
Concretely, capital consists of all forms of marketable matter which
embody labour. Land or nature is excluded except for improvements:
human powers are excluded as not being matter; commodities in the
hands of consumers are excluded because they are no longer marketable.
Thus the actual concrete forms of capital are the raw materials of
production, including the finished stage of shop goods; and the plant
and implements used in the several processes of industry, including
the monetary implements of exchange. Concrete business capital is
composed of these and of nothing but these.[1] In taking modern
industrial phenomena as the subject of scientific inquiry it is better
to accept such terminology as is generally and consistently received
by business men, than either to invent new terms or to give a private
significance to some accepted term which shall be different from that
given by other scientific students, and, if we may judge from past
experience, probably inferior in logical exactitude to the current
meaning in the business world.

§ 3. The chief material factor in the evolution of Capitalism is
machinery. The growing quantity and complexity of machinery applied to
purposes of manufacture and conveyance, and to the extractive
industries, is the great special fact in the narrative of the
expansion of modern industry.

It is therefore to the development and influence of machinery upon
industry that we shall chiefly direct our attention, adopting the
following method of study. It is first essential to obtain a clear
understanding of the structure of industry or "the industrial
organism" as a whole, and of its constituent parts, before the new
industrial forces had begun to operate. We must then seek to ascertain
the laws of the development and application of the new forces to the
different departments of industry and the different parts of the
industrial world, examining in certain typical machine industries the
order and pace of the application of the new machinery and motor to
the several processes. Turning our attention again to the industrial
organism, we shall strive to ascertain the chief changes that have
been brought about in the size and structural character of industry,
in the relations of the several parts of the industrial world, of the
several trades which constitute industry, of the processes within
these trades, of the businesses or units which comprise a trade or a
market, and of the units of capital and labour comprising a business.
It will then remain to undertake closer studies of certain important
special outcomes of machinery and factory production. These studies
will fall into three classes. (1) The influences of machine-production
upon the size of the units of capital, the intensification and
limitation of competition; the natural formation of Trusts and other
forms of economic monopoly of capital; trade depressions and grave
industrial disorders due to discrepancies between individual and
social interests in the working of modern methods of production. (2)
Effects of machinery upon labour, the quantity and regularity of
employment, the character and remuneration of work, the place of women
in industry (3) Effects upon the industrial classes in the capacity of
consumers, the growth of the large industrial town and its influences
upon the physical, intellectual, moral life of the community. Lastly,
an attempt will be made to summarise the net influences of modern
capitalist production in their relation to other social progressive
forces, and to indicate the relations between these which seem most
conducive to the welfare of a community measured by generally accepted
standards of character or happiness.

§ 4. Since every industrial act in a modern community has its monetary
counterpart, and its importance is commonly estimated in terms of
money, it will be evident that the growth of capitalism might be
studied with great advantage in its monetary aspect. Corresponding to
the changes in productive methods under mechanical machinery we should
find the rapid growth of a complex monetary system reflecting in its
international and national character, in its elaborate structure of
credit, the leading characteristics which we find in modern productive
and distributive industry. The whole industrial movement might be
regarded from the financial or monetary point of view. But though such
a study would be capable of throwing a flood of light upon the
movements of concrete industrial factors at many points, the
intellectual difficulties involved in simultaneously following the
double study, in constantly passing from the more concrete to the more
abstract contemplation of industrial phenomena, would tax the mental
agility of students too severely, and would greatly diminish the
chance of a substantially accurate understanding of either aspect of
modern industry. We shall therefore in this study confine our
attention to the concrete aspect of capitalism, merely indicating by
passing references some of the direct effects upon industrial methods,
especially in the expansion and complexity of markets, of the
elaborate monetary system of modern exchange.

§ 5. The inherent difficulty which besets every literary presentation
of the study of a living and changing organism is here present in no
ordinary degree. A book of physiology is necessarily defective in that
it can neither present the just simultaneity of phenomena which occur
together, nor the just sequence of phenomena which are successive.
Diagrams may serve effectively to set forth tolerably simple
simultaneity, but a complex diagram inevitably fails of its object;
for it confuses the sight of one who seeks to simultaneously grasp the
whole, and thus compels a successive examination of different parts
which is generally inferior to skilled narration, in that it affords
no security of the fittest order of examination of the parts. For
certain simple relations between the movements of a few definite
objects a working model may be serviceable; but when complex changes
of shape, pace, and local relations exist, when intricate interaction
takes place, and when new phenomena arise affecting by their presence
all former ones, little can be effected by such visual presentment.
Still less can a succession of diagrams assist us to realise the
continuity of the working of such shifting forces as are presented in
industrial movements.

Thus while the impossibility of adequate experimentation, the
difficulties of scientific observations of phenomena so vast in scope
and so intricate in their relations, make the student of sociological
subjects more dependent upon printed records for his material than is
the case in most other sciences, these printed records induce a
sequence of thought antagonistic to the grasp of a living and moving
unity. This cause is primarily responsible for the failure of many of
the ablest and subtlest economic treatises to impress upon the reader
a clear conception of the industrial world as a single "going
concern." Each piece of the mechanism is clearly described, and the
reader is informed how it fits into the parts which are most closely
related to it, but no simultaneous grasp of the mechanism as a working
whole is attained. When we graft upon the idea of a mechanism that
character of continuous self-development which transforms it into an
"organism," the synthesis of the changing phenomena is still more
difficult to comprehend. These difficulties can only be overcome by a
recognition that the scientific imagination must play a larger part
here than it does in those sciences whose subject-matter is more
amenable to direct observation. In the latter the chief function of
the imagination will be the increase of knowledge by means of
hypotheses which tentatively transcend the region of known facts.

In economic science, as Cairnes has ably shown, the use of hypothesis
is much wider, serving in large measure as a substitute for
experiment.[2] But the scientific imagination has another constant
service to perform. Its exercise is constantly required by the
economist, and in general by the sociologist, to gather into true
relations of time, space, and causality those intricately connected
phenomena which, though individually amenable to sensuous
presentation, are not able to be thus presented as an aggregate in
their right organic order.

The attempts to construct a deductive economic science upon a
piece-meal basis by framing special and separate theories of wages,
rent, value, the functions of money, and so forth, are now recognised
to be in large measure failures precisely because they involve the
fundamental scientific fallacy of supposing that the several parts of
an organic whole can be separately studied, and that from this study
of the parts we can construct a correct idea of the whole. As in
economic theory so in the comprehension of industrial history, no
detailed investigation of a number of different heaps of facts
laboriously collected by intellectual moles will suffice for our
purpose. To understand the evolution of the system of modern industry
we must apply to the heaps of bare unordered facts those principles of
order which are now recognised as the widest generalisations or the
most valid assumptions derivable from other sciences, and endeavour
without slavish conformity to the formulæ of these other sciences to
trace in the growth of industrial organisms those general laws of
development which seem common to all bodies of closely-related
phenomena.

FOOTNOTES:

[1] Professor Marshall regards this restricted use of capital as
"misleading," rightly urging that "there are many other things which
truly perform the services commonly attributed to capital"
(_Principles_ Bk. II., chap. iv.). But if we enlarge our definition so
as to include all these "other things" we shall be driven to a
political economy which shall widely transcend Industry as we now
understand the term, and shall comprehend the whole science and art of
life so far as it is concerned with human effort and satisfaction. If
it is convenient and justifiable to retain for certain purposes of
study the restricted connotation of Industry now in vogue, the
confinement of Capital as above to Trade Capital is logically
justified. For a fuller treatment of the question of the use of the
term Capital in forming a terminology descriptive of the parts of
Industry the reader is referred to Chapter VII., and in particular to
Appendix I.

[2] _Logical Method of Political Economy_, p. 81, etc.




CHAPTER II.

THE STRUCTURE OF INDUSTRY BEFORE MACHINERY.

    § 1. _Dimensions of International Commerce in early Eighteenth
         Century._
    § 2. _Natural Barriers to International Trade._
    § 3. _Political, Pseudo-economic, and Economic Barriers--
         Protective Theory and Practice._
    § 4. _Nature of International Trade._
    § 5. _Size, Structure, Relations of the several Industries._
    § 6. _Slight Extent of Local Specialisation._
    § 7. _Nature and Conditions of Specialised Industry._
    § 8. _Structure of the Market._
    § 9. _Combined Agriculture and Manufacture._
    § 10. _Relations between Processes in a Manufacture._
    § 11. _Structure of the Domestic Business: Early Stages of
          Transition._
    § 12. _Beginnings of Concentrated Industry and the Factory._
    § 13. _Limitations in Size and Application of Capital--
          Merchant Capitalism._


§ 1. In order to get some clear understanding of the laws of the
operation of the new industrial forces which prevail under
machine-production it is first essential to know rightly the structure
and functional character of the "industrial organism" upon which they
were destined to act. In order to build up a clear conception of
industry it is possible to take either of two modes of inquiry. Taking
as the primary cell or unit that combination of labour and capital
under a single control for a single industrial purpose which is termed
a Business, we may examine the structure and life of the Business,
then proceed to discover how it stands related to other businesses so
as to form a Market, and, finally, how the several Markets are
related locally, nationally, internationally so as to yield the
complex structure of Industry as a whole. Or reversely, we may take
Industry as a whole, the Industrial Organism as it exists at any given
time, consider the nature and extent of the cohesion existing between
its several parts, and, further, resolving these parts into their
constituent elements, gain a close understanding of the extent to
which differentiation of industrial functions has been carried in the
several divisions.

Although in any sociological inquiry these two methods are equally
valid, or, more strictly speaking, are equally balanced in virtues and
defects, the latter method is here to be preferred, because by the
order of its descent from the whole to the constituent parts it brings
out more definitely the slight cohesiveness and integration of
industry beyond the national limits, and serves to emphasise those
qualities of nationalism and narrow localism which mark the character
of earlier eighteenth century industry. We are thus enabled better to
recognise the nature and scope of the work wrought by the modern
industrial forces which are the central object of study.

While the Market or the Trade is less and less determined or confined
by national or other political boundaries in modern times, and
nationalism is therefore a factor of diminishing importance in the
modern science of economics, the paramount domination of politics over
large commerce in the last century, acting in co-operation with other
racial and national forces, obliges any just analysis of eighteenth
century industry to give clear and early emphasis to the slight
character of the commercial interdependency among nations. The degree
of importance which statesmen and economists attached to this foreign
commerce as compared with home trade, and the large part it played in
the discussion and determination of public conduct, have given it a
prominence in written history far beyond its real value.[3]

It is true that through the Middle Ages a succession of European
nations rose to eminence by the development of navigation and
international trade, Italy, Portugal, Spain, France, Holland, and
England; but neither in size nor in character was this trade of the
first importance. Even in the case of those nations where it was most
developed it formed a very small proportion of the total industry of
the country, and it was chiefly confined to spicery, bullion,
ornamental cloths, and other objects of art and luxury.

It is important to recognise that in the first half of the eighteenth
century international trade still largely partook of this character.
Not only did it bear a far smaller proportion to the total industry of
the several countries than does foreign trade to-day, but it was still
engaged to a comparatively small extent with the transport of
necessaries or prime conveniences of life. Each nation, as regards the
more important constituents of its consumption, its staple foods,
articles of clothing, household furniture, and the chief implements of
industry, was almost self-sufficing, producing little that it did not
consume, consuming little it did not produce.

In 1712 the export trade of England is officially estimated at
£6,644,103,[4] or considerably less than one-sixth of the home trade
of that date as calculated by Smith in his _Memoirs of Wool_. Such an
estimate, however, gives an exaggerated impression of the relation of
foreign to home trade, because under the latter no account is taken of
the large domestic production of goods and services which figure in no
statistics. A more instructive estimate is that which values the total
consumption of the English people in 1713 at forty-nine or fifty
millions, out of which about four millions covers the consumption of
foreign goods.[5] In 1740 imports amounted to £6,703,778, exports to
£8,197,788. In 1750 they had risen respectively to £7,772,339 and
£12,699,081,[6] and ten years later to £9,832,802 and £14,694,970.
Macpherson, whose _Annals of Commerce_ are a mine of wealth upon the
history of foreign commerce in the eighteenth century, after
commenting upon the impossibility of obtaining a just estimate of the
value of home trade, alludes to a calculation which places it at
thirty-two times the size of the export trade. Macpherson contents
himself with concluding that it is "a vast deal greater in value than
the whole of the foreign trade."[7] There is every reason to believe
that in the case of Holland and France, the only two other European
nations with a considerable foreign trade, the same general conclusion
will apply.

    [Illustration: PROGRESS OF FOREIGN TRADE IN ENGLAND.]

The smallness of the part which foreign trade played in industry
signifies that in the earlier part of the eighteenth century the
industrial organism as a whole must be regarded as a number of
tolerably self-sufficing and therefore homogeneous national forms
attached to one another by bonds which are few and feeble. As yet
there was little specialisation in national industry, and therefore
little integration of national parts of the world-industry.

§ 2. Since the breaking-down of international barriers and the
strengthening of the industrial bonds of attachment between nations
will be seen to be one of the most important effects of the
development of machine-industry, some statement of the nature of these
barriers and their effect upon the size and character of international
trade is required.

Though considerable advances had been made by England and Holland at
the beginning of the eighteenth century in the improvement of
harbours, the establishment of lighthouses, and the development of
marine insurance,[8] navigation was still subject to considerable
risks of the loss of life and of investments, while these "natural"
dangers were increased by the prevalence of piracy. Voyages were slow
and expensive, commerce between distant nations being necessarily
confined to goods of a less perishable character which would stand the
voyage. Trade in fresh foods, which forms so large a part of modern
commerce, would have been impossible except along the coasts of
adjoining nations. With these natural barriers to commerce may be
reckoned the defective knowledge of the position, resources, and
requirements of large parts of the earth which now fill an important
place in commerce. The new world was but slightly opened up, nor could
its known resources be largely utilised before the development of more
adequate machinery of transport. We can scarcely realise the
inconveniences, costs, and risks entailed by the more distant branches
of foreign trade at a time when the captain of a merchant-ship still
freighted his vessel at his own expense, and when each voyage was a
separate speculation. Even in the early nineteenth century the
manufacturer commonly shipped his surplus produce at his own risk,
employing the merchant upon commission, and in the trade with the
Indies, China, or South America he had frequently to lie out of his
money or his return freight of indigo, coffee, tea, etc., for as long
as eighteen months or two years, and to bear the expense of
warehousing as well as the damage which time and tide inflicted on his
goods.

§ 3. Next come a series of barriers, partly political, partly
pseudo-economic, in which the antagonism of nations took shape, the
formation of political and industrial theories which directed the
commercial intercourse of nations into certain narrow and definite
channels.

Two economic doctrines, separate in the world of false ideas, though
their joint application in the world of practice has led many to
confuse them, exercised a dominant influence in diminishing the
quantity, and determining the quality of international trade in the
eighteenth century. These doctrines had reference respectively to the
construction and maintenance of home industries and the balance of
trade. The former doctrine, which was not so much a consciously-evolved
theory as a short-sighted, intellectual assumption driven by the urgent
impulse of vested interests into practical effect, taught that, on the
one hand, import trade should be restricted to commodities which were
not and could not with advantage be produced at home, and to the
provision of cheap materials for existing manufactures; while export
trade, on the other hand, should be generally encouraged by a system of
bounties and drawbacks. This doctrine was first rigidly applied by the
French minister, Colbert, but the policy of France was faithfully
copied by England and other commercial nations and ranked as an
orthodox theory of international trade.

The Balance of Trade doctrine estimated the worth of a nation's
intercourse with another by the excess of the export over the import
trade, which brought a quantity of bullion into the exporting country.
This theory was also widely spread, though obviously its general
application would have been destructive of all international commerce.
The more liberal interpretation of the doctrine was satisfied with a
favourable balance of the aggregate export over the aggregate import
trade of the country, but the stricter interpretation, generally
dominant in practice, required that in the case of each particular
nation the balance should be favourable. In regarding England's
commerce with a foreign nation, any excess in import values over
export was spoken of as "a loss to England." England deliberately cut
off all trade with France during the period 1702 to 1763 by a system
of prohibitive tariffs urged by a double dread lest the balance should
be against us, and lest French textile goods might successfully
compete with English goods in the home markets. On the other hand, we
cultivated trade with Portugal because "we gain a greater balance from
Portugal than from any other country whatever." The practical policy
prevalent in 1713 is thus summarised by one of its enthusiastic
upholders--"We suffer the goods and merchandises of Holland, Germany,
Portugal, and Italy to be imported and consumed among us; and it is
well we do, for we expect a much greater value of our own to those
countries than we take from them. So that the consumption of those
nations pays much greater sums to the rents of our lands and the
labour of our people than ours does to theirs. But we keep out as much
as possible the goods and merchandises of France, because our
consumption of theirs would very much hinder the consumption of our
own, and abate a great part of forty-two millions which it now pays to
the rents of our lands and the labour of our people."[9] Thus our
policy was to confine our import trade to foreign luxuries and raw
materials of manufacture which could not be here produced, drawn
exclusively from countries where such trade would not turn the balance
against us, and, on the other hand, to force our export trade on any
country that would receive it. Since every European nation was largely
influenced by similar ideas and motives, and enforced upon their
colonies and dependencies a like line of conduct, many mutually
profitable exchanges were prevented, and commerce was confined to
certain narrow and artificial grooves, while the national industrial
energy was wasted in the production of many things at home which could
have been more cheaply obtained from foreign countries through
exchange.

The following example may suffice to illustrate the intricacy of the
legislation passed in pursuance of this policy. It describes a change
of detailed policy in support and regulation of textile trade:--

"A tax was laid on foreign linens in order to provide a fund for
raising hemp and flax at home; while bounties were given on these
necessary articles from our colonies, the bounty on the exportation of
hemp was withdrawn. The imposts on foreign linen yarn were withdrawn.
Bounties were given on British linen cloth exported; while the making
of cambricks was promoted, partly by prohibiting the foreign and
partly by giving fresh incentives, though without success, to the
manufacture of cambricks within our island. Indigo, cochineal, and
logwood, the necessaries of dyes, were allowed to be freely
imported."[10]

The encouragement of English shipping (partly for commercial, partly
for political reasons) took elaborate shape in the Navigation Acts,
designed to secure for English vessels a monopoly of the carrying
trade between England and all other countries which sent goods to
English or to colonial shores. This policy was supported by a network
of minor measures giving bounties to our colonies for the exportation
of shipping materials, pitch, tar, hemp, turpentine, masts, and spars,
and giving bounties at home for the construction of defensible ships.
This Navigation policy gave a strong foundational support to the whole
protective policy. Probably the actuating motives of this policy were
more political than industrial. Holland, the first to apply this
method systematically, had immensely strengthened her maritime power.
France, though less successfully, had followed in her wake. Doubtless
there were many clear-thinking Englishmen who, though aware of the
damage done to commerce by our restrictive regulations about shipping,
held that the maintenance of a powerful navy for the defence of the
kingdom and its foreign possessions was an advantage which outweighed
the damage.[11]

The selfish and short-sighted policy of this protective system found
its culminating point in the treatment of Ireland and the American
plantations. The former was forbidden all manufacture which might
either directly or indirectly compete with English industry, and was
compelled to deal exclusively with England; the American colonies were
forbidden to weave cloth, to make hats, or to forge a bolt, and were
compelled to take all the manufactured goods required for their
consumption from England.

The freedom and expansion of international commerce was further
hampered by the policy of assigning monopolies of colonial and foreign
trade to close Chartered Companies. This policy, however, defensible
as an encouragement of early mercantile adventure, was carried far
beyond these legitimate limits in the eighteenth century. In England
the East Indian was the most powerful and successful of these
companies, but the assignment of the trade with Turkey, Russia, and
other countries to chartered companies was a distinct hindrance to the
development of foreign trade.

Our foreign trade at that period might indeed be classed or graded in
accordance with the degree of encouragement or discouragement offered
by the State.

Imports would fall into four classes.

    1. Imports forbidden either (_a_) by legislative prohibition,
       or (_b_) by prohibitive taxation.

    2. Imports admitted but taxed.

    3. Free imports.

    4. Imports encouraged by bounties.

Exports might be graded in similar fashion.

    1. Prohibited exports (_e.g._, sheep and wool, raw hides,
       tanned leather, woollen yarn, textile implements,[12]
       certain forms of skilled labour).

    2. Exports upon which duties are levied (_e.g._, coals[13]).

    3. Free exports.

    4. Exports encouraged by bounties, or by drawbacks.

The unnatural and injurious character of most of this legislation is
best proved by the notable inability to effectively enforce its
application. The chartered companies were continually complaining of
the infringement of their monopolies by private adventurers, and more
than one of them failed through inability to crush out this illegal
competition. A striking condemnation of our policy towards France
consisted in the growth of an enormous illicit trade which, in spite
of the difficulties which beset it, made a considerable part of our
aggregate foreign trade during the whole of the century. The lack of
any clear perception of the mutuality of advantage in foreign and
colonial trade was the root fallacy which underlay these restrictions.
Professor Cunningham rightly says of the colonial policy of England,
that it "implied that each distinct member should strengthen the head,
and not at all that these members should mutually strengthen each
other."[14]

So, as we tried to get the better of our colonies, still more
rigorously did we apply the same methods to foreign countries,
regarding each gain which accrued to us as an advantage which would
have wholly gone to the foreigner if we had not by firmness and
enterprise secured it for ourselves.

The slight extent of foreign intercourse was, however, partly due to
causes which are to be regarded as genuinely economic. The life and
experience of the great mass of the population of all countries was
extremely restricted; they were a scattered and rural folk whose wants
and tastes were simple, few, home-bred, and customary. The customary
standard of consumption, slowly built up in conformity with local
production, gave little encouragement to foreign trade. Moreover, to
meet the new tastes and the more varied consumption which gradually
found its way over this country, it was in conformity with the
economic theory and practice of the day to prefer the establishment of
new home industries, equipped if necessary with imported foreign
labour, to the importation of the products of such labour from abroad.
So far as England, in particular, is concerned, the attitude was
favoured by the political and religious oppression of the French
government which supplied England in the earlier eighteenth century
with a constant flow of skilled artisan labour. Many English
manufacturers profited by this flow. Our textile industries in silk,
wool, and linen, calico-printing, glass, paper, and pottery are
special beholden to the new arts thus introduced.

Among the economic barriers must be reckoned the slight development
of international credit, and of the machinery of exchange.

§ 4. These barriers, natural, political, social, economic, against
free international intercourse, throw important light upon the general
structure of world-industry in the eighteenth century.

In this application they determined and strictly limited not only the
quantity but the nature of the international trade. The export trade
of England, for example, in 1730 was practically confined to woollen
goods and other textile materials, a small quantity of leather, iron,
lead, silver, and gold plate, and a certain number of re-exported
foreign products, such as tobacco and Indian calicoes. The import
trade consisted of wine and spirits, foreign foods, such as rice,
sugar, coffee, oil, furs, and some quantity of foreign wool, hemp,
silk, and linen-yarn, as material for our specially favoured
manufactures. Having regard to the proportion of the several
commodities, it would not be much exaggeration to summarise our
foreign trade by saying that we sent out woollen goods and received
foreign foods. These formed the great bulk of our foreign trade.[15]
Excepting the woollen goods and a small trade in metals, leather is
the only manufactured article which figured to any appreciable extent
in our export of 1730. At that time it is clear that in the main
English manufacture, as well as English agriculture, was for the
supply of English wants. The same was true of other industrial
countries. Holland and France, who divided with England the shipping
supremacy, had a foreign trade which, though then deemed considerable,
bore no greater proportion to the total industry of these countries
than in the case of England. Germany, Italy, Russia, Spain, and even
Portugal were almost wholly self-sustained.

Regarding, then, the known and related world of that time in the light
of an industrial organism, we must consider it as one in which the
processes of integration and of differentiation of parts has advanced
but a little way, consisting as yet of a number of homogeneous and
incoherent national cells.

This homogeneity is of course qualified by differences in production
and consumption due to climate, natural products, national character
and institutions, and the development of industrial arts in the
several nations.

§ 5. This consideration of the approximate homogeneity of the national
units of world-industry gives a higher scientific value to the
analysis of a single typical industrial nation such as England, than
would be the case in modern times, when the work of differentiation of
industrial functions among the several nations has advanced much
further.

Taking, therefore, the national industry of England as the special
subject of analysis, we may seek to obtain a clear conception of the
size, structure, and connections, of the several branches of industry,
paying special regard to the manufactures upon which the new
industrial forces were chiefly to operate.

It is not possible to form a very accurate estimate of the relative
importance of the different industries as measured either by the money
value of their products, or by the amount of labour engaged in
producing them. Eighteenth century statistics, as we saw, furnished no
close estimate of the total income of the nation or of the value of
home industries. Since no direct census of the English population was
taken before 1805, the numbers were never exactly known, and
eighteenth century economists spent much time and ingenuity in trying
to ascertain the growth of population by calculations based upon the
number of occupied houses, or by generalising from slender and
unreliable local statistics, without in the end arriving at any close
agreement. Still less reliable will be the estimates of the relative
size and importance of the different industries.

Two such attempts, however, one slightly prior to the special period
we are investigating, and one a little later, may be taken as general
indications of the comparative importance of the great divisions of
industry, agriculture, manufacture, distribution or commerce.

The first is that of Gregory King in the year 1688. King's
calculation, however, can only be regarded as roughly approximate. The
quantity of combined agriculture and manufacture, and the amount of
domestic industry for domestic consumption, renders the manufacturing
figures, however carefully they might have been collected, very
deceptive. The same criticism, though to a less degree, applies to the
estimate of Arthur Young for 1769.

    [Illustration]

If to Young's estimate of the population dependent upon agriculture we
add the class of landlords and their direct dependents and a proper
proportion of the non-industrious poor, who, though not to be so
classed in a direct measurement of occupations, are supported out of
the produce of agriculture, we shall see that in 1769 we are justified
in believing that agriculture was in its productiveness almost
equivalent to the whole of manufactures and commerce.

In turning to the several branches of manufacture, the abnormal
development of one of them, viz. the woollen, for purposes of foreign
trade, marks the first and only considerable specialisation of English
industry before the advent of steam machinery. With the single
exception of woollen goods almost the whole of English manufactures
were for home consumption. At the opening of the eighteenth century,
and even as late as 1770, no other single manufacture played any
comparable part in the composition of our export trade.

According to Chalmers,[16] in the period 1699-1701, the annual value
of woollen exports was over two and a half million pounds, or about
two-fifths of the total export trade, while in 1769-71 it still
amounted to nearly one-third of the whole, giving entire or partial
employment to no fewer than "a million and a half of people," or half
of the total number assigned by Young to manufacture.

Next to the woollen, but far behind in size and importance, came the
iron trade. In 1720 England seems to have developed her mining
resources so imperfectly as to be in the condition of importing from
foreign countries 20,000 out of the 30,000 tons required for her
hardware manufactures.[17] Almost all this iron was destined to home
consumption with the exception of hardware forced upon the American
colonies, who were forbidden to manufacture for themselves. In 1720 it
is calculated that mining and manufacture of iron and hardware
employed 200,000 persons.[18]

Copper and brass manufactures employed some 30,000 persons in
1720.[19]

Silk was the only other highly developed and considerable
manufacture. It had, however, to contend with Indian competition,
introduced by the East India Company, and also with imported
calicoes.[20] In 1750 there were about 13,000 looms in England, the
product of which was almost entirely used for home consumption. Cotton
and linen were very small manufactures during the first half of the
eighteenth century. At the beginning of the century the linen trade
was chiefly in the hands of Russia and Germany, although it had taken
root in Ireland as early as the close of the seventeenth century, and
was worked to some extent in Lancashire, Leicestershire, and round
Darlington in Yorkshire, which districts supplied the linen-warp to
the cotton weavers.[21] As for cotton, even in 1760 not more than
40,000 persons were engaged in the manufacture, and in 1764 the cotton
exports were but one-twentieth of the value of the woollen
exports.[22] The small value of the cotton trade and an anticipatory
glance at its portentous after-growth is conveyed in the following
figures:--

            Home Market.     Export Trade.

  1766        £379,241         £220,759   (Postletwayte)
  1819-21   13,044,000       15,740,000 }
  1829-31   13,351,000       18,074,000 } (Ellison[23])

The many other little manufactures which had sprung up, such as glass,
paper, tin-plate, produced entirely for home consumption, and employed
but a small number of workers.

§ 6. If we turn from the consideration of the size of English industry
and the several departments to the analysis of its structure and the
relation to the several trades, we shall find the same signs of
imperfect organic development which we found in the world-industry,
though not so strongly marked. Just as we found each country in the
main self-sufficing, so we find each district of England (with a few
significant exceptions) engaged chiefly in producing for its own
consumption. There was far less local specialisation in industry than
we find to-day. The staple industries, tillage, stock-raising, and
those connected with the supply of the common articles of clothing,
furniture, fuel, and other necessaries were widespread over the whole
country.

Though far more advanced than foreign intercourse, the internal trade
between more distant parts of England was extremely slight. Defective
facilities of communication and transport were of course in large
measure responsible for this.

The physical obstructions to such freedom of commerce as now subsists
were very considerable in the eighteenth century. The condition of the
main roads in the country at the opening of the century was such as to
make the carriage of goods long and expensive. Agricultural produce
was almost entirely for local consumption, with the exception of
cattle and poultry, which were driven on foot from the neighbouring
counties into London and other large markets.[24] In the winter, even
round London, bad roads were a great obstacle to trade. The
impossibility of driving cattle to London later than October often led
to a monopoly of winter supply and high prices.[25] The growth of
turnpike roads, which proceeded apace in the first half of the
century, led to the large substitution of carts for pack horses, but
even these roads were found "execrable" by Arthur Young, and off the
posting routes and the neighbourhood of London the communication was
extremely difficult. "The great roads of England remained almost in
this ancient condition even as late as 1752 and 1754, when the
traveller seldom saw a turnpike for two hundred miles after leaving
the vicinity of London."[26]

Rivers rather than roads were the highways of commerce, and many Acts
were passed in the earlier eighteenth century for improving the
navigability of rivers, as the Trent, Ouse, and Mersey, partly in
order to facilitate internal trade and partly to enable towns like
Leeds and Derby to engage directly in trade by sea,[27] and to connect
adjoining towns such as Liverpool and Manchester. In 1755 the first
canal was constructed, and in the latter part of the century the part
played by canals in the development of the new factory system was
considerable. But in spite of these efforts to improve methods of
transport in the earlier eighteenth century, it is evident that the
bulk of industry was engaged in providing articles for local
consumption, and that the area of the market for most products was
extremely narrow.

The facile transport of both capital and labour, which is essential to
highly specialised local industry, was retarded not merely by lack of
knowledge of the opportunities of remunerative investment, but also by
legal restrictions which had the influence of checking the free
application and migration of labour. The Statute of Apprentices by
requiring a seven years' apprenticeship[28] in many trades, and the
Law of Settlement by impairing mobility of labour, are to be regarded
as essentially protective measures calculated to prevent that
concentrated application of capital and labour required for
specialisation of industry.

Within the nation we had for the most part a number of self-sufficing
communities, or, in other words, there was little specialisation of
function in the several parts, and little integration in the national
industry. With the single exception of Holland, whose admirable
natural and artificial water communication seemed to give unity to its
commerce, the other countries of Europe, France, Germany, Italy,
Spain, Russia, were still more disintegrated in their industry.

§ 7. In regarding those districts of England in which strong
indications of growing industrial specialisation showed themselves, it
is important to observe the degree and character of that
specialisation.

We find various branches of the woollen, silk, cotton, iron, hardware,
and other manufactures allocated to certain districts. But if we
compare this specialisation with that which obtains to-day we shall
observe wide differences.

In the first place, it was far less advanced. The woollen industry of
England, though conveniently divided into three districts--one in the
Eastern Counties, with Norwich, Colchester, Sandwich, Canterbury,
Maidstone, for principal centres; one in the West, with Taunton,
Devizes, Bradford (in Wilts), Frome, Trowbridge, Stroud, and Exeter;
and the third, in the West Riding, is in reality distributed over
almost the whole of England south of the Thames, and over a large part
of Yorkshire, to say nothing of the widespread production, either for
private consumption or for the market, in Westmoreland, Cumberland,
and indeed all the North of England. Where the land was richer in
pasture or with easier access to large supplies of wool, the clothing
manufactures were more flourishing and gave more employment, but over
all the southern and most of the northern counties some form of
woollen manufacture was carried on.

    [Illustration: INDUSTRIAL ENGLAND IN 1830.]

The only part of England which Defoe regarded as definitely
specialised in manufacture is part of the West Riding, for though
agriculture is carried on here to some extent, the chief manufacturing
district is dependent upon surrounding districts for its main supply
of food.[29]

Iron, the industry of next, though of far inferior importance, was of
necessity less widely distributed. But in 1737 the fifty-nine furnaces
in use were distributed over no fewer than fifteen counties, Sussex,
Gloucester, Shropshire, Yorkshire, and Northumberland taking the
lead.[30] So too the industries engaged in manufacturing metal goods
were far less concentrated than in the present day. Though Sheffield
and Birmingham even in Defoe's time were the great centres of the
trade, of the total consumption of the country the greater part was
made in small workshops scattered over the land.

Nottingham and Leicester were beginning to specialise in cotton and
woollen hosiery, but a good deal was made round London, and generally
in the woollen counties of the south. Silk was more specialised owing
to the importation of special skill and special machinery to
Spitalsfield, Stockport, Derby, and a few other towns. In Coventry it
was only the second trade in 1727.[31]

The scattered crafts of the wheelwright, the smith, carpenter, turner,
carried on many of the subsidiary processes of building, manufacture
of vehicles and furniture, which are now for the most part highly
centralised industries.

When we come presently to consider the structure of the several
industries we shall see that even those trades which are allocated to
certain local areas are much less concentrated within these areas than
is now the case.

But though stress is here laid upon the imperfect differentiation of
localities in industry, it is not to be supposed that the eighteenth
century shows England a simple industrial community with no
considerable specialisation.

Three conditions of specialised industry are clearly discernible in
the early eighteenth century--conditions which always are among the
chief determinants.

1. _Physical aptitudes of soil_--_e.g._, since timber was still used
almost entirely for smelting, iron works are found where timber is
plentiful or where river communication makes it easily procurable. So
the more fertile meadows of Gloucester and Somerset led these
districts to specialise in the finer branches of the woollen trade. A
still more striking example is that of South Lancashire. By nature it
was ill-suited for agriculture, and therefore its inhabitants employed
themselves largely in the cotton and woollen trades. The numerous
little streams which flowed from the hills to the neighbouring sea
gave plenty of water-power, and thus made this district the home of
the earlier mills and the cradle of machine-industry.[32] The "grit"
of the local grindstones secured the supremacy of Sheffield cutlery,
while the heavy clay required for the "seggars," or boxes in which
pottery is fired, helped to determine the specialisation of
Staffordshire in this industry.[33]

2. _Facility of Market._--The country round London, Bristol, and other
larger towns became more specialised than the less accessible and more
evenly populated parts, because the needs of a large town population
compelled the specialisation in agriculture of much of the surrounding
country; cottagers could more easily dispose of their manufactures;
improved roads and other facilities for conveyance induced a
specialisation impossible in the purely rural parts.

3. _The Nature of the Commodity._--When all modes of conveyance were
slow the degree of specialisation depended largely upon the keeping
quality of the goods. From this point of view hardware and textiles
are obviously more amenable to local specialisation than the more
perishable forms of food. Where conveyance is difficult and expensive
a commodity bulky for its value is less suitable for local
specialisation in production than one containing a high value in small
weight and bulk. So cloth is more suitable for trade than corn;[34]
and coal, save where navigation is possible, could not be profitably
taken any distance.[35]

The common commodities consumed, as food, fuel, and shelter, were thus
excluded from any considerable amount of specialisation in their
production.

§ 8. Turning from consideration of the attributes of goods and of the
means of transport which served to limit the character of internal
trade and determine the size of the market, let us now regard the
structure of the market, the central object in the mechanism of
internal commerce.

The market, not the industry, is the true term which expresses the
group of organically related businesses. How far did England present a
national market? How far was the typical market a district or purely
local one?

The one great national market town was London. It alone may be said to
have drawn supplies from the whole of England, and there alone was it
possible to purchase at any season of the year every kind of produce,
agricultural or manufactured, made anywhere in England or imported
from abroad. This flow to and from the great centre of population was
incessant, and extended to the furthermost parts of the land. Other
large towns, such as Bristol, Leeds, Norwich, maintained close and
constant relations with the neighbouring counties, but exchanged their
produce for the most part only indirectly with that of more distant
parts of the country.

The improving communication of the eighteenth century enabled the
clothiers and other leading manufacturers to distribute more of their
wares even in the remotest parts of the country, but the value paid
for their wares reached the vendors by slow and indirect channels of
trade, passing for the most part through the metropolis.

But while London was the one constant national market-place, national
trade was largely assisted by fairs held for several weeks each year
at Stourbridge, Winchester, and other convenient centres. At the most
important of these the large merchants and manufacturers met their
customers, and business was transacted between distant parts of the
country, including all kinds of wares, English and foreign. Thus we
had one constant and two or three intermittent avenues of free
national trade. The great bulk of markets, however, were confined
within far smaller areas.

In the more highly developed and specialised textile trades certain
regular market-places were established of wide local importance. The
largest of these specialised district markets were at Leeds, Halifax,
Norwich, and Exeter. Here the chief local manufacturers of cloth,
worsted, or crape met the merchants and factors and disposed of their
wares to these distributing middlemen.

It was, however, in the general market-places of the county town or
smaller centres of population that the mass of the business of
exchange was transacted. There the mass of the small workers in
agriculture and manufacture brought the product of their labour and
sold it, buying what they needed for consumption and for the pursuance
of their craft. Only in considerable towns were there to be found in
the earlier eighteenth century any number of permanent shops where all
sorts of wares could be bought at any time. The weekly market in the
market-town was the chief medium of commerce for the great mass of the
population.

Regarding the general structure of Industry we see that not only are
international bonds slight and unessential, but that within the nation
the elements of national cohesion are feeble as compared with those
which subsist now. We have a number of small local communities whose
relations, though tolerably strong with other communities in their
immediate neighbourhood, become greatly weakened by distance. For the
most part these small communities are self-sufficing for work and
life, producing most of their own necessaries, and only dependent on
distant and unknown producers for their comforts and luxuries.

Trade is for the most part conducted on a small steady local basis
with known regular customers.

Outside of agriculture the elements of speculation and fluctuation are
almost entirely confined to foreign trade. Capital and labour are
fixed to a particular locality and a particular business.[36]

§ 9. Turning to the structure of the several industries we find that
different employments are not sharply separated from one another. In
the first place, agriculture and manufacture are not only carried on
in the same locality but by the same people. This combined agriculture
and manufacture took several forms.

The textile industries were largely combined with agriculture. Where
spinning was carried on in agricultural parts there was, for the most
part, a division of labour within the family. The women and children
spun while the men attended to their work in the fields.[37] Every
woman and child above the age of five found full employment in the
spinning and weaving trades of Somerset and the West Riding.[38]

This method prevailed more largely in the spinning than in the weaving
trades, for before the introduction of the spinning-jenny the weaving
trade was far more centralised than the other. For example, a large
quantity of weaving was done in the town of Norwich while the earlier
process was executed in the scattered cottages over a wide district.
But even these town workers were not specialised in manufacture to the
extent which prevails to-day. Large numbers of them had allotments in
the country to which they gave their spare time, and many had pasture
rights and kept their cattle on the common lands. This applied not
merely to the textile but to other industries. At West Bromwich, a
chief centre of the metal trade, agriculture was still carried on as a
subsidiary pursuit by the metal workers.[39] So too the cutlers of
Sheffield living in the outskirts of the town had their plot of land
and carried on agriculture to a small extent, a practice which has
lasted almost up to the present day. The combined agriculture and
manufacture often took the form of a division of labour according to
season. Where the weaving was not concentrated in towns it furnished a
winter occupation to many men who gave the bulk of their summer time
to agriculture. Generally speaking, we may take as fairly
representative of the manufacturing parts of England the picture which
Defoe gave of the condition of affairs in the neighbourhood of
Halifax. He found "the land divided into small enclosures from two
acres to six or seven acres each, seldom more; every three or four
pieces of land had a house belonging to it--one continued village,
hardly a house standing out of speaking distance from another--at
every house a tenter, and on almost every tenter a piece of cloth or
kersie or shalloon--every clothier keeps a horse--so every one
generally keeps a cow or two for his family."[40]

Not only were agriculture and many forms of manufacture conjoined, but
the division of labour and differentiation of processes within the
several industries was not very far advanced. The primitive tillage of
the common-fields which still prevailed in the early eighteenth
century, though the rapid enclosure of commons was effecting a
considerable, and from the wealth-producing point of view, a very
salutary change, did not favour the specialisation of land for pasture
or for some particular grain crops. Each little hamlet was engaged in
providing crops of hay, wheat, barley, oats, beans, and had to fulfil
the other purposes required by a self-subsisting community. This
partly arose from the necessity of the system of land tenure, partly
from ignorance of how to take advantage of special qualities and
positions of soil, and partly from the self-sufficiency improved by
difficulties of conveyance. As the century advanced, the enclosure of
commons, the increase of large farms, the application of new science
and new capital led to a rapid differentiation in the use of land for
agricultural purposes. But in the earlier part of the century there
was little specialisation of land except in the West Riding and round
the chief centres of the woollen trade, and to a less extent in the
portions of the counties round London whose position forced them to
specialise for some particular market of the metropolis.

§ 10. As the small agriculturist on a self-sufficing farm must perform
many different processes, so the manufacturer was not narrowed down to
a single process of manufacture. A large part of the ruder
manufactures were home productions for home consumption, and the same
hands tended the sheep which furnished the wool, and spun and wove the
wool for family use. The smith was in a far fuller sense the maker of
the horse-shoe or the nail or bolt than he is to-day; the wheelwright,
the carpenter, and other handicraftsmen performed a far larger number
of different processes than they do now. Moreover, each household, in
addition to its principal employments of agriculture and manufacture,
carried on many minor productive occupations, such as baking, brewing,
butter-making, dressmaking, washing, which are now for the most part
special and independent branches of employment.

In the more highly-developed branches of the textile and metal trades
the division of processes appears at first sight more sharply marked
than to-day. The carder, spinner, weaver, fuller in the cloth trade
worked in the several processes of converting raw wool into finished
cloth, related to one another only by a series of middlemen who
supplied them with the material required for their work and received
it back with the impress of their labour attached, to hand it out once
more to undergo the next process.[41] But though modern
machine-production will show us these various processes drawn together
into close local proximity, sometimes performed under the same roof
and often making use of the same steam power, we shall find that a
chief object and effect of this closer local co-ordination of the
several processes is to define and narrow more precisely the labour of
each worker and to make the spinner and the weaver confine himself to
the performance of a fractional part of the full process of spinning
or weaving. Thus we find that English industry in the early eighteenth
century is marked on the one hand by a lack of clear differentiation
as regards industries, and on the other hand by a lack of minute
differentiation of processes within the industry.

§ 11. We must now descend from the consideration of the Industry and
the Market, or group of related businesses, to examine the character
and structure of the unit of industry--the Business.

In a study of the composition or co-operation of labour and capital in
a Business before the era of machine-production there are five points
of dominant importance--(1) The ownership of the material; (2) the
ownership of the tools; (3) the ownership of the productive power; (4)
the relations subsisting between the individual units of labour; (5)
the work-place.

English manufacturing industry in the first half of the eighteenth
century furnishes a variety of different forms of business of widely
different nature and complexity. The simplest form of manufacturing
industry is that in which an industrial family owning the raw material
and the requisite tools, and working with the power of their own
bodies in their own homes, produce commodities for their own
consumption. This private production for private consumption survived
largely in the eighteenth century, not merely in the case of
agriculturists who produced the more necessary articles of food for
themselves as well as for the market, but also in the case of farmers
and cottagers in the remotest parts of the country who produced their
own wool and flax, and spun and wove it for their own use.[42]

From this primitive form which required no commerce and no industrial
organisation we may trace the growth of various forms of higher
industrial development, many of which co-existed in eighteenth century
England.

The simplest structure of "domestic" manufacture is that in which the
farmer-manufacturer is found purchasing his own material, the raw wool
or flax if he is a spinner, the warp and weft if he is a weaver, and,
working with his family, produces yarn or cloth which he sells
himself, either in the local market or to regular master-clothiers or
merchants. The mixed cotton weaving trade was in this condition in the
earlier years of the eighteenth century. "The workshop of the weaver
was a rural cottage, from which, when he was tired of sedentary
labour, he could sally forth into his little garden, and with the
spade or the hoe tend its culinary productions. The cotton-wool which
was to form his weft was picked clean by the fingers of his younger
children, and was carded and spun by the older girls assisted by his
wife, and the yarn was woven by himself assisted by his sons."[43]

Following as the central point the ownership of the requisites of
production, we find in the next stage that the ownership of the
material has passed from the workman into the hands of the organising
merchant or middleman, who usurps the title "manufacturer." The
workman, however, still retains the ownership of the implements of his
craft and works in his own house. The condition of the worsted trade
later in the century, about 1770, well illustrates this industrial
form.

"The work was entirely domestic, and its different branches widely
scattered over the country. First, the manufacturer had to travel on
horseback to purchase his raw material among the farmers, or at the
great fairs held in those old towns that had formerly been the
exclusive markets, or, as they were called, 'staples' of wool. The
wool, safely received, was handed over to the sorters, who rigorously
applied their gauge of required length of staple and mercilessly
chopped off by shears or hatchet what did not reach the standard as
wool fit for the clothing trade. The long wool thus passed into the
hands of the combers, and, having been brought back to them into the
combed state, was again carefully packed and strapped on the back of
the sturdy horse, to be taken into the country to be spun.... Here, at
each village, he had his agents, who received the wool, distributed it
amongst the peasantry and received it back as yarn. The machine
employed was still the old one-thread wheel, and in summer weather on
many a village green might be seen the housewives plying their busy
trade, and furnishing to the poet the vision of contentment spinning
at the cottage door. Returning in safety with his yarn, the
manufacturer had now to seek out his weavers, who ultimately delivered
to him his camblets or russels, or tammies or calimancoes (such were
the leading names of the fibres) ready for sale to the merchant or
delivery to the dyer."[44]

The condition of the cotton-trade in Lancashire about 1750
illustrates most clearly the transition from the independent weaver to
the dependent weaver. So far as the linen warp of his fabric was
concerned he had long been in the habit of receiving it from the
larger "manufacturer" in Bolton or in Manchester, but the cotton yarn
he had hitherto supplied himself, using the yarn spun by his own
family or purchased by himself in the neighbourhood. The difficulty of
obtaining a steady, adequate supply, and the waste of time involved in
trudging about in search of this necessary material, operated more
strongly as the market for cotton goods expanded and the pressure of
work made itself felt.[45] It was this pressure which we shall see
acting as chief stimulus to the application of new inventions in the
spinning[46] trade. In the interim, however, the habit grew of
receiving not only linen warp but cotton weft from the merchant or
middleman. Thus the ownership of the raw material entirely passed out
of the weaver's hands, though he continued to ply his domestic craft
as formerly.[47] This had grown into the normal condition of the trade
by 1750. The stocking-trade illustrates one further encroachment of
the capitalist system upon domestic industry. In this trade not only
was the material given out by merchants, but the "frames" used for
weaving were likewise owned by them, and were rented out to the
workers, who continued, however, to work in their own homes.[48]

§ 12. Two further steps remained to be taken in the transition from
the "domestic" to the "factory" system, the one relating to the
ownership of "power," the other to the work-place, (_a_) The
substitution of extra-human power owned by the employer for the
physical power of the worker; (_b_) the withdrawal of the workers from
their homes, and the concentration of them in factories and
work-places owned by the capitalists.

Although these steps were not completely taken until the age of steam
had well set in, before the middle of the eighteenth century there
were found examples of the factory, complete in its essential
character, side by side and in actual competition with the earlier
shapes of domestic industry.

Capitalist ownership of extra-human industrial "power" was of course
narrowly restricted before the age of steam. Water-power, horse-power,
and to a much smaller extent, wind-power, were utilised. But the most
important services water rendered to industry prior to the great
inventions were in facilitating the transport of goods, and in certain
subsidiary processes of manufacture such as dyeing. Though a
considerable number of water-mills existed early in the century, they
played no large part in manufacture. A natural force so strictly
confined in quantity and in local application, and subject to such
great waste from the backward condition of mechanical art, was not
able to serve to any great extent as a substitute for or aid to the
muscular activity of man.

But although the economy of mechanical power was not yet operative to
any appreciable extent in concentrating labour, certain other notable
economics of large-scale production were beginning to assert
themselves in all the leading manufactures. Indeed so powerful are
some of the economies of division of labour and co-operation even in a
primitive condition of the industrial arts, that Professor Ashley
considers it not improbable that the great manufactory might have
become an important or even a dominant feature of the woollen trade as
early as the sixteenth century, if legislative enactments had not
stood in the way.[49] As it was, these earlier centralising forces,
while they drove the workers to work and live in closer and compacter
masses, did not at first dispose them in factories to any great
extent. They continued for the most part to work in their own houses,
though for material and sometimes for the implements of their craft
they were dependent upon some merchant or large master-manufacturer.
This was the condition of industry in the neighbourhood of Leeds in
1725. "The houses are not scattered and dispersed as in the vicarage
of Halifax, one by one, but in villages, and those houses thronged
with people and the whole country infinitely populous."[50] In the
more highly-developed branches of the cloth trade, however, where the
best looms were a relatively costly form of capital, the foundation of
the factory system was clearly laid. In Norwich, Frome, Taunton,
Devizes, Stourbridge, and other clothing centres, Defoe found the
weaving industry highly concentrated, and rich employers owning
considerable numbers of looms. Some of this work was put out by the
master-manufacturers, but other work was done in large sheds or other
premises owned by the master. This large organised "business," half
factory, half domestic, continued to prevail in the important West of
England clothing industry up to the close of the eighteenth century.
"The master clothier of the West of England buys his wool from the
importer, if it be foreign, or in the fleece if it be of domestic
growth; after which, in all the different processes through which it
passes, he is under the necessity of employing as many distinct
classes of persons; sometimes working in their own houses, sometimes
in that of the master clothier, but none of them going out of their
proper line. Each class of workman, however, acquires great skill in
performing its particular operation, and hence may have arisen the
acknowledged excellence, and, till of late, the superiority of the
cloths of the West of England."[51]

So again, in the cotton industry of Lancashire, the hold which the
merchants had got over the weavers by supplying them with warp and
weft led in some cases, before the middle of the century, to the
establishment of small factories containing a score or two of looms,
in which hired men were employed to weave. A little later, though long
before steam power, Arthur Young finds a factory at Darlington with
over fifty looms, a factory at Boynton with 150 workers, and a silk
mill at Sheffield with 152 workers. Even where the final step of
substituting the factory for the home had not been taken the
subordination of the handicraftsman to the master who provided the
materials and paid the wages was tolerably complete. By the middle of
the century the free artisan was gradually passing into the condition
of a hired "hand." Improved means of communication were beginning to
expand the area of the market, enlarged businesses enabled labour to
be profitably divided, and required a more effective control over the
workers than could be obtained over a scattered population of
agricultural manufacturers.

§ 13. Regarding the Business as a combination of Labour and Capital,
we perceive that one strongly distinctive characteristic of the
pre-machinery age is the small proportion which capital bears to
labour in the industrial unit. It is this fact that enabled the
"domestic" worker to hold his own so long in so many industries as the
owner of a separate business. So long as the mechanical arts are
slightly developed and tools are simple, the proportion of "fixed
capital" to the business is small and falls within the means of the
artisan who plies his craft in his home. So long as tools are simple,
the processes of manufacture are slow, therefore the quantity of raw
material and other "circulating capital" is small and can also be
owned by the worker. The growing divorcement in the ownership of
capital and labour in the industrial unit will be found to be a direct
and most important result of those improvements in mechanical arts
which, by continually increasing the proportion of capital to labour
in a business, placed capital more and more beyond the possession of
those who supplied the labour power required to co-operate in
production.

In the middle of last century there were very few instances of a
manufacturing business in which a large capital was engaged, or in
which the capital stood to the labour in anything like modern
proportion. It was indeed the merchant and not the manufacturer who
represented the most advanced form of Capitalism in the eighteenth
century. Long before Dr. Johnson's discovery that "an English merchant
is a new species of gentleman," Defoe had noted the rise of
merchant-princes in the Western clothing trades, observing that "many
of the great families who now pass for gentry in these counties have
been originally raised from and built out of this truly noble
manufacture."[52] These wealthy _entrepreneurs_ were sometimes spoken
of as "manufacturers," though they had no claim either upon the old or
the new signification of that name. They neither wrought with their
hands nor did they own machinery and supervise the labour which worked
with it. They were, as has been shown above, merchant-middlemen. The
clothing trade being the most highly developed, evolved several
species of middlemen, including under that term all collectors and
distributors of the raw material or finished goods.

(_a_) One important class of "factors" engaged themselves in buying
wool from farmers and selling it to clothiers, and appear to have
sometimes exercised an undue and tyrannous control over the latter by
an unscrupulous manipulation of the credit system which was growing up
in trade.[53]

(_b_) The "clothiers" themselves must be regarded in large measure as
middleman-collectors, analogous in function to the distributors, who
still rank as one of the grades of middlemen in the cheap clothing
trade of London to-day.[54]

(_c_) After the cloth was made three classes of middlemen were engaged
in forwarding it to the retailer--(1) travelling merchants or
wholesale dealers who attended the big fairs or the markets at Leeds,
Halifax, Exeter, etc., and made large purchases, conveying the goods
on pack-horses over the country to the retail trader; (2) middlemen
who sold on commission through London factors and warehousemen, who in
their turn disposed of the goods to shopkeepers or to exporters; (3)
merchants directly engaged in the export trade.

With the exception of shipping and canal transport (which became
important after the middle of the century) there were no considerable
industries related to manufacture where large capitals were laid down
in fixed plant. Even the capital sunk in permanent improvements of
land, which played so important a part in the development of
agriculture, belonged chiefly to the latter years of the eighteenth
century. Almost the only persons who wielded large capitals within the
country were those merchants, dealers, or middlemen, whose capital at
any given time consisted of a large stock of raw material or finished
goods. Even the latter were considerably restricted in the magnitude
of their transactions by the imperfect development of the machinery of
finance and the credit system. In 1750 there were not more than twelve
bankers' shops out of London.[55] Until 1759 the Bank of England
issued no notes of less value than £20.

Joint-ownership of capital and effective combination of the labour
units in a business were only beginning to make progress. The Funded
Debt, the Bank of England, the East India Company were the only
examples of really large and safe investments at the opening of the
eighteenth century. Joint-ownership of large capitals for business
purposes made no great progress before the middle of the eighteenth
century, except in the case of chartered companies for foreign trade,
such as the East India Company, the Hudson's Bay Company, the Turkish,
Russian, Eastland, and African companies. Insurance business became a
favourite form of joint-stock speculation in the reign of George I.
The extraordinary burst of joint-stock enterprise culminating in the
downfall of the South Sea Company shows clearly the narrow limitations
for sound capitalist co-operation. Even foreign trade on joint-stock
lines could only be maintained successfully on condition that the
competition of private adventurers was precluded.

Joint-capital had yet made no inroad into manufacture, one of the
earliest instances being a company formed in 1764 with a capital of
£100,000 for manufacturing fine cambrics.[56]

The limits of co-operative capitalism at the opening of the period of
Industrial Revolution are indicated by Adam Smith in a passage of
striking significance:--"The only trades which it seems possible for a
joint-stock company to carry on successfully, without an exclusive
privilege, are those of which all the operations are capable of being
reduced to what is called a routine, or to such a uniformity of method
as admits of little or no variation. Of this kind is, first, the
banking trade; secondly, the trade of insurance from fire and from sea
risk and capture in time of war; thirdly, the trade of making and
maintaining a navigable cut or canal; and fourthly, the similar trade
of bringing water for the supply of a great city."[57]

In other words, the businesses amenable to joint-stock enterprise are
those where skilled management can be reduced to a minimum, and where
the scale of the business or the possession of a natural monopoly
limits or prohibits competition from outside.

FOOTNOTES:

[3] A. Smith, _Wealth of Nations_, Bk. iv., chap. i.

[4] Macpherson, _Annals of Commerce_, vol. ii. p. 728.

[5] Smith, _Memoirs_, vol. ii., chap. iii. As the approximate
calculation of a very competent business man these figures are more
reliable than the official figures of imports and exports, the value
of which throughout the eighteenth century is seriously impaired by
the fact that they continued to be estimated by the standard of values
of 1694.

[6] Whitworth's _State_ quoted, Macpherson, vol. iii. p. 283.

[7] _Annals_, vol. iii. p. 340.

[8] Cunningham, _History of English Industry_, vol. ii. p. 287, etc.

[9] Smith, _Memoirs of Wool_, vol. ii. p. 113.

[10] Chalmers, _Estimates_, p. 148.

[11] Cf. Cunningham, _Growth of English Industry_, vol. ii. p. 292.

[12] Smith, _Wealth of Nations_, Bk. iv., chap. viii.

[13] _Ibid._

[14] _Growth of English Industry_, vol. ii. p. 303.

[15] Macpherson, _Annals_, vol. iii. pp. 155, 156.

[16] Chalmers, _Estimate_, p. 208. See, however, Baines, who gives a
slightly smaller estimate, _History of the Cotton Manufacture_, p.
112.

[17] Macpherson, _Annals_, vol. iii. p. 114.

[18] _Ibid._, vol. iii. p. 73.

[19] _Ibid._, vol. iii. p. 73.

[20] Smith, _Memoirs of Wool_, vol. ii. pp. 19, 45.

[21] Smith, _ibid._, vol. ii. p. 270; cf. also Cunningham, _Growth of
English Industry_, vol. ii. p. 300.

[22] Toynbee, _Industrial Revolution_, p. 50.

[23] Schulze-Gaevernitz, _Der Grossbetrieb_, p. 77.

[24] Defoe, _Tour_, vol. ii. p. 371.

[25] _Ibid._, vol. ii. p. 370.

[26] Chalmers, pp. 124, 125.

[27] Defoe, _Tour_, vol. iii. p. 9, etc.

[28] Smith, _Wealth of Nations_, vol. i., chap. x., part 2.

[29] Defoe, _Tour_, vol. iii. p. 84.

[30] Scrivener, _History of the Iron Trade._

[31] Defoe, _Tour_, vol. ii. p. 323.

[32] Schulze-Gaevernitz, _Der Grossbetrieb_, p. 52.

[33] Cf. Marshall, _Principles_, p. 328. In the case of Staffordshire,
however, there existed an early trade in wooden platters dependent on
quality of timber and traditional skill. When the arts of pottery came
in, the new trade taken up in the same locality ousted the old, though
there was no particular local advantage in materials.

[34] Smith, _Wealth of Nations_, Book III., chap. iii.

[35] Westmoreland coal did not compete in the Newcastle
market,--_Wealth of Nations_, Book I., chap. xi. p. 2.

[36] Adam Smith, writing later in the century, observes with some
exaggeration, "A merchant, it has been said very properly, is not
necessarily the citizen of a particular country. It is in a great
measure indifferent to him from what place he carries on his trade,
and a very trifling disgust will make him remove his capital, and
together with it all the industry which it supports, from one country
to another."--Book III., chap. iv.

[37] Defoe, vol. ii. p. 37.

[38] _Ibid._, vol. ii. p. 17.

[39] _Annals of Agriculture_, chap. iv. p. 157.

[40] Defoe, vol. iii. pp. 78, 79.

[41] Cf. Burnley, _Wool and Wool-combing_, p. 417.

[42] Smith, _Memoirs of Wool_, vol. ii. p. 297.

[43] Ure, _History of the Cotton Manufacture_, vol. i. p. 224.

[44] James, _History of the Worsted Manufacture_, p. 323 (quoted
Taylor, _The Modern Factory System_, p. 61).

[45] Baines, _History of the County Palatine of Lancashire_, vol. ii.
p. 413.

[46] Ure, _History of Cotton Manufacture_, vol. i. p. 224, etc.

[47] Dr. Aikin, _History of Manchester_ (quoted Baines, p. 406).

[48] Taylor, _The Modern Factory System_, p. 69.

[49] _Economic History_, vol. ii. p. 237.

[50] Defoe, _Tour_, vol. iii. p. 89.

[51] _Report from the Committee on the Woollen Manufacture of
England_, (1806).

[52] _Tour_, vol. ii. p. 35.

[53] For an interesting account of the cunning devices of "factors"
see Smith's _Memoirs of Wool_, vol. ii. p. 311, etc.

[54] Cf. Booth, _Labour and Life of the People_, vol. i. p. 486, etc.

[55] Toynbee, _Industrial Revolution_, p. 55.

[56] Cunningham, vol. ii. p. 350.

[57] _Wealth of Nations_, Bk. V., chap. i., part 3.




CHAPTER III.

THE ORDER OF DEVELOPMENT OF MACHINE INDUSTRY.

    § 1. _A Machine differentiated from a Tool._
    § 2. _Machinery in Relation to the Character of Human Labour._
    § 3. _Contributions of Machinery to Productive Power._
    § 4. _Main Factors in Development of Machine Industry._
    § 5. _Importance of Cotton-trade in Machine Development._
    § 6. _History refutes the "Heroic" Theory of Invention._
    § 7. _Application of Machinery to other Textile Work._
    § 8. _Reverse order of Development in Iron Trades._
    § 9. _Leading Determinants in the General Application of
         Machinery and Steam-Motor._
   § 10. _Order of Development of modern Industrial Methods in the
          several Countries--Natural, Racial, Political, Economic._


§ 1. It appears that in the earlier eighteenth century, while there
existed examples of various types of industrial structure, the
domestic system in its several phases may be regarded as the
representative industrial form. The object of this chapter is to
examine the nature of those changes in the mechanical arts which
brought about the substitution of machine-industry conducted in
factories or large workshops for the handicrafts conducted within the
home or in small workshops, with the view of discovering the economic
bearing of these changes.

A full inductive treatment would perhaps require this inquiry to be
prefaced by a full history of the inventions which in the several
industries mark the rise of the factory system and the adoption of
capitalist methods. This, however, is beyond the scope of the present
work, nor does it strictly belong to our scientific purpose, which is
not to write the narrative of the industrial revolution, but to bring
such analysis to bear upon the records of industrial changes as shall
enable us to clearly discern the laws of those changes.

The central position occupied by machinery as the chief material
factor in the modern evolution of industry requires that a distinct
answer should be given to the question, What is machinery?

In distinguishing a machine from a mere tool or handicraft implement
it is desirable to pay special attention to two points, complexity of
structure and the activity of man in relation to the machine. Modern
machinery in its most developed shape consists, as Karl Marx points
out, of three parts, which, though mechanically connected, are
essentially distinct, the motor mechanism, the transmitting mechanism,
and the tool or working machine.

"The motor mechanism is that which puts the whole in motion. It either
generates its own motive power, like the steam-engine, the caloric
engine, the electro-magnetic machine, etc., or it receives its impulse
from some already existing natural force, like the water-wheel from a
head of water, the windmill from wind, etc. The transmitting
mechanism, composed of fly-wheels, shafting, toothed wheels, pullies,
straps, ropes, bands, pinions, and gearing of the most varied kind,
regulates the motion, changes its form where necessary, as, for
instance, from linear to circular, and divides and distributes it
among the working machines. These two first parts of the whole
mechanism are there solely for putting the working machines in motion,
by means of which motion the subject of labour is seized upon and
modified as desired."[58]

Although the development of modern machinery is largely concerned with
motor and transmitting mechanisms, it is to the working machine we
must look in order to get a clear idea of the differences between
machines and tools. A tool may be quite simple in form and action as a
knife, a needle, a saw, a roller, a hammer, or it may embody more
complex thought in its construction, more variety in its movement, and
call for the play of higher human skill. Such tools or implements are
the hand-loom, the lathe, the potter's-wheel. To these tools man
stands in a double relation. He is handicraftsman in that he guides
and directs them by his skill within the scope of activity to which
they are designed. He also furnishes by his muscular activity the
motive force with which the tool is worked. It is the former of these
two relations which differentiates the tool from the machine. When the
tool is removed from the direct and individual guidance of the
handicraftsman and placed in a mechanism which governs its action by
the prearranged motion of some other tool or mechanical implement, it
ceases to be a tool and becomes part of a machine. The economic
advantage of the early machines consisted chiefly in the economy of
working in combined action a number of similar tools by the agency of
a single motor. In the early machine the former tool takes its place
as a central part, but its movements are no longer regulated by the
human touch.[59] The more highly evolved modern machinery generally
represents an orderly sequence of processes by which mechanical unity
is given to the labour once performed by a number of separate
individuals, or groups of individuals with different sorts of tools.
But the economy of the earlier machines was generally of a different
character. For the most part it consisted not in the harmonious
relation of a number of different processes, but rather in a
multiplication of the same process raised sometimes to a higher size
and speed by mechanical contrivances. So the chief economic value of
the earlier machinery applied to spinning consisted in the fact that
it enabled each spinner to work an increased number of spindles,
performing with each the same simple process as that which he formerly
performed with one. In other cases, however, the element of
multiplication was not present, and the prime economy of the machine
consisted in the superior skill, regularity, pace, or economy of power
obtained by substituting mechanical direction of the tool for close
and constant human direction. In modern machinery the sewing-machine
illustrates the latter, as the knife-cleaning machine illustrates the
former.

The machine is inherently a more complex structure than the tool,
because it must contain within itself the mechanical means for working
a tool, or even for the combined working of many tools, which formerly
received their direction from man. In using a tool man is the direct
agent, in using a working machine the transmitting mechanism is the
direct agent, so far as the character of the several acts of
production is not stamped upon the form of the working machine itself.
The man placed in charge of a machine determines whether it shall act,
but only within very narrow limits how it shall act. The two
characteristics here brought out in the machine, complexity of action
and self-direction or automatic character, are in reality the
objective and subjective expression of the same factor--namely, the
changed relation of man towards the work in which he co-operates.

Some of the directing or mental effort, skill, art, thought, must be
taken over, that is to say, some of the processes must be guided not
directly by man but by other processes, in order to constitute a
machine. A machine thus becomes a complex tool in which some of the
processes are relatively fixed, and are not the direct expression of
human activity. A machinist who feeds a machine with material may be
considered to have some control over the pace and character of the
first process, but only indirectly over the later processes, which are
regulated by fixed laws of their construction which make them
absolutely dependent on the earlier processes. A machine is in the
nature of its work largely independent of the individual control of
the "tender," because it is in its construction the expression of the
individual control and skill of the inventor. A machine, then, may be
described as a complex tool with a fixed relation of processes
performed by its parts. Even here we cannot profess to have reached a
definition which enables us in all cases to nicely discriminate
machine from tool. It is easy to admit that a spade is a tool and not
a machine, but if a pair of scissors, a lever, or a crane are tools,
and are considered as performing single simple processes, and not a
number of organically relative processes, we may by a skilfully
arranged gradation be led on to include the whole of machinery under
tools. This difficulty is of course one which besets all work of
definition.

But while it is not easy by attention to complexity of structure
always to distinguish a tool from a machine, nothing is gained by
making the differentia of a machine to consist in the use of a steam
or other non-human motor.

A vast amount of modern machinery is of course directed not to
combining tools or series of productive processes upon which the
productive skill of man is closely engaged, but to substituting other
motors for the muscular power of man. But though certain tools as well
as certain forms of human effort are here replaced by machines, these
tools are not commonly embodied in the machinery for generating and
transmitting the new force, so that the mere consideration of the
different part played by the worker in generating productive force
does not assist us to distinguish a machine from a tool. A
type-writer, a piano, which receive their impulse from the human
muscles, must evidently be included among machines. It is indeed true
that these, like others of the same order, are exceptional machines,
not merely in that the motive power is derived more essentially from
human muscles, but in that the _raison d'être_ of the mechanism has
been to provide scope for human skill and not to destroy it. But
though it is true that a high degree of skill may be imparted to the
first process of the working of a piano or type-writer, it is none the
less true that the "tool," the implement which strikes the sound or
makes the written mark, is not under immediate control of human touch.
The skill is confined to an early process, and the mechanism as a
whole must be classed under machinery. Nothing would indeed be gained
in logical distinctness if we were to abandon our earlier differentia
of the machine and confine that term to such mechanical appliances as
derived their power from non-human sources--the fact which commonly
marks off modern from earlier forms of machine production. For we
should find that this substitution of non-human for human power was
also a matter of degree, and that the most complex steam-driven
machinery of to-day cannot entirely dispense with some directing
impulse of human muscular activity, such as the shovelling of coal
into a furnace, though the tendency is ever to reduce the human effort
to a minimum in the attainment of a given output.

This consideration of the difficulties attending exact definitions of
machinery is not idle, for it leads to a clearer recognition of the
nicely graded evolution which has changed the character of modern
industry, not by a catastrophic substitution of radically different
methods, but by the continuous steady development of certain elements,
common to all sorts of industrial activity, and a corresponding
continuous degeneration of certain other elements.

§ 2. The growth of machine-industry then may be measured by the
increased number and complexity of the processes related to one
another in the mechanical unit or machine, and by a corresponding
shrinkage of the dependence of the product upon the skill and volition
of the human being who tends or co-operates with the machine. Every
product made by tool or machine is _quâ_ industrial product or
commodity the expression of the thought and will of man; but as
machine-production becomes more highly developed, more and more of the
thought and will of the inventor, less and less of that of the
immediate human agent or machine-tender is expressed in the product.
But it is evidently not enough to say that the labour-saving machine
has merely substituted the stored and concentrated effort of the
inventor for that labour of the handicraftsman which is saved. This
would be to ignore the saving of muscular power due to the
substitution of forces of nature--water, steam, electricity, etc., for
the painful effort of man. It is the thought of the inventor, plus the
action of various mechanical and other physical forces, which has
saved the labour of man in the production of a commodity. The further
question--how far this saving of labour in respect of a given
commodity is compensated by the increased number of commodities to
which human labour is applied--is a consideration which belongs to a
later chapter.

In tracing the effect of the application of modern machinery to
English industry there appear two prominent factors, which for certain
purposes require separate treatment--the growth of improved mechanical
apparatus, and the evolution of extra-human motor power.

We speak of the industry which has prevailed since the middle of the
eighteenth century as machine-production, not because there were no
machines before that time, but firstly, because a vast acceleration in
the invention of complex machinery applied to almost all industrial
arts dates from that period, and secondly, because the application
upon an extensive scale of non-human motor powers manifested itself
then for the first time.

One important external effect and indication of the momentous
character of these changes is to be found in the quickening of that
operation, the beginning of which was observable before the great
inventions, the substitution of the Factory System for the Domestic
System.

The peculiar relation of Machinery to the Factory System consists in
the fact that the size, expensiveness, and complexity of machinery on
the one hand, and the use of non-human power on the other hand, were
forces which united to drive labour from the home workshop to the
large specialised workshop--the Factory.

"The water frame, the carding engine, and the other machines which
Arkwright brought out in a finished state, required both more space
than could be found in a cottage, and more power than could be applied
by the human arm. Their weight also rendered it necessary to place
them in strongly-built walls, and they also could not be
advantageously turned by any power then known but that of water.
Further, the use of machinery was accompanied by a greater division of
labour, and therefore a greater co-operation was requisite to bring
all the processes of production into harmony and under a central
superintendence."[60] Hence the growth of machine-production is to a
large extent synonymous with the growth of the modern Factory System.

§ 3. Man does his work by moving matter. Hence machinery can only aid
him by increasing the motive power at his disposal.

(1) Machinery enables forces of man or nature to be more effectively
applied by various mechanical contrivances composed of levers,
pulleys, wedges, screws, etc.

(2) Machinery enables man to obtain the use of various motor forces
outside his body--wind, water, steam, electricity, chemical action,
etc.[61]

Thus by the provision of new productive forces, and by the more
economical application of all productive forces, machinery improves
the industrial arts.

Machinery can increase the scope of man's productive ability in two
ways. The difficulty of concentrating a large mass of human force upon
a given point at the same time provides certain quantitative limits to
the productive efficiency of the human body. The steam-hammer can
perform certain work which is quantitatively outside the limit of the
physical power of any number of men working with simple tools and
drawing their motor power from their own bodies. The other limit to
the productive power of man arises from the imperfect continuity of
human effort and the imperfect command of its direction. The
difficulty of maintaining a small, even, accurate pressure, or a
precise repetition of the same movement, is rather a qualitative than
a purely quantitative limit. The superior certainty and regularity of
machinery enables certain work to be done which man alone could not do
or could do less perfectly. The work of the printing machine could not
be achieved by man. Machinery has improved the texture and quality of
certain woollen goods;[62] recent improvements in milling result in
improved quality of flour and so on. Machinery can also do work which
is too fine or delicate for human fingers, or which would require
abnormal skill if executed by hand. Economy of time, which Babbage[63]
accounts a separate economy, is rightly included in the economies just
named. The greater rapidity with which certain manufacturing
processes--_e.g._, dyeing--can be achieved arises from the superior
concentration and continuity of force possible under machinery. All
advantages arising from rapid transport are assignable to the same
causes.

The continuity and regularity of machine work are also reflected in
certain economies of measurement. The faculty of self-registering,
which belongs potentially to all machinery, and which is more utilised
every day, performs several services which may be summed up by saying
that they enable us to know exactly what is going on. When to
self-registration is applied the faculty of self-regulation, within
certain limits a new economy of force and knowledge is added. But
machinery can also register and regulate the expenditure of human
power. Babbage well says:--"One of the most singular advantages we
derive from machinery is in the check which it affords against the
inattention, the idleness, or the knavery of human agents."[64] This
control of the machine over man has certain results which belong to
another aspect of machine economy.[65]

These are the sources of all the improvements of economies imputed to
machine-production. All improvements in machinery, as applied to
industrial arts, take therefore one of the following forms:--

(1) Re-arrangement or improvement of machinery so as to utilise more
fully the productive power of nature or man. Improvements enabling one
man to tend more spindles, or enabling the same engine at the same
boiler-pressure to turn more wheels, belong to this order of
improvement.

(2) Economies in the source of power. These will fall under four
heads--

    1. Substitution of cheaper for dearer kinds of human power.
        Displacement of men's labour by women's or children's.

    2. Substitution of mechanical power for human power. Most
        great improvements in the "labour-saving" character of
        machinery properly come under this head.

    3. Economies in fuel or in steam. The most momentous
        illustration is the adoption of the hot blast and the
        substitution of raw coal for coke in the iron trade.[66]

    4. The substitution of a new mechanical motor for an old one
        derived from the same or from different stores of
        energy--_e.g._, steam for water power, natural gas for
        steam.

(3) Extended application of machinery. New industrial arts owing their
origin to scientific inventions and their practice to machinery arise
for utilising waste products. Under "waste products" we may include
(_a_) natural materials, the services of which were not recognised or
could not be utilised without machinery--_e.g._, nitrates and other
"waste" products of the soil; (_b_) the refuse of manufacturing
processes which figured as "waste" until some unsuspected use was
found for it. Conspicuous examples of this economy are found in many
trades. During the interval between great new inventions in machinery
or in the application of power many of the principal improvements are
of this order. Gas tar, formerly thrown into rivers so as to pollute
them, or mixed with coal and burnt as fuel, is now "raw material for
producing beautiful dyes, some of our most valued medicines, a
saccharine substance three hundred times sweeter than sugar, and the
best disinfectants for the destruction of germs of disease." "The
whole of the great industries of dyeing and calico-printing have been
revolutionised by the new colouring matters obtained from the old
waste material gas tar."[67] These economies both in fuel and in the
utilisation of waste material are largely due to the increased scale
of production which comes with the development of machine industry.
Many waste products can only be utilised where they exist in large
quantities.

§ 4. If we trace historically the growth of modern capitalist
economies in the several industries we shall find that they fall
generally into three periods--

    1. The period of earlier mechanical inventions, marking the
        displacement of domestic by factory industry.

    2. The evolution of the new motor in manufacture. The
        application of steam to the manufacturing processes.

    3. The evolution of steam locomotion, with its bearing on
        industry.

As these periods are not materially exclusive, so also there are close
economic relations subsisting between the development of machinery and
motor, and between the improvements in manufacture and in the
transport industry. But in order to understand the nature of the
irregularity which is discernible in the history of the development of
machinery, it is essential to consider these factors both separately
and in the historical and economic relation they stand to each other.
For this purpose we will examine two large staple industries, the
textile and the iron industries of England, in order that we may trace
in the chief steps of their progress the laws of the evolution of
modern machinery.

The textile industry offers special facilities to such a study. The
strongest and most widespread of English manufactures, it furnishes in
the early eighteenth century the clearest examples of the several
forms of industry. To the several branches of this industry the
earliest among the great inventions were applied. This start in
industrial development has been maintained, so that the most advanced
forms of the modern factory are found in textile industry. Moreover,
the close attention which has been given to, and the careful records
which have been kept of certain branches of this work, in particular
the Lancashire cotton industry, enable us to trace the operation of
the new industrial forces here with greater precision than is the case
with any other industry. As Schulze-Gaevernitz, in his masterly study,
says of the cotton industry--"The English cotton industry is not only
the oldest, but is in many respects that modern industry which
manifests most clearly the characteristics of modern industrial
methods, both in their economic and their social relations."[68]

The iron industry has been selected on the ground of its close
connection with the application of steam-driven machinery to the
several industries. It is in a sense the most fundamental industry of
modern times, inasmuch as it furnishes the material environment of the
great modern economic forces. Moreover, we have the advantage of
tracing the growth of the iron manufacture _ab ovo_, for, as we have
seen, before the industrial revolution it played a most insignificant
part in English commerce.

Lastly, a study of the relations between the growth of the iron and
the textile industries will be of special service in assisting us to
realise the character of the interaction of the several manufactures
under the growing integration of modern industry.[69]

§ 5. In observing the order of inventions applied to textile
industries, the first point of significance is that cotton, a small
industry confined to a part of Lancashire, and up to 1768 dependent
upon linen in order to furnish a complete cloth, should take the lead.

The woollen trades, in the first half of the eighteenth century, as
we saw, engaged the attention of a vastly larger number of persons,
and played a much more important part in our commerce. The silk trade
had received new life from the flow of intelligent French workers, and
the first modern factory with elaborate machinery was that set up for
silk throwing by Lombe. Yet by far the larger number of the important
textile inventions of the eighteenth century were either applied in
the first instance to the cotton manufacture and transferred,
sometimes after a lapse of many years, to the woollen, worsted, and
other textile trades, or being invented for woollen trades, proved
unsuccessful until applied to cotton.[70]

Although the origin and application of inventive genius is largely
independent of known laws, and may provisionally be relegated to the
domain of "accident," there are certain reasons which favoured the
cotton industry in the industrial race. Its concentration in South
Lancashire and Staffordshire, as compared with the wide diffusion of
the woollen industries, facilitated the rapid acceptance of new
methods and discoveries. Moreover, the cotton industry being of later
origin, and settling itself in unimportant villages and towns, had
escaped the influence of official regulations and customs which
prevailed in the woollen centres and proved serious obstacles to the
introduction of new industrial methods.[71] Even in Lancashire itself
official inspectors regulated the woollen trade at Manchester,
Rochdale, Blackburn, and Bury.[72]

The cotton industry had from the beginning been free from all these
fetters. The shrewd, practical business character which marks
Lancashire to-day is probably a cause as well as a result of the great
industrial development of the last hundred years.

Moreover, it was recognised, even before the birth of the great
inventions, that cotton goods, when brought into free competition with
woollen goods, could easily undersell them and supplant them in
popular consumption. This knowledge held out a prospect of untold
fortune to inventors who should, by the application of machinery,
break through the limitations imposed upon production by the
restricted number of efficient workers in some of the processes
through which the cotton yarn must pass.

But the stimulus which one invention afforded to another gave an
accumulative power to the application of new methods. This is
especially seen in the alternation of inventions in the two chief
processes of spinning and weaving.

Even before the invention of John Kay's Fly Shuttle, which doubled the
quantity of work a weaver could do in a day, we found that spinners
had great difficulties in supplying sufficient yarn to the weavers.
This seems to have applied both to the Lancashire cotton and to the
Yorkshire woollen manufactures. After the fly-shuttle had come into
common use this pressure of demand upon the spinners was obviously
increased, and the most skilful organisation of middleman-clothiers
was unable to supply sufficient quantities of yarn. This economic
consideration directed more and more attention to experiments in
spinning machinery, and so we find that, long before the invention of
the jenny and the water-frame, ingenious men like John Kay of Bury,
Wyatt, Paul, and others had tried many patents for improved spinning.
The great inventions of Hargreaves and Arkwright and Crompton enabled
spinning to overtake and outstrip weaving and when, about 1790, steam
began to be applied to considerable numbers of spinning mills, it was
no longer spinning but weaving that was the limiting process in the
manufacture of woollen and cotton cloths.

This strain upon weaving, which had been tightening through the period
of the great spinning improvements, acted as a special incentive to
Cartwright, Horrocks, and others to perfect the power-loom in its
application, first to woollen, then to cotton industries. Not until
well into the nineteenth century, when steam power had been fully
applied by many minor improvements, were the arts of spinning and
weaving brought fully into line. The complete factory, where the
several processes of carding, spinning, weaving (and even dyeing and
finishing), are conducted under the same roof and worked in
correspondence with one another, marks the full transition from the
earlier form of domestic industry, where the family performed with
simple tools their several processes under the domestic roof.[73]

§ 6. The history of these textile inventions does a good deal to
dispel the "heroic" theory of invention--that of an idea flashing
suddenly from the brain of a single genius and effecting a rapid
revolution in a trade. No one of the inventions which were greatest in
their effect, the jenny, the water-frame, the mule, the power-loom,
was in the main attributable to the effort or ability of a single man;
each represented in its successful shape the addition of many
successive increments of discovery; in most cases the successful
invention was the slightly superior survivor of many similar attempts.
"The present spinning machinery which we now use is supposed to be a
compound of about eight hundred inventions. The present carding
machinery is a compound of about sixty patents."[74] This is the
history of most inventions. The pressure of industrial circumstances
direct the intelligence of many minds towards the comprehension of
some single central point of difficulty, the common knowledge of the
age induces many to reach similar solutions: that solution which is
slightly better adapted to the facts or "grasps the skirts of happy
chance" comes out victorious, and the inventor, purveyor, or, in some
cases, the robber is crowned as a great inventive genius. It is the
neglect of these considerations which gives a false interpretation to
the annals of industrial invention by giving an irregular and
catastrophic appearance to the working of a force which is in its
inner pressure much more regular than in its outward expression. The
earlier increments of a great industrial invention make no figure in
the annals of history because they do not pay, and the final increment
which reaches the paying-point gets all the credit, though the
inherent importance and the inventive genius of the earlier attempts
may have been as great or greater.

There is nothing fortuitous or mysterious in inventive energy.
Necessity is its mother, which simply means that it moves along the
line of least resistance. Men like Kay, Hargreaves, Arkwright,
Cartwright, set their intelligence and industry to meet the several
difficulties as they arose. Nearly all the great textile inventors
were practical men, most of them operatives immersed in the details of
their craft, brought face to face continually with some definite
difficulty to be overcome, some particular economy desirable to make.
Brooding upon these concrete facts, trying first one thing then
another, learning from the attempts and failures made by other
practical men, and improving upon these attempts, they have at length
hit upon some contrivance that will get over the definite difficulty
and secure the particular economy. If we take any definite invention
and closely investigate it, we shall find in nearly every case it has
thus grown by small increments towards feasibility. Scientific men,
strictly so-called, have had very little to do with these great
discoveries. Among the great textile inventors, Cartwright alone was a
man leading a life of thought.[75] When the spinning machinery was
crippled in its efficiency by the crude methods of carding, Lees and
Arkwright set themselves to apply improvements suggested by
common-sense and experience; when Cartwright's power-loom had been
successfully applied to wool, Horrocks and his friends thought out
precisely those improvements which would render it remunerative in the
cotton trade.

Thus in a given trade where there are several important processes, an
improvement in one process which places it in front of the others
stimulates invention in the latter, and each in its turn draws such
inventive intelligence as is required to bring it into line with the
most highly-developed process. Since the later inventions, with new
knowledge and new power behind them, often overshoot the earlier ones,
we have a certain law of oscillation in the several processes which
maintains progress by means of the stimulus constantly applied by the
most advanced process which "makes the pace." There is nothing
mysterious in this. If one process remains behind in development each
increment of inventive effort successfully applied there brings a
higher remuneration than if applied to any of the more forward
processes. So the movement is amenable to the ordinary law of "Supply
and Demand" enforced by the usual economic motives. As the invention
of the fly-shuttle gave weaving the advantage, more and more attention
was concentrated upon the spinning processes and the jenny was
evolved; the deficiency of the jenny in spinning warp evolved the
water-frame, which for the first time liberated the cotton industry
from dependence upon linen warp: the demand for finer and more uniform
yarns stimulated the invention of the mule. These notable improvements
in spinning machinery, with their minor appendages, placed spinning
ahead of weaving, and stimulated the series of inventions embodied in
the power-loom. The power-loom was found to be of comparatively little
service until the earlier processes of dressing and sizing had been
placed on a level of machine development by the efforts of Horrocks
and others. Not until after 1841 was an equilibrium reached in the
development of the leading processes. So likewise each notable advance
in the machinery for the main processes has had the effect of bringing
an increase of inventive energy to bear upon the minor and the
subsidiary processes--bleaching, dyeing, printing, etc. Even now the
early process of "ginning" has not been brought fully into line in
spite of the prodigious efforts, made especially in the United States,
to overcome the difficulties involved in this preparatory stage of the
cotton industry.

The following schedule will serve to show the relation of the growth
of the cotton industry as measured by consumption of raw cotton to the
leading improvements of machinery.

     Cotton Imported.                Inventions &c.
          lbs.
1730     1,545,472       1730   Wyatt's roller-spinning (patented
                                1738).
                         1738   Kay's fly-shuttle.
1741     1,645,031       1748   Paul's carding-machine (useless until
                                improved by Lees, Arkwright,
                                Wood, 1772-74).
1764     3,870,392        1764  Hargreave's spinning-jenny (patented
                                1770), for weft only.
                          1764  Calico-printing introduced into
                                Lancashire.
                          1768  Arkwright perfects Wyatt's
                                spinning-frame (patented 1769),
                                liberating cotton from dependence on
                                linen warp.
1771 }
 to  }   4,764,589        1771  Arkwright's mill built at Cromford.
1775 }
                          1775  Arkwright takes patents for carding,
                                drawing, roving, spinning.
                          1779  Crompton's mule completed (combining
                                jenny and water-frame, producing finer
                                and more even yarn).
1781    5,198,775

1785   18,400,384         1785  Cartwright's power-loom.
                                Watt and Boulton's first engine for
                                cotton-mills.
1792   34,907,497         1792  Whitney's saw-gin.
1813   51,000,000         1813  Horrocks' dressing-machine.
1830  261,200,000         1830  The "Throstle" (almost exclusively
                                used in England for spinning warp).
1832  287,800,000         1832  Roberts' self-acting mule perfected.
1841  489,900,000         1841  Bullough's improved power-loom.
                                Ring spinning (largely used in U.S.A.,
                                recently introduced into Lancashire).

From this schedule it is evident that the history of this trade may be
divided with tolerable accuracy into four periods.

(1) The preparatory period of experimental inventions of Wyatt, Paul,
etc., to the year 1770.

(2) 1770 to 1792 (_circa_), the age of the great mechanical
inventions.

(3) 1792 to 1830, the application of steam power to manufacture and
improvements of the great inventions.

(4) 1830 onward, the effect of steam locomotion upon the industry
(1830, the opening of the Liverpool and Manchester railway).

If we measure the operation of these several industrial forces within
these several periods, as they are reflected on the growing size of
the cotton industry, we shall realise the accumulative character of
the great industrial movement, and form some approximately accurate
conception of the relative importance of the development of mechanical
inventions and of the new motor-power.

§ 7. The history of the cotton industry is in its main outlines also
the history of other textile industries. We do not possess the same
means of measuring statistically the growth of the woollen industries
in the period of revolution; but since, on the one hand, many of the
spinning and weaving inventions were speedily adapted into the woollen
from the cotton industry, while the application of steam to
manufacture and the effects of steam locomotion were shared by the
older manufacture, the growth of the trade in the main conforms to the
same divisions of time. The figures of imported wool are not so
valuable a register as in the case of cotton, because no account is
taken of home-produce, but the following statistics of foreign and
colonial wool imported into England serve to throw light upon the
growth of our woollen manufactures.


STATISTICS OF WOOL IMPORTED INTO ENGLAND.

           lbs.                         lbs.
    1766    1,926,000   |   1830   32,305,000
    1771    1,829,000   |   1840   49,436,000
    1780      323,000   |   1850   74,326,000
    1790    2,582,000   |   1860  151,218,000
    1800    8,609,000   |   1870  263,250,000
    1810   10,914,000   |   1880  463,309,000
    1820    9,775,000   |   1892  743,046,104

In the silk industry the influence of machinery is complicated by
several considerations especially affecting this manufacture. Although
the ingenuity and enterprise of the Lombes had introduced complex
machinery into silk throwing many years before it was successfully
applied to any other branch of textile industry, the trade did not
grow as might have been expected, and the successive increments of
great mechanical invention were slowly and slightly applied to the
silk industry. There are special reasons for this, some of them
connected with the intrinsic value of the commodity, others with the
social regulation of the trade.

The inherent delicacy of many of the processes, the capricious
character of the market for the commodities, the expensive production
of which renders them a luxury and especially amenable to the shifts
of taste and fashion, have preserved for artistic handicraft the
production of many of the finer silk fabrics, or have permitted the
application of machinery in a far less degree than in the cotton and
woollen industries.

Moreover, the heavy duties imposed upon raw and thrown silk, which
accompanied the strict prohibition of the importation of manufactured
silk goods in 1765, by aggravating the expenses of production and
limiting the market at the very epoch of the great mechanical
inventions, prevented any notable expansion of consumption of silk
goods, and rendered them quite unable to resist the competition of the
younger and more enterprising cotton industry, which, after the
introduction of colour-printing early in the nineteenth century, was
enabled to out-compete silk in many markets.

Even in the coarser silk fabrics where weaving machinery was
successfully applied at an early date, the slow progress in "throwing"
greatly retarded the expansion of the trade, and after the repeal of
the duty on imported silk in 1826 the number of throwing mills was
still quite inadequate to keep pace with the demands of the
weavers.[76] Subsequent improvements in throwing mills, and the
application of the ingenious weaving machinery of Jacquard and later
improvers, have given a great expansion to many branches of the trade
in the last fifty years.

But the following statistics of the consumption of raw and thrown silk
from 1765 to 1844 indicate how slight and irregular was the expansion
of the trade in England during the era of the great inventions and the
application of the steam-motor, and how disastrously the duties upon
raw and thrown silks weighed upon this branch of manufacture.

AVERAGE IMPORTATION.[77]

            lbs.                        lbs.
    1765  }                |     1823    2,468,121
    1766  }   715,000      |     1824    4,011,048[78]
    1767  }                |     1825    3,604,058
    1785 }                 |     1826    2,253,513
    1786 }    881,000      |     1827    4,213,153
    1787 }                 |     1828    4,547,812
    1801  }                |     1829    2,892,201
     to   } 1,110,000      |     1830    4,693,517
    1812  }                |     1831    4,312,330
    1814    2,119,974      |     1832    4,373,247
    1815    1,475,389      |     1833    4,761,543
    1816    1,088,334      |     1834    4,522,451
    1817    1,686,659      |     1835    5,788,458
    1818    1,922,987      |     1836    6,058,423
    1819    1,848,553      |     1837    4,598,859
    1820    2,027,635      |     1838    4,790,256
    1821    2,329,808      |     1839    4,665,944
    1822    2,441,563      |     1840    4,819,262

In the linen industry the artificial encouragement given to the Irish
trade, which, bounty-fed and endowed with a monopoly of the British
markets, was naturally slow to adopt new methods of production, and
the uncertain condition of the English trade, owing to the strong
rivalry of cotton, prevented the early adoption of the new machine
methods. Although Adam Smith regarded linen as a promising industry,
it was still in a primitive condition. Not until the very end of the
eighteenth century were flax spinning mills established in England and
Scotland, and not until after 1830 was power-loom weaving introduced,
while the introduction of spinning machinery into Ireland upon a scale
adequate to supply the looms of that country took place a good deal
later.

We see that the early experimental period in the cotton industry
produced no very palpable effect upon the volume of the trade. Between
1700 and 1750 the manufacture was stagnant.[79] The woollen
manufacture, owing largely to the stimulus of the fly-shuttle, showed
considerable expansion. The great increase of cotton production in
1770-90 measures the force of the mechanical inventions without the
aid of the new motor. The full effects of the introduction of steam
power were retarded by the strain of the French war. Though 1800 marks
the beginning of a large continuous expansion in both cotton and
woollen manufactures, it was not until about 1817, when the new motor
had established itself generally in the large centres of industry and
the energy of the nation was called back to the arts of peace, that
the new forces began to fully manifest their power. The period 1840
onwards marks the effect of the revolution in commerce due to the
application of the new motor to transport purposes, the consequent
cheapening of raw material, especially of cotton, the opening up of
new markets for the purchase of raw material and for the sale of
manufactured goods. The effect of this diminished cost of production
and increased demand for manufactured goods upon the textile trades is
measured by the rapid pace of the expansion which followed the opening
of the early English railways and the first establishment of
steam-ship traffic.

§ 8. The development of the textile trades, and that of cotton in
particular, arose from the invention of new machinery. This machinery
was quickened and rendered effective by the new motor. The iron trade
in its development presents the reverse order. The discovery of a new
motor was the force which first gave it importance. The mechanical
inventions applied to producing iron were stimulated by the
requirements of the new motor.

In 1740 the difficulty of obtaining adequate supplies of timber, and
the failure of attempts to utilise pit-coal, had brought the iron
trade to a very low condition. According to Scrivener, at this time
"the iron trade seemed dwindling into insignificance and
contempt."[80]

The earlier steps in its rise from this degradation are measured by
the increased application of pit-coal and the diminished use of
charcoal.

The progress may be marked as follows:--

(1) The application of Watt's earlier improvements upon Newcomen's
engines, patented 1769, was followed by a rise in the average output
for furnaces worked with charcoal. The average output of 294 tons in
1750 was increased to 545 tons in 1788.

(2) The substitution of coke for charcoal proceeding _pari passu_ with
improved methods of smelting yielded an average output for coke-fed
furnaces of 903 tons in 1788. To this epoch belong also Cort's
inventions for puddling and rolling (patented 1783-84), which
revolutionised the production of bar-iron.

(3) The introduction of Watt's double-power engine in 1788-90. In 1796
the production of pig-iron was double that of 1788, and the average
output per furnace raised to 1048 tons.

(4) The substitution of hot for cold blast in 1829, effecting an
economy of coal to the extent of 2 tons 18 cwt. per ton of cast-iron.

(5) The adoption of raw coal instead of coke in 1833, effecting a
further reduction of expenditure of coal from 5 tons 3-1/2 cwt. to 2
tons 5-1/4 cwt. in producing a ton of cast-iron.

These were the leading events in the establishment of the iron
industry of this country. The following table indicates the growth of
the production of English iron from 1740 to 1840:--

    Year.   No. of Furnaces.   Average Output.   Total Produce.
                                    Tons.            Tons.
    1740            59           294                17,350
    1788            77           909 coke    }      61,300
                                 545 charcoal}
    1796           121          1048               125,079
    1806           133          1546               258,206
    1825           364          2228               703,184
              (261 in blast)
    1828           365          2530
              (277 in blast)
    1839           378          3592             1,347,790

Here we see that economy of power rather than improved machinery is
the efficient cause of the development of industry, or more properly,
that economy of power precedes and stimulates the several steps in
improvement of machinery.

The substitution of coke for charcoal and the application of steam
power not merely increased enormously the volume of the trade, but
materially affected its localisation. Sussex and Gloucester, two of
the chief iron-producing counties when timber was the source of power,
had shrunk into insignificance by 1796, when facilities of obtaining
coal were a chief determinant. By 1796, it is noteworthy that the four
districts of Stafford, Yorkshire, South Wales, and Salop were to the
front.

The discovery of the hot blast and substitution of raw coal for coke
occurring contemporaneously with the opening of railway enterprise
mark the new interdependence of industries in the age of machinery.

Iron has become a foundation upon which every machine-industry alike
is built. The metal manufactures, so small in the eighteenth century,
attained an unprecedented growth and a paramount importance in the
nineteenth.

The application of machinery to the metal industries has led to an
output of inventive genius not less remarkable in this century than
the textile inventions of the eighteenth century.

"In textile manufacture it was improved machinery that first called
for a new motor; in metal manufacture it was the new motor which
rendered necessary improved machinery.... For all modern purposes the
old handicraft implements were clearly obsolete. The immediate result
of this requirement was the bringing to the front a number of
remarkable men, Brindley, Smeaton, Maudsley, Clements, Bramah,
Nasmyth, etc., to supply mechanism of a proportionate capacity and
nicety for the new motive-power to act upon and with, and the ultimate
result was the adoption of the modern factory system in the larger
tool-making and engineering workshops, as well as in metal
manufactories proper. Thus there gradually grew up," says Jevons, "a
system of machine-tool labour, the substitution of iron hands for
human hands, without which the execution of engines and machines in
their present perfection would be impossible."[81]

In the later era of machine development an accumulative importance is
attached to the improvements in the machine-making industries. The
great inventions associated with the names of Maudsley and Nasmyth,
the cheapening of steel by the Bessemer process, and the various steps
by which machines are substituted for hands in the making of
machinery, have indirect but rapid and important effects upon each and
every machine-industry engaged in producing commodities directly
adapted to human use. The economy of effort for industrial purposes
requires that a larger and larger proportion of inventive genius and
enterprise shall be directed to an interminable displacement of
handicraft by machinery in the construction of machinery, and a
smaller proportion to the relatively unimportant work of perfecting
manufacturing machinery in the detailed processes of each manufacture
engaged in the direct satisfaction of some human want.

A general survey of the growth of new industrial methods in the
textile and iron industries marks out three periods of abnormal
activity in the evolution of modern industry. The first is 1780 to
1795, when the fruits of early inventions are ripened by the effective
application of steam to the machine-industries. The second is 1830 to
1845, when industry, reviving after the European strife, utilised more
widely the new inventions, and expanded under the new stimulus of
steam locomotion. The third is 1856 to 1866 (_circa_), when the
construction of machinery by machinery became the settled rule of
industry.

§ 9. Bearing in mind how the invention of new specific forms of
machinery in the several processes of manufacture proceeds
simultaneously with the application of the new motor-power, we find
ourselves quite unable to measure the amount of industrial progress
due to each respectively. But seeing that the whole of modern industry
has thus been set upon a new foundation of coal and iron, it is
obvious that the bonds connecting such industries as the textile and
the iron must be continually growing closer and stronger. In earlier
times the interdependency of trades was slight and indirect, and the
progress in any given trade was almost wholly derived from
improvements in specific skill or in the application of specific
mechanical invention. The earlier eighteenth century did indeed
display an abnormal activity in these specific forms of invention. For
examples of these it is only necessary to allude to Lombe's silk mill
at Derby, the pin factory made famous by Adam Smith, Boulton's
hardware factory at Soho, and the renowned discoveries of Wedgwood.
But all increased productivity due to these specific improvements was
but slight compared with that which followed the discovery of steam as
a motor and the mechanical inventions rendering it generally
applicable, which marked the period 1790 to 1840. By this means the
several specific industries were drawn into closer unity, and found a
common basis or foundation in the arts of mining, iron-working, and
engineering which they lacked before.

From these considerations it will follow that the order in which the
several industries has fallen under the sway of modern industrial
methods will largely depend upon the facility they afford to the
application of steam-driven machinery. The following are some of the
principal characteristics of an industry which determine the order,
extent, and pace of its progress as a machine industry:--

(_a_) _Size and complexity of Structure._--The importance of the
several leading textile manufactures, the fact that some of them were
highly centralised and already falling under a factory system, the
control of wealthy and intelligent employers, were among the chief
causes which enabled the new machinery and the new motor to be more
quickly and successfully applied than in smaller, more scattered, and
less developed industries.

(_b_) _Fixity in quantity and character of demand._--Perfection of
routine-work is the special faculty of machine-production. Where there
is a steady demand for the same class of goods, machinery can be
profitably applied. Where fashion fluctuates, or the individual taste
of the consumer is a potent factor, machinery cannot so readily
undertake the work. In the textile industries there are many
departments which machinery has not successfully invaded. Much
lace-making, embroidery, certain finer weaving is still done by human
power, with or without the aid of complex machinery. In the more
skilled branches of tailoring, shoe-making, and other clothing trades,
the individual character of the demand--_i.e._, the element of
irregularity--has limited the use of machinery. A similar cause
retains human motor-power in certain cases to co-operate with and
control complex machinery, as in the use of the sewing-machine.

(_c_) _Uniformity of material and of the processes of
production._--Inherent irregularity in the material of labour is
adverse to machinery. For this reason the agricultural processes have
been slow to pass under steam-power, especially those directly
concerned with work on the soil, and even where steam-driven machines
are applied their economy, as compared with hand labour, is less
marked than in manufacturing processes. To the getting of coal and
other minerals steam and other extra-human power has been more slowly
and less effectively applied than in dealing with the matter when it
is detached from the earth.

(_d_) _Durability of valuable properties._--The production of quickly
perishable articles being of necessity local and immediate demands a
large amount of human service which cannot economically be replaced or
largely aided by machinery. The work of the butcher and the baker have
been slow to pass under machinery. Where butchering has become a
machine-industry to some extent, the direct cause has been the
discovery of preservative processes which have diminished the
perishability of meat. So with other food industries, the facility of
modern means of transport has alone enabled them gradually to pass
under the control of machinery. Until quite recently cakes and the
finer forms of bakery were a purely local and handicraft product.

(_e_) _Ease or simplicity of labour involved._--Where abundance of
cheap labour adequate to the work can be obtained, and particularly in
trades where women and children are largely engaged, the development of
machinery has been generally slower. This condition often unites with
(_b_) or (_c_) to retain an industry in the "domestic" class. A large
mass of essentially "irregular" work requiring a certain delicacy of
manipulation, which by reason of its narrowness of scope is yet easily
attained, and which makes but slight demands upon muscular force or
intelligence, has remained outside machine-production. Important
industries containing several processes of this nature have been slower
to fall into the complete form of the factory system. The slow progress
of the power-loom in cotton and wool until after 1830 is explained by
these considerations. The stocking-frame held out against machinery
still longer, and hand work still plays an important part in several
processes of silk manufacture. Even now, in the very centre of the
factory system, Bolton, the old hand-weaving is represented by a few
belated survivors.[82]

(_f_) _Skilled Workmanship._--High skill in manipulation or treatment
of material, the element of art infused into handicraft, gives the
latter an advantage over the most skilful machinery, or over such
machinery as can economically be brought into competition with it. In
some of the metal trades, in pottery and glass-making there are many
processes which have not been able to dispense with human skill. In
these manufactures, moreover, more progress is attributable to
specific inventions than to the adoption of the common machinery and
motor-power which are not largely available in the most important
processes.

From these considerations it will appear that where an industry is
large and regular in character, it falls more readily and completely
under the control of machinery, where it is small and irregular it
conforms more slowly and partially to the new methods. Most of the
extractive industries of agriculture, stock-raising, fishing, mining,
hunting, are irregular by reason of the nature of their material and
its subjection to influences, geological, chemical, climatic, and
others which are but slightly under calculation or human control. The
final processes by which commodities are adapted to the use of
individual consumers necessarily partake of the irregularity or
variety of human tastes and desires. We shall therefore find most
regularity in the intermediate processes where the raw materials,
having been extracted from nature, are being endowed with those
qualities of shape, position, etc., which are required to enable them
to satisfy human wants. The manufacturing stages where machinery finds
fullest application are in nearly all cases intermediate stages of
production. Even where machine-production seems directly to satisfy
some human want, there are commonly some final processes required
which involve individual skill. Almost all products which satisfy the
desires of man pass through a large number of productive processes
which may be classed as extractive, transport, manufacturing, and
distributive. These are, of course, not in all cases clearly
distinguishable. Mixed with the extractive processes of mining and
wheat-raising are several processes of transport and manufacture: the
various stages of manufacture may be broken by stages of transport: a
final process of manipulation or manufacture may precede the final act
of distribution, as in the sale of drugs to the consumer. But,
generally speaking, these four kinds of productive processes mark four
historic stages in the passage from raw material to finished
commodity.

The two middle stages of transport and manufacture have fallen far
more fully under the control of steam-driven machinery than the
others, and it is in the elaboration of older manufacturing and
transport processes and the addition of new processes that we trace
the largest effects of the evolution of modern industrial methods.

The following list of the divisions under which workers engaged in the
production of material wealth are classified for purposes of the
census may serve to bring out more clearly this proportionate
development of machinery. The figures appended give the numbers
engaged in the several occupations in 1891, and serve to approximately
indicate the relative importance of the several principal branches of
industry:--

    Agriculture                            1,311,720
    Fishing                                   25,225
    Mining                                   561,637
    Stone, clay, road-making                 209,972
    Transport--
      (_a_) Railways                         186,774
      (_b_) Roads                            366,605
      (_c_) Canals, rivers, seas             208,443
      (_d_) Messages and porterage           194,044
    Houses, furniture, and decorations       820,582
    Food and lodgings                        797,989
    Iron and steel                           380,193
    Other metals                             146,550
    Ships and boats                          170,517
    Carriages and harness                    108,780
    Machines and implements                  342,231
    Textiles                               1,128,589
    Dress                                  1,099,833
    Earthenware and glass                     90,007
    Chemicals and compounds                   56,047
    Books                                    135,616
    Animal substances (manufacture)           76,566
    Vegetable substances (paper, etc.)       196,889
    General mechanics and labourers          805,105
    Commercial--
      (_a_) Merchants and agents             363,037
      (_b_) Dealers in money                  21,891
      (_c_) Insurance                         31,437
    Engineers and surveyors                   15,441

In glancing down this list of the chief industries engaged in the
production of commercial wealth, it will be recognised at once that
the manufacturing and transport industries are those to which
steam-power and the economies of large production have been especially
applied. Though, historically, the first industrial use of steam-power
was in coal-mining, it remains true that the extensive application of
modern machinery to agriculture and the other extractive industries is
of comparatively recent growth, while the work of retail distribution
has hitherto made but trifling use of machinery and steam-power. Only
within the last few years have a few gigantic retail distributive
businesses shown a tendency to apply steam and electricity to
mechanical contrivances for purposes of distribution.

§ 10. The new industrial forces first applied to the cotton spinning
of South Lancashire, and rapidly forcing their way into other branches
of the textile manufactures, then more gradually transforming the
industrial methods of the machinery, hardware, and other staple
English manufactures, passed into the Western Continent of Europe and
America, destroying the old domestic industry and establishing in
every civilised country the reign of steam-driven machinery. The
factors determining the order and pace of the new movement in the
several countries are numerous and complex. In considering the order
of machine-development, it must be remembered that the different
nations did not start from an equal footing at the opening of the age
of great inventions. By the beginning of the eighteenth century
England had established a certain supremacy in commerce. The growth of
her colonial possessions since the Revolution and the drastic and
successful character of her maritime policy had enabled her to
outstrip Holland. In 1729 by far the greater part of the Swedish iron
exported from Gothenburg went to England for shipbuilding
purposes.[83] At the close of the seventeenth century Gregory King
placed England, Holland, and France at the head of the industrial
nations with regard to the productivity of their labour.[84] Italy
and Germany were little behind in the exercise of manufacturing arts,
though the naval superiority and foreign possessions of the
above-named nations gave them the commercial superiority. By 1760
England had strengthened her position as regards foreign commerce, and
her woollen industry was the largest and most highly-developed
industry in the world. But so far as the arts of manufacture
themselves were concerned there was no such superiority in England as
to justify the expectation of the position she held at the opening of
the nineteenth century. In many branches of the textile arts,
especially in silk spinning and in dyeing, in pottery, printing, and
other manufactures, more inventive genius and more skill were shown on
the Continent, and there seemed _à priori_ no reason why England
should outstrip so signally her competitors.

The chief factors in determining the order of the development of
modern industrial methods in the several countries may be classified
as natural, political, economic.

NATURAL. (1) _The structure and position of the several
countries._--The insular character of Great Britain, her natural
facilities for procuring raw materials of manufacture and supplies of
foreign food to enable her population to specialise in manufacture,
the number and variety of easily accessible markets for her
manufactures, gave her an immense advantage. Add to this a temperate
climate, excellent internal communication by river (or canal), and an
absence of mountain barriers between the several districts. These
advantages were of greater relative importance before steam transport,
but they played a large part in facilitating the establishment of
effective steam transport in England. Extent of sea-board and good
harbourage have in no small measure directed the course of modern
industry, giving to England, Holland, France, Italy an advantage which
the levelling tendency of modern machinery has not yet been able to
counteract. The slow progress of Germany until recent years, and the
still slow progress of Russia, is attributable more to these physical
barriers of free communication, internal and external, than to any
other single cause that can be adduced. Inherent resources of the
soil, quality of land for agriculture, the proximity of large supplies
of coal and iron and other requisites of the production of machinery
and power rank as important determinants of progress. The machine
development of France in particular has been retarded by the slow
discovery of her natural areas of manufacture, the districts where
coal and iron lie near to one another in easily accessible supply. The
same remark applies to Germany and to the United States. At the close
of last century, when the iron trade of England was rapidly advancing,
the iron trade of France were quite insignificant, and during the
earlier years of the nineteenth century the progress was extremely
slight.[85]

(2) _Race and National Character._--Closely related to climate and
soil, these qualities of race are a powerful directing influence in
industry. Muscular strength and endurance, yielding in a temperate
climate an even continuity of vigorous effort; keen zest of material
comfort stimulating invention and enterprise; acquisitiveness, and the
love of external display; the moral capacities of industry, truth,
orderly co-operation; all these are leading factors determining the
ability and inclination of the several nations to adopt new industrial
methods. Moral qualities in English workmanship have indisputably
played a large part in securing her supremacy. "A British trade-mark
was accepted as a guarantee of excellence, while the products of other
countries were viewed with a suspicion justified by experience of
their comparative inferiority."[86] The more highly civilised nations
have thus gained by this civilisation, and have widened the distance
which separates them from the less civilised. England, France,
Germany, Holland, and the United States are in wealth and in
industrial methods far more widely removed from Spain and Russia than
was the case a hundred years ago.

(_b_) POLITICAL.--Statecraft has played an important part in
determining the order and pace of industrial progress. The possession
of numerous colonies and other political attachments in different
parts of the world, comprising a large variety of material resources,
gave to England, and in a less measure to France, Holland, Spain, a
great advantage. The tyrannical use these nations made of their
colonies for the purpose of building up home manufactures enabled
them to specialise more widely and safely in those industries to which
the new methods of production were first applied. Even after the North
American colonies broke loose, the policy of repression England had
applied to their budding manufactures enabled her to retain to a large
extent the markets thus created for her manufactured goods.

The large annexations England made during the eighteenth and early
nineteenth centuries gave her a monopoly of many of the finest markets
for the purchase of raw materials and for the sale of manufactured
goods. The large demand thus established for her textile and metal
wares served not only to stimulate fresh inventions, but enabled her
to utilise many improvements which could only be profitably applied in
the case of large industries with secure and expanding markets.

But the most important factor determining the priority of England was
the political condition of continental Europe at the very period when
the new machinery and motor-power were beginning to establish
confidence in the new industrial order. When Crompton's mule,
Cartwright's power-loom, Watt's engines were transforming the industry
of England, her continental rivals had all their energies absorbed in
wars and political revolutions. The United States and Sweden were the
only commercial nations of any significance who, being neutral,
obtained a large direct gain from the European strife. Yet England, in
spite of the immense drain of blood and money she sustained, under the
momentum of the new motor-power far outstripped the rivalry of such
states. Though she had to pay a heavy price for her immunity from
invasion, she thereby secured an immense start in the race of modern
machine-production. Until 1820 she had the game in her own hands. In
European trade she had a practical monopoly of the rapidly advancing
cotton industry. It was this monopoly which, ruthlessly applied to
maintain prices at a highly remunerative rate, and to keep down wages
to starvation point, built up, in an age of supreme and almost
universal misery for the masses, the rapid and colossal fortunes of
the cotton kings. Not until peace was established did the textile and
other factories begin to take shape upon the Continent, and many
years elapsed before they were able to compete effectively with
England. Switzerland was the first continental country to actively
adopt the new methods. The large supply of water-power stood her in
good stead, and the people took more willingly to the factory system
than in other countries.[87] France was slower in her development, in
spite of the strong protective system by which she strove, though not
very successfully, to exclude English cotton goods. The fall of
English prices and profits in the cotton trade between 1820 and 1830
marks clearly the breakdown of the English monopoly before the cheap
labour of Alsace and the cheap raw material of the United States, now
organised in the factory system with the new machinery.[88] In this,
the most advanced trade, the world-competition which now is operative
in a thousand different industries, measuring and levelling economic
advantages, first clearly shows itself, and in 1836 Ure finds the
continental nations and America competing successfully with England in
markets which had hitherto been entirely her own.

(_c_) ECONOMIC CONDITIONS.--The transformation of English agriculture,
the growth of large farms, drove great numbers of English peasants
into the towns, and furnished a large supply of cheap labour for the
new machinery.

This movement was accelerated by the vices of our land tenure. In
France and Germany, where the agricultural workers had a stronger
interest and property in their land, they were less easily detached
for factory purposes. But in England, where the labourer had no
property in the land, reformed methods of agriculture and the
operation of the Poor Law combined to incite the large proprietors and
farmers to rid themselves of all superfluous population in the rural
parts and accelerated the migration into the towns. Here the
population bred with a rapidity hitherto unknown. The increase of
population in England and Wales during the thirty years from 1770 to
1800 is placed at 1,959,590, or 27-1/10 per cent., while during the
next thirty years, 1800 to 1830, it amounted to 5,024,207, or 56-3/5
per cent.[89] This large supply of cheap labour in the towns enabled
the Lancashire and Yorkshire factories to grow with startling
rapidity. The exhaustion left by the Napoleonic wars, the political
disorder and insecurity which prevailed on the Continent, retarded
until much later the effective competition of other European nations
who were behind England in skill, knowledge, and the possession of
markets. The American manufactures which had sprung up after the
revolution had made considerable strides, but the conquest and
settlement of vast new areas of land, and the immense facilities
afforded for the production of raw material, retarded their rate of
growth until long after the opening of this century. It was, indeed,
not until about 1845 that the cotton manufacture made rapid strides in
the United States. During the twenty years previous the progress had
been very slight, but between 1845 and 1859 a very substantial and,
making allowance for fluctuations in the cotton crops, a very steady
growth took place.[90]

Another great economic advantage which assisted England was the fact
that she, more than any other European nation, had broken down the old
industrial order, with its guilds, its elaborate restrictions, and
conservative methods. Personal freedom, security of property, liberty
to work and live where and how one liked, existed in England to an
extent unknown on the Continent before the French Revolution. The
following account of the condition of the cotton manufacture in
Germany in the eighteenth century will serve to indicate the obstacles
to the reformed methods of industry:--"Everything was done by rule.
Spinning came under public inspection, and the yarn was collected by
officials. The privilege of weaving was confined to the confraternity
of the guild. Methods of production were strictly prescribed; public
inspectors exercised control. Defects in weaving were visited with
punishment. Moreover, the right of dealing in cotton goods was
confined to the confraternity of the merchant guild: to be a
master-weaver had almost the significance of a public office. Besides
other qualifications, there was the condition of a formal examination.
The sale also was under strict supervision; for a long time a fixed
price prevailed, and a maximum sale was officially prescribed for each
dealer. The dealer had to dispose of his wares to the weaver, because
the latter had guaranteed to him a monopoly of the export trade."[91]

Under such conditions the new machine-industry could make little
advance. Excepting in the case of the woollen industries, England had
for the most part already shaken off the old regulations before 1770.
In particular, the cotton trade, which was in the vanguard of the
movement, being of recent growth and settling outside the guild towns,
had never known such restrictions, and therefore lent itself to the
new order with a far greater facility than the older trades. Moreover,
England was free from the innumerable and vexatious local taxes and
restrictions prevalent in France and in the petty governments of
Germany. Although the major part of these foolish and pernicious
regulations has been long swept away from Germany and other
continental nations, the retarding influence they exercised, in common
with the wider national system of protection which still survives,
kept back the cotton industry, so that in Germany it still stands half
a century behind its place in England.[92]

The following figures show how substantial was the lead held by
England in the cotton manufacture a little before the middle of the
century.

NUMBER OF SPINDLES WORKING IN COTTON MILLS IN 1846.[93]

                                    Spindles.
    England and Wales              15,554,619
    Scotland                        1,727,871
    Ireland                           215,503
    Austria and Italy               1,500,000
    France                          3,500,000
    Belgium                           420,000
    Switzerland                       650,000
    Russia                          7,585,000
    United States                   3,500,000
    States of the Zollverein          815,000
                                   ----------
                                   35,467,993

The development of the cotton industry in 1888 in the chief industrial
countries, as indicated by the consumption of raw cotton, is expressed
in the accompanying diagram.

Lastly, the national trade policy of England was of signal advantage
in her machine development. Her early protective system had, by the
enlargement of her carrying trade and the increase of her colonial
possessions, laid the foundation of a large complex trade with the
more distant parts of the world, though for a time it crippled our
European commerce. While we doubtless sacrificed other interests by
this course of policy, it must be generally admitted that "English
industries would not have advanced so rapidly without Protection."[94]
But as we built up our manufacturing industries by Protection, so we
undoubtedly conserved and strengthened them by Free Trade--first, by
the remission of tariffs upon the raw materials of manufacture and
machine-making, and later on by the free admission of food stuffs,
which were a prime essential to a nation destined to specialise in
manufacture. France, our chief national competitor, weakened her
position by a double protective policy, not merely refusing admittance
to foreign manufactures in her markets, but retaining heavy duties
upon the importation of foreign coal and iron, the foundational
constituents of machine-production. This protective policy, adopted by
nations whose skill, industry, and natural resources would have
rendered them formidable competitors to English manufacturers, has
hindered considerably the operation of those economic forces which
impel old and thickly-peopled countries to specialise in manufacture
and trade, and so has retarded the general development of modern
machine-production. But while protective tariffs indisputably operate
in this way, it is not possible to determine the extent of their
influence. In a large country of rich resources a high degree of
specialisation in manufacture is possible in spite of a protective
policy. The pressure of high wages is an economic force more
powerfully operative than any other in stimulating the adoption of
elaborate machinery.[95] Both in the textile and the iron industries
the United States present examples of factory development more
advanced even than those of England. Certain processes of warping and
winding are done by machinery in America which are still done by hand
labour in England.[96] The chain and nail-making trades, which employ
large numbers of women in South Staffordshire and Worcestershire, are
made more cheaply by machinery in America.[97] Moreover, the high
standard of living and the greater skill of the American operatives
enables them to tend more machines. In German factories a weaver tends
two, or rarely three looms; in Lancashire women weavers undertake
four, and in Massachusetts often six looms, and sometimes eight.[98]

    [Illustration: CONSUMPTION OF RAW COTTON, 1887-88. (Millions
    of lbs.)]

Thus we see how the new industrial forces were determined in the order
of their operation by the character and conditions of the several
countries, their geographical position and physical resources, the
elements of racial character, political and industrial institutions,
deliberate economic policies, and, above all, by the absorbing nature
of the military and political events contemporary with the outburst of
inventive ingenuity. The composition of these forces determined the
several lines of less resistance along which the new industry moved.

The exact measurement of so multiform a force is impossible. The
appended tables and diagrams may, however, serve to indicate the
progress of the several industrial nations as measured by (i.)
development of railway and merchant shipping; (ii.) consumption of
coal and iron; (iii.) application of steam-power; (iv.) estimated
annual value of manufactures:--

I. COMPARATIVE MILEAGE OF RAILWAYS, 1840 TO 1890.

                         1840.  1850.   1860.   1870.   1880.    1890.
    United Kingdom         800  6,600  10,400  15,500  17,900   19,800
    Continent of Europe    800  7,800  21,400  47,800  83,800  110,200
    United States        2,800  9,000  30,600  53,400  93,600  156,000
    India                  --     --      800   4,800   9,300   16,000
    Australia              --     --      200   1,200   5,400   10,100
    Rest of the World      --     --    2,800   5,500  18,400   42,300

RAILWAY MILEAGE IN RELATION TO AREA AND POPULATION.

                                          Density of           Railway
                                          Population per       Mileage
                           Square         Square Mile          (1888).
    Area.                  Miles.         (1890).
    United Kingdom         120,849            320               19,810
    France                 204,092            184               20,900
    Germany                208,738            233               24,270
    Russia               1,902,227             42               17,700
    Austria                240,942            166               15,610
    Italy                  110,623            260                7,830
    Spain                  197,670             86                5,930
    Portugal                34,038            136                1,190
    Sweden                 170,979             28                4,670
    Norway                 124,495             16                  970
    Denmark                 15,289            133                1,220
    Holland                 12,648            350                1,700
    Belgium                 11,373            530                2,760
    Switzerland             15,976            190                1,870
    Greece                  25,041             88                  370
    Turkey                  65,909             73                  900
    U.S.A. (excluding
    Alaska and Indian
    territory)           1,175,550             21              156,080
    Japan                  145,655            274                  910
    India                  964,992            229               15,250
    Australia            3,030,771           1.20               10,140
    Canada               3,315,647           1.45               12,700
    Egypt (cultiv. area)    12,976            638                1,260

    [Illustration: TONNAGE OF MERCHANT SHIPPING.]

    [Illustration: COMPARATIVE TABLE OF CONSUMPTION OF COAL AND
    IRON PER INHABITANT IN DIFFERENT COUNTRIES.]

    [Illustration: STEAM POWER OF EUROPEAN COUNTRIES.]

    [Illustration: STEAM AND OTHER POWER IN DIFFERENT COUNTRIES.]

    [Illustration: ESTIMATED ANNUAL VALUE OF MANUFACTURES.]

FOOTNOTES:

[58] Karl Marx, _Capital_, p. 367.

[59] Marx points out how in many of the most highly evolved machines
the original tool survives, illustrating this from the original
power-loom. (_Capital_, p. 368.)

[60] Cooke Taylor, _History of the Factory System_, p. 422.

[61] Cf. Babbage, p. 15.

[62] Burnley, _Wool and Wool-combing_, p. 417.

[63] _Economy of Machinery_, p. 6.

[64] _Economy of Machinery_, p. 39.

[65] _Vide infra_, p. 249.

[66] Scrivener, _History of the Iron Trade_, pp. 296, 297.

[67] Sir Lyon Playfair, _North American Review_, Nov. 1892.

[68] _Der Grossbetrieb_, p. 85.

[69] The important part which the cotton and iron industries play in
the export trade of England entitles them to special consideration as
representatives of world-industry. Out of £263,530,585 value of
English exports in 1890, cotton comprised £74,430,749; iron and steel,
£31,565,337.

[70] Cunningham, chap. ii. p. 450.

[71] Schulze-Gaevernitz, _Der Grossbetrieb_, p. 34.

[72] Ure, _The Cotton Manufacture_, p. 187.

[73] Modern economy now favours the specialisation of a factory and
often of a business in a single group of processes--_e.g._, spinning
or weaving or dyeing, both in the cotton and woollen industries. This,
however, is applicable chiefly to the main branches of textile work.
In minor branches, such as cotton thread, the tendency is still
towards an aggregation of all the different processes under a single
roof, both in England and in the United States.

[74] P.R. Hodge, civil engineer--evidence before House of Lords
Committee in 1857.

In Germany a spinning-wheel had been long in use for flax-spinning,
which in effect was an anticipation of the throstle (cf. Karmarch,
_Technologie_, vol. ii. p. 844, quoted Schulze-Gaevernitz, p. 30), and
machine-weaving is said to have been discovered in Danzig as early as
1579.

[75] Cf. Brentano, _Uber die Ursachen der heutigen socialen Noth; Der
Grossbetrieb_, p. 30.

[76] Porter, _Progress of the Nation_, p. 219.

[77] Selected from Porter, p. 218.

[78] In 1824 Mr. Huskisson introduced the principle of free trade,
securing a reduction of the duties on raw and thrown silks, and in
1825, 1826, considerable further reductions were made. (Cf. Ure,
_Philosophy of Manufactures_, p. 454, etc.) But protection of English
silk manufactured goods was maintained until the French Treaty of
1860.

[79] Cf. Ure, _History of the Cotton Manufacture_, vol. i. p. 223.

[80] Scrivener, _History of the Iron Trade_, p. 56.

[81] Cooke Taylor, _Modern Factory System_, p. 164; cf. also Karl
Marx, _Capital_, p. 381.

[82] Schulze-Gaevernitz, p. 140.

[83] Yeats, _The Growth and Vicissitudes of Commerce_, p. 284.

[84] The average income for England in 1688 he puts at £7 18s; for
Holland, £8 1s. 4d.; France, £6--p. 47. Such an estimate, however, has
little value.

[85]

    In 1810 the total produce was 140,000 tons.
    "  1818       "     "      "  114,000  "
    "  1824       "     "      "  164,000  "

(Scrivener, _History of the Iron Trade_, p. 153.)

[86] Yeats, _Growth and Vicissitudes of Commerce_, p. 285.

[87] Schulze-Gaevernitz, _Der Grossbetrieb_, p. 48.

[88] Ellison, _History of the Cotton Trade_, presents the following
interesting table (yarn, 40 hanks to the lb.):--

                    1779.   1784.   1799.  1812.  1830.      1882.
                    s. d.   s. d.   s. d.  s. d.  s. d.      s. d.

  Selling price     16  0   10 11   7  6   2  6   1  2-1/2   0  10-1/2
  Cost of Cotton
  (18 oz.)           2  0    2  0   3  4   1  6   0  7-3/4   0   7-1/8
                    -----   -----   ----   ----   --------   ---------
  Labour & Capital  14  0    8 11   4  2   1  0   0  6-3/4   0   3-3/8

[89] Porter, _Progress of the Nation_, p. 13. Eighteenth century
figures are, however, not trustworthy. The first census was in 1801.

[90] Ure, _Philosophy of Manufactures_, p. 531.

[91] Schulze-Gaevernitz, _Der Grossbetrieb_, p. 34.

[92] In 1882 42 per cent. of the German textile industry was still
conducted in the home or domestic workshop, while only 38 per cent.
was carried on in factories employing more than 50 persons. More
weavers were still engaged with hand-looms than with power-looms, and
the latter was so little developed that the hand-loom could still hold
its own in many articles. Knitting, lace-making, and other minor
textile industries are still in the main home industries.--(_Social
Peace_, p. 113.) "While in England in 1885 each spinning or weaving
mill had an average of 191 operatives, each spinning mill in Germany
in 1882 employed an average of 10 persons only."--(Brentano, _Hours,
Wages, and Production_, p. 64.)

[93] Ure, _Philosophy of Manufactures_, p. 515.

[94] Toynbee, _Industrial Revolution_, p. 79.

[95] The highly elaborate American machine industry of watch-making is
a striking example of this influence of high wages. Cf.
Schulze-Gaevernitz, _Social Peace_, p. 125.

[96] Schoenhof, _Economy of High Wages_, p. 279.

[97] _Ibid._, pp. 225, 226.

[98] Schulze-Gaevernitz, p. 66 (note). This six and eight-loom weaving
is, however, at a lower speed.




CHAPTER IV.

THE STRUCTURE OF MODERN INDUSTRY.

    § 1. _Growing Size of the Business-Unit._
    § 2. _Relative Increase of Capital and Labour in the Business._
    § 3. _Increased Complexity and Integration of Business
         Structure._
    § 4. _Structure and Size of the Market for different
         Commodities._
    § 5. _Machinery a direct Agent in expanding Market Areas._
    § 6. _Expanded Time-area of the Market._
    § 7. _Interdependency of Markets._
    § 8. _Sympathetic and Antagonistic Relations between Trades._
    § 9. _National and Local Specialisation in Industry._
   § 10. _Influences determining Localisation of Industry under
         World-Competition._
   § 11. _Impossibility of Final Settlement of Industry._
   § 12. _Specialisation in Districts and Towns._
   § 13. _Specialisation within the Town._


§ 1. Turning once more to the unit of industry, the Business, and
thence to the Trade and the Market, or area of competition, it is
necessary to examine the structural and functional changes brought
about by the action of the new industrial forces.

In considering the effect of modern machine-production upon the
Business, the most obvious external change is a great increase in
size. The typical unit of production is no longer a single family or a
small group of persons working with a few cheap simple tools upon
small quantities of material, but a compact and closely organised mass
of labour composed of hundreds or thousands of individuals,
co-operating with large quantities of expensive and intricate
machinery, through which passes a continuous and mighty volume of raw
material on its journey to the hands of the consuming public.

The expansion in mass of labour and capital composing the industrial
unit does not, however, proceed at the same pace in the different
industries.

The largest growths are found in two classes of industry. First, those
which close dependence on monopoly of land, or other privilege
conferred by state or municipal government, has placed outside
competition. The size here is determined by that amount of capital
required to achieve the most profitable equation of supply and demand
prices under terms of monopoly.[99] In this class are placed such
large businesses as railways, gas, or water companies. Second, those
industries where the net advantages of large-scale production over
small scale in competitive industry are greatest. Generally speaking,
those industries where the most expensive machinery is employed come
under this head, or where, as in banking and financial business, a
large capital is managed more economically, and enjoys a monopoly of
certain profitable kinds of work.

In retail trade, where neither of these forces is so powerfully
operative, the increase in mass of capital and labour is not so great,
though here too the economies of large-scale production are giving
more and more prominence to the Universal Provider, and a large number
of local shops are falling into the hands of companies. Large
syndicates of capital at Smithfield are owning butchers' shops in most
large towns, the drapery, jewellery, shoe trade are more and more
passing into the hands of large companies, while an increased
proportion of tobacconists, publicans, grocers, and other retailers
are practically but agents of large capitalist firms. In such branches
of agriculture as have lent themselves most effectively to new
machinery the same movement is visible in the prevalence of large
farming. This is seen everywhere where land is placed on the same
property footing as other forms of capital. Though small farms are for
some purposes still capable of yielding a large net as well as gross
product, it is for the most part the legal, customary, and
sentimental restrictions on free transfer of land that impede the
tendency towards large farming.

It is, however, in the manufacturing and transport industries that we
trace the most general and rapid growth of the unit of production. And
here machinery is the chief external cause. Gigantic railways and
steamship companies are the successors of stage coach businesses and
small shippers. The size and value of the modern cotton factory, iron
works, sugar refinery, or brewery are incomparably greater than the
units of which these industries were composed a century and a half
ago. In certain highly-machined industries the size of the unit is so
enlarged that the number of businesses engaged in turning out the
ever-growing output is actually diminishing. Among textile industries
the spinning mills of England and Wales show a marked diminution in
numbers between 1870 and 1890, while a similar movement in weaving
mills is only retarded by the capacity of small sweating masters to
compete with the more developed factories in certain minor branches,
such as tape manufacture, and by the survival of the home worker
owning his loom and hiring his power in such trades as the ribbon
weaving of Coventry.[100]

The following statistics[101] of the cotton and woollen industries in
Great Britain serve to illustrate the growing size of the unit of
production in the representative branches of textile work:--

KEY:
A: Spinning.
B: Weaving.
C: Spinning and Weaving.
D: Others.
E: Total.
F: Spinning.
G: Doubling.
H: Power-Looms.

                                    COTTON.
               NO. OF MILLS.                    NO. OF SPINDLES.
           A     B     C     D     E        F          G        H
  1870   1108   693   532   150   2483  33,995,221  3,723,537  440,676
  1890    935   990   438   175   2538  40,511,934  3,992,885  615,714

                              WOOLLEN.
  1870    648   109   860   212   1829   2,531,768    160,993   48,140
  1890    494   124   895   280   1793   2,107,209    299,793   61,831

This increase of the number of spindles and looms in the average
textile mill is more significant when the "speeding up" of modern
machinery is taken into account. The increased size of the unit of
industry as measured by productivity is even greater than appears from
the statistics above quoted.

Schulze-Gaevernitz points out that in the thirty years between 1856
and 1885, while the factories in cotton spinning and weaving only
increased from 2210 to 2633, the number of spindles increased from
28,010,217 to 44,348,921, the number of looms from 298,847 to 560,955,
and that since both spindles and looms worked much faster in 1885 than
in 1856, the output has increased in still greater proportion.[102]

Turning to another highly-developed machine industry, that of milling,
we find a similar movement. Flour mills are diminishing in number both
in England and in the United States. The period 1884-86 showed a
diminution in the number of flour mills in the United States from
25,079 to 18,267, though the total productive power of the smaller
number was greatly increased. Mr. Wells finds a similar tendency in
the general manufacturing industry of the United States:--"Between
1850 and 1860 the number of manufacturing firms and corporations in
the United States increased from 123,025 to 140,433, and the value of
manufactured products increased from $1,019,106,616 to $1,885,861,876,
so that in that decade there was an increase of 17,408 establishments,
to an increase of $866,755,060 in the value of products. In 1870 there
were 252,148 firms and corporations so employed, producing
$4,232,325,442 in manufactured products; or an increase of 111,715
establishments in the decade of 1860 to 1870 gave an increase of
$2,346,463,766 in the value of products. In 1880 the number of
manufacturing establishments was returned at 253,852, producing
articles valued at $5,365,579,191, or an addition of only 1704 firms
and corporations was accompanied with an increase of product of
$1,133,537,749. Here then is a demonstration that the average product
of a manufacturing establishment in the United States in 1880 was just
60 per cent. greater than it was in 1860."[103]

§ 2. While the mass of capital and labour which constitutes a business
is growing, the latter grows less rapidly than the former. That is to
say, capital is in point of size becoming more and more the dominant
factor in the business. With the effect of this upon the economic
character and conditions of labour we are not here concerned. The
subject requires a separate treatment. Here it suffices to recognise
the quantitative change that has taken place. Under domestic industry
the value of the implements used was, as a rule, equivalent only to a
few months' wages. In 1845 McCulloch estimated that the fixed capital
in well-appointed cotton mills amounted to about two years' wages of
an operative.[104] In 1890 Professor Marshall assigns a capital in
plant amounting to about £200 or five years' wages for every man,
woman, and child in a fully-equipped spinning mill.[105] In the
typical modern industry, that of cotton-spinning and weaving, the
increasing size is both continuous and rapid. The average number of
spindles and looms to the single factory in 1850 and 1885 are as
follows:--

              Spindles.  Power-Looms.

    1850       10,858       155
    1885       15,227       213

Even these figures do not fully represent the facts, for they include
considerable numbers of mills of the older sort, where spinning and
weaving are carried on together. Taking the more highly specialised
spinning mills in the Oldham district, the average is stated at
65,000, while the largest mills have as many as 185,000 spindles. So
also the average number of power-looms in the North Lancashire
district is placed at 600, the largest number in a single business
amounting to 4500.[106]

"Again, the cost of a steamship is perhaps equivalent to the labour of
ten years or more of those who work her, while a capital of about
£900,000,000 invested in railways in England and Wales is equivalent
to the work for about twenty years of the 400,000 people employed on
them."[107]

This growth in the unit of capital is, as we perceive, largely due to
the establishment of large and expensive machinery and other plant as
a leading feature in modern production. The fact that modern methods
are largely instrumental in increasing the quantity of products might
lead us to suppose that the growth of the raw material or circulating
part of the capital of a business would correspond with the growth of
fixed forms of capital. This, however, is not the case. In the most
highly organised machine industry an increasing proportion of the
economy goes into the improved methods of manipulating material so as
to prevent waste, and by improved quality of work and elaboration of
manufacture to get a larger net amount of product out of a given
quantity of raw material.

In cotton-spinning, for example, since 1834 the waste of raw material
has been reduced from 1/7 to about 1/10; inferior material, once
useless, is now mixed with better stuff; and more important still,
modern machinery has, by adapting itself to the spinning of finer
yarn, effected great saving in the quantity consumed by each spindle.
In many other industries we shall find this same process going on,
whereby the proportion of capital which consists of raw material is
reduced, and the proportion which consists in machinery and other
fixed capital enhanced.

The growth of the unit of capital in the developed modern
manufacturing business entails also a growth in the unit of labour,
though not a corresponding growth. The number of employees in a
business is larger in proportion as the business passes into the stage
of highest industrial organisation. In the United States in 1880 it
was estimated that the average number of employees in a manufacturing
business for the whole country was a little less than 11, but in the
chief manufacturing states of Massachusetts, Connecticut, and Rhode
Island it was about 25, while in Pittsburg, the great centre of iron
industry, it was more than 33.

§ 3. In addition to increased size we find increased and
ever-increasing complexity of structure in the business-unit. This has
proceeded in two directions, horizontally and laterally--that is to
say, by subdivision and accession of processes on the one hand, and by
an increased variety of products, and therefore of processes, upon the
other hand. The constantly growing specialisation of fixed capital and
of labour in our factories and workshops is a commonplace. Adam
Smith's famous pin manufactory, with its ten separate processes, has
been left far behind. In a modern shoe factory in the United States
there are sixty-four distinct processes. Grain, in the elaborate
machinery of a steam flour mill, passes through a score of different
stages, cleaning, winnowing, grinding, etc. The American machine-made
watch is the product of 370 separate processes. The organisation of a
modern textile factory provides a dozen different processes
contributing to the spinning or weaving of cotton or silk. New
processes of cleaning, finishing, and ornamenting are continually
being added. The subsidiary process of packing, the manufacture of
packing cases, the printing of labels, etc., are taken on in many
factories.[108] Many branches of production which were formerly
carried on in separate places and as separate business-units are
grouped together under the factory roof, or if still separated
locally, and executed by separate machinery and power, are related as
forming part of the same business, and are under the same management.
So in the woollen manufactures the preliminary processes of sorting
and cleansing, carding or combing, as well as the main processes of
spinning and weaving, fulling, dyeing, and finishing, each of which
was once committed to a separate and independent group of workers, are
now frequently found going on simultaneously in a single factory.[109]
Thus a number of small simple business-units representing the various
stages in the production of a commodity, come to group themselves into
a large complex unit.

This complexity is further increased by constant demand for variety in
size, quality, and character of goods to meet the growing variety of
demand in a market of increasing area. Special classes of goods must
be manufactured for Australia, for Egypt, for Burmah. Less civilised
customers, including such countries as China and Persia, insist upon
their imported goods being made up and packed in some familiar form
long after the use or convenience of this form has passed away. The
exigencies of close competition require constant experiment in new
lines of goods to benefit the fancy of a newly-opened market, or to
get away the trade of some competitor. Moreover, the increasingly
important part which is played by advertising in the trades where
competition is keenest is followed by a very singular result, which
seems at first sight to contravene the growing specialism or
differentiation of function that marks modern trade. Finding that
goods advertise one another, manufacturers are frequently induced to
add new departments to their business, expanding the scope and variety
of their productions. In retail trade this tendency is widely
operative. The modern grocer sells tinned meats, cakes, wine,
tea-pots, and Christmas cards, the draper sells every sort of
ornamental ware, the stationer, the oil shop, the china shop set out
an increasing and miscellaneous number of differing wares, moving
towards the position of a general dealer. The Stores and the Universal
Providers represent the culmination of this movement in the retail
business, returning to an enlarged and more complex form of the
primitive little "general shop" of the village. But this same economy
is strong enough in certain classes of manufacture to overpower the
advantages of an expansion of business in the older form. Up to a
certain point the economies of production upon a large scale will make
it advantageous to a manufacturer to employ all the capital at his
command in producing increased quantities of the same class of goods.
But after the market for these goods is fairly supplied it may pay
better to appeal to a variety of wants by new species of goods of the
same generic character, than by attempting to force new markets, or to
effect an increased sale in the old markets at such reduced prices as
the increased scale of production may permit. The business of Messrs.
Huntley & Palmer is a striking example of this enterprise, issuing in
a large variety of products and of processes which, though generically
related, cover a widening range of food luxuries. The new products
which are taken on will of course not only reap the advantage of being
effectively advertised by the earlier products, but consisting
largely of new adaptations of the same kind of raw material, the
economies of purchase and transport will be almost as great as attend
an increased production of the same goods, while much of the machinery
of management, and even of manufacture, can be utilised for the new
processes. This tendency not merely to multiply processes in the
manufacture of a single commodity, but to increase the variety of
commodities turned out by analogous processes in a single business, is
also operative in certain textile and metal industries, where an
increasing proportion of the expensive machinery and skilled labour is
engaged, not in narrowly specific processes of manufacture, but in
generating power and in transmitting it for a number of later uses to
be governed by specific machinery. There is in many factories an
increasing facility to take on new processes, and to transfer a large
portion of the plant from the manufacture of one class of goods to
another class.

"Most of the operatives in a watch factory would find machines very
similar to those with which they were familiar if they strayed into a
gun-making factory or sewing-machine factory, or a factory for making
textile machinery. A watch factory, with those who worked in it, could
be converted without any overwhelming loss into a sewing-machine
factory."[110] Thus in the evolution of the modern business we see not
only a number of processes in the production of a commodity, each of
which constituted a separate business-unit in the earlier division of
labour, growing together into a large complex whole, but a growing
together of analogous processes in the production of different
commodities, a lateral aggregation of processes. So we recognise that
the growing complexity of the business-unit, whether we regard it from
the point of view of capital or of labour, arises in large measure
from an increased integration of productive processes. The
business-unit is larger, more heterogeneous, and more highly
integrated.

§ 4. Ascending from the business-unit to the larger unit in the
structure of industry, the Market, or groups of directly competing
businesses, we find similar changes have taken place. In considering
these changes the relation between Market and Trade should be clearly
grasped. The mere fact that two persons or groups of persons in
different places are engaged in similar processes of production, that
is to say, belong to the same trade, has no significance for us. The
trade or aggregate of productive units of a particular sort receives
industrial unity only in so far as there is competition of the units
in buying the raw materials, tools, and labour for carrying on their
trade, and in selling the results of their activity. Weavers of cotton
goods in Central China belong to the same trade as weavers in
Lancashire, and conduct their craft with similar implements to those
which still prevail in the cottage industries of France and Germany,
but such competition as may exist between them is so indirect and
slight that it may be neglected in considering industrial structure.
It is in the competition of a market that businesses meet and are
vitally related. In a trade there may be several markets whose
connection is distant and indirect. Market is the name given to a
number of directly competing businesses. "Economists understand by the
term market not any particular market-place in which things are bought
and sold, but the whole of any region in which buyers and sellers are
in such free intercourse with one another that the prices of the same
goods tend to equalise easily and quickly."[111]

A single competitive price is then the essential feature and the test
of a market. Businesses in such close relation with one another that
the prices at which they buy and sell are the same, or differ only by
reason of and in correspondence with certain local advantages or
disadvantages, are members of a single market. The money market is a
single market throughout the world. The price of money in London,
Rome, Rio de Janeiro, may differ, but this difference will correspond
to certain differences of risk. There will be a tendency towards a
single price, or, putting the case in other words, wherever in the
world £100 of money represents the same commodity the same price will
be paid for its use, while any difference in its value as a commodity
will be accurately reflected in the difference of price.

Absolute freedom of intercourse is not essential to the establishment
of a common market. Market tariffs and other advantages and
disadvantages may place the competitors on an unequal footing.
Moreover, in order to form part of a market as helping to determine
the price, a business need not actively enter the field of
competition. Fear of the potential competition of outsiders often
keeps down prices to a level above which they would rise were it not
for the belief that such a rise would bring into active, effective
competition the outsider. England had until recently a monopoly of the
market for cotton goods in certain Eastern countries, but the price at
which she sold was determined by the possibility of rival French or
German merchants, as well as by the direct competition of the several
English firms. In certain commodities the market is conterminous with
the trade, that is, we have a world-market. This is the case with many
of the forms of money, the most abstract form of wealth, and the most
highly competitive.

Dealers in Stock Exchange securities, in the precious metals, are in
active, constant competition at all the great commercial centres of
the world. Other staple commodities, whose value is great, durable,
and portable, such as jewels, wheat, cotton, wool, have to all intents
and purposes a single market.

This world-market represents the fullest expansion due to modern
machinery of transport and exchange, the railway, steamship,
newspaper, telegraph, and the system of credit built up and maintained
by the assistance of these material agents.

The market-area for various commodities varies with the character of
these commodities, from the world-market for stock exchange securities
down to the minimum market consisting of a few neighbouring farmers
competing to sell their over-ripe plums or their skim-milk. The chief
qualities which determine the market-area are--

(_a_) _Extent of demand._--Things in universal or very wide demand,
which are at the same time durable, such as money, wool, wheat,
compete over very wide areas. Things specially accommodated to the
taste or use of a particular locality or a small class of individuals
will have a narrow market. This is the case with clothes of a
particular cut, and with many kinds of fabrics out of which clothes
are made. The market for certain classes of topographical books will
be confined to the limits of a county, though the book market for many
books is a world-market.

(_b_) _Portability._--Even where the demand is far from a general one,
the market-area may be very wide where high value is stored in small
bulk. Smoking tobacco and more highly valued wines and liqueurs are
examples of this order. The market for common bricks is local, though
Portland marble finds a national market.

(_c_) _Durability._--Durable objects and objects which can easily be
brought within reach of modern means of rapid transport have a wide
market. Perishable goods, as, for example, many fruits and vegetables,
have for these reasons a narrow market.

§ 5. Modern machinery has in almost all cases raised the size of the
market. The space-area of competition has been immensely widened,
especially for the more durable classes of goods. It is machinery of
transport--the transport of goods and news--that is chiefly
responsible for this expansion. Cheaper, quicker, safer, and more
calculable journeys have shrunk space for competing purposes. Improved
means of rapid and reliable information about methods of production,
markets, changes in price and trade have practically annihilated the
element of distance.

Machinery of manufacture as well as of transport has a levelling
tendency which makes directly for expansion of the area of
competition. As the spread of knowledge places each part of the
industrial world more closely _en rapport_ with the rest, the newest
and best methods of manufacture are more rapidly and effectively
adopted. Thus in all production where less and less depends on the
skill of the workers, and more and more upon the character of the
machinery, every change which gives more prominence to the latter
tends to equalise the cost of production in different countries, and
thus to facilitate effective competition.

§ 6. Modern methods of production have also brought about a great
expansion in the time-area of the market. Competition covers a wider
range of time as well as of space. Production is no longer directed by
the quantity and quality of present needs alone, but is more and more
dependent upon calculation of future consumption. A larger proportion
of the brain power of the business man is devoted to forecasting
future conditions of the market, and a larger proportion of the
mechanical and human labour to providing future goods to meet
calculated demands. This expansion of the time-market, or growth of
speculative production, is partly cause, partly effect of the improved
mechanical appliances in manufacture and in transport. The
multiplication of productive power under the new machinery has in many
branches of industry far outstripped the requirements of present known
consumption at remunerative prices, while increased knowledge of the
widening market has given a basis of calculation which leads
manufacturers to utilise their spare productive power in providing
against future wants. So long as industry was limited by the labour of
the human body, assisted but slightly by natural forces and working
with simple tools, the output of productive energy could seldom
outstrip the present demand for consumable goods.

But machinery has changed all this. Modern industrial nations are able
to produce consumables far faster than those who have the power to
consume them are willing to exercise it. Hence there is an
ever-increasing margin of productive power redundant so far as the
production of present consumptive goods is concerned. This excess of
productive power is saved. It can only be saved by being stored up in
some material forms which are required not for direct consumption but
for assisting to increase the rate at which consumables may be
produced in the future. In order to make a place for these new forms
of saving it is necessary to interpose a constantly increasing number
of mechanical processes between the earliest extractive process which
removes the raw material from the earth and the final or retailing
process which places it in the consumer's hands. New machinery, more
elaborate and costly, is applied; special workshops, with machines to
make this machinery--other machinery to make these machines; there is
an expansion of the mechanism of credit, the system of agents and
representatives is expanded, new modes of advertising are adopted.
Thus an ever-widening field of investment is provided for the spare
energy of machine-production. The change is commonly described by
saying that production is more "roundabout."[112] A larger number of
steps are inserted in the ladder of production. This increased
complexity in the mechanism of production is not, however, the central
point of importance. We must realise that the change is one which is
essentially an increase in the "speculative" character of commerce.
The "roundabout" method of production signifies a continual increase
in the proportion of productive forces devoted to making "future
goods" as Now future goods, plant, machinery, raw material of
commodities, are essentially "contingent goods": their worth or waste
depends largely upon conditions yet unborn: their social utility and
the value based upon it depend entirely upon the future powers and
desires of those unknown persons who are expected to purchase and
consume the commodities which shall come into existence as results of
the existence and activity of these future goods.

The actual time which elapses between the extractive stage and the
final retail stage of a commodity may not be greater and is in many
cases far less under the new methods of industry. The raw cotton of
South Carolina gets on the wearer's back more quickly than it did a
century and a half ago. But when we add in the time-elements involved
in the provision of the various forms of intricate plant and machinery
whose utility entirely consists in forwarding these cotton goods, and
whose existence in the industrial mechanism depends upon them, we
shall perceive that the "roundabout" method signifies a great
extension of the speculative or time-element in the market.[113]

§ 7. The growing interdependency of trades and markets, the ever
closer sympathy which exists between them, the increased rapidity with
which a movement affecting one communicates itself to others, is
another striking characteristic of modern trade. This interdependency
is in large measure one of growing structural attachment between
trades and markets formerly in faint and distant sympathetic
relationship. Formerly, agriculture was the one important foundational
industry, and from the feebleness of the transport system the vital
connections and the unity it supplied was local rather than national
or international. Now the agricultural industries no longer occupy
this position of prominence. The coal and iron industries engaged in
furnishing the raw material of machinery and steam-motor, the machine
manufacture, and the transport services, are the common feeders and
regulators of all industries, including that of agriculture. They form
a system corresponding to the alimentary system of the human body, any
quickening or slackening of whose functional activities is directly
and speedily communicated to the several parts. Any disturbance of
price, of efficiency, or regularity of production in these
foundational industries is reflected at once and automatically in the
several industries which are engaged in the production and
distribution of the several commodities. The mining and metal
industries, shipbuilding, and the railway services are recognised more
and more as furnishing the true measure and test of modern trade;
their labour enters in ever larger proportion into the production of
all the consumptive goods.

Besides the general integration or unification of industry implied by
the common dependency of the specific trades upon these great
industries, there are other forces engaged in integrating groups of
trades. Foremost is the "roundabout" method of production, to which
our attention has been already directed. Not merely does this
capitalist system bring a number of trades and processes under the
control of a single capital, as a single complex business, but it
establishes close identity of trade-life and interests among
businesses, trades, and markets which remain distinct so far as
ownership and management are concerned.

§ 8. If we take the mass of capital and labour composing one of our
staple productive industries, we shall find that it is related in four
different ways to a number of other industries.

(1) It has a number of trades which are directly co-ordinate--_i.e._,
engaged in the earlier or later processes of producing the same
consumptive goods. Thus the manufacture of shoes is related
co-ordinately to the import trades of hides and bark, to tanning, to
the export trade in shoes, and to the retail shoe trade. A common
stream of produce is flowing through these several processes, and
though from the point of view of ownership and management there may be
no connection, there is a close identity of trade interest and a quick
sympathy of commercial life at these several points.

(2) Each important manufacturing industry has a number of industries
which in their relation to it are secondary, although in some cases,
having similar relations to a number of other trades, they may in
themselves be large and important. In the large textile centres are
found a number of minor industries, planers, sawyers, turners,
fitters, smiths, engaged in irregular work of alteration and repairs
upon the plant and machinery of the textile factories. The same holds
of all important manufactures, especially those which are closely
localised.

A somewhat similar relation appertains between those manufactures
engaged in producing the main body of any product and the minor
industries, which supply some slighter and essentially subsidiary
part. In relation to the main textile and clothing industries, the
manufacture of buttons, of tape, feathers, and other elements of
ornament or trimmings may be regarded as subsidiary. In the same way
the manufacture of wall-papers or house paint may be considered
subsidiary to the building trades, that of blacking to the shoe
manufacture. These subsidiary trades are related to the primary one
more or less closely, and are affected by the condition of the latter
more or less powerfully in proportion as the subsidiary elements they
furnish are more or less indispensable in character. The fur and
feather trades are far more dependent upon direct forces of fashion
than upon any changes of price or character in the main branches of
the clothing trade. On the other hand, any cause which affected
considerably the price of sugar would have a great and direct
influence on the jam manufacture, while the rise in price of tin due
to the M'Kinley tariff caused serious apprehension to the Chicago
manufacturers and exporters of preserved meats.

(3) The relations between one of the great arterial industries, such
as coal-mining, railway transport, or machine-making, and a specific
manufacture may be regarded as auxiliary. The extent to which the
price of coal, railway rates, etc., enters into the price of the goods
and affects the condition of profits in the trade measures the
closeness of this auxiliary connection. In the case of the smelting
industries or in the steam transport trades, even in the pottery
trades, the part played by coal is so important that the relation is
rather that of a primary than an auxiliary connection--_i.e._,
coal-mining must be ranked as co-ordinate to smelting. But where heat
is not the direct agent of manufacture, but is required to furnish
steam-motor alone, as in the textile factories, the connection may be
termed auxiliary.

(4) The relationship between some industries is "sympathetic" in the
sense that the commodities they produce appeal to closely related
tastes, or are members of a group whose consumption is related
harmoniously. In foods we have the relations between bread, butter,
and cheese; the relation in which sugar and salt stand to a large
number of consumables. Some of these are natural relations in the
sense that one supplies a corrective to some defect of the other, or
that the combination enhances the satisfaction or advantage which
would accrue from the consumption of each severally. In other cases
the connection is more conventional, as that between alcohol and
tobacco. The sporting tastes of man supply a strong sympathetic bond
between many trades. The same is true of literary, artistic, or other
tastes, which by the simultaneous demand which they make upon several
industries, in some proportion determined by the harmonious
satisfaction of their desires, throw these industries into sympathetic
groups.[114] These four bonds mark an identity of interest between
different industries.

The relationship is sometimes one of divergency or competition of
trades. Where the same service may be supplied by two or more
different commodities the trades are related by direct competition.
Oil, gas, electricity, as illuminants, are a familiar example of this
relationship. Many trades which produce commodities that are similar,
but far from identical in character, feel this relationship very
closely. The competition between various kinds of food, which with
different kinds and degrees of satisfaction may produce the same
substantial effects, between fish and meat, between various kinds of
vegetables and drinks, enables us to realise something of the
intricacy of the relations of this kind. In clothing we have
antagonism of interests between the various fabrics which has led to
great industrial changes. The most signal example is the rise of
cotton, its triumph over woollen clothes by the earlier application of
the new machinery, and over silk by the early superiority of its
dyeing and printing processes.[115] So in recent years in the conflict
among beverages, tea, and in a less measure cocoa, have materially
damaged the growth of the coffee industry so far as English
consumption is concerned. Where such rivalry exists, an industry may
be as powerfully and immediately affected by a force which raises or
depresses its competitor as by a force which directly affects itself.

§ 9. The growth of numerous and strongly-built structural attachments
between different trades and markets related to different localities
implies the existence of a large system of channels of communication
throughout our industrial society. By the increased number and
complexity of these channels connecting different markets and
businesses, and relating the most distant classes of consumers, we can
measure the evolution of the industrial organism. Through these
channels flow the currents of modern industrial life, whose pace,
length, and regularity contrast with the feeble, short, and spasmodic
flow of commerce in earlier times. This advance in functional activity
of distribution is thus expressed by Mr. Spencer:--"In early English
times the great fairs, annual and other, formed the chief means of
distribution, and remained important down to the seventeenth century,
when not only villages, but even small towns, devoid of shops, were
irregularly supplied by hawkers who had obtained their stocks at these
gatherings. Along with increased population, larger industrial
centres, and improved channels of communication, local supply became
easier; and so frequent markets more and more fulfilled the purpose
of infrequent fairs. Afterwards, in chief places and for chief
commodities, markets themselves multiplied, becoming in some cases
daily. Finally came a constant distribution, such that of some foods
there is to each town an influx every morning; and of milk even more
than once in the day. The transition from times when the movements of
people and goods between places were private, slow, and infrequent, to
times when there began to run at intervals of several days public
vehicles moving at four miles an hour, and then to times when these
shortened their intervals and increased their speed, while their lines
of movement multiplied, ending in our own times, when along each line
of rails there go at full speed a dozen waves daily that are
relatively vast, sufficiently show us how the social circulation
progresses from feeble, slow, irregular movements to a rapid, regular,
and powerful pulse."[116]

The differentiation of function in the several parts of the industrial
organism finds a partial expression in the localisation of certain
industries. As there is growing division of labour among individuals
and groups of individuals, so the expansion of the area of competition
has brought about a larger and larger amount of local specialisation.

Roughly speaking, the West of Europe and of America has specialised in
manufacture, drawing an ever larger proportion of their food supplies
from the North-West States of America, from Russia, the Baltic
Provinces, Australia, Egypt, India, etc., and their raw materials of
manufacture from the southern United States, South America, India,
etc., while these latter countries are subjected to a correspondent
specialisation in agriculture and other extractive arts. If we take
Europe alone, we find certain large characteristics which mark out the
Baltic trade, the Black Sea trade, the Danube trade, the Norwegian and
White Sea trade. So the Asiatic trade falls into certain tolerably
defined divisions of area, as the Levant trade, the Red Sea trade, the
Indian, the Straits, and East Indian, the China trade, etc. The whole
trade of the world is thus divided for commercial purposes.[117]
Though these trade divisions are primarily suggested by
considerations of transport rather than of the character of
production, the geographical, climatic, and other natural factors
which determine convenient lines of transport are found to have an
important bearing on the character of the production, and convenience
of transport itself assists largely to determine the kind of work
which each part of the world sets itself to do.

The establishment of a world-market for a larger and larger number of
commodities is transforming with marvellous rapidity the industrial
face of the globe. This does not now appear so plainly in the more
highly-developed countries of Europe, which, under the influence of
half a century's moderately free competition for a European market,
have already established themselves in tolerably settled conditions of
specialised industry. But in the new world, and in those older
countries which are now fast yielding to the incursions of
manufacturing and transport machinery, the specialising process is
making rapid strides.

Improved knowledge of the world, facile communication, an immense
increase in the fluidity of capital, and a considerable increase in
that of labour, are busily engaged in distributing the productions of
the world in accordance with certain dominant natural conditions.
Those industrial forces which have during the last century and a half
been operative in England, draining the population and industry from
the Southern and Eastern counties, and concentrating it in larger
proportions in Lancashire, the West Riding, Staffordshire, and round
the Northumbrian and South Wales coal-fields, specialising each town
or locality upon some single branch of the textile, metal, or other
industries for which its soil, position, or other natural advantages
made it suitable, are now beginning to extend the area of their
control over the whole surface of the known and inhabited globe.

As large areas of Asia, South and Central Africa, Australia, and South
America fall under the control of European commercial nations, are
opened up by steamships, railways, telegraphs, and are made free
receptacles for the increased quantity of capital which is unable to
find a safe remunerative investment nearer home, we are brought nearer
to a condition in which the whole surface of the world will be
disposed for industrial purposes by these same forces which have long
been confined in their direct and potent influence to a small portion
of Western Europe and America. This vast expansion of the area of
effective competition is beginning to specialise industry on the basis
of a world-market, which was formerly specialised on the more confined
basis of a national or provincial market. So in England, where the
early specialisation of machine-industry was but slightly affected by
outside competition, great changes are taking place. Portions of our
textile and metal industries, which naturally settled in districts of
Lancashire, Yorkshire, and Staffordshire, while the area of
competition was a national one,[118] seem likely to pass to India, to
Germany, or elsewhere, now that a tolerably free competition on the
basis of world-industry has set in. It is inevitable that with every
expansion of the area of competition under which a locality falls the
character of its specialisation will change. A piece of English ground
which was devoted to corn-growing when the market was a district one
centred in the county town, becomes the little factory town when
competition is established on a national basis; it may become the
pleasure-ground of a retired millionaire speculator if under the
pressure of world-competition it has been found that the manufacture
which now thrives there can be carried on more economically in Bombay
or Nankin, where each unit of labour power can be bought at the
cheapest rate, or where some slight saving in the transport of raw
material may be effected.

§ 10. The question how industry would be located, assuming the whole
surface of the globe was brought into a single market or area of
competition, with an equal development of transport facilities in all
its parts; or in other words, "What is the ideal disposition of
industry in a world-society making its chief end the attainment of
industrial wealth estimated at present values?" is one to which of
course no very exact answer can be given. But since this ideal
represents the goal of modern industrial progress, it is worth while
to call attention to the chief determinants of the localisation of
industries under free world-competition. The influences may be placed
in three groups, which are, however, interrelated at many points.

(1) The first group may be called Climatic, the chief influences of
which are astronomical position, surface contour, prevalent winds,
ocean currents, etc. Climatic zones have their own flora and fauna,
and so far as these enter into industry as agricultural and pastoral
produce, as raw materials of manufacture, as sustenance of labour,
they are natural determinants of the localisation of industry. In
vegetable products the climatic zones are very clearly marked. "The
boreal zone has its special vegetation of mosses, lichens, saxifrages,
berries, oats, barley, and rye; the temperate zone its peas, beans,
roots, hops, oats, barley, rye, and wheat; this zone, characterised by
its extent of pastures, hop gardens, and barley fields, has also a
distinctive title in the 'beer and butter region.' The warm temperate
zone, or region of 'wine and oil,' is characterised by the growth of
the vine, olive, orange, lemon, citron, pomegranate, tea, wheat,
maize, and rice; the sub-tropical zone, by dates, figs, the vine,
sugar-cane, wheat, and maize; the tropical zone is characterised by
coffee, cocoa-nut, cocoa, sago, palm, figs, arrowroot, and spices; and
the equatorial by bananas, plantains, cocoa-nut, etc."[119]

(2) The second group is geographical and geological. The shape and
position of a country, its relation in space to other countries, the
character of the soil and sub-soil, its water-supply, though closely
related to climatic influences, have independent bearings. The
character of the soil, which provides for crops their mineral food,
has an important bearing upon the raw materials of industry. The shape
and position of the land, especially the configuration of its coast,
have a social as well as climatic significance, directing the
intercourse with other lands and the migrations of people and
civilisations which play so large a part in industrial history.

(3) Largely determined by the two groups of influences named above are
the forces which represent the national character at any given time,
the outcome of primitive race characteristics, food supply, speed and
direction of industrial development, density of population, and the
various other causes which enter in to determine efficiency of labour.
The play of these natural and human forces in world-competition leads
to such a settlement of different industries in different localities
as yields the greatest net productiveness of labour in each part.

§ 11. But this world-competition, however free it may become, can lead
to no finality, no settled appointment of industrial activity to the
several parts of the earth. Setting aside all political and other
non-economic motives, there are three reasons which render such local
stability of industry impossible.

There is first the disturbance and actual loss sustained by nature in
working up the mineral wealth of the soil, and the flora and fauna
sustained by it, into commodities which are consumed, and an exact
equivalent of which cannot be replaced. The working out of a
coal-field, the destruction of forests which reacts upon the
elementary climatic influences, are examples of this disturbance.

Secondly, there is the progress of industrial arts, new scientific
discoveries applicable to industry. There is no reason to believe that
human knowledge can reach any final goal: there is infinity alike in
the resources of nature and in the capacity of the development of
human skill.

Lastly, as human life continues, the art of living must continually
change, and each change alters the value attached to the several forms
of consumption, and so to the industrial processes engaged in the
supply of different utilities. New wants stimulate new arts, new arts
alter the disposition of productive industry, giving value to new
portions of the earth. Ignoring those new material wants which require
new kinds of raw material to be worked up for their satisfaction, the
growing appreciation of certain kinds of sport, the love of fine
scenery, a rising value set upon healthy atmosphere, are beginning to
exercise a more and more perceptible influence upon the localisation
of certain classes of population and industry in the more progressive
nations of the world.

§ 12. The same laws and the same limitations which are operative in
determining the character and degree of specialisation of countries or
large areas are also seen to apply to smaller districts, towns, and
streets. Industries engaged in producing valuable, durable material
objects in wide demand are locally specialised; those engaged in
providing bulky perishable non-material goods, or goods in narrow
demand, are unspecialised. England, where internal intercourse has
been most highly developed, and where internal competition has been
freest and keenest, shows the most advanced specialisation in several
of its staple industries. The concentration of cotton spinning in
South Lancashire is an example, the full significance of which often
escapes notice. From the beginning South Lancashire was the chief seat
of the industry, but it is now far more concentrated than was the case
a century ago. Several of the most valuable inventions in spinning
were first applied in Derbyshire, in Nottingham, at Birmingham, and in
Scotland. Scotland then competed closely in weaving with Lancashire.
Now the Scotch industry is confined to certain specialities. In spite
of the enormous growth of the manufacture, the local area it covers is
even narrower than last century. Within Lancashire itself the actual
area of production has shrunk to some 25 square miles in the extreme
south, while the two great cities are further specialised--Liverpool
as the market for cotton, Manchester for yarn and cotton cloths.

Moreover, the localisation of various departments of the trade within
Lancashire is still more remarkable. Not only have the old mills in
which spinning and weaving were carried on together given way before
division of labour, but the two processes are mostly conducted in
different districts, the former in the towns immediately around
Manchester, the latter in the more distant northern circuit. Nor is
the specialisation confined to this. Spinning is again divided
according to the coarser and finer qualities of yarn. The Oldham
district, with Ashton, Middleton, and other towns south of Manchester
are chiefly confined to the medium numbers. Bolton, Chorley, Preston,
and other northern towns undertake the finer numbers. In weaving there
is even more intricate division of labour, each town or district
specialising upon some particular line of goods.[120] Moreover, it
must be borne in mind that the substitution of the factory for the
domestic system and the continual enlargement of the average factory
indicates an important progressive concentration. So the cotton
industry does not in fact cover nearly so large a local area as when
it was one-hundredth the size. The same is true of the other chief
branches of the textile and metal industries. Nor is it only in the
manufactures that towns and districts are closely specialised. The
enormous increase of commerce due to machinery of manufacture and of
transport requires the specialisation of certain towns for purely
commercial purposes. London, Liverpool, Glasgow, and Hull are more and
more devoted to the functions of storage and conveyance. Manchester
itself is rapidly losing its manufacturing character and devoting
itself almost exclusively to import and export trade. The railway
service has made for itself large towns, such as Crewe, Derby,
Normanton, and Swindon. Cardiff is a portentous example of a new
mining centre created when the machine development of England was
already ripe.

The specialisation of function in a large town is, however, qualified
in two ways. The strong local organisation of a staple trade requires
the grouping round it of a number of secondary or auxiliary trades. In
large textile towns the manufactures of textile machinery, and of
subsidiary materials, are found. The machine-making of Manchester is
one of its most important industries, furnishing the neighbouring
textile towns. Leeds is similarly equipped for the woollen trade. This
is one of the respects in which the superior development of the
English cotton industry over the continental ones is indicated. In
Alsace alone of the continental centres has the concentration of
industry advanced so far as to furnish a local machine industry
specially devoted to cotton machinery. Germany is still mainly
dependent upon England for her machines.[121] So likewise with regard
to co-ordinate trades, there is an advantage in the leading processes
being grouped in local proximity, though they are not united in the
same business. Thus we find dye-works and the various branches of the
clothing trade largely settled in the large textile towns, such as
Leeds, Bradford, Manchester, Bolton. The unit of local specialisation
is thus seen to be not a single trade, but a group of closely allied
trades, co ordinate, dependent, and derivative.

Round some large industries in which men find employment minor
parasitic industries spring up stimulated by the supply of cheap
abundant labour of women and children. In metal and machine towns such
as Birmingham, Dudley, Walsall, in Newcastle-on-Tyne, and other
shipbuilding towns, where the staple industries are a masculine
monopoly, textile factories have been planted. The same holds of
various mining villages and of agricultural villages in the
neighbourhood of large textile centres. There is in the midland
counties a growing disposition to place textile factories in rural
villages where cheap female labour can be got, and where the
independence of workers is qualified by stronger local attachments and
inferior capacity of effective trade union organisation. As textile
work passes more and more into the hands of women,[122] this tendency
to make it a parasitic trade thriving upon the low wages for which
women's labour can be got where strong and well-paid male work is
established, will probably be more strongly operative.

§ 13. The specialisation of certain districts within the town, though
far less rigid than in the mediæval town, is very noticeable in the
larger centres of industry. Natural causes often determine this
division of localities, as in the case of the riverside industries,
brick-making and market-gardening in the outer suburbs. Round the
central station in every large town, for convenience of work and life,
settle a number of industries related to the carrying trade. Every
trade, market, or exchange is a centre of attraction. So the broking,
banking, and the general financing businesses are grouped closely
round the Royal Exchange. Mark Lane and Mincing Lane are centres of
the corn and tea trades. In all town industries not directly engaged
in retail distribution there are certain obvious economies and
conveniences in this gregariousness. Agents, travellers, collectors,
and others who have relations of sale or purchase with a number of
businesses in a trade find a number of disadvantages in dealing with a
firm locally detached from the main body, so that when a district is
once recognised as a trade centre, it becomes increasingly important
to each new competitor to settle there. The larger the city the
stronger this force of trade centralisation. Hence in London,
untrammelled by guild or city regulations, we find a strong
localisation of most wholesale and some retail businesses. In retail
trade, however, the economic gain is less universal. Since retail
commodities are chiefly for use in the home, and homes are widely
distributed, the convenience of being near one's customers and away
from trade competitors is often a predominating motive. Shops which
sell bread, meat, fish, fruit, groceries, articles which are bought
frequently and mostly in small quantities, shops selling cheaper
articles of ordinary consumption, such as tobacco, millinery,
stationery, and generally shops selling articles for domestic use, the
purchase of which falls to women, are widely dispersed. On the other
hand, where the articles are of a rarer and more expensive order, when
it is likely that the purchaser will seek to compare price and
character of wares, and will presumably be willing to make a special
journey for the purpose, the centralising tendency prevails in retail
trade. So we find the vendors of carriages, pianos, bicycles, the
heavier articles of furniture, jewellery, second-hand books, furs, and
the more expensive tailors and milliners clustering together in a
special street or neighbourhood.

Effective competition in retail trade sometimes requires
concentration, sometimes dispersion of business. But the most
characteristic modern movement in retail trade is a combination of the
centralising and dispersive tendencies, and is related to the
enlargement of the business-unit which we found proceeding everywhere
in industry. The large distributing company with a number of local
branch agents, who call regularly at the house of the consumer for
orders, is the most highly organised form of retail trade. In all the
departments of regular and general consumption the movement is towards
this constant house-to-house supply. The wealthier classes in towns
have already learned to purchase all the more perishable forms of food
and many other articles of house consumption in this way, while the
growing facilities of postage and conveyance of goods enable them to
purchase from a large central store by means of a price-list all other
consumables into which the element of individual taste or caprice
does not largely enter. This habit is spreading in the smaller towns
among the middle classes, so that the small dispersed retail
businesses are becoming more and more dependent upon the supply of the
needs of the working classes, and of such articles of comfort and
luxury as may appeal to the less regular and calculable tastes of the
moneyed classes. Just as in towns we have a constant automatic supply
of water and gas instead of an intermittent supply dependent on a
number of individual acts of purchase, so it seems likely that all the
routine wants of the consumer will be supplied.

How far mechanical inventions may be applied to increase the facility
and cheapen the cost of this distribution it is difficult to say. The
automatic machine for distributing matches and sweetmeats is adaptable
to most forms of routine consumption. In the larger stores many kinds
of labour-saving machinery are already applied. As steam or electric
power is adopted more widely in the local transport services the
retail distribution of goods from a large single centre is likely to
proceed apace, and a displacement of human labour by machinery similar
to that which is taking place in manufacture will take place in
distribution. So far as the wants of large classes of the public
become regular and their consumption measurable in quantity, machinery
will unquestionably take over the labour of distribution, especially
in the large towns which are absorbing in a way convenient for
mechanical distribution a larger proportion of the consuming public.
With each new encroachment of machinery into the domain of the
distributing trades the characteristics of machine-industry, enlarged
mass of the business, increased area of the market, increased
complexity of relations to other trades, increased specialisation of
local activity will be clearly discernible.

We thus see in the several departments of industry, under the pressure
of the same economic forces, an expansion of size, a growing complexity
of structure and functional activity, and an increased cohesion of
highly differentiated parts in the business, the market, and in that
aggregation of related trades and markets which forms the
world-industry. The physical instrument by which these economic forces,
making for increased size, heterogeneity, and cohesiveness,[123] have
been able to operate is machinery applied to manufacture and transport.
Moreover, each new encroachment of machinery upon the extractive and
the distributing industries brings into prominence within these
processes the same structural and functional characteristics.

    [Illustration: COMPARATIVE VALUE OF FOREIGN TRADE IN EUROPEAN
    COUNTRIES.]

FOOTNOTES:

[99] Cf. Chap. VI. for a discussion of this equation of maximum
profit.

[100] _Report to Labour Commission on Employment of Women_ (1893), p.
125.

[101] _Statistical Abstract_, 1878-92, p. 182

[102] _Social Peace_, p. 126; cf. also Brentano, _Hours, Labour, and
Production_, p. 60.

[103] _Contemporary Review_, 1889, p. 394.

[104] Porter, _Progress of the Nation_, p. 216.

[105] _Principles of Economics_, 2nd edit., p. 282.

[106] Schulze-Gaevernitz, _Der Grossbetrieb_, p. 90.

[107] Marshall, _Principles of Economics_, 2nd edit., p. 283.

[108] The works of Messrs. Colman, at Norwich, comprise among others
the following subsidiary departments:--Coopery, engineering shop, saw
mills, box-making, packing, paper-making, printing, laboratory. To the
most highly developed businesses of pottery and machine-making schools
of art and design are not uncommonly attached.

[109] A good deal of the cleansing and combing in the cloth and
worsted trades is, however, done separately on commission by large
firms such as Lister's. Cf. Burnley, p. 417.

[110] Marshall, _Principles of Economics_, 2nd edit., p. 517.

[111] Cournot, _Recherches sur les Principes Mathématiques de la
Theorie des Richesses_ (quoted Marshall, _Principles of Economics_, p.
384).

[112] It ought, however, to be kept in mind that the application of
the "roundabout" method is only economically justified by a continual
increase in consumption. So far as a given quantity of consumption is
concerned the result of the "roundabout" method is to diminish the
quantity of capital which assists to produce it.

[113] Professor Böhm Bawerk shows this increased time of production to
be the essential characteristic of capitalist production. Cf.
_Positive Theory of Capital_.

[114] For a full and valuable treatment of these harmonious relations,
from the point of view of consumption and production, see Patten's
_Economics of a Dynamic Society_.

[115] Cf. Porter, _Progress of the Nation_, pp. 177-206.

[116] _Principles of Sociology_, vol. i. p. 500 (3rd edit.).

[117] For a detailed account of the national trade divisions, cf. Dr.
Yeats, _The Golden Gates of Trade_.

[118] Foreign competition with English textiles, though comparatively
modern so far as the more highly developed machine-made fabrics is
concerned, was keenly felt early in the century in hand-made goods.
Schulze-Gaevernitz points out that the depression in work and wages of
the hand-loom workers in 1820 was due more to foreign competition than
to the new machinery. (_Der Grossbetrieb_, p. 41.)

[119] Yeats, _The Golden Gates of Trade_, p. 12. (Philip & Son.)

[120] Cf. Schulze-Gaevernitz's minute investigation of this whole
subject, _Der Grossbetrieb_, pp. 98, 99, etc.

[121] Schulze-Gaevernitz, p. 110.

[122] For the gain of female over male employment in textile
factories, cf. Chap. xi.

[123] In a free application of Spencer's formula of evolution to
modern industry I have not included the quality of "definiteness,"
which close reflection shows to possess no property which is not
included under heterogeneity and cohesiveness.




CHAPTER V.

THE FORMATION OF MONOPOLIES IN CAPITAL.

    § 1. _Productive Economies of the Large Business._
    § 2. _Competitive Economies of the Large Business._
    § 3. _Intenser Competition of the few Large Businesses._
    § 4. _Restraint of Competition and Limited Monopoly._
    § 5. _Facilities for maintaining Price-Lists in different
         Industries._
    § 6. _Logical Outcome of Large-Scale Competition._
    § 7. _Different Species of "Combines."_
    § 8. _Legal and Economic Nature of the "Trust."_
    § 9. _Origin and "Modus Operandi" of the Standard Oil Trust._
   § 10. _The Economic Strength of other Trusts._
   § 11. _Industrial Conditions favourable to "Monopoly."_


§ 1. The forces which are operating to drive capital to group itself
in larger and larger masses, and the consequent growth of the
business-unit, require special study in relation to changes effected
in the character of competition in the market and the establishment of
monopolies. The economies which give to the large business an
advantage over the small business may be divided into two
classes--economies of productive power, and economies of competitive
power.

In the first class will be placed those economies which arise from
increased sub-division of labour and increased efficiency of
productive energy, and which represent a net saving in the output of
human energy in the production of a given quantity of commodities,
from the standpoint of the whole productive community. These include--

(_a_) The effort saved in the purchase and transport of raw materials
in large quantities as compared with small quantities, and a
corresponding saving in the sale and transport of the goods,
manufactured or other. Under this head would come the discovery and
opening up of new markets for purchase of raw materials and sale of
finished goods, and everything which increases the area of effective
competition and co-operation in industry.

(_b_) The adoption of the best modern machinery. Much expensive
machinery will only "save labour" when it is used to assist in
producing a large output which can find a tolerably steady market. The
number of known or discoverable inventions for saving labour which are
waiting either for an increase in the scale of production or for a
rise in the wages of the labour they might supersede, in order to
become economically available, may be considered infinite. With every
rise in the scale of production some of these pass from the "unpaying"
into the "paying" class, and represent a net productive gain in saved
labour of the community.

(_c_) The performance of minor or subsidiary processes upon the same
premisses or in close organic connection with the main process, the
establishment of a special workshop for repairs, various economies in
storage, which attend large-scale production.

(_d_) Economies consisting in saved labour and increased efficiency of
management, superintendence, clerical and other non-manual work, which
follow each increase of size in a normally constructed business. These
are often closely related to (_b_), as where clerical work is
economised by the introduction of type-writers or telephonic
communication, and to (_c_), as by the establishment of more numerous
and convenient centres of distribution.

(_e_) The utilisation of waste-products, one of the most important
practical economies in large-scale production.

(_f_) The capacity to make trial of new experiments in machinery and
in industrial organisation.

§ 2. To the class Economies in Competitive Power belong those
advantages which a large business enjoys in competing with smaller
businesses, which enable it either to take trade away from the latter,
or to obtain a higher rate of profits without in any way increasing
the net productiveness of the community. This includes--

(1) A large portion of the economy in advertising, travelling, local
agents, and the superiority of display and touting which a large
business is able to afford. In most cases by far the greater part of
this publicity and self-recommendation is no economy from the
standpoint of the trade or the community, but simply represents a gain
to one firm compensated by a loss to others. In not a few cases the
"trade" may be advantaged to the damage of other trades or of the
consumer, as when a class of useless or deleterious drugs is forced
into consumption by persistent methods of self-appraisal which deceive
the public.

(2) The power of a large business to secure and maintain the sole use
of some patent or trade secret in machinery or method of manufacture
which would otherwise have gone to another firm, or would have become
public property in the trade, represents no public economy, and
sometimes a public loss. Where such improvement is due solely to the
skill and enterprise of a business man, and would not have passed into
use unless the sole right were secured to his business, this economy
belongs to the productive class.

(3) The superior ability of a large business to depress wages by the
possession of a total or partial monopoly of local employment, the
corresponding power to obtain raw material at low prices, or to extort
higher prices from consumers than would obtain under the pressure of
free competition, represent individual business economies which may
enable a large business to obtain higher profits.

§ 3. Now all these forces operative in trades which are said to be
subject to the law of increasing returns tend to increase the size and
to diminish the number of businesses competing within a given area. In
some industries the expanding size of the market or area of
competition keeps pace with this movement, so that the total number of
the larger competitors within the market may be as great as before.
But in most of the markets the growing scale of the business is
attended by an absolute diminution in the number of effective
competitors, or at any rate by an increase which is very much smaller
than the increase in the amount of trade that is done.

So long as we have merely the substitution of a smaller number of
large competing businesses for a larger number of small ones, no
radical change is effected in the nature of industry. So long as
every purchaser is able to buy from two or more equally developed and
effectively competing firms he can make them bid against one another
until he obtains the full advantage of the economies of large-scale
production which are common to them. So long as there remains
effective competition, all the productive economies pass into the
hands of the consumer in reduction of price. Nay, more than this, a
competing firm cannot keep to itself the advantages of a private
individual economy if its competitor has another private economy of
equal importance. If A and B are two closely competing firms, A owning
a special machine capable of earning for him 2 per cent. above the
normal trade profit, and B owning a similar advantage by possession of
"cheaper labour," these private economies will be cancelled by
competition, and pass into the pocket of the consuming public.

There is every reason to believe that with a diminution in the number
of competitors and an increase of their size, competition grows keener
and keener. Under old business conditions custom held considerable
sway; the personal element played a larger part alike in determining
quality of goods and good faith; purchasers did not so closely compare
prices; they were not guided exclusively by figures, they did not
systematically beat down prices, nor did they devote so large a
proportion of their time, thought, and money to devices for taking
away one another's customers.[124] From the new business this personal
element and these customary scruples have almost entirely vanished,
and as the net advantages of large-scale production grow, more and
more attention is devoted to the direct work of competition. Hence we
find that it is precisely in those trades which are most highly
organised, provided with the most advanced machinery, and composed of
the largest units of capital, that the fiercest and most unscrupulous
competition has shown itself. The precise part which machinery, with
its incalculable tendency to over-production, has played in this
competition remains for later consideration. Here it is enough to
place in evidence the acknowledged fact that the growing scale of the
business has intensified and not diminished competition. In the great
machine industries trade fluctuations are most severely felt; the
smaller businesses are unable to stand before the tide of depression
and collapse, or are driven in self-defence to coalesce. The borrowing
of capital, the formation of joint-stock enterprise and every form of
co-operation in capital has proceeded most rapidly in the textile,
metal, transport, shipping, and machine-making industries, and in
those minor manufactures, such as brewing and chemicals, which require
large quantities of expensive plant. This joining together of small
capitals to make a single large capital, this swallowing up of small
by large businesses, means nothing else than the endeavour to escape
the risks and dangers attending small-scale production in the tide of
modern industrial changes. But since all are moving in the same
direction, no one gains upon the other. Certain common economies are
shared by the monster competitors, but more and more energy must be
given to the work of competition, and the productive economies are
partly squandered in the friction of fierce competition, and partly
pass over to the body of consumers in lowered prices. Thus the
endeavour to secure safety and high profits by the economies of
large-scale production is rendered futile by the growing severity of
the competitive process. Each big firm finds itself competent to
undertake more business than it already possesses, and underbids its
neighbour until the cutting of prices has sunk the weaker and driven
profits to a bare subsistence point for the stronger competitors.

So long as the increased size of business brings with it a net
economic advantage, the competition of ever larger competitors, whose
total power of production is far ahead of sales at remunerative
prices, and who are therefore constrained to devote an increased
proportion of energy to taking one another's trade, must intensify
this cut-throat warfare. The diminishing number of competitors in a
market does not ease matters in the least, for the intensity of the
strife reaches its maximum when two competing businesses are fighting
a life or death struggle. As the effective competitors grow fewer, not
only is the proportion of attention each devotes to the other more
continuous and more highly concentrated, but the results of success
are more intrinsically valuable, for the reward of victory over the
last competitor is the attainment of monopoly.

§ 4. To keen-eyed business men engaged in the thick of large-scale
competition it becomes increasingly clear that good profits can only
be obtained in one of two ways. A successful firm must either be in
possession of some trade secret, patent, special market, or such other
private economy as places it in a position of monopoly in certain
places or in certain lines of goods, or else it must make some
arrangement with competing firms whereby they shall consent to abate
the intensity or limit the scope of their competition. It will
commonly be found that both these conditions are present where a
modern firm of manufacturers or merchants succeeds in maintaining
during a long period of time a prosperous or paying business. The
firm, though in close competition over part of the field of industry,
will have a speciality of a certain class of wares, at any rate in
certain markets, and it will be fortified by a more or less firmly
fixed rate of prices extending over the whole class of commodities.
Both of these forces signify a restriction upon competition.

To the older economists, who regarded free competition as the only
safe guarantee of industrial security and progress, it appeared
natural that capitalists continually engaged in the maximum
competition would yet secure a living rate of profit, for if this were
not the case, they ingenuously urged, capital would cease to remain in
such a trade. With the fallacy involved in this theory we shall deal
in a later chapter. It is sufficient here to observe that where keen
competition is operative in modern machine industries the average rate
of profits obtained for capital is generally below that which would
suffice to induce new capital invested with full knowledge to come
into the trade.

In highly organised trades, where the natural effects of free
competition have been fully manifested, we find that the hope of a
profitable business is entirely based upon the possibility that a
trade agreement will so mitigate competition as to allow a rate of
selling prices to obtain which remains considerably higher than that
which free competition would allow.

As the field of competition is narrowed to a comparatively few large
competitors, there arises a double inducement to suspend or mitigate
hostilities; as the competition is fiercer more is gained by a truce;
as the number of combatants is smaller, a truce can be more easily
formed and maintained. In most machine-using countries each branch of
a staple industry endeavours to protect itself from free competition
by a combination of masters to fix a scale of prices. This is the
normal condition of trade in England to-day. These combinations to fix
and maintain prices are not equally successful in all trades, but they
are always operative to a more or less extent in modifying or
retarding the effects of competition. Where trade unions of operatives
are strong, well-informed, and resolute, or where outsiders have large
facilities for investing capital and dividing the trade, the
endeavours to maintain prices and to secure a higher than the
competitive rate of profits are unsuccessful. The joint operation of
both these conditions in the cotton-spinning trade explains why the
Lancashire spinners have been unable to check the effects of
cut-throat competition. But throughout all branches of textile, metal,
pottery, engineering, and machine-making trades strong and persistent
endeavours are made by co-operative action of capitalists to limit
competition by fixing a scale of prices which should not be underbid.

Where competing railways fix a tariff of rates for carriage, or
competing manufacturers fix a scale of prices for their goods, their
object is to secure to themselves in higher profits a portion or the
whole of the productive and competitive economies attending
large-scale production, instead of allowing them by unrestricted
competition to pass into the hands of their customers. Suppose that a
number of steel rail manufacturers freely competing would drive down
the selling price to £1 a ton, but that by a trade agreement they
maintain £1 10s. as the minimum price, 10s. per ton represents the
economies of production which they divert from their customers into
their own possession by a limitation of the competition. Part of the
10s. may represent the actual saving of the labour which would have
been spent in competition as prices fell from £1 10s. to £1. Part may
represent a taking in higher profits of some of the economies of new
machinery or improved methods of production common to the competing
firms, and which would inevitably have led to a fall of price if the
competitive process had been allowed free play.

The prices thus fixed are monopoly prices--that is to say, they are
determined by the action of a number of competing capitals which at a
certain point agree to suspend their conflict and act as a single
capital; when the bidding is above a certain figure they are many,
when it is below that figure they are one. The condition in such a
trade is one of limited monopoly. The prices fixed by such trade
agreements will generally be different from those of a single firm
with the absolute monopoly of a market, whose prices are arranged to
yield the maximum net profit on the capital engaged. For since the
economies of competition and some of the economies of production would
be far greater for a single producing firm with a monopoly, the
schedule of supply prices measuring the expenses of producing the
different quantities of goods will be different, and this difference
will be reflected in a different scale of non-competitive market
prices from that which would issue from a trade agreement. Moreover, a
loose voluntary compact between trade rivals yields a monopoly of a
far feebler order than does the unity of a single capital. If a scale
of prices were fixed which would yield a considerably higher profit
than the market rate, the temptation to secure a larger share of trade
by secret underbidding through commissions, drawbacks, or otherwise,
or even by an open cutting of rates, is very powerful. Moreover, the
ability of a number of firms with conflicting interests to secure this
monopoly by quick and vigorous repression of the attempts of outside
capital to come in either for the purpose of sharing the higher
profits, or of being bought out, is far less than in the case of a
single monopolist firm. So the scale of prices fixed by a number of
competing firms will generally be nearer to the competition prices
than would be the case with the prices of a single monopolist.

§ 5. The recognition of the advantages of limiting competition by
price tariffs, and the experience of the difficulty of maintaining
such tariffs, lead competing businesses to take further steps in the
curtailment of competition. Where a powerful trade opinion can be
focussed on an offender against the scale, where he can be boycotted
or otherwise subjected to punishment, and where outsiders can be
prevented from intruding into the trade, a common scale of profitable
prices can often be maintained with the verbal or even the tacit
consent of those concerned. This is the case in many manufactures
where the fixed and well-known character of the goods makes a close
price-list possible. Retail dealers in local markets are often able to
keep a close adherence to a rigid scale by the pure force of _esprit
de corps_. The price of bread, meat, milk, coals, and other articles
sold locally by well-known measures, is seldom, if ever, regulated by
free competition among the vendors. In articles where more depends
upon the individual quality of wares, and where a rigid tariff is less
easily fixed and less easily maintained, as in the case of vegetables,
fruit, fish, and groceries, trade agreements are less easy to
maintain. Still more difficult is it to maintain a tariff for articles
of dress or adornment of the person or the house, and in other
articles where the consumer is less confined to a narrow local market.

The general experience of manufacturing and mercantile businesses,
where each firm is closely confronted by other firms of similar
capacity and equipment at every point in the market, indicates an
increasing difficulty in maintaining prices at a profitable level.
Everywhere complaints are heard of a reckless use of the productive
power of machinery, of over-stocked markets, of a cutting of prices in
order to get business, and of a growing inability to make a living
rate of profit.

§ 6. The endeavour of a number of individual businesses in a trade to
fix and maintain a certain profitable scale of prices is constantly
frustrated. The introduction of new machinery enabling certain firms
to make a profit at prices below the tariff induces them to utilise
their full productivity, cut prices, and still sell at a profitable
price; others involved in the meshes of speculative production are
compelled to cut prices and effect sales even at a loss; the
difficulty of finding safe investments drives new capital into the
hands of company-promoters, who fling it with criminal negligence into
this or that branch of production, underbidding the tariff to win a
footing in the market. All these forces render loose agreements to
limit competition more and more inadequate to secure their purpose.
Frequent experience of the impotence of these partial forms of
co-operation drives trade competitors to seek ever closer forms of
combination. An issue of this necessity is the Syndicate and the
Trust. By raising the co-operative action so as to cover the whole,
and by thus reducing the competition to zero, it is hoped that a union
may be formed strong enough to maintain monopoly prices. Thus the
Trust is seen as the logical culmination of the operation of economic
forces which have been continually engaged in diminishing the number
of effective competitors, while increasing their size and the
proportion of their energy devoted to the competition.

At each stage in the process the smaller competitors are eliminated,
and the larger driven to increase their size so that the whole may be
illustrated by a pyramid, the base or first stage of which consists of
a larger number of small units, and each higher stage of a smaller
number of larger units, with a Trust or Monopoly Syndicate for its
apex.

§ 7. The motive which induces a number of businesses hitherto
separate, or associated merely for certain specific actions, such as
the fixing of prices or wages, to amalgamate so that they form a
single capital on which a single rate of interest is paid, is a
double-edged one. There is, on the one hand, the desire to protect
themselves against excessive competition and cutting of rates, and on
the other hand a desire to secure the advantages which arise from
monopoly. The way in which Syndicates and Trusts are regarded depends
very much from which of these two aspects they are regarded. Those who
consider these business "combines" as arbitrary and high-handed
interferences with freedom of commerce, undertaken in order to place
in the hands of a few persons a power to rob and oppress the consuming
public by legalised extortion, regard the motive of combination to be
monopoly. On the other hand, the combining firms represent themselves
as the victims of circumstances, bound in self-protection to combine.
Our analysis of the operations of commercial competition enables us to
see that these two forces are not really separate, but are only two
ways of looking at the same action. Every avoidance of so-called
"excessive" competition is _ipso facto_ an establishment of a
monopoly. The tariff of prices established a weak and partial
monopoly. The "combine," whether it takes the name of "ring,"
"syndicate," or "trust," succeeds, in so far as it establishes a
stronger and more absolute monopoly.

In their economic aspect these terms are somewhat vague, the vagueness
arising in some degree from the changing and secret shapes these
combinations often find it convenient to adopt in order to preserve
the appearance of competition, or to avoid public obloquy or legal
interference. "Combine" is probably the generic term which covers all
these operations. A syndicate of capitalists are said to form a
"combine" with the view of controlling prices so as to pay a
profitable interest. If they apply their capital not to the
acquisition of the plant and machinery of manufacture with the view of
regulating production, but directly and mainly to the planning of some
speculative stroke or series of strokes in the produce market,
obtaining temporary control of sufficient goods of a particular kind
to enable them to manipulate prices, they are said to form a "corner"
or "ring." Such forms of combined action are generally of short
duration. Technically they consist in an artificial diversion[125] of
a particular class of goods from the ordinary channel of a number of
competing owners into a single ownership, so that they may be held and
placed upon the supply market at such times and in such ways as to
enable the owner to obtain a famine price. The following description
of a wheat "corner" will serve to exemplify this method of
"combine":--

"The man who forms a corner in wheat, first purchases or secures the
control of the whole available supply of wheat, or as near the whole
supply as he can. In addition to this he purchases more than is really
within reach of the market by buying 'futures,' or making contracts
with others who agree to deliver him wheat at some future time. Of
course he aims to secure the greater part of his wheat quietly, at low
figures; but after he deems that the whole supply is nearly in his
control, he spreads the news that there is a 'corner' in the market,
and buys openly all the wheat he can, offering higher and higher
prices, until he raises the price sufficiently high to suit him. Now
the men who have contracted to deliver wheat to him at this date are
at his mercy. They must buy their wheat of him at whatever price he
chooses to ask, and deliver it as soon as purchased, in order to
fulfil their contracts. Meanwhile mills must be kept in operation, and
the millers have to pay an increased price for wheat; they charge the
bakers higher prices for flour, and the bakers raise the price of
bread. Thus is told by the hungry mouths in the poor man's home the
last act in the tragedy of the corner."[126]

These "corners," of which in various forms and degrees the speculative
business on the stock and produce markets largely consists, are
attempts to substitute for a time a high monopoly price for a
competitive price by "rigging the market." Since the calculations upon
which these "corners" are based are essentially hazardous, attempted
corners frequently break down. One of the most special examples of the
collapse of a powerful corner in recent years is that of "La Société
Industrielle Commerciale des Métaux," commonly known as the "Copper
Syndicate." A body of French capitalists, for the most part not owners
of mines or metal merchandise, but speculators pure and simple, placed
a sum of money with the intention of cornering the supply of "tin."
Before completing this design they were induced to undertake a larger
speculation in the "copper market." In 1887 they entered into
contracts with the largest copper-producing companies in various
countries, agreeing to buy all the copper produced for the next three
years at a fixed price of 13 cents per pound, with an added bonus
equivalent to half the profit from their sale of the same. In 1888 the
Syndicate sought to extend its contracts with chief mining companies
to cover a period of twelve years, arranging with them also to limit
the output of copper. For some time they held the market in their
grip, and prices advanced considerably. But partly owing to a failure
to complete their contracts securing a restriction in production, and
partly from inability to meet their current liabilities, the "corner"
was broken down in 1889, and the artificially inflated prices fell.
Not only are the makers of "corners" liable to these miscalculations,
but they are liable to be overthrown by counter combinations of
capitalists or of operatives. The breakdown of a formidable attempt
to "corner" cotton in Lancashire in 1889 was due to the prompt action
of the Trades Unions, who undertook to unite with their employers in a
stoppage of work for such length of time as was requisite to force the
collapse of the "ring."

In the same year a formidable flour syndicate broke down before the
firm attitude of the co-operative flour mills.[127]

But though the speculative character of modern commerce, assisted by
the abundant use of credit, has lent special facilities to the
formation of "corners" and "rings," it is hardly necessary to say that
commerce has never been free from them. The celebrated "corner" in
grain which Joseph organised on behalf of the King of Egypt was one of
the largest and most successful. The commercial law of the Middle Ages
is full of provisions against engrossers, forestallers, and regrators,
all of whom were engaged in artificially raising prices to the
consumer by obtaining some sort of monopoly. Organised rings to secure
a monopoly of the food supply of some great city have been frequent
throughout history. Cicero informs us of the celebrated ring of
capitalists under Crassus to raise food prices at Rome. A
closely-formed combination of northern coalowners continued to
restrict output and impose monopoly prices upon London consumers for a
considerable time in the middle of the eighteenth century.[128]

In modern times these "corners" are essentially of brief duration so
far as they consist in narrowing the stream of commerce at a
particular point so as to check its free flow. Most of them are
confined to goods which are dealt with upon commercial exchanges, and
are amenable to the operations of skilled speculators. The "deal" must
be upon a scale large enough to enable a big net profit to be secured
in a short time. The stimulation which artificially inflated prices
apply to the early productive processes, the activity of other
speculators, and the check given to consumption by high prices,
generally preclude the possibility of a "corner" lasting long. The
strength of the copper "corner," had it succeeded, would have lain in
the hold it would have obtained over the early extractive stage,
preventing the operation of the natural stimulus of high prices to
increase production. If the Copper Syndicate had established its hold
upon the mining companies, it would have been able to hold the market
for an indefinite period, passing from the state of a "corner" into
the more durable and established position of the Trust.

§ 8. A Trust may be regarded from an economic aspect, or from a legal
aspect. Economically, the term Trust is applied to a class of
syndicates which have established a partial or total monopoly in
certain productive industries by securing the ownership of a
sufficient proportion of the instruments of production to enable them
to control prices. Legally, a Trust is a form of business
association--"a trust of corporate stocks by means of which a body of
men united in interest are enabled to carry on business through
separate corporate agencies."[129] It is a company of companies, under
which, while the formal structure of the original companies is
maintained, they are incorporated as single cells in the larger
organism which directs their activity. The constitution of the Trust
is best explained by a description of its origin in the industry of
the United States. The owners of a majority of the shares in a number
of corporations hitherto separate in their constitution (though they
may have been acting in agreement with one another, or have been
largely owned by the same persons) agree to place their shares of
stock in the full control of a body of persons called trustees. These
trustees may or may not be shareholders or directors of the several
corporations. They "act under an agreement that they will cast the
votes represented by the stock so held for the perpetuation of the
trust during the time agreed upon, and in furtherance of its purposes:
will elect the officers provided for by law in each of the
corporations, and in behalf of all of them manage the business of all,
except, it may be, in small matters of detail." "Each shareholder,
upon surrendering his corporate stock to the board of trustees,
receives a certificate entitling him to an interest in all the
property and earnings of all the corporations of the trust."[130]

These certificates are believed in many cases to certify a money value
far in excess of the real value of the stock surrendered at the time
when the Trust was formed. The Report of the New York Chamber of
Commerce for 1887-88 estimates the "certificates" given by the Sugar
Trust to the shareholders of its constituent corporations as bearing
"water" to the amount of 200 per cent., so that the nominal dividend
of 10-1/2 per cent. paid during the year represented a real net profit
of 31-1/2 per cent. Such statements cannot, however, be verified,
since it is the interest of the only persons who actually know to keep
secret such an arrangement.

It is asserted by many, and several State courts have sustained the
position, that a Trust is in America an illegal association, because
it implies on the part of its constituent corporations a violation of
the conditions under which they received the powers and privileges
conferred in their charters by the government of the several States.
Their illegality consists, it is held--

(1) In surrendering the power to manage and control their business to
some persons other than those legally authorised.

(2) In engaging, through the Trust, in kinds of business not
authorised by the charter.

§ 9. It is, however, the economic character and powers of the Trust,
and not its legal position, which concern us here.

The following short history of the origin and _modus operandi_ of the
Standard Oil Trust, the largest and in some respects the strongest of
these organisations, will serve to give distinctiveness to the idea of
the Trust:--

Petroleum began to be an article of extensive commerce about the year
1862. The wells from which the crude petroleum oil was drawn were in
Pennsylvania, and the work of boring the wells with machinery and
extracting the oil grew to be a considerable business. The crude oil
was sold to various refiners, who set up factories in Cleveland
(Ohio), in Pittsburg, and in several other cities. By 1865 these
factories had become pretty numerous, and in that year a private
refinery at Cleveland, owned by a few partners, obtained a charter
forming it into a corporation entitled the Standard Oil Company, with
a capital of $100,000. Until 1870 the progress of the company was
comparatively slow. In order to increase their hold upon the sources
of production in Pennsylvania, and to expand their trade, they began
to purchase stock in corporations already existing in that State, and
succeeded in establishing others, with which they worked in close
alliance. A Standard Oil Company was organised at Pittsburg, the stock
of which passed into the hands of the owners of the Cleveland Company.
They then proceeded to establish agencies in other States, primarily
for the sale of their goods, but when these businesses were firmly
planted they obtained for them from the several States charters
incorporating them as companies for refining oil. In 1872 the
shareholders of the Standard Oil Companies at Cleveland, Pittsburg,
and Philadelphia organised another corporation called the South
Improvement Company, obtaining a charter from the State of
Pennsylvania. This corporation, which was in fact though not in legal
form the "Standard Oil Companies," then entered into contracts with
the New York Central and Hudson River Railroad Company, the Erie
Railway Company, and several other lines which traversed the
oil-producing country, for the shipment of petroleum. The South
Improvement Company agreed to ship over these railways all the
petroleum products. In return the railway companies agreed to carry
their goods, not upon the terms open to other customers, but with a
system of rebates, paid not only upon the oil shipped by the company,
but upon that shipped by any other competing companies. "In one
locality the railroad companies were to charge oil shippers as freight
not exceeding $1.50 per barrel, and pay a rebate to the South
Improvement Company of $1.06 per barrel, whether it was the shipper of
the oil or not, so that under these contracts the Standard Oil Company
members would pay no more than 44 cents per barrel as freight to the
carrier, while their competitors would pay $1.50, and of this last sum
the railways were to pay back to the combination $1.06 per
barrel."[131]

Though this monstrous conspiracy was quickly unmasked, and the South
Improvement Company lost its charter, secret negotiations with the
railway companies enabled the Standard Oil Companies to strengthen
themselves by this system of rebates paid out of the pockets of their
business rivals. Chiefly by means of these and other discriminating
contracts they were enabled to enlarge their sphere of activity, and
making full use of their growing capital, succeeded in destroying or
absorbing their competitors, until, as early as 1875, they held a
practical monopoly of the refineries of the interior. No fewer than
seventy-four refineries are stated to have been bought up, leased, or
bankrupted by the Standard Oil Company in Pennsylvania alone in the
course of its career.

Until about 1878 the chief source of power of the company seems to
have been the alliance with the railroads and the local monopolies
obtained by buying up or crushing rival businesses. But the president,
Mr. Rockefeller, and his associates were men of keen business ability,
who understood how to make use of the inventive genius of the abler
employees who passed into their service, and of the improvements in
method of production and distribution of oil which were suggested. In
the next few years the company were enabled to effect enormous
economies in the storage and conveyance of oil. Pipe lines were laid
down connecting New York, Philadelphia, Baltimore, Buffalo, Pittsburg,
Cleveland, and Chicago, and a network of feeding lines joining the
sources of supply. Thousands of huge tanks were erected for holding
surplus stores; a large number of agencies were established along the
sea-shore with storage attached. Further considerable economies were
effected by the undertaking of the manufacture of barrels and cans and
other subsidiary articles required in the trade. At the close of 1881
the owners of the entire capital of fifteen corporations and parts of
the stock of a number of others, the latter chiefly trading companies,
established the Trust. The number of shareholders thus associated was
forty, and they placed their stocks in the hands of nine of their
number as trustees, who continued to administer the whole business,
paying interest upon the certificates which represented the stock of
the several shareholders until March 1892, when the Trust was legally
dissolved. The legal dissolution of the Trust has not, however,
materially impaired its economic unity and power; on the contrary, it
has extended in the United States its monopolic control of the
market, and has already established a strong control over several
European markets for the sale of oil, and over the chief natural
sources of supply. Although a practical monopoly in many parts of the
interior had been acquired at a tolerably early date, there continued
to be active competition in all branches of the petroleum business
until 1884, when the war of rates, which had been waged for some time
with a formidable Canadian competitor, the Tidewater Company, ceased,
an alliance being formed between the rivals. From that time the
Standard Oil Trust has held a practical monopoly over the greater part
of the country. It has introduced new economies in the machinery of
refining, has found profitable uses for naphtha and other waste
products, and has vastly increased its output and the machinery of
distribution. Not content with controlling the market for crude oil,
it has during the last few years obtained the possession of larger and
larger portions of the oil-producing country, forming companies to
acquire mining rights, sink wells, and oust the private producers from
whom it had previously been content to purchase the raw material at
their own prices.

Bearing in mind the fact that the actual unification of businesses
took place a good many years before the formation of the Trust, there
is nothing in the account given above inherently inconsistent with the
following explanation afforded by the Standard Oil Trust of their
proceedings:--

"The Standard Oil Trust offers to prove by various witnesses that the
disastrous condition of the refining business, and the numerous
failures of refiners prior to 1875, arose from imperfect methods of
refining, want of co-operation among refiners, the prevalence of
speculative methods in the purchase and sale of both crude and refined
petroleum, sudden and great reductions in price of crude, and
excessive rates of freight; that these disasters led to co-operation
and association among the refiners, and that such association and
co-operation, resulting eventually in the Standard Oil Trust, has
enabled the refiners so co-operating to reduce the price of petroleum
products, and thus benefit the public to a very marked degree."[132]

So far as this furnishes an explanation of the motives leading to the
earlier growth of the Company, the consolidation of rival companies,
no doubt it contains a considerable element of truth. The Standard Oil
Trust, however, differs from most others in that it was not directly
formed by the union of a number of leading rival businesses, but was
merely a reorganisation upon a firmer basis of a single complex
business. The motive of self-protection, though it might be operative
in the early history of the Company, cannot be adduced as the true
motive of the formation of the Trust.

Since the claim of the Standard Oil Trust to be a public benefit rests
upon the fall of price to the customer, resulting from the various
economies and improvements adopted by the Trust, it may be well to
append a diagram showing the actual fall of prices during the twenty
years 1870 to 1890.

In this diagram we note that from 1870 to 1875 there was a rapid
reduction of price in consequence of the fact that these were years of
keen competition with other Pennsylvanian businesses. 1875, which
marks the establishment of a monopoly of the interior trade in the
hands of the Standard Oil Trust, also marks a sharp rise of prices.
The expansion of their business brought them into contact with new and
more distant competitors, and a fall of price continued until 1879,
while prices continued to oscillate until 1881, the year of the
formation of the Trust. From the time of the formation of the Trust
the fall of price has been only half a cent. The moral is obvious. So
long as there is competition, in spite of the expense of conducting
the strife, prices fall; when the competition is suspended, and there
is a saving of friction, the public gains no further reduction.

The reason why, even after the complete monopoly had been attained,
the price of oil was not put up again will be apparent when we come to
examine the economic limits of the power of a Trust.

    [Illustration: FLUCTUATIONS OF PRICES OF STANDARD OIL, 1870 TO
    1890.]

§ 10. A large number of these Trusts, similar in their constitution to
the Standard Oil Trust, and with the same object of maintaining a
scale of prices based upon monopoly, have been founded in the United
States. Some have undoubtedly owed their establishment to the
prevalence of low profits in a trade where close competition has led
to a constant cutting of prices, and their foundation has been
leniently regarded as an act of self-defence. To this order belong the
Whisky Trust, the Cotton Oil Trust, the Cotton Bagging Trust, and
others. Indeed, one well-informed writer upon the subject holds that
this is the normal origin of the Trust. "With the exception of the
Standard Oil Trust, and perhaps one or two others that rose somewhat
earlier, it may be fairly said, I think, that not merely competition,
but competition that was proving ruinous to many establishments, was
the cause of the combinations."[133]

This condition of ruinous competition must be recognised as the normal
condition of all highly-organised businesses where modern machinery is
applied, and which are not sheltered by some private economy in the
shape of special facilities in producing or in disposing of their
goods. Even the Standard Oil Company, as we saw, claimed that a policy
of consolidation was forced upon it by the conditions of the market.
But this claim is not a refutation, but an admission of the statement
that the object of a Trust is to obtain monopoly prices; for these
ruinously low prices and profits are the result of free competition,
and the only alternative to this free competition is monopoly. Hence
it is a legitimate conclusion that the economic object of a Trust is
to substitute monopoly for competitive prices, and to do this more
effectively than can be done by the mere acceptance of a common
price-list by the separate firms engaged in a branch of production. In
order to attain this object it is not necessary that the Trust shall
comprise all the capital engaged in an industry. Even when the
Standard Oil Trust was firmly established, and was, according to its
own admission, paying 12-1/2 or 13 per cent. on its highly-watered
stock, there appears to have existed no fewer than 111 smaller
independent companies competing with it directly or indirectly at some
point within the area of its market.[134] But the Standard Oil Trust
was able to control prices, as the producer of some 75 per cent. of
the total product, and the practical monopolist over the main area of
its market. Similarly the Sugar Refineries Trust in 1888 had a firm
grip over prices by its possession of 80 per cent. of the sugar
refining capacity of the Atlantic Coast, or 65 per cent. of the sugar
consumed in the United States.[135] There are other cases where a
formally constructed Trust is for a time engaged in close effective
competition, either with another Trust, as was the position of the
Standard Oil Trust over a portion of its markets in the period 1881 to
1884, or with powerful companies not organised as Trusts. This is what
Mr. Gunton appears to consider the normal condition of a Trust, one in
which competition takes place between a few large bodies of capital
instead of between many smaller bodies.[136] Certain Trusts have
certainly been compelled to struggle for the retention of their
monopoly power over the market. A notorious example is that of the
Sugar Trust, which, after a most successful start in 1888, found
itself in 1890 face to face with a new and formidable competitor in
the shape of the Claus Spreckles refineries of Philadelphia and San
Francisco, and was compelled to forego the high profits it had been
making and fight for its existence under terms of keenest competition.

But in so far as a Trust stands in this position it has failed to
achieve its industrial end of checking "ruinous competition" and the
"cutting of prices." It is not in the possession of the chief
economies of a Trust so long as it remains at warfare, for it is
compelled to expend all that it gains from the enlarged scale of
business and from the cessation of competition among its constituent
companies upon the strife with its single antagonist. A Trust in this
inchoate condition has no special economic character distinguishing it
from other large aggregates of competing capital. It is with
fully-formed trusts which are able to control prices and regulate to
some degree production and profits that we are concerned. An economic
Trust has its _raison d'être_ in monopoly. It may not have eliminated
all actual competitors, and is generally limited in its power by the
possibility of outside opposition, but so far as its power extends it
must be able to regulate prices upon non-competitive lines.

§ 11. A large number of different articles have at some stage in
their production fallen under the monopoly of a Trust.[137]

As is the case with "corners" and "rings" in the produce market,
certain classes of commodities lend themselves more readily than
others to the monopoly of Trusts.

There are three classes of industry which more easily than others
permit the formation of effective trusts.

(1) Industries connected with, or closely dependent on, the nature and
properties of land. When the whole or a large proportion of the raw
material required for producing any class of goods is confined within
a restricted area, the possession of that land by a single body of
owners will give a strong monopoly. It was not essential to the
Standard Oil Trust in its earlier years to own the sources of the oil
provided they could possess themselves of the stream after it had left
the source. But they have strengthened this monopoly lately by
securing the ownership of the oil lands in Pennsylvania. The most
striking example, however, is the monopoly of the anthracite coal
region in Pennsylvania by the shareholders of the Pennsylvania and
Reading Railway. The tendency of a Trust to strengthen its industrial
position and at the same time to find a profitable investment for its
surplus profits by fastening upon an earlier process of production or
a contiguous industry, and drawing it under the control of its
monopoly, is one of the most important evidences of the rapid growth
of the system in America. The rapidity with which the whole railway
system is passing into the hands of the two great monopolist
syndicates with the necessary result of stifling competition is in
some respects the most momentous economic movement in the United
States at the present time. The magnificent distances which separate
the great mass of the producers of agricultural and other raw products
from their market makes the railway their only high-road, and the fact
that except between a few large centres of population there is no
competition of rival railways, places the producer entirely at the
mercy of a single carrier, who regulates his rates so as to secure his
maximum profit. Indeed, so fast is the amalgamation of railway capital
proceeding that even between large cities there is little genuine
competition. The same is true of the telegraph and the supply of such
things as water and gas, which, by reason of their relation to land,
and the power thus conferred upon the owner of the first and most
convenient means of supply, are "natural" monopolies. Where such
industries are left, as in most cities of America, to private
enterprise, they form the objects of a monopoly which is commonly so
strong as to crush with ease attempts at competition where such are
legally permissible. Jay Gould's Western Union Telegraph Company is an
example of an absolute monopoly maintained for many years without the
possibility of effective competition. The purchase of Western lands in
order to hold them for monopoly prices has been a favoured form of
syndicate investment during the last forty years.

(2) Articles which for economy of transport and distribution require
to be massed together in large quantities are specially amenable to
monopoly. Grains produced over a wide area have often to be collected
in large quantities to be re-assorted according to quality, and to be
warehoused before being placed in the market. So the produce of
thousands of competing farmers passes into the hands of a syndicate of
owners of grain elevators at Chicago or elsewhere. The same is true of
meat, fish, fruit, vegetables, dairy produce. All these things, raised
under circumstances which render effective co-operation for purposes
of sale well-nigh impossible, flow from innumerable diverse places
into a common centre, where they fall into the hands of a small group
of middlemen, merchants, and exporters. Even the retail merchants, as
we have seen, are able to make effective combinations to maintain
prices in the case of more perishable goods.

In England the combination of retail merchants commonly takes the form
of a trade regulation of prices restricting competition. But in the
United States regular Trusts have been in some cases established in
retail trade. The Legislative Committee of New York State, in its
investigations, discovered a milk trust which had control of the
retail distribution in New York City, fixing a price of three cents
per quart to be paid to the farmer, and a selling price of seven or
eight cents for the consuming public.

Hence it arises that the prices paid by the consumer for farm produce
are picked pretty clean by various groups of monopolists or restricted
competitors before any of them get back to the farmers or first
producers.

The farmer, from his position in the industrial machine, is more at
the mercy of Trusts and other combinations than any other body of
producers. In the United States he is helpless under the double sway
of the railway and the syndicate of grain elevators and of
slaughterers in Chicago, Kansas City, and elsewhere. In England, in
France, and in all countries where the farmer is at a long distance
from his market, farm produce is subject to this natural process of
concentration, and we hear the same complaints of the oppressive rates
of the railway and the monopoly of the groups of middlemen who form
close combinations where the stream of produce narrows to a neck on
its flow to the consumer. The position of the American farmer, crushed
between the upper and the nether mill-stone of monopoly, is one of
pathetic impotence.

(3) In those industries to which the most elaborate and expensive
machinery is applied, and where, in consequence, the proportion of
fixed capital to labour is largest, the economies of large-scale
production are greatest. Here, as we have seen, the growing strain of
the fiercer competition of ever larger and ever fewer capitals drives
towards the culminating concentration of the Trust. Where, owing
either to natural advantages, as in the case of oil and coal, or to
other social and industrial reasons, a manufacture is confined within
a certain district, and is in the hands of a limited number of firms
in fairly close commercial touch with one another, we have conditions
favouring the formation of a Trust. In most of the successful
manufacturing Trusts some natural economy of easy access to the best
raw material, special facilities of transport, the possession of some
state or municipal monopoly of market, are added to the normal
advantages of large-scale production. The artificial barriers in the
shape of tariff, by which foreign competition has been eliminated from
many leading manufactures in the United States, have greatly
facilitated the successful operation of Trusts. Where the political,
natural, and industrial forces are strongly combined, we have the most
favourable soil for the Trust. Where a manufacture can be carried on
in any part of the country, and in any country with equal facility, it
is difficult to maintain a Trust, even though machinery is largely
used and the individual units of capital are big.

Each kind of commodity, as it passes through the many processes from
the earth to the consumer, may be looked upon as a stream whose
channel is broader at some points and narrower at others. Different
streams of commodities narrow at different places. Some are narrowest
and in fewest hands at the transport stage, when the raw material is
being concentrated for production, others in one of the processes of
manufacture, others in the hands of export merchants. Just as a number
of German barons planted their castles along the banks of the Rhine,
in order to tax the commerce between East and West which was obliged
to make use of this highway, so it is with these economic "narrows."
Wherever they are found, monopolies plant themselves in the shape of
"rings," "corners," "pools," "syndicates," or "trusts."

FOOTNOTES:

[124] There still survive in certain old-fashioned trades firms which
do business without formal written contracts, and which would be
ashamed to take a lower price than they had at first asked, or to seek
to beat down another's price.

[125] There need, of course, be no actual diversion of goods into the
possession of the Ring: the essence of the monopoly consists in the
control, not in the possession of goods.

[126] Baker, _Monopolies and the People_, p. 81.

[127] Cf. Miss Potter, _The Co-operative Movement_, p. 199.

[128] Porter, _Progress of the Nation_, pp. 283-285.

[129] C.S.T. Dodd, "Ten Years of the Standard Oil Trust," _Forum_, May
1892.

[130] "The Standard Oil Trust," Roger Sherman, _Forum_, July 1892.

[131] Roger Sherman, "The Standard Oil Trust," _The Forum_, July 1892.

[132] Argument of Standard Oil Trust before the House Committee on
Manufactures, 1888 (quoted Baker, _Monopolies and the People_, p. 21).

[133] J.W. Jenks, _Economic Journal_, vol. ii. p. 73.

[134] _Report to the Commission of the Senate of New York State_, p.
440.

[135] _Economic Journal_, vol. ii. p. 83.

[136] "The Economic and Social Aspect of Trusts," _Political Science
Quarterly_, Sept. 1888.

[137] Baker, writing 1890, names fifty-nine articles which have at
various times formed the material of Trusts, ranging in importance
from sugar and iron rails to castor-oil, school slates, coffins, and
lead pencils.




CHAPTER VI.

ECONOMIC POWERS OF THE TRUST.

    § 1. _Power of a Monopoly over earlier or later Processes in
         Production of a Commodity._
    § 2. _Power over Actual or Potential Competitors._
    § 3. _Power over Employees of a Trust._
    § 4. _Power over Consumers._
    § 5. _Determinants of a Monopoly Price._
    § 6. _The Possibility of low Monopoly Prices._
    § 7. _Considerations of Elasticity of Demand limiting Prices._
    § 8. _Final Summary of Monopoly Prices._


§ 1. It remains to investigate the actual economic power which a
"monopoly" possesses over the several departments of an industrial
society. Although the "trust" may be taken as the representative form
of monopoly of capital, the economic powers it possesses are common in
different degrees to all the other weaker or more temporary forms of
combination, and to the private business which, by the possession of
some patent, trade secret, or other economic advantage, is in control
of a market. These powers of monopoly may be placed under four heads
in relation to the classes upon whose interests they operate--(_a_)
business firms engaged in an earlier or later process of production;
(_b_) actual and potential competitors or business rivals; (_c_)
employees of the Trust or other monopoly; (_d_) the consuming public.

(_a_) The power possessed by a monopoly placed in the transport stage,
or in one of the manufacturing or merchant stages, to "squeeze" the
earlier or less organised producers, has been illustrated by the
treatment of farmers by the railways and by the Elevator Companies
and the Slaughtering Companies of the United States. The Standard Oil
Trust, as we saw, preferred, until quite recently, to leave the oil
lands and the machinery for extracting crude oil in the hands of
unattached individuals or companies, trusting to their position as the
largest purchasers of crude oil to enable them to dictate prices. The
fall in the price paid by the company for crude oil from 9.19 cents in
1870 to 2.30 in 1881, when the Trust was formed, and the maintenance
of an almost uniform lower level from 1881 to 1890, testifies to the
closeness of the grip in which the company held the oil producers; for
although improvements in the machinery for sinking wells and for
extracting oil took place during the period, these economies in
production do not at all suffice to explain the fall. Indeed, the
method of the company's transactions with the oil producers, as
described by their own solicitor in his defence of the Trust, is
convincing testimony of their control of the situation:--"When the
producer of oil puts down a well, he notifies the pipe line company (a
branch of the Trust), and immediately a pipe line is laid to connect
with his well. The oil is taken from the tank at the well, whenever
requested, into the large storage tanks of the company, and is held
for the owner as long as he desires it. A certificate is given for it,
which can be turned into cash at any time; and when sold it is
delivered to the purchaser at any station on the delivery lines."[138]
In similar fashion the Sugar Trust, before the competition of the
Spreckles refineries arose, controlled the market for raw sugar. Nor
was this power exercised alone over the producers of raw sugar. It
extended to dictating the price at which the wholesale grocers who
took from them the refined sugar should sell to their customers.[139]
This power of a monopoly is not merely extended to the control of
prices in the earlier and later processes of production and
distribution of the commodity. One of the most potent forms it assumes
in manufactures where machinery is much used is a control over the
patentees and even the manufacturers of machinery. Where a strong
Trust exists, the patentee of a new invention can only sell to the
Trust and at the Trust's price. Charges are even made against the
Standard Oil Trust and other powerful monopolies to the effect that
they are in the habit of appropriating any new invention, whether
patented or not, without paying for it, trusting to their influence to
avoid the legal consequences of such conduct. There is indeed strong
reason to believe that the irresponsible position in which some of
these corporations are placed induces them to an unscrupulous use of
their great wealth for such purposes.

§ 2. (_b_) Since the prime object of a Trust is to effect sales at
profitable prices, and prices are directly determined by the
quantitative relation between supply and demand, it is clearly
advantageous for a Trust to obtain as full a power in the regulation
of the quantity of supply as is possible. In order to effect this
object the Trust will pursue a double policy. It will buy up such
rival businesses as it deems can be worked advantageously for the
purposes of the Trust. The price at which it will compel the owners of
such businesses to sell will have no precise relation to the value of
the business, but will depend upon the amount of trouble which such a
business can cause by refusing to come into the Trust. If the
outstanding firm is in a strong position the Trust can only compel it
to sell, by a prolonged process of cutting prices, which involves
considerable loss. For such a business a high price will be paid. By
this means a strongly-established Trust or Syndicate will bring under
its control the whole of the larger and better-equipped businesses
which would otherwise by their competition weaken the Trust's control
of the market. A smaller business, or an important rival who
persistently stands out of the Trust, is assailed by the various
weapons in the hands of the Trust, and is crushed by the brute force
of its stronger rival. The most common method of crushing a smaller
business is by driving down prices below the margin of profit, and by
the use of the superior staying power which belongs to a larger
capital starving out a competitor. This mode of exterminating warfare
is used not merely against actually existing rivals, as where a
railway company is known to bring down rates for traffic below cost
price in order to take the traffic of a rival line, but is equally
effective against the potential competition of outside capital. After
two or three attempts to compete with Jay Gould's telegraph line from
New York to Philadelphia had been frustrated by a lowering of rates to
a merely nominal price, the notoriety of this terrible weapon sufficed
to check further attempts at competition. In this way each
strongly-formed Trust is able to fence off securely a certain field of
investment, thus narrowing the scope of use for any outside capital.
This employment of brute force is sometimes spoken of as "unfair"
competition, and treated as something distinct from ordinary trade
competition. But the difference drawn is a purely fallacious one. In
thus breaking down a competitor the Trust simply makes use of those
economies which we have found to attach to large-scale businesses as
compared with small. Its action, however oppressive it may seem from
the point of view of a weaker rival, is merely an application of those
same forces which are always operating in the evolution of modern
capital. In a competitive industrial society there is nothing to
distinguish this conduct of a Trust in the use of its size and staying
power from the conduct of any ordinary manufacturer or shopkeeper who
tries to do a bigger and more paying business than his rivals. Each
uses to the full, and without scruple, all the economic advantages of
size, skill in production, knowledge of markets, attractive
price-lists, and methods of advertisement which he possesses. It is
quite true that so long as there is competition among a number of
fairly equal businesses the consuming public may gain to some extent
by this competition, whereas the normal result of the successful
establishment of a Trust is simply to enable its owners to take higher
profits by raising prices to the consumer. But this does not
constitute a difference in the mode of competition, so that in this
case it deserves to be called "fair," in the other "unfair."

It is even doubtful whether such bargains as that above described
between the Standard Oil Company and the Railways, whereby a
discriminative rate was maintained in favour of the Company, is
"unfair," though it was underhand and illegal. In the ordinary sense
of the term it was a "free" contract between the Railways and the Oil
Company, and in spite of its discriminative character might have been
publicly maintained had the law not interfered on a technical point.
The same is even true of the flagrant act of discrimination described
by Mr. Baker:--"A combination among manufacturers of railway
car-springs, which wished to ruin an independent competitor, not only
agreed with the American Steel Association that the independent
company should be charged $10 per ton more for steel than the members
of the combine, but raised a fund to be used as follows: when the
independent company made a bid on a contract for springs, one of the
members of the Trust was authorised to under-bid at a price which
would incur a loss, which was to be paid out of the fund. In this way
the competing company was to be driven out of business."[140] These
cases differ only in their complexity from the simpler modes of
underselling a business rival. Mean, underhand, and perhaps illegal
many of these tactics are, but after all they differ rather in degree
than in kind from the tactics commonly practised by most businesses
engaged in close commercial warfare. If they are "unfair," it is only
in the sense that all coercion of the weak by the strong is "unfair,"
a verdict which doubtless condemns from any moral standpoint the whole
of trade competition, so far as it is not confined to competing
excellence of production.

The only exercise of power by a Trust or Monopoly in its dealings with
competing capital which deserves to be placed in a separate category
of infamy, is the use of money to debauch the legislature into the
granting of protective tariffs, special charters or concessions, or
other privileges which enable a monopoly company to get the better of
their rivals, to secure contracts, to check outside competition, and
to tax the consuming public for the benefit of the trust-maker's
pocket. Under this head we may also reckon the tampering with the
administration of justice which is attributed, apparently not without
good reason, to certain of the Trusts, the use of the Trust's money to
purchase immunity from legal interference, or, in the last resort, to
buy a judgment in the Courts.

How far the more or less definite allegations upon this subject are
capable of substantiation it is beyond our scope to inquire, but
certain disclosures in connection with the Tweed Ring, the Standard
Oil Company, the Anthracite Coal Trust, and other syndicates induce
the belief that the more unscrupulous capitalists seek to influence
the Courts of Justice as well as the Houses of Legislature in the
pursuance of their business interests.

§ 3. (_c_) The more or less complete control of the capital engaged in
an industry, and of the market, involves an enormous power over the
labour engaged in that industry. So long as competition survives, the
employee or group of employees are able to obtain wages and other
terms of employment determined in some measure by the conflicting
interests of different employers. But when there is only one employer,
the Trust, the workman who seeks employment has no option but to
accept the terms offered by the Trust. His only alternative is to
abandon the use of the special skill of his trade and to enter the
ever-swollen unskilled labour market. This applies with special force
to factory employees who have acquired great skill by incessant
practice in some narrow routine of machine-tending. The average
employee in a highly-elaborated modern factory is on the whole less
competent than any other worker to transfer his labour-power without
loss to another kind of work.[141] Now, as we have seen, it is
precisely in these manufactures that many of the strongest Trusts
spring up. The Standard Oil Company or the Linseed Oil Trust are the
owners of their employees almost to the same extent as they are owners
of their mills and machinery, so subservient has modern labour become
to the fixed capital under which it works. It has been claimed as one
of the advantages of a Trust that the economies attending its working
enable it to pay wages higher than the market rate. There can be no
question as to the ability of the stronger Trusts to pay high wages.
But there is no power to compel them to do so, and it would be pure
hypocrisy to pretend that the interests of the labourers formed any
part of the motive which led a body of keen business men to acquire a
monopoly. One of the special economies which a large capital possesses
over a small, and which a Trust possesses _par excellence_, is the
power of making advantageous bargains with its employees.

It is possible that a firm like the Standard Oil Trust may to some
limited extent practise a cheap philanthropy of profit-sharing in
order to deceive the public into supposing that its huge profits
enrich many instead of few. But there is no evidence that the
employees of a Trust have gained in any way from the economies of
industrial monopoly, nor, as we see, is there any _à priori_
likelihood they should so gain.[142]

But the practical ownership of its employees involved in the position
of a monopoly is by no means the full measure of the oppressive power
exercised by the Trust over labour. Since the means by which Trust
prices are maintained is the regulation of production, the interests
of the Trust often require that a large part of the fixed capital of
the companies entering the Trust shall stand idle. "When competition
has become so fierce that there is frequently in the market a supply
of goods so great that all cannot be sold at remunerative prices, it
is necessary that the competing establishments, in order to continue
business at all (of course, under perfectly free competition many will
fail), check their production. Now an ordinary pool makes provision
for each establishment to run in one of the two ways suggested.
Manifestly a stronger organisation like the Trust, by selecting the
best establishments, and running them continuously at their full
capacity, while closing the others, or selling them, and making other
use of the capital thus set free, will make a great saving. The most
striking example of this kind in the recent history of the Trusts is
furnished by the Whisky Trust. More than eighty distilleries joined
the Trust. Formerly, when organised as a pool, as has been said, each
establishment ran at part capacity, one year at 40 per cent., one year
at only 28 per cent. A year after the organisation of the Trust only
twelve were running; but these were producing at about their full
capacity, and the total output of alcohol was not at all lessened. The
saving is to be reckoned by the labour and running capital which had
formerly been employed in nearly sixty distilleries. It must be borne
in mind that on the product of these twelve distilleries good profits
were made on the capital represented in more than eighty plants. All
the greater Trusts, such as the Standard Oil, the Cotton Oil, the
Cotton Bagging, and the Sugar Trust, have followed this plan of
closing entirely the weaker establishments and running only the
stronger, thereby effecting a saving in capital and labour."[143]

Here we see a Trust exercising its economic power of regulating
production. That power, as we shall see below, is not merely confined
to closing the inferior mills in order that the same aggregate output
may be obtained by a full working of the more efficient plant. Where
over-production has occurred it is to the interest of the Trust to
lessen production. With this end in view it will suddenly close half
the mills, or works, or elevators in a district. The owners of these
closed plants get their interest from the Trust just as if they were
working. But the labour of these works suddenly, and without any
compensation for disturbance, is "saved"--that is to say, the
employees are deprived of the services of the only kind of plant and
material to which their skilled efforts are applicable. It is probable
that one result of the formation of each of these larger trusts has
been to throw out of employment several thousands of workers, and to
place them either in the ranks of the unemployed or in some other
branch of industry where their previously acquired skill is of little
service, and where their wages are correspondingly depressed. From the
account given above of the changes in organisation of production under
the Trust it might appear that the effect upon labour was not to
reduce the net employment, but to give full, regular employment to a
smaller number instead of partial and irregular employment to many,
and that thus labour, considered as a whole, might be the gainer. An
industrial movement which substitutes the regular employment of a few
for the irregular employment of many is so far a progressive movement.
But it must be borne in mind first that there is usually a net
reduction of employment, a substitution not of 50 workers at full-time
for 100 at half-time, but of 30 only. For not only will there be a
net saving of labour in relation to the same output, the result of
using exclusively the best equipped and best situated factories, but
since the Trust came into existence in order to restrict production
and so raise prices, the aggregate output of the business will be
either reduced or its rate of increase will be less than under open
competition. The chief economy of the Trust will in fact arise from
the net diminution of employment of labour. As the Trust grows
stronger and absorbs a larger and larger proportion of the total
supply for the market, the reduction of employment will as a rule
continue. Of course, if the scale of prices which the Trust finds most
profitable happens to be such as induce a large increase of
consumption, and therefore to permit an expansion of the machinery of
production, the aggregate of employment may be maintained or even
increased. But, as we shall see below, there is nothing in the nature
of a Trust to guarantee such a result. The normal result of placing
the ordering of an industry in the hands of a monopoly company is to
give them a power which it is their interest to exercise, to narrow
the scope of industry, to change its _locale_, to abandon certain
branches and take up others, to substitute machinery for hand labour,
without any regard to the welfare of the employees who have been
associated with the fixed capital formerly in use. When to this we add
the reflection that the ability to choose its workmen out of an
artificially made over-supply of labour, rid of the competition of
other employers, gives the Trust a well-nigh absolute power to fix
wages, hours of work, to pay in truck, and generally to dictate terms
of employment and conditions of life, we understand the feeling of
distrust and antagonism with which the working classes regard the
growth of these great monopolies on both sides of the Atlantic.

The following is a short summary of the findings of a Committee of
Congress with reference to the relations existing between the railroad
and coal companies which control the anthracite coal-fields in
Pennsylvania and the coal-miners:--"Congress has found (Document No.
4) that the coal companies in the anthracite regions keep thousands of
surplus labourers in hand to underbid each other for employment and
for submission to all exactions; hold them purposely ignorant when the
mines are to be worked and when closed, so that they cannot seek
employment elsewhere; bind them as tenants by compulsion in the
companies' houses, so that the rent shall run against them whether
wages run or not, and under leases by which they can be turned out
with their wives and children on the mountain-side in mid-winter if
they strike; compel them to fill cars of larger capacity than agreed
upon; make them buy their powder and other working outfit of the
companies at an enormous advance on the cost; compel them to buy coal
of the company at the company's price, and in many cases to buy a
fixed quantity more than they need; compel them to employ the doctor
named by the company and to pay him whether sick or well; 'pluck' them
at the company's store, so that when pay-day comes round the company
owes the men nothing, there being authentic cases where 'sober,
hard-working miners toiled for years, or even a lifetime, without
having been able to draw a single dollar, or but few dollars in actual
cash,' in 'debt until the day they died;' refuse to fix the wages in
advance, but pay them upon some hocus-pocus sliding-scale, varying
with the selling price in New York, which the railway slides to suit
itself; and most extraordinary of all, refuse to let the miners know
the prices on which their living slides, a 'fraud,'" says the report
of Congress, "on its face" (pp. 71 and 72). The companies dock the
miners' output arbitrarily for slate and other impurities, and so can
take from their men 5 to 50 tons more in every 100 than they pay for
(p. 76). In order to keep the miners disciplined and the coal market
under supplied, the railroads restrict work, so that the miners often
have to live for a month on what they can earn in six or eight days,
and these restrictions are enforced upon their miners by holding cars
from them to fill, as upon competitors by withholding cars to go to
market. (Document No. 4, p. 77.)

Labour organisations are forbidden, and the men intentionally provoked
to strike to affect the coal market. The labouring population of the
local regions, finally, is kept "down" by special policemen, enrolled
under special laws, and often in violation of law, by the railroads
and coal and iron companies, practically when and in what number they
choose, and practically without responsibility to any one but their
employers, armed as the Corporation see fit with army revolvers or
Winchester rifles, or both; made detectives by statute, and not
required to wear their shields, provoking the public to riot (pp. 9
and 93-98), and then shooting them legally. "By the percentage of
wages," says the report of Congress, "by false measurements, by rents,
stores, and other methods the workman is virtually a chattel of the
operator."[144]

§ 4. (_d_) Those who admit that a Trust is in its essence a monopoly,
and that it is able, by virtue of its position, to sell commodities at
high prices, sometimes affirm that it is not to the interest of a
Trust to maintain high prices, and that in fact Trusts have generally
lowered prices. We have here a question of fact and a question of
theory. Of these the former presents the greater difficulty. It seems
a simple matter to compare prices before and after the formation of
the Trust, and to observe the tendencies to rise or fall. This
comparison has been made in a good many cases, with the result that
some Trusts seem to lower prices, others to raise them. The growth of
the Standard Oil Company and the strengthening of its power was
attended, as we saw, by a considerable fall of price. So also we are
told respecting the Cotton Seed Oil Trust, formed in 1883, that
"during these four years the price of cotton seed oil fell more than
eight times as much as it did during the five years before the Trust
was formed."[145] The rates of the most absolute monopoly, the Western
Union Telegraph Company, are very little higher than those which
prevail in England, where the Government works the telegraph system at
a considerable loss each year. The Sugar Trust, on the other hand,
directly it was formed, raised prices considerably. The same is true
of several of the other most conspicuous combinations.

Now, it is argued, if it be admitted that prices have in fact fallen
under the administration of some of the strongest Trusts, it cannot be
maintained that Trusts have a tendency to raise prices. In reply, it
is pointed out that in almost all highly-organised modern industries
improved methods of production are rapidly lowering the expenses of
production and prices, and that therefore the statement that Trusts
tend to maintain high prices is quite consistent with the fact of an
absolute fall, the question at issue being whether the fall of prices
under the Trust was as great as it would have been under free
competition. Moreover, a comparison of dates appears to indicate that
the Trust's prices, as we saw in the Standard Oil Company, fluctuate
with the degree of their monopoly, falling rapidly under the pressure
of actual or threatened competition, rising when the danger is past.
Finally, opponents of the Trust allude to certain Trusts which, in
spite of the greater economies of production they possess, have raised
prices.

Excepting by the inverse and questionable method of arguing that the
high profits distributed by a Trust are themselves proof that prices
have not fallen as they would have fallen under free competition, it
is not possible to build a very convincing condemnation of the Trust
from statistics of price. And even when profits are high it is open to
the defenders of the Trust to maintain that they only represent the
saving of the cost of competition, and that if competition were
introduced the profits would be squandered in the struggle instead of
passing into the consumer's pocket.

It is only from a deductive treatment of the subject that we are able
to clearly convict the Trust of possessing a power over prices
antagonistic to the interests of the consuming public.

A Trust, or other company, or a single individual who has a complete
monopoly of a class of goods for which there is a demand, will strive
to fix that price which shall give him the largest net profit on his
capital. The question with him will be simply this, "How many articles
shall I offer for sale?" If he offers only a small number the
competition of more urgent wants among the consumers will enable him
to sell the small number at a high price. Assuming, for the moment,
that the production of these articles was subject to the law of
constant returns--_i.e._, that a few things were produced relatively
as cheaply as many, this small sale would give the highest rate of
profit on each sale, for the "marginal utility" of the supply would be
high and would enable a high price to be obtained for the whole
supply. But if he possesses large facilities of production it may pay
him better to sell a larger number of articles at a lower price with a
lower rate of profit on each sale, because the aggregate of a larger
number of small profits may yield a larger net profit on his whole
capital. How far it will pay him to go on increasing the supply and
selling a larger number of articles at a lower price will entirely
depend upon the effect each increment of supply exercises upon demand,
and so upon prices and profits. Everything will hinge upon the
"elasticity of demand" in the particular case. If the object of the
monopoly satisfies a keen, widely-felt want, or stimulates a craving
for increased consumption among those who take off the earlier supply,
a large increase in supply may be attended by a comparatively small
fall in prices. Sometimes a large increase of supply at a lowered
price will, by reaching a new social stratum, or by forcing the
substitution of this article for another in consumption, so enlarge
the sale that though the margin of profit on each sale is small, the
net profit on the whole capital is very large. In all such cases of
great elasticity it may pay a monopolist to sell a large number of
articles at a low price.

Where the article belongs to that class in which the law of increasing
returns is strongly operative--_i.e._, where great economies in
expenses of production attend a larger scale of production, this
increase of supply and fall of prices may continue with no assignable
limit. On the other hand, where there is little elasticity of demand,
where an increase of supply can be taken off only at a considerable
fall of price, it will probably pay a monopolist to restrict
production and sell a small number of articles at a high price. It is
this motive which often induces the destruction of tons of fish and
fruit in the London markets for fear of spoiling the market. These
goods could be sold at a sufficiently low price, but it pays the
companies owning them to destroy them, and to sell a smaller number
which satisfies the wants of a limited class of people who "can afford
to pay." Now, when free competition exists among sellers, as among
buyers, this can never happen. It will always be to the interest of a
competing producer or dealer to lower his price below that which would
yield him the largest net profit on his capital were he a monopolist.
If he is a monopolist he will only lower his prices provided the
elasticity of demand in the commodity in question is so great that the
increased consumption will be so considerable as to yield him a larger
net profit. But if he is a competing dealer he does not look chiefly
to the consumption of the community, but to the proportion of that
consumption which he himself shall supply. The elasticity of demand,
so far as his individual business is concerned, is not limited to the
amount of the increased consumption of the community stimulated by a
lowering of prices, but includes that portion of the custom of his
rivals which he may be able to divert to himself. Hence it arises that
under free competition it will be the tendency of the several
competitors to drive down the prices to the point at which the most
advantageously placed competitors make the minimum profit on their
capital.

§ 5. It is all important to an understanding of the subject to
recognise that a monopoly price and a competitive price are determined
by the operation of an entirely different set of economic forces. The
loose opinion that it must be to the interest of a Trust or other
monopoly to sell at the same price as would be fixed by competition is
quite groundless.

Let us look more closely at the determinants of a monopoly price.
Suppose we are dealing with a Trust owning a large amount of fixed
capital, some of it more and some less favourably ordered for
production, and having an absolute monopoly in the market for steel
rails, cotton bagging, or other manufactured articles. First look at
expenses of production. A very small output, though produced by the
exclusive use of the very best machinery and labour, would not be
produced very cheaply, because the economies attending large-scale
production would be sacrificed. Each successive increment in output
would involve a decreased expense per unit of production so long as
the most favourably situated plant was employed. If the output grew so
large that worse material or works fitted with inferior plant, or less
favourably placed, were called into requisition, the economies of an
increased scale of production would be encroached upon by this
lowering of the margin of production. Taking the Trust's capital at a
fixed amount, there would necessarily come an increment of output
which it would not pay to produce even if sold at the price fetched
by the previous increment. The ton of steel or of cotton bagging which
would only yield a bare margin of profit, if sold at the price fetched
by the last ton, limits the maximum output of the business. Under the
pressure of free competition this marginal ton will be actually
produced. But though, considered by itself, it yields a margin of
profit, it will rarely if ever be produced as part of the actual
output of a Trust. The actual output of a Trust, we shall find, will
be determined at any point between the first unit of output and this
marginal increment. The expenses of production will not increase in
any close correspondence with the growth of the output, but will
represent the fluctuating resultant of the several economies of
production at the several points.

    [Illustration: CURVE OF PROFIT IN TRUST.]

In the figures A and B the perpendicular line _ai_ represents a number
of increments of production. The expense of producing a supply of 100
will be measured by the line _bb'_, that of producing 200 by _cc'_,
and so on. But never in actual industry will the lines of growing
expense be regular in their relation to the increase of production, as
would be the case in the figure A; they will always be irregular, as
in the figure B. The curve of expense _ai'_ in the figure B will be
determined by the resultant of the various forces which make for
increasing and diminishing returns for each new increment of the
requisites of production required to produce the new portion of
output. When the increased scale of production makes some new
application of machinery economically possible, or where recourse must
be had to some decidedly inferior land for the raw material, a large
sudden irregularity may show itself in the curve of expense.

When we turn from expenses of production to the aggregate takings from
the sale of the several quantities of supply, we shall find a similar
irregularity of increase. Elasticity in demand, as tested by the
stimulus given to consumption by a fall of price, differs not merely
in different commodities, but at different points in a falling scale
of prices. A number of equal decrements in price, according as they
stimulate the satisfaction of weaker wants of earlier consumers, or
strike into new classes of consumers, or supply new kinds of wants,
will have widely different effects in increasing the aggregate
takings.

We have then two widely fluctuating and highly irregular gradations of
money terms, representing expenses of production and the aggregate
price of the various quantities of supply, each determined by a wholly
different class of considerations. But the interest of a Trust, as we
see, lies in fixing supply at the highest net profits. Now the net
profits of producing and selling any specified quantity of supply are
ascertained by deducting the expenses of production from the aggregate
takings. The relation between the growth of expenses of production and
of aggregate takings will yield a different net amount of profit at
each increment of supply. The diagram opposite will illustrate the
nature of these relations.

AL is the line indicating at the several points, B, C, D, etc.,
proportional increments in supply. If the monopoly be a steel rail
trust, B marks the millionth ton, C the two millionth ton of output,
and so on. A'L' is a curve indicating, by its diminishing distance
from AL, the diminishing expense of producing each unit of the
increased output, so that the expense of producing the first ton, if
only one is produced, is AA', that of the millionth ton, if one
million are produced, BB', and so on. The expenses of producing one
million tons will thus be represented by the figure ABB'A', those of
two millions by the figure ACC'A'. Further, let the curve _al_
represent, by its diminishing distance from AL, the diminishing price
at which the several additions to supply can be sold, so that the
first ton sells at A_a_, the millionth at B_b_, and so on, the
aggregate price of the first million tons being AB_ba_, that of the
first two millions being AC_ca_.

    [Illustration: DIAGRAM OF TRUST PRICES.]

Assuming that the Trust is planning a new business and determining the
most profitable output, it will limit that output not necessarily at
the point where the selling price gives the widest margin of profit
upon the expenses of production, as might be the case at the point B
in the diagram, but at the point F, where the margin of profit bears
the largest proportion to the expenses of production, or in other
words, where the area of absolute takings shows the largest surplus
over the area of aggregate expenses. Thus it will here be to the
interest of the Trust to produce and sell six millions (limiting
production at F) with an aggregate expense AFF'A' and an aggregate
takings AF_fa_, yielding an aggregate net profit A'F'_fa_. They will
not produce five millions because the figure AE_ea_ bears a smaller
proportion to AEE'A' than does AF_fa'_ to AFF'A'. For a similar reason
they will not produce seven millions.

Since the fluctuations in the curve of expenses and in that of selling
price or "demand" are determined by an entirely different set of
forces, it will be evident that there may be several points in AL
where the proportions between the area of expenses and that of profits
may be the same. So there may be several maxima at which Trust prices
may be indifferently fixed. The figure upon F'_f_ may have the same
quantitative relation to the figure upon FF', as that upon H'_h_ to
that upon HH'. In such a case it will be a matter of indifference to
the Trust whether it sells five million tons at a price 100s. per ton,
or seven millions at 90s.

We have seen that the causes which determine expenses at the several
points in A'L' have no relation to the causes which determine the
selling price at the various points, except to furnish a minimum below
which the price cannot fall. Above this limit expenses of production
in no sense help to determine monopoly prices; the true determinants
are entirely in the region of demand, and are measured by the marginal
utility or satisfaction afforded to consumers by the several
quantities which constitute supply at any given time.

Since expenses of production always enter into the determination of
competition-prices, which are fixed by the interaction of expenses and
money estimates of utility--_i.e._, by supply and demand, it is
evident that the curve of monopoly prices has no assignable relation
whatever to the curve of competition prices, and that the most
profitable output and prices of Trust-made goods are in no way
identified with the most profitable output and prices in a
competitive trade. In competition the curve of selling prices tends to
follow closely the curve of expenses, and consequently the areas of
profits and expenses tend to bear the same proportion to each other at
different points of increment in the trade. For if at any point great
increases in economy of production are achieved, while the large
elasticity of demand maintains a price nearly the same as before, the
wide margin of profit which might fix the actual price at that point
for a monopolist only serves to stimulate such increased output on the
part of trade competitors as will continue until the flexibility of
demand weakens, and prices are lowered to such a point as will yield
the normal margin or market rate of profit.

There is, therefore, nothing in common between competition prices and
monopoly prices for different quantities of supply, nor anything to
secure that the actual quantity of supply and the price shall be the
same in the two cases.

§ 6. It is, however, conceivable that in a certain commodity where a
genuine monopoly holds the market, the price should be as low as under
free competition. This may be illustrated by the following curves of
expense and price:--

    [Illustration]

where the economies of increased production continue to be very great,
while the flexibility of demand is also high. In other words, it may
pay the Trust better to make very large sales at a low price when the
expenses of production are low, than to sell a smaller quantity at a
higher price and with a higher expense of production. In this case the
consumer may get a part of the advantage of large-scale production
along with the saving of expense of competition. There is, however, no
guarantee to society that low prices will be fixed. In the vast
majority of cases it will probably pay the Trust better to limit
production and sell at higher prices.

In the illustration above we have assumed that a monopoly was starting
_de novo_. Where a Trust is formed, as is commonly the case, by an
amalgamation of existing capitals largely embodied in plant and
machinery of production, it will probably not pay to limit production
to a very small output, even though the largest proportionate margin
of profit might seem to stand there. For the interest upon the closed
mills and other idle capital should be reckoned among the expenses of
production for the purposes of determining the profitable price. Thus
where large means of production are owned by a monopoly it will seldom
pay to sell a very small supply at a very high price.

So far we have treated of absolute monopolies, eliminating all
consideration of competition. We have found that the supply and the
price of an article of absolute monopoly is determined by the relation
between expenses of production and flexibility of demand. Although a
new invention or a wide expansion of market may alter so considerably
the expenses of production of the several quantities of supply as to
materially affect monopoly-supply and prices, it is the latter
influence, that of flexibility of demand, that directly in each
specific case determines whether a Trust's prices shall be high or
low. When we find the Standard Oil Trust maintaining a low level of
prices, or the Western Union Telegraph Company charging low rates, we
shall find the explanation in the character of the public demand for
oil and telegraphic messages.

§ 7. A number of considerations relating to "demand" limit the
economic power of monopolies to charge high prices.

A monopoly price, as we have seen, exactly measures the marginal
utility of the supply, as indicated by the quantity of money which the
purchaser of the last increment of supply is just willing to pay for
it. When this marginal utility sinks fast with an increase of supply
the monopoly price will be high for it, and it will pay the monopolist
better to restrict the output and sell the limited supply at a high
price, because a large reduction of price will not stimulate a
proportionably large increase of consumption. So where the marginal
utility sinks slowly, it will pay to increase the supply and lower the
price, for each fall of price will stimulate a large increase of
consumption.

Since the marginal utility of a number of increments of supply will
not be the same in the case of any two commodities, it is evident that
the determination of monopoly prices is a very delicate operation.

It is not possible to present even an approximately accurate
classification of commodities in relation to the powers of a Trust or
Monopoly. But the following considerations will assist us to
understand why in some cases a Trust appears to raise prices, in
others to keep them as they were, and in others even to lower them:--

(_a_) The urgency of the need which a commodity satisfies enables the
monopolist to charge high prices. Where a community is dependent for
life upon some single commodity, as the Chinese on rice, the
monopolist is able to obtain a high price for the whole of a supply
which does not exceed what is necessary to keep alive the whole
population. Thus a monopolist of corn or rice in a famine can get an
exorbitant price for a considerable supply. But after the supply is
large enough to enable every one to satisfy the most urgent need for
sustenance, the urgency of the need satisfied by any further supply
falls rapidly, for there is no comparison between the demand of famine
and the demand induced by the pleasures of eating.

A monopoly of a necessity of life is therefore more dangerous than any
other monopoly, because it not merely places the lives of the people
at the mercy of private traders, but because it will generally be the
interest of such monopolists to limit supply to the satisfaction of
the barest necessaries of life.

Next to a necessary in this respect will come what is termed a
"conventional necessary," something which by custom has been firmly
implanted as an integral portion of the standard of comfort. This
differs, of course, in different classes of a community. Boots may now
be regarded as a "conventional necessary" of almost all grades of
English society, and a monopolist could probably raise the price of
boots considerably without greatly diminishing the consumption. Half a
century ago, however, when boots were not firmly established as part
of the standard of comfort of the great mass of the working classes,
the power of a monopolist to raise prices would have been far smaller.

As we descend in the urgency of wants supplied we find that the
comforts and luxuries form a part of the standard of life of a smaller
and smaller number of persons, and satisfying intrinsically weaker
needs, are more liable to be affected by a rise of price.

(_b_) Closely related to this consideration, and working in with it at
every point, is the question of the possibility of substituting
another commodity for the one monopolised. This everywhere tempers the
urgency of the need attaching to a commodity. There are few, if any,
even among the commodities on which we habitually rely for food,
shelter, clothing, which we could not and would not dispense with if
prices rose very high. The incessant competition which is going on
between different commodities which claim to satisfy some particular
class of need cannot be got rid of by the monopoly of one of them.
This is probably the chief explanation of the low prices of the
Standard Oil. As an illuminant, oil is competing with gas, candles,
electricity, and unless the monopoly were extended laterally so as to
include these and any other possible illuminants, the Trust's prices
cannot be determined merely by the pressure of the need for artificial
light. Though to a modern society artificial light is probably even
more important than sugar, a Sugar Trust may have a stronger monopoly
and be able to raise prices higher than an Oil Trust, because the
substitutes for sugar, such as molasses and beetroot, are less
effective competitors than gas, candles, and electricity with oil.

The power of railway monopolies largely depends upon the degree in
which their services are indispensable, and no alternative mode of
transport is open. Sometimes, however, they miscalculate the extent of
their power. The high railway rates in England have recently led in
several quarters to a substitution of road and canal traffic in the
case of goods where rapidity of conveyance was not essential. So also
in other cases sea-transport has been substituted.

The stronger monopoly of American railways consists partly in the fact
that distances are so great, and the sea-board or other water
conveyance so remote, that over a large part of the Continent the
monopoly is untempered by alternative possibilities of transport.

The reverse consideration, the possibility of substituting the article
of monopoly for other articles of consumption, and so securing a wider
market, has quite as important an influence on prices. The possibility
of substituting oil for coal in cooking and certain other operations
has probably a good deal to do with the low price of oil. A Trust will
often keep prices low for a season in order to enable their article to
undersell and drive out a rival article, a competition closely akin to
the competition with a rival producer of the same article. When
natural gas was discovered in the neighbourhood of Pittsburg, the
price was lowered sufficiently to induce a large number of factories
and private houses to give up coal and to burn gas. After expensive
fittings had been put in, and the habit of using gas established, the
Gas Company, without any warning, proceeded to raise the rates to the
tune of 100 per cent. When we ascend to the higher luxuries, the
competition between different commodities to satisfy the same generic
taste, or even to divert taste or fashion from one class of
consumption to another class, is highly complicated, and tempers
considerably the control of a Trust over prices.

The power of a company which holds the patent for a particular kind of
corkscrew is qualified very largely not only by competition of other
corkscrews, but by screw-stoppers and various other devices for
securing the contents of bottles. The ability to dispense with the
object of a monopoly, though it does not prevent the monopolist from
charging prices so much higher than competition prices as to extract
all the "consumer's rent," of the marginal consumer, forms a practical
limit to monopoly prices.

(_c_) Lastly, there is the influence of existing or potential
competition of other producers upon monopoly prices. Where prices and
profits are very high a Trust is liable to more effective competition
on the part of any surviving independent firms, and likewise to the
establishment of new competitors. This ability of outside capital to
enter into competition will of course differ in different trades.
Where the monopoly is protected by a tariff the possibility of new
competition from outside is lessened. When the monopoly is connected
with some natural advantage or the exclusive possession of some
special convenience, as in mining or railways, direct competition of
outsiders on equal terms is prohibited. Where the combination of large
capital and capable administration is indispensable to the possibility
of success in a rival producer, the power of a monopoly is stronger
than where a small capital can produce upon fairly equal terms and
compete. If the monopoly is linked with close personal qualities and
with special opportunities of knowledge, as in banking, it is most
difficult for outside capital to effectively compete.

§ 8. These considerations show that the power of a Trust or other
monopoly over prices is determined by a number of intricate forces
which react upon one another with varying degrees of pressure,
according as the quantity of supply is increased or diminished. But a
Trust is always able to charge prices in excess of competitive prices,
and it is generally its interest to do so. It will commonly be to the
interest of a Trust or other monopoly to maintain a lower scale of
prices in those commodities which are luxuries or satisfy some less
urgent and more capricious taste, and to maintain high prices where
the article of monopoly is a common comfort or a prime necessary of
life for which there is no easily available substitute.

FOOTNOTES:

[138] S.C.T. Dodd, _The Forum_, May 1892.

[139] "Trusts in the United States," _Economic Journal_, p. 86.

[140] Baker, _Monopolies and the People_, p. 85.

[141] Cf. Chapter ix.

[142] Mr. George Gunton, in writing upon "The Economic Aspect of
Trusts" (_Political Science Quarterly_, Sept. 1888), claims a rise in
wages as one of the advantages of Trusts, but Mr. Gunton throughout
his argument assumes that a Trust is a large competing capital and not
a monopoly. If a Trust were a competing capital its formation would be
an economic and social advantage, tending, as he says, "to increase
production, to lower prices, and to raise wages." But as a Trust is
not a competing capital it does none of these things.

[143] J.W. Jenks, "Trusts in the United States," _Economic Journal_,
vol. ii. p. 80.

[144] H.D. Lloyd, Essay on "Trusts," reprinted in _Boston Daily
Traveller_ (June 16, 1893).

[145] G. Gunton, _Political Science Quarterly_, Sept. 1888. This
statement, however, appears in contradiction to the "Report of the
Committee on Investigations relative to Trusts in the State of New
York," p. 12.




CHAPTER VII.

MACHINERY AND INDUSTRIAL DEPRESSION.

    § 1. _The external phenomena of Trade Depression._
    § 2. _Correctly described as Under-production and
         Over-production._
    § 3. _Testimony to a general excess of Productive Power over the
         requirement for Consumption._
    § 4. _The connection of modern Machine-production and Depression
         shown by statistics of price._
    § 5. _Changing forms in which Over-supply of Capital is embodied._
    § 6. _Summary of economic relation of Machinery to Depression._
    § 7. _Under-consumption as the root-evil._
    § 8. _Economic analysis of "Saving."_
    § 9. _Saving requires increased Consumption in the future._
   § 10. _Quantitative relation of parts in the organism of Industry._
   § 11. _Quantitative relation of Capital and Consumption._
   § 12. _Economic limits of Saving for a Community._
   § 13. _No limits to the possibility of individual Saving--Clash of
         individual and social interests in Saving._
   § 14. _Objection that excess in forms of Capital would drive
         interest to zero not valid._
   § 15. _Excess is in embodiments of Capital, not in real Capital._
   § 16. _Uncontrolled Machinery a source of fluctuation._


§ 1. The leading symptom of the disease called Depression of Trade is
a general fall of wholesale prices, accompanied by a less than
corresponding fall of retail prices. Whatever may be the ultimate
causes of a trade depression, the direct and immediate cause of every
fall of price must be a failure of demand to keep pace with supply at
the earlier price. So long as those who have goods to sell can sell
all these goods at the price they have been getting, they will not
lower the price. The efficient cause then of any fall of price is an
actual condition of over-supply at earlier prices. A very small
quantity of over-supply will bring down prices in a business, or in a
whole market, provided the competition between the businesses is keen.
Where such a fall of prices quickly stimulates demand so that the
over-supply is carried off and the rate of demand is equated to the
rate of supply at the lower price level, the condition is commonly
described as a "tendency to over-supply." But it is important to bear
in mind that in strictness it was not a "tendency" but an actually
existing quantity of over-supply which brought down the price.

Where any fall of price thus brought about quickly stimulates a
corresponding increase of demand, stability of prices follows, and
there will be a full, healthy production at the lower prices.

The mere fact then that prices are generally lower than they were five
or ten years ago is no evidence of depressed trade. Depressed trade
signifies not merely low prices but relaxed production: more has been
produced than can be sold at the lowest profitable prices, and markets
are congested with stock, but less is being produced than could be
produced with existing means of production. The fact which faces us in
a period of depression is an apparent excess of productive power. If
this excess were of labour alone it might be explained with some
plausibility as due to the displacement of labour by machinery. For it
has been admitted that the first and immediate effect of introducing
labour-saving or labour-aiding machines may be a diminution in the
demand for labour, even when the labour of making and repairing the
machines and of distributing the increased product which finds a sale
is taken into consideration. The simultaneous application of a number
of new forms of machinery attended by other general economies in the
organisation of industry might seem to explain why for a time there
should be a general redundancy of labour in all or most of the chief
industries of a country. Such an over-supply of labour would result
from the accumulated action of "first effects." When the cheapening
influences of machinery had time to exercise their full natural
influence in stimulating consumption the labour temporarily displaced
would be again fully utilised; for the moment, past labour saved and
stored in forms of fixed capital would do a great deal of the work
which would otherwise be done by present living labour. But such an
explanation is wholly negatived by the fact that in a depressed
condition of trade there is an excess of forms of capital as well as
of labour. There exists simultaneously a redundancy of both factors in
production. Labourers are out of work or are in irregular employment,
mills and factories are closed or working short time, the output of
coal and metals is reduced, and yet with this relaxed production the
markets are glutted with unsold goods unable to find purchasers at a
price which will yield a minimum profit to their owners. To this must
be added, in the case of the extractive industries, agriculture,
mining, etc., the exclusion from productive use of land which had
formerly found a profitable employment.

§ 2. To this condition of industry the antithetical terms,
over-production and under-production, may be both correctly applied,
according as one regards production as a state or as a process. The
state of trade in a depression is one of over-production--the
industrial body is congested with goods which are not drawn out for
consumption fast enough. This plethora debilitates the industrial
body, its functional activities are weakened. The slackness of trade
thus induced is rightly described as under-production.

It is commonly said by English writers upon economics that the state
of over-production, the redundancy of capital and labour, though found
in one or two or several trades at the same time, cannot be of general
application. If too much capital and labour is engaged in one industry
there is, they argue, too little in another, there cannot be at the
same time a general state of over-production. Now if by general
over-production is meant not that every single industry is supplied
with an excess of capital, but that there exists a net over-supply,
taking into account the plethora in some trades and the deficiency in
others, this assertion of English economists is not in accordance with
ascertained facts or with the authority of economists outside of
England.

§ 3. If a depression of trade signified a misapplication of capital
and labour, so that too much was applied in some industries, too
little in others, there would be a rise of prices in as many cases as
there was a fall of prices, and the admitted symptom of depression,
the simultaneous fall of price in all or nearly all the staple
industries, would not occur. The most careful students of the
phenomena of depressed trade agree in describing the condition as one
of general or net excess of the forms of capital. They are also agreed
in regarding the enormous growth of modern machinery as the embodiment
of a general excess of producing power over that required to maintain
current consumption.

Lord Playfair, writing on this subject in 1888, says, "It matters not
whether the countries were devastated by war or remained in the
enjoyment of peace; whether they were isolated by barriers of
Protection or conducted these industries under Free Trade; whether
they abounded in the raw materials of industry or had to import them
from other lands; under all these varying conditions the machine-using
countries of the world have felt the fifteen years of depression in
the same way, though with varying degrees of intensity." His
conclusion is "that the improvements of machinery used in production
have increased the supply of commodities beyond the immediate demands
of the world."[146] In support of this position he adduces the
authority of continental writers such as Dr. A. von Studnitz, Piermez,
Jules Duckerts, Laveleye, Trasenster, Annecke, and Engel. In the
United States, Carroll Wright, David Wells, and Atkinson are foremost
in upholding this to be the explanation of depression of trade. Mr.
Carroll D. Wright, Commissioner of Labour at Washington, is emphatic
in his assertion of the fact. "So far as the factories and the
operatives of the countries concerned are to be taken into
consideration (England, the United States, France, Belgium, Germany),
there does exist a positive and emphatic over-production, and this
over-production could not exist without the introduction of
power-machinery at a rate greater than the consuming power of the
nations involved, and of those dependent upon them, demand; in other
words, the over-production of power-machinery logically results in
the over-production of goods made with the aid of such machinery, and
this represents the condition of those countries depending largely
upon mechanical industries for their prosperity."[147] The Reports of
the English "Commission on the Depression of Trade and Industry" make
similar admissions of an excess of producing power as distinct from a
mere miscalculation in the application of capital and labour. The
Majority Report, defining "over-production" as "the production of
commodities, or even the existence of a capacity for production at a
time when the demand is not sufficiently brisk to maintain a
remunerative price to the producer," affirms "that such an
over-production has been one of the prominent features of the course
of trade during recent years, and that the depression under which we
are now suffering may be partially explained by this fact...."[148]
The Minority Report lays still stronger stress upon "systematic
over-production," alleging "that the demand for commodities does not
increase at the same rate as formerly, and that our capacity for
production is consequently in excess of our home and export demand,
and could, moreover, be considerably increased at short notice by the
fuller employment of labour and appliances now partially idle."[149]

The most abundant information regarding the excess of the machinery of
production in the several branches of industry has been given by Mr.
D.A. Wells, who regards machinery as the direct cause of depressed
trade, operating in three ways--(1) increased capacity of production,
(2) improved methods of distribution, (3) the opening up of new
abundant supplies of raw material. Thus production grows faster than
consumption. "In this way only is it possible to account for the
circumstances that the supply of the great articles and
instrumentalities of the world's use and commerce have increased
during the last twelve or fifteen years in a far greater ratio than
the contemporaneous increase of the world's population or of its
immediate consuming capacity."[150]

The earlier inventions in the textile industries, and the general
application of steam to manufacture and to the transport services,
have played the most dramatic part in the industrial revolution of the
last hundred years. But it should be borne in mind that it is far from
being true that the great forces of invention have spent themselves,
and that we have come to an era of small increments in the growth of
productive power. On the contrary, within this last generation a
number of discoveries have taken place in almost all the chief
industrial arts, in the opening up of new supplies of raw material,
and in the improvement of industrial organisation, which have
registered enormous advances of productive power. In the United
States, where the advance has been most marked, it is estimated that
in the fifteen or twenty years preceding 1886 the gain of machinery,
as measured by "displacement of the muscular labour," amounts to more
than one-third, taking the aggregate of manufactures into account. In
many manufactures the introduction of steam-driven machinery and the
factory system belongs to this generation. The substitution of
machinery for hand labour in boot-making signifies a gain of 80 per
cent. for some classes of goods, 50 per cent. for others. In the silk
manufacture there has been a gain of 50 per cent., in furniture some
30 per cent., while in many minor processes, such as wood-planing, tin
cans, wall-papers, soap, patent leather, etc., the improvement of
mechanical productiveness per labourer is measured as a rise of from
50 to 300 per cent. or more. The gain is, however, by no means
confined to an extension of "power" into processes formerly performed
by human muscle and skill. Still more significant is the increased
mechanical efficiency in the foundational industries. In the
manufacture of agricultural implements the increase is put down at
from 50 to 70 per cent., in the manufacture of machines and machinery
from 25 to 40 per cent., while "in the production of metals and
metallic goods long-established firms testify that machinery has
decreased manual labour 33-1/3 per cent." The increase in the
productive power of cotton mills is far greater than this. From 1870
to 1884 the make of pig-iron rose 131 per cent. in Great Britain and
237 per cent. in the rest of the world.[151] "In building vessels an
approximate idea of the relative labour displacement is given as 4 or
5 to 1--that is, four or five times the amount of labour can be
performed to-day by the use of machinery in a given time that could be
done under old hand methods."[152]

In England the rise in productiveness of machinery is roughly
estimated at 40 per cent. in the period 1850 to 1885, and there is no
reason to suppose this is an excessive estimate. In the shipping
industry, where more exact statistics are available, the advance is
even greater. The diminution of manual labour required to do a given
quantity of work in 1884 as compared with 1870 is put down at no less
than 70 per cent., owing in large measure to the introduction and
increased application of steam-hoisting machines and grain elevators,
and the employment of steam power in steering, raising the sails and
anchors, pumping, and discharging cargoes.[153] In the construction of
ships enormous economies have taken place. A ship which in 1883 cost
£24,000 can now be built for £14,000. In the working of vessels the
economy of fuel, due to the introduction of compound-engines, has been
very large. A ton of wheat can now be hauled by sea at less than a
farthing per mile. Similarly with land haulage the economy of fuel has
made immense reductions in cost. "In an experiment lately made on the
London and North Western Railway, a compound locomotive dragged a ton
of goods for one mile by the combustion of two ounces of coal."[154]
The quickening of voyages by steam motor, and by the abandonment of
the old Cape route in favour of the Suez Canal, enormously facilitated
commerce. The last arrangement is calculated to have practically
destroyed a tonnage of two millions. The still greater facilitation of
intelligence by electricity did away with the vast system of
warehousing required by the conditions of former commerce. These
economies of the foundational transport industries have deeply
affected the whole commerce and manufacture of the country, and have
played no inconsiderable part in bringing about the general fall of
prices by lowering the expenses of production and stimulating an
increased output.

Excessive production of transport-machinery, especially of railways,
has played an important part as an immediate cause of modern trade
depression. The depression beginning in 1873 and culminating in 1878
is described as having its origin "in the excessive lock-up of capital
in the construction of railways, especially in America and Germany,
many of which, when built, had neither population to use them nor
traffic to carry; in the wild speculation that followed the German
assertion of supremacy on the Continent; in the exaggerated armaments,
which withdrew an inordinate amount of labour from productive
industry, and over-weighed the taxpayers of the great European
nations; and in over-production in the principal trades in all
European countries."[155]

Mr. Bowley points out that "after each of the great railway booms of
the century, for instance in England about 1847, in America before
1857 and 1873, in India in 1878, and on the Continent in 1873, the
collapse has been very violent; for the materials are bought at
exaggerated prices; the weekly wage during construction is enormous;
no return is obtained till the whole scheme, whose carrying out
probably lasts many years, is complete."

A great deal of this railway enterprise meant over-production of forms
of transport-capital and a corresponding withholding of current
consumption. In other words, a large part of the "savings" of England,
Germany, America, etc., invested in these new railways, were
sterilised; they were not economically needed to assist in the work of
transport, and many of them remain almost useless, as the quoted value
of the shares testifies. It is not true, as is sometimes suggested,
that after a great effort in setting on foot such gigantic
enterprises, a collapse is economically necessary. If the large
incomes and high wages earned in the period prior to 1873, when
capital and labour found full employment in these great enterprises,
had been fully applied in increased demand for commodities and an
elevated standard of consumption, much of the new machinery of
transport, which long stood useless, would have been required to
assist in forwarding goods to maintain the raised standard of
consumption. This argument, of course, assumes that ignorance or fraud
have not caused a misdirection of investment. There is no evidence to
indicate that the vast sums invested in 1869-72 in railway enterprise
could have found any safer or more remunerative investment. It is the
overflow of "savings," after all capital economically needed to carry
on the work of production to supply steady current wants has been
secured, that flows into the hands of speculative company-promoters.
Such savings are not diverted from safe and useful forms of
investment, they are "savings" which ought never to have been
attempted, for they have no economic justification in the needs of
commerce, as is proved by results.

§ 4. The direct causal connection between the increased productive
power of modern machinery and trade depression clearly emerges from a
comparison of the fluctuations in the several departments of industry
in different industrial countries. As modern machinery and modern
methods of commerce are more highly developed and are applied more
generally, trade fluctuations are deeper and more lasting. A
comparison between more backward countries largely engaged in raising
food and raw materials of manufacture for the great manufacturing
countries is sometimes adduced in support of the contention that
highly-evolved industry is steadier. But though Mr. Giffen is
undoubtedly correct in holding that depressions are often worse in
countries producing raw materials than in manufacturing
countries,[156] this is only true of raw-material producing countries
which produce for export, and which are therefore dependent for their
trade upon fluctuations in demand for commodities in distant markets
whose movements they are least able to calculate or control.
Irregularity of climate, disease, and other natural causes must be a
constant source of fluctuation in the productivity of agriculture. But
those non-manufacturing countries which are little dependent upon
commerce with manufacturing nations, and which are chiefly
self-supporting, will of necessity retain a larger variety of
agriculture and of other primitive industries, and will therefore be
less at the mercy of some climatic or other injury than a country more
specialised in some single crop or other industry. The specialisation
impressed upon a backward country by commerce with advanced industrial
countries, confining it to growing cotton or wheat or sheep or wine,
exaggerates the irregularity imposed by nature upon its productivity,
by making it subservient to the fluctuating demands of distant and
wholly incalculable markets. The fluctuations brought about by
irregular consumption and uncontrolled production in highly-evolved
industrial countries are thus reflected with terrible force upon the
more primitively-ordered parts of the industrial world. Thus does the
character of modern machine-industry impress itself on the countries
which feed it with raw materials.

If we turn to investigate the several departments of industry in the
more highly-evolved communities, where statistics yield more accurate
information, we have most distinct evidence that so far as the
world-market is concerned, the fluctuations are far more extreme in
the industries to which machine-production and high organisation have
been applied. An investigation of changes of wholesale prices
indicates that the most rapid and extreme fluctuations are found in
the prices of textile and mineral materials which form the foundation
of our leading manufactures. A comparison of the price changes of food
as a whole, and of corn prices with textiles and minerals, shows that
especially during the last thirty years the fluctuations of the latter
have been much more rapid and pronounced. (See following diagrams.)

    [Illustration: COURSE OF AVERAGE PRICES OF GENERAL
    COMMODITIES.]

    [Illustration: CORN PRICES.]

§ 5. It ought to be clearly understood that the real congestion with
which we are concerned, the over-supply, does not chiefly consist of
goods in their raw or finished state passing through the machine on
their way to the consumer. The economic diagnosis is sometimes
confused upon this point, speaking of the increased productive power
of machinery as if it continued to pour forth an unchecked flood of
goods in excess of possible consumption. This shows a deep
misunderstanding of the malady. Only in its early stages does it take
this form. When in any trade the producing power of machinery is in
excess of the demand at a remunerative price, the series of processes
through which the raw material passes on its way to the consumer
soon become congested with an over-supply. This, however, need not be
very large, nor does it long continue to grow. So long as the
production of these excessive wares continues, though we have a
growing glut of them, the worst features of industrial disease do not
appear; profits are low, perhaps business is carried on at a loss, but
factories, workshops, mines, railways, etc., are in active operation;
wages may be reduced, but there is plenty of employment. It is when
this congestion of goods has clogged the wheels of the industrial
machine, retarded the rate of production, when the weaker
manufacturers can no longer get credit at the bank, can no longer meet
their engagements, and collapse, when the stronger firms are forced to
close some of their mills, to shut down the less productive mines, to
work short hours, to economise in every form of labour, that
depression of trade assumes its more enduring and injurious shape.
The condition now is not that of an increasing glut of goods; the
existing glut continues to block the avenues of commerce and to check
further production, but it does not represent the real burden of
over-supply. The true excess now shows itself in the shape of idle
machinery, closed factories, unworked mines, unused ships and railway
trucks. It is the auxiliary capital that represents the bulk of
over-supply, and whose idleness signifies the enforced unemployment of
large masses of labour. It is machinery, made and designed to increase
the flow of productive goods, that has multiplied too fast for the
growth of consumption. This machinery does not continue in full use, a
large proportion of it is not required to assist in producing the
quantity of consumptive goods which can find a market, and must of
necessity stand idle; it represents a quantity of useless forms of
capital, over-supply, and its unused productive power represents an
incomparably larger amount of potential over-supply of goods. Economic
forces are at work preventing the continuation of the use of this
excessive machinery; if it were used in defiance of these forces, if
its owners could afford to keep it working, there would be no market
for the goods it would turn out, and these too would swell the mass of
over-supply.

    [Illustration: GENERAL FOOD PRICES.]

    [Illustration: MINERAL PRICES.]

§ 6. The general relation of modern Machinery to Commercial Depression
is found to be as follows:--Improved machinery of manufacture and
transport enables larger and larger quantities of raw material to pass
more quickly and more cheaply through the several processes of
production. Consumers do not, in fact, increase their consumption as
quickly and to an equal extent. Hence the onward flow of productive
goods is checked in one or more of the manufacturing stages, or in the
hands of the merchant, or even in the retail shop. This congestion of
the channels of production automatically checks production, depriving
of all use a large quantity of the machinery, and a large quantity of
labour. The general fall of money income which has necessarily
followed from a fall of prices, uncompensated by a corresponding
expansion of sales, induces a shrinkage of consumption. Under
depressed trade, while the markets continue to be glutted with unsold
goods, only so much current production is maintained as will
correspond to the shrunk consumption of the depressed community.
Before the turn in the commercial tide, current production even falls
below the level of current consumption, thus allowing for the gradual
passage into consumption of the glut of goods which had congested the
machine. After the congestion which had kept prices low is removed,
prices begin to rise, demand is more active at each point of industry,
and we see the usual symptoms of reviving trade.

    [Illustration: TEXTILE PRICES.]

This is an accurate account of the larger phenomena visible in the
commercial world in a period of disturbance. When the disease is at
its worst, the activity of producer and consumer at its lowest, we
have the functional condition of under-production due to the pressure
of a quantity of over-supply, and we have a corresponding state of
under-consumption.

§ 7. Machinery thus figures as the efficient cause of industrial
disease, but the real responsibility does not rest on the shoulders of
the inventor of new machinery, or of the manufacturer, but of the
consumer.

The root-evil of depressed trade is under-consumption.[157] If a
quantity of capital and labour is standing idle at the same time, in
all or in the generality of trades, the only possible reason why they
remain unemployed is that there is no present demand for the goods
which by co-operation they are able to produce.

English economists, most of whom, ever since the time of J.B. Say,
have denied the possibility of the condition of general over-supply
which is seen to exist in depressed trade, are contented to assume
that there can be no general over-supply because every one who
produces creates a corresponding power to consume. There cannot, it is
maintained, be too much machinery or too much of any form of capital
provided there exists labour to act with it; if this machinery,
described as excessive, is set working, some one will have the power
to consume whatever is produced, and since we know that human wants
are insatiable, too much cannot be produced. This crude and
superficial treatment, which found wide currency from the pages of
Adam Smith and McCulloch, has been swallowed by later English
economists, unfortunately without inquiring whether it was consistent
with industrial facts. Since all commerce is ultimately resolvable
into exchange of commodities for commodities, it is obvious that every
increase of production signifies a corresponding increase of power to
consume. Since there exists in every society a host of unsatisfied
wants, it is equally certain that there exists a desire to consume
everything that can be produced. But the fallacy involved in the
supposition that over-supply is impossible consists in assuming that
the power to consume and the desire to consume necessarily co-exist in
the same persons.

In the case of a glut of cotton goods due to an increased application
of machinery, the spinners and manufacturers have the power to consume
what is produced, while a mass of starving, ill-clad beings in Russia,
East London--even in Manchester--may have the desire to consume these
goods. But since these latter are not owners of anything which the
spinners and manufacturers wish to consume or to possess, the exchange
of commodities for commodities cannot take place. But, it will be
said, if the Lancashire producers desire to consume anything at all,
those who produce such articles of desire will have the power, and
possibly the desire, to consume more cotton goods, or at any rate the
desire to consume something produced by other people who will have
both power and desire to consume cotton goods. Thus, it will be said,
the roundabout exchange of commodities for commodities must be brought
about. And this answer is valid, on the assumption that the Lancashire
producers desire to consume an equivalent of the goods they produce.
But let us suppose they do not desire to do so. The reply that since
human wants are insatiable every one with power to consume must have
desire to consume, is inadequate. In order to be operative in the
steady maintenance of industry the desire to consume must be a desire
to consume _now_, to consume continuously, and to consume to an extent
corresponding with the power to consume.

Let us take the Lancashire trade as a test case. Evidently, there
could be no superfluous capital and labour in Lancashire trade if the
cotton-spinners, manufacturers and their operatives, increased their
own consumption of cotton goods to correspond with every increase of
output.

But if they do not do this, they can only make good and maintain
their capital and labour in employment by persuading others to
increase their consumption of cotton goods. How can they do this? If,
instead of desiring to consume more cotton goods, the Lancashire
employers and operatives desire to consume, and do actually consume,
more hardware, houses, wine, etc., then the increased consumption of
these things, raising their prices and so stimulating their
production, and distributing a larger purchasing-power among the
capitalists and operatives engaged in producing the said hardware,
houses, wine, etc., will enable the latter to consume more cotton
goods, and if these desire to do so, their effective demand will
maintain the new capital and labour employed in Lancashire trade.

But if, instead of taking this course, the Lancashire capitalists and
operatives want not to consume either cotton or anything else, but
simply to _save_ and put up more mills and prepare more yarn and
cloth, they will soon find they are attempting the impossible. Their
new capital, and the fresh labour conjoined with it, can only be
employed on condition that they or others shall increase their
consumption of cotton goods. They themselves _ex hypothesi_ will not
do so, and if the capitalists and operatives engaged in setting up the
new cotton-mills, etc., will consent to do so, this only postpones the
difficulty, unless we suppose a continuous erection of new mills, and
a continuous application on the part of those who construct these
mills of the whole of their profits and wages in demanding more cotton
goods--a _reductio ad absurdum_. In short, cotton capitalists and
operatives can only effect this saving and provide this increased
employment of capital and labour on condition that either those
engaged in erecting and working the new mills shall spend all their
income in demanding cotton goods, or that other persons shall diminish
the proportion of their incomes which hitherto they have saved, and
shall apply this income in increased demand for cotton goods.

Now if the same motives which induce Lancashire capitalists and
workers to refuse to increase their present consumption _pari passu_
with the rate of production are generally operative, it will appear
that capital and labour lie idle because those who are able to consume
what they could produce are not willing to consume, but desire to
postpone consumption--_i.e._, to save.

§ 8. The process of "Saving" has received but scant attention from
economic writers. Jevons appears to have held that superfluous food
and other necessary consumptive goods, in whosoever hands they were,
constituted the only true fund of capital in a community at any given
time. Sidgwick also holds that all "Savings" are in the first instance
"food." That this is not the case will appear from the following
example:--A self-sufficing man produces daily for his daily
consumption a quantity of food, etc., denoted by the figure 10. 5 of
this is necessary and 5 superfluous consumption. This man, working
with primitive tools, discovers an implement which will greatly
facilitate his production, but will cost 4 days' labour to make. Three
alternatives are open to him. He may spend half his working day in
producing the strictly necessary part of his previous consumption, 5,
and devote the other half to making the new implement, which will be
finished in 8 days. Or he may increase the duration of his working day
by one quarter, giving the extra time to the making of his new
implement, which will be finished in 16 days. Or lastly, he may
continue to produce consumptive goods as before, but only consume half
of them, preserving the other half for 8 days, until he has a fund
which will suffice to keep him for 4 continuous days, which he will
devote to making the new implement. If he adopts the first
alternative, he simply changes the character of his production,
producing in part of his working day future goods instead of present
consumptive goods. In the second he creates future goods by extra
labour. In the third case only does the "saving" or new "capital" take
as its first shape food. In the same way a community seeking to
introduce a more "roundabout" method of production requiring new
plant, or seeking to place in the field of industry a new series of
productive processes to satisfy some new want, may achieve their
object by "saving" food, etc., or by changing for awhile the character
of their production, or by extra labour. Thus new capital, whether
from the individual or the community point of view, may take either
"food" or any other material form as its first shape.

Since "savings" need not take the shape of food or any article capable
of immediate consumption, Adam Smith and J.S. Mill are clearly wrong
when they urge in terms almost identical[158] that what is saved is
necessarily consumed, and consumed as quickly as that which is spent.
The antithesis of saving and spending shows these writers, and the
bulk of English economists who follow them, are misled, because they
regard "saving" as doing something with money, and do not sufficiently
go behind the financial aspect of putting money into a bank.

A closer analysis of saving yields the result that, except in one of
the simple cases taken in our example above, where "saving" implied
withholding consumable goods from present consumption, every act of
saving in a complex industrial society signifies making, or causing to
be made, forms of capital which are essentially incapable of present
consumption--_i.e._, future or productive goods.

Each member of an industrial community receives his money income as
the market equivalent of value created in goods or services by the
requisites of production, land, capital, labour which he owns. For
every £1 paid as income an equivalent quantity of material or
non-material wealth has been already created.

Let A be the owner of a requisite of production, receiving £500 a year
as income in weekly payments of £10. Before receiving each £10 he has
caused to come into existence an amount of wealth which, if material
goods, may or may not be still in existence; if services, has already
been consumed. It is evident that A may each week consume £10 worth of
goods and services without affecting the general condition of public
wealth. A, however, determines to consume only £5 worth of goods and
services each week, and puts the other £5 into the bank. Now what
becomes of the £5 worth of goods and services which A might have
consumed, but refused to consume? Do they necessarily continue to
exist so long as A is credited with the money which represents their
"saving"; if so, in what form? In other words, what actually takes
place in the world of commerce when money income is said to be saved,
what other industrial facts stand behind the financial fact of A
depositing part of his income in the bank as "savings"?

To this question several answers are possible.

(1) B, a spendthrift owner of land or capital, wishing to live beyond
his income, may borrow from the bank each £5 which A puts in,
mortgaging his property. In this case B spends what A might have
spent; B's property (former savings perhaps?) falls into A's hands. A
has individually effected a "saving" represented by tangible property,
but as regards the community there is no saving at all, real or
apparent.

(2) C, a fraudulent promoter of companies, may by misrepresentation
get hold of A's saved money, and may spend it for his own enjoyment,
consuming the goods and services which A might have consumed, and
giving to A "paper" stock which figures as A's "savings." Here A has
individually effected no saving.

From the point of view of the community there is no real saving (C has
consumed instead of A), but so long as the "stock" has a market value
there is an apparent saving. To this category belongs the "savings"
effected if A lends his money to a government to be spent on war. From
the standpoint of the community there is no saving (unless the war be
supposed to yield an asset of wealth or security), but A's paper stock
represents his individual saving. A's "saving" is exactly balanced by
the spending of the community in its corporate capacity, A receiving a
mortgage upon the property of the community.[159]

(3) D and E, manufacturers or traders, engaged in producing luxuries
which A used to buy with his £5 before he took to saving, finding
their weekly "takings" diminished and being reduced to financial
straits, borrow A's "savings" in order to continue their business
operations, mortgaging their plant and stock to A. So long as, with
the assistance of A's money, they are enabled to continue producing,
what they produce is over-supply, not needed to supply current
consumption, assuming the relation between spending and saving in the
other members of the community remains unaltered. This over-supply is
the material representative of A's "savings." So far as real capital
is concerned there is no increase by A's act of saving, rather a
decrease, for along with the net reduction in the consumption of
luxuries on the part of the community due to A's action, there must be
a fall in the "value" of the capital engaged in the various processes
of producing luxuries, uncompensated by any other growth of values.
But by A's "saving" new forms of capital exist which bear the
appearance of capital, though in reality they are "over-supply." These
empty forms represent A's saving. Of course A, with full knowledge of
the facts, would only lend to D and E up to the real value of their
mortgaged capital. When this point was reached D and E could get no
further advances, and their stock and plant would pass into A's hands.
From the point of view of the community A's action has resulted in the
creation of a number of material forms of capital which, so long as
the existing relations between the community's production and
consumption continue, stand as over-supply.

(4) A may hand over his weekly £5 to F on security. F by purchase
obtains the goods which A refused to consume, and may use them (or
their equivalent in other material forms) as capital for further
production. If F can with this capital help to produce articles for
which there is an increasing consumption, or articles which evoke and
satisfy some new want, then A's action will have resulted in "saving"
from the point of view of the community--_i.e._, there will be an
increase of real capital; forms of capital which would otherwise have
figured as over-supply have the breath of economic life put into them
by an increase in general consumption. No real difficulty arises from
a doubt whether the goods and services which A renounced were capable
of becoming effective capital. The things he renounced were luxurious
consumptive goods and services. But he could change them into
effective capital in the following way:--Designing henceforth to
consume only half his income, he would deliberately employ half the
requisites of production which furnished his income in putting extra
plant, machinery, etc., into some trade. Whether he does this himself,
or incites F to do it, makes no difference; it will be done. In this
way, by establishing new forms of useful capital, A can make good his
saving, assuming an increase of general consumption. These are the
four possible effects of A's saving from the point of view of the
community--

    (1) Nil.
    (2) Bogus or "paper" saving.
    (3) Over-supply of forms of capital.
    (4) Increase of real capital.

It appears then that every act which in a modern industrial society is
"saving," from the standpoint of the community, and not a mere
transfer of "spending" from one person to another, consists in the
production of a form of goods in its nature or position incapable of
present consumption.

This analysis of "saving" convicts J.S. Mill of a double error in
saying, "Everything which is produced is consumed; both what is saved
and what is said to be spent; and the former quite as rapidly as the
latter." In the first place, by showing that "saving," from the point
of view of the community, generally means producing something
incapable of present consumption, it proves that even if what is
"saved" is consumed, it is not consumed as quickly as what is spent.
Mill seemed to think that what was "saved" was necessarily food,
clothing, and so-called finished goods, because "saving" to him was
not a process, but a single negative act of refusing to buy. Because a
man who has "saved" has command of an extra stock of food, etc., which
he may hand over to labourers as real wages, he seems to think that a
community which saves will have its savings in this form. We see this
is not the case. Even where in a primitive society extra food is the
first form savings may take, it belongs to the act of saving that this
food shall not be consumed so soon as it was available for
consumption. In short, Mill's notion was that savings must necessarily
mean a storing up of more food, clothing, etc., which, after all, is
not stored, but is handed over to others to consume. He fails to
perceive that a person who saves from the social as opposed to the
individual point of view necessarily produces something which neither
he nor any one else consumes at once--_i.e._, steam engines, pieces of
leather, shop goods. A "saving" which is merely a transfer of spending
from A to B is obviously no saving from the point of view of the
community to which both A and B belong. If A, who is said to save,
pays wages to B, who makes a machine which would otherwise not have
been made, when this machine is made something is saved, not before.

Though Mill does not seem, in Bk. I. chap, v., to regard increased
plant, machinery, etc., as "savings," but rather as something for
which "savings" may be exchanged,[160] the more usual economic view of
"savings" embodies part of them in plant and raw material, etc., and
considers the working up of these into finished goods as a
"consumption." But though industrial usage speaks of cotton yarn,
etc., being consumed when it is worked up, the same language is not
held regarding machinery, nor would any business man admit that his
"capital" was consumed by the wear and tear of machinery, and was
periodically replaced by "saving." The wearing away of particular
material embodiments of capital is automatically repaired by a process
which is not saving in the industrial or the economic sense. No
manufacturer regards the expenditure on maintenance of existing plant
as "saving"; what he puts into additional plant alone does he reckon
"savings." It would be well for economists to clearly recognise that
this business aspect of capital and saving is also the consistent
scientific aspect. "Saving" will then be seen to apply exclusively to
such increased production of plant and productive goods as will
afterwards yield an increased crop of consumptive goods, provided the
community is willing to consume them. "Saving" is postponed
consumption--_i.e._, the production of "future goods," plant,
machinery, raw materials in their several stages, instead of
commodities suitable for immediate consumption.

§ 9. There are, in fact, two distinct motives which induce individuals
to continue to produce, one is the desire to consume, the other the
desire to save--_i.e._, to postpone consumption. It is true that the
latter may be said also to involve a desire to consume the results of
the savings at some indefinitely future time, but the motive of their
production at present is a desire to reduce the quantity of the
present consumption of the community, and to increase the quantity of
postponed consumption.

It is this consideration which gives the answer to the single sentence
of J.S. Mill, which has been sometimes held to offer a complete
refutation of the notion of an existing state of over-supply. "The
error is in not perceiving that, though all who have an equivalent to
give _might_ be fully provided with every conceivable article which
they desire, the fact that they go on adding to the production proves
that this is not actually the case."[161] Here the present desire to
consume either what is produced or its equivalent is assumed to be the
only motive which can lead an individual to produce. The fact that
people go on producing is regarded as proof that they are not "fully
provided with every conceivable article they desire." If this were
true it would be a final and conclusive refutation of the idea of
over-supply. But if saving means postponed consumption, and the desire
to save, as well as the desire to consume, is a _vera causa_ in
production, then the fact of continued production affords no proof
that such production must be required to supply articles which are
desired for consumption. Ultimately a belief that some one will
consent to consume what is produced underlies the continued production
of "a saving person," but, as we shall see presently, the belief of a
competing producer that he can get a market for his goods, even when
justified by events, is no guarantee against excessive production in
the whole trade.

If, then, those who have the power to consume in the present desire to
postpone their consumption they will refuse to demand consumptive
goods, and will instead bring into existence an excess of productive
goods.

§ 10. The diagram on next page may serve more clearly to indicate the
quantitative maladjustment of Consuming and Saving which constitutes
under-consumption, and exhibits itself in a plethora of machinery and
productive goods.

    [Illustration: MECHANISM OF PRODUCTION.]

A, B, C, D, E represent the several stages through which the raw
material obtained from Nature passes on its way to the position of a
consumer's utility. The five stages represent the five leading
processes in production--the extractive process, transport,
manufacture, wholesale and retail trade. The raw materials extracted
at A, the wheat, skins, iron, timber, cotton, etc., obtained from
various quarters of the globe, are gathered together in large
quantities into places where they undergo various transformations of
shape and character; they are then distributed by wholesale and retail
merchants, who hand them over to persons who consume them as bread,
boots, kettles, chairs, shirts. The extractive, transport,
manufacturing, and merchant stages may of course be subdivided into
many complex processes, as applied to the history of the more
elaborately-produced commodities. But at each point in the process of
production there must stand a quantity of plant and machinery designed
to assist in moving the productive goods a single step further on the
road towards consumption. This fixed capital is denoted by the black
circles placed at the points A, B, C, D, E. But each machine, or
factory building, or warehouse is itself the ultimate product of a
series of steps which constitute a process similar to that denoted by
the main channel of production. Consisting in raw material extracted
from nature, the machinery and plant are built up by a number of
productive stages, which correspond to A, B, C, D, E, into the
completed shapes of fixed capital, adjusted to the positions where
they can give the proper impulse to the main tide of production. Each
productive stage in the production of plant or machinery requires the
presence of other plant and machinery to assist its progress. Each of
these secondary forms of fixed capital situate at _a_, _b_, _c_, _d_,
_e_, has of course a similar history of its own. To represent the full
complexity of the mechanism of industry thus suggested would be
confusing and would serve no purpose here. It is sufficient that we
recognise that at each point A, B, C, D, E, and at each of the points
_a_, _b_, _c_, _d_, _e_, upon the perpendicular lines, stands a
quantity of forms of fixed capital which are gradually worn out in the
work of forwarding quantities of A to B, and quantities of B to C, and
so on. Now if we turn to the point F, where goods pass out of the
productive machine into the hands of consumers, who destroy them by
extracting their "utility or convenience," we shall find in this flow
of goods out of the industrial machine the motive-force and regulator
of the activity of the whole machine.

Let us take an illustration from a single trade, the shoe trade. The
number of boots and shoes purchased by consumers at retail shops and
drawn out from the mechanism at the point F, determines the rate at
which retailers demand and withdraw shoes from wholesale merchants,
assuming for the sake of simplicity that all shopkeepers deal with
manufacturers through the medium of merchant middlemen. If the number
of sales effected in a given time by retailers increases, they
increase their demand from the merchants, if it falls off they lower
their demand. The quantity of goods which retailers will in normal
conditions keep in stock will be regulated by the demand of
consumers.[162] Thus the flow of shoes from D to E, and the quantity
of shoes which at any given time are at the point E, are determined by
the demand of consumers--that is to say, by the quantity or pace of
consumption. If, owing to miscalculation, a larger number of shoes
stands in the retail shops than is required to satisfy current
consumption, or if the flow from D to E is faster than the outflow
from E, this excess ranks as an over-supply of these forms of capital.
Now just as the demand of consumers determines the number of shoes
which stand at E and flow from D to E, so the demand of the retailer
determines the number of shoes which at any time constitutes the stock
of the merchants at D, and the size and number of the orders they give
to the manufacturers at C. Similarly with the earlier processes of
production; the flow of leather from the "tanners" and the quantity of
leather kept in stock are likewise determined by the demand of the
manufacturers; and the transport of hides and bark, and the demand for
these materials of tanning, will be regulated by the demands of the
tanners. So the quantity of stock at each of the points A, B, C, D, E,
and the rate of their progress from one point to the next, are
dependent in each case upon the quantity demanded at the next stage.
Hence it follows that the quantity of productive goods at any time in
stock at each of the points in the production of shoes, and the
quantity of productive work done and employment given at each point,
is determined by the amount of consumption of shoes. If we knew the
number of purchases of shoes made in any community by consumers in a
given time, and also knew the condition of the industrial arts at the
different points of production, we should be able to ascertain exactly
how much stock and how much auxiliary capital was required at each
point in the production of shoes. At any given time the flow of
consumption indicated by F determines the quantity of stock and plant
of every kind economically required at each point A, B, C, D, E. What
applies to the shoe trade applies to trade in general. Given the rate
or quantity of consumption in the community, it is possible to
determine exactly the quantity of stock and plant required under
existing industrial conditions to maintain this outflow of consumptive
goods, and any stock or plant in excess of this amount figures as
waste forms of capital or over-supply. F then is the quantitative
regulator of A, B, C, D, E.[163] Nor is the accuracy of this statement
impaired by the speculative character of modern trade. Speculative
merchants or manufacturers may set up business at D or C and provide
themselves with stock and machinery to start with, but unless they
meet or create a growing demand of consumers their capital is waste,
or else if they succeed in getting trade it is at the expense of other
members of the trade, and their capital is made productive by
negativing the capital of other traders.

§ 11. The truth here insisted on, that an exact quantitative relation
exists between the amount of stock and plant, severally and
collectively, required at the different points A, B, C, D, E, and that
the amount economically serviceable at each point is determined by the
quantity of current consumption, would seem self-evident. But though
this has never been explicitly denied, the important results following
from its recognition have been obscured and befogged by several
conceptions and phrases relating to capital which have found
acceptance among English economists.

Chief and foremost among these errors is the framing of a definition
of capital so as to exclude the clear separation of productive goods
and machinery, the economic means, from consumptive goods, the
economic end. So long as a definition of capital is taken which
includes any consumptive goods whatsoever, two results follow. One is
a hopeless confusion in the commercial mind, for in commerce
everything is capital which forms the stock or plant of a commercial
firm, and nothing is capital which does not form part of such stock or
plant. Secondly, to include under capital the food in the possession
of productive labourers or any other consumptive goods is an
abandonment of the idea of consumption as the economic end and a
substitution of production.

If we follow Böhm-Bawerk and the Austrian economists in definitely
refusing to include the consumptive goods of labourers as
capital,[164] we get a conception of capital which is at once in
accordance with the universal conception of commercial men, and which
enables us to realise the vital relation between capital and
consumption. We now see Capital in the form of stock and plant at each
point in the industrial machine deriving its use and value from its
contribution to the end, Consumption, and dependent for its quantity
upon the quantity of Consumption. We have seen that a demand for
commodities is the true and exact determinant of the quantity of
capital at each industrial stage. It is therefore the determinant of
the aggregate of wealth which can function as useful forms of capital
in the industrial community at any given time. The aggregate of plant
and stock which constitute the material forms of capital at the points
A, B, C, D, E must in a properly adjusted state of industry have an
exact quantitative relation to the consumption indicated by F. If F
increases, the quantity of forms of capital at A, B, C, D, E may
severally and collectively increase; if F declines, the useful forms
of capital at each point are diminished. Since we have seen that the
sole object of saving from the social point of view is to place new
forms of capital at one of the points A, B, C, D, E, it is evident
that the amount of useful saving is limited by the rate of
consumption, or financially, by the amount of "spending." Where there
is an improvement in the general productive power of a community, only
a certain proportion of that increased power can be economically
applied to "saving"--_i.e._, to the increase of forms of capital; a
due proportion must go to increased spending and a general rise in
consumption.

§ 12. This will hardly be disputed, except by those who still follow
Mill in maintaining that the whole of the current production could be
"saved," with the exception of what was required to support the
efficiency of labour, a doctrine to which even he could only give
passing plausibility by admitting that the increased savings which
resulted from an attempt to do this would take the shape of luxuries
consumed by the said labourers--that is to say, would not be "savings"
at all, but a transfer of "spending" from one class to another.[165]
If capital be confined to commercial capital, and "saving" to the
establishment of the forms of such capital, no one will deny that the
quantity of "saving" which can be effectually done by a community at
any time depends upon the current rate of consumption, or that any
temporary increase of such saving must be justified by a corresponding
future increase in the proportion of spending.[166]

This will be generally admitted. But there are those who will still
object that production just as much limits and determines consumption
as consumption does production, and who appear to hold that any
increase in present saving, and the consequent increase of amount of
plant and stock, has an economic power to force a corresponding rise
of future consumption which shall justify the saving. This they urge
in the teeth of the fact that in a normal state of industry in
machine-using countries there exists more machinery and more labour
than can find employment, and that only for a brief time in each
decennial period can the whole productive power of modern machinery be
fully used, notwithstanding the increasing blood-letting to which
superfluous saving is exposed by the machinations of bogus companies,
in which the "saving" done by the dupes is balanced by the "spending"
of the sharps. Ignoring the fact that the alleged power of increased
saving to stimulate increased consumption is not operative, they still
maintain that there cannot be too much "saving," because the tendency
of modern industry is to make production more and more "roundabout" in
its methods, and thus to provide scope for an ever-increasing quantity
of forms of capital.

Under modern machinery we see a constant increase in the number of
direct and subordinate processes connected with the forwarding of any
class of commodities to its completion. A larger proportion of the
productive labour and capital is employed, not upon the direct
horizontal line, but upon the perpendicular lines which represent the
making of subsidiary machinery. More and more saving may be stored up
in the shape of machines to make machines, and machines to make these
machines, and thus the period at which the "saving" shall fructify in
consumption may be indefinitely extended.

Some of the labour stored and the capital established in the
construction of harbours, the drainage of land, the construction of
scientific instruments, and other works of durable nature and indirect
service, may not be represented in consumptive goods for centuries.
Admitting this, it may be urged, can any limits be set to present
"saving" and its storage in forms of capital, provided those forms be
selected with a due regard to a sufficiently distant future? The answer
is that only under two conditions could an indefinitely large amount of
present "saving" be justified. The first condition is that an unlimited
proportion of this "saving" can be stored in forms which are practically
imperishable; the second condition is that our present foresight shall
enable us to forecast the methods of production and consumption which
shall prevail in the distant future. In fact neither of these conditions
exists. However much present "saving" we stored in the most enduring
forms of capital with which we are acquainted--_e.g._, in the permanent
way of railroads, in docks, in drainage and improvement of land, a large
proportion of this "saving" would be wasted if the consumption it was
destined to subserve was postponed for long.[167] Neither can we predict
with any assurance that the whole value of such "savings" will not have
disappeared before a generation has elapsed by reason of changes in
industrial methods.

The amount of present "saving" which is justified from the point of
view of the community is strictly limited. We cannot forecast the
demand of our twentieth generation of descendants, or the industrial
methods which will then prevail; we do not even know whether there
will be a twentieth generation; there are certain large inevitable
wastes in postponed consumption by reason of the perishability of all
material forms of wealth, or the abstraction of them by others than
those for whose use they were intended. Moreover, we do not believe it
would be good for our descendants to have the enjoyment of excessive
wealth without a corresponding personal effort of producing, nor would
it be good for us to exert effort without some proximate and
corresponding enjoyment. The limits of individual life rightly demand
that a large proportion of individual effort shall fructify in the
individual life.

Thus there are practical limits set upon the quantity of "saving"
which can be usefully effected by extending the interval between
effort and enjoyment. If the right period be exceeded the risk and
waste is too great. The analogy of gardening adduced by Ruskin is a
sound one.[168] By due care and the sacrifice of bud after bud the
gardener may increase the length of the stem and the size of the
flower that may be produced. He may be said to be able to do this
indefinitely, but if he is wise he knows that the increased risks of
such extension, not to mention the sacrifice of earlier units of
satisfaction, impose a reasonable limit upon the procrastination. The
proportion of "saving" which may be and is applied to establish
late-fructifying forms of wealth, differs not only with the different
developments of the industrial arts, but with the foresight and moral
character of the race and generation. As our species of civilisation
advances, and the demand for complex luxuries and the arts of
supplying them advance, a larger amount of "roundabout" production
becomes possible, and as regard for the future generations advances,
more capital will be put into forms which fructify for them. But at
the present in any given community there is a rational and a
necessary limit to the quantity of "saving" which can be applied to
such purposes.

Secondly, we find that in fact the surplus "saving" over and above
what is needed to provide the necessary forms of capital to assist in
satisfying current consumption is not absorbed in making provision for
distant future consumption by more "roundabout methods." Much of it
goes into a mere increase of the number of existing forms of capital
whose _raison d'être_ lies in the satisfaction of present or
immediately future wants. The multiplication of cotton-spinning-mills,
of paper-mills, of breweries, ironworks, has gone on far faster than
the growth of current consumption. This increase of productive
machinery has not in fact been able to force such an increase of
consumption as gives adequate employment to these new forms of
machinery and to the labour which is at hand to work them.

§ 13. It is not therefore correct to say that the rate of production
determines the rate of consumption just as much as the rate of
consumption determines the rate of production. The current productive
power of capital and labour places a maximum limit upon current
consumption, but an increase of productive power exercises no
sufficient force to bring about a corresponding rise in consumption.
Just as in a particular trade--_e.g._, the Lancashire cotton trade, an
excess of "saving" may be applied to the establishment of mills and
machinery which cannot be kept working because there is no market for
their output, so it is with trade in general. It is not true that the
inflation of capital in the Lancashire trade is due to a misdirection
which implies a lack of capital in some other branch of industry. In a
period of depression like the present every other important branch of
industry displays the same symptoms of excessive plant, over-supply of
stock, irregular and deficient employment of labour, though not to the
same extent. Nor is there any _à priori_ reason why there should not
be from time to time such general maladjustment. If ignorance and
miscalculation leads to the investment of too much capital in, say,
the cotton and iron industries, it is not unreasonable to suppose that
in a complex industrial society there should be such general
miscalculation of the right proportion between saving and spending
that too much should be saved at certain periods. That is to say,
turning again to the diagram of industry, just as it is admitted that
miscalculation may induce too much capital to be placed at A or B or
C, and too little at one of the other points of production, disturbing
the harmonious ordering of the parts of capital, so likewise there may
be a maladjustment of the proportion between A, B, C, D, E, the
aggregate of forms of capital, and F, the aggregate of consumption,
between "saving" and "spending." Now if it be admitted that such
maladjustment is possible, the balance can only lean one way. There
cannot be too little saving to furnish current consumption, taking the
industrial community as a whole, for it is impossible to increase the
rate of consumption, F, faster than the increase of the rate of
current production: any increase of the purchase of shop-goods by
raising prices and circulating more money down the paths of production
stimulates and strains the sinews of production, and if the existing
machinery of production is inadequate it supplies a motive-power to
increase "saving." In no case can a community consume faster than it
produces. An individual can do so by living on his capital, a nation
may do so for a time by living upon its capital, giving to other
nations by means of an increased debt a lien upon its future wealth.
But a whole industrial community can never live upon its capital, can
never in the literal sense of the term "spend too much." This
statement requires a single qualification. While a community can never
by "spending" deplete its capital, while it cannot increase its
"spending" without at the same time increasing its real capital,[169]
it will doubtless be profitable to a progressive community to reduce
its consumption for a while below the normal proportion in order to
fully utilise new discoveries in the industrial arts which shall
justify in the future increased consumption.

But with this necessary qualification it is true that a community
cannot exceed in the direction of spending. But the balance may lean
the other way. A community may "save too much," that is to say, it may
establish a larger quantity of productive machinery and goods than is
required to maintain current or prospective consumption. What is to
prevent a community consisting of a vast number of individuals with no
close knowledge of one another's actions, desires, and intentions,
making such a miscalculation as will lead them to place at each of the
points A, B, C, D, E, and in all or most branches of industry, a
larger quantity of forms of capital than are required?

It is said that the harmony which subsists between the social interest
and the self-interest of individuals will prevent this, or, in other
words, that individuals would find that if they attempted to unduly
increase the aggregate of capital beyond what was socially
advantageous in view of the community's consumption, it would not pay
them to do so. Is this true?

An individual working entirely for himself, whose capital lay in his
tools and his raw or unfinished commodities, would never increase the
latter unduly. A socialist community properly managed would never add
to its stock of machinery or increase the quantity of its raw
materials or unfinished goods, so as to leave any machines unused or
half used, or any goods unnecessarily occupying warehouse room and
deteriorating in quality. But when competition of individual interests
comes in there is no such security.

It may pay individuals to build new factories and put in new machinery
where it would not pay the community to do so, were it the sole owner
of the means of production.

The knowledge that enough capital is already invested in an industry
to fully supply all current demands at profitable prices has no power
to deter the investment of fresh capital, provided the new investors
have reason to believe their capital can be made to displace some
existing capital owned by others. If the new-comer can, by superior
business address, by successful advertising, by "sweating" his
employees or otherwise, get hold of a portion of the business hitherto
in the hands of other firms, it will pay him to build new factories
and stock them with the requisite machinery, and to begin the process
of manufacture. There may be in existence already more bicycle works
than are sufficient to supply the consumption of the community. But
if a would-be manufacturer thinks he can withdraw from other makers a
sufficient number of customers, he will set up works, and make new
machines, though his methods of production and the goods he turns out
may be no better than those of other makers. The same holds at every
stage of production. In wholesale or retail distribution the fact that
there are sufficient warehouses and shops in existence to adequately
supply the current demand does not prevent any one from embarking new
savings in more warehouses or shops, provided he believes he is able
to divert into his own firm a sufficient amount of the business
formerly held by others. In a district two grocers' shops may be quite
sufficient to supply the needs of the neighbourhood, and to secure
adequate competition. But if a third man, by an attractive shop-front
or superior skill in the labelling or adulteration of his wares, can
procure for himself an adequate share of the custom, it will pay him
to put the requisite plant and stock into a shop, though the trade on
the one hand and the community on the other is no gainer by his
action.

There is indeed much evidence to show that it may be to the advantage
of individuals to increase the machinery of production, even though
there is no reasonable prospect of this machinery being worked at a
profit. It is the unanimous testimony of business men that the
Lancashire trade has been congested with mills and machinery in this
way. As a result of an excessive desire to postpone consumption there
are considerable sums of money which cannot find a safe remunerative
investment. Here is the material for the company promoter. By means of
the specious falsehoods of prospectuses he draws this money together;
with him work a builder and an architect who desire the contract of
putting up the factory; the various firms interested in manufacturing
and supplying the machinery, the boiler-maker and fitters of various
kinds, the firm of solicitors whose services are requisite to place
the concern upon a sound legal footing, or to establish confidence,
take up shares. It is to the interest of all these and many other
classes of persons to bring into the field of production new forms of
capital, quite independently of the question whether the condition of
a trade or the consumption of the community have any need for them.

§ 14. These operations, which imply a conflict between the interests
of individuals and those of the community, pervade all modern
commerce, but are more prevalent in businesses where complex machinery
plays a prominent part, or where specious advertising gives the
outsider a larger chance of successful entry.

In each and all of these cases it is to the interest of the individual
to place new "savings" in new forms of capital in branches of industry
where sufficient capital already exists to assist in supplying the
current demand for consumptive goods. So far is it from being true
that the self-interest of individuals provides an economic check upon
over-supply, that it is possible that at each of the points of
production, A, B, C, D, E, and in all or the majority of industries at
the same time, there should be an excess of forms of capital as
compared with that which would suffice for the output, F. The
automatic growth of bubble companies and every species of rash or
fraudulent investment at times of depressed trade is proof that every
legitimate occupation for capital is closed, and that the current rate
of saving is beyond that which is industrially sound and requisite.
These bubble companies are simply tumours upon the industrial body
attesting the sluggish and unwholesome circulation; they are the
morbid endeavours of "saving" which is socially unnecessary, and ought
never to have taken place, to find investments. When one of these
"bubble" companies collapses it is tacitly assumed by unthinking
people that those who invested their money in it were foolish persons
who might have sought and found some better investment. Yet a little
investigation would have shown that at the time this company arose no
opportunity of safe remunerative investment open to the outside public
existed, every sound form of business being already fully supplied
with capital.

At first sight it might appear that Consols and first-class railway
and other stocks were open, and that the folly of the investors in
bogus companies consisted in not preferring a safe 2-1/2 per cent. to
a risky 5 or 10 per cent. But this argument is once more a return to
the unsound individualistic view. It was doubtless open to any
individual investor of new savings to purchase sound securities at
2-1/2 per cent., but, since the aggregate of such soundly-placed
capital would not be increased, this would simply mean the
displacement of an equal quantity of some one else's capital. A could
not buy Consols unless B sold, therefore the community to which A and
B belong could not invest any fresh savings in Consols. Any widespread
attempt on the part of those who plunged into bogus companies to try
first-class investments would obviously have only had the effect of
further reducing the real interest of these investments far below
2-1/2 per cent. The same effect would obviously follow any effective
legal interference with company-promoting of this order. The fact that
Consols and other first-class investments do not rise greatly at such
times is, however, evidence that the promoters of unsound enterprises
succeed in persuading individual investors that their chance of
success is not less than 2-1/2 per cent. In many instances the
investor may be acting wisely in preferring a smaller chance of much
higher profits, because a secure 2-1/2 per cent. may be quite
inadequate to his needs. For it must be borne in mind that a knowledge
that the new bank or new building society is unnecessary, because
enough banks and building societies already exist, does not make it
impossible or necessarily improbable that the new venture will
succeed.

The objection, then, which takes the form that over-saving cannot
exist, because the worst investments made with open eyes must be
productive of more than that which could be obtained by investing in
Consols, is not a valid one. It would only be valid on the supposition
that capital were absolutely fluid, that the quantity of
soundly-placed investments were indefinitely expansible, and that new
forms of capital had in no case the power to oust or negative the use
of old forms of capital. But this we have seen is not the case. If
there existed absolute fluidity of competition in all forms of
capital, the fact that interest for new investments stood above zero
would be a proof that there was not excess of forms of capital.
Capital appears to have this fluidity when it is regarded from the
abstract financial point of view. A man who has "saved" appears to
hold his "savings" in the form of bank credit, or other money which he
is able to invest in any way he chooses. But, as we have seen, the
real "savings," which represent his productive effort plus his
abstinence, are of necessity embodied in some material forms, and are
therefore devoid of that fluidity which appears to attach to them when
reflected in bank money.

§ 15. The evils of trade depression, or excessive growth of the forms
of capital beyond the limits imposed by consumption, are traced in
large measure directly, but also indirectly, to the free play of
individual interests in the development of machine-production. The
essential irregularities of invention, the fluctuations of public
taste, the artificial restrictions of markets, all enable individual
capitalists to gain at the public expense. The added interests of its
individual members do not make the interest of the community. All
these modes of conflict between the individual and the public interest
derive force from the complexity of modern capitalist production.

In fastening upon the uncontrolled growth of machinery the chief
responsibility for that depression of trade which is derived from an
attempt to devote too large a proportion of the productive power of
the community to forms of "saving," two points should be clearly
understood.

In the first place, it is the forms of capital and not real capital
which are produced in excess. If there are 500 spinning-mills in
Lancashire where 300 would suffice, the destruction of 200 mills would
no whit diminish the amount of real capital. If 200 mills were burnt
down, though the individual owners would sustain a loss, that loss,
estimated in money, would be compensated by a money rise in the value
of the other mills. The quantity of real capital in cotton-spinning is
dependent upon the demand for the use of such forms of capital--that
is to say, upon the consumption of cotton goods. If 300 mills are
sufficient to do the work of supplying yarn to meet the demand of all
manufacturers, the value of 500 mills is no greater than of 300;
assuming that the 500 mills equally distributed the trade, it would
simply mean that the real capital was thinly spread over 500 mills,
which could only work a little over half-time without producing a glut
of goods, instead of being concentrated upon 300 mills fully occupied.

Turning once more to the diagram,

    [Illustration]

_f_ (the current rate of consumption) determines the quantity of real
productive power of capital that can be effectively employed at each
point, _a_, _b_, _c_, _d_, _e_. The condition of the arts of industry,
including the rates of wages and other conditions of the labour
market, determines how many forms of capital (mills, warehouses,
ironworks, raw material, etc.) at any given time are socially
requisite to embody this capital. But though _f_ has an economic power
to force into existence the requisite minimum of these forms of
capital, it has no power to prevent the pressure of individual
interests from exceeding that minimum and planting at _a_, _b_, _c_,
_d_, _e_ more forms of capital than are required.

Secondly, over-production or a general glut is only an external phase
or symptom of the real malady. The disease is under-consumption or
over-saving. These two imply one another. The real income of a
community in any given year is divisible into two parts, that which is
produced and consumed, that which is produced and not consumed--_i.e._,
is saved. Any disturbance in the due economic proportion of these two
parts means an excess of the one and a defect of the other. All
under-consumption therefore implies a correspondent over-saving. This
over-saving is embodied in an excess of machinery and goods over the
quantity economically required to assist in maintaining current
consumption. It must, however, be remembered that this over-saving is
not measured by the quantity of new mills, machinery, etc., put into
industry. When the mechanism of industry is once thoroughly congested,
over-saving may still continue, but will be represented by a
progressive under-use of existing forms of capital, that unemployment
of forms of capital and labour which makes trade depression.

An increased quantity of saving is requisite to provide for an
expected increase of consumption arising from a growth of population
or from any other cause. Such increased saving is of course not
over-saving. The proportion, as well as the absolute amount of the
community's income which is saved, may at any time be legitimately
increased, provided that at some not distant time an increased
proportion of the then current income be consumed. If in a progressive
community the proportion of "saving" to consumption, in order to
maintain the current standard of living with the economic minimum of
"forms" of capital, be as 2 to 10, the proportion of saving in any
given year may be raised to 3 to 9, in order to provide for a future
condition in which saving shall fall to 1 to 11. Such increased
"saving" will not be over-saving; the forms of capital in which it is
embodied will not compete with previously existing forms so as to
bring down market prices. The efforts which take the form of permanent
improvements of the soil, the erection of fine buildings, docks,
railways, etc., for future use, may provide the opportunity to a
community of increasing the proportion of its savings for a number of
years. But such savings must be followed by an increased future
consumption without a correspondent saving attached to it. The notion
that we can indefinitely continue to increase the proportion of our
savings to our consumption, bounded only by the limit of actual
necessaries of life, is an illusion which places production in the
position of the human goal instead of consumption.

§ 16. Machinery has intensified the malady of under-consumption or
over-saving, because it has increased the opportunities of conflict
between the interests of individuals and those of the community. With
the quickening of competition in machine industries the opportunities
to individuals of making good their new "savings" by cancelling the
old "savings" of others continually grow in number, and as an ever
larger proportion of the total industry falls under the dominion of
machinery, more and more of this dislocation is likely to arise; the
struggles of weaker firms with old machinery to hold their own, the
efforts of improved machinery to find a market for its expanded
product, will continue to produce gluts more frequently, and the
subsequent checks to productive activity, the collapse of businesses,
the sudden displacement of large masses of labour, in a word, all the
symptoms of the malady of "depression" will appear with increased
virulence.

It must be clearly recognised that the trouble is due to a genuine
clash of individual interests in a competitive industrial society,
where the frequent, large, and quite incalculable effects of improved
machinery and methods of production give now to this, now to that
group of competitors a temporary advantage in the struggle. It was
formerly believed that this bracing competition, this free clash of
individual interests, was able to strike out harmony, that the steady
and intelligent pursuit by each of his own separate interest formed a
sure basis of industrial order and induced the most effective and
serviceable disposition of the productive powers of a community.

It now appears that this is not the case, and that the failure cannot
in the main be attributed to an imperfect understanding by individuals
of the means by which their several interests may be best subserved,
but is due to the power vested in individuals or groups of individuals
to secure for themselves advantages arising from improved methods of
production without regard for the vested interests of other
individuals or of society as a whole.


APPENDIX I.

ARE GOODS IN THE POSSESSION OF CONSUMERS CAPITAL?

The question whether food, clothing, etc., which are "capital" so long
as they form part of the stock of a shopkeeper, are to be regarded as
ceasing to be capital when they pass into the possession of consumers
has seldom been definitely faced by English economists. Jevons was
perhaps the first to clearly recognise the issues involved. He
writes:--"I feel quite unable to adopt the opinion that the moment
goods pass into the possession of the consumer they cease altogether
to have the attributes of capital. This doctrine descends to us from
the time of Adam Smith, and has generally received the undoubting
assent of his followers. Adam Smith, although he denied the
possessions of a consumer the name of capital, took care to enumerate
them as part of the stock of the community." (_The Theory of Political
Economy_, 2nd edit., p. 280.)

As a historical judgment this is very misleading. Adam Smith, chiefly
impressed by the necessity of separating consumptive goods from goods
used as a means of making an income--_e.g._, commercial capital, quite
logically severed revenue from capital as a distinct species of the
community's stock. His "followers," however, differed very widely, and
usually expressed themselves obscurely. Generally speaking, the
English economists of the first half of this century inclined to the
inclusion of certain consumptive goods in the possession of labourers
under capital. Ricardo, for example, thus expresses himself:--"In
every society the capital which is employed in production is
necessarily of limited durability. The food and clothing consumed by
the labourer, the buildings in which he works, the implements with
which his labour is assisted, are all of a perishable value. There is,
however, a vast difference in the time for which all these different
capitals will endure. A steam engine will last longer than a ship, a
ship than the clothing of the labourer, and the clothing of the
labourer than the food which he consumes." (_Principles of Political
Economy_, 1817, p. 22.) The last sentence is conclusive in its
inclusion under capital of goods in the possession of labourers.
McCulloch again regrets Smith's exclusion of "revenue" from capital,
insisting that "it is enough to entitle an article to be considered
capital that it can directly contribute to the support of man or
assist him in appropriating or producing commodities," and he would
even go so far as to include "a horse yoked to a gentleman's coach,"
on the ground that it was "possessed of the capacity to assist in
production." (_Principles of Political Economy_, Part I., chap. ii. §
3.)

Malthus does not, so far as I can ascertain, face the question. James
Mill alone, among the earlier nineteenth century economists,
definitely excludes labourers' consumptive goods from capital.
(_Principles of Political Economy_, chap. i. § 2.) J.S. Mill is not
equally clear in his judgment. In Bk. I., chap. iv. § 1, food
"destined" for the consumption of productive labourers apparently
ceases to be capital when it is already "appropriated to the
consumption of productive labourers." This position, however, is not
consistent with his later position regarding the unlimited character
of saving, which can only be justified by regarding real wages when
paid as continuing to be capital. Fawcett is vague, but he is disposed
not only to include under capital food which is in the possession of
consumers, but to exclude food which is in the possession of dealers.
"If a man has so much wheat, it is wealth which may at any moment be
employed as capital; but this wheat is not made capital by being
hoarded; it becomes capital when it feeds the labourers, and it cannot
feed the labourers unless it is consumed." (_Manual of Political
Economy_, Bk. I., chap, iv., p. 29.) Among later English writers,
Cairnes, like all holders of the "Wages fund" doctrine, does not
clearly meet the question, "Does the food, etc., forming the real wage
fund which is one part of capital, cease to be capital when it is
actually paid out in wages?" He plays round the question in _Leading
Principles_, Part II., chap. i. Bonamy Price includes consumptive
goods. "It is to be remarked of all this capital, these materials,
implements, and necessaries for the labourers, that they are consumed
and destroyed in the process of creating wealth, some rapidly, some
more slowly. Thus the very purpose of capital is to be consumed and
destroyed; it is procured for that very end." (_Practical Political
Economy_, pp. 103, 104.) Since, he adds a little later, "an article
cannot be declared to be capital or not capital till the purpose it is
applied to is determined," it would appear that flour in the dealer's
hands is not capital, but that it only becomes capital when handed
over to persons who productively consume it. Thorold Rogers appears to
take the same view, holding the food of a country to be part of its
capital irrespective of the consideration in whose hands it is.
(_Political Economy_, p. 61.) Professor Sidgwick appears to regard
"food" consumed by productive labourers as capital. "On this view it
is only so far as the labourer's consumption is distinctly designed to
increase his efficiency that it can properly be regarded as an
investment of capital." (_Principles of Political Economy_, Bk. I.,
chap. v.)

General Walker apparently holds that stored food used to support
productive work is capital in whosoever hands it lies. (_Political
Economy_, 2nd edit., § 87.) He is, however, concerned with
illustrations from primitive society, and possibly might hold the food
ceased to be capital if paid over by one person to another as wages.

Hearn, on the contrary, definitely excludes consumptive goods. "The
bullock, which when living formed part of the capital of the grazier,
and when dead of the butcher, is not capital when the meat reaches the
consumer." (_Plutology_, p. 135.)

Professor Marshall defers to the commercial usage so far as to apply
the term Trade Capital to "those external things which a person uses
in his trade, either holding them to be sold for money, or applying
them to produce things that are to be sold for money." But turning to
the individual, he insists upon speaking of the necessaries he
consumes to enable him to work as "capital." "Some enjoyment is indeed
derived from the consumption of the necessaries of life which are
included under capital; but they are counted as capital because of the
work for the future which they enable people to do, and not on account
of the present pleasure which they afford." (_Principles_, 2nd edit.,
p. 125.)

These instances show that Jevons is wrong in attributing to English
economists a general acceptance of the belief that goods cease to be
capital when they come into the possession of consumers. They also
serve to explain the source of the conflict of judgment and the
confusion of expression. Economists who take it to be the end of
industrial activity to place in the possession of consumers goods
which shall satisfy their desires, regard "capital" as a convenient
term to cover those forms of wealth which are a means to this end, and
are thus logically driven to exclude all consumers' goods from
capital. This view of capital coincides with the ordinary accepted
commercial view which regards capital not from its productivity side
but from its income-yielding side. Those economists, on the other
hand, who actually, though not avowedly, take production to be the end
of industry, regard as "capital" all forms of material wealth which
are means to that end, and therefore include food, etc., productively
consumed by labourers. If work considered as distinct from enjoyment
be regarded as the end, it is reasonable enough that some term should
be used to cover all the forms of material wealth serviceable to that
end. It is, however, unfortunate that the term "capital" should be
twisted from its fairly consistent commercial use to this purpose.

Dr. Keynes,[170] who seems to think the sole difficulty as regards the
definition of capital arises from the difference in the point of view
of the individual and of the community, suggests the use of two terms,
"revenue capital" and "production capital." But these terms are doubly
unsatisfactory. In the first place, the "productive consumption"
economist might fairly claim that as his food, etc., enabled the
workman to obtain his wages or revenue, they belonged to revenue
capital. On the other hand, regarding it as essential to distinct
terminology to sever entirely consumptive goods from productive goods,
I should insist that the "production capital" of the community was
synonymous with its "revenue capital," and that although the
individual view of capital is not always coincident with the
community's view, that difference cannot be expressed by the
distinction of "revenue capital" and "production capital."

Moreover, the consumptive-production economists, to be consistent and
to preserve the continuity of the conception of economic activity,
would do well to abolish labour-power as a separate factor, and to
include the body of the labourer with its store of productive energy
as a species of capital. For it is urged (_e.g._, by Professor
Marshall) that the fact that the food consumed by labourers enables
them to earn an income entitles it to rank as capital. In that case
the "wages" which form that income should rank as interest upon the
capital. Again, there is no reason for breaking the continuity of the
capital at the time when the "food" is actually eaten. The food is not
destroyed, but built up into the frame of the labourer as a fund of
productive energy. If consumptive goods are once admitted as capital,
the labourer's body must be likewise capital yielding interest in the
shape of wages. If the other factor "natural agents" be still retained
(an unnecessary proceeding, since all land, etc., which is
productively serviceable is so by reason of the application of some
element of stored labour, and may therefore be called "capital"),
labour could be resolved into natural agents (the infant body) and
capital (the food, etc., used to strengthen and support the body).
Wages could then be reckoned partly as rent, partly as interest. It is
difficult to understand why "productive-consumption" economists, some
of whom have evidently contemplated the change of terminology, have
refused to take a step which would at any rate have the merit of
imparting consistency to their terminology. It is, of course, true
that no "productive-consumption" economist would straightly admit
production not consumption to be the economic goal, but his
terminology can only approximate to consistency upon this supposition.

Mr. Cannan, in his able exposure of Adam Smith's mixed notions upon
Capital, inclines to an extended use of the term which shall include
"the existing stock of houses, furniture, and clothes" on the ground
that they are "just as much a part of the surplus of production over
consumption, and therefore the result of saving, as the stock of
warehouses, machinery, and provisions."[171] Moreover, whether in
merchants' or consumers' hands they produce a real income, in the
latter case consisting of the comforts and conveniences which attend
their consumption. But if this view be accepted all forms of wealth
must rank as capital; the distinction between those which have been
saved and those which have not loses all meaning; so long as a piece
of wealth which has been made exists, it has been saved, and is an
"investment" which will, at any rate in the satisfaction due to its
consumption, yield a real income. But this extension, though logically
defensible, must be rejected on grounds of convenience. When
economists can be got to recognise the necessity of measuring all
"incomes," as indeed all "outputs," in terms of human satisfaction and
effort, then it may be well to recognise that all forms of wealth
which have figured as producers' capital continue to exist as
consumers' capital, yielding an income of satisfaction until they are
consumed. To place the consumptive-goods on a common level with forms
of productive capital, it would of course be necessary to make the
usual provision against wear and tear and depreciation before
reckoning income. There would be no justification for reckoning the
total use of a coat worn out and not replaced as income from capital.

As matters now stand, the only logically accurate correlation of
economic activities which shall enable us to give a clear and separate
meaning to capital and labour-power involves the distinct recognition
of unproductive consumption--_i.e._, consumption considered as an end
and not as a means to further production of industrial wealth, as the
final object of economic activity. In other words, it is the benefit
or satisfaction arising from the destruction of forms of industrial
wealth that constitutes the economic goal. Life not work, unproductive
not productive consumption, must be regarded as the end. The
consideration that a good and wholesome human life is identified with
work, some of which will be industrial in character, so that many
forms of industrial wealth will be destroyed under conditions which
enable them to render direct service in creating new forms, does not
impair the validity of this conception. The inability of most economic
thinkers to clearly grasp and to impress on others the idea of the
industrial organism as a single "going concern," has arisen chiefly
from the circular reasoning involved in making "production" at once
the means and the end, and the inconsistent definitions required to
support this fallacy.


APPENDIX II.

"OVER-CONSUMPTION" CONSIDERED AS CAUSE OF DEPRESSION.

It is of course quite possible that a temporary over-production in one
or several trades may be explained by a correspondent under-production
in others--that is to say, there may be a misplacement of industrial
enterprise. But this can afford no explanation of the phenomenon
Depression of Trade, which consists in a general or net over-supply of
capital, as evidenced by a general fall of prices.

In like manner it is possible to explain a commercial crisis in a
single country, or part of a commercial community, as the reaction or
collapse following an attempt to increase the quantity of fixed
capital out of proportion to the growth of the current national
income, by a reckless borrowing. This attempt of a single country to
enlarge its business operations beyond the limits of the possible
savings of its own current income, Mr. Bonamy Price and M. Yves Guyot
speak of under the questionable title of Over-consumption. Since they
tender this vice of over-consumption as the true and sufficient
explanation of commercial crises, it is necessary to examine the
position.

Professor Bonamy Price applied the following analysis to the great
crisis in the United States of 1877:--

"We are now in a position to perceive the magnitude of the blunder of
which the American people were guilty in constructing this most
mischievous quantity of fixed capital in the form of railways. They
acted precisely like a landowner who had an estate of £10,000 a year,
and spent £20,000 on drainage. It could not be made out of savings,
for they did not exist, and at the end of the very first year he must
sell a portion of the estate to pay for the cost of his draining. In
other words, his capital, his estate, his means of making income
whereon to live was reduced. The drainage was an excellent operation,
but for him it was ruinous. So it was with America. Few things in the
long run enrich a nation like railways; but so gigantic an
over-consumption, not out of savings, but out of capital, brought her
poverty, commercial depression, and much misery. The new railways have
been reckoned at some 30,000 miles, at an estimated cost of £10,000 a
mile; they destroyed three hundred million of pounds worth, not of
money, but of corn, clothing, coal, iron, and other substances. The
connection between such over-production and commercial depression is
here only too visibly that of parent and child. But the disastrous
consequences were far from ending here. The over-consumption did not
content itself with the wealth used up in working the railways and the
materials of which they were composed. It sent other waves of
destruction rolling over the land. The demand for coal, iron, engines,
and materials kindled prodigious excitement in the factories and the
shops; labourers were called for from every side; wages rose rapidly;
profits shared the upward movement; luxurious spending overflowed;
prices advanced all round; the recklessness of a prosperous time
bubbled over; and this subsidiary over-consumption immensely enlarged
the waste of the national capital set in motion by the expenditure on
the railways themselves. Onward still pressed the gale; foreign
nations were carried away by its force. They poured their goods into
America, so over-powering was the attraction of high prices. They
supplied materials for the railways, and luxuries for their
constructors. Their own prices rose in turn; their business burst into
unwonted activity; profits and wages were enlarged; and the vicious
cycle repeated itself in many countries of Europe. Over-consumption
advanced with greater strides; the tide of prosperity rose ever
higher; and the destruction of wealth marched at greater speed."[172]

Now, in the first place, our analysis of saving and the confinement of
the term consumption to direct embodiments of utility and convenience
forbid us to acknowledge that the action of the United States or the
analogy of the improving landowner is a case of over-consumption at
all. If the landowner borrowed money on his estates in order to live
in luxury for a season beyond his income, or similarly, if a State
raised loans in order to consume powder and shot, the term
over-consumption rightly applies. But where the landowner borrows so
much money to improve his land that he is unable to hold out till the
improvements bear fruit, and must sell his land to pay the interest,
he is not rightly accused of over-consumption. His reduced consumption
later on while practising retrenchment is simply a process of "saving"
which, when complete, is to take the place of an amount of "saving"
previously made by some one else and borrowed by him. What happened
was simply this. A, wishing to drain his land, had not "saved" enough
to do it; B has saved, and A, borrowing his "saving," holds it for a
time in his shape of drainage. If he can continue to pay interest and
gradually "save" to pay off the capital, he will do so; if not, as in
the case supposed, B, the mortgagee, will foreclose and legally enter
upon his savings in the shape of "drainage" which he really owned all
along. But even if A in this case were rightly accused of
over-consumption, this over-consumption must be considered as balanced
by the under-consumption of B, so that as regards the community of
which A and B are both members there is no over-consumption.

Now, precisely the same line of reasoning applies if for the
individual A we take the country of the United States. If it tries to
increase its factories, machinery, etc., in excess of its ability to
pay, it can only do so by borrowing from other countries; and if it
cannot pay the interest on such loans, the "savings," in the shape of
fixed capital which it has endeavoured to secure for itself, remain
the property of the other countries which have effected the real
saving which they embody, assuming them to have a value. If the action
of the United States be called over-consumption, it is balanced by an
under-consumption of England, France, or other countries of the
commercial community. Mr. Price sought to avoid this conclusion by
saying nothing about the individual from whom the landowner or the
country from which the United States borrowed in order to increase the
fixed capital. But as the landowner and the United States, _ex
hypothesi_, did not make their improvements out of their own savings,
they made them out of somebody else's savings, and that conduct which
is styled over-consumption in them is balanced by an equal quantity of
under-consumption in some other party. If thus we look at the
individual landowner or the single country of the United States, we
might say, accepting Price's view of consumption, that he and it were
guilty of over-consumption, and that this was the cause of the
commercial crisis. But since this over-consumption is absolutely
conditioned by a correspondent under-consumption of some other member
of the industrial community, it is not possible to conclude with
Professor Price that over-consumption can even for a time exist in the
community as a whole, or that such a condition can be the explanation
of a crisis commonly felt by all or most of the members of that
community.

What actually happened in the case of United States railways was that
a number of people, either in America or in Europe, under-consumed or
over-saved: their excessive saving could find no better form to take
than American railways, which, _ex hypothesi_, were not wanted for
use. A number of persons who might have made and consumed three
hundred million pounds' worth more of corn, clothing, coals, etc.,
than they actually did consume, refused to do so, and instead of doing
so made a number of railway lines, locomotives, etc., which no one
could consume and which were not wanted to assist production. What
occurred was a waste of saving power through an attempt to make an
excessive number of forms of capital.

Even if, some years later, many of these forms obtained a use and a
value, none the less they represent an excess or waste of "saving" to
an extent measured by the normal rate of interest over that period of
time which elapsed before they fructified into use. In a word, what
had happened was not over-consumption, but under-consumption.

M. Guyot appears to think that in the community as a whole too much
saving can be put into the form of "fixed" capital and too little into
circulating capital, and that such a condition of affairs will bring
depression. "Fixed capital," he says, "cannot be utilised if there is
no available circulating capital. Ships and railways are useless if
there are no commodities for them to convey; a factory cannot be
worked unless there are consumers ready to buy its products. If, then,
circulating capital has been so far exhausted as to take a long time
replacing, fixed capital must meanwhile remain unproductive, and the
crisis is so much the longer and more severe."[173]

To this there are two sufficient answers. The prevalence of low prices
for goods of various kinds as well as for plant in a time of
depression, the general glut of goods which forms one phase of the
depression proves that the crisis does not arise from storing too much
saving in plant and too little in goods. Where there exists
simultaneously a larger quantity of plant, raw material, finished
goods, and labour than the industrial society can find use for, no
assertion of maladjustment, either as between trade and trade, country
and country, fixed and circulating capital, will afford any
explanation. Secondly, M. Guyot gives away his entire position by
admitting "a factory cannot be worked unless there are consumers ready
to buy its products." A "consumer" here can logically only mean one
who buys finished goods for personal use, and if this be generally
applied it amounts to a clear admission that under-consumption is the
reason why there appears to be a glut of capital, fixed or other.

FOOTNOTES:

[146] _Contemporary Review_, March 1888.

[147] _Report on Industrial Depressions_, Washington, 1886.

[148] Report, pars. 61-66.

[149] Report, par. 106.

[150] _Contemporary Review_, July 1887.

[151] _Contemporary Review_, March 1888.

[152] _Report of the Commissioner of Labour_, Washington, 1886, pp. 80
to 88.

[153] D.A. Wells, _Contemporary Review_, August 1887.

[154] Lord Playfair, in the _Contemporary Review_, March 1888, gives a
number of interesting illustrations of recent economies in transport
and manufacture.

[155] _Statist_, 1879, quoted Bowley, _England's Foreign Trade in the
Nineteenth Century_, p. 80.

[156] _Essays in Finance_, vol. i. p. 137, etc.

[157] For the view that over-consumption is cause, see Appendix II.

[158] "What is annually saved is as regularly consumed as what is
annually spent, and nearly in the same time too; but it is consumed by
a different set of people." (_Wealth of Nations_, p. 149_b_,
McCulloch.) "Everything which is produced is consumed; both what is
saved and what is said to be spent, and the former quite as quickly as
the latter." (_Principles of Political Economy_, Book I., chap. v.,
sec. 6.)

[159] An able analysis of the nature of "paper savings" is found in
Mr. J.M. Robertson's _Fallacy of Saving_. (Sonnenschein.)

[160] Chap. v. § 5.

[161] Bk. III., chap. xiv. § 3.

[162] The stock of a small retailer will not, however, in all cases
vary proportionately with the aggregate sales of all classes of goods.
A small shopkeeper, to retain his custom and credit, is often required
to keep a small stock of a large variety of goods not often in
request. If he sells them rather more quickly, he does not necessarily
increase his stock in hand at any particular time.

[163] It likewise determines the quantity of plant and stock at _a_,
_b_, _c_, _d_ down each of the perpendicular lines, for the demand at
each of these points in the production of plant and machinery is
derived from the requirements at the points A, B, C, D, E. The flow of
goods therefore up these channels, though slower in its movement
(since in the main channel only goods flow, while fixed capital is
subject to the slower "wear and tear"), is equally determined by and
derived from the consumption at F. The whole motive-power of the
mechanism is engendered at F, and the flow of money paid over the
retail counter as it passes in a reverse current from F towards A,
supplies the necessary stimulus at each point, driving the goods
another stage in their journey.

[164] Böhm-Bawerk, _Positive Theory of Capital_, p. 67. See Appendix
I. for conflict of opinion among English economists.

[165] _Principles of Political Economy_, Bk. I., chap. v. § 3; see
also Bk. III., chap. xiv. § 3.

[166] It should be noted that an increased amount of consumption in
the future does not necessarily compensate for a disturbance of the
current balance of saving and spending, for an _increased proportion
of future income_ will have to be spent in order to compensate.

[167] It must be borne in mind that many articles of utility and
enjoyment must in their final processes be produced for immediate
consumption. The "saving" of perishable goods is confined to a saving
of the more enduring forms of machinery engaged in their production,
or in some few cases to a storing up of the raw material. So likewise
that large portion of productive work termed "personal services"
cannot be antedated. These limits to the possibility of "saving" are
important. No amount of present sacrifice in the interest of the next
generation could enable them to live a life of luxurious idleness.

[168] Ruskin, _Unto this Last_, p. 145.

[169] This does not necessarily imply a stimulation of new saving. A
fuller vitality given to existing forms of capital will raise the
quantity of real capital as measured in money. Mills and machinery
which have no present or future use, though they embody saving, have
no value and do not increase real capital.

[170] _Scope and Method of Political Economy_, p. 162.

[171] _Production and Consumption_, chap. iv. § 2.

[172] _Contemporary Review_, May 1879.

[173] _Principles of Social Economy_, p. 245. (Sonnenschein.)




CHAPTER VIII.

MACHINERY AND DEMAND FOR LABOUR.

    § 1. _The Influence of Machinery upon the number of Employed,
         dependent on "elasticity of demand."_
    § 2. _Measurement of direct effects on Employment in Staple
         Manufactures._
    § 3. _Effects of Machinery in other Employments--The Evidence
         of French Statistics._
    § 4. _Influence of Introduction of Machinery upon Regularity of
         Employment._
    § 5. _Effects of "Unorganised" Machine-industry upon Regularity._
    § 6. _Different Ways in which modern Industry causes Unemployment._
    § 7. _Summary of General Conclusions._


§ 1. In discussing the direct influences of machinery upon the
economic position of the labourer we must distinguish its effects upon
(1) the number of workers employed; (2) the regularity of employment;
(3) the skill, duration, intensity, and other qualities of labour; (4)
the remuneration of labour. Though these influences are closely
related in complex interaction, it is convenient to give a separate
consideration to each.

(1) _Effects of Machinery upon the number of Employed._--The motive
which induces capitalist employers to introduce into an industry
machinery which shall either save labour by doing work which labour
did before, or assist labour by making it more efficient, is a desire
to reduce the expenses of production. A new machine either displaces
an old machine, or it undertakes a process of industry formerly done
by hand labour without machinery.

In the former case it has been calculated that the expenses incurred
in making, maintaining, and working the new machines so as to produce
a given output will be less than the corresponding expenses involved
in the use of the old machines. Assuming that the labour of making and
working the new machines is paid at no lower rate than the labour it
displaces, and that the same proportion of the price of each machine
went as wages and as profits, it must follow that the reduction of
expenses achieved signifies a net displacement of labour for a given
quantity of production. Since the skilled labour of making new
machines is likely to be paid higher than that of making more old
machines, and the proportion of the price which goes as profit upon a
new invention will be higher than in the case of an old one,[174] the
actual displacement of labour will commonly be larger than is
represented by the difference in money price of the two machines.
Moreover, since in the case of an old manufacturing firm the cost of
discarding a certain amount of existing machinery must be reckoned in,
the substitution of new machinery for old will generally mean a
considerable displacement of labour.

Similarly, when a new process is first taken over by machinery the
expenses of making and working the machines, as compared with the
expenses of turning out a given product by hand labour, will, other
things being equal, involve a net diminution of employment. The fact
that the new machinery is introduced is a proof that there is a net
diminution of employment as regards a given output; for otherwise no
economy would be effected.

What then is meant by the statement so generally made, that machinery
gives more employment than it takes away--that its wider and ultimate
effect is not to diminish the demand for labour?

The usual answer is that the economy effected by labour-saving
machinery in the expenses of production will, through competition of
producers, be reflected in a lower scale of prices, and this fall of
prices will stimulate consumption. Thus, it is urged, the output must
be greatly increased. When we add together the labour spent in
producing the machinery to assist the enlarged production, the labour
spent in maintaining and working the same, and the labour of conveying
and distributing the enlarged production, it will be found that more
labour is required under the new than under the old conditions of
industry. So runs the familiar argument.

The whole argument in favour of the gain which machinery brings to the
working classes hinges upon the contention that it increases rather
than decreases the amount of employment. Now, though we shall find
reason to believe that machinery has not caused any net diminution of
employment, there is nothing to support the rough-and-ready rule by
which the optimism of English economists argues the case in its
application to a single trade.

The following is a fair example of the argument which has passed
current, drawn from the pages of a competent economic writer:--

"The first introduction of machinery may indeed displace and diminish
for a while the employment of labour, may perchance take labour out of
the hands of persons otherwise not able to take another employment,
and create the need of another class of labourers altogether; but if
it has taken labour from ten persons, it has provided labour for a
thousand. How does it work? A yard of calico made by hand costs two
shillings, made by machinery it may cost fourpence. At two shillings a
yard few buy it; at fourpence a yard, multitudes are glad to avail
themselves of it. Cheapness promotes consumption; the article which
hitherto was used by the higher classes only is now to be seen in the
hand of the labouring classes as well. As the demand increases, so
production increases, and to such an extent that, although the number
of labourers now employed in the production of calico may be immensely
less in proportion to a given quantity of calico, the total number
required for the millions of yards now used greatly exceeds the number
engaged when the whole work was performed without any aid of
machinery."[175]

Now, turning from the consideration of the particular instance, which
we shall find reason to believe is peculiarly unfortunate when we deal
with the statistics of the cotton industry, it must be observed that
economic theory makes dead against this _à priori_ optimism. Ignoring,
for the sake of convenience, the not improbable result that an economy
of production may, at any rate for a time, swell profits instead of
reducing prices, it will be evident that the whole value of the
argument turns upon the effect of a fall of price in stimulating
increased consumption. Now the problem, how far a given fall in price
will force increased consumption, we have found in our discussion of
monopoly prices to involve extremely intricate knowledge of the
special circumstances of each case, and refined calculations of human
motives. Everything depends upon "elasticity of demand," and we are
certainly not justified in assuming that in a particular industry a
given fall of prices due to machine-production will stimulate so large
an increase of consumption that employment will be given to as many,
or more persons than were formerly employed. On the contrary, if we
apply a similarly graduated fall of prices to two different classes of
goods, we shall observe a widely different effect in the stimulation
of consumption. A reduction of fifty per cent. in the price of one
class of manufactured goods may treble or quadruple the consumption,
while the same reduction in another class may increase the consumption
by only twenty per cent. In the former case it is probable that the
ultimate effect of the machinery which has produced the fall in
expenses of production and in prices will be a considerable increase
in the aggregate demand for labour, while in the latter case there
will be a net displacement. It is therefore impossible to argue _Ã
priori_ that the ultimate effect of a particular introduction of
machinery must be an increased demand for labour, and that the labour
displaced by the machinery will be directly or indirectly absorbed in
forwarding the increased production caused by machinery. It is alleged
that the use of steam-hammers has displaced nine of the ten men
formerly required, that with modern machinery one man can make as many
bottles as six men made formerly, that in the boot and shoe trade one
man can do the work five used to do, that "in the manufacture of
agricultural implements 600 men now do the work which fifteen or
twenty years ago required 2145, thus displacing 1515," and so
forth.[176] Now in some of these cases we shall find that the fall of
prices following such displacements has led to so large an increase of
demand that more persons are directly engaged in these industries than
before; in other cases this is not the case.

The following quotation from a speech made at the Industrial
Remuneration Conference in 1885 will present the most effective
criticism upon Professor Leone Levi's position:--

"In carpet weaving fifty years ago the workman drove the shuttle with
the hand, and produced from forty-five to fifty yards per week, for
which he was paid from 9d. to 1s. per yard, while at the present day a
girl attending a steam loom can produce sixty yards a day, and does
not cost her employer 1-1/2d. per yard for her labour. That girl with
her loom is now doing the work of eight men. The question is, How are
these men employed now? In a clothier's establishment, seeing a girl
at work at a sewing machine, he asked the employer how many men's
labour that machine saved him. He said it saved him twelve men's
labour. Then he asked, 'What would those twelve men be doing now?'
'Oh,' he said, 'they will be much better employed than if they had
been with me, perhaps at some new industry.' He asked, 'What new
industry?' But the employer could not point out any except
photography; at last he said they would probably have found employment
in making sewing machines. Shortly afterwards he was asked to visit
the American Singer Sewing Machine Factory, near Glasgow. He got this
clothier to accompany him, and when going over the works they came
upon the very same kind of machines as the clothier had in his
establishment. Then he put the question to the manager, 'How long
would it take a man to make one of these machines?' He said he could
not tell, as no man made a machine; they had a more expeditious way of
doing it than that--there would be upwards of thirty men employed in
the making of one machine; but he said 'if they were to make this
particular kind of machine, they would turn out one for every four
and a half days' work of each man in their employment.' Now, there was
a machine that with a girl had done the work of twelve men for nearly
ten years, and the owner of that machine was under the impression that
these twelve men would be employed making another machine, while four
and a half days of each of these men was sufficient to make another
machine that was capable of displacing other twelve men."

In cases like the above we must, of course, bear in mind that a
diminution in employment in the several manufacturing processes
directly and indirectly engaged in forwarding an industry, is not of
itself conclusive evidence that the machinery has brought about a net
displacement of labour. If the output is increased the employment in
the extractive, the transport, and the various distributing processes
may compensate the reduction in making goods and machinery.

§ 2. The industrial history of a country like England can furnish no
sufficient data for a conclusive general judgment of the case. The
enormous expansion of production induced by the application of
machinery in certain branches of textile industry during the first
half of this century indisputably led to an increased demand for
English labour in trades directly or indirectly connected with textile
production. But, in the first place, this cannot be regarded as a
normal result of a fall of prices due to textile machinery, but is
largely attributable to an expansion in the area of consumption--the
acquisition of vast new markets--in which greater efficiency and
cheapness of transport played the most considerable part. Secondly,
assuming that the more pressing needs of the vast body of consumers
are already satisfied by machine-made textile goods, we are not at
liberty to conjecture that any further cheapening of goods, owing to
improved machinery, will have a correspondent effect on consumption
and the demand for labour. If England had been a self-contained
country, manufacturing only for her own market, the result of
machinery applied to textile industries would without doubt have been
a considerable net displacement of textile labour, making every
allowance for growth of population and increased home consumption. The
expansion of English production under the rapid development of
machinery in the nineteenth century cannot therefore be taken as a
right measure of the normal effects of the application of machinery.

What direct evidence we have of the effect of machinery upon demand
for labour is very significant. Mr. Charles Booth, in his _Occupations
of the People_, presents an analysis of the census returns, showing
the proportion of the population engaged in various employments at
decennial points from 1841 to 1881. To these may be added such
statistics of the 1891 census as the present condition of their
presentation allows us to relate to the former censuses.[177] If we
turn to manufactures, upon which, together with transport, machinery
exercises the most direct influence, we find that the aggregate of
manufactures shows a considerable increase in demand for labour up to
1861--that is, in the period when English wares still kept the lead
they had obtained in the world market--but that since 1861 there is a
positive decline in the proportion of the English population employed
in manufactures. The percentages up to 1881 run as follows:--

    1841[178]     27.1 per cent.
    1851        32.7    "
    1861        33.0    "
    1871        31.6    "
    1881        30.7    "

If we take the staple manufactures, employing the largest number of
workers, we shall find that for the most part they show a rising
demand for labour up to 1861, a stationary or falling demand when
compared with the population after that date. The foundational
industries--machinery and tools, shipbuilding, metal working--whose
demand for labour during the period 1841-61 increased by leaps and
bounds, still show in the aggregate an increased proportion of
employment, largely due to the rise since 1861 of a large export
trade in machinery. But while the machine-making industries continue
to grow faster than the population in the employment they give,
increasing from 209,353 in 1881 to 262,910 in 1891, and shipbuilding
also gives a proportionate increase, it is noteworthy that the steel
and iron trades, which up to 1871 grew far faster than the population,
began to show signs of decline. In 1881 the number of steel and iron
workers was 361,343, in 1891 it had increased to 380,193, a growth of
only 5.3 per cent. as compared with a growth of population amounting
to 11.7 per cent., and a growth of the number of occupied persons
amounting to 15.3 per cent.

Fuel, gas, chemicals, and other general subsidiary trades show a
steady advance in proportionate employment. The textile and dyeing
industries, on the other hand, showing an increased proportion of
employment up to 1851, by which time the weaving industry was taken
over by machinery, present a continuous and startling decline in the
proportion of employment since that date. A considerably smaller
proportion of the employed classes are now engaged in these trades
than in 1841. The dressmaking industries give the same result--a
continuous decline in proportion of employment since 1851, though in
this case the 1891 figures indicate a slight recovery. The following
are the percentages:--

            Textile and
              Dyeing.         Dress.
    1841       9.1              7.8
    1851      11.1             10.3
    1861      10.2              9.8
    1871       9.3              8.5
    1881       8.2              8.1
    1891       7.6              8.3

The failure of demand for labour to keep pace in its growth with the
growth of population in the main branches of the spinning and weaving
industries is emphasised by Mr. Ellison. Comparing 1850 with 1878, he
says:--"In spinning-mills there is an increase of about 189 per cent.
in spindles, but only 63 per cent. in hands employed; and in weaving
mills an increase of 360 per cent. in looms, but only 253 per cent. in
operatives. This, of course, shows that the machinery has become more
and more automatic or self-regulating, thus requiring the attendance
of a relatively smaller number of workers."[179] When the subsidiary
branches of textile industry are added the results point still more
conclusively in the same direction.

          No. of Spindles.  No. of Looms.  No. of Operatives.
    1850    20,977,817        249,627          330,924
    1878    44,206,690        514,911          482,903

More recent statistics show that the relative diminution of employment
in textile industries traceable since 1851, became a positive
diminution after 1871, though the statistics of 1891 indicate a
certain recovery.

    1841        618,509[180]
    1851        603,800
    1861        934,500
    1871        970,000
    1881        962,000
    1891      1,016,100[181]

The significance of these figures in relation to the demand for labour
receives further emphasis when the large and rapid displacement of
male by female labour is taken into account. In the dress trades it
may be observed that the absolute increase which every census, save
that of 1871, discloses, is absorbed by the tailoring and millinery
branches, where machinery plays a relatively unimportant part, and
that in the boot and shoe trade, where there has been a greatly
increased application of machinery, there has been not only a
proportionate but an absolute fall-off of employment in the twenty
years following 1861, though the 1891 census again brings up the
absolute numbers of the boot and shoe trade to a little above the
level of 1851.[182]

The branches of manufacture which show a large increase in the
proportion of employment they give in 1891 as compared with 1861 are
machinery and tools, printing and bookbinding, wood furniture and
carriages, fuel, gas, chemicals, and unspecified trades (chiefly
connected with machinery). Machinery and tools alone, among the larger
manufactures, yield a large proportionate increase of employment,
amounting, according to the Census Report, to 27.7 per cent. between
1881 and 1891, though dealers are included in this estimate as well as
makers.

From these facts two conclusions may be drawn regarding the direct
effects of machinery. First, so far as the aggregate of manufactures
is concerned, the net result of the increased use of machinery has not
been to offer an increased demand for labour in these industries
commensurate with the growth of the working population. Second, an
increased proportion of the manufacturing population is employed
either in those branches of the large industries where machinery is
least used, or in the smaller manufactures which are either subsidiary
to the large industries, or are engaged in providing miscellaneous
comforts and luxuries.

§ 3. When we turn from manufactures to other employments, we perceive
that while mining and building employ an increasing proportion of the
working classes since 1851, agriculture offers a rapidly diminishing
employment, descending from 20.9 per cent. in 1851 to 11.5 per cent.
in 1881, and 9.9 in 1891.[183]

It is, however, to the transport trades, to the distributing or
"dealing" trades, and to industrial service that we must look for the
notable increase of employment. All of these departments have grown
far faster than the population since 1841.

           Transport.  Dealing.    Industrial
                                   Service.
    1841      2.1        5.3          5.4
    1851      4.1        6.5          4.5
    1861      4.6        7.1          4.0
    1871      4.9        7.8          6.0
    1881      5.6        7.8          6.7

The statistics of 1891 still further emphasise this movement. The
transport services show an enormous rise upon 1881, yielding a
proportionate employment of 7.4 per cent. The dealing classes show
likewise a great increase. Merchants and agents increase from 285,138
to 363,037, dealers in money are about 30 per cent. more numerous,
while insurance employs more than double the number employed in 1881,
and six times the number of 1871. Taking drapers and mercers as
indicative of the dealing class in a staple trade, we find an increase
from 82,362 to 107,018, or 29.9 per cent. The numbers of those
employed in thirteen representative retail trades have increased
between 1881 and 1891 by not less than 27.9 per cent.

    [Illustration: DIAGRAM (COMPARISON OF ENGLISH EMPLOYMENTS).]

When we look at these figures there can be no doubt that one indirect
result of the increased production due to the application of machinery
has been increased employment in the distributing and transport
industries. This increased employment in transport is by no means
confined to the new services of steam locomotion by land and sea. The
earlier apprehensions that railways would destroy road traffic is not
justified by experience. Though employment on railways has of course
grown very fast, road traffic has increased almost in the same ratio.

            Railways.  Roads.
    1841      .03       .7
    1851      .3        .9
    1861      .5       1.1
    1871      .8       1.2
    1881     1.2       1.5
    1891     1.4       2.8

The census returns for the United States show clearly that carts and
horses have not been displaced by railways, or, more strictly
speaking, that railways have made more cartage work than they have
taken away. In 1850 the manufacture of carriages and waggons employed
15,590 men, in 1870 it employed 54,928. During the same period of
railway growth the number of horses in the country increased from
4,336,717 to 7,145,370. In fact, while the population grew 66 per
cent., the number of carriage and cart makers, in spite of the
increased use of labour-saving machinery in their manufacture, grew
more than 200 per cent.

It must, however, be clearly recognised that the direct effect of
machinery upon the transport industries also is to cause a diminished
proportionate employment of labour. A comparison of the two chief
branches of steam locomotion will bring this home.

Machinery occupies a very different place in the railway from that
which it occupies in steam transport by sea. The engine only
indirectly determines and regulates the work of the majority of
railway men. Most of them are not tenders of machinery. Engine-driver,
stoker, and guard are alone in close direct association with the
machine. To them must be added those engaged in construction and
repair within the workshops. Pointsmen and certain station officials
come next in proximity to the machine; shunters and porters are also
"tending" machinery, though their work is more directly dominated by
general business considerations. But are we to say that the army of
platelayers, navvies, etc., engaged along the line is serving
machinery instead of using tools?[184] The work of ticket clerks and
collectors is only governed by the locomotive in a very indirect way.
Though the steam-engine is the central factor in railway work, the
bulk of the labour is skilled or unskilled work in remote relation to
the machine. This explains why the growth of the railway industry,
after the chief work of construction has been done, is not attended by
a diminishing proportion of employment. On the contrary, we find that
railway employment increases faster than mileage and railway capital.
The following statistics of railways in the United Kingdom illustrate
this fact:--

    Year.     Mileage.  Capital (paid up).  Operatives.
    1851         ...         ...                25,200
    1861       10,865    £362,327,338           53,400
    1871       15,376    £552,661,551           84,900
    1881       18,175    £745,528,162          139,500
    1891       20,191    £919,425,121          186,700

But when we turn to the shipping trade, where a much larger proportion
of workers is directly concerned with the tending and direction of
machinery, and trace the effect upon employment of the application of
steam, the result is very different.

            Sailing Vessels   Steamers       Men on         Men on
              (Tonnage).     (Tonnage).  Sailing-ships.  Steam-ships.
    1850      3,396,359        168,474       142,730         8,700
    1860      4,204,360        454,327       145,487        26,105
    1870      4,577,855      1,112,934       147,207        48,755
    1880      3,851,045      2,723,488       108,668        84,304
    1890      2,907,405      5,037,666        84,008       129,366[185]

If we take the period 1870-90, during which there is an absolute
shrinkage of sailing tonnage, we find that this shrinkage is
accompanied by a less than corresponding diminution of employment. On
the other hand, the tonnage of steamships in this period increased
more than fourfold, but brought with it an increase of employment
which is less than threefold.

    [Illustration: TONNAGE OF SHIPS IN RELATION TO EMPLOYMENT OF
    SEAMEN.]

French statistics during the last half century indicate the same
general movement so far as employment is concerned, though the
movement is less regular.

There is the same decline in the proportion of those engaged in
agriculture, though less rapid than in England, the same shrinkage of
the proportion engaged in manufacture, and generally in "making"
industries, and the same notable expansion of the "dealing" classes. A
rapid growth of the professional and public services is common to
England and France. The following percentages mark these movements in
France:--[186]

                     1856.  1861.  1866.  1872.  1876.  1881.  1886.
Agricultural
  classes             52.9   53.2   51.5   52.5   53.0   50.0   47.8
Industrial            29.1   27.4   28.8   24.1   25.9   25.6   25.2
Commercial             4.5    3.9    4.0    8.4   10.7   10.5   11.5[187]
Professional,      }
  public service,  }
  persons living   }   9.1    9.2    9.5   11.1   10.3   10.2   11.1
  on their incomes }

These facts and figures seem to support the following conclusions:--

(1) That along with the increased application of machinery to the
textile and other staple manufactures there has been in these
industries a decrease of employment relative to the growth of the
working population.

(2) That in the transport industries the increase of employment is in
inverse proportion to the introduction of machinery into the several
branches as a dominating factor.

(3) That the considerable diminution of agricultural employment is not
compensated by any proportionate increase of manufacturing employment,
but that the displaced agricultural labour finds employment in such
branches of the transport and distributive trade as are less subject
to machinery.

In the rough estimate of the effect of machinery upon employment, its
influence upon English agriculture has been left untouched by reason
of the inherent complexity of the forces which are operative. But it
must not be forgotten that by far the most important factor in the
decline of English agricultural employment is the transport machinery
which has brought the produce of distant countries into direct
competition with English agricultural produce.

So far, therefore, as the statistics of employments present a just
register of the influence of machinery upon demand for labour, we are
driven to conclude that the net influence of machinery is to diminish
employment so far as those industries are concerned into which
machinery directly enters, and to increase the demand in those
industries which machinery affects but slightly or indirectly. If this
is true of England, which, having the start in the development of the
factory system, has to a larger extent than any other country
specialised in the arts of manufacture, it is probable that the net
effect of machinery upon the demand for labour throughout the
industrial world has been to throw a larger proportion of the
population into industries where machinery does not directly enter.
This general conclusion, however, for want of exact statistical
inquiries conducted upon a single basis, can only be accepted as
probable.

§ 4. (2) _Effects of Machinery upon the Regularity of
Employment._--The influence of machinery upon regularity of employment
has a twofold significance. It has a direct bearing upon the
measurement of demand for labour, which must take into account not
only the number of persons employed, but the quantity of employment
given to each. It has also a wider general effect upon the moral and
industrial condition of the workers, and through this upon the
efficiency of labour, which is attracting increased attention among
students of industrial questions. The former consideration alone
concerns us here. We have to distinguish--(_a_) the effects of the
introduction of machinery as a disturbant of regularity of labour;
(_b_) the normal effects of machine-production upon regularity of
labour.

(_a_) The direct and first effect of the introduction of machinery is,
as we have seen, to displace labour. The machinery causes a certain
quantity of unemployment, apart from the consideration of its ultimate
effect on the number of persons to whom employment is given. Professor
Shield Nicholson finds two laws or tendencies which operate in
reducing this disturbing influence of machinery. He holds (1) that a
radical change made in the methods of production will be gradually and
continuously adopted; (2) that these radical changes--these
discontinuous leaps--tend to give place to advances by small
increments of invention.[188]

History certainly shows that the fuller application of great
inventions has been slow, though Professor Nicholson somewhat
over-estimates the mobility of labour and its ability to provide
against impending changes. The story of the introduction of the
power-loom discloses terrible sufferings among the hand-weavers of
certain districts, in spite of the gradual manner in which the change
was effected. The fact that along with the growth of the power-loom
the number of hand-looms was long maintained, is evidence of the
immobility of the hand-weavers, who kept up an irregular and ill-paid
work through ignorance and incapacity to adapt themselves to changed
circumstances.[189] In most of the cases where great distress has been
caused, the directly operative influence has not been introduction of
machinery, but sudden change of fashion. This was the case with the
crinoline-hoop makers of Yorkshire, the straw-plaiters of
Bedfordshire, Bucks, Herts, and Essex.[190] The suddenly-executed
freaks of protective tariffs seem likely to be a fruitful source of
disturbance. So far as the displacement has been due to new
applications of machinery, it is no doubt generally correct to say
that sufficient warning is given to enable workers to check the
further flow of labour into such industries, and to divert it into
other industries which are growing in accordance with the new methods
of production, though much suffering is inflicted upon the labour
which is already specialised in the older method of industry.

Moreover, the changes which are taking place in certain machine
industries favour the increasing adaptability of labour. Many machine
processes are either common to many industries, or are so narrowly
distinguished that a fairly intelligent workman accustomed to one can
soon learn another. If it is true that "the general ability, which is
easily transferable from one trade to another, is every year rising in
importance relatively to that manual skill and technical knowledge
which are specialised in one branch of industry,"[191] we have a
progressive force which tends to minimise the amount of unemployment
due to new applications of specific machinery.

Professor Nicholson's second law is, however, more speculative and
less reliable in its action. It seems to imply some absolute limit to
the number of great inventions. Radical changes are no doubt generally
followed by smaller increments of invention; but we can have no
guarantee that new radical changes quite as important as the earlier
ones may not occur in the future. There are no assignable limits to
the progress of mechanical invention, or to the rate at which that
progress may be effected. If certain preliminary difficulties in the
general application of electricity as a motor can be overcome, there
is every reason to believe that, with the improved means of rapidly
communicating knowledge we possess, our factory system may be
reorganised and labour displaced far more rapidly than in the case of
steam, and at a rate which might greatly exceed the capacity of labour
to adjust itself to the new industrial conditions. At any rate we are
not at liberty to take for granted that the mobility of labour must
always keep pace with the application of new and labour-disturbing
inventions. Since we are not able to assume that the market will be
extended _pari passu_ with the betterment in methods of production, it
is evident that improvements in machinery must be reckoned as a normal
cause of insecurity of employment. The loss of employment may be only
"temporary," but as the life of a working man is also temporary, such
loss may as a disturbing factor in the working life have a
considerable importance.

§ 5. (_b_) Whether machinery, apart from the changes due to its
introduction, favours regularity or irregularity of employment, is a
question to which a tolerably definite answer can be given. The
structure of the individual factory, with its ever-growing quantity of
expensive machinery, would seem at first sight to furnish a direct
guarantee of regular employment, based upon the self-interest of the
capitalist. Some of the "sweating" trades of London are said to be
maintained by the economy which can be effected by employers who use
no expensive plant or machinery, and who are able readily to increase
or diminish the number of their employees so as to keep pace with the
demands of some "season" trade, such as fur-pulling or artificial
flowers. When the employer has charge of enormous quantities of fixed
capital, his individual interest is strongly in favour of full and
regular employment of labour. On this account, then, machinery would
seem to favour regularity of employment. On the other hand, Professor
Nicholson has ample evidence in support of his statement that "great
fluctuations in price occur in those commodities which require for
their production a large proportion of fixed capital. These
fluctuations in prices are accompanied by corresponding fluctuations
in wages and irregularity of employment."[192] In a word, while it is
the interest of each producer of machine-made goods to give regular
employment, some wider industrial force compels him to irregularity.
What is this force? It is uncontrolled machinery. In the several units
of machine-production, the individual factories or mills, we have
admirable order and accurate adjustment of parts; in the aggregate of
machine-production we have no organisation, but a chaos of haphazard
speculation. "Industry has not yet adapted itself to the changes in
the environment produced by machinery." That is all.

Under a monetary system of commerce, though commodities still exchange
for commodities, it is an essential condition of that exchange that
those who possess purchasing power shall be willing to use a
sufficient proportion of it to demand consumptive goods. Otherwise the
production of productive goods is stimulated unduly while the demand
for consumptive goods is checked,--the condition which the business
man rightly regards as over-supply of the material forms of capital.
When production was slower, markets[193] narrower, credit less
developed, there was less danger of this big miscalculation, and the
corrective forces of industry were more speedily effective. But modern
machinery has enormously expanded the size of markets, the scale of
competition, the complexity of demand, and production is no longer for
a small, local, present demand, but for a large, world, future demand.
Hence machinery is the direct material cause of these great
fluctuations which bring, as their most evil consequence, irregularity
of wages and employment.

How far does this tend to right itself? Professor Nicholson believes
that time will compel a better adjustment between machinery and its
environment.

"The enormous development of steam communication and the spread of the
telegraph over the whole globe have caused modern industry to develop
from a gigantic star-fish, any of whose members might be destroyed
without affecting the rest, into a μέγα ζωον which is convulsed in
agony by a slight injury in one part. A depression of trade is now
felt as keenly in America and even in our colonies as it is here.
Still, in the process of time, with the increase of organisation and
decrease of unsound speculation, this extension of the market must
lead to greater stability of prices; but at present the disturbing
forces often outweigh altogether the supposed principal elements."[194]

The organisation of capital under the pressure of these forces is
doubtless proceeding, and such organisation, when it has proceeded far
enough, will indisputably lead to a decrease of unsound speculation.
But these steps in organisation have been taken precisely in those
industries which employ large quantities of fixed capital, and the
admitted fact that severe fluctuations still take place in these
industries is proof that the steadying influences of such organisation
have not yet had time to assert themselves to much purpose. The
competition of larger and larger masses of organised capital seems to
induce heavier speculation and larger fluctuations. Not until a whole
species of capital is organised into some form or degree of
"combination" is the steadying influence of organisation able to
predominate.

§ 6. But there is also another force which, in England at any rate,
under the increased application of machinery, makes for an increase
rather than a diminution of speculative production. It has been seen
that the proportion of workers engaged in producing comforts and
luxuries is growing, while the proportion of those producing the prime
necessaries of life is declining. How far the operation of the law of
diminishing returns will allow this tendency to proceed we cannot here
discuss. But statistics show that this is the present tendency both in
England and in the United States. Now the demand for comforts and
luxuries is essentially more irregular and less amenable to
commercial calculation than the demand for necessaries. The greatest
economies of machine-production are found in industries where the
demand is largest, steadiest, and most calculable. Hence the effect of
machinery is to drive ever and ever larger numbers of workers from the
less to the more unsteady employments. Moreover, there is a marked
tendency for the demand for luxuries to become more irregular and less
amenable to calculation, and a corresponding irregularity is imposed
upon the trades engaged in producing them. Twenty years ago it was
possible for Coventry ribbon-weavers to "make to stock" during the
winter months, for though silk ribbons may always be classed as a
luxury, certain patterns commanded a tolerably steady sale year after
year. Now the fluctuations of fashion are much sharper and more
frequent, and a far larger proportion of the consumers of ribbons are
affected by fashion-changes. Hence it has become more and more
difficult to forecast the market, less and less is made to stock, more
and more to order, and orders are given at shorter and shorter notice.
So looms and weavers kept idle during a large part of the year are
driven into fevered activity of manufacture for short irregular
periods. The same applies to many other season and fashion trades. The
irregularity of demand prevents these trades from reaping the full
advantages of the economies of machinery, though the partial
application of machinery and power facilitates the execution of orders
at short notice. Hence the increased proportion of the community's
income spent on luxuries requires an increased proportion of the
labour of the community to be expended in their production. This
signifies a drifting of labour from the more steady forms of
employment to those which are less steady and whose unsteadiness is
constantly increasing. A larger proportion of town workers is
constantly passing into trades connected with preparing and preserving
animal and vegetable substances, to such industries as the hat and
bonnet, confectionery, bookbinding, trades affected by weather,
holiday and season trades, or those in which changes in taste and
fashion are largely operative.

Thus it appears there are three modes in which modern capitalist
methods of production cause temporary unemployment. (1) Continual
increments of labour-saving machinery displace a number of workers,
compelling them to remain wholly or partially unemployed, until they
have "adjusted" themselves to the new economic conditions. (2)
Miscalculation and temporary over-production, to which machine
industries with a wide unstable market are particularly prone, bring
about periodic deep depressions of "trade," temporarily throwing out
of work large bodies of skilled and unskilled labour. (3) Economies of
machine-production in the staple industries drive an increasing
proportion of labour with trades which are engaged in supplying
commodities, the demand for which is more irregular, and in which
therefore the fluctuations in demand for labour must be greater.

Most economists, still deeply imbued with a belief in the admirable
order and economy of "the play of economic forces," appear to regard
all unemployment not assignable to individual vice or incapacity as
the natural and necessary effect of the process of adjustment by which
industrial progress is achieved, ignoring altogether the two latter
classes of consideration. There is, however, reason to believe that in
an average year a far larger number of the "unemployed" at any given
time owe their unemployment to a temporary depression of the trade in
which they are engaged, than to the fluctuations brought about by
organic changes in the economic structure of the trade.

The size and importance of the "unemployment" due primarily to trade
depressions is very imperfectly appreciated. The following statistics
of the condition of the skilled labour market in the period 1886-92,
based upon the reports of twenty-two trades unions, have an important
bearing on this point:--

    Year.     Percentage out of work.
    1886         10.1 per cent.[195]
    1887          8.6      "
    1888          4.4      "
    1889          1.8      "
    1890          2.6      "
    1891          4.45     "
    1892          7.33     "
    1893          7.9[196] "

When it is remembered that these figures apply only to the
well-organised trades unions, which, as a rule, comprise the best and
most highly-skilled workers in the several trades, who are less likely
than others to be thrown out in a "slack time," that the building and
season trades are not included in the estimate, and that women's
industries, notoriously more irregular than men's, are altogether
ignored, it will be evident that these statistics very inadequately
represent the proportion of unemployment for the aggregate of the
working classes at the several periods. The _Report on Principal and
Minor Textile Trades_ deducts 10 per cent. from the normal wages to
represent unemployment, though the year 1885, to which the figures
refer, is spoken of as "fairly representative of a normal year."[197]

The injury inflicted upon the wages, working efficiency, and character
of the working classes by irregular employment is, however, very
inadequately represented by figures indicating the average of
"unemployment" during a long period. In the first place, in such an
estimate no allowance is made for the "short time," often worked for
months together by large bodies of operatives. Secondly, in measuring
the evil of "unemployment," we must look rather to the maximum than to
the mean condition. If a man is liable to have his food supply cut off
for a month at a time, no estimate showing that on the average he has
more than enough to eat and drink will fairly represent the danger to
which he is exposed. If once in every ten years we find that some 10
per cent. of the skilled workers, and a far larger percentage of
unskilled workers, are out of employment for months together, these
figures measure the economic malady of "unemployment," which is in no
sense compensated by the full or excessive labour of periods of better
trade.

§ 7. Our reasoning from the ascertained tendencies of
machine-production points to the conclusion that, having regard to the
two prime constituents in demand for labour, the number of those
employed, and the regularity of employment, machinery does not, under
present conditions, generally favour an increased steady demand for
labour. It tends to drive an increased proportion of labour in three
directions.

(1) To the invention, construction, and maintenance of machinery to
make machines, the labour of machine-making being continually
displaced by machines, and being thus driven to the production of
machines more remote from the machines directly engaged in producing
consumptive goods. The labour thus engaged must be in an
ever-diminishing proportion to a given quantity of consumption.
Nothing but a great increase in the quantity of consumption, or the
opening of new varieties of consumption, can maintain or increase the
demand for labour in these machine-making industries.

(2) To continual specialisation, subdivision, and refinement in the
arts of distribution. The multiplication of merchants, agents,
retailers, which, in spite of forces making for centralisation in
distributive work, is so marked a feature in the English industry of
the last forty years, is a natural result of the influence of
machinery, in setting free from "making" processes an increased
proportion of labour.

(3) To the supply of new forms of wealth, which are either (_a_)
wholly non-material--_i.e._, intellectual, artistic, or other personal
services; (_b_) partly non-material--_e.g._, works of art or skill,
whose value consists chiefly in the embodiment of individual taste or
spontaneous energy, or (_c_) too irregular or not sufficiently
extended in demand to admit the application of machinery. The learned
professions, art, science, and literature, and those branches of
labour engaged in producing luxuries and luxurious services furnish a
constantly increasing employment, though the supply of labour is so
notoriously in excess of the demand in all such employments that a
large percentage of unemployment is chronic.

So long then as a community grows in numbers, so long as individuals
desire to satisfy more fully their present wants and continue to
develop new wants, forming a higher or more intricate standard of
consumption, there is no evidence to justify the conclusion that
machinery has the effect of causing a net diminution in demand for
labour, though it tends to diminish the proportion of employment in
the "manufacturing" industries; but there is strong reason to believe
that it tends to make employment more unstable, more precarious of
tenure, and more fluctuating in market value.

FOOTNOTES:

[174] Against this we may set the possibility of a fall in the rate of
interest at which manufacturers may be able to borrow capital in order
to set up improved machinery. Where an economy can be effected in this
direction, the displacement of labour due to the introduction of
machinery may not be so large--_i.e._, it will pay a manufacturer to
introduce a new machine which only "saves" a small amount of money, if
he can effect the change at a cheap rate of borrowing. (Cf. Marshall,
_Principles of Economics_, 2nd edit., pp. 569, 570.)

[175] Leone Levi, _Work and Pay_, p. 28.

[176] Statement by Mr. Shaftoe, President of the Trades Union
Congress, 1888; cf. Carroll D. Wright, _Report on Industrial
Depressions_, Washington, 1886, pp. 80-90.

[177] The merging of retail dealers with the "making" classes, the
classification of merchants with those engaged in transport
industries, and certain departures from precedent in the mode of
classification, render a full use of the 1891 figures impossible at
present.

[178] In the years 1831-41 there was an enormous increase of the
factory population. Between 1835 and 1839, according to Porter, the
increase amounted to 68,263, or a rise of 19.2 per cent. (_Progress of
the Nation_, p. 78.)

[179] T. Ellison, _Cotton Trade of Great Britain_, p. 74.

[180] Only 349,452, or 56.8 per cent. in factories. (Porter, p. 78.)

[181] This increase since 1881 is chiefly explained by the feverish
expansion and over-production of the cotton industry. The census
return for 1891 is reduced to correspond with the earlier estimates in
Booth's _Occupations of the People_.

[182] The 1851 census gives 235,447, that of 1891 gives 240,000 (with
an estimated deduction for clog and patten-makers).

[183] The enormous fall between the census of 1861 and 1871 is partly
attributable to changes in classification. (1) Female relatives of
farmers, included in 1861, were excluded in later censuses; (2)
certain changes were made in the treatment of "retired" persons.

[184] The "steam-navvy" is, however, making digging a machine
industry. Thirteen men with a machine-navvy can do the work of between
60 and 70 human navvies.

[185] The aggregate effect of the change upon employment of seamen is
traced by the following figures, in which the tonnage of sailing and
steam vessels is massed together:--

             Tonnage.       Men.
    1850    3,564,833     151,430
    1860    4,658,687     171,592
    1870    5,690,789     195,962
    1880    6,574,513     192,972
    1890    7,945,071     213,374

[186] M.S. Levasseur, _La Population Française_. Paris, 1889.

[187] From 1876 the transport services, which in 1886 amounted to 2.8
per cent. of the income-receiving population, were included under
commercial. Taking this into consideration, a comparison of the
industrial and the commercial population of 1866 and 1886 shows that
while the former falls from 28.8 to 25.2, the latter rises from 4.0 to
8.7.

[188] J.S. Nicholson, _Effects of Machinery on Wages_, p. 33.

[189] Babbage, _Economy of Manufactures_, p. 230.

[190] Cf. Thorold Rogers, _Political Economy_ (1869), pp. 78, 79.

[191] Marshall, _Principles of Economics_, p. 607; cf. Cunningham,
_Uses and Abuses of Money_, p. 59. See, however, _infra_ Chap. ix.

[192] _Effects of Machinery on Wages_, p. 66.

[193] An increase in the space-area of a market may, however, in some
cases make a trade more steady, especially in the case of an article
of luxury subject to local fluctuations of fashion, etc. A narrow silk
market for England meant fluctuating employment and low skill. An open
market gave improved skill and stability, for though silk is still the
most unsteady of the textile industries, it is far less fluctuating
than was the case in the eighteenth century. (Cf. Porter, p. 225.)

[194] _Op. cit._, p. 117.

[195] _Board of Trade Journal_, November 1892.

[196] For twenty-six societies.

[197] Page xii.




CHAPTER IX.

MACHINERY AND THE QUALITY OF LABOUR.

    § 1. _Kinds of Labour which Machinery supersedes._
    § 2. _Influence of Machine-evolution upon intensity of physical
         work._
    § 3. _Machinery and the length of the working day._
    § 4. _The Education of Working with Machinery._
    § 5. _The levelling tendency of Machinery--The subordination of
         individual capacity in work._


§ 1. In considering the influence of Machinery upon the quality of
labour--_i.e._, skill, duration, intensity, intellectuality, etc., we
have first to face two questions--What are the qualities in which
machinery surpasses human labour? What are the kinds of work in which
machinery displaces man? Now, since the whole of industrial work
consists in moving matter, the advantage of machinery must consist in
the production and disposition of motive power. The general economies
of machinery were found to be two[198]--(1) The increased quantity of
motive force it can apply to industry; (2) greater exactitude in the
regular application of motive force (_a_) in time--the exact
repetition of the same acts at regulated intervals, or greater
evenness in continuity, (_b_) in place--exact repetition of the same
movements in space.[199] All the advantages imputed to machinery in
the economy of human time, the utilisation of waste material, the
display of concentrated force or the delicacy of manipulation, are
derivable from these two general economies. Hence it follows that
wherever the efficiency of labour power depends chiefly upon the
output of muscular force in motive power, or precision in the
regulation of muscular force, machinery will tend to displace human
labour. Assuming, therefore, that displaced labour finds other
employment, it will be transferred to work where machinery has not the
same advantage over human labour--that is to say, to work where the
muscular strain or the need for regularity of movement is less. At
first sight it will thus seem to follow that every displacement of
labour by machinery will bring an elevation in the quality of labour,
that is, will increase the proportion of labour in employments which
tax the muscles less and are less monotonous. This is in the main the
conclusion towards which Professor Marshall inclines.[200]

So far as each several industry is concerned, it has been shown that
the introduction of machinery signifies a net reduction of employment,
unless the development of trade is largely extended by the fall of
price due to the diminution in expenses of production. It cannot be
assumed as a matter of course that the labour displaced by the
introduction of automatic folders in printing will be employed in less
automatic work connected with printing. It may be diverted from
muscular monotony in printing to the less muscular monotony of
providing some new species of luxury, the demand for which is not yet
sufficiently large or regular to justify the application of
labour-saving machinery. But even assuming that the whole or a large
part of the displaced labour is engaged in work which is proved to
have been less muscular or less automatic by the fact that it is not
yet undertaken by machinery, it does not necessarily follow that there
is a diminution in the aggregate of physical energy given out, or in
the total "monotony" of labour.

One direct result of the application of an increased proportion of
labour power to the kinds of work which are less "muscular" and less
"automatic" in character will be a tendency towards greater division
of labour and more specialisation in these employments. Now the
economic advantages of increased specialisation can only be obtained
by increased automatic action. Thus the routine or automatic
character, which constituted the monotony of the work in which
machinery displaced these workers, will now be imparted to the higher
grades of labour in which they are employed, and these in their turn
will be advanced towards a condition which will render them open to a
new invasion of machinery.

Since the number of productive processes falling under machinery is
thus continually increased, it will be seen that we are not entitled
to assume that every displacement of labour by machinery will increase
the proportion of labour engaged in lighter and more interesting forms
of non-mechanical labour.

§ 2. Nor is it shown that the growth of machine-production tends to
diminish the total physical strain upon the worker, though it greatly
lessens the output of purely muscular activity. As regards those
workers who pass from ordinary manual work to the tending of
machinery, there is a good deal of evidence to show that, in the
typical machine industries, their new work taxes their physical vigour
quite as severely as the old work. Professor Shield Nicholson quotes
the following striking statement from the _Cotton Factory Times_:--"It
is quite a common occurrence to hear young men who are on the best
side of thirty years of age declare they are so worked up with the
long mules, coarse counts, quick speeds, and inferior material, that
they are fit for nothing at night, only going to bed and taking as
much rest as circumstances will allow. There are few people who will
credit such statements; nevertheless they are true, and can be
verified any day in the great majority of the mills in the spinning
districts."

Schulze-Gaevernitz shows that the tendency in modern cotton-spinning
and weaving, especially in England, has been both to increase the
number of spindles and looms which an operative is called upon to
tend, and to increase the speed of spinning. "A worker tends to-day
more than twice or nearly three times as much machinery as his father
did; the number of machines in use has increased more than five-fold
since that time, while the workers have not quite doubled their
numbers."[201] With regard to speed, "since the beginning of the
seventies the speed of the spinning machines alone has increased about
15 per cent."[202]

We are not, however, at liberty to infer from Schulze-Gaevernitz's
statement regarding the increased number of spindles and looms an
operative tends, that an intensification of labour correspondent with
this increase of machinery has taken place, nor can the increased
output per operative be imputed chiefly to improved skill or energy of
the operative. Much of the labour-saving character of recent
improvements, especially in the carding, spinning, and intermediate
processes, has reduced to an automatic state work which formerly taxed
the energy of the operative, who has thereby been enabled to tend more
machinery and to quicken the speed without a net increase of working
energy.

In the carding, slubbing, intermediate, roving, and spinning machinery
there is in every case an increase in the amount of machinery tended.
But carding machinery has been revolutionised within the last few
years; the drawing frame has been made to stop automatically when
there is a fault, thus relieving the tender of a certain amount of
supervision; in the slubbing, intermediate, and roving frames certain
detailed improvements have been effected, as is also the case in the
spinning mules and sizing machines.

To some extent the increased quantity of spindles, etc., and increased
speed may be regarded as set off by relief due to these improvements.
Moreover, though there has no doubt been some general speeding up, any
exact measurement is hardly possible, for the speed of machinery is
very often regulated by the amount of work each process is made to do;
for example, if a roving frame makes a coarse hank, the speed of the
spindles does not require to be so great as when the hank is finer; in
that case the mule draws out the sliver to a greater extent than when
the roving is finer, or, in other words, the mule in one case does the
work of the roving frame to a certain extent.

The general opinion seems to be that in the spinning mills, roughly
speaking, 75 per cent. of the increased output per operative may be
imputed to improved machinery, 25 per cent. to increased intensity of
labour in regard to quantity of spindles or "speeding up."

In the weaving processes more specific measurement is possible, though
even there much depends upon the quality of yarn that is used. Here a
reduction in the working day is followed by an increase in speed
without any labour-saving improvements. Previous to the Factory
legislation of 1878, the speed of looms was generally from 170 to 190
picks per minute during the ten hours' day. In the course of about two
years after the reduction of hours (6 per cent.) the general speed had
become 190 to 200 picks, without change in machinery or raw material,
a growth which must have proportionately increased the intensity of
the work of weaving. A deterioration in the quality of the raw
material used for producing cotton cloth is also commonly assigned as
a fact involving more care on the part of the weaver, and increased
danger and disagreeability of work owing to the heavy sizing and
steaming it has brought into vogue. It is not easy to argue much
respecting increased intensity of labour from the increased average of
looms attended, for, as was recently admitted in evidence before the
Labour Commission, everything depends upon the class of looms and of
goods they are manufacturing. "It is quite as easy to drive five looms
of some classes as two of others."[203] But the prevalence of the
"driving" system, by which the overlookers are paid a bonus on the
product of the looms under their charge, has admittedly induced, as it
was obviously designed to do, an increased intensity of labour.

Summing up the evidence, we are able to conclude that the shortening
of working hours and the improvements in machinery has been attended
by an increased effort per unit of labour time. In the words of an
expert, "the change to those actually engaged in practical work is to
lessen the amount of hard manual work of one class, but to increase
their responsibility, owing to being placed in charge of more
machinery, and that of a more expensive kind; while the work of the
more lowly skilled will be intensified, owing to increased production,
and that from an inferior raw material. I mean that to the operative
the improvements in machinery have been neutralised by the inferior
quality of raw material used, and I think it is fair to assume that
their work has been intensified at least in proportion to the increase
of spindles, etc."

The direct evidence drawn from this most highly-evolved machine
industry seems to justify the general opinion expressed by Professor
Nicholson, "It is clear that the use of machines, though apparently
labour-saving, often leads to an increase in the _quantity of labour_,
negatively, by not developing the mind, positively by doing harm to
the body."[204]

§ 3. When any muscular or other physical effort is required it is
pretty evident that an increased duration or a greater continuity in
the slighter effort may tax the body quite as severely as the less
frequent or constant application of a much greater bodily force. There
can be no question but that in a competitive industrial society there
exists a tendency to compensate for any saving of hard muscular, or
other physical effort afforded by the intervention of machinery in two
ways: first, by "forcing the pace"--_i.e._, compelling the worker to
attend more machines or to work more rapidly, thus increasing the
strain, if not upon the muscles, then upon the nerves; secondly, by
extending the hours of labour. A lighter form of labour spread over an
increased period of time, or an increased number of minor muscular
exertions substituted for a smaller number of heavier exertions within
the same period of time, may of course amount to an increased tax upon
the vital energy. It is not disputed that a general result of the
factory system has been to increase the average length of the working
day, if we take under our survey the whole area of machine-production
in modern industrial communities. This is only in part attributable to
the fact that workers can be induced to sell the same daily output of
physical energy as before, while in many cases a longer time is
required for its expenditure. Another influence of equal potency is
the economy of machinery effected by working longer hours. It is the
combined operation of these two forces that has lengthened the average
working day. Certain subsidiary influences, however, also deserve
notice, especially the introduction of cheap illuminants. Before the
cheap provision of gas, the working time was generally limited by
daylight. Not until the first decade of this century was gas
introduced into cotton-mills, and another generation elapsed before it
passed in general use in manufactories and retail shops.[205] Now a
portion of nature's rest has been annexed to the working day. There
are, of course, powerful social forces making for a curtailment of the
working day, and these forces are in many industries powerfully though
indirectly aided by machinery. Perhaps it would be right to say that
machinery develops two antagonistic tendencies as regards the length
of the working day. Its most direct economic influence favours an
extension of the working hours, for machinery untired, wasting power
by idleness, favours continuous work. But when the growing pace and
complexity of highly-organised machinery taxes human energy with
increasing severity, and compresses an increased human effort within a
given time, a certain net advantage in limiting the working day for an
individual begins to emerge, and it becomes increasingly advantageous
to work the machinery for shorter hours, or, where possible, to apply
"shifts" of workers.[206]

But in the present stage of machine-development the economy of the
shorter working day is only obtainable in a few trades and in a few
countries; the general tendency is still in the direction of an
extended working day.[207] The full significance of this is not
confined to the fact that a larger proportion of the worker's time is
consumed in the growing monotony of production. The curtailment of his
time for consumption, and a consequent lessening of the subjective
value of his consumables, must be set off against such increase in
real wages or purchasing power as may have come to him from the
increased productive power of machinery. The value of a shorter
working day consists not merely in the diminution of the burden of
toil it brings, but also in the fact that increased consumption time
enables the workers to get a fuller use of his purchased consumables,
and to enjoy various kinds of "free wealth" from which he was
precluded under a longer working day.[208] So far as machinery has
converted handicraftsmen into machine-tenders, it is extremely
doubtful whether it has lessened the strain upon their energies,
though we should hesitate to give an explicit endorsement to Mill's
somewhat rhetorical verdict. "It is questionable if all the mechanical
inventions yet made have lightened the day's toil of any human being."
At any rate we have as yet no security that machinery, owned by
individuals who do not themselves tend it, shall not be used in such a
way as to increase the physical strain of those who do tend it. "There
is a temptation," as Mr. Cunningham says, "to treat the machine as the
main element in production, and to make it the measure of what a man
ought to do, instead of regarding the man as the first consideration,
and the machine as the instrument which helps him; the machine may be
made the primary consideration, and the man may be treated as a mere
slave who tends it."[209]

§ 4. Now to come to the question of "monotony." Is the net tendency of
machinery to make labour more monotonous or less, to educate the
worker or to brutalise him? Does labour become more intellectual under
the machine? Professor Marshall, who has thoughtfully discussed this
question, inclines in favour of machinery. It takes away manual skill,
but it substitutes higher or more intellectual forms of skill.[210]
"The more delicate the machine's power the greater is the judgment and
carefulness which is called for from those who see after it."[211]
Since machinery is daily becoming more and more delicate, it would
follow that the tending of machinery would become more and more
intellectual. The judgment of Mr. Cooke Taylor, in the conclusion of
his admirable work, _The Modern Factory System_, is the same. "If man
were merely an intellectual animal, even only a moral and intellectual
one, it could scarcely be denied, it seems to us, that the results of
the factory system have been thus far elevating."[212] Mr. Taylor
indeed admits of the operative population that "they have deteriorated
artistically; but art is a matter of faculty, of perception, of
aptitude, rather than of intellect." This strange severance of Art
from Intellect and Morals, especially when we bear in mind that Life
itself is the finest and most valuable of Arts, will scarcely commend
itself to deeper students of economic movements. The fuller
significance of this admission will appear when the widest aspect of
the subject is discussed in our final chapter.

The question of the net intellectual effects of machinery is not one
which admits of positive answer. It would be open to one to admit with
Mr. Taylor that the operatives were growing more intellectual, and
that their contact with machinery exercises certain educative
influences, but to deny that the direct results of machinery upon the
workers were favourable to a wide cultivation of intellectual powers,
as compared with various forms of freer and less specialised manual
labour. The intellectualisation of the town operatives (assuming the
process to be taking place) may be attributable to the thousand and
one other influences of town life rather than to machinery, save
indirectly so far as the modern industrial centre is itself the
creation of machinery.[213] It is not, I think, possible at present to
offer any clear or definite judgment. But the following distinctions
seem to have some weight in forming our opinion.

The growth of machinery has acted as an enormous stimulus to the study
of natural laws. A larger and larger proportion of human effort is
absorbed in processes of invention, in the manipulation of commerce on
an increasing scale of magnitude and complexity, and in such
management of machinery and men as requires and educates high
intellectual faculties of observation, judgment, and speculative
imagination. Of that portion of workers who may be said, within
limits, to control machinery, there can be no question that the total
effect of machinery has been highly educative.

The growing size, power, speed, complexity of machinery, undoubtedly
makes the work of this class of workers "more intellectual." Some
measure of these educative influences even extends to the "hand" who
tends some minute portion of the machinery, so far as the proper
performance of his task requires him to understand other processes
than those to which his labour is directly and exclusively applied.

So likewise consideration must be taken of the skilled work of making
and repairing machinery. The engineers' shop and other workshops are
becoming every year a more and more important factor in the equipment
of a factory or mill. But though "breakdowns" are essentially erratic
and must always afford scope for ingenuity in their repair, even in
the engineers' shop there is the same tendency for machinery to
undertake all work of repair which can be brought under routine. So
the skilled work in making and repairing machinery is continually
being reduced to a minimum, and cannot be regarded, as Professor
Nicholson is disposed to regard it, as a factor of growing importance
in connection with machine-production. The more machinery is used, the
more skilled work of making and repairing will be required, it might
seem. But the rapidity with which machinery is invading these very
functions turns the scale in the opposite direction, at any rate so
far as the making of machinery is concerned. Statistics relating to
the number of those engaged in making machinery and tools show that
the proportion they bear to the whole working population is an
increasing one; but the rate of this increase is by no means
proportionate to the rate of increase in the use of machinery. While
the percentage of those engaged in making machinery and tools rises
from 1.7 in 1861 to 1.8 in 1871 and 1.9 in 1881, 2.0 in 1891, the
approximate increase of steam-power applied to fixed machinery and
locomotives shows a much more rapid rise,--from 2,100,000 horse-power
in 1860 to 3,040,000 in 1870 and 5,200,000 in 1880.[214] Moreover, an
increased proportion of machinery production is for export trade, so
that a large quantity of the labour employed in those industries is
not required to sustain the supply of machinery used in English work.
In repairs of machinery, the economy effected by the system of
interchangeable parts is one of growing magnitude, and tends likewise
to minimise the skilled labour of repair.[215]

Finally, it should be borne in mind that in several large industries
where machinery fills a prominent place, the bulk of the labour is not
directly governed by the machine. This fact has already received
attention in relation to railway workers. The character of the machine
certainly impresses itself upon these in different degrees, but in
most cases there is a large amount of detailed freedom of action and
scope for individual skill and activity.

Though the quality of intelligence and skill applied to the invention,
application, and management of machinery is constantly increasing,
practical authorities are almost unanimous in admitting that the
proportion which this skilled work bears to the aggregate of labour in
machine industry is constantly diminishing. Now, setting on one side
this small proportion of intelligent labour, what are we to say of the
labour of him who, under the minute subdivision enforced by machinery,
is obliged to spend his working life in tending some small portion of
a single machine, the whole result of which is continually to push
some single commodity a single step along the journey from raw
material to consumptive goods?

The factory is organised with military precision, the individual's
work is definitely fixed for him; he has nothing to say as to the plan
of his work or its final completion or its ultimate use. "The constant
employment on one sixty-fourth part of a shoe not only offers no
encouragement to mental activity, but dulls by its monotony the brains
of the employee to such an extent that the power to think and reason
is almost lost."[216]

The work of a machine-tender, it is urged, calls for "judgment and
carefulness." So did his manual labour before the machine took it
over. His "judgment and carefulness" are now confined within narrower
limits than before. The responsibility of the worker is greater,
precisely because his work is narrowed down so as to be related to and
dependent on a number of other operatives in other parts of the same
machine with whom he has no direct personal concern. Such realised
responsibility is an element in education, moral and intellectual. But
this gain is the direct result of the minute subdivision, and must
therefore be regarded as purchased by a narrowing of interest and a
growing monotony of work. It is questionable whether the vast majority
of machine workers get any considerable education, from the fact that
the machine in conjunction with which they work represents a huge
embodiment of the delicate skill and invention of many thousands of
active minds, though some value may be attached to the contention that
"the mere exhibition of the skill displayed and the magnitude of the
operations performed in factories can scarcely fail of some
educational effect."[217] The absence of any true apprenticeship in
modern factories prevents the detailed worker from understanding the
method and true bearing even of those processes which are closely
linked to that in which he is engaged. The ordinary machine-tender,
save in a very few instances, _e.g._, watchmaking, has no general
understanding of the work of a whole department. Present conditions do
not enable the "tender" to get out of machinery the educational
influence he might get. Professor Nicholson expresses himself
dubiously upon the educational value of the machine. "Machinery of
itself does not tend to develop the mind as the sea and mountains do,
but still it does not necessarily involve deterioration of general
mental ability."[218] Dr. Arlidge expresses a more decided opinion.
"Generally speaking, it may be asserted of machinery that it calls for
little or no brain exertion on the part of those connected with its
operations; it arouses no interest, and has nothing in it to quicken
or brighten the intelligence, though it may sharpen the sight and
stimulate muscular activity in some one limited direction."[219]

The work of machine-tending is never of course absolutely automatic
or without spontaneity and skill. To a certain limited extent the
"tender" of machinery rules as well as serves the machine; in seeing
that his portion of the machine works in accurate adjustment to the
rest, the qualities of care, judgment, and responsibility are evolved.
For a customary skill of wrist and eye which speedily hardens into an
instinct, is often substituted a series of adjustments requiring
accurate quantitative measurement and conscious reference to exact
standards. In such industries as those of watchmaking the factory
worker, though upon the average his work requires less manual
dexterity than the handworker in the older method, may get more
intellectual exercise in the course of his work. But though economists
have paid much attention to this industry, in considering the
character of machine-tending it is not an average example for a
comparison of machine labour and hand labour; for the extreme delicacy
of many of the operations even under machinery, the responsibility
attaching to the manipulation of expensive material, and the minute
adjustment of the numerous small parts, enable the worker in a watch
factory to get more interest and more mental training out of his work
than falls to the ordinary worker in a textile or metal factory.
Wherever the material is of a very delicate nature and the processes
involve some close study of the individual qualities of each piece of
material, as is the case with the more valuable metals, with some
forms of pottery, with silk or lace, elements of thought and skill
survive and may be even fostered under machine industry. A great part
of modern inventiveness, however, is engaged in devising automatic
checks and indicators for the sake of dispensing with detailed human
skill and reducing the spontaneous or thoughtful elements of tending
machinery to a minimum. When this minimum is reached the highly-paid
skilled workman gives place to the low-skilled woman or child, and
eventually the process passes over entirely into the hands of
machinery. So long, however, as human labour continues to co-operate
with machinery, certain elements of thought and spontaneity adhere to
it. These must be taken into account in any estimate of the net
educative influence of machinery. But though these mental qualities
must not be overlooked, exaggerated importance should not be attached
to them. The layman is often apt to esteem too highly the nature of
skilled specialist work. A locomotive superintendent of a railway was
recently questioned as to the quality of engine-driving. "After twenty
years' experience he declared emphatically that the very best
engine-drivers were those who were most mechanical and unintelligent
in their work, who cared least about the internal mechanism of the
engine."[220] Yet engine-driving is far less mechanical and monotonous
than ordinary tending of machinery.

So far as the man follows the machine and has his work determined for
him by mechanical necessity, the educative pressure of the latter
force must be predominant. Machinery, like everything else, can only
teach what it practises. Order, exactitude, persistence, conformity to
unbending law,--these are the lessons which must emanate from the
machine. They have an important place as elements in the formation of
intellectual and moral character. But of themselves they contribute a
one-sided and very imperfect education. Machinery can exactly
reproduce; it can, therefore, teach the lesson of exact reproduction,
an education of quantitative measurements. The defect of machinery,
from the educative point of view, is its absolute conservatism. The
law of machinery is a law of statical order, that everything conforms
to a pattern, that present actions precisely resemble past and future
actions. Now the law of human life is dynamic, requiring order not as
valuable in itself, but as the condition of progress. The law of human
life is that no experience, no thought or feeling is an exact copy of
any other. Therefore, if you confine a man to expending his energy in
trying to conform exactly to the movements of a machine, you teach him
to abrogate the very principle of life. Variety is of the essence of
life, and machinery is the enemy of variety. This is no argument
against the educative uses of machinery, but only against the
exaggeration of these uses. If a workman expend a reasonable portion
of his energy in following the movements of a machine, he may gain a
considerable educational value; but he must also have both time and
energy left to cultivate the spontaneous and progressive arts of life.

§ 5. It is often urged that the tendency of machinery is not merely
to render monotonous the activity of the individual worker, but to
reduce the individual differences in workers. This criticism finds
expression in the saying: "All men are equal before the machine." So
far as machinery actually shifts upon natural forces work which
otherwise would tax the muscular energy, it undoubtedly tends to put
upon a level workers of different muscular capacity. Moreover, by
taking over work which requires great precision of movement, there is
a sense in which it is true that machinery tends to reduce the workers
to a common level of skill, or even of un-skill.

"Whenever a process requires peculiar dexterity and steadiness of
hand, it is withdrawn as soon as possible from the cunning workman,
who is prone to irregularities of many kinds, and it is placed in
charge of a peculiar mechanism, so self-regulating that a child can
superintend it."[221]

That this is not true of the most highly-skilled or qualitative work
must be conceded, but it applies with great force to the bulk of
lower-skilled labour. By the aid of machinery--_i.e._, of the
condensed embodiment of the inventor's skill, the clumsy or weak
worker is rendered capable of assisting the nicest movements on a
closer equality with the more skilled worker. Of course piece-work, as
practised in textile and hardware industries, shows that the most
complete machinery has not nearly abolished the individual differences
between one worker and another. But assuming that the difference in
recorded piece wages accurately represents difference in skill or
capacity of work--which is not quite the case--it seems evident that
there is less variation in capacity among machine-workers than among
workers engaged in employments where the work is more muscular, or is
conducted by human skill with simpler implements. The difference in
productive capacity between an English and a Hindoo navvy is
considerably greater than the difference between a Lancashire mill
operative and an operative in an equally well-equipped and organised
Bombay mill.

But this is by no means all that is signified by the "equality of
workers before the machine." It is the adaptability of the machine to
the weaker muscles and intelligence of women and children that is
perhaps the most important factor. The machine in its development
tends to give less and less prominence to muscle and high individual
skill in the mass of workers, more and more to certain qualities of
body and mind which not only differ less widely in different men, but
in which women and children are more nearly on a level with men. It is
of course true that considerable differences of individual skill and
effort survive in the typical machine industry. "Machine-weaving, for
instance, simple as it seems, is divided into higher and lower grades,
and most of those who work in the lower grades have not the stuff in
them that is required for weaving with several colours."[222] But the
general effect of machinery is to lessen rather than to increase
individual differences of efficiency. The tendency of machine industry
to displace male by female labour is placed beyond all question by the
statistics of occupations in England, which show since 1851 a regular
and considerable rise in the proportion of women to men workers in
most branches of manufacture. Legal restrictions, and in the more
civilised communities, the growth of a healthy public opinion, prevent
the economic force from being operative to the same degree so far as
children are concerned.

Those very qualities of narrowly restricted care and judgment,
detailed attention, regularity and patience, which we see to be
characteristic of machine work, are common human qualities in the
sense that they are within the capacity of all, and that even in the
degree of their development and practice there is less difference
between the highly-trained adult mechanic and the raw "half-timer"
than in the development and practice of such powers as machinery has
superseded. It must be recognised that machinery does exercise a
certain equalising influence by assigning a larger and larger relative
importance to those faculties which are specific as compared with
those which are individual.[223] "General ability" is coming to play a
more important part in industry than specialised ability,[3] and
though considerable differences may exist in the "general ability" of
individuals, the differences will be smaller than in specialised
abilities.[224]

The net influence of machinery upon the quality of labour, then, is
found to differ widely according to the relation which subsists
between the worker and the machine. Its educative influence,
intellectual and moral, upon those concerned with the invention,
management, and direction of machine industry, and upon all whose work
is about machinery, but who are not detailed machine-tenders, is of a
distinctly elevating character. Its effect, however, upon
machine-tenders in cases where, by the duration of the working day or
the intensity of the physical effort, it exhausts the productive
energy of the worker, is to depress vitality and lower him in the
scale of humanity by an excessive habit of conformity to the automatic
movements of a non-human motor. This human injury is not adequately
compensated by the education in routine and regularity which it
confers, or by the slight understanding of the large co-operative
purposes and methods of machine industry which his position enables
him to acquire.

FOOTNOTES:

[198] Cf. _supra_, chap. iii. § 2.

[199] Karl Marx ranks the chief economies of machinery under two
heads--(1) Machinery supersedes the skill of men working with tools.
"The machine, which is the starting-point of the industrial
revolution, supersedes the workman, who handles a single tool, by a
mechanism operating with a number of similar tools, and set in motion
by a single motive power, whatever the form of that power may be." (2)
Machinery supersedes the strength of man. "Increase in the size of a
machine, and in the number of its working tools, calls for a more
massive mechanism to drive it; and this mechanism requires, in order
to overcome its resistance, a mightier moving power than that of man."
(_Capital_, vol. ii. pp. 370, 371.)

[200] _Principles of Economics_, 2nd edit., pp. 314, 322.

[201] _Der Grossbetrieb_, p. 120.

[202] _Ibid._, p. 117.

[203] Evidence given by Mr. T. Birtwistle.

[204] _Op. cit._, p. 82. Babbage, in laying stress on one of the
"advantages" of machinery, makes an ingenuous admission of this
"forcing" power. "One of the most singular advantages we derive from
machinery is the check it affords against the inattention, the
idleness, or the knavery of human agents." (_Economy of Machinery_, p.
39; cf. also Ure, _Philosophy of Manufactures_, p. 30.)

[205] Porter, _Progress of the Nation_, p. 590.

[206] Cf. Schulze-Gaevernitz, p. 115.

[207] For a fuller treatment of this subject, see the next chapter.

[208] Cf. Patten, _The Theory of Dynamic Economics_, chap. xi.

[209] _Uses and Abuses of Money_, p. 111.

[210] _Principles_, p. 315.

[211] _Ibid._, p. 316.

[212] Page 435.

[213] A similar difficulty in distinguishing town influences from
specific trade influences confronted Dr. Arlidge in his investigation
into diseases of employments. "It is a most difficult problem to
solve, especially in the case of an industrial town population, how
far the diseases met with are town-made and how far trade-made; the
former almost always predominates." (_Diseases of Occupation_, p. 33.)

[214] Mulhall, _Dictionary of Statistics_, p. 545.

[215] Cf. Marshall, _Principles of Economics_, vol. i. p. 315.

[216] D.A. Wells, _Contemporary Review_, 1889, p. 392.

[217] Taylor, _Modern Factory System_, p. 435.

[218] Cf. the comparison of conditions of town and country labour in
Adam Smith's _Wealth of Nations_, Bk. I., chap. x., part 2.

[219] _Diseases of Occupations_, pp. 25, 26.

[220] _The Social Horizon_, p. 22.

[221] Ure, _Philosophy of Manufactures_, chap. i. p. 19.

[222] Marshall, _Principles of Economics_, p. 265.

[223] Cf. chap. x.

[224] Cf. Marshall, p. 265.




CHAPTER X.

THE ECONOMY OF HIGH WAGES.

    § 1. _The Economy of Low Wages._
    § 2. _Modifications of the Early Doctrine--Sir T. Brassey's
         Evidence from Heavy Manual Work._
    § 3. _Wages, Hours, and Product in Machine-industry._
    § 4. _A General Application of the Economy of High Wages and
         Short Hours inadmissible._
    § 5. _Mutual Determination of Conditions of Employment and
         Productivity._
    § 6. _Compressibility of Labour and Intensification of Effort._
    § 7. _Effective Consumption dependent upon Spare Energy of the
         Worker._
    § 8. _Growth of Machinery in relation to Standard of Comfort._
    § 9. _Economy of High Wages dependent upon Consumption._


§ 1. The theory of a "natural" rate of wages fixed at the bare
subsistence-point which was first clearly formulated in the writings
of Quesnay and the so-called "physiocratic" school was little more
than a rough generalisation of the facts of labour in France. But
these facts, summed up in the phrase, "Il ne gagne que sa vie," and
elevated to the position of a natural law, implied the general belief
that a higher rate of wage would not result in a correspondent
increase of the product of labour, that it would not pay an employer
to give wages above the point of bare sustenance and reproduction.
This dogma of the economy of cheap labour, taught in a slightly
modified form by many of the leading English economists of the first
half of the nineteenth century, has dominated the thought and
indirectly influenced the practice of the business world. It is true
that Adam Smith in a well-known passage had given powerful utterance
to a different view of the relation between work and wages:--"The
liberal reward of labour as it encourages the propagation so it
encourages the industry of the common people. The wages of labour are
the encouragement of industry, which, like every other human quality,
improves in proportion to the encouragement it receives."[225] But the
teaching of Ricardo, and the writers who most closely followed him in
his conception of the industrial system, leaned heavily in favour of
low wages as the sound basis of industrial progress.

The doctrine of the economy of low wages in England scarcely needed
the formal support of the scientific economist. It was already
strongly implanted in the mind of the eighteenth century "business
man," who moralised upon the excesses resulting from high wages much
in the tone of the business man of to-day. It would be scarcely
possible to parody the following line of reflection:--

    "The poor in the manufacturing counties will never work any
    more time in general than is necessary just to live and
    support their weekly debauches. Upon the whole we may fairly
    aver that a reduction of wages in the woollen manufactures
    would be a national blessing and advantage and no real injury
    to the poor. By this means we might keep our trade, uphold our
    rents, and reform the people into the bargain." (Smith's
    _Memoirs of Wool_, vol. ii. p. 308.)

Compare with this Arthur Young's frequent suggestion that rents should
be raised in order to improve farming.[226] So Dr. Ure, half a century
later, notwithstanding that his main argument is for the "economy of
high wages," both on the ground that it evokes the best quality of
work and because it keeps the workman contented, is unable to avoid
flatly contradicting himself as follows:--

    "High wages, instead of leading to thankfulness of temper and
    improvement of mind, have, in too many cases, cherished pride
    and supplied funds for supporting refractory spirits in
    strikes wantonly inflicted upon one set of mill-owners after
    another throughout the several districts of Lancashire for the
    purpose of degrading them into a state of servitude."
    (_Philosophy of Manufactures_, p. 366.)

So again (p. 298):--"In fact, it was their high wages which enabled
them to maintain a stipendary committee in affluence, and to pamper
themselves into nervous ailments by a diet too rich and exciting for
their indoor occupation."

The experiments of Robert Owen in raising wages and shortening
hours in his New Lanark mills failed utterly to convince his
fellow-manufacturers that a high standard of comfort among the workers
would bring a correspondent rise in working efficiency.

The history of the early factory system, under which rapid fortunes
were built out of the excessive toil of children and low-skilled adult
workers paid at rates which were, in many instances, far below true
"subsistence wages," furnished to the commercial mind a convincing
argument in favour of "cheap labour," and set political economy for
half a century at war with the rising sentiments of humanity.[227]
Even now, the fear frequently expressed in the New World regarding the
"competition of cheap labour" attests a strong survival of this
theory, which held it to be the first principle of "good business" to
pay as low wages as possible.

§ 2. The trend of more recent thought has been in the direction of a
progressive modification of the doctrine of the "economy of low
wages." The common maxim that "if you want a thing well done you must
expect to pay for it" implies some general belief in a certain
correspondence of work and wages. The clearer formulation of this idea
has been in large measure the work of economic thinkers who have set
themselves to the close study of comparative statistics. The work in
which Mr. Brassey, the great railway contractor, was engaged gave him
an opportunity of making accurate comparison of the work and wages of
workmen of various nationalities, and his son, Sir Thomas Brassey,
collected and published a number of facts bearing upon the subject
which, as regards certain kinds of work, established a new relation
between work and wages. He found that English navvies employed upon
the Grand Trunk Railway in Canada, and receiving from 5s. to 6s. a
day, did a greater amount of work for the money than French-Canadians
paid at 3s. 6d. a day; that it was more profitable to employ
Englishmen at 3s. to 3s. 6d. upon making Irish railways than Irishmen
at 1s. 6d. to 1s. 8d.; that "in India, although the cost of dark
labour ranges from 4-1/2d. to 6d. a day, mile for mile the cost of
railway work is about the same as in England;" that in quarry work,
"in which Frenchmen, Irishmen, and Englishmen were employed side by
side, the Frenchman received three, the Irishman four, and the
Englishman six francs a day. At those different rates the Englishman
was found to be the most advantageous workman of the three." Extending
his inquiries to the building trades, to mining, and to various
departments of manufactures, he found a general consensus of opinion
among employers and other men of practical experience making for a
similar conclusion. In France, Germany, and Belgium, where wages and
the standard of living were considerably lower than in England, the
cost of turning out a given product was not less, but greater. In the
United States and in a few trades of Holland, where the standard of
comfort was as high or higher than in the corresponding English
industries, more or better work was done. In short, the efficiency of
labour was found to vary with tolerable accuracy in accordance with
the standard of comfort or real wages.

In his introduction to his work on _Foreign Work and English Wages_,
Sir Thomas Brassey gives countenance to a theory of wages which has
frequently been attributed to him, and has sometimes been accepted as
a final statement of the relation of work and wages--viz., that "the
cost of work, as distinguished from the daily wage of the labourer,
was approximately the same in all countries." In other words, it is
held that, for a given class of work, there is a fixed and uniform
relation between wages and efficiency of labour for different lands
and different races.

Now, to the acceptance of this judgment, considered as a foundation of
a theory of comparative wages, there are certain obvious objections.
In the first place, in the statement of most of the cases which are
adduced to support the theory reference is made exclusively to money
wages, no account being taken of differences of purchasing power in
different countries. In order to establish any rational basis, the
relation must be between real wages or standard of living and
efficiency. Now, though it must be admitted as inherently probable
that some definite relation should subsist between wages and work, or,
in other words, between the standard of consumption and the standard
of production, it is not _à priori_ reasonable to expect this relation
should be uniform as between two such countries as England and India,
so that it should be a matter of economic indifference whether a piece
of work is done by cheap and relatively inefficient Indian labour or
by expensive and efficient English labour. Such a supposition could
only stand upon one of two assumptions.

The first assumption would be that of a direct arithmetical
progression in the relation of wage and work such as would require
every difference in quantity of food, etc., consumed by labourers to
be reflected in an exactly correspondent difference of output of
productive energy--an assumption which needs no refutation, for no one
would maintain that the standard of comfort furnished by wages is the
sole determinant of efficiency, and that race, climate, and social
environment play no part in economic production. The alternative
assumption would be that of an absolute fluidity of capital and
labour, which should reduce to a uniform level throughout the world
the net industrial advantages, so that everywhere there was an exact
quantitative relation between work and wage, production, and
consumption. Though what is called a "tendency" to such uniformity may
be admitted, no one acquainted with facts will be so rash as to
maintain that this uniformity is even approximately reached.

§ 3. There is, then, no reason to suppose that wages, either nominal
or real, bear any exact, or even a closely approximate, relation to
the output of efficient work, quantity and quality being both taken
into consideration. But, in truth, the evidence afforded by Sir T.
Brassey does not justify a serious investigation of this theory of
indifference or equivalence of work and wages. For, in the great
majority of instances which he adduces, the advantage is clearly shown
to rest with the labour which is most highly remunerated. The theory
suggested by his evidence is, in fact, a theory of "the economy of
high wages."

This theory, which has been advancing by rapid strides in recent
years, and is now supported by a great quantity of carefully-collected
evidence, requires more serious consideration. The evidence of Sir T.
Brassey was chiefly, though by no means wholly, derived from branches
of industry where muscular strength was an important element, as in
road-making, railway-making, and mining; or from the building trades
where machinery does not play a chief part in directing the pace and
character of productive effort. It would not be unreasonable to expect
that the quantitative relation between work and wages might be closer
in industries where freely expended muscular labour played a more
prominent part than in industries where machinery was a dominating
factor, and where most of the work consisted in tending machinery. It
might well be the case that it would pay to provide a high standard of
physical consumption to navvies, but that it would not pay to the same
extent to give high wages to factory operatives, or even to other
classes of workers less subject to the strain of heavy muscular work.

In so far as the tendency of modern production is to relieve man more
and more of this rough muscular work, it might happen that the true
economy favoured high wages only in those kinds of work which were
tending to occupy a subordinate place in the industry of the future.
The earlier facts, which associated high wages with high productivity,
low wages with low productivity, in textile factories and ironworks,
were of a fragmentary character, and, considered as evidence of a
causal connection between high wages and high productivity, were
vitiated by the wide differences in the development of machinery and
industrial method in the cases compared. In recent years the labours
of many trained economists, some of them with close practical
knowledge of the industrial arts, have collected and tabulated a vast
amount of evidence upon the subject. A large number of American
economists, among them General F.A. Walker, Mr. Gunton, Mr. Schoenhof,
Mr. Gould, Mr. E. Atkinson, have made close researches into the
relation between work and wages in America and in the chief industrial
countries of Europe. A too patent advocacy of tariff reform or a
shorter working day has in some cases prevented the statistics
collected from receiving adequate attention, but there is no reason to
doubt the substantial accuracy of the research.

The most carefully-conducted investigation has been that of Professor
Schulze-Gaevernitz, who, basing his arguments upon a close study of
the cotton industry, has related his conclusion most clearly to the
evolution of modern machine-production. The earlier evidence merely
established the fact of a co-existence between high wages and good
work, low wages and bad work, without attempting scientifically to
explain the connection. Dr. Schulze-Gaevernitz, by his analysis of
cotton spinning and weaving, successfully formulates the observed
relations between wages and product. He compares not only the present
condition of the cotton industry in England and in Germany and other
continental countries, but the conditions of work and wages in the
English cotton industry at various times during the last seventy
years, thus correcting any personal equation of national life which
might to some extent vitiate conclusions based only upon international
comparison. This double method of comparison yields certain definite
results, which Dr. Schulze-Gaevernitz sums up in the following
words:--"Where the cost of labour (_i.e._ piece wages) is lowest the
conditions of labour are most favourable, the working day is shortest,
and the weekly wages of the operatives are highest" (p. 133). The
evolution of improved spinning and weaving machinery in England is
found to be attended by a continuous increase in the product for each
worker, a fall in piece wages reflected in prices of foods, a
shortening of the hours of labour, and a rise in weekly wages. The
following tables, compiled by Dr. Schulze-Gaevernitz, give an accurate
statement of the relations of the different movements, taking the
spinning and weaving industries as wholes in England:--

SPINNING.

 ----------+-----------+-------------+---------+---------+------------
           | Product   |  Number of  | Product | Cost of |  Average
           | of yarn   |   workers   |   per   | labour  |  yearly
           |   in      | in spinning | worker  | per lb. |  wages.
           | 1000 lbs. |   mills.    | in lbs. |         |
 ----------+-----------+-------------+---------+---------+------------
           |           |             |         | s.  d.  |  £ s. d.
 1819-21   |   106,500 |   111,000   |    968  |  6   4  | 26 13 0
 1829-31   |   216,500 |   140,000   |   1546  |  4   2  | 27  6 0
 1844-46   |   523,300 |   190,000   |   2754  |  2   3  | 28 12 0
 1859-61   |   910,000 |   248,000   |   3671  |  2   1  | 32 10 0
 1880-82   | 1,324,000 |   240,000   |   5520  |  1   9  | 44  4 0[228]
 ----------+-----------+-------------+---------+---------+------------

WEAVING.

 --------+------------+-----------+------------+---------+------------
         | Products   | Number of |  Product   | Cost of |  Average
         |      in    | workers.  | per worker | labour  |  yearly
         |  1000 lbs. |           |   in lbs.  | per lb. |  income.
 --------+------------+-----------+------------+---------+------------
         |            |           |            |  s.  d. |  £ s. d.
 1819-21 |    80,620  |  250,000  |      322   |  15   5 | 20 18  0
 1829-31 |   143,200  |  275,000  |      521   |   9   0 | 19 18  0[229]
 1844-46 |   348,110  |  210,000  |     1658   |   3   5 | 24 10  0
 1859-61 |   650,870  |  203,000  |     3206   |   2   9 | 30 15  0
 1880-82 |   993,540  |  246,000  |     4039   |   2   3 | 39  0  0
 --------+------------+-----------+------------+---------+------------

The same holds good of the growth of the cotton-weaving industry in
America, as the following table shows:--

  +------+-------------+-----------+-------------+
  |      | Yearly      | Cost of   | Yearly      |
  |      | product     | labour    | earnings    |
  |      | per worker. | per yard. | per worker. |
  +------+-------------+-----------+-------------+
  |      |     Yards.  |   Cents.  |  Dollars.   |
  | 1830 |     4,321   |    1.9    |    164      |
  | 1850 |    12,164   |   1.55    |    190      |
  | 1870 |    19,293   |   1.24    |    240      |
  | 1884 |    28,032   |   1.07    |    290      |
  +------+-------------+-----------+-------------+

Of Germany and Switzerland the same holds. Every improvement of
machinery increasing the number of spindles or looms a worker can
tend, or increasing the pace of the machinery and thus enlarging the
output per worker, is attended by a higher weekly wage, and in general
by a shortening of the hours of labour.

A detailed comparison of England, the United States, and the
Continent, as regards the present condition of the cotton industry,
yields the same general results. A comparison between England and the
United States shows that in weaving, where wages are much higher in
America, the labour is so much more efficient as to make the cost of
production considerably lower than in England; in spinning, where
English wages are about as highly paid, the cost of production is
lower than in America (p. 156). A comparison between Switzerland and
Germany, England, and America, as regards weaving, yields the
following results (p. 151):--

  ---------------------+-------------+-----------+----------+--------
                       |   Weekly    |           |          |
                       |   product   |   Cost    | Hours of | Weekly
                       | per worker. | per yard. | labour.  | wage.
  ---------------------+-------------+-----------+----------+--------
                       |   Yards.    |           |          | s.  d.
  Switzerland and      |             |           |          |
    Germany            |     466     |   0.303   |    12    | 11   8
  England              |     706     |   0.275   |     9    | 16   3
  America              |    1200     |   0.2     |    10    | 20   3
  ---------------------+-------------+-----------+----------+--------

The low-paid, long-houred labourers of the Italian factories are
easily undersold by the higher paid and more effective labour of
England or America. So also a comparison between Mulhausen and the
factories of the Vosges valleys shows that the more highly-paid labour
of the former is the more productive.

In Russia the better-paid labour in the factories near Petersburg and
in Esthland can outcompete the lower paid labour of the central
governments of Vladimir and Moscow.

Schulze-Gaevernitz goes so far as to maintain that under existing
conditions of low wages and long hours, the Indian factories cannot
undersell their Lancashire competitors, and maintains that the
stringent factory laws which are demanded for India are likely to
injure Lancashire,[230] instead of giving her an advantage. The most
vital points of the subject are thus summarised, after an elaborate
comparison of the cotton-spinning of England and of those parts of
Germany which use English machinery:--

    "In England the worker tends nearly twice as much machinery as
    in Germany; the machines work more quickly; the loss as
    compared with the theoretic output (_i.e._, waste of time and
    material) is smaller. Finally, there comes the consideration
    that in England the taking-off and putting-on from the
    spindles occupies a shorter time; there is less breaking of
    threads, and the piecing of broken threads requires less time.
    The result is that the cost of labour per pound of
    yarn--especially when the work of supervision is taken into
    account--is decidedly smaller in England than in Germany. So
    the wages of the English spinners are nearly twice as high as
    in Germany, while the working day occupies a little over 9
    hours as compared with 11 to 11-1/2 in Germany." (P. 136.)

§ 4. From the evidence adduced by Schulze-Gaevernitz, modern
industrial progress is expressed, so far as its effects on labour are
concerned, in seven results: (_a_) Shorter hours of labour. (_b_)
Higher weekly wage. (_c_) Lower piece-wage. (_d_) Cheaper product.
(_e_) Increased product per worker. (_f_) Increased speed of
machinery. (_g_) Increased number and size of machines to the worker.

All these factors must be taken into consideration before a full
judgment of the net results of machinery upon the worker can be
formed. The evidence above recorded, conclusive as it is regarding the
existence of some causal connection between a high standard of living
and high productivity of labour, does not necessarily justify the
conclusion that a business, or a federation of employers, may go ahead
increasing wages and shortening hours of labour _ad libitum_ in sure
and certain expectation of a corresponding increase in the net
productivity of labour.

Before such a conclusion is warranted, we must grasp more clearly the
nature of the causal relation between high standard of living and
efficiency. How far are we entitled to regard high wages and other
good conditions of employment as the cause, how far as the effect of
efficiency of labour? The evidence adduced simply proves that _a_ _b_
_c_, certain phenomena relating to efficiency--as size of product,
speed of workmanship, quantity of machines tended--vary directly with
_d_ _e_ _f_, certain other phenomena relating to wages, hours of
labour, and other conditions of employment. So far as such evidence
goes, we are only able to assert that the two sets of phenomena are
causally related, and cannot surely determine whether variations in
_a_ _b_ _c_ are causes, or effects of concomitant variations in _d_
_e_ _f_, or whether both sets of phenomena are or are not governed by
some third set, the variations of which affect simultaneously and
proportionately the other two.

The moral which writers like Mr. Gunton and Mr. Schoenhof have sought
to extract, and which has been accepted by not a few leaders in the
"labour movement," is that every rise of wages and every shortening of
hours will necessarily be followed by an equivalent or a more than
equivalent rise in the efficiency of labour. In seeking to establish
this position, special stress is laid upon the evidence of the
comparative statistics of textile industries. But, in the first place,
it must be pointed out that the evidence adduced does not support any
such sweeping generalisation. The statistics of Mr. Gould and Mr.
Schoenhof, for instance, show many cases where higher money and real
wages of American operatives are not accompanied by a correspondingly
larger productivity. In such cases the "cheap" labour of England is
really cheap.

Again, in other cases where the higher wages of American workers are
accompanied by an equivalent, or more than equivalent, increase of
product, that increased product is not due entirely or chiefly to
greater intensity or efficiency of labour, but to the use of more
highly elaborated labour-saving machinery. The difference between the
labour-cost of making and maintaining this improved machinery, and
that of making and maintaining the inferior machinery it has
displaced, ought clearly to be added in, where a comparison is made
between the relation of net labour-cost to product in different
countries, or in different stages of industrial development in the
same country. The omission of this invalidates much of the reasoning
of Schulze-Gaevernitz, Brentano, Rae, and other prophets of "the
economy of high wages." The direct labour-cost of each commodity may
be as little, or even less, than in England, but the total cost of
production[231] and the selling price may be higher. Lastly, in that
comparison between England and America, which is in many respects the
most serviceable, because the two countries are nearest in their
development of industrial methods as well as in the character of their
labourers, the difference of money and of real wage is not commonly
accompanied by a difference in hours of labour.

The evidence we possess does not warrant any universal or even general
application of the theory of the economy of high wages. If it was
generally true that by increasing wages and by shortening working
hours the daily product of each labourer could be increased or even
maintained, the social problem, so far as it relates to the
alleviation of the poverty and misery of the lower grades of workers,
would admit of an easy solution. But though it will be generally
admitted that a rise of wages or of the general standard of comfort of
most classes of workers will be followed by increased efficiency of
labour, and that a shortening of hours will not be followed by a
corresponding diminution in output, it by no means follows that it
will be profitable to increase wages and shorten hours indefinitely.
Just as it is admitted that the result of an equal shortening of hours
will be different in every trade, so will the result of a given rise
in standard of comfort be different. In some cases highly-paid labour
and short hours will pay, in other cases cheaper labour and longer
hours. It is not possible by dwelling upon the concomitance of high
wages and good work, low wages and bad work, in many of the most
highly-developed industries to appeal to the enlightened self-interest
of employers for the adoption of a general rise in wages and a general
shortening of hours. Because the most profitable business may often be
conducted on a system which involves high wages for short intense work
with highly evolved machinery, it by no means follows that other
businesses may not be more profitably conducted by employing low-paid
workers for long hours with simpler machinery. We are not at liberty
to conclude that the early Lancashire mill-owners adopted a
short-sighted policy in employing children and feeble adult labour at
starvation wages.

The evidence, in particular, of Schulze-Gaevernitz certainly shows
that the economy of high wages and short hours is closely linked with
the development of machinery, and that when machinery is complex and
capable of being worked at high pressure a net economy of high wages
and short hours emerges. In this light modern machinery is seen as the
direct cause of high wages and short hours. For though the object of
introducing machinery is to substitute machine-tenders at low wages
for skilled handicraftsmen, and though the tireless machine could be
profitably worked continuously, when due regard is had to human nature
it is found more profitable to work at high pressure for shorter hours
and to purchase such intense work at a higher price. It must, of
course, be kept in mind that high wages are often the direct cause of
the introduction of improved machinery, and are an ever-present
incentive to fresh mechanical inventions. This was clearly recognised
half a century ago by Dr. Ure, who names the lengthened mules, the
invention of the self-acting mule, and some of the early improvements
in calico-printing as directly attributable to this cause.[232]

But, admitting these tendencies in certain machine industries, we are
not justified in relying confidently upon the ability of a rise of
wages, obtained by organisation of labour or otherwise, to bring about
such improvements of industrial methods as will enable the higher
wages to be paid without injuring the trade, or reducing the profits
below the minimum socially required for the maintenance of a privately
conducted industry.

Our evidence leads to the conclusion that, while a rise of wages is
nearly always attended by a rise of efficiency of labour and of the
product, the proportion which the increased productivity will bear to
the rise of wage will differ in every employment. Hence it is not
possible to make a general declaration in favour of a policy of high
wages or of low wages.

§ 5. The economically profitable wages and hours will vary in
accordance with many conditions, among the most important being the
development of machinery, the strain upon muscles and nerves imposed
by the work, the indoor and sedentary character of the work, the
various hygienic conditions which attend it, the age, sex, race, and
class of the workers.

In cotton-weaving in America it pays better to employ women at high
wages to tend six, seven, or even eight looms for short hours, than to
pay lower wages to inferior workers such as are found in Germany,
Switzerland, or even in Lancashire. But in coal-mining it appears that
the American wages are economically too high--that is to say, the
difference between American and English wages is not compensated by an
equivalent difference of output. The gross number of tons mined by
United States miners working at wages of $326 per annum is 377,
yielding a cost of 86-1/2 cents per ton, as compared with 79 cents per
ton, the cost of North Staffordshire coal produced by miners earning
$253, and turning out 322 tons per head.[233] So also a ton of
Bessemer pig iron costs in labour about 50 cents more in America than
in England, the American wages being about 40 per cent. higher.[234]

It is, indeed, evident from the aggregate of evidence that no
determinable relation exists between cost in labour and wages for any
single group of commodities.

Just as little can a general acceptance be given to the opposite
contention that it is the increased efficiency of labour which causes
the high wages. This is commonly the view of those business men and
those economists who start from the assumption that there is some law
of competition in accordance with whose operation every worker
necessarily receives as much as he is worth, the full value of the
product of his labour. Only by the increased efficiency of labour can
wages rise, argue these people; where wages are high the efficiency of
labour is found to be high, and _vice versâ_; therefore efficiency
determines wages. Just as the advocates of the economy of high-wages
theory seek by means of trade-unionism, legislation, and public
opinion to raise wages and shorten hours, trusting that the increased
efficiency which ensues will justify such conduct, so the others
insist that technical education and an elevation of the moral and
industrial character of the workers must precede and justify any rise
of wages or shortening of hours, by increasing the efficiency of
labour. Setting aside the assumption here involved that the share of
the workers in the joint product of capital and labour is a fixed and
immovable proportion, this view rests upon a mere denial of the effect
which it is alleged that high wages and a rise in standard of comfort
have in increasing efficiency.

The relation between wages and other conditions of employment, on the
one hand, and efficiency of labour or size of product on the other, is
clearly one of mutual determination. Every rise in wages, leisure, and
in general standard of comfort will increase the efficiency of labour;
every increased efficiency, whether due directly to these or to other
causes, will enable higher wages to be paid and shorter hours to be
worked.

§ 6. One further point emerges from the evidence relating to
efficiency and high wages. According to Schulze-Gaevernitz's formula,
every fall in piece wages is attended by a rise in weekly wages. But
it should be kept in mind that a rise in time wages does not
necessarily mean that the price of labour measured in terms of effort
has been raised. Intenser labour undergone for a shorter time may
obtain a higher money wage per unit of time, but the price per unit of
effort may be lower. It has been recognised that a general tendency of
the later evolution of machinery has been to compress and intensify
labour. In certain classes of textile labour the amount of muscular or
manual labour given out in a day is larger than formerly. This is the
case with the work of children employed as piecers. In Ure's day
(1830) he was able to claim that during three-fourths of the time
spent by children in the factory they had nothing to do. The increased
quantity of spindles and the increased speed have made their labour
more continuous. The same is true of the mule spinners, whose labour,
even within the last few years, has been intensified by increased size
of the mule. Though as a rule machinery tends to take over the heavier
forms of muscular work, it also tends to multiply the minor calls upon
the muscles, until the total strain is not much less than before. What
relief is obtained from muscular effort is compensated by a growing
strain upon the nerves and upon the attention. Moreover, as the
machinery grows more complex, numerous, and costly, the responsibility
of the machine-tender is increased. To some considerable extent the
new effort imposed upon the worker is of a more refined order than the
heavy muscular work it has replaced. But its tax upon the physique is
an ever-growing one. "A hand-loom weaver can work thirteen hours a
day, but to get a six-loom weaver to work thirteen hours is a physical
impossibility."[235] The complexity of modern machinery and the
superhuman celerity of which it is capable suggest continually an
increased compression of human labour, an increased output of effort
per unit of time. This has been rendered possible by acquired skill
and improved physique ensuing on a higher standard of living. But it
is evident that, where it appears that each rise in the standard of
living and each shortening of the working-day has been accompanied by
a severer strain either upon muscles, nerves, or mental energy during
the shorter working day, we are not entitled to regard the higher
wages and shorter hours as clear gain for the worker. Some limits are
necessarily imposed upon this compressibility of working effort. It
would clearly be impossible by a number of rapid reductions of the
working day and increases of time wages to force the effectiveness of
an hour's labour beyond a certain limit for the workers. Human nature
must place limits upon the compression. Though it may be better for a
weaver to tend four looms during the English factory day for the
moderate wage of 16s. a week than to earn 11s. 8d. by tending two
looms in Germany for twelve hours a day, it does not follow that it is
better to earn 20s. 3d. in America by tending six, seven, or even
eight looms for a ten-hours day,[236] or that the American's condition
would be improved if the eight-hours day was purchased at the expense
of adding another loom for each worker.

The gain which accrues from high wages and a larger amount of leisure,
over which the higher consumption shall be spread, may be more than
counteracted by an undue strain upon the nerves or muscles during the
shorter day. This difficulty, as we have seen, is not adequately met
by assigning the heavier muscular work more and more to machinery, if
the possible activity of this same machinery is made a pretext for
forcing the pace of such work as devolves upon machine-tenders.

In many kinds of work, though by no means in all, an increase of the
amount of work packed into an hour could be obtained by a reduction of
the working-day; but two considerations should act in determining the
progressive movement in this direction: first, the objective economic
question of the quantitative relation between the successive
decrements of the working-day and the increments of labour put into
each hour; second, the subjective economic question of the effect of
the more compressed labour upon the worker considered both as worker
and as consumer.

There is not wanting evidence to show that increased leisure and
higher wages can be bought too dear.

In drawing attention to this consideration it must not, however, be
assumed that the increase of real wages and shortening of hours traced
in progressive industries are necessarily accompanied by a
corresponding increase in the compression of labour. In the textile
and iron industries, for example, it is evident (_pace_ Karl Marx)
that the operatives had obtained some portion of the increased
productivity of improved machinery in a rise of wages. Even where more
machinery is tended we are not entitled to assume a correspondent
increase in felt effort or strain upon the worker. A real growth of
skill or efficiency will enable an increased amount of machinery to be
tended with no greater subjective effort than a smaller amount
formerly required. But while allowance should be made for this, the
history of the factory system, both in England and in other countries,
clearly indicates that factory labour is more intense than formerly,
not, perhaps, in its tax upon the muscles, but in the growing strain
it imposes upon the nervous system of the operatives.

The importance of this point is frequently ignored alike by advocates
of a shorter working-day and by those who insist that the chief aim of
workers should be to make their labour more productive. So far as the
higher efficiency simply means more skill and involves no increased
effort it is pure gain, but where increased effort is required the
question is one requiring close and detailed consideration.

§ 7. Another effect of over-compressed labour deserves a word.

The close relation between higher wages and shorter hours is generally
acknowledged. A rise of money wages which affects the standard of
living by introducing such changes in consumption as require for their
full yield of benefit or satisfaction an increase of consuming-time
can only be made effective by a diminution in the producing time or
hours of labour. When, for example, the new wants, whose satisfaction
would be naturally sought from a rise of the standard living, are of
an intellectual order, involving not merely the purchase of books,
etc., but the time to read such books, this benefit requires that the
higher wages should be supplemented by a diminution in the hours of
labour in cases where the latter are unduly long. But it is not so
clearly recognised that such questions cannot be determined without
reference to the question of intensity of labour. Yet it is evident
that an eight-hours day of more compressed labour might be of a more
exhausting character than a ten-hours day of less intense labour and
disqualify a worker from receiving the benefits of the opportunities
of education open to him more than the longer hours of less intense
labour. The advantage of the addition of two hours of leisure might be
outweighed by the diminished value attached to each leisure hour. In
other words, the excess of intense work might be worse in its effects
than the excess of more extended work. This possibility is often
overlooked in the arguments of those who support the movement towards
a shorter working-day by maintaining that each unit of labour-time
will be more productive. When the argument concerns itself merely with
alleging the influence of higher wages, without shorter hours, upon
the efficiency of labour, this neglect of the consideration of intense
labour has a more urgent importance. It may be gravely doubted whether
the benefit of the higher wages of the Massachusetts weavers is not
overbalanced by the increased effort of tending so large a number of
looms for hours which are longer than the English factory day. The
exhausting character of such labour is likely to leave its mark in
diminishing the real utility or satisfaction of the nominally higher
standard of living which the high wages render possible. Where the
increased productivity of labour is largely due to the improved
machinery or methods of production which are stimulated by high wages
without a corresponding intensification of the labour itself, the gain
to labour is clear. But the possibility that short hours and high
wages may stimulate an injurious compression of the output of
productive effort is one which must not be overlooked in considering
the influence of new industrial methods upon labour.

§ 8. Duration of labour, intensity of labour, and wages, in their
mutual relations, must be studied together in any attempt to estimate
the tendencies of capitalist production. Nor can we expect their
relations to be the same in any two industries. Where labour is
thinly extended over an inordinately long working-day, as in the
Indian mills, it is probable that such improvements of organisation as
might shorten the hours to those of an ordinary English factory day,
and intensify the labour, would be a benefit, and the rise of wages
which might follow would bring a double gain to the workers. But any
endeavour to further shorten and intensify the working-day might
injure the workers, even though their output were increased. Such an
instance, however, may serve well to bring home the relativity which
is involved in all such questions. The net benefit derived from a
particular quantitative relation between hours of labour, intensity,
and earnings would probably be widely different for English and for
Indian textile workers. It would, _à priori_, be unreasonable to
expect that the working-day which would bring the greatest net
advantage to both should be of the same duration. So also it may well
be possible that the more energetic nervous temperament of the
American operative may qualify him or her for a shorter and intenser
working-day than would suit the Lancashire operative. It is the
inseparable relation of the three factors--duration, intensity, and
earnings--which is the important point. But in considering earnings,
not merely the money wage, nor even the purchasing power of the money,
but the net advantage which can be obtained by consuming what is
purchased must be understood, if we are to take a scientific view of
the question.

It should be clearly recognised that in the consideration of all
practical reforms affecting the conditions of labour, the "wages"
question cannot be dissociated from the "hours" question, nor both
from the "intensity of labour" question; and that any endeavour to
simplify discussion, or to facilitate "labour movements," by seeking a
separate solution for each is futile, because it is unscientific. When
any industrial change is contemplated, it should be regarded, from the
"labour" point of view, in its influence upon the net welfare of the
workers, due regard being given, not merely to its effect upon wage,
hours, and intensity, but to the complex and changing relations which
subsist in each trade, in each country, and in each stage of
industrial development between the three.

But although, when we bear in mind the effects of machinery in
imparting intensity and monotony to labour, in increasing the number
of workers engaged in sedentary indoor occupations, and in compelling
an ever larger proportion of the working population to live in crowded
and unhealthy towns, the net benefit of machinery to the working
classes may be questioned, the growth of machinery has been clearly
attended by an improved standard of material comfort among the
machine-workers, taking the objective measurement of comfort.

Whatever allowance may be made for the effects of increased intensity
of labour, and the indirect influences of machinery, the bulk of
evidence clearly indicates that machine-tenders are better fed,
clothed, and housed than the hand-workers whose place they take, and
that every increase in the efficiency and complexity of machinery is
attended by a rise in real wages. The best machinery requires for its
economical use a fair standard of living among the workers who
co-operate with it, and with the further development of machinery in
each industry we may anticipate a further rise of this standard,
though we are not entitled to assume that this natural and necessary
progress of comfort among machine-workers has no fixed limit, and that
it is equally applicable to all industries and all countries.

It might, therefore, appear that as one industry after another fell
under machine-production, the tendency of machine-development must
necessarily make for a general elevation of the standard of comfort
among the working classes. It may very well be the case that the net
influence of machinery is in this direction. But it must not be
forgotten that the increased spread of machine-production does not
appear to engage a larger proportion of the working population in
machine-tending. Indeed, if we may judge by the recent history of the
most highly-evolved textile industries, we are entitled to expect
that, when machinery has got firm hold of all those industries which
lend themselves easily to routine production, the proportion of the
whole working population engaged directly in machine-tending will
continually decrease, a larger and larger proportion being occupied in
those parts of the transport and distributing industries which do not
lend themselves conveniently to machinery, and in personal services.
If this is so, we cannot look upon the evolution of machinery, with
its demand for intenser and more efficient labour, as an adequate
guarantee of a necessary improvement in the standard of comfort of the
working classes as a whole. To put the matter shortly, we have no
evidence to show that a rise in the standard of material comfort of
shopmen, writing clerks, school-teachers, 'busmen, agents,
warehousemen, dockers, policemen, sandwich-men, and other classes of
labour whose proportion is increasing in our industrial society, will
be attended by so considerable a rise in the efficiency of their
labour as to stimulate a series of such rises. The automatic movement
which Schulze-Gaevernitz and others trace in the typical
machine-industries is not shown to apply to industry as a whole, and
if the tendency of machine-development is to absorb a larger
proportion of the work but a smaller proportion of the workers, it is
not possible to found large hopes for the future of the working
classes upon this movement of the earning of high wages in
machine-industry.

§ 9. But though the individual self-interest of the producer cannot be
relied upon to favour progressive wages, except in certain industries
and up to a certain point, the collective interest of consumers lends
stronger support to "the economy of high wages." We have seen that the
possession of an excessive proportion of "power to consume" by classes
who, because their normal healthy wants are already fully satisfied,
refuse to exert this power, and insist upon storing it in unneeded
forms of capital, is directly responsible for the slack employment of
capital and labour. If the operation of industrial forces throw an
increased proportion of the "power to consume" into the hands of the
working classes, who will use it not to postpone consumption but to
raise their standard of material and intellectual comfort, a fuller
and more regular employment of labour and capital must follow. If the
stronger organisation of labour is able to raise wages, and the higher
wages are used to demand more and better articles of consumption, a
direct stimulus to the efficiency of capital and labour is thus
applied. The true issue, however, must not be shirked. If the power of
purchase now "saved" by the wealthier classes passed into the hands of
the workers in higher money wages, and was not spent by them in
raising their standard of comfort, but was "invested" in various
forms of capital, no stimulus to industry would be afforded; the
"savings" of one class would have fallen into the hands of another
class, and their excess would operate to restrict industry precisely
as it now operates. Though we would gladly see in the possession of
the working classes an increased proportion of those forms of capital
which are socially useful, this simple act of transfer, however
brought about, would furnish no stimulus to the aggregate industry.
From the standpoint of the community nothing else than a rise in the
average standard of current consumption can stimulate industry. When
it is clearly grasped that a demand for commodities is the only demand
for the use of labour and of capital, and not merely determines in
what particular direction these requisites of production shall be
applied, the hope of the future of our industry is seen to rest
largely upon the confident belief that the working classes will use
their higher wages not to draw interest from investments (a
self-destructive policy) but to raise their standard of life by the
current satisfaction of all those wholesome desires of body and mind
which lie latent under an "economy of low wages." The satisfaction of
new good human desires, by endowing life with more hope and interest,
will render all intelligent exertion more effective, by distributing
demand over a larger variety of commodities will give a fuller
utilisation both of natural and human resources, and by redressing the
dislocated balance of production and consumption due to inequality of
purchasing power, will justify high wages by increased fulness and
regularity of work. But it must be clearly recognised that however
desirable "saving" may seem to be as a moral virtue of the working
classes, any large practice of saving undertaken before and in
preference to an elevation of current consumption, will necessarily
cancel the economic advantages just dwelt upon. Just as the wise
individual will see he cannot afford to "save" until he has made full
provision for the maintenance of his family in full physical
efficiency, so the wise working class will insist upon utilising
earlier accesses of wages in promoting the physical and intellectual
efficiency of themselves and their families before they endeavour to
"invest" any considerable portion of their increased wages. Mr. Gould
puts this point very plainly and convincingly: "Where economic gains
are small, savings mean a relatively low plane of social existence. A
parsimonious people are never progressive, neither are they, as a
rule, industrially efficient. It is the man with many wants--not
luxurious fancies, but real legitimate wants--who works hard to
satisfy his aspirations, and he it is who is worth hiring. Let
economists still teach the utility and the necessity of saving, but
let the sociologist as firmly insist that to so far practise economy
as to prevent in the nineteenth century a corresponding advance in
civilisation of the working with the other classes is morally
inequitable and industrially bad policy. I am not sorry that the
American does not save more. Neither am I sure but that if many
working-class communities I have visited on the Continent were
socially more ambitious, there would not be less danger from Radical
theories. One of the most intelligent manufacturers I ever met told me
a few years ago he would be only too glad to pay higher wages to his
working people, provided they would spend the excess legitimately and
not hoard it. He knew that in the end he should gain thereby, since
the ministering to new wants only begets others."[237] If there are
theoretic economists who still hold that "a demand for commodities is
not a demand for labour," they may be reminded that a paradox is not
necessarily true. In fact, this particular paradox is seen to be
sustained by a combination of slipshod reasoning and moral prejudice.
The growing opinion of economic students is veering round to register
in theory the firm empirical judgment from which the business world
has never swerved, that a high rate of consumption is the surest
guarantee of progressive trade. The surest support of the "economy of
high wages" is the conviction that it will operate as a stimulus to
industry through increased consumption. The working classes,
especially in the United States and in England, show a growing
tendency to employ their higher wages in progressive consumption. Upon
the steady operation of this tendency the economic future of the
working classes, and of industry in general, largely depends.

FOOTNOTES:

[225] _Wealth of Nations_, vol. i. p. 86.

[226] Cf. _Northern Tour_, vol. ii. p. 86.

[227] It is true that out-and-out defenders of the factories against
early legislation sometimes had the audacity to assert the "economy of
high wages," and to maintain that it governed the practice of early
mill-owners. So Ure, "The main reason why they (_i.e._ wages) are so
high is, that they form a small part of the value of the manufactured
article, so that if reduced too low by a sordid master, they would
render his operatives less careful, and thereby injure the quality of
their work more than could be compensated by his saving in wages. The
less proportion wages bear to the value of the goods, the higher,
generally speaking, is the recompense of labour. The prudent master of
a fine spinning-mill is most reluctant to tamper with the earnings of
his spinners, and never consents to reduce them till absolutely forced
to it by a want of remuneration for the capital and skill embarked in
his business" (_Philosophy of Manufactures_, p. 330). This does not,
however, prevent Dr. Ure from pointing out a little later the grave
danger into which trade-union endeavours to raise wages drive a trade
subject to the competition of "the more frugal and docile labour of
the Continent and United States" (p. 363). Nor do Dr. Ure's statements
regarding the high wages paid in cotton-mills, which he places at
three times the agricultural wages, tally with the statistics given in
the appendix of his own book (cf. p. 515). Male spinners alone
received the "high wages" he names, and out of them had to pay for the
labour of the assistants whom they hired to help them.

[228] _Der Grossbetrieb_, p. 132. In regarding the advance of recent
average wages it should be borne in mind that the later years contain
a larger proportion of adults. In considering the net yearly wages a
deduction for unemployment should be made from the sums named in the
table.

[229] Account must be taken of the depressed condition of hand-loom
weavers, who had not yet disappeared.

[230] Here Schulze-Gaevernitz appears to strain his argument. Though
official reports lay stress upon the silver question as an important
factor in the rise of Bombay mills, there seems no doubt of the
ability of Bombay cheap labour, independently of this, to undersell
English labour for low counts of cotton in Asiatic markets. Brentano
in his work, _Hours and Wages in Relation to Production_, supports
Schulze-Gaevernitz.

[231] Mr. Gould's general conclusion, from his comparison of American
and European production, is "that higher daily wages in America _do
not mean a correspondingly enhanced labour-cost to the manufacturers_"
(_Contemporary Review_, Jan. 1893). This he holds to be partly due to
superior mechanical agencies, which owe their existence to high wages,
partly to superior physical force in the workers. But Mr. Gould's
evidence and his conclusion here stated, taken as testimony to the
"economy of high wages," are insufficient, for they only show that
high wages are attended by increased output of labour, not by an
increase _correspondent_ to this higher wage.

[232] Ure's _Philosophy of Manufactures_, pp. 367-369. Dr. Ure
regarded mechanical inventions as the means whereby capital should
keep labour in subjection. In describing how the "self-acting mule"
came into use he adds triumphantly: "This invention comprises the
great doctrine already propounded, that when capital enlists science
in her service the refractory hand of labour will always be taught
docility" (p. 368).

[233] "No. 64 Consular Report" (quoted Schoenhof, p. 209).

[234] Schoenhof, p. 216.

[235] _Der Grossbetrieb_, p. 167.

[236] _Vide supra_, p. 269. These wages, however, are the average of
all the labour employed in the weaving-sheds, not of "weavers" alone.

[237] E.R.L. Gould, _Contemporary Review_, January 1893.




CHAPTER XI.

SOME EFFECTS OF MODERN INDUSTRY UPON THE WORKERS AS CONSUMERS.

    § 1. _How far the different Working Classes gain from the Fall of
         Prices._
    § 2. _Part of the Economy of Machine-production compensated by the
         growing Work of Distribution._
    § 3. _The Lowest Class of Workers gains least from
         Machine-production._


§ 1. In considering the effect of machine-production upon a body of
workers engaged in some particular industry we are not confined to
tracing the effects of improvements in the arts and methods of that
single branch of production. As consumers they share in the
improvements introduced into other industries reflected in a fall of
retail prices. Insomuch as all English workers consume bread they are
benefited by the establishment of a new American railway or the
invention of new milling machinery which lowers the price of bread; as
all consume boots the advantage which the introduction of boot-making
machinery confers upon the workers is not confined to the higher wages
which may be paid to some operatives in the boot factory, but is
extended to all the workers who can buy cheaper boots.

How far do methods of modern capitalist production tend to benefit the
labourer in his capacity as consumer?

Economic theory is in tolerably close accord with experience in the
answer it gives to this question. Each portion of the working classes
gains in its capacity of consumer from improved methods of production
in proportion to the amount by which its income exceeds the bare
subsistence wage of unskilled workers. The highly-paid mechanic gains
most, the sweated worker least. The worker earning forty shillings per
week gains much more than twice as much as the worker earning twenty
shillings from each general cheapening in the cost of production.
There are several reasons why this is so.

1. Where there exists a constant over-supply of labour competing for
what must be regarded at any particular time as a fixed quantity of
employment, wages are determined with tolerably close reference to the
lowest standard of living among that class of workers, and not by any
fixed or customary money wage. This is particularly the case in the
"sweating" trades of large towns. Here such improvements in machinery
and methods of industry as lower the price of articles which fall
within the "standard of living" of this class are liable to be
speedily reflected in a fall of money wages paid for such low-skilled
work. In other words, a "bare subsistence wage" does not gain by a
fall in the price of the articles which belong to its standard of
comfort.

Even in the lowest kinds of work there is no doubt some tendency to
stick to the former money wage and thus to raise somewhat the standard
of real wages, but where the competition is keenest this _vis inertiæ_
is liable to be overborne, and money wages fall with prices. As we
rise to the more highly skilled, paid, and organised grades of labour,
we come to workers who are less exposed to the direct constant strain
of competition, where there is not a chronic over-supply of labour.
Here a fall of retail prices is not necessarily or speedily followed
by any corresponding fall of money wages, and the results of the
higher real wages enjoyed for a time impress themselves in a higher
habitual standard of comfort and strengthen the resistance which is
offered to any attempt to lower money wages, even though the attempt
may be made at a time when an over-supply of labour does exist.

In proportion as a class of workers is highly paid, educated, and
organised, it is able to gain the benefit which improved machinery
brings to the consumer, because it is better able to resist the
economic tendency to determine wages by reference to a standard of
comfort independent of monetary considerations. So far as the lowest
waged and most closely competing labourers have gained by the fall of
prices, it has been due to the pressure of sentiment on the part of
the better class of employers and of the public against the lowering
of money wages, even where the smaller sum of money will purchase as
much as a larger sum previously.

2. The smaller the income the larger the proportion of it that is
spent upon commodities whose expense of production and whose price is
less affected by machinery. Machine-production, by the fall of prices
it brings, has benefited people in direct proportion to their income.
The articles which have fallen most rapidly in price are those
comforts and luxuries into which machine-production enters most
largely. The aristocracy of the working classes, whose standard of
comfort includes watches, pianos, books, and bicycles, has gained much
more by the fall of prices than those who are obliged to spend all
their wages on the purchase of bare necessaries of life. The gain of
the former is manifold and great, the benefit of the latter is
confined to the cheapening of bread and groceries--a great benefit
when measured in terms of improved livelihood no doubt, but small when
compared with the increase of purchasing power conferred by modern
production upon the Lancashire factory family, with its £3 or £4 a
week, and in large measure counterbalanced by the increased proportion
of the income, which, in the case of town operatives, goes as rent and
price of vegetables, dairy produce, and other commodities which have
risen in price.

3. The highly-paid operatives generally work the shortest hours, the
low-paid the longest. So far as this is not compensated by an
increased intensity of labour on the part of those working short
hours, it implies an increased capacity of making the most out of
their wages. Longer leisure enables a worker to make the most of his
consumption, he can lay out his wages more carefully, is less tempted
to squander his money in excesses directly engendered by the reaction
from excessive labour, and can get a fuller enjoyment and benefit from
the use of the consumables which he purchases. A large and increasing
number of the cheapest and the most intrinsically valuable
commodities, of an intellectual, artistic, and spiritual character,
are only open to the beneficial consumption of those who have more
leisure at their command than is yet the lot of the low-skilled
workers in our towns.

§ 2. If we compare the statistics of wages we shall find that the
largest proportionate rise of money wages has been in the
highly-organised machine industries, and that the benefit which
machinery confers upon the workers in the capacity of consumers falls
chiefly to the same workers.

It must not, however, be assumed that improved methods of production
yield their full benefit through competition to the consuming public.
On the contrary, much of the economy of machine-production fails to
exercise its full influence upon retail prices. There are two chief
reasons for this failure. To one of these adequate attention has been
already drawn, the growth of definite forms of capitalist monopoly,
which secure at some point or other in the production of a commodity,
as higher profits, that which under free competition would pass to the
consumer through lower shop prices. The second consists in the
abnormal growth of the distributive classes, whose multiplication is
caused by the limitation which the economy of machinery imposes upon
the amount of capital and labour which can find profitable employment
in the extractive and manufacturing processes. A larger and larger
number of industrial workers obtain a living by a subdivision of the
work of distribution carried to a point far beyond the bounds of
social utility. For, on the one hand, when competition of
manufacturers and transporters is more and more confined to a small
number of large businesses which, because their united power of
production largely transcends the consumption at profitable prices,
are driven into closer competition, a larger amount of labour is
continually engaged in the attempt of each firm to secure for itself
the largest share of business at the expense of another firm. On the
other hand, shut out from effective or profitable competition in the
manufacturing industries, a larger amount of capital and labour seeks
to engage in those departments of the distributive trade where
new-comers have a better chance, and where by local settlement or
otherwise they have an opportunity of sharing the amount of
distribution that is to be done. Hence a fall of wholesale prices is
usually not reflected in a corresponding fall of retail prices, for
competition in retail trade, as J.S. Mill clearly recognised, "often,
instead of lowering prices, merely divides the gains of the high price
among a greater number of dealers."[238]

§ 3. The wide difference between the economic position of the skilled
mechanic and the common labourer shows how fallacious is that
treatment of the influence of machinery upon the condition of the
working classes which is commonly found in treatises of political
economy. To present a comparative picture of the progress of the
working classes during the last half century, which assigns to them an
increase of money wages, obtained by averaging a number of rises in
different employments, and reduces this increase to real wages without
any reference to the different use of wages by different classes, is
an unscientific and mischievous method of dealing with one of the most
important economic questions. The influence of machine-production
appears to be widely different upon the skilled mechanic and the
common labourer considered both as producers and consumers, and tends
to a wide difference in standard of comfort between the two classes.
This difference is further enhanced by the indirect assistance which
machinery and large-scale industry gives to the skilled workers to
combine and thus frequently to secure wages higher than are
economically requisite to secure their efficient work. On the other
hand, growing feelings of humanity and a vague but genuine feeling of
social justice in an ever larger portion of the public often enable
the low-skilled worker to secure a higher standard of comfort than the
operation of economic competition alone would enable him to reach. But
after due allowance is made for this, the conclusion is forced upon us
that the gain of machine-production, so far as an increase in real
wages is concerned, has been chiefly taken by the highly-skilled and
highly-waged workers, and that as the character of work and wages
descends, the proportionate gain accruing from the vast increase of
productive power rapidly diminishes, the lowest classes of workers
obtaining but an insignificant share.

FOOTNOTES:

[238] _Principles of Political Economy_, Bk. ii., chap. iv. § 3.




CHAPTER XII.

WOMEN IN MODERN INDUSTRY.

    § 1. _Growing Employment of Women in Manufacture._
    § 2. _Machinery favours Employment of Women._
    § 3. _Wages of Women lower than of Men._
    § 4. _Causes of Lower Wages for Women._
    § 5. _Smaller Productivity or Efficiency of Women's Labour._
    § 6. _Factors enlarging the scope of Women's Wage-work._
    § 7. _"Minimum Wage" lower for Women--Her Labour often subsidised
         from other sources._
    § 8. _Woman's Contribution to the Family Wages--Effect of Woman's
         Work upon Man's Wages._
    § 9. _Tendency of Woman's Wage to low uniform level._
   § 10. _Custom and Competition as determinants of Low Wages._
   § 11. _Lack of Organisation among Women--Effect on Wages._
   § 12. _Over-supply of Labour in Women's Employments the
         root-evil._
   § 13. _Low Wages the chief cause of alleged Low "Value" of Woman's
         Work._
   § 14. _Industrial Position of Woman analogous to that of
         Low-skilled Men._
   § 15. _Damage to Home-life arising from Women's Wage-work._


§ 1. Modern manufacture with machinery favours the employment of women
as compared with men. Each census during the last half century shows
that in England women are entering more largely into every department
of manufacture, excepting certain branches of metal work,
machine-making and shipbuilding, etc., where great muscular strength
is a prime factor in success.

The following table,[239] indicating the number of males and females
employed in the leading groups of manufactures at decennial points
since 1841, clearly indicates the nature and extent of the industrial
advance of woman.

MALE AND FEMALE EMPLOYMENT IN MANUFACTURES, 1841-91.

---------------------------+------------------+------------------+
                           |      M. 1841. F. |      M. 1851. F. |
---------------------------+------------------+------------------+
Earthenware                |   23,600    7,400|   34,800   11,700|
Fuel, Gas, Chemicals       |    5,800      300|   16,400    1,700|
Fur, Leather, Glue         |   31,600    2,400|   44,500    6,500|
Wood Furniture, Carriages, |                  |                  |
etc.                       |  147,500    4,900|  180,200    8,900|
Paper, Floorcloth,         |                  |                  |
Waterproof, etc.           |    8,900    3,200|   13,600    8,300|
Textiles, Dyeing           |  346,200  257,600|  462,400  472,100|
Dress                      |  343,600  177,200|  397,500  471,200|
Food, Drink, Smoking       |   82,700    8,000|  120,900   12,400|
Watches, Instruments,      |                  |                  |
Toys                       |   19,600      800|   23,500    1,300|
Printing, Bookbinding,     |                  |                  |
etc.                       |   21,100    1,800|   30,400    3,800|
---------------------------+------------------+------------------+
TOTAL                      |1,030,600  463,600|1,324,200  997,900|
---------------------------+------------------+------------------+

---------------------------+--------------------+--------------------+
                           |      M. 1861. F.   |      M. 1871. F.   |
---------------------------+--------------------+--------------------+
Earthenware                |   42,500     13,400|   49,700     17,700|
Fuel, Gas, Chemicals       |   24,800      1,500|   34,900      4,100|
Fur, Leather, Glue         |   47,300      8,300|   49,400     10,200|
Wood Furniture, Carriages, |                    |                    |
etc.                       |  202,200     14,100|  214,200     19,500|
Paper, Floorcloth,         |                    |                    |
Waterproof, etc.           |   14,600     10,700|   20,300     13,400|
Textiles, Dyeing           |  439,700    526,500|  414,500    555,500|
Dress                      |  378,600    550,900|  363,300    552,700|
Food, Drink, Smoking       |  133,400     15,600|  145,700     18,500|
Watches, Instruments,      |                    |                    |
Toys                       |   32,800      2,900|   35,900      3,000|
Printing, Bookbinding,     |                    |                    |
etc.                       |   41,300      6,200|   57,600      8,600|
---------------------------+--------------------+--------------------+
TOTAL                      |1,357,200  1,150,100|1,385,500  1,203,200|
---------------------------+--------------------+--------------------+

---------------------------+--------------------+--------------------+
                           |       M. 1881. F.  |       M. 1891. F.  |
---------------------------+--------------------+--------------------+
Earthenware                |   52,200     19,700|   64,300     23,800|
Fuel, Gas, Chemicals       |   44,000      4,000|   66,400      6,300|
Fur, Leather, Glue         |   49,400     13,300|   59,100     18,200|
Wood Furniture, Carriages, |                    |                    |
etc.                       |  221,600     18,400|  253,600     23,300|
Paper, Floorcloth,         |                    |                    |
Waterproof, etc.           |   24,600     23,200|  28,600     34,200 |
Textiles, Dyeing           |  396,400    566,200|  430,500    585,600|
Dress                      |  344,700    609,300|  353,800    681,300|
Food, Drink, Smoking       |  152,300     28,900|  173,100     50,200|
Watches, Instruments,      |                    |                    |
Toys                       |   41,700      3,400|   44,600      5,500|
Printing, Bookbinding,     |                    |                    |
etc.                       |   75,000     13,100|  102,100     19,100|
---------------------------+--------------------+--------------------+
TOTAL                      |1,401,900  1,299,500|1,576,100  1,447,500|
---------------------------+--------------------+--------------------+

From this table we perceive that while the number of males engaged in
these manufactures has increased by 53 per cent. during the half
century 1841 to 1891, the number of females has increased by 221 per
cent. This movement, which must be regarded partly as a displacement
of male by female labour, partly as an absorption of new manufactures
by female labour, proceeded with great rapidity from the beginning of
the period up to 1881. The check apparent in the last decennium, in
which the number of males employed seems to have increased faster than
that of the females, does not, however, indicate a reversal or even a
suspension of the industrial movement. It is attributable to an
abnormal change in a single great industry--the cotton trade;
excluding this, the employment of females in each group of
manufactures has grown faster than that of males.

    [Illustration: TEXTILE WORKERS.]

If we confine our survey to adults (excluding males and females below
fifteen) the rapid and regular advance of female employment as
compared with male is still more striking.

    [Illustration: DRESS WORKERS.]

When we turn to the textile industries and to dress, the change of
proportionate employment among the sexes is very noteworthy. In
textiles and dyeing there was a continuous decline in the absolute
numbers of adult male workers and a continuous increase of female
workers up to 1881. In 1851 there were 394,400 men employed, in 1881
the number had fallen to 345,900, while the women had risen during the
same period from 390,800 to 500,200. The census figures for 1891 mark
a decided check in this movement. Adult male workers show an increase
of 34,000 upon the 1881 figures in the textile industries, while the
increase of female workers is only 15,000. This is due, on the one
hand, to the feverish and disordered expansion of the cotton
industry, which offers a larger proportion of male employment than
other textile branches; on the other hand, to the alarming decay of
the lace and linen industries, which show an absolute decline of
female employment amounting to nearly 13,000. So likewise in the dress
industries 377,400 men were employed in 1851, and 335,900 in 1881,
while the number of women employed had increased from 441,000 to
589,000.[240]

    [Illustration]

These figures chiefly indicate a displacement of male by female
labour. But the movement is by no means peculiar to the textile and
dress industries which may appear specially adapted to the faculties
of women. Wherever women have got a firm footing in a manufacture a
similar movement is traceable; the relative rate of increase in the
employment of women exceeds that of men, even where the numbers of the
latter do not show an absolute decline. Such industries are wood
furniture and carriages; printing and bookbinding; paper, floorcloths,
waterproof; feathers, leather, glues; food, drink, smoking;
earthenware, machinery, tools.[241] Women have also obtained
employment in connection with other industries which are still in the
main "male" industries, and in which no women, or very few, were
engaged in 1841. Such are fuel, gas, chemicals; watches, instruments,
toys. The only group of machine industries in which their numbers have
not increased more rapidly than those of men since 1851 are the metal
industries. Over some of these, however, they are obtaining an
increased hold. In the "more mechanical portions" of the growing
"cycle" industry, hollow-ware, and in certain departments of the
watchmaking trade, they are ousting male labour, executing with
machinery the work formerly done by male hand-workers.[242]

From this and similar evidence relating to the statistics of
employment in modern industrial countries, the following conclusions
seem justified:--

(1.) That the tendency of modern industry is to increase the quantity
of wage-work given to women as compared with that given to men.

In qualification of this tendency consideration should be taken of the
greater irregularity of women's work, and of the fact that a large
number of women returned as industrial workers give only a portion of
their working-day to industry.

(2.) That this tendency is specially operative in manufacturing
industries. The increase of female employment in the "dealing"
industries and in "industrial service" is not larger than the increase
of male employment between 1851 and 1881.

(3.) That in the manufacturing industries, omitting a few essentially
male industries where even under machinery the muscles are severely
taxed, the increased rate of female employment is greatest in those
industries where machinery has been most highly developed, as for
example in the textile industries and dress.

Out of 1,840,898 women placed in the industrial class in 1891 no fewer
than 1,319,441 were engaged in textile industries and dress, though
under the latter head there is of course still a good deal of hand
industry.

It seems evident that modern improvements in machinery under normal
circumstances favour the employment of women rather than of men. There
is some reason to suppose that machinery also favours the employment
of children as compared with adults, where the economic forces are
allowed free play. In the textile industries of the United States the
work of women and children predominates even more largely than in
England; in 1880 the number of women and children employed were
112,859 as compared with 59,685 men, while in Massachusetts out of
61,246 work-people only 22,180 were adult males. So far as legislation
and public opinion do not interfere, the tendency is strongly in
favour of employing children. Mr. Wade says, in _Fibre and Fabric_,
"The tendency of late years is towards the employment of child labour.
We see men frequently thrown out of employment owing to the spinning
mule being displaced by the ring-frame, or children spinning yarn
which men used to spin. In the weave-shops, girls and women are
preferable to men, so that we may reasonably expect that in the not
very distant future all the cotton manufacturing districts will be
classed in the category of she-towns."[243]

§ 2. In modern machinery a larger and larger amount of inventive skill
is engaged in adjusting machine-tending to the physical and mental
capacity of women and children. The evolution of machinery has not
moved constantly in this direction. In cotton-spinning, for example,
the earlier machines--Hargreave's jennies and Arkwright's
water-frames--were generally worked by women and children, the women
who had been engaged in the use of the older instruments--the distaff,
spindle, hand-wheel--coming into the mills. But the growing complexity
and size of the mule made it too cumbrous for women and children, and
spinning for a while became a male occupation in England. In the
United States the difficulty of procuring male labour stimulated the
invention of the ring spinning-frame, some sixty years ago, which
could be worked by woman's labour. The limitations and imperfections
of this mode of spinning retarded its adoption in England for upwards
of half a century. But recent improvements have led to a rapid
increase of the adoption of the ring-frame in Lancashire. In the low
medium and low counts it is rapidly displacing the mule, and in
countries where fine counts are little spun it will probably be the
dominant machine.[244] In Lancashire it does not, however, seem at all
likely to be rendered capable of displacing the mule in finer counts.
The ring-frame throws spinning once more into the hands of women and
of children, who in some Lancashire towns are quickly displacing the
labour of the men.

So far as children are concerned, the economic tendency to adjust
machine-tending to their limited strength is in some measure defeated
by the growth of strong public feeling and legislative protection of
younger children. Had full and continued licence been allowed to the
purely "economic" tendencies of the factory system in this country and
in America, there can be little doubt but that almost the whole of the
textile industry and many other large departments of manufacture would
be administered by the cheap labour of women and young children. The
profits attending this free exploitation of cheap labour would have
been so great that invention would have been concentrated, even more
than has been the case, upon spreading out the muscular exertion and
narrowing the technical skill so as to suit the character of the
cheaper labour. It is quite possible that some of the oppressive
conditions of our early factory system, the exhausting hours of
labour, the cruelty of overseers, the utter neglect of all sanitation,
the bad food, might have been found opposed to the true interests of
economy and efficiency, and that the more developed factory might have
been managed more humanely. But if we may judge by the progress made
in the employment of weaker labour where it has had free scope, it
seems reasonable to believe that, had no Factory Acts been passed, and
had public feeling furnished no opposition, the great mass of the
textile factories of this country would have been almost entirely
worked by women and children.

We have seen already that the advantages attending efficient labour
furnish no guarantee that it will be most profitable to employ the
most efficient labour at the highest wages. The evidence of industrial
history shows that it will often be most profitable to employ less
efficient labour provided that labour can be got "cheap." The
increasing employment of women in machine-industry is in nearly all
cases directly traceable to the "cheapness" of woman's labour as
compared with man's.

§ 3. Thus we are brought to the discussion of the important question
which underlies all understanding of the position of woman in modern
industry--"Why are women paid less wages than men?"

In almost all kinds of work in which both men and women are engaged,
the women earn less than the men. Where men and women are engaged in
the same industries but in different branches, the wage level of the
woman's work is nearly always lower than that of the men. A general
survey of industry shows that the highly-paid industries are almost
invariably monopolised by men, the lowly-paid industries by women.
This applies not only to unskilled and skilled manual work, but to
routine-mental, intellectual, and artistic work,[245] wherever custom
or competition are the chief direct determinants of wages. Certain
exceptions to this rule, which readily suggest themselves, are
explained by the fact that the wages of the labour in question are
determined not by custom or competition, but by some other law. Where
the product is of the highest intellectual or artistic quality, sex
makes no difference in the price; "the rent of ability" of George
Eliot or Madame Patti is determined by the law of monopoly values. In
certain employments, as, for instance, the stage, sexual attractions
give women a positive advantage, which in certain grades of the
profession assist them to secure a high level of remuneration. So also
in a few cases governments or private employers pay women as highly as
men for the same work, though women could be got to work for less. But
even in those occupations where women would seem to be most nearly
upon an economic equality with men, in literature, art, or the stage,
the scale of pay for all work, save that where special skill, personal
attraction, or reputation secures a "fancy" price, is lower for women
than for men.

§ 4. It is easy to find answers to the question, "Why are women paid
less than men?" which evidently contain an element of truth. Three
answers leap readily to the lips: "Because women cannot work so hard
or so well," "Because women can live upon less than men," "Because it
is more difficult for a woman to get wage-work." Each of these answers
comprises not one reason but a group of reasons why women get low
wages, and the difficulty lies in relating the different reasons in
these different groups so as to yield something that shall approach an
accurate solution of the problem. Setting these groups in somewhat
more exact language, we may classify the causes as--

_a._ Causes relating to "productivity" or efficiency of labour.

_b._ Causes relating to "needs" or standard of comfort.

_c._ Causes relating to character and intensity of competition.

§ 5. _a._ Women do not on the average work so hard or so well as men,
so that if wages were paid with sole reference to quantity and quality
of the product of labour women would get less. This inferiority in the
net efficiency of women's labour is partly due to physical, partly to
social causes. The following are the leading factors in this
inferiority of efficiency:--

(1) The physical weakness of woman, as compared with man, closes many
occupations to her. In manufactures the metal industries have been
almost entirely closed to women, and most branches of the mining and
railway industries. In England and America the rougher work of
agriculture is almost wholly given over to male labour, and in several
continental countries there is a growing tendency to spare women the
kinds of labour which tax the muscular forces most severely. The
growing consideration for the duties of maternity, operating through
public opinion and legislation, favour this curtailment of woman's
sphere of activity. Further, in all employments where physical
strength is an important factor, the net productivity of woman's
labour tends to fall below man's, although in some cases superior
deftness or lightness of hand related to physical fragility may
compensate. Even in modern textile factories the superior force of
man's muscles often gives him a great advantage. In fustian and velvet
cutting, where the same piece-wages are paid to men and women, the
actual takings of the men are about double. "Every person has two long
frames upon which the cloth is stretched ready for cutting, and while
women are unable to cut more than one piece at a time, men can cut two
pieces without difficulty."[246]

Where physical strength is not a prime factor it may enter
incidentally. So even in weaving women are under some disadvantage
through inability to work the heavy Jacquard looms, and to "tune"
their looms.[247]

Where manual work is concerned brute strength and endurance form an
important ingredient in what is called manual skill, and affect the
quality of the work as well as the pace and regularity of the output.
Though, as we have seen, a chief object of modern machinery is to
diminish the importance of this element, it plays no inconsiderable
part in affecting the quantity of work turned out by women as compared
with men even in industries where the direct strain upon the muscles
is less severe.

(2) But even when we take those kinds of work where skill seems least
dependent upon physical force, men have generally some advantage in
productivity, though a smaller one. There are cases in which this does
not seem to be the case, as in the weaving industries of Lancashire
and part of Yorkshire, where women not merely receive the same piece
wages, but earn weekly wages which, after making allowance for
sickness and irregularity, indicate that in quantity and quality of
work they are upon a level with the men.[248] In certain branches of
low-skilled mental work the same holds true, as in the Savings Bank
Department of the Post Office. But generally, even where the "skill"
is of a purely technical order, the man has the advantage. Where the
elements of design, resource, judgment, enter in, the superiority of
male labour is unquestioned, and in occupations which demand these
qualities women are confined generally to the lower routine portions
of the work. This is the case in the Post Offices where women are
largely used as sorting clerks and telegraphists, and in numerous
offices of private business firms. How far these defects of manual and
intellectual skill, which generally prevent women from successfully
competing in the higher grades of labour, are natural, how far the
results of defective education and industrial training, we are not
called upon here to consider. The fact stands that women do not work
so well.

(3) The reluctance of male workers to allow women to qualify for and
to undertake certain kinds of work which men choose to regard as
"their own," though sometimes defensible when all the terms of
competition are taken into account,[249] must be held to confine and
lessen the average productivity of female labour in certain
departments of industry. Closely allied to this is the social feeling,
partly based upon the recognition of a real difference of physical and
mental vigour, partly upon prejudice, which bars women from the
highly-paid and responsible posts of superintendence and control in
industries where both sexes are employed. In a general comparison of
the male and female wage in a highly organised industry, the fact that
women are held disqualified for all posts of high emolument and
responsibility has a material effect upon the average of wages. Where
men and women work in the same industry, the women are commonly
confined to the less productive work, and where they do the same work
they seldom reach man's level in quantity and quality.

(4) This inferior efficiency is not solely attributable to these
reasons. Woman's incentive to acquire industrial efficiency is not so
great as man's. A large number of women-workers do not enter an
industrial occupation as the chief means of support throughout their
life. The influence of matrimony and domestic life operates in various
ways upon women's industry. The expectation of marriage and a release
from industrial work must lessen the interest of women in their work.
The fact that even while unmarried a large proportion of women-workers
are not dependent upon their earnings for a livelihood will have the
same result. A larger proportion of the woman's industrial career is
occupied in acquiring the experience which makes her a valuable
worker, and the probability that, after she has acquired it, she may
not need to use it, diminishes both directly and indirectly the net
value of her industrial life; the element of uncertainty and
instability prevents the advancement of competent women to posts where
fixity of tenure is an important factor.

Where married women are engaged in industrial work either in factories
or at home, domestic work of necessity engages some of their strength
and interest, and is liable to trench upon the energy which otherwise
might go into industry. Even unmarried women have frequently some
domestic work to do which is added to their industrial work. Thus the
incentive to efficiency is weaker in woman, her industrial position is
less stable and her industrial life shorter, while part of her energy
is diverted to other than industrial channels.

(5) There is conclusive evidence to show that women are more often
absent from work owing to sickness and other claims upon their time
than men.[250] Though closely related to the former factors this may
be treated separately in assessing the net productiveness of women,
because it is distinctly measurable. But in touching this point it
should be remarked that weaker muscular development does not
necessarily imply more sickness. The loss of working time sustained by
women could probably be reduced considerably by more attention to
physical training and exercise and by a higher standard of diet.

(6) Although the limitations of law and custom, which limit the hours
of labour for women in many of their industrial occupations and forbid
them to undertake night-work, cannot be reasonably held to reduce the
net efficiency of women's labour taken as an aggregate, they must be
allowed to diminish the direct net productiveness of women in certain
employments as compared with men, and either to bar them out of these
employments or engage them upon lower wages. In certain textile
factories where goods of some special pattern are woven at short
notice, and where overtime is essential, women cannot be employed. In
the Post Office, where night-work is required at certain seasons,
women are at a disadvantage, which is doubtless reflected in the lower
wages they receive.

(7) Lastly, the inferior mobility of woman as compared with man has an
influence in reducing the average efficiency of her labour. On the one
hand, women are more liable to have the locality of their home fixed
by the requirements of the male worker in the family; on the other
hand, they are physically less competent to undertake work far from
their home. Hence they are far more narrowly restricted in their
choice of work than men. They must often choose not that work they
like best, or can do best, or which is most remunerative, but that
which lies near at hand. This restriction implies that large numbers
of women undertake low-skilled, low-paid, ineffective, and irregular
work at their own homes or in some neighbouring work-room, instead of
engaging in the more productive and more remunerative work of the
large factories. Every limitation in freedom of choice of work
signifies a reduction in the average effectiveness of labour.

§ 6. These elements of inferior physique and manual skill, lower
intelligence and mental capacity, lack of education and knowledge of
life, irregularity of work, more restricted freedom of choice, must in
different degrees contribute to the inferior productivity of woman's
industrial labour.

In regarding this influence the experienced student of industrial
questions hardly requires to be reminded that these must be regarded
not merely as causes of low wages, but also as effects. This constant
recognition of the interaction of the phenomena we are regarding as
cause and effect is essential to a scientific conception of industrial
society. Women are paid low wages because they are relatively
inefficient workers, but they also are inefficient workers because
they are paid low wages.

While this smaller productivity diminishes the maximum wage attainable
by women as compared with men, it is evident that many forces are at
work which tend to equalise the productivity of men and women in
industry: the evolution of machinery adapted to the weaker physique of
women; the breakdown of customs excluding women from many occupations;
the growth of restrictions upon male adult labour with regard to the
working-day, etc., correspondent with those placed upon women;
improved mobility of women's labour by cheaper and more facile
transport in large cities; the recognition by a growing number of
women that matrimony is not the only livelihood open to them, but that
an industrial life is preferable and possible. These forces, unless
counteracted by stronger moral and social forces, seem likely to raise
the average productivity of women's industrial labour, and to incite
her more and more to undertake industrial wage-work.

§ 7. As the maximum wage may be said to vary with productivity, so the
minimum wage is said to vary with the "wants" of the worker. Women are
said to "want" less than man, and therefore the stress of competition
can drive their wages to a lower level. It is possible that a woman
can sustain the smaller quantity of physical energy required for her
work somewhat more cheaply than a man can sustain the energy required
for his work, and that the early increments of material comfort above
the bare subsistence line may be attended by a larger increase of
productivity in the man than in the woman. If this is so, then the
minimum subsistence wage and the wage of true economic efficiency, the
smallest wage a wise employer in his own interest will consent to pay,
are lower in the case of women than of men. But this difference
furnishes no adequate explanation of the difference between the male
and the female minimum wage. The wage of the low-skilled male labourer
enables him to consume certain things which do not belong strictly to
his "subsistence"--to wit, beer and tobacco; the wage of the
low-skilled female labourer often falls below what is sufficient with
the most rigid economy to provide "subsistence." We are not then
concerned with a difference which refers primarily to the quantity of
food, etc., required to support life. The wages of the low-skilled
labourer in regular employ would, if properly used, suffice to furnish
him more than a bare physical subsistence; the wages of the
lowest-paid women workers in factories would not suffice to maintain
them in the physical condition to perform their work.[251]

It is not then precisely with the "standard of comfort" of male and
female workers that we are concerned. The economic relation in which
men and women workers stand to other members of their family is a more
important factor. The wage of a male worker must be sufficient to
support not only himself but the average family dependent upon him, in
the standard of comfort below which he will not consent to work. When
little work is available for his wife and children, or where his
"standard of comfort" requires them not to undertake wage-work, his
minimum wage must suffice to keep some four persons. His standard of
comfort may be beaten down by stress of circumstances, his family may
be driven to take what work they can get, but in any case his wage
must be above the "subsistence" of a single man. When the man is the
sole wage-earner, or is only assisted slightly by his family, as, for
example, in the metal and mining and building industries, average male
wages are much higher than in the textile industries, where the women
and children share largely in the work.[252]

Women workers, on the other hand, have not in most cases a family to
support out of their wages. In the majority of instances their own
"sustenance" does not or need not fall entirely upon the wages they
earn. They are partly supported by the earnings of a father or a
husband or other relative, upon some small unearned income, upon
public or private charity. Where married women undertake work in order
to increase the family income, or where girls not obliged to work for
a living enter factories or take home work to do, there is no
ascertainable limit to the minimum wage in an industry. Grown-up women
living at home will often work for a few shillings a week to spend in
dress and amusements, utterly regardless of the fact that they may be
setting the wage below starvation-point for those unfortunate
competitors who are wholly dependent on their earnings for a living.
Even where girls living at home pay to their parents the full cost of
their keep, the economy of family life may enable them to keep down
wages to such a point that another girl who has to keep herself alone
may be sorely pressed, while a woman with a family to support cannot
get a living.

Miss Collet, in her investigation of women workers in East London,
remarked of the shirt-finishers, one of the lowest-paid
employments--"These shirt-finishers nearly all receive allowances from
relatives, friends, and charitable societies, and many of them receive
outdoor relief."[253] This is true of most of the low-paid work of
women. Even in the textile factories, with the exception of weaving,
most of the scales of wages are below what would suffice to keep the
recipient in the standard of comfort provided by the family wage.

§ 8. The relation of a worker to other persons in the family is such
that, in determining the minimum wage for any member, it is right to
take the standard of comfort of the family as the basis, and to
consider the mutual relations of the several workers upon this basis.
We shall find that not merely is the wage of the woman affected by the
industrial condition of the adult male worker, but that the wage of
the latter is affected by women's wages, while the wages of child
labour exercise an influence upon each. The problem is one of the
distribution of work and wages among the several working members of a
family, how much of the family work and how much of the family wage
shall fall to each. As the children, and in many cases the women, are
not free agents in the transaction, it may often happen that they are
employed for wages which represent neither the cost of subsistence nor
any other definite amount but the prevalent opinion of the dominant
male of the family. A "little piecer" in a Lancashire mill may get
wages more than sufficient for his keep, while many a farm boy or
errand boy could not keep himself in food out of the earnings he
brings home. This element of economic unfreedom in the lives of many
women and most children must not be left out of sight in a
consideration of the comparative statistics of wages for men, women,
and children. Men workers often fail to recognise that by encouraging
their wives and driving their children to the mills or other
industrial work, they are helping to keep down their own wages. Men's
wages in all the textile industries of the world are low as compared
with those prevalent in industries demanding no higher skill or
intelligence, but in which women take no important part. If the male
textile workers used their rising intelligence and education to keep
their women and children out of the mills, men's wages must and would
distinctly rise.[254] The low wages paid to both men and women in many
branches of textile work as compared with wages in other industries on
approximately the same level of skill, goes for the most part to the
consuming public in reduced prices of textile wares. It is true the
Lancashire and certain of the Yorkshire textile operatives often enjoy
a fairly high family wage, but they give out a more than correspondent
aggregate of productive energy.

American statistics yield some striking evidence in illustration of
the depressing influence exercised upon male wages by the labour of
women and children. "Among factory operatives, all branches taken
together, the wives and children who contribute to the support of the
family are, on an average, as one and a quarter to each family, while
among those employed in the building trades the average of wives and
children who work is only one to every four families. Hence in the
building trades the wages of the man supply about 97-1/2 per cent. of
the total cost of the family's living, while among the factory
operatives the wages of the man only supply 66 per cent., or
two-thirds, of the cost of the family's living, because the other
one-third is furnished by the labour of the wife or children. Nor is
this because the cost of living of the factory operative family is
greater than that of the labourer in the building trades, for while
the average family in the building trades contains 4-1/2 persons, that
of the factory operative contains 5-7/8 persons.[255] The total cost
of living in the former is about $50 a year more than in the latter,
and the wages of the man in the former are nearly $250 a year more
than those of the latter."[256] Similar evidence is tendered from
other trades, the gist of which is summed up in the Report of the
Labour Bureau of Massachusetts in the following words:--"Thus it is
seen that in neither of the cases where the man is assisted by his
wife or children does he earn as much as other labourers. Also that in
the case where he is assisted by both wife and children he earns the
least."[257]

§ 9. But though the minimum wage of women and children is, strictly
speaking, not to be measured by any ascertainable standard of
subsistence, so far as the factory work of adult women is concerned
10s. may be said to be a standard wage. Factory wages, excepting for
cotton-weavers, seldom vary widely from this sum. Differences of
difficulty, disagreeability, or skill have little power to raise wages
much above 10s., or to depress them much below. Moreover, fluctuations
of trade and prices have very little effect upon this wage. Though
women are largely employed in industries where improvements in
machinery and methods have immensely increased the productivity of
labour, their wages are very little higher than they were half a
century ago. Since this rate prevails in many industries where an
adequate supply of women's labour cannot be drawn from married or
"assisted" women, and where the wage must be sufficient to tempt women
who have to keep themselves, 10s. may be said to be the "bare
subsistence" wage for women. The wide prevalence of this wage and its
independence of conditions of locality, time, nature of work, have
made it generally recognised as a "customary wage," and for any casual
work, or any new employment requiring ordinary feminine skill or
exertion, 10s. is regarded as sufficient remuneration for a woman. The
basis of this custom is the knowledge that women can always be induced
to work for a bare subsistence measured at 10s. or thereabouts, or for
extra comforts procurable by this sum regarded as a subsidiary
income.[258]

It appears that the wages of bare subsistence and the wages of extra
comforts have a certain tendency to equality in some of the low-paid
factory trades of London, though accompanied by a difference in the
quality and intensity of the labour involved.

The following diagram exhibits the uniformity of factory wages in East
End women's industries:--

    [Illustration]

Upon this table Miss Collet bases the following opinion:--"The most
striking feature is the uniformity of maximum wages and the difference
in the skill required, and I believe it to be the fact that the match
girls and the jam girls, who are at the bottom of the social scale, do
not have to work so hard for their money as, for example, the
capmakers and bookbinders, who, in the majority of cases, belong to a
much higher social grade. And whereas the bookfolder or booksewer who
earns 11s. a week exercises greater skill, and gives a closer
attention to her work, than the jam or match girl who earns the same
amount, that sum which would be almost riches to the dock-labourer's
daughter represents grinding poverty to the daughter of the clerk or
bookbinder, with a much higher standard of decency, if she is by any
chance obliged to depend on herself. How is it that this uniformity
prevails, and that efficiency brings with it nothing but the privilege
of working harder for the same money?"[259]

Miss Collet's reply to the question is, that while the match and jam
girls pay the full price of home, board, and lodging, the others often
pay nothing, spending all they get upon dress and amusement. This,
taken along with the influence of the competition of home-workers in
the bookfolding and booksewing trades, explains the fact that the
harder and higher-skilled work gets no higher wages.

§ 10. A knowledge of the productivity of labour as measuring the
maximum wage-level, and of "wants" or standard of comfort as measuring
the minimum wage-level, does not enable us to determine even
approximately the actual wage-level in any industry. The actual wage
may be fixed at any point between the two extremes. So far as
competition is an active determinant, everything will depend upon the
quantitative relation between supply and demand for labour. When there
is a short supply of labour available for any work, wages may rise to
the maximum; when there is more labour available than is required,
wages will fall towards the minimum. But, as we have already admitted,
competition works very slowly and inadequately in many of the
industries in which women and children are engaged. The force of
custom, assisted by ignorance of the labour market, prevents women
from taking advantage of an increased demand or a decreased supply of
labour to lift this wage above the customary level towards the level
of productivity. Women are more contented to live as they have lived
than men. As Miss Collet says, "the contentment of women themselves,
when they have obtained enough for their standard of living, is
another reason why competition is so ineffective among highly-skilled
workers."[260]

This "contentment" or apathy, partly the result of ignorance, partly
the result of sex feebleness, enhanced by the exhausting burden of
present industrial conditions, is alluded to by the several reports of
the sub-commissioners to the Labour Commission as a chief difficulty
in the effective organisation of women workers, even when the work is
conducted in large factories.

In other ways, woman is less of a purely "economic" creature than man.
The flow of labour from one occupation to another, which tends to
equalise the net advantages amongst male occupations, is far feebler
among women workers, notwithstanding that trade union barriers and the
vested interests of expensively-acquired skill are less operative in
woman's work. The reluctance of women to freely communicate to one
another facts regarding their wage and conditions of labour is
particularly noted as a barrier to united action.

Those who have investigated the conditions of women workers in towns
are agreed as to the enormous influence of class and æsthetic feelings
in narrowing the competition. "The girl who makes seal-skin caps at a
city warehouse does not wish to work for an East End chamber-master,
even though she could make more at the commoner work; just as a
soap-box maker would not care to make match-boxes, even though skilled
enough to make more by it."[261] This sensitiveness of social
distinction in industrial work, based partly upon consideration of the
class and character of those employed, partly upon the skill and
interest of the work itself, is a widespread and powerful influence
among women workers. It tends to bring about that equalisation of
wages in skilled and unskilled industries which, as we have seen,
practically exists, for if there is an economic rise of wages in the
lower grades of work, it does not tempt the competition of
high-skilled workers, while a corresponding rise in the wages of the
higher grades would draw competitors from the lower grades to qualify
themselves for undertaking work which would at once give them more
money and more social respect. The lower wages often paid for more
highly-skilled work simply mean that the women take out a larger
portion of their wage in "gentility." This influence, which is
operative amongst men, reducing the wages of routine-mental labour to
the level of common unskilled manual labour, is powerful in all ranks
of women, rising perhaps in its potency with the social status of the
woman. Considerations of "gentility" enable us to obtain "teachers"
for board schools at an average "salary" of £75 per annum, as compared
with £119 for men, the fixed scale of women teachers in the same grade
being 16 per cent. less than for men.

Thus custom, ignorance, contentment, social prejudices operate in
different ways and in different degrees to prevent women workers from
claiming in higher wages that share of the increased capacity of the
community for making wealth which men workers have been able to
procure.

§ 11. The above-mentioned forces operate chiefly as barriers of free
economic competition. But women are equally at a disadvantage when and
in so far as they do compete for work, and wages. Weak, unorganised
units of labour, they are compelled to make terms with large organised
masses of capital. By the organised action of trade unionism the
majority of skilled working men have been able to raise their wages
far above the bare subsistence minimum, and to hold it at the higher
level until a firm standard of higher comfort is formed to be a
platform for further endeavour. With a few significant exceptions,
skilled women workers have been unable to do the same. Instead of
presenting a firm, united front to their employers in their demand for
higher wages, or their resistance of a fall, they are taken singly and
compelled to submit to any terms which the employers choose to impose,
or custom appears to sanction. The consequence is that in most
instances skilled women workers are paid very little higher wages than
unskilled women workers. The high value due to their skill goes
either to the employer in high profits, or, where keen competition
operates, to the consumer in low prices; the woman who puts out skill
is paid not according to her worth but according to her wants. Yet the
possession of technical skill is the basis of trade organisation.
Wherever a number of women workers possess a particular skill and
experience, and are engaged in fairly stable employment, the
requisites of effective trade organisation exist. By combination these
women can wield an economic power, measured by the difficulty and cost
of dismissing them _en masse_ and replacing them by less skilled and
experienced labour, which they can use as a lever to raise their wages
and other conditions of employment by a series of steps until they
approach the maximum limit imposed by their productivity. That such
action is feasible is proved by experience. Concerted action of
factory women in several minor trades, both in London and in the
provincial towns, has been attended with success. The examples of the
cigar-makers at Nottingham, the women at Messrs. Bryant & May's, the
rope-makers in a large East London factory, show what can be done by
determined combination, even confined to workers in a single factory.
But the crucial case is furnished again by the textile industries. In
the Lancashire weaving, where men and women are working side by side
in the same sheds, and are members of the same trades unions, we find
the one notable exception to the low wages of women. Here women's
weekly earnings are nearly the same as men's. The weaving is
unquestionably skilled work, but so also is a great deal of other
textile work not nearly so well paid. It is beyond doubt the power of
the joint union of male and female weavers that alone maintains these
wages for women. The same is the explanation of the equality of wages
paid to men and women in the Sheffield file-making.

"But what if the Union should break down? It is as certain as anything
based on experience can be, that in a few weeks, or even days, it
would be possible for the employers to reduce the wages of the
women-weavers; that rather than lose their work, women would consent
to the reduction; that as they accepted lower wages, men would drop
off to other industries, and would cease to compete for the same
work; and that in a comparatively short time power-loom weaving would
be left, like its sister, cotton-spinning, to women workers
exclusively, and wages fall to the general level of women's
wages."[262] Where these conditions of strong combination in trades
unions do not exist we find that women's weekly wages fall
considerably below men's in the weaving trades. This is so in most of
the woollen industries of Yorkshire, and still more in the minor and
more scattered textile work in other counties.[263] In the
spinning-mills of Lancashire the women, combined in unions of their
own, are able to obtain wages considerably higher than those which
prevail elsewhere for similar work, though not so high as that of
weavers. The following table, in which spinning and weaving and other
departments are "pooled" for purposes of wages, is sufficient to
indicate the advantage Lancashire women enjoy from their strong
industrial position, as compared on the one hand with average factory
work and wages, on the other hand with the less favourably placed
worsted and linen industries, and even with the woollen.

                     Weekly Wages.                Average.
                  Cotton.    Woollen.       Worsted.    Linen.
                   s.  d.     s.  d.        s.  d.      s.  d.
  Men              25   3     23   2        23   4      19   9
  Lads and boys     9   4      8   6         6   6       6   3
  Women            15   3     13   3        11  11       8  11
  Girls             6  10      7   5         6   2       4  11[264]

Thus we see that whereas men's wages are nearly the same in the three
chief English industries, women's wages vary widely, yielding a very
great advantage to the Lancashire cotton-workers.

§ 12. It cannot, however, reasonably be maintained that the whole of
this economic advantage owned by weavers and other women workers in
Lancashire is due directly to organisation. It is no doubt partly due
to the conditions which also make Trade Unionism effective, an
abundant demand for female labour in relation to the supply. In the
less concentrated woollen industries of the West of England, where a
large supply of female labour is available beyond the demand, the
difference between men's and women's wages is far greater than it is
even in those parts of Yorkshire where women are but slightly
organised. This brings us to the most vital point in the problem of
the industrial position of women. When there is an over-supply of
labour qualified to compete for any work, wages must fall to the
minimum of "wants" unless those in possession of the work are so
strongly organised as to prevent outsiders from effectively competing.
In a highly-skilled trade the workers may often have a practical
monopoly of the skill, which gives them both power to organise and
power when organised. But in a low-skilled trade, or where employers
are able to introduce unlimited numbers of girls into the trade, there
exists no such power to organise. Those who most need organisation are
least able to organise. This is the crux for low-skilled male labour,
and the great mass of women's industries are in the same economic
condition, because the kind of skill required is possessed or easily
attainable by a much larger number of competitors for work than are
sufficient to meet the demand at a decent wage. The deep abiding
difficulty in the way of organising women workers lies here. Cut out
as they are, by physical weakness, by lack of the means of technical
training, in some cases by organised opposition of male workers, or by
social prejudices, from competing in a large number of skilled
industries, their competition within the permitted range of
occupations is keener than among men: not merely in the unskilled but
in the skilled industries the available supply of labour is commonly
far in excess of the demand, for the skill is generally such as is
common to or easily attainable by a large number of the sex. To this
must be added the consideration that a larger proportion of women's
industries are concerned with the production of luxuries which are
peculiarly subject to fluctuation of trade by the elements of season,
weather, fashion, and rise or fall of incomes. Finally, a much larger
proportion of women's work is done in small factories, in workshops,
and in the home, under conditions which are inimicable to the
effective organisation of the workers. Until out-work is much
diminished, and effective inspection and limitation of hours in small
workshops drives a much larger proportion of women workers into large
factories, where closer social intercourse can lay the moral
foundation of trade organisation in mutual acquaintance, trust, and
regard, there is little prospect of women being able to raise their
"customary" wage considerably above its present subsistence level, or
to obtain any considerable alleviation of the burdensome conditions of
excessive hours of labour, insanitary surroundings, unjust fines,
etc., from which many women workers suffer.

Women cannot in most of their industries organise effectively under
present conditions. In each trade, therefore, the workers employed are
surrounded by a permanent mass of potential "black legs" willing to
take their labour from urgent need, ignorance, or thoughtlessness, and
possessing or able to attain the small skill required. In men's
industries, save in the most unskilled, there is not a constant
over-supply of labour, in most women's industries there is.

§ 13. Comparing women's wages with men's we are now able to sum up as
follows:--The smaller productivity of woman's work makes the possible
maximum wage lower; the smaller wants of women make the possible
minimum wage lower; the greater weakness of women as competitors,
arising chiefly from excess of supply of labour, makes their actual
wage approximate to the lower rather than to the higher level.

In regarding productivity as a measure of maximum wage it is necessary
to guard carefully against one misapprehension. So far as we are
comparing the wage of men and women engaged upon the same work, the
smaller wages of the latter may easily be seen to have some relation
to the smaller product of their labour. But when productivity is
expressed in terms of the selling value of the work no such
measurement is open to us. We are thus thrown back on market value and
are told that the reason women get so little is that what they make
fetches so low a price. But the circularity of this argument will
appear on revising the question and asking, "Why do women's products
sell so cheap?" the obvious answer being, "Because the cost of labour
in them is so little,"--_i.e._, because women receive low wages. But
if we refuse to take selling prices as the measure of productivity,
what measure have we? No accurate measure of effort, skill, or
efficiency is open if we refuse the scale of the market itself. Yet if
we consider the conditions of wages and prices in such "sweated"
trades as shirt-making, we cannot but conclude that the consumer gets
the advantage of the "sweating"; that is to say, a certain portion of
the productivity of the workers passes to the consumer through the
agency of low prices. That which might have gone to the shirt-makers
in decent wages has gone to the purchaser. This criticism of course
posits a measurement of productivity at variance with that afforded by
competition, or, more strictly speaking, it discounts the abnormal
terms of the competition in the sweated industry. If we say that 1s.
11-1/2d. as the retail price of a shirt is a "sweating" or unfair
price, we mean that the skill and effort embodied in this product
would, if there were absolute equality of competition and absolute
fluidity of labour, be measured at say 3s. It is true that no such
measurement is open to us, and all such estimates are guesswork. But
the idea which underlies the sentiment against "sweating" is a true
one, although it has no exact practical embodiment so long as our only
meaning of "value" is value in exchange at present competitive rates.
It is therefore not inaccurate to represent productivity as forming
the maximum wage, though we may have no exact measure of productivity
at hand. The fact that any increase in productivity of labour is
liable under certain circumstances of competition to pass away
entirely to the consumer, is no reason for denying that an increase of
productivity has taken place which might under other circumstances of
competition have gone to the producer as higher wages. Though
productivity as a measure of maximum wages is more or less of an
unknown quantity, it is none the less true that as this "unknown"
fluctuates so the possibility of high wages fluctuates.

§ 14. If the above analysis is correct it is not difference of sex
which is the chief factor in determining the industrial position of
woman. Machinery knows neither sex nor age, but chooses the labour
embodied in man, woman, or child, which is cheapest in relation to the
degree of its efficiency. Thus the causes which depress woman's
industry are chiefly the same which depress the industry of
low-skilled men and children. In each case the limits of productivity
and "wants" are lower than for skilled men workers, while the terms of
their competition keep their wages to the lower level and check the
full incentive to efficiency. Setting aside the case of children, who
are protected in some degree from the full effects of competition upon
the conditions of their employment, the industrial case of women is
closely analogous to that of low-skilled men. The physical weakness of
the one corresponds with the technical weakness of the other so far as
efficiency is concerned; in both cases the low standard of wants gives
a low minimum wage, while the excessive supply of labour, rendering
concerted action almost impossible, keeps wages close to the minimum.

§ 15. The displacement of male adult labour which is going on by
female, and, when permitted, by child labour, does not necessarily
imply that women and children are doing more work and men less than
they used to do. Before the industrial revolution women were quite as
busily and numerously engaged in industry as now, and the children
employed in textile and other work were often worked in their own
homes with more cruel disregard to health and happiness than is now
the case. Even now the longest hours, the worst sanitary conditions,
the lowest pay, are in the domestic industries of towns which still
survive under modern industry. But though the regular factory women
and the half-timers are generally better off in all the terms of their
industry than the uninspected women and children who still slave in
such domestic industries as the trimmings and match-box trades, the
growing tendency of modern industry to engage women and children away
from their homes is fraught with certain indirect important
consequences. When industry was chiefly confined to domestic
handicrafts, the claims of home life constantly pressed in and
tempered the industrial life. The growth of factory work among women
has brought with it inevitably a weakening of home interests and a
neglect of home duties. The home has suffered what the factory has
gained. Even the shortening of the factory day, accompanied as it has
been by an intensification of labour during the shorter hours, does
not leave the women competent and free for the proper ordering of home
life. Home work is consciously slighted as secondary in importance and
inferior, because it brings no wages, and if not neglected is
performed in a perfunctory manner, which robs it of its grace and
value. This narrowing of the home into a place of hurried meals and
sleep is on the whole the worst injury modern industry has inflicted
on our lives, and it is difficult to see how it can be compensated by
any increase of material products. Factory life for women, save in
extremely rare cases, saps the physical and moral health of the
family. The exigencies of factory life are inconsistent with the
position of a good mother, a good wife, or the maker of a home. Save
in extreme circumstances, no increase of the family wage can balance
these losses, whose values stand upon a higher qualitative level.

The direct economic tendency of machine-industry to take women and
children away from the home to work must be looked upon as a tendency
antagonistic to civilisation.[265] In the case of children, factory
legislation of increasing severity has been necessary to prevent the
spread or continuance of the evil.[266] The factory regulations
restricting and protecting women are directly continuous with this
policy, and may be regarded in the light of a protection of the home
against the undue encroachments of the machine. How far further
restrictions may be left to voluntary action and the growth of a saner
estimate of values, or how far further legal protection of the home
may be required, it remains for history to determine.


APPENDIX.

The following Table of Factory Legislation is constructed to
illustrate the lines along which State protection of labour has
advanced in this century in England. Four laws of development are
clearly discernible:--

    1. Movement along the line of strongest human feeling. Weakest
        workers are protected first, pauper children who are the
        least "free" parties in a contract, then protection
        advances to other children, young persons, women, men.

    2. Protective legislation moves from the more highly organised
        to the less highly organised structures of industry.
        Cotton-mills are sole subjects of earliest Factory Acts,
        then woollen, then other textile trades, trades subsidiary
        to textile industries, non-textile factories, larger
        workshops, domestic workshops, retail trade, domestic
        service.

    3. Growing complexity of aims and of legislative machinery.
        Primarily Factory Acts aim at regulation of quantity of
        labour. Reductions of the working-day forms a backbone of
        this legislation. A twelve-hour day, ten, nine, eight,
        covering wider classes of workers and applied to a larger
        number of industries, marks the line of movement. With each
        advance the basis of protection is broadened, other
        considerations of machine-fencing, sanitation, education,
        etc., entering more largely into the Acts.

    4. Increased effectiveness of legislation with growth of
        centralised control. Local initiative and control proves
        ineffective, yields to State inspection, the number of
        inspectors growing, and their power increasing. Improvements
        in the mechanism of central control, an increased number of
        inspectors, working men and women inspectors, are the
        distinguishing features of recent State protection of
        labour.

LEADING POINTS IN THE DEVELOPMENT OF FACTORY LEGISLATION.

-----+-------------------+--------------+------------------------+
     |                   | Class of     |                        |
     |  Industries       | Workers      | Nature of              |
Date.|  affected.        | chiefly      | Regulations.           |
     |                   | protected.   |                        |
-----+-------------------+--------------+------------------------+
1802 | Cotton and 'other | Apprenticed  | 12 Hours Day.          |
     | mills' (applied   | Pauper       | Night-work regulated.  |
     | exclusively to    | Children.    | Education, sanitation. |
     | cotton).          |              |                        |
     |                   |              |                        |
1819}|    Do.            | Children     | Prohibition of work    |
1820}|    Do.            | (not         | under 9 years. Young   |
     |                   | Paupers).    | persons (under 16) a   |
     |                   |              | 12 hour day.           |
     |                   |              | Regulation for         |
     |                   |              | meal-time. Amendment   |
     |                   |              | of 1802 Act.           |
     |                   |              |                        |
1825 |    Do.            |   Do.        | Shortened Saturday     |
     |                   |              | labour. Penalties      |
     |                   |              | provided for breach    |
     |                   |              | of Factory             |
     |                   |              | Regulations.           |
     |                   |              |                        |
     |                   |              |                        |
1833}| All Textile       | Children     | 48 Hours Week for      |
1834}| Industries.       | and Young    | Children (9-13), 69    |
     |                   | Persons.     | Hours for Young        |
     |                   |              | Persons (13-18).       |
     |                   |              | Prohibits night-work   |
     |                   |              | for Young Persons.     |
     |                   |              | Children in Silk Mills,|
     |                   |              | 10 Hours Day.          |
     |                   |              |                        |
1842 | Mines.            | Children and | No underground         |
     |                   | Women.       | work.                  |
     |                   |              |                        |
1844}|                   | Children,    | Factory Acts applied.  |
 to }| Printworks.       | Young        | 'False relay' system   |
1846}|                   | Persons,     | for children checked.  |
     |                   | Women.       | 6-1/2 Hours Day for    |
     |                   |              | Children. Female Young |
     |                   |              | Persons age raised to  |
     |                   |              | 21. 12 Hours Day for   |
     |                   |              | Women. No night-work   |
     |                   |              | for women.             |
     |                   |              |                        |
1847}| Textile Factories,|    Do.       | 10 Hours Day,          |
 to }| Printworks, etc.  |              | afterwards 10-1/2      |
1850}|                   |              | Hours Day for Young    |
     |                   |              | Persons and Women,     |
     |                   |              | practically for Men.   |
     |                   |              |                        |
1860 | Bleaching and     |   Do.        | Do., with special      |
     | Dyeing.           |              | regulations for        |
     |                   |              | overtime.              |
     |                   |              |                        |
1860 | Coal and Iron     | All          | Restriction on male    |
     | Mines.            | Workers.     | labour under 12.       |
     |                   |              | Safety, ventilation,   |
     |                   |              | etc.                   |
1863 | Finishing         | Children,    |}                       |
     | processes in      | Young        |}                       |
     | Bleaching and     | Persons,     |}                       |
     | Dyeing,           | Women.       |}                       |
     | Bakehouses, Alkali|              |}                       |
     | Works.            |              |}                       |
     |                   |              |}                       |
1864 | Non-textile       |   Do.        |} Factory Acts          |
     | Factories,        |              |} generally             |
     | (Earthenware,     |              |} applied.              |
     | Fustian Cutting,  |              |}                       |
     | Cartridges,       |              |}                       |
     | Lucifer Matches,  |              |}                       |
     | Paper-staining).  |              |}                       |
     |                   |              |                        |
1867 | All Factories     |   Do.        | Factory Acts Extension |
     | & Workshops.      |              | Act. Workshops         |
     |                   |              | Regulation Act,        |
     |                   |              | applying to Workshops. |
     |                   |              | Factory rules affecting|
     |                   |              | hours, education, etc. |
     |                   |              | in modified form.      |
     |                   |              |                        |
1867 | Agriculture.      | Children,    | Act for Suppression of |
     |                   | Women.       | Agricultural Gangs     |
     |                   |              | fixing minimum age at  |
     |                   |              | 8, regulating          |
     |                   |              | employment of Women.   |
     |                   |              |                        |
1870 | Printworks,       | Children,    | Application of chief   |
     | Bleaching,        | Young        | provisions of 1867     |
     | Dyeing.           | Persons,     | Factory Act.           |
     |                   | Women.       |                        |
     |                   |              |                        |
1871 | Brickworks and    | Children and | Forbids employment.    |
     | Fields.           | Young Female | Improved conditions    |
     |                   | Persons.     | for Women.             |
     |                   |              |                        |
1873 | Agriculture.      | Children.    | Minimum age raised     |
     |                   |              | to 10.                 |
     |                   |              |                        |
1878 | Factories,        | Children,    | Consolidation of       |
     | Workshops,        | Young        | Factories &            |
     | Agriculture.      | Persons,     | Workshops Act          |
     |                   | Women,       | (extending some        |
     |                   | (incidentally| provisions to          |
     |                   | Men).        | agriculture).          |
     |                   |              |                        |
1891 |    Do.            |    Do.       | Amendment of Factories |
     |                   |              | & Workshops Act. Age   |
     |                   |              | for Children raised to |
     |                   |              | 11. Protection in      |
     |                   |              | dangerous trades.      |
     |                   |              |                        |
1892 | Shops.            | Children,    | Limits working-day.    |
     |                   | Young        |                        |
     |                   | Persons.     |                        |
     |                   |              |                        |
1893 | Various           | All          | Restrictions on        |
     | Trades.           | workers.     | dangerous trades.      |
     |                   |              |                        |
     |                   |              |                        |
1893 | Railways.         | Adult males  | Restrictions on        |
     |                   |              | hours of labour.       |
     |                   |              |                        |

-----+---------------------+----------------
     |                     |
     | Mode of             | Effectiveness.
Date.| Administration.     |
     |                     |
-----+---------------------+----------------
1802 | Local Justices      | Virtually
     | to appoint          | inoperative.
     | visitors.           |
     |                     |
     |                     |
1819}|   Do.               |   Do.
1820}|                     |
     |                     |
     |                     |
     |                     |
     |                     |
     |                     |
     |                     |
1825 |   Do.               | Generally
     | (Millowners and     | evaded.
     | relatives prevented |
     | from acting on the  |
     | Bench in reference  |
     | to Factory Acts.)   |
     |                     |
1833}| Government          | 1 out of every 11
1834}| Inspectors (4).     | millowners convicted
     |                     | in 1834, in spite
     |                     | of defiant attitude
     |                     | of magistrates.
     |                     |
     |                     |
     |                     |
     |                     |
1842 | Mine Inspectors.    |
     |                     |
     |                     |
1844}| Government          | Improved
 to }| Inspectors.         | administration,
1846}|                     | but 'false
     |                     | relay' system
     |                     | reestablished.
     |                     | Fines inadequate.
     |                     |
     |                     |
     |                     |
     |                     |
1847}| Increased Staff of  | Largely defied or
 to }| Government          | evaded for some
1850}| Inspectors.         | time.
     |                     |
     |                     |
     |                     |
1860 |                     |
     |                     |
     |                     |
     |                     |
1860 | Mine                |
     | Inspectors.         |
     |                     |
     |                     |
1863 |                     |
     |                     |
     |                     |
     |                     |
     |                     |
     |                     |
     |                     |
1864 |                     |
     |                     |
     |                     |
     |                     |
     |                     |
     |                     |
     |                     |
     |                     |
1867 | Workshops Act left  | Workshops Act
     | at first to local   | dead letter in
     | authorities,        | 1868-69.
     | brought under       | Later, fines
     | Factory Inspectors, | inadequate.
     | 1871.               | Inspectors
     |                     | inadequate.
     |                     |
1867 |                     |
     |                     |
     |                     |
     |                     |
     |                     |
     |                     |
1870 |                     |
     |                     |
     |                     |
     |                     |
     |                     |
1871 |                     |
     |                     |
     |                     |
     |                     |
1873 |                     |
     |                     |
     |                     |
1878 | Increased           |
     | Staff of            |
     | Inspectors.         |
     |                     |
     |                     |
     |                     |
     |                     |
1891 | Board of Trade      |
     | power to            |
     | schedule            |
     | dangerous           |
     | trades.             |
     |                     |
1892 |                     |
     |                     |
     |                     |
     |                     |
1893 | Appointment of      |
     | working men and     |
     | women Inspectors.   |
     |                     |
1893 | Increased number of |
     | Inspectors.         |
     |                     |

FOOTNOTES:

[239] The figures for the periods 1841 to 1881 are drawn from Mr.
Charles Booth's _Occupations of the People_. The figures for 1891 are
drawn from the Census Report, and arranged as nearly as possible in
accordance with Mr. Booth's classification.

[240] Here also the figures for 1891 give a result slightly divergent
from the above. While the number of women employed continues to
increase, reaching 691,441, the number of men employed are greater
than in 1881, amounting to 408,392, a large proportionate increase,
though less than that of the women.

[241] The recent statistics of tailoring and shoemaking, which are
becoming more and more machine industries, mark this movement
strongly. In the tailoring trade, while male workers increase from
107,668 in 1881 to 119,496 in 1891, female workers increase from
52,980 to 89,224. In the boot and shoe trade, while men increase from
180,884 to 202,648, women increase from 35,672 to 46,141. In
Leicestershire and Northamptonshire, where boots and shoes are a
machine-industry, 40 women are employed to 100 men, though the
proportion for the whole industry is only 23 women to 100 men.

[242] _Report to Commission of Labour on Employments of Women_, pp.
142, 146.

[243] Quoted Wells, _Contemporary Review_, 1887, p. 392.

[244] Marsden, _Cotton Spinning_, p. 296, etc. S. Andrew, _Fifty Years
Cotton Trade_, p. 7.

[245] This fourfold classification--(1) manual, (2) routine-mental,
(3) artistic, (4) intellectual--is a serviceable suggestion of Mr.
Sidney Webb in his paper upon woman's wages (_Economic Journal_, vol.
i., 1881).

[246] _Report to Commission of Labour on Employment of Women_, p. 141.

[247] Webb, _Economic Journal_, vol. i. p. 658.

[248] I am informed, however, in Lancashire, that the strongest and
ablest male workers will not undertake weaving, finding it tedious and
monotonous.

[249] Women sometimes abuse the superior competitive powers contained
in their lower standard of subsistence, and the smaller number of
those dependent on them, to undersell male labour. In Sheffield
file-making, where women are paid the same list of prices as men, it
is said that they practise sweating in their homes to the detriment of
male workers. So in carpet-weaving at Halifax; recently when the men
struck against a reduction upon their wage of 35s., women took the
work at 20s. (Lady Dilke, "Industrial Position of Women," _Nineteenth
Century_, Oct. 1893.) In watch-making, "the hand-work for which men
were paid about 18s. a-week is now done by women with machinery for
about 12s." (_Report to Labour Commission on Women's Employments_, p.
146.)

[250] Dr. Bertillon (_Journal de la Société de Statistique de Paris_,
Oct.-Nov. 1892) shows that among the Lyons silkworkers (1872-89) and
in the Italian Societies (1881-85) the sickness of women is
considerably greater than of men. In Lyons 9.39 days as compared with
7.81 for men; in Italy 8.5 as compared with 6.6.

[251] This holds, for example, of many branches of the fur, trimmings,
stays, umbrella, match-box trades, and the "finishing" departments of
the trousers and shirt trades in East London. Cf. Miss Collet in
_Labour and Life of the People_, vol. i.

[252] In the United States the general standard of money wages for
working women in cities is considerably higher than in England. The
average wage throughout the country was recently estimated to amount
to $5.24 per week, or just under 21s. But the divergences from this
average are much wider than in England. The lowest wages fall almost
to the lowest English level, for some 3 per cent. of the number
averaged were earning less than 8s. a week. About 20 per cent. were
earning between 14s. and 19s. per week. The earnings in the chief
textile industries show wide variations, yielding, however, a rough
average of about 20s. weekly wages in cotton mills, and about 22s. in
woollen mills. A general comparison would yield a standard of some
15s. as the customary wage corresponding to the 10s. in England
(_Report of the Commissioner of Labour_, 1888, chap. iii. and Table
xxix.). Some allowance, however, must be made for the more expensive
living in American cities. However, in spite of the fact that
organised action is almost unknown among women workers in America, the
real wages are higher than in England. This is partly owing to the
general insistence upon a higher standard of consumption, partly to
the fact that a larger number of employments are open to women than in
England, and partly to the higher skill and intelligence they put into
their work. Thus the maximum wage, measured by productivity, is
higher, the minimum, measured by "wants," is higher, while the terms
of competition do not so generally keep down actual wages to the
minimum.

[253] _Labour and Life of the People_, vol. i. p. 410.

[254] It must, however, be borne in mind that the results of such a
policy followed by Lancashire, or any other single part of the textile
industry of the world, would be qualified or even negatived if the
example was not followed by their competitors.

[255] This effect of industrial opportunities for women and children
in promoting early and more fruitful marriages is also illustrated in
Lancashire; the average family of the factory operative is
considerably higher than the average for the working classes as a
whole.

[256] Gunton, _Wealth and Progress_, p. 169.

[257] _Report of the Statistics of Labour_, p. 71.

[258] Dr. Smart has a valuable treatment of the subject in his
pamphlet, _Women's Wages_, pp. 22-25.

[259] _Labour and Life of the People_, vol. i. p. 469.

[260] _Labour and Life of the People_, vol. i. p. 460.

[261] _Ibid._, vol. i. p. 459; cf. also p. 469.

[262] Smart, _Woman's Wages_, p. 23.

[263] In some cases where women are found getting the same rate of
wages as men, the industry is a woman's industry in which a few
lower-skilled or inferior male workers are employed. The woman's scale
dominates, the men who are employed descending to it. This is the case
in some weaving trades where men work still almost entirely with
hand-looms, leaving women with a practical monopoly of power-loom
work. (_Report of Woollen Manufactures in Miscellaneous English
Towns_, pp. 98, 99.) Where both men and women are freely engaged in
the same class of work, the men are always (save in the area of the
Lancashire trade unions) paid at higher rates: where the same rates
are paid they are determined upon the woman's scale. The comparison
between Huddersfield and other cloth-making towns in Yorkshire
establishes this point. "In the cloth mills of these three districts,
Bradford, Huddersfield, and Leeds, men and women engaged upon the same
work at the looms receive the same pay. In the Huddersfield district
the proportion of men to women among the weavers is much greater than
it is in the districts of Bradford, Halifax, or Leeds, and in the
Huddersfield districts alone there is a weaver's scale, according to
which women are paid from 15 to 50 per cent. below men. The proportion
of women is, however, rapidly increasing; and I found many firms where
the scale is not in operation. At some places men and women were paid
alike _upon the woman's scale_. At other firms men were paid at a
slightly higher rate than women, the women's scale being the basis of
calculation for all classes of work." (Miss Abraham in _Reports on
Employment of Women to the Labour Commission_, p. 100.)

[264] _Report on Principal Textile Trades_, p. xxv.

[265] The evidence adduced by Dr. Arlidge in his _Diseases of
Occupations_ regarding the effects of factory life upon the physique
of children is conclusive. See p. 38, etc.

[266] See Appendix on Factory Legislation.




CHAPTER XIII.

MACHINERY AND THE MODERN TOWN.

    § 1. _The Modern Industrial Town as a Machine-product._
    § 2. _Growth of Town as compared with Rural Population in the Old
         and New Worlds._
    § 3. _Limits imposed upon the Townward Movement by the Economic
         Conditions of World-industry._
    § 4. _Effect of increasing Town-life upon Mortality._
    § 5. _The impaired quality of Physical Life in Towns._
    § 6. _The Intellectual Education of Town-life._
    § 7. _The Moral Education of Town-life._
    § 8. _Economic Forces making for Decentralisation._
    § 9. _Desirability of Public Control of Transport Services to
         effect Decentralisation._
   § 10. _Long Hours and Insecurity of Work as Obstacles to Reforms._
   § 11. _The Principle of Internal Reform of Town-life._


§ 1. In the last few chapters we have examined some of the influences
of modern machine-production upon men and women in the capacity of
producers, in relation to character, duration, intensity, regularity
of employment, the remuneration of labour, and the economic relations
which subsist between workers and employers. It remains to give
special consideration to one factor in the environment of modern
industrial life, which is of paramount importance upon the public,
both in its working and living capacity.

The biggest, and in some respects the most characteristic of
machine-products is the modern industrial town. Steam-power is in a
most literal sense the maker of the modern town. When the motive-power
of industrial work was chiefly confined to the forces stored in man,
the economy obtained by collecting larger numbers of men to work in
close proximity to one another was comparatively small, and was
commonly outweighed by the difficulty of securing for them a
sufficient supply of food and other commodities, and by the greater
immobility of labour at a time when fixed local associations were a
strong binding force, and transport was slow and expensive. When the
earlier machinery drew its motive-power chiefly from water, the local
attachment and wide distribution of this power prevented the
concentration of industry from advancing very far. Only in proportion
as steam-power became the dominating agent did the economies of
factory-production drive the workers to crowd ever more densely in the
districts where coal and water for generating steam were most
accessible, and to throng together for the most economical use of
steam-power in industry.

This rapid appreciation of the economies of centralised production,
heedless of all considerations, sanitary, æsthetic, moral, found a
hasty business expression in these huge hideous conglomerations of
factory buildings, warehouses, and cheap workmen's shelters, which
make the modern industrial town. The requirements of a decent,
healthy, harmonious individual or civic life played no appreciable
part in the rapid transformation of the mediæval residential centre,
or the scattered industrial village into the modern manufacturing
town. Considerations of cheap profitable work were paramount;
considerations of life were almost utterly ignored. So swift,
heedless, anarchic has this process been, that no adequate provisions
were made for securing the prime conditions of healthy, physical
existence required to maintain the workers in the most profitable
state of working efficiency. Only of recent years in a few of the
larger manufacturing towns has some slow revival of the idea of civic
life, as distinct from the organised manipulation of municipal affairs
for selfish business purposes, begun to manifest itself. The typical
modern town is still a place of workshops, not of homes.

Transport-machinery, the railway and the steamship, have been almost as
important factors in the making of towns as manufacturing-machinery. By
easily, quickly, and cheaply bringing food from a distance, they make
town work and town life upon a large scale possible; by imparting
increased fluidity to capital and labour, they continually increase the
economic advantages of highly concentrated industry. In the opening up
of new countries like the United States and Australia, the railway is
the literal maker of the town, in older countries it is the chief
alimental channel.

The pace at which this concentration of population in large towns
proceeds is the most serviceable measurement of the progress which the
various parts of the industrial world are making in machine-industry.

There are changes other than those of industrial method which help the
townward movement. The spirit of curiosity and enterprise stimulated
by education and the newspaper press, a desire for freer and more
varied social intercourse, a love of sensation and amusement, a
seeking after culture and intellectual development, in some cases the
mere promptings of idleness, discontent, or even criminal desires,
drive an increasing proportion of the younger rural population towards
the towns. But it is the combination of industrial changes in which
machinery plays the central part--the increased application of
machinery to agriculture reducing the demand for agricultural labour,
the development of manufacturing industries in towns, the labour of
transport and distribution requiring centralised machinery--that makes
this movement physically and economically feasible. The shift in the
proportionate demand for labour in towns and in country attributable
to machine-production is a principal direct agent in the movement.

§ 2. In England, _par excellence_ the manufacturing country, the
growth of the town as compared with the country is strongly marked
during the last thirty years.

                          1861.  1871.  1881.  1891.

    Urban Population[267]   62.3   64.8   66.6   71.7
    Rural      "          37.7   35.2   33.4   28.3

During the decennium 1881-91 there was a considerable check in the
immigration from the country into the large towns, though the
proportion of townsfolk to country folk grew even more rapidly than in
the preceding ten years.[268]

In Holland and Belgium, notwithstanding a large migration to foreign
lands, the towns grow far quicker than the total population. Thus in
Holland in the period 1870-79 the towns increased 17.25, while the
rural districts only increased 6.8. In Belgium, where the emigration
across the border is still larger, there is a tide of migration of the
parochial or country population continually setting towards Antwerp,
Brussels, and Liege.[269]

    [Illustration: GROWTH OF FRENCH POPULATION.]

This flow of population to the towns is not affected to any
considerable extent either by the rate of growth of the population
itself or by the small stake in the land possessed by the bulk of the
agricultural population in such a country as England. For in France,
where the growth of population during the last half century has been
extremely slow, and where the majority of the agriculturists have a
definite stake in the soil, the growth of the town population is most
remarkable. In Germany also, where peasant-proprietors are very
numerous, the towns continually absorb a larger proportion of the
population. In 1871 the urban population of the empire was 36.1 per
cent. of the total, in 1885 it was 41.8 per cent. In Austria, Hungary,
Sweden, Italy, a similar movement is clearly traceable. The above
diagram relating to movements of French population indicates that
Paris has been growing more rapidly than other French towns. In other
industrial countries also it is found that the pace of growth varies
for the most part directly with the size of the town. In England, it
is true that the largest cities show during the last decennium a
certain slackening in the pace of growth. But the towns between 20,000
and 100,000 are still growing far more rapidly than those between
5,000 and 20,000, while those below 5,000 fail to keep pace with the
general rise of population. This fact obtains the clearest recognition
in the preliminary report of the census of 1891.[270] "The urban
population increases then very much more rapidly than the rural
population. And not only so, but the larger, or rather the more
populous the urban districts,[271] and the more decided therefore its
urban character, the higher, generally speaking and with many
individual exceptions, is the rate of growth."

The movement is then not merely to town life, but to large-town life.
The following diagram shows the rate of growth of the chief European
centres of population during the present century:--

    [Illustration]

The figures relating to Germany are peculiarly instructive upon this
point:--

GERMANY--RATE OF INCREASE OF GOVERNMENT DISTRICTS.[272]

+-----------+------------------------------------+
|           | Times in which such rate occurred. |
| Per Cent. |-----------------+------------------+
|           | Town Districts. | Rural Districts. |
+-----------+-----------------+------------------+
| Increase. |                 |                  |
|     30    |        3        |       --         |
|   25-30   |        2        |       --         |
|   20-25   |       10        |        1         |
|   15-20   |       33        |        2         |
|   11-15   |       65        |       --         |
|    9-11   |       55        |        4         |
|    5-9    |       50        |       35         |
|    3-5    |        8        |       69         |
|    1-3    |       --        |       56         |
|    0-1    |        1        |       28         |
| Decrease. |                 |                  |
|    1-0    |        1        |       18         |
|    3-1    |       --        |       22         |
|    5-3    |       --        |        3         |
|    0-5    |       --        |        4         |
+-----------+-----------------+------------------+

  --------------------+------------+------------+------------------
   German Empire.     |    1871.   |   1886.    | Rate of Increase.
  --------------------+------------+------------+------------------
   Towns over 100,000 |  1,968,000 |  3,327,000 | 69 per cent.
     "    "    20,000 |  3,147,000 |  4,147,000 | 31   "
     "    "     5,000 |  4,588,000 |  5,694,000 | 24   "
     "    "     2,000 |  5,086,000 |  5,734,000 | 12   "
   Rural Population   | 26,219,000 | 26,318,000 |  3   "
  --------------------+------------+------------+------------------

But the movement is by no means confined to the densely-populated
countries of Europe. If we turn to the "new world" we find it
illustrated still more remarkably. In the United States of America,
long before the population approached its present height, and while
large tracts of fertile land still remained to be parcelled out, the
towns began to absorb more and more of the population. The following
diagram will show this movement to have been continuous, and with a
gathering momentum as the century moved on:--

    [Illustration: GROWTH OF CITY POPULATION IN THE UNITED STATES.]

What holds of the United States holds also of the newly settled
countries with small populations, as New South Wales, Victoria,
Canada, and even Manitoba,[273] Argentina, and Uruguay. Nearly
one-third of the whole population of New South Wales is resident in
Sydney, and a fourth of the population of Queensland in Brisbane.
Victoria presents the most striking case. In 1881 its four largest
towns contained more than two-fifths of the whole population,
Melbourne alone holding one-third.

In Canada there is the same diminution of rural and growth of town
population. New Brunswick contains 14 counties; in the decade 1871-81
only one of these showed a slight diminution, but not less than 7 in
the decade 1881-91. The 18 counties of Nova Scotia all showed an
increase in 1871-81, 8 showed a decrease in 1881-91. Quebec contains
61 counties, 10 of which showed a decrease in 1871-81, 26 in 1881-91.
Ontario has 48 counties, only 4 of which showed slight decrease in
1871-81; 20 showed a much more rapid decrease in 1881-91.

The following table shows that the accelerating decrease of the rural
parts is accompanied by a correspondingly accelerating increase of the
chief towns:--

  ----------------+----------+----------+----------
                  |  1871.   |  1881.   |  1891.
  ----------------+----------+----------+----------
  Kingston[274]   |  12,407  |  14,091  |  19,264
  London          |  15,826  |  26,266  |  31,977
  Ottawa          |  21,545  |  31,307  |  44,154
  Hamilton        |  26,717  |  35,961  |  48,980
  Toronto         |  56,092  |  96,196  | 181,220
  ----------------+----------+----------+----------
                  | 132,586  | 203,821  | 325,595
  ----------------+----------+----------+----------

The portentously rapid growth of the largest cities is of course not
wholly attributable to economic causes. To form the capital cities of
the New World, political and social influences have co-operated with
industrial. Nor can these causes be ignored in explaining the rapid
growth of certain European capitals, especially Berlin, Paris,
London, and Vienna. But the effective operation of these forces is
largely dependent on the modern machinery of transport, and in the
main these great centres must be regarded as manufacturing and
commercial towns.

Though the lack of any common statistical basis prevents us from being
able to trace with exactitude the comparative pace of this movement in
different countries, we know enough to justify the general conclusion
that this centralising tendency varies directly with the degree of
material civilisation attained in the several countries by the mass of
the population. In England, France, United States, Australia, where
steam engines, electric light, newspapers, and all the most highly
elaborated mechanical contrivances are available in towns, the growth
of town life is most rapid; in Russia, Turkey, India, Egypt, where
mechanical development is still far behind, the townward march is far
slower. As the area of machine-industry spreads, so this movement of
population will become more general, and as towns grow larger so it
would appear that this power to suck in the rural population is
stronger and more extensive.

§ 3. These facts and figures do not, however, of themselves justify
the conclusion that a larger proportion of the world's population is
moving into towns. In all the advanced industrial countries a smaller
proportion of the population is engaged in those extractive and
domestic industries which belong to rural life, a larger proportion in
the manufacturing and distributive industries which belong to towns.
But this movement is made possible by the fact that an increasing
proportion of the food and the raw materials of manufacture used in
these countries is drawn from the labour of the more backward
countries. The increase of the area of the industrial world is
effecting such a division of labour as hands over an ever-increasing
proportion of the agricultural work to the inhabitants of those
countries which do not rank as civilised industrial countries. The
known growth of certain large trading centres in India, China, Egypt,
South Africa, etc., does not justify us, in the absence of careful
statistical inquiry, in assuming that an increased proportion of the
inhabitants of these and other more backward portions of the globe is
passing into town life. Unless agricultural machinery and improved
agricultural methods are advancing more rapidly in these great
"growing areas" than we have a right to suppose, it would seem that
there must be some increased demand for agricultural and other rural
labour which shall, partially, at any rate, compensate for the
diminished demand for such kinds of labour in the more advanced
industrial communities. For although a large number of the industries
subsidiary to agriculture, the making of tools, waggons, gates,
fencing, etc., have now passed from the country to the towns, while
the economies of machinery and improved cultivation have advanced so
far that it is alleged that three men working on soil of average
quality can raise food for one thousand, still the growth of
population with a constantly rising standard of material consumption
seems likely to prevent any net diminution in the proportion of labour
engaged upon the soil in the industrial world. So long as modern
methods of production and consumption in civilised countries require
an ever-increasing quantity of raw materials, it would seem _à priori_
unlikely that a smaller proportion of the whole industry of the world
should be devoted to agricultural and other extractive industries, and
a larger amount to the manufacturing and distributive industries,
where the chief economies of machine-production are so largely
applied.

Since this growth of town population is quicker in the advanced
industrial communities, slower in the less advanced, so it may well be
the case that, in the countries which are but slightly and indirectly
affected by modern industry, it does not exist at all. There exist,
however, no satisfactory data upon which a judgment may be formed upon
this point.

§ 4. The effects of this concentration of population upon the
character and life of the people are multifarious. For convenience in
grouping facts, these effects may be considered in relation to (_A_)
physical health, (_B_) intelligence, (_C_) morals, though it will be
evident that the influences placed under these respective heads act
and react upon one another in many intricate and important ways.

(_A_) The best test of the effect of town life upon the population is
afforded by a comparison of the rates of mortality of town and country
population respectively.

DEATH-RATE IN TOWN AND COUNTRY DISTRICTS OF ENGLAND, 1851-90.[275]

  --------+------------------------------+-------------------
          |   Annual Deaths per 1000.    | Deaths in Town
          +----------+--------+----------+ Districts to
  Years.  | England  |        |          | 100 Deaths in
          | and      | Town.  | Country. | Country in equal
          | Wales.   |        |          | numbers living.
  --------+----------+--------+----------+-------------------
  1851-60 |  22.2    |  24.7  |  19.9    |     124
  1861-70 |  22.5    |  24.8  |  19.7    |     126
  1871-80 |  21.4    |  23.1  |  19.0    |     122
  1881    |  18.9    |  20.1  |  16.9    |     119
  1882    |  19.6    |  20.9  |  17.3    |     121
  1883    |  19.5    |  20.5  |  17.9    |     115
  1884    |  19.5    |  20.6  |  17.7    |     117
  1885    |  19.0    |  19.7  |  17.8    |     111
  1886    |  19.3    |  20.0  |  18.0    |     111
  1887    |  18.8    |  19.7  |  17.2    |     115
  1888    |  17.8    |  20.9  |  17.4    |     114
  1889    |  17.9    |  19.3  |  16.4    |     118
  1890    |          |  20.9  |  17.4    |     120
  --------+----------+--------+----------+-------------------

But as matters stand at present the statistics above quoted do not
mark the full extent of the difference of healthfulness in town and
country. When allowance is made for age and sex distribution in town
and country population, the difference in death-rate appears much
greater. For in the towns are found (_a_) a much larger proportion of
females; (_b_) a larger proportion of adults of both sexes in the
prime of life; (_c_) a much smaller proportion of very aged
persons:[276] hence if conditions of health were equal in town and
country, the town death-rate would be lower instead of higher than
that of the country. The _Report of the Census of 1881_[277] calls
special attention to this point, which is commonly ignored in
comparing death-rates of town and country. "If we take the mean
(1871-80) death-rates in England and Wales at each age-period as a
standard, the death-rate in an urban population would be 20.40 per
1000, while the death-rate in the rural population would be 22.83.
Such would be their respective death-rates on the hypothesis that the
urban districts and the rural districts were equally healthy. We know,
however as a matter of fact that urban death-rates, instead of being
lower than rural death-rates, are much higher. The difference of
healthiness, therefore, between the two is much greater than the
difference between their death-rates."

The same facts come out in comparing Paris with the rest of France. At
each age the death-rate for Paris is higher than for France.

                       Paris.     France.
  Age.[278]            1886.      1877-80.

   0 to  1 year        230?        170?
   1 to  5 years        58.2       28
  15 to 20   "           9.1        6
  30 to 40   "          13.6       10
  60 to 70   "          51.2       41

The English statistics indicate a slight and by no means constant
tendency towards a diminution of the difference between town and rural
mortality, due no doubt to improvements in city sanitation and to some
general elevation of the physical environment and standard of living
among a large section of the working classes. The same slight tendency
is visible in France. During the period 1861-65 the urban death-rate
was 26.1, as compared with 21.5, the rural death-rate; during the
period 1878-82 the rates were respectively 24.3 and 20.9.[279]

Such indications of hygienic progress in our towns are not, however,
sufficient to justify any expectation that the life of industrial
towns will be made as healthy as that of the country. It is not
possible to ignore the fatal significance of the continuous flow of an
increasing proportion of the younger, healthier, and more vigorous
part of the country population into town life. Dr. Ogle, who has
collected much evidence upon this subject, sums up as follows:--"The
combined effect of this constantly higher mortality of the towns, and
of the constant immigration into it of the pick of the rural
population, must clearly be a gradual deterioration of the whole,
inasmuch as the more energetic and vigorous members of the community
are consumed more rapidly than the rest of the population. The system
is one which leads to the survival of the unfittest."

§ 5. Not only is life on an average of shorter duration in the towns,
but it is of inferior physical quality while it lasts. The lowering of
the townsman's physique not merely renders him less able to resist
definite assaults of disease but injures his general capacity of work
and enjoyment. This progressive deterioration of physique accounts for
the unceasing flow of fresh country blood into the towns. In spite of
the advantage of possession and knowledge of the town, the townsman
cannot hold his own in the competition for town work; the new-comer
jostles the old-comer from the best posts, and drives him to depend
upon inferior and more precarious occupations for a living. Economic
conditions, acquired social tastes, and impaired powers of physical
labour prevent the feeble town blood from flowing back into the
country to recruit its vigour. Hence the _impasse_ which forces
problems of town poverty and incapacity ever more prominently upon the
social reformer.

In dealing with the diseases of occupations, Dr. Arlidge says, "It is
a most difficult problem to solve, especially in the case of an
industrial town population, how far the diseases met with in it are
town-made and how far trade-made; the former almost always
predominate."[280]

It is not indeed possible to clearly distinguish the two classes of
effects. Since machinery makes the industrial town, it makes it as a
place to work in and a place to live in, and though certain trade
conditions will operate more directly upon the inhabitants as workers,
their effects will merge with and react upon the life-conditions of
the town. The special characteristics of town work which cause
ill-health and disease are--

    (_a_) The predominance of indoor occupations, involving
    unwholesome air.

    (_b_) The sedentary character of most work in factories or
    workrooms, or otherwise the lack of free play of physical
    activities.

    (_c_) The wear and tear of nerve fibre (_e.g._, in
    boiler-making, weaving sheds, etc.).

    (_d_) The wearisome monotony and lack of interest attending
    highly specialised and sub-divided machine-industry, producing
    physical lassitude.[281]

    (_e_) Injuries arising from dust fumes, or other deleterious
    matter, or from the handling of dangerous material or tools.

Much valuable work has been done of recent years by French, German,
and English physicians and statisticians, throwing light upon the
specific diseases appertaining to various industries, and giving some
measurement of their extent. But though certain specifically
industrial qualities have a considerable place in swelling the
mortality of towns, Dr. Arlidge is fully justified in his opinion that
in industrial centres more of the diseases are town-made than
trade-made. The statistics of infant mortality are conclusive upon
this point. In comparing the death-rates for town and country, the
difference is far wider for children below the industrial age than for
adults engaged in industrial work. Mr. Galton has calculated that in a
typical industrial town the number of children of artisan townsfolk
that grow up are little more than half as many as in the case of the
children of labouring people in a healthy country district.[282] The
figures quoted above from M. Levasseur relating to France point to a
similar conclusion. Many of the evils commonly classified as belonging
to specific industries, in particular the foul atmosphere, imperfect
sanitation, and overcrowding, which are found in many factories and
most city workshops, are rightly regarded as town-made rather than
trade-made, for they are the normal and often the necessary
accompaniments of a congested industrial population. In qualification
of this, having regard to the effects of machine-development, we must
remember that the worst hygienic conditions of town work are found in
those branches of industry which have lagged behind in industrial
evolution, while the best hygienic conditions are found in the most
highly-organised branches of textile industry. "Generally speaking,
the more elaborate and costly the machinery, the more excellent the
architecture. Thus in textile works machinery acquires its maximum of
importance, and by its dimensions necessitates commodious shops,
buildings of great size, and well-ordered arrangements to facilitate
the performance of the mutually dependent series of operations carried
on."[283]

Legal restrictions upon unhealthy and dangerous employments, shorter
working hours, adequate inspection, the stimulus given by such
measures to a more rapid application of highly-developed machinery,
may succeed in reducing considerably the physical evils directly
arising from town industries. But the town will still remain a more
unhealthy place to live in than the country, and as on the one hand
the fundamental and paramount importance of a healthy physical
environment receives fuller recognition, and on the other hand larger
leisure and opportunities of enjoyment and development make life more
valuable to the mass of the workers than it is at present, the
pressure of this problem of town life will grow apace.

§ 6. (_B_) That town life, as distinguished from town work, is
educative of certain intellectual and moral qualities, is evident.
Setting aside that picked intelligence which flows to the town to
compete successfully for intellectual employment, there can be no
question but that the townsman has a larger superficial knowledge of
the world and human nature. He is shrewd, alert, versatile, quicker,
and more resourceful than the countryman. In thought, speech, action,
this superiority shows itself. The townsman has a more developed
consciousness, his intelligence is constantly stimulated in a thousand
ways by larger and more varied society, and by a more diversified and
complex economic environment. While there is reason to believe that
town work is on the average less educative than country work, town
life more than turns the scale. The social intercourse of the club,
the trade society, the church, the home, the public-house, the
music-hall, the street, supply innumerable educative influences, to
say nothing of the ampler opportunities of consciously organised
intellectual education which are available in large towns. If,
however, we examine a little deeper the character of town education
and intelligence certain tolerably definite limitations show
themselves. School instruction, slightly more advanced than in the
country, is commonly utilised to sharpen industrial competition, and
to feed that sensational interest in sport and crime which absorbs the
attention of the masses in their non-working hours; it seldom forms
the foundation of an intellectual life in which knowledge and taste
are reckoned in themselves desirable. The power to read and write is
employed by the great majority of all classes in ways which evoke a
minimum of thought and wholesome feeling. Social, political, and
religious prejudices are made to do the work which should be done by
careful thought and scientific investigation.

Scattered and unrelated fragments of half-baked information form a
stock of "knowledge" with which the townsman's glib tongue enables him
to present a showy intellectual shop-front. Business smartness pays
better in the town, and the low intellectual qualities which are
contained in it are educated by town life. The knowledge of human
nature thus evoked is in no sense science, it is a mere rule-of-thumb
affair, a thin mechanical empiricism. The capable business man who is
said to understand the "world" and his fellow-men, has commonly no
knowledge of human nature in the larger sense, but merely knows from
observation how the average man of a certain limited class is likely
to act within a narrow prescribed sphere of self-seeking. Town life,
then, strongly favours the education of certain shallow forms of
intelligence. In actual attainment the townsman is somewhat more
advanced than the countryman. But the deterioration of physique which
accompanies this gain causes a weakening of mental fibre: the
potentiality of intellectual development and work which the countryman
brings with him on his entry to town life is thwarted and depressed by
the progressive physical enfeeblement. Most of the best and strongest
intellectual work done in the towns is done by immigrants, not by
town-bred folk.

§ 7. (_C_) This intellectual weakness of town life is best expressed
in terms which show the intimate relation between intelligence and
morals. A lack of "grit," pertinacity of purpose, endurance,
"character," marks the townsman of the second generation as compared
with the countryman. As the intellectual powers of the townsman,
though quantitatively impaired, are more highly developed than those
of the countryman, so it is with his "morals." In positive
attainments of conscience, virtue, and vice, the townsman shows
considerable advance. This point is commonly misunderstood. The annals
of crime afford irrefutable evidence of the greater criminality of the
towns. London, containing less than one-fifth of the population of
England and Wales, is responsible for more than one-third of the
annual number of indictable crimes.[284] In France the criminality of
the urban population is just double that of the rural population.[285]
In 1884-86, out of each 100,000 city population sixteen were charged
with crimes; out of each 100,000 rural population only eight. It is
indeed commonly recognised in criminology that, other things being
equal, crime varies with the density of population. There is no
difficulty in understanding why this should be so. The pressure of
population and the concentration of property afford to the
evil-disposed individual an increased number of temptations to invade
the person or property of others; for many sorts of crime the
conditions of town life afford greater security to the criminal;
social and industrial causes create a large degenerate class not
easily amenable to social control, incapable of getting regular work
to do, or of doing it if they could get it.

If the town were a social organism formed by men desirous of living
together for mutual support, comfort, and enjoyment in their lives, it
might reasonably be expected that a wholesome public feeling would be
so strongly operative as to outweigh the increased opportunities of
crime. But, as we have seen, the modern town is a result of the desire
to produce and distribute most economically the largest aggregate of
material goods: economy of work, not convenience of life, is the
object. Now, the economy of factory co-operation is only social to a
very limited extent; anti-social feelings are touched and stimulated
at every point by the competition of workers with one another, the
antagonism between employers and employed, between sellers and buyers,
factory and factory, shop and shop.

Perhaps the most potent influence in breaking the strength of the
_morale_ of the town worker is the precarious and disorderly
character of town work. That element of monotonous order, which we
found excessive in the education afforded by the individual machine to
the machine-tender, is balanced by a corresponding defect in
machine-industry taken as a whole. Town work, as we have seen, is more
irregular than country work, and this irregularity has a most
pernicious effect upon the character of the worker. Professor Foxwell
has thus strikingly expressed the moral influences of this economic
factor: "When employment is precarious, thrift and self-reliance are
discouraged. The savings of years may be swallowed up in a few months.
A fatalistic spirit is developed. Where all is uncertain and there is
not much to lose, reckless overpopulation is certain to be set at.
These effects are not confined to the poorer classes. The business
world is equally demoralised by industrial speculation, careful
prevision cannot reckon upon receiving its due return, and speculation
of the purest gambling type is thereby encouraged. But the working
class suffers most."[286]

The town as an industrial structure is at present inadequate to supply
a social education which shall be strong enough to defeat the
tendencies to anti-social conduct which are liable to take shape in
criminal action. The intellectual training given by town life does
not, as we have seen, assist in stimulating higher intellectual and
moral interests whose satisfaction lies above the plane of material
desire. There is indeed some evidence that the meagre and wholly
rudimentary education given to our town-dwellers is, by reason of its
inadequacy, a direct feeder of town vices. The lower forms of
music-hall entertainment, the dominant popular vice of gambling, the
more degraded kinds of printed matter, owe their existence and their
financial success to a public policy which has confined the education
of the people to the three R's, making it generally impossible, always
difficult, for them to obtain such intellectual training as shall
implant higher intellectual interests with whose pursuit they may
occupy their leisure. But, in taking count of the criminality and vice
of large towns it is not just to ignore a certain counter-claim which
might be made. If our annals of virtue were kept as carefully as our
annals of vice, we might find that town life stood higher in the one
than in the other. There are more opportunities to display positive
goodness and positive badness in the town; life is more crowded and
more rapid, and it is likely that acts of kindness, generosity,
self-denial, even of heroic self-sacrifice, are more numerous in the
town than in the country. The average townsman is more developed
morally as well as intellectually for good and for evil. That the good
does not more signally predominate is in no small measure due to the
feeble social environment. Public opinion is generally a little in
advance of the average morality of the individuals who compose the
public. Here is a mighty lever for raising the masses. But where the
density of population is determined by industrial competition, rather
than by human-social causes, it would seem that the force of sound
public opinion is in inverse proportion to the density of population,
being weakest in the most crowded cities. In spite of the machinery of
political, religious, social, trade organisations in large towns, it
is probable that the true spiritual cohesiveness between individual
members is feebler than in any other form of society. If it is true
that as the larger village grows into the town, and the town into the
ever larger city, there is a progressive weakening of the bonds of
moral cohesion between individuals, that the larger the town the
feebler the spiritual unity, we are face to face with the heaviest
indictment that can be brought against modern industrial progress, and
the forces driving an increased proportion of our population into
towns are bringing about a decadence of _morale_ which is the
necessary counterpart of the deterioration of national physique.

So far as we are justified in regarding the modern town and the
tendency to increased town life as results of machinery and industrial
evolution, there can be little doubt of the validity of these
accusations. The free play of economic forces under the guidance of
the selfish instincts of commercial individuals, or groups of
individuals, is driving an increased proportion of the population of
civilised countries into a town life which is injurious to physical
and moral health, and provides no security for the attainment of an
intellectual life which is worth living.

§ 8. But powerful as these centralising forces have been during the
last century and a half, we are not justified in assuming that they
will continue to operate with gathering momentum in the future, and
that the results which are assigned to them will increase in
magnitude. Such an assumption would ignore two groups of counteracting
forces which are beginning to manifest themselves in the more advanced
industrial communities.

The first of these groups consists of a number of directly
counteracting or decentralising forces.

As a town grows in size the value of the ground on which it stands
grows so rapidly that it becomes economically available only for
certain classes of industrial undertaking, in which the occupation of
central space is an element of prime importance. In all large
commercial cities the residential quarters are driven gradually
farther and farther away from the centre by incessant encroachments of
business premises. The city of London and the "down town" quarter of
New York are conspicuous examples of this displacement of residential
buildings by commercial. The richer inhabitants are the earliest and
quickest to leave. As the factory or the shop plants itself firmly
among the better-class dwelling-houses, these inhabitants pass in
large numbers to the outskirts of the town, forming residential
suburbs which, for some time at any rate, are free from the specific
evils of congestion. This encroachment of the factory and the shop at
first has little effect, if any, in thinning the residential
population of the district. While the shopkeepers and their employees
live in the neighbourhood, and the factory workers can afford to pay
the rent for houses or lodgings near their work, the central
population will grow denser than before. But as the city grows in size
and commercial importance, an increasing number of the most central
sites will pass from manufactory premises and shops into use for
warehouses and business offices, and for other work in connection with
distribution and finance. The workers on these premises will, in the
case of the wealthier, be unwilling, in the case of the poorer be
unable, to live near their work; where factories and shops remain, the
great mass of the employees will not be able to afford house-rents
determined by this competition of a more valuable commercial use of
land. So we find that the number of inhabitants of the city of London
diminishes in each recent census, and the same is true as regards the
most valuable portions of Paris, New York, and other large cities.
This decentralising force is, however, only in full operation in the
very centre of the largest cities. The first effect of the competition
of commercial with living premises is to raise house-rents and to
drive the poorer population into narrower, less commodious, and less
sanitary dwellings. Where ground landowner and builder have a free
hand the market value of central ground for small, lofty, cheap-built
slums can be made to hold its own for a long time with the business
premises which surround them. Even when ground value has risen so high
as to displace many of these slums, the tendency is for the latter to
spring up and thicken in districts not far removed from the centre.
Thus in London the densest population is found in Whitechapel and St.
George's in the East. Indeed, there is evidence that these districts
have already reached "saturation point," that is to say, the pressure
of business demands for ground, the increased competition of the
dwellers themselves, and the growing restrictions imposed by law and
public opinion upon the construction of the most "paying" forms of
house property, prevent any further growth of population in these
parts. As this saturation point is reached in one district, the growth
of dense population goes on faster in the outlying districts, and,
with forms which vary with local conditions, the same economic forces
manifest themselves with similar results over a wider area. The poorer
population shifts as short a distance as it can, and then only when
driven by a rise of rents. Even when it moves somewhat farther out it
seldom gets far enough to escape the centralising forces. Residential
working-class districts like West Ham become rapidly congested by the
constant flow of population from more central places. Moreover, the
same decentralising forces are set up in the large suburban districts,
by the planting there of factories and other industrial works designed
to take advantage of a large supply of labour close at hand, and land
procurable at a lower rental. This applies also to many of the suburbs
originally chosen as residential quarters of the well-to-do classes.
The whole western district of London, comprised by Kensington, Notting
Hill, Hammersmith, etc., contains large and designed areas of dense
poverty and overcrowding. So far as the mass of poorer workers in
London and other large cities are concerned, it would appear that
their endeavour to escape beyond the limits of congested city life has
hitherto been unavailing: the decentralising forces of rising ground
rents, uncomfortable and insanitary dwellings, are ever at work, but
the centralising forces set up by any large number who seek an outlet
in the same direction, with close spacial limitations to their
migrating tendency, are too strong. High rents, a fuller appreciation
of the hygienic advantages of more space, and of proximity to country
air and country scenes, have induced an increasing number of the
"middle" classes, and even of those who, in a pecuniary sense, form
the upper working class, to incur the expenditure of time, trouble,
and railway fares involved in living sufficiently far from the centre
to avoid the centralising pressure. The most important practical
problem of social reform to-day is how to secure this option of
extra-city life for the mass of city workers. If the economies of low
ground rent and slightly cheaper labour were sufficiently large to
induce the establishment of manufactories at considerable distances
from large centres of population, we might look in time to see the
large industrial town give place to a number of industrial villages,
gathered round some single large factory or "works." The growing
facilities of communication with large towns at increased distances,
afforded by recent expansions of railway service, and by improvements
in telegraphic and telephonic media, have done something towards this
form of decentralisation. Round Manchester and other larger northern
manufacturing towns an increasing number of factories are springing
up; in the United States the same phenomenon is still commoner.
Smaller rents, cheaper living, lower wages, especially in textile
mills where women are largely employed, and lastly, more submissive
labour, are everywhere the economic stimuli of this decentralisation
of manufacture. Assuming that some more cheaply and easily
transmissible motor-power can be found for manufacture, and that a
cheap and readily available transport service by steam or electricity
is widely spread, it seems not unlikely that the economies of
decentralised manufacture may widely or even universally outweigh the
primary centralising economies which created our great manufacturing
towns. Whether a wide diffusion of industrial villages, which might be
of a size and structure to reproduce in a somewhat less virulent form
many of the physical and moral vices of the larger towns, and which
possibly might retard or nullify some of the educative and elevating
influences springing from the organisation and co-operative action of
large masses of workers, can be regarded as a desirable substitute or
remedy for our congested city life, is open to grave doubt. A whole
country like England, thickly blotched at even intervals by big
industrial villages comprised of a huge factory or two with a few
rectangular streets of small, dull, grimy, red-brick cottages, and one
or two mansions standing inside their parks at the side remote from
the factories, would, from an æsthetic point of view, be repulsive to
the last degree; and out of a country, the whole of which was thus
ordered for pure purposes of industrial economy, it is difficult to
believe that any of the higher products of human effort could proceed.
But the possibility of some such outcome of the decentralising forces
already visible must not be ignored. It is even likely that the labour
movement, advancing as it does more rapidly in large manufacturing
centres than elsewhere, may, by increasing the freedom and power of
labour associated upon a large scale, apply an additional stimulus to
the _entrepreneur_ to place his business undertakings so as to make
strongly combined action of labourers more difficult. American
manufacturers are distinctly actuated by this motive in selecting the
locality of their factories, and have been able in many cases to
maintain a despotic control over the workers which would be quite
impossible were their factories planted in the middle of a large
city.[287]

§ 9. This method of partial decentralisation depends in large measure,
it is evident, upon such progress in the transport services for
persons, goods, and intelligence as shall minimise the inconvenience
of a less central position, rendering the location of the business a
matter of comparative indifference. But it is to improved transport
services that we may look to facilitate a kind of decentralisation,
the net gain of which is less dubious than that arising from the
substitution of a large number of industrial villages for a small
number of industrial towns. Is it not possible for more town-workers
to combine centralised work with decentralised life--to work in the
town but to live in the country? May not this advantage, at present
confined to the wealthier classes, be brought within the reach of the
poorer classes? Some small progress has been made of recent years
towards the realisation of this ideal. Three chief difficulties stand
in the way of success: the length of the working-day, which makes the
time required for travelling to and from a distant home a matter of
serious consideration; the defective supply of convenient, cheap, and
frequent trains or other quick means of conveyance; the irregularity
and uncertainty of tenure in most classes of labour, which prevents
the establishment of a settled house chosen with regard to convenient
access to a single point of industry. Some recent progress has been
made in large cities, such as Vienna, Paris, and London, in providing
workmen's trains and by the cheapening of train and 'bus fares; but
such experiments are generally confined within too narrow an area to
achieve any satisfactory amount of decentralisation, for the interests
of private carrying companies demand that the largest number of
passengers shall travel from the smallest number of stations. It would
appear that considerable extension of direct public control over the
means of transport will be required, in order to secure to the people
the full assistance of modern mechanical appliances in enabling them
to avoid the mischief of over-crowded dwellings. For such purposes the
railway has now replaced the high-road, and we can no more afford to
entrust the public interest in the one case to the calculating
self-interest of private speculation than in the other case. A firm
public control in the common interest over the steam and electric
railways of the future seems essential to the attainment of adequate
decentralisation for dwelling purposes. Private enterprise in
transport, working hand in hand with private ownership of land, will
only substitute for a single mass of over-crowded dwellings a number
of smaller suburban areas of over-crowded dwellings. The bicycle
alone, among modern appliances of mechanical speed, can safely be
entrusted to the free private control of individuals, and, if one may
judge by the remarkable expansion of its use, it seems likely to
afford no trifling assistance to the decentralising tendencies.

§ 10. The removal of the other two barriers belongs to that joint
action of labour organisation and legislation which aims at building
up a condition of stable industrial economy. One of the most
serviceable results of that shortening of the working-day, upon which
public attention is so powerfully concentrated, would be the
assistance it would render to enable workmen and workwomen to live at
a longer distance from their work. So long, however, as a large
proportion of city workers have no security of tenure in their work,
are liable at a day's or a week's notice, for no fault of their own,
to be obliged to seek work under another employer in a distant
locality, or if employed by the same master to be sent to a distant
job, now to find themselves without any work at all, at another time
to have to work all hours to make up a subsistence wage, it is evident
that these schemes of decentralisation can be but partial in their
application. An increased stability both in the several trades and in
the individual businesses within the trade is a first requisite to the
establishment of a fixed healthy home for the industrial worker and
his family.

§ 11. It is, however, unlikely that any wide or lasting solution of
the problem of congested town life will be found in a sharp local
severance of the life of an industrial society which shall abandon the
town to the purposes of a huge workshop, reserving the country for
habitation. The true unity of individual and social life forbids this
abrupt cleavage between the arts of production and consumption,
between the man and his work. It is only in the case of the largest
and densest industrial cities, swollen to an unwieldy and dangerous
size, that such methods of decentralisation can in some measure be
applied. In these monstrous growths machinery of decentralisation may
be evoked to undo in part at any rate the work of centralising
machinery. In smaller towns, where the circumference bears a larger
proportion to the mass, a spreading of the close-packed population
over an expanded town-area will be more feasible, and will form the
first step in that series of reforms which shall humanise the
industrial town. The congestion of the poorer population of our towns,
and the struggle for fresh air and elbow-room which it implies, is
the most formidable barrier to the work of transforming the town from
a big workshop into a human dwelling-place, with an individual life, a
character, a soul of its own. The true reform policy is not to destroy
the industrial town but to breathe into it the breath of social life,
to temper and subordinate its industrial machine-goods-producing
character to the higher and more complex purposes of social life. An
ample, far-sighted, enlightened, social control over the whole area of
city ground, whether used for dwellings or for industrial purposes, is
the first condition of the true municipal life. The industrial town,
left for its growth to individual industrial control, compresses into
unhealthily close proximity large numbers of persons drawn together
from different quarters of the earth, with different and often
antagonistic aims, with little knowledge of one another, with no
important common end to form a bond of social sympathy. The town
presents the single raw material of local proximity out of which
municipal life is to be built. The first business of the municipal
reformer then is to transform this excessive proximity into wholesome
neighbourhood, in order that true neighbourly feelings may have room
to grow and thrive, and eventually to ripen into the flower of a fair
civic life. "A modern city," it has been well said, "is probably the
most impersonal combination of individuals that has ever been formed
in the world's history."[288] To evoke the personal human qualities of
this medley of city workers so as to reach within the individual the
citizen, to educate the civic feeling until it take shape in civic
activities and institutions, which shall not only safeguard the public
welfare against the encroachments of private industrial greed, but
shall find an ever ampler and nobler expression in the æsthetic beauty
and spiritual dignity of a complex, common life--all this work of
transformation lies in front of the democracy, grouped in its
ever-increasing number of town-units.

FOOTNOTES:

[267] According to Arthur Young, in 1770 half the population was
already urban. But though the townward drift, owing in large measure
to the land-hunger of the aristocracy and wealthy merchant class, and
the labour-saving economy of large farming, was clearly visible before
the development of machine-industry, it is probable that Young's
estimate goes beyond the facts.

[268] Mr. Cannan points out that this is due on the one hand to the
healthier conditions of the towns whose natural increase is larger; on
the other hand, to an increased migration from the rural parts to
foreign countries. ("The Decline of Urban Immigration," _National
Review_, January 1894.)

[269] Ravenstein, _Statistical Journal_, June 1889.

[270] _Preliminary Report_ (c. 6422), p. 23.

[271] It is often pointed out that an Urban Sanitary District is not
always a town. But if rural areas are sometimes classed as towns, many
large outskirts of towns, practically partaking of the character of
the towns, are not included. The figures cited above may therefore be
regarded as a fairly accurate account of the growth of town life.

[272] Longstaff, "Rural Depopulation," _Journal of Stat. Soc._, Sept.
1893.

[273] Cf. Longstaff, _Studies in Statistics_, p. 157.

[274] These Canadian statistics are quoted from Dr. Longstaff's paper
in _Journal of Statistical Society_, Sept. 1893.

[275] _Report of Commissioners, etc._, vol. XXX. p. 65.

[276] Newsholm, _Vital Statistics_, p. 137. (Sonnenschein.)

[277] Vol. iv. p. 23.

[278] Levasseur, vol. ii. p. 402.

[279] _Ibid._, vol. ii. p. 155.

[280] _Diseases of Occupations_, p. 33.

[281] Dr. Arlidge, pp. 25, 26.

[282] Quoted by Professor Marshall, _Principles of Political Economy_,
p. 258. Cf. also _Statistical Society_, March 1873, for U.S.A.
statistics.

[283] Dr. Arlidge, p. 30.

[284] W.D. Morrison, "The Study of Crime," _Mind_, vol. i. N.S., No.
4.

[285] Levasseur, vol. ii. p. 456.

[286] _Claims of Labour_, p. 196.

[287] One of the specific advantages in America has been the absence
of any serious endeavour on the part of legislation to put down Truck.
The grossest abuses of Truck appear in country manufacturing towns of
the United States.

[288] J.S. Mackenzie, _An Introduction to Social Philosophy_, p. 101.




CHAPTER XIV.

CIVILISATION AND INDUSTRIAL DEVELOPMENT.

    § 1. _Imperfect Adjustment of Industrial Structure to its
         Environment._
    § 2. _Reform upon the Basis of Private Enterprise and Free Trade._
    § 3. _Freedom and Transparency of Industry powerless to cure the
         deeper Industrial Maladies._
    § 4. _Beginnings of Public Control of Machine-production._
    § 5. _Passage of Industries into a public Non-competitive
         Condition._
    § 6. _The "raison d'être" of Progressive Collectivism._
    § 7. _Collectivism follows the line of Monopoly._
    § 8. _Cases of "Arrested Development:" the Sweating Trades._
    § 9. _Retardation of rate of Progress in Collective Industries._
   § 10. _Will Official Machine-work absorb an Increasing Proportion
         of Energy?_
   § 11. _Improved Quality of Consumption the Condition of Social
         Progress._
   § 12. _The Highest Division of Labour between Machinery and Art._
   § 13. _Qualitative Consumption defeats the Law of Decreasing
         Returns._
   § 14. _Freedom of Art from Limitations of Matter._
   § 15. _Machinery and Art in production of Intellectual Wealth._
   § 16. _Reformed Consumption abolishes Anti-Social Competition._
   § 17. _Life itself must become Qualitative._
   § 18. _Organic Relations between Production and Consumption._
   § 19. _Summary of Progress towards a Coherent Industrial Organism._


§ 1. Modern industrial societies have hitherto secured to a very
inadequate extent the services which modern machinery and methods of
production are capable of rendering. The actual growth of material
wealth, however great, has been by no means commensurate with the
enormously increased powers of producing material commodities afforded
by the discoveries of modern science, and the partial utilisation of
these discoveries has been attended by a very unequal distribution of
the advantages of this increase in the stock of common knowledge and
control of nature. Moreover, as an offset against the growth of
material wealth, machinery has been a direct agent in producing
certain material and moral maladies which impair the health of modern
industrial communities.

The unprecedented rapidity and irregularity of the discovery and
adoption of the new methods made it impossible for the structure of
industrial society to adjust itself at once to the conditions of the
new environment. The maladies and defects which we detect in modern
industry are but the measure of a present maladjustment.

The progressive adjustment of structure to environment in the
unconscious or low-conscious world is necessarily slow. But where the
conscious will of man, either as an individual or as a society, can be
utilised for an adjusting force, the pace of progress may be
indefinitely quickened. A strongly-rooted custom in a man yields very
slowly to the pressure of changed circumstances which make it useless
or harmful, unless the man consciously recognises the inutility of the
custom and sets himself to root it out and plant another custom in its
place. So the slowness of this work of industrial adjustment has been
in no small measure due to the lack of definite realisation by the
members of modern communities of the need and importance of this
adjustment. A society which should bring its conscious will to bear
upon the work of constructing new social and industrial forms to fit
the new economic conditions, may make a progress which, while rapid,
may yet be safe, because it is not a speculative progress, but one
which is guided in its line of movement by precedent changes of
environment.

Regarding, then, this conscious organised endeavour, enlightened and
stimulated by a fuller understanding of industrial forces in their
relation to human life, as a determinant of growing value in the
industrial evolution of the future, it may properly belong to a
scientific study of modern industry to seek to discover how the forces
of conscious reform can reasonably work in relation to the economic
forces whose operations have been already investigated.

In other words, what are the chief lines of economic change required
to bring about a readjustment between modern methods of production and
social welfare? The answer to this question requires us to amplify our
interpretation of the industrial evolution of the past century, by
producing into the future the same lines of development, that they may
be justified by the appearance of consistency with some rational
social end. The most convenient, and perhaps the safest way to meet
this demand is to indicate, with that modesty which rightly belongs to
prophecy, some of the main reforms which seem to lie upon the road of
industrial progress, rendered subordinate to larger human social ends.

§ 2. So far as the waste of economic maladjustment consists in the
excessive or defective application of various kinds of productive
force at different points of industry, upon the existing basis of
individual initiative and control, the reforms which are desirable
must be considered as contributing to the more complete establishment
of "free" competition in industry.

The complete breakdown of all barriers which impede the free flow of
commerce and the migration of capital and labour, the fullest and
widest dissemination of industrial information, are necessary to the
attainment of the individualistic ideal of free trade. Perfect
transparency of industrial operations, perfect fluidity of labour and
of wealth would effect incalculably great economies in the production
of commercial wealth. The free-trader, in his concentration upon the
achievement of the latter economy, has generally failed to do full
justice to the importance of the former. He has indeed to some limited
extent recognised the value of accurate and extended industrial
information as the intellectual basis of free trade. But, in common
with most economists, he has failed to carry this consideration far
enough. It is generally admitted that the increased publication of
accounts and quotations of stock, springing out of the extension of
joint-stock enterprise, the growth of numerous trade journals, the
collection and dissemination of industrial facts by government bureaux
and private statisticians, are serviceable in many ways. But the
extreme repugnance which is shown towards all endeavours to extend the
compulsory powers of acquiring information by the state, the extreme
jealousy with which the rights of private information are maintained,
show how inadequately the true character of modern industry is
grasped. In the complexity of modern commerce it should be recognised
that there is no such thing as a "self-regarding" or a private action.
No fact bearing on prices, wages, profits, methods of production,
etc., concerns a single firm or a single body of workers. Every
industrial action, however detailed in character, however secretly
conducted, has a public import, and necessarily affects the actions
and interests of innumerable persons. Indeed it is often precisely in
the knowledge of those matters regarded as most private, and most
carefully secreted, that the public interest chiefly lies. Yet so
firmly rooted in the business mind is the individualistic conception
of industry, that any idea of a public development of those important
private facts upon which the credit of a particular firm is based,
would appear to destroy the very foundation of the commercial fabric.
But, although in the game of commerce a single firm which played its
hand openly while others kept theirs well concealed might suffer
failure, it is quite evident that the whole community interested in
the game would gain immensely if all the hands were on the table.
Many, if not most, of the great disasters of modern commercial
societies are attributable precisely to the fact that the credit of
great business firms, which is pre-eminently an affair of public
interest, is regarded as purely private before the crash. As industry
grows more and more complex, so the interest of the public and of an
ever-wider public in every industrial action grows apace, and a
correspondingly growing recognition of this public interest, with
provision for its security, will be found necessary. So far as the
natural changes of industrial structure in the private business fail
to provide the requisite publicity, the exercise of direct public
scrutiny must come to be enforced. The reluctance shown alike by
bodies of employers and of workers to divulge material facts is in
large measure due to the false ideas they have conceived as to the
nature of industrial activity, which education can do something to
remove, but which, if not removed, must be over-ruled in the public
interest.

§ 3. It must not, however, be supposed that the most thorough
transparency of industry, any more than the removal of the political
barriers which prevent Free Trade, would tend to bring about the
desirable adjustment between the healthy social organism and the
environment of machine-production. Full free trade would supply,
quicken, and facilitate the operation of those large economic forces
which we have seen at work: the tendency of capital to gravitate into
larger and fewer masses, localised where labour can be maintained upon
the most economical terms: a correspondent but slower and less
complete organisation of labour in large masses: the flow of labouring
population into towns, together with a larger utilisation of women and
(where permitted) children for industrial work: a growing keenness of
antagonism as the mass of the business-unit is larger, and an
increased expenditure of productive power upon aggressive commercial
warfare: the growth of monopolies springing from natural, social, or
economic sources, conferring upon individuals or classes the power to
consume without producing, and by their consumption to direct the
quantity and character of large masses of labour.

The complete realisation of full free trade in all directions has no
power whatever to abate the activity of these forces, and would only
serve to bring their operation into more signal and startling
prominence.

For the waste of periodic over-production visible in trade depression,
for the sufferings caused by ever larger oscillations in prices and
greater irregularity of employment of capital and labour, for the
specific evils of long hours or excessive intensity of labour,
dangerous and unwholesome conditions of employment, increased
employment of women and children, and growth of large-city life,
freedom of trade conjoined with publicity of business operations can
furnish no remedies.

It has been seen that these injuries to individuals and groups of
individuals, and through them to society, arise naturally and
necessarily from the unfettered operation of the enlightened
self-interest of individuals and groups of individuals engaged in
obtaining for themselves, by the freest use of industrial means
available, the largest quantity of money.

So far as these evils are in form or in magnitude the peculiar
products of the last two centuries, they are in large measure
traceable to methods of production controlled by machinery, and to the
social estimate of machine-products which gives machinery this
controlling power.

If this is so, such progress as shall abate these evils and secure for
humanity the uses of machinery without the abuses will lie in two
directions, each of which deserves consideration: (i) an adequate
social control over machine-production; (2) an education in the arts
of consumption such as may assign proper limits to the sphere of
machine-production.

§ 4. That machinery subject to the unrestricted guidance of the
commercial interests of an individual or a class cannot be safely
trusted to work for the general welfare, is already conceded by all
who admit the desirability or necessity of the restrictive legislation
of Factory Acts, Mines Regulation Acts, and the large growth of public
provisions for guarding against economic, hygienic, and other injuries
arising from the conditions of modern industrial life.

These provisions, whether designed directly to secure the interests of
a class of employees, as in the case of Factory Acts, or to protect
the consuming public, as in the case of Adulteration Acts, must be
regarded as involving an admission of a genuine antagonism between the
apparent interests of individuals and of the whole community, which it
is the business of society to guard against.

All this legislation is rightly interpreted as a restriction of the
freedom of individual industry under modern methods of production,
required in the public interest. Uncontrolled machine-production would
in some cases force children of six or eight years to work ten hours a
day in an unhealthy factory, would introduce suddenly a host of
Chinese or other "cheap" workers to oust native labour accustomed to a
higher standard of comfort, would permit an ingenious manufacturer to
injure the consumer by noxious adulteration of his goods, would force
wages to be paid by orders upon shops owned or controlled by
employers, would oblige workers to herd together in dens of
infection, and to breed physical and moral diseases which would injure
the body politic. The need of a growing social control over modern
machine-production, in cases where that production is left in the main
to the direction of individual enterprise, is admitted on every side,
though the development of that control has been uneven and determined
by the pressure of concrete grievances rather than by the acceptance
of any distinct theory of public responsibility.

Other limitations upon individual freedom of industry imply a clearer
recognition of the falsehood of the _laissez faire_ position. The
undertaking by the State or the Municipality, or other units of social
life, of various departments of industry, such as the railways,
telegraphs, post-offices, is a definite assertion that, in the supply
of the common services rendered by these industries, the competition
of private interests cannot be relied upon to work for the public
good.

§ 5. The industries which the State either limits or controls in the
interest either of a body of workers or of the consuming public may be
regarded as passing from a private competitive condition to a public
non-competitive condition. If therefore we wish to ascertain how far
and in what directions social control of modern production will
proceed, we shall examine those industries which already exhibit the
collective character. We shall find that they are of two kinds--(1)
industries where the size and structure of the "business" is such that
the protection afforded by competition to the consuming public and to
the workers has disappeared, or is in frequent abeyance, (2)
industries where the waste and damage of excessive competition
outweighs the loss of enterprise caused by a removal or restriction of
the incentive of individual gain. As we have seen in the analysis of
"trusts," these two characteristics, wasteful competition and
monopoly, are often closely related, the former signifying the process
of intense struggle, the object and ultimate issue of which is to
reach the quiet haven of monopoly. Generally speaking, social control
in the case of over-competing industries is limited to legislative
enactments regarding conditions of employment and quality of goods.
Only those industries tend to pass under public administration where
the monopoly is of an article of general and necessary consumption,
and where, therefore, a raising of prices considerably above the
competition rate would not succeed in evoking effective competition.
Since the general tendency of industry, so far as it falls under
modern economies of machinery and method, is either towards wasteful
competition or towards monopoly, it is to be expected that there will
be a continual expansion of State interference and State undertakings.
This growing socialisation of industry must be regarded as the natural
adjustment of society to the new conditions of machine-production. As
under the economies of machine-production the business-unit, the mass
of capital and labour forming a single "firm" or "business," grows
larger in size and more potent in its operations, the social
disturbances which it can occasion by its private activity, the
far-reaching and momentous results of its strain of competition, the
probability of an anti-social exercise of "monopolic" power over the
whole or part of its market-area, will of necessity increase. The
railway and shipping industries, for example, in countries like
England and the United States, have already reached a stage of
industrial development when the social danger arising from an
arbitrary fixing of rates by a line or a "pool" of lines, from a
strike or lock-out of "dockers" or railway men, is gaining keener
recognition every year. The rapidly growing organisation of both
capital and labour, especially in the fundamental industries of coal,
iron, and machine-making, in the machine-transport industries, and the
most highly evolved manufactories, gives to a body of employers or
employed, or to a combination of both, the power at any moment to
paralyse the whole or a large portion of the entire trade of a country
in pursuit of some purely private interest or resentment, or in the
acquisition of some strategical position, which shall enable them to
strengthen their competing power or gain a monopoly. Although the
organisation of masses of capital and of labour may, as is often
urged, make industrial strife less frequent, the effects of such
strife upon the wider public, who have no opportunity of casting a
vote for war or peace, are more momentous. Moreover, as these private
movements of capital and labour proceed, the probability of combined
action between employers and employed in a particular industry, to
secure for themselves some advantages at the public expense, will be
a factor of increasing importance in industrial evolution.

The Trade Union movement and the various growths of Industrial
Partnership, valuable as they are from many points of view, furnish no
remedies against the chief forms of economic monopoly and economic
waste; they can only change the personality and expand the number of
monopolists, and alter the character, not the quantity, of economic
waste. Society has an ever-deepening and more vital interest in the
economical management of the machinery of transport, and this interest
is no whit more secure if the practical control of railways and docks
were in the hands of the Dockers' Union or the Amalgamated Society of
Railway Servants, or of a combined board of directors and trade union
officials, than it is under present circumstances. On the contrary, an
effective organisation of capital and labour in an industry would be
more likely to pursue a policy opposed to the interests of the wider
public than now, because such a policy would be far more likely to
succeed.

§ 6. When it is said that modern industry is becoming essentially more
collective in character and therefore demands collective control, what
is meant is that under modern industrial development the interest of
the industrial society as a whole, and of the consuming public in each
piece of so-called private enterprise, is greater than it was ever
before, and requires some guarantee that this interest shall not be
ignored. Where the industry is of such a kind, and in such a stage of
development, that keen competition without undue waste survives, this
public interest can commonly be secured by the enactment of
restrictive legislation. Where such partial control is insufficient to
secure the social interest against monopoly or waste, State
management, upon a national, municipal, or such other scale as is
economically advisable, must take the place of a private enterprise
which is dangerous to society. This necessity becomes obvious as soon
as the notion of a business as being purely "private" or
"self-regarding" in its character is seen to be directly negatived by
an understanding of the complex social nature of every commercial act.
So soon as the idea of a social industrial organism is grasped, the
question of State interference in, or State assumption of, an industry
becomes a question of social expediency--that is, of the just
interpretation of the facts relating to the particular case. In large
measure this social control is to be regarded, not as a necessary
protection against the monopolic power of individuals, but as
necessary for the security of individual property within the limits
prescribed by social welfare. Modern machine-evolution, as is seen,
permits and encourages the wanton invasion and destruction of forms of
capital by the competition of new savings employed in an anti-social
way. It likewise tends to the frequent destruction of the value of
that labour power which is the sole property of the mass of workers.
"The property which every man has in his own labour, as it is the
original foundation, so it is the most sacred and inviolable."[289]

There are certain wastes of economic power involved in all
competition; there are certain dangers of monopoly attaching to all
private conduct of industry. Collective control deals with these
wastes and dangers, adjusting itself to their extent and character.

§ 7. To the question how far and how rapidly may this extension of
collective control proceed, no more definite answer is possible than
this, that as a larger and larger amount of industry passes into the
condition of the most highly evolved machine-industries of to-day, and
develops along with the corresponding economies, corresponding dangers
and wastes, larger portions will pass under restrictive legislation or
State management.

The evolution in the structure of capitalist enterprise, while it
breeds and aggravates the diseases of trade depression, sweating,
etc., likewise prepares the way and facilitates the work of social
control. It is easier to inspect a few large factories than many small
ones, easier to arbitrate where capital and labour stands organised in
large masses, easier to municipalise big joint-stock businesses in
gas, water, or conveyance. Every legislative interference, in the way
of inspection or minor control, quickens the evolution of an industry,
and hastens the time when it acquires the position of monopoly which
demands a fuller measure of control, and finally passes into the ranks
of public industry.

Thus it would follow that, unless proceeding _pari passu_ with this
evolution there was a springing up or an expansion of other
industries not so amenable to large machine production and therefore
not prone to the dangers and wastes which appertain to it,
collectivism would absorb an ever-increasing proportion of industrial
effort.

§ 8. At present it appears that there are two great classes of
productive work which have not fallen under machine-industry and
capitalism in its typical form. There is that work which machinery is
technically competent to perform, but which it cannot economically
undertake so long as large quantities of very cheap labour are
available. This class comprises the bulk of what are commonly called
the "sweating" trades, the cheap low-skilled domestic workshop labour.
The other class consists of artistic and intellectual work which
cannot be successfully undertaken by machinery. The first of these
classes is universally admitted to comprise cases of arrested
development. The irregular working of the more highly-evolved
industries, the successive supplantation of branches of skilled labour
by machinery, the blind migration of labour from distant parts, keeps
the large industrial centres supplied with a quantity of unskilled and
untrained labour, which can be bought so cheaply that in the lowest
branches of many trades it does not pay the _entrepreneur_ to incur
the initial cost of setting up expensive machinery and the risk of
working it. The social and moral progress of industrial nations
requires, as a first condition of orderly progress, that these cases
of arrested growth shall be absorbed into the general mass of
machine-industry. These problems of "the sweating system," the
unemployed, the pauper class, the natural products of the working of a
system of competition where the competitors start from widely
different lines of opportunity, can never be solved by the private
play of enlightened self-interest, unless that enlightenment take a
far more altruistic form than is consistent with the continuance of
competitive industry. This is the fundamental paralogism of that
school of reformers who find the cure of industrial maladies in the
humanisation of the private employer. A whole class of employers
sufficiently humane and far-sighted to consistently desire the welfare
of their employees (and no fewer than the whole class would suffice,
for otherwise the less benevolent will undersell and take the business
from the more benevolent) would be so highly civilised that they
would no longer be willing to compete with one another so as to injure
one another's business: they would out of pure goodwill organise into
a "monopoly," and working this monopoly for the exclusive interest of
themselves and their employees, rack-rent the consuming public; or if
their benevolence extended to all their customers they would socialise
their business, conducting it for the greatest good of all society.
Such a form of socialised industry, dependent upon the moral character
of perishable individuals, would possess all the weaknesses charged
against State socialism without any of the educative advantages or the
security and stability of that system. The "captain of industry"
remedy is a sentimental and not a scientific one. Once regard
"sweating" as a case of arrested development and the true line of
progress will be seen to lie in the absorption of these backward
industries into the main current of industrial movement, leaving them
to pass through the necessary phases of machine-production and to be
subjected to an increasing pressure of social control until they are
ripe for society to undertake. Then there will remain outside of
capitalist machine-industry only that class of work which is artistic
and therefore individualistic in character.

§ 9. We now stand face to face with the main objection so often raised
against all endeavours to remedy industrial and social diseases by the
expansion of public control. Competition and the zest of individual
gain, it is urged, furnish the most effective incentive to enterprise
and discovery. Assuming that society were structurally competent to
administer industry officially, the establishment of industrial order
would be the death-blow to industrial progress. The strife, danger,
and waste of industrial competition are necessary conditions to
industrial vitality.

How much force do these objections contain in the light of the
information provided by our study of industrial evolution? It should
be recognised at the outset that the economic individualist is not a
conservative, defending an established order and pointing out the
dangers attending proposed innovations. Our analysis of the structure
of modern industry shows the progressive socialisation of certain
classes of industry as a step in the order of events, equally natural
and necessary with the earlier steps by which machine-industry
superseded handicraft and crystallised in ever larger masses with
changing relations to one another. The indictment against social
control over industry is an indictment against a natural order of
events, on the ground that nature has taken a wrong road of
advancement. It is only possible to regard the legislative action by
which public control over industry is established as "unnatural" or
"artificial" by excluding from "Nature" those social forces which find
expression in Acts of Parliament, an eminently unscientific mode of
reasoning.

But though this growing exercise of social control cannot be regarded
as "fighting against the constitution of things,"[290] it may be
considered by those who hold we have no guarantee of the future
development of the human race, as one of the lines of action in which
the advancing enfeeblement of man may express itself: the abandonment
of individual strife in commerce may be regarded as a mark of
diminishing vitality, which seeks immunity from effort and an equable
condition of material comfort, in preference to the risks and
excitement of a more eventful and arduous career. Order will be
purchased at the price of progress: the abandonment of individual
enterprise in industry is part of the decadence of humanity. This is
the interpretation which Dr. Pearson, in his _National Life and
Character_, places upon the socialistic tendencies of the age: the
suppression of competitive industry in order to cure poverty, physical
misery, and social injustice, will produce a society which is
"sensuous, genial, fibreless." The validity of such a judgment rests
upon two assumptions: first, that social control of industry
necessarily crushes the spirit of individual enterprise and checks
industrial progress; second, that extension of State control over
capitalist industry necessarily implies a diminished scope of
individual control in the production of wealth.

The first assumption is open to a number of criticisms which must be
held to greatly modify its force, and which may be summarised as
follows:--

(1) Much individual enterprise in industry does not make for
industrial progress. A larger and larger proportion of the energy
given out in trade competition is consumed in violent warfare between
trade rivals, and is not represented either in advancement of
industrial arts or in increase of material wealth.

(2) History does not show greed of gain as the motive of the great
steps in industrial progress. The love of science, the pure delight of
mechanical invention, the attainment of some slight personal
convenience in labour, and mere chance, play the largest part in the
history of industrial improvements. These motives would be as equally
operative under state-control as under private enterprise.

(3) Such personal inducements as may supply a useful stimulus to the
inventive faculty could be offered in socially-controlled industry,
not merely publicity and honour, but such direct material rewards as
were useful.

Industrial history shows that in modern competitive industry the
motive of personal gain is most wastefully applied. On the one hand,
the great mass of intelligent workers have no opportunity of securing
an adequate reward for any special application of intelligence in
mechanical invention or other improvement of industrial arts. Few
great modern inventors have made money out of their inventions. On the
other hand, the _entrepreneur_, with just enough business cunning to
recognise the market value of an improvement, reaps a material reward
which is often enormously in excess of what is economically required
to induce him to apply his "business" qualities to the undertaking.

(4) The same charges of weakened individual interest, want of
plasticity and enterprise, routine torpidity, are in a measure
applicable to every large business as compared with a smaller. Adam
Smith considered them fatal barriers to the growth of joint-stock
enterprise outside a certain narrowly-defined range. But the economies
of the large business were found to outweigh these considerations. So
a well-ordered state-industry may be the most economical in spite of
diminished elasticity and enterprise.

But while these considerations qualify the force of the contention
that state-control would give no scope for industrial progress, they
do not refute it. The justification of the assumption by the State of
various functions, military, judicial, industrial, is that a safe
orderly routine in the conduct of these affairs is rightly purchased
by a loss of elasticity and a diminished pace of progress. The arts
of war and of justice would probably make more advance under private
enterprise than under public administration, and there is no reason to
deny that postal and railway services are slower to adopt improvements
when they pass under government control.

It may be generally admitted that, as the large modern industries pass
from the condition of huge private monopolies to public departments,
the routine character will grow in them, and they will become less
experimental and more mechanical. It is the nature of machines to be
mechanical, and the perfection of machine-industries, as of single
machines, will be the perfection of routine. Just in proportion as the
machine has established its dominancy over the various industries, so
will they increase in size, diminish in flexibility, and grow ripe for
admission, as routine businesses, into the ranks of state-industry. If
the chief object of society was to secure continual progress in
military arts and to educate to the utmost the military qualities, it
would be well to leave fighting to private enterprise instead of
establishing state monopolies in the trade of war. It sacrifices this
competition, with the progress it induces and the personal fitness it
evolves, in order that the individual enterprise of its members may be
exercised in the competition of industrial arts, inducing industrial
progress and evolving industrial fitness. The substitution of
industrialism for warfare is not, however, understood to imply a
diminution of individual enterprise, but an alteration in its
application.

If, starting from this point of view, we regard human life as
comprising an infinite number of activities of different sorts,
operating upon different planes of competition and educating different
human "fitnesses," we shall understand how the particular phase of
industrial evolution we are considering is related to the wider
philosophic view of life. All progress, from primitive savagedom to
modern civilisation, will then appear as consisting in the progressive
socialisation of the lower functions, the stoppage of lower forms of
competition and of the education of the more brutal qualities, in
order that a larger and larger proportion of individual activity may
be engaged in the exercise of higher functions, the practice of
competition upon higher planes, and the education of higher forms of
fitness.

If the history of past civilisation shows us this, there is an _Ã
priori_ presumption that each further step in the repression of
individual enterprise and in the extension of state-control does not
mean a net diminution in individual activity or any relaxation of
effort in self-assertion, but merely an elevation of the plane of
competition and of the kind of human qualities engaged. This is, in
fact, the philosophical defence of progressive socialism, that human
progress requires that one after another the lower material animal
functions shall be reduced to routine, in order that a larger amount
of individual effort may be devoted to the exercise of higher
functions and the cultivation by strife of higher qualities.

To suppose that the reduction of all machine-industry to public
routine services, when it becomes possible, will imply a net
diminution in the scope of individual self-expression, rests upon the
patent fallacy of assigning certain fixed and finite limits to human
interest and activity, so that any encroachment from the side of
routine lessens the absolute scope of human spontaneity and interest.
If, as there is reason to believe, human desires and the activities
which are engaged in satisfying them are boundless, the assumption
that an increase in the absolute amount of state-control or
routine-work implies a diminution of the field for individual
enterprise is groundless. The underlying motive, which alone can
explain and justify each step in progressive socialism, is the
attainment of a net economy of individual effort, which, when it is
released from exercise upon a lower plane of competition, may be
devoted to exercise upon a higher. If the result of extending social
control over industry were merely to bring about a common level of
material comfort, attended by spiritual and intellectual torpor and
contentment, the movement might be natural and necessary, but could
hardly be termed progress.

But such a view is based upon a denial of the axiom that the
satisfaction of one want breeds another want. Experience does not
teach the decay but the metamorphosis of individuality. Under
socialised industry progress in the industrial arts would be slower
and would absorb a smaller proportion of individual interest, in order
that progress in the finer intellectual and moral arts might be
faster, and might engage a larger share of life. To future generations
of more highly evolved humanity the peculiar barbarism of our age
will consist in the fact that the major part of its intelligence,
enterprise, genius, has been devoted to the perfection of the arts of
material production through mechanical means. If it is desirable that
more of this individual energy should be engaged in the production of
higher forms of wealth by competition upon higher planes, this can
only be achieved by the process of reducing to routine the lower
functions. Higher progress can only be purchased by an economy of the
work of lower progress, the free, conscious expression of higher
individuality by the routine subordination of lower individuality.
Industrial progress would undoubtedly be slower under state-control,
because the very object of such control is to divert a larger
proportion of human genius and effort from these occupations in order
to apply them in producing higher forms of wealth. It is not, however,
right to assume that progress in the industrial arts would cease under
state-industry; such progress would be slower, and would itself
partake of a routine character--a slow, continuous adjustment of the
mechanism of production and distribution to the slowly-changing needs
of the community.

§ 10. A most important misunderstanding of the line of industrial
development arises from a conviction that all production of wealth
embodied in matter tends to pass under the dominion of machinery, that
an increasing number of workers in the future will become
machine-tenders, and that the state-control of machine-industry would
bring the vast majority of individuals into the condition of official
machine-workers. This, however, is by no means a reasonable forecast.
In competitive machine-industry, although it is to the interest of the
individual business to "save" as much labour as possible, the play of
competition causes to be made and worked a much larger quantity of
machinery than is enough to maintain the current rate of consumption,
and thus keeps in the ranks of manufacture a much larger quantity of
labour than is socially necessary. Yet in a typical manufacturing
country like England statistics show that the proportion of the
working population engaged in machine manufactures is not increasing.
If, then, by the gradual elimination of competition in the
machine-industries, the quantity of machine-work were kept down to
the social requirements of the community's consumption, the proportion
of machine-workers would be less than it is, assuming the demand for
machine-made goods continued the same.

But what, it may be said, will become of the increasing proportion of
the workers not required by machinery? will they go to swell
indefinitely the ranks of distributors? Will the number of merchants,
jobbers, speculators, shopkeepers, agents: middlemen of various sorts,
grow without limit? Assuming that the work of distribution were left
to competitive enterprise, and that the quantity and quality of
consumption remained the same as now, this result would seem
necessarily to follow. The labour saved in manufacture would pass, as
it does now, to intensify the competition of the distributive trades
and to subdivide into needlessly small fragments the necessary but
limited amount of distributive work. But these assumptions are not
necessarily correct. If, as seems likely, the increased intensity of
competition forced the growth of strong monopolies in certain
departments of distribution, the anti-social power thus bestowed upon
individuals would necessitate the extension of state-control to them
also. The work of distribution would thus pass into routine-industry
administered by the public for the public interest. Thus the area of
socialised industry would extend until it absorbed one after another
all industries possessing the machine-character and capable of
administration by routine. It might thus appear that, after all, the
forebodings of the individualist would be verified, the work of life
would be reduced to a dull monotonous mechanism grinding out under
bureaucratic sway an even quantity of material comforts for a
community absorbed in the satisfaction of its orderly behaviour.

This goal seems inevitable if we assume that no change takes place in
the quantity and quality of the consumption of the community, that
individual consumers save or try to save the same proportion of their
incomes as now, and apply the portion that they spend to the purchase
of increased quantities of ever-cheapening machine-made goods.

But are we justified in considering it necessary, or even probable,
that consumption will in amount and character remain unchanged? In
proportion as the large industries pass into the condition of
monopolies, whether under private or public control, the area of safe
and profitable-investment for the average "saving" man will be more
restricted. Thus some of the useless "saving" which takes the shape of
excessive plant, machinery, and other forms of capital will be
prevented. In other words, the quantity of consumption will increase,
and this increase will give fuller employment to the machinery of
production and? to the labour engaged in working it and in
distributing the increased product. If, however, increased consumption
merely took the form of consuming increased quantities of the same
material goods as before, the gain would be limited to the rise of
material comfort of the poorer classes, and this gain might be set off
by the congested and torpor-breeding luxury of the better-to-do. A
mere increase in quantity of consumption would do nothing to avert the
drifting of industry into a bureaucratic mechanism.

§ 11. It is to improved quality and character of consumption that we
can alone look for a guarantee of social progress. Allusion has been
already made to the class of artistic and intellectual work which
cannot be undertaken by machinery. It must never be forgotten that art
is the true antithesis of machinery. The essence of art in this wide
sense is the application of individual spontaneous human effort. Each
art-product is the repository of individual thought, feeling, effort,
each machine-product is not. The "art" in machine-work has been
exhausted in the single supreme effort of planning the machine; the
more perfect the machine the smaller the proportion of individual
skill or art embodied in the machine-product The spirit of machinery,
its vast rapid power of multiplying quantities of material goods of
the same pattern, has so over-awed the industrial world that the craze
for quantitative consumption has seized possession of many whose taste
and education might have enabled them to offer resistance. Thus, not
only our bread and our boots are made by machinery, but many of the
very things we misname "art-products." Now a just indictment of this
excessive encroachment of machinery is not based upon the belief,
right or wrong, that machinery cannot produce things in themselves as
fit or beautiful as art. The true inadequacy of machine-products for
human purposes arises from the fact that machine-products are exactly
similar to one another, whereas consumers are not. So long as
consumers consent to sink their individuality, to consume articles of
precisely the same shape, size, colour, material, to assimilate their
consumption to one another, machinery will supply them. But since no
two individuals are precisely similar in physical, intellectual, or
moral nature, so the real needs of no two will be the same, even in
the satisfaction of ordinary material wants. As the dominance of
machinery over the workers tends to the destruction of individuality
in work, obliging different workers to do the same work in the same
way with a premium upon the mere capacity of rapid repetition, in the
same way it tends to crush the individuality of consumers by imposing
a common character upon their consumption. The progressive utilisation
of machinery depends upon the continuance of this indiscriminate
consumption, and the willingness of consumers to employ every increase
of income in demanding larger and larger quantities of goods of the
same pattern and character. Once suppose that consumers refuse to
conform to a common standard, and insist more and more upon a
consumption adjusted to their individual needs and tastes, and
likewise strive to follow and to satisfy the changing phases of their
individual taste, such individuality in consumption must impose a
corresponding individuality in production, and machinery will be
dethroned from industry. Let us take the example of the clothing
trade. Provided the wearing public will consent to wear clothes
conforming to certain common patterns and shapes which are only
approximate "fits," machinery can be used to make these clothes; but
if every person required his own taste to be consulted, and insisted
upon an exactitude of fit and a conformity to his own special ideas of
comfort, the work could no longer be done by machinery, and would
require the skill of an "artist." It is precisely upon this issue that
the conflict of machine _versus_ hand-labour is still fought out. The
most highly-finished articles in the clothing, and boot trades are
still hand-made; the best golf-clubs, fishing-rods, cricket bats,
embody a large amount of high manual skill, though articles of fair
average make are turned out chiefly by machinery in large quantities.
These hand-made goods are produced for a small portion of the
consuming public, whose education and refinement of taste induces them
to prefer spending their money upon a smaller quantity of commodities
adjusted in character to their individual needs, than upon a larger
quantity of common commodities.

Assuming that industrial evolution places an increasing proportion of
the consuming public in secure possession of the prime physical
necessaries of life, it is surely possible that they too may come to
value less highly a quantitative increase in consumption, and may
develop individuality of tastes which require individual production
for their satisfaction. In proportion as this happens, hand-work or
art must play a more important part in these industries, and may be
able to repel the further encroachments of machinery, or even to drive
it out of some of the industrial territory it has annexed. But
although the illustration of the present condition of the clothing
trades serves to indicate the nature of the contest between machinery
and art in the region of ordinary material consumption, it is not
suggested that social progress will, or ought to, expel machinery from
most of the industries it controls, or to prevent its application to
industries which it has not yet reached. The luxury and foppish
refinement of a small section of "fashionable" society, unnaturally
relieved of the wholesome necessity of work, cannot be taken as an
indication of the ways in which individuality or quality of
consumption may or will assert itself, in a society where social
progress is based upon equality of opportunity, and the power to
consume has some just relation to ability and merit. It seems
reasonable to expect that on the whole machinery will retain, and even
strengthen and extend, its hold of those industries engaged in
supplying the primitive needs of man--his food, clothing, shelter, and
other animal comforts. In a genuinely progressive society the object
will be so to order life as to secure, not merely the largest amount
of individual freedom or self-expression, but the highest quality. If
an undue amount of individuality be devoted to the production and
consumption of food, clothing, etc., and the conscious, refined
cultivation of these tastes, higher forms of individual expression in
work and life will be neglected. The just economy of individuality
will therefore relegate certain branches of production to machinery,
in order that the energy saved by such routine-work may be set free
for higher individual endeavour. The satisfaction of the primary
animal wants--hunger, thirst, cold, etc.--are common to all; in these
purely physical demands there is less qualitative difference in
different men; as the needs are the same the consumption will be the
same. The absence of wide individual differences of taste marks out
the commodities for routine or machine-production. As individuals are
nearest alike in their prime physical needs, so, as they gradually
develop higher material wants, and, after these are satisfied,
æsthetic, intellectual, moral wants, their individualism becomes more
and more marked. It is therefore in the most highly developed, or, as
they are sometimes called, the more "artificial" wants of man, that
the diversity of individual nature shows itself most strongly, and
demands a satisfaction peculiar to itself which only art can give. In
a highly evolved society it is likely that many physical needs, and
even some intellectual needs, will be common to all, and will engage
little individual attention. These may be graded as routine wants, and
may be satisfied by machine-made goods. As a society, safely ordered
in the supply of ordinary physical comforts, continued to develop, a
less and less diversity would show itself in the ordinary aspect of
its material civilisation, because the individuality which once found
expression there is raised to a higher plane of activity. The
enrichment and enlargement of human life in such a society would
undoubtedly manifest itself in a greater likeness between the
individual members in the lower modes of life, but the extent of
individual difference in the higher modes would be ever widening. The
object of the levelling in the lower processes of life would be that
higher individual differences might have opportunity to assert
themselves. In a progressive society thus conceived, where
socialisation and individuation grow inseparably related and reacting
on one another, there is evidently no fixed limit to the progress of
machinery. As each higher want is educated, some lower want will drop
into the position of a routine-want, and will pass into the rightful
province of machinery. But though a large proportion of material
commodities would doubtless be made by machinery, it is not signified
that art will be banished from what are commonly called the industrial
arts. On the contrary, art may be in many ways the friend and
co-operator of machinery, the latter furnishing a routine foundation
for the display of individual taste and of individual satisfaction in
the consumer. One of the most hopeful signs of the last few years is
the growing intrusion of art into the machine-industries,--the
employment of skilled designers and executants who shall tempt and
educate the public eye with grace of form and harmony of colour. In
pottery, textile wares, hardware, furniture, and many other
industries, the beginnings of public taste are operating in demand for
variety and ornament. May not this be the beginning of a cultivation
of individual taste which shall graft a fine-art upon each
machine-industry, apportioning to machinery that work which is hard,
dull, dangerous, monotonous, and uneducative, while that which is
pleasant, worthy, interesting, and educative is reserved for the human
agent?

§ 12. Machinery is thus naturally adapted to the satisfaction of the
routine wants of life under social control. The character of
machine-production, as has been shown, is essentially collective. The
maladies of present machine-industries are due to the fact that this
collective character is inadequately recognised, and machinery, left
to individual enterprise and competition, oppresses mankind and causes
waste and commercial instability. In a word, the highest division of
labour has not been yet attained, that which will apportion machinery
to the collective supply of the routine needs of life, and art to the
individual supply of the individual needs. In this way alone can
society obtain the full use of the "labour-saving" character of
machinery, minimising the amount of human exertion engaged in tending
machinery and maximising the amount engaged in the free and
interesting occupations. Engaged in satisfying the steady, constant
needs of society under social regulation, machinery would no longer be
subject to those fearful oscillations of demand which are liable
unforeseen to plunge whole masses of workers into unemployment and
poverty, and to waste an infinite amount of "saving." Where the
fluctuations in consumption were confined to the region of individual
taste, the changes of taste and growing variety of consumption would
furnish the education of the artist, who will acquire skill and
flexibility by freely following and directing the changing tastes of
consumers.

In such a forecast it is of course useless to endeavour to predict
how far art will continue to occupy itself with industry, or how far,
set free by machinery, it will be absorbed in the creation of finer
intellectual or spiritual products, or in what are now termed the fine
arts. This must depend upon the nature of the harmonious development
of human capacities of effort and enjoyment under conditions of
individual freedom, and the interaction of the free development of
individuals in a society founded upon an equality of the material
means of life. The study of the qualitative development of consumption
in modern society is only just beginning to be recognised as the true
starting-point of economic science, for although many of the older
economists did verbal homage to the importance of this branch of
study, it has been reserved for recent thinkers to set about the
work.[291]

§ 13. It is hardly too much to say that the whole of social progress
depends upon the substitution of qualitative for quantitative methods
of consumption. In so far as individuals apply their growing ability
to consume in order to demand increased quantities of the same
articles they consumed before, or flash variety of fashionable goods
in no wise adjusted to individual need or taste, they extend the
dominion of machinery. In so far as they develop individual taste,
delicacy rather than quantity of satisfaction, they give wider scope
to work which embodies conscious human skill and deserves the name of
art.

But there is another bearing of this point of equal significance.
Political economists have a dismal formula called the Law of
Diminishing Returns, which casts a dark shadow upon industrial
progress as it is commonly conceived. The more food and clothing,
fuel, and other material goods we require, the further we have to go
for the material, and the harder it is to get: we must plough inferior
lands yielding smaller crops, we must sink deeper shafts for our coal
and iron. As our population grows ever larger, and this larger number
wants more and more pieces of the earth to feed its machines and to
turn out the increased quantity of goods, the drain upon natural
resources is constantly increasing. The material world is limited; in
time Nature will become exhausted, and, long before this happens, the
quantity of human labour required to raise the increased supply of raw
material in the teeth of the Law of Diminishing Returns will far
exceed the economies attending large-scale machine-production.

This danger will also be found to result entirely from the
quantitative estimate of human wealth and human life.

Confining our view for the moment to that branch of production which
is engaged in providing food, to which the Law of Diminishing Returns
is held to apply with special rigour, we can see without difficulty
how, by a progressive differentiation of consumption, we can mitigate
or even utterly defeat the operation of this law. If the inhabitants
of a country persist in maintaining a single narrow standard of diet,
and use the whole of their land for growing wheat and raising sheep,
not merely do they waste all other fine productive qualities belonging
to certain portions of the cultivated or uncultivated soil, but every
increase in their narrow consumption drives them to worse soil,
obliges them to put more labour into a quarter of wheat or a sheep,
and increases the proportion of their aggregate product which goes as
rent.[292] If, on the other hand, a community cultivates a varied
consumption and seeks to utilise each portion of its soil for whatever
form of food it can grow best, instead of grading its land exclusively
according to its wheat or sheep-raising capacity, it is able to defeat
the "niggardliness of nature" which asserts itself when the community
insists upon a continual extension of the same demands. For land which
may be very bad for wheat-growing or grazing, which may even be "below
the margin of cultivation" for these purposes, may be well adapted for
producing other commodities. A large variety of alternative uses will
enable us to get the largest net amount of utilities out of Nature,
and a community which, in lieu of an extension of demand for the same
commodities, asserts its civilisation in the education of new demands
and a greater complexity in the standard of its comfort, may draw
from the land an indefinite increase of wealth without putting forth
more labour or paying higher rent. It is simply one more example of
the economy attainable by division of labour and specialisation of
function.

§ 14. What applies to food will equally apply to the use of the earth
for providing the raw material of all other forms of material wealth.
A people with growing variety of consumption is ever finding new and
more profitable uses for slighted or neglected capacities of nature.
The social progress of nations must be chiefly determined by the
amount of their intelligent flexibility of consumption. Mere variety
of consumption in itself is not sufficient to secure progress. There
must be a progressive recognition of the true relations, between the
products which can be most economically raised upon each portion of
the soil, and the wholesome needs of mankind seeking the full
harmonious development of their faculties in their given physical
environment. A progressive cultivation of taste for a variety of
strong drinks, though it might provide an increased number of
alternative uses for the soil, and might enhance the aggregate
market-values of the wealth produced, would not, it is generally held,
make for social progress. That nation which, in its intelligent
attainment of a higher standard of life, is able to thoroughly
assimilate and harmonise the largest variety of those products for
which their soil and climate are best adapted, will be foremost in
industrial progress and in the other arts of civilisation which spring
out of it.

The case is a simple one. A mere increase in the variety of our
material consumption relieves the strain imposed upon man by the
limits of the material universe, for such variety enables him to
utilise a larger proportion of the aggregate of matter. But in
proportion as we add to mere variety a higher appreciation of those
adaptations of matter which are due to human skill, and which we call
Art, we pass outside the limits of matter and are no longer the slaves
of roods and acres and a law of diminishing returns. So long as we
continue to raise more men who demand more food and clothes and fuel,
we are subject to the limitations of the material universe, and what
we get ever costs us more and benefits us less. But when we cease to
demand more, and begin to demand better, commodities, more delicate,
highly finished and harmonious, we can increase the enjoyment without
adding to the cost or exhausting the store. What artist would not
laugh at the suggestion that the materials of his art, his colours,
clay, marble, or what else he wrought in, might fail and his art come
to an end? When we are dealing with qualitative, _i.e._ artistic,
goods, we see at once how an infinite expenditure of labour may be
given, an infinite satisfaction taken, from the meagrest quantity of
matter and space. In proportion as a community comes to substitute a
qualitative for a quantitative standard of living, it escapes the
limitations imposed by matter upon man. Art knows no restrictions of
space or size, and in proportion as we attain the art of living we
shall be likewise free.

§ 15. So far the consideration of reformed qualitative consumption has
been confined to material goods. But a people moving along the line of
progress, seeking ever a more highly qualitative life, will demand
that a larger proportion of their energy shall be given to the
production and consumption of intellectual goods.

This world likewise is at present largely under the dominion of
Machinery and a Law of Diminishing Returns. By making of our
intellectual life a mere accumulation of knowledge, piling fact upon
fact, reading book upon book, adding science to science, striving to
cover as much intellectual ground as possible, we become mere
worshippers of quantity. It is not unnatural that our commercial life
should breed such an intellectual consumption, and that the English
and American nations in particular, who have beyond others developed
machine-production and the quantitative genius for commerce, should
exhibit the same taste in their pursuit after knowledge. Pace, size,
number, cost, are ever on their lips. To visit every European capital
in a fortnight, see acres of pictures, cathedrals, ruined castles,
collect out of books or travel the largest mass of unassorted and
undigested information, is the object of such portion of the
commercial life as can be spared from the more serious occupations of
life, piling up bale after bale of cotton goods and eating dinner
after dinner of the same inharmoniously ordered victuals.

Our schools and colleges are engaged in turning out year by year
immense quantities of common intellectual goods. Our magazines,
books, and lectures are chiefly machine-products adjusted to the
average reader or hearer, and are reckoned successful if they can
drive a large number of individuals to profess the same feelings and
opinions and adopt the same party or creed, with the view of enabling
them to consume a large number of copies of the same intellectual
commodities which can be turned out by intellectual machinery, instead
of undergoing the effort of thinking and feeling for themselves. This
danger, connected with the rapid spread of printed matter, is a grave
one. Happily there are visible here also counteracting influences,
forces that tend to individualise intellectual consumption and thus to
stimulate the higher arts of intellectual production. In a progressive
community it will be more fully recognised that it is not sufficient
to induce people to give more time and attention to intellectual
consumption; they must demand intellectual goods vitally adjusted to
their individual needs.

§ 16. To the increased regard for quality of life we must likewise
look to escape the moral maladies which arise from competition. For
what is the cause of anti-social competition? It is the limitation of
quantity. Two dogs are after one bone. Two persons wish to consume one
commodity at the same time. Now, even in material goods, the more
qualitative consumption becomes, and the more insistent each
individual is upon the satisfaction of his peculiar tastes, the
smaller will be the probability that two persons will collide in their
desires, and struggle for the possession of the self-same commodity.
Even in art-objects which are still bounded by matter, among genuine
lovers of art the individuality of each stands out in mitigation of
the antagonism of competition, for no two will have precisely the same
tastes or estimates, or will seek with equal avidity the same
embodiments of art. As we rise to purely intellectual or moral
enjoyments, competition gives way to generous rivalry in co-operation.
In the pursuit of knowledge or goodness the rivalry is no longer
antagonism--what one gains another does not lose. One man's success is
not another's failure. On the contrary, the enrichment of one is the
enrichment of all. Both in the production and the consumption of the
highest goods of Science, Art, and Virtue, social, not anti-social,
motives are the chief stimulus. In the highest forms of consumption,
the practice of the noblest arts of life, the enjoyment of the finest
intellectual and spiritual goods, there is no purely selfish
consumption. For though the highest individuality is then attained,
the enjoyment of one individual requires the enjoyment of others. The
attainment of the highest reaches of knowledge is impossible for the
individual without the constant and increasing aid of other minds and
the inspiring "spirit of the age"; the enjoyment of such knowledge is
in an even wider communication. The practice and enjoyment of the arts
of goodness are necessarily social, because the good life can only be
lived in a good society. Spinoza has summed up the truth in
saying--"The highest good is common to all, and all may equally enjoy
it." So it appears that the highest goods are essentially at once
individual and social, pointing once more the attainment of the higher
synthesis in which the antagonism of the "one" and the "all," which
shows itself in the lower planes of competing effort and enjoyment,
disappears.

§ 17. One necessary condition of this progressive life cannot be
ignored. Human life itself must become more qualitative, not only in
its functional activities, but in its physical basis. The greatness
and worth of a community must be seen more clearly to consist not in
the numbers, but in the character of its members. If the number of
individuals in a society continually increases, no reform in methods
of consumption can prevent the constant increase in the proportion of
human energy which must be put into the production of the prime
material necessaries of physical life which are, and in spite of all
improved methods of treating nature will remain, ultimately subject to
a law of diminishing returns: so, less and less energy can be spared
for the life of varied and delicate consumption, high individuality
and intellectual and moral growth. Professor Geddes has well expressed
the importance of this truth: "The remedy lies in higher and higher
individuation--_i.e._, if we would repress excessive multiplication,
we must develop the average individual standard throughout society.
Population not merely tends to out-run the means of subsistence, but
to degenerate below the level of subsistence, so that without steadily
directing more and more of our industry from the production of those
forms of wealth which merely support life to those which evoke it,
from the increase of the fundamental necessities of animal life to
that of the highest appliances of human culture, degeneration must go
on."[293]

§ 18. One final consideration remains. Modern large-scale industry has
enlarged and made more distinct an unnatural and injurious separation
of the arts of production and the arts of consumption. Work has become
more and more differentiated from enjoyment, and in a twofold way.
Modern machine-industry has in the first place sharpened the
distinction between the "working classes," whose name indicates that
their primary function is to labour and not to live, and the
comfortable classes, whose primary function is to live and not to
labour, which private enterprise in machine-industry has greatly
enlarged. The extremes of these large classes present the divorcement
of labour and life in startling prominence. But since work and
enjoyment are both human functions, they must be organically related
in the life of every individual in a healthy community. It must be
recognised to be as essential to the consumer to produce as for the
producer to consume. The attempt on the part of an individual or a
class to escape the physical and moral law which requires the output
of personal exertion as the condition of wholesome consumption can
never be successful. On the plane of physical health, Dr. Arlidge, in
his book upon _The Diseases of Occupations_, points the inevitable
lesson in the high rate of disease and mortality of the "unoccupied
class" in that period of their life when they have slaked their zest
for volunteer exertion and assume the idle life which their economic
power renders possible. The man of "independent means" cannot on the
average keep his life in his body nearly so long as the half-starved,
ill-housed agricultural labourer, from whose labour he draws the rents
which keep him in idleness. The same law applies in the intellectual
world. The dilettante person who tries to extract unceasing increments
of intellectual or æsthetic enjoyment from books or pictures or
travel, without the contribution of steady, painful intellectual
effort, fails to win an intellectual life, for the mere automatic
process of collecting the knowledge of others for personal consumption
without striving to enlarge the general stock, congests and
debilitates the mind and prevents the wholesome digestion and
assimilation.

The same necessary evil arises from the sharp separation of the
processes of production and consumption in the individual life of the
worker. Industry which is purely monotonous, burdensome,
uninteresting, uneducative, which contains within itself no elements
of enjoyment, cannot be fully compensated by alternate periods of
consumption or relaxation. The painful effort involved in all labour
or exertion should have linked with it certain sustaining elements of
related interest and pleasure. It is the absence of this which
condemns machine-tending from the human standpoint, it is the presence
of this which distinguishes every art. Hence in a progressive society
we must look to see not the abolition of machinery, but the diminution
of machine-tending which attends the growing perfection of machinery,
in order that the arts may be able to absorb a larger share of human
exertion.

The arts of production and consumption will, in the evolution of a
wholesome industrial society, be found inseparable: not merely will
they be seen to be organically related, but rather will appear as two
aspects of the same fact, the concave and the convex of life. For the
justly ordered life brings the identification of life, a continuous
orderly intake and output of wholesome energy. This judgment, not of
"sentimentalism" but of science, finds powerful but literally accurate
expression in the saying of a great living thinker, "Life without work
is guilt, work without art is brutality." Just in proportion as the
truth of the latter phrase finds recognition the conditions which make
"life without work" possible will disappear. Everything in human
progress will be found to depend upon a progressive realisation of the
nature of good "consumption." Just in proportion as our tastes become
so qualitative that we require to put our own spontaneity, our sense
of beauty and fitness, our vital force, into whatever work we do, and
likewise require the same elements of spontaneity and individuality in
all we enjoy, the economic conditions of a perfect society will be
attained.

§ 19. This forecast of the social and industrial goal seems justified
by a thoughtful interpretation of the tendencies visible in the
development of modern industry. How fast may be the progress towards
such an ideal, or how far such progress may be frustrated or impaired
by the appearance of new or the strengthening of old antagonistic
forces, lies beyond the powers of legitimate speculation. The
endeavour to test industrial evolution by reference to the wider
movements of human life brings into prominence two great tendencies
whose operations, attested not dimly by modern history, are in close
accord with the general trend of the development of social and
individual life and the relations subsisting between the two.

As modern industrial societies develop they disclose certain material
wants which are common to all or most members, and are less subject to
fluctuations in quantity or quality of demand than others. These
routine wants, representing that part of consumption which is common,
can be supplied most economically by highly organised machinery and
highly concentrated methods of production. But so long as the
machinery for the satisfaction of the common wants remains outside the
common control, and is worked for the benefit of sections of the
community whose interests conflict, both with one another and with the
general interest, an immense amount of waste and danger arises from
the working of the machinery, and grave social maladies are
engendered. These maladies evoke in the best ordered and most
intelligent communities an increasing pressure of public control. This
public control is strengthened and extended in proportion as the
highly evolved structure of the industry enables its administrators to
exercise powers of monopoly either in relation to the treatment of its
employees, or in relation to the price or quality of the commodities
it supplies to the public. Such industries as develop these economic
powers of monopoly in the highest degree, and in relation to the
supply of prime necessaries or comforts of common life, pass gradually
into the condition of public industries organised for the public good.
It seems likely that all the important machine industries engaged in
satisfying common routine wants will gradually develop the monopolic
characteristics which accrue to large production, and will pass by
degrees through the different phases of public control until they
become merged in public industry.

This so-called socialistic movement in industry represents the growing
cohesiveness of modern societies. At all times there is a strong
natural tendency to supply common wants by common efforts. So long as
the common wants in their wider significance only extend to protection
of the person and of certain forms of personal property, state-work is
confined within these protective limits, and the work of producing
common wealth, so far as it exists, is left to village communities or
other small units of social organisation. As the elements of steady
common consumption grow in number, the common organisation of activity
to supply them will grow, and where the supply has at first been left
to private enterprise, the abuse of power and growing inconvenience of
competition will drive them into public industry. But since the very
_raison d'être_ of this increased social cohesiveness is to economise
and enrich the individual life, and to enable the play of individual
energy to assume higher forms out of which more individual
satisfaction may accrue more and more human effort will take shape in
industries which will be left to individual initiative and control,
the arts in which the freedom of personal spontaneity will find scope
in the expression of physical or moral beauty and fitness and the
attainment of intellectual truth. The infinite variety which these
forms of artistic expression may assume, fraught with the
individuality of the artist, will prevent them from ever passing into
"routine" or "common" industries, though even in the fine arts there
will be certain elements which, as they become part of the common
possession, will become relatively void of individual interest, and
will thus pass into a condition of routine activity. The idea of
continuity in human progress demands this admission. But since each
encroachment of routine into the "finer arts" is motived by a prior
shifting of the interest of the consumer into forms of higher
refinement, there will be a net gain and not a loss in the capacity of
individual exercise in artistic work. In every form of human activity
the progress of routine industry will be the necessary condition of
the expansion of individual freedom of expression. But while the
choice and control of each higher form of "industry" will remain
individualistic, in proportion as the moral bonds of society obtain
fuller conscious recognition, the work of the "artist" likewise will
be dedicated more and more to the service of his fellow-men. Thus will
the balance of the social and individual work in the satisfaction of
human wants be preserved, while the number of those wants increase and
assume different values with the progress of the social and individual
life.

FOOTNOTES:

[289] _Wealth of Nations_, p. 110.

[290] Spencer, _Contemporary Review_, March 1884.

[291] Professor Jevons' work upon this branch of Economics was marred
by an attempt to treat it purely mathematically, that is to reduce
qualitative to quantitative differences--an impossibility. Among
recent writers, Professor Patten, of Pennsylvania University, has made
by far the most important contributions towards a systematic treatment
of the economics of consumption.

[292] Patten's _Premises of Political Economy_, chap. iv.

[293] Professor Patrick Geddes, _Claims of Labour_. Cf. _The Evolution
of Sex_, chap, xx. (Contemporary Science Series: Walter Scott).




INDEX.


Abraham, _Report on Employment of Women_, 315

Adjustment in progressive industry, 351

Agriculture, 32, 41, 102;
  agricultural labour, 333

Andrew, S., _Fifty Years' Cotton Trade_, 297

Apprentices, statute of, 26

Arkwright, 50, 56

Arlidge, Dr., 252, 255, 320, 336, 337, 379

Art in industry, 371-378

Ashley, Professor, _Economic History_, 38


Babbage, _Economy of Manufactures_, 50-51, 236, 249

Baines, _History of Cotton Manufacture_, 23, 37

Baker, _Monopolies and the People_, 128, 134, 139, 147

_Board of Trade Journal_, 241

Balance of trade, 15

Banking, 42

Bertillon, 303

Birtwistle, T., 248

Böhm-Bawerk, _Positive Theory of Capital_, 101, 196.

Booth, Charles, _Labour and Life of the People_, 41;
  _Occupations of the People_, 226, 228, 290

Bowley, A.L., _England's Foreign Trade_, 174

Brassey, _Foreign Work and English Wages_, 265-266

Brentano, _Uber die Ursachen der heutigen Not_, 58;
  _Hours and Wages in Relation to Production_, 78, 91, 270

Burnley, _Wool and Wool-Combing_, 33, 51, 94

Business, evolution of the, 10, 35, 40, 88, 92


Cairnes, J.E., _Logical Method of Political Economy_, 8;
  _Some Leading Principles of Political Economy_, 211

Canada, town population, 331

Canals, 25

Cannan, E., _Production and Consumption_, 214;
  _Decline of Urban Immigration_, 327 (note)

Capital, meaning of, 5;
  fixed, 40;
  growing size of, 92-93;
  excessive forms of, 170, etc.;
  definitions of, 209-215;
  concentration of, 117-122

Capitalism, 4, 40;
  factors in growth of, 73-81, 101

Carding, 57

Cartwright, 58, 75

Census, occupations of the people, 71, 228;
  town population, 328;
  mortality in towns, 334

Chalmers, _Estimate_, 23

Chartered companies, 18

Child-workers, in domestic industry, 32;
  in factory, 297, 307, 319;
  legal protection of, 322-323;
  child mortality, 337

Climate, 73, 109

Clothier, 39, 40, etc.

Collet, 305, 307, 311, 312

Competition, 104, 108, 118, 120, etc.;
  "unfair," 146

Consumption, insufficient quantity, 180, etc;
  progressive, 284; quality of, 368

Concentration of industry, 38, 101

Cooke-Taylor, _The Modern Factory System_, 36, 37, 50, 66, 251-252, 255

Corner, 127, 129

Cotton, 24, 37, 55, 63, 105;
  consumption of, 80;
  machinery, 90, 247;
  statistics, 228;
  spinning labour, 246;
  factory legislation, 322

Cournot, _Recherches sur les Principes Mathématiques de la Theorie
  des Richesses_, 97

Crime in towns, 340

Crompton, 56

Cunningham, _History of English Industry_, 14, 19, 42, 55;
  _Uses and Abuses of Money_, 236, 251

Custom, in women's industries, 311


Decentralisation, 345

Defoe, _Tour_, 25, 28, 32, 33, 38, 40

Depression of trade, 171, 206, etc.

Dilke, Lady, 301 (note)

Differentiation, 106

Diminishing returns, law of, 374

Dodd, C.S.T., _Ten Years of the Standard Oil Trust_, 130, 144

Domestic industry, 35, 69, 78

Dress trades, 293, 294

"Driving," 248, 249


Economy of competitive power, 118;
  of high wages, 261-286

Ellison, T., _History of the Cotton Trade_, 76, 228

Europe, growth of towns, 329


Factor, 41

Factory, 37, 39, 57;
  system, 50, 319, 320;
  legislation, 321-323

Fairs, 30, 105

Foreign trade, in England, 13, 73;
  Europe, 20, 106

Foxwell, H.S., _The Claims of Labour_, 341

Foundational industries, 102

France, English trade with, 16;
  machine-development, 74;
  employments, 233;
  town population, 328, 335;
  treaty, 63

Free trade, 63, 79, 352-354


Gas-tar, 53

Geddes, Professor Patrick, _The Evolution of Sex_, 379;
  _The Claims of Labour_, 379

Germany, 79;
  cotton trade in, 77-78, 81;
  town population, 329

Giffen, R., _Essays in Finance_, 175

Gould, 272, 284

Gunton, G., _The Economic and Social Aspect of Trusts_, 138, 149, 153;
  _Wealth and Progress_, 271, 309

Guyot, Yves, _Principles of Social Economy_, 219


Hargreaves, 56

Halifax, 31, 33, 41, 301 (note)

Hearn, _Plutology_, 211

Hodge, evidence before House of Lords, 57

Holland, trade of, 16, 17, 26;
  towns in, 327


Immigration, 19, 326-331

India, 108, 270, 280

Industrial organism, 11, 20, 105

International trade, 14, 75

Invention, "heroic" view of, 57;
  by small increments, 58-59

Iron trade, 23, 28, 72, 84;
  growth of, 64-66


James, _History of Worsted Manufacture_, 36

Jenks, J.W., 137, 150

Jevons, W.S., _Theory of Political Economy_, 185, 209, 373

Joint-stock company, 42, 121, 353


Kay, fly-shuttle, 56

Keynes, _Scope and Method of Political Economy_, 212

King, Gregory, 22, 72


Labour organisations, 152, 317, 357

Lancashire, 29, 55, 81, 111, 183, 184, 270, 297, 314

Leeds, 31, 41

Levasseur, M.S., _La Population Française_, 233, 335

Levi, Leone, _Work and Pay_, 222

Linen manufacture, 24, 63

Lloyd, H.D., 153

Localisation of industry, 109, 111-115

Lombe, 55, 61, 68

Longstaff, _Rural Depopulation_, 329;
  _Studies in Statistics_, 331


Machinery, place of, in modern industry, 6;
  definition of, 45, etc.;
  evolution of, 60;
  machine-making, 66, 67;
  laws of application, 68-70;
  relation to trade depression, chap. vii.;
  productivity of, 173;
  effects on demand for labour, chap. viii.;
  effects on character of labour, chap. ix.;
  education of, 257;
  gain to workers from, 281;
  machine-goods, 287;
  social control over, 355;
  economic limits of, 369;
  intellectual, 376

Macpherson, _Annals of Commerce_, 12, 13, 20, 23, 32

Mackenzie, _Introduction to Social Philosophy_, 349

Malthus, _Principles of Political Economy_, 210

Market, 10, 96, 99; towns, 30

Marsden, _Cotton Spinning_, 297

Marshall, _Principles of Economics_, 5 (note), 29, 96, 97, 211,
  221 (note), 236, 245, 251, 254, 259, 337

Marx, _Capital_, 45, 46, 66, 244

Middleman, 41

Mill, J.S., _Principles of Political Economy_, 185, 189-191, 197,
  210, 289

Mill, James, _Elements of Political Economy_, 210

Money, 7, 97, 98

Monopolies, 89, 124, 356;
  economic powers of, chap. vi.;
  monopoly-prices, 156, etc.;
  monopoly wages, 299

Morrison, _The Study of Crime_, 340

Motor, 45, 66, 67

Mulhall, _Dictionary of Statistics_, 251


Navigation, risks of, 14;
  acts, 17

Newsholm, _Vital Statistics_, 334

Nicholson, J.S., _Effects of Machinery on Wages_, 235, 238, 239, 249


Over-consumption, 215-219

Over-production, 169, 171;
  economic diagnosis of, 176-190

Over-crowding, 344

Owen, Robert, 263


Parasitic industries, 113

Patten, S.N., _Theory of Dynamic Economics_, 104, 251, 373;
  _Premises of Political Economy_, 374

Physiocrats, 261

Playfair, Sir L., 53, 170, 173

Population, English, 22, 77;
  statistics of, 326-332;
  population question, 378

Porter, _Progress of the Nation_, 62, 63, 77, 105, 129, 226, 250

Portugal, English trade with, 16

Potter, _The Co-operative Movement_, 129

Power, 38

Price, Bonamy, _Practical Political Economy_, 211, 215

Prices, fall of, 285;
  fluctuations of, 176

Protection, 18, 77, 79

Publicity in business, 353


Railways, comparative statistics, 82, 139, 140, 112, 174, 231, 232, 347

Ravenstein, _Statistical Journal_, 327

Retail trade, 114, 115, 229;
  multiplication of retailers, 288

Ricardo, D., 210

Ring-spinning, 127

Robertson, J.M., _Fallacy of Saving_, 187

Rogers, Thorold, _Political Economy_, 211, 236

Ruskin, J., _Unto this Last_, 199

Russia, 73, 79, 270


Saving, analysis of, 185-190, 198-201

Schoenhof, _Economy of High Wages_, 81, 275

Schulze-Gaevernitz, _Der Grossbetrieb_, 24, 29, 54, 55, 70, 76,
  78, 81, 108, 111, 247, 250, 267-270, 276;
  _Zum Socialen Frieden_, 91

Scrivener, _History of Iron Trade_, 28, 52, 64, 74

Secondary industries, 103

Shaftoe, 224

Sheffield, 29

Sherman, R., _The Standard Oil Trust_, 130, 132

Shipping, 83, 173, 233

Sidgwick, _Principles of Political Economy_, 185, 211

Silk trade, 23, 55, 61-63, 238, 240

Smart, Dr., _Women's Wages_, 309, 315

Smith, Adam, _Wealth of Nations_, 11, 18, 26, 30, 32, 43, 63,
  185, 209, 255, 262, 359, 363

Smith, _Memoirs of Wool_, 12, 24, 35, 41, 262

Socialism, 356-361;
  in relation to competition, 364, 365;
  in relation to individualism, 370, etc.

Specialisation, local, 28, etc., 33, 93

Spencer, H., _Principles of Sociology_, 106, 362

Spinning, 56, 57;
  statistics of, 79, 268, 269;
  ring-spinning, 296, 297

Spinoza, 378

Staffordshire, 29

Standard Oil Trust, 131-137, 144

_Statistical Abstract_, 90

Steam power, 85, 86

Supply and demand, 68, 162-166;
  applied to invention, 59

Sweating 286, 307, 310, 318, 360, 361

Sympathy in trades, 104

Syndicates, 89, 126, 128


Textiles, protected, 17;
  domestic industry, 32, 54, 68, 112;
  statistics, 228, 296;
  wages, 242, 316;
  men and women in, 292, 303

Towns, as machine-products, 324, etc.;
  growth of town populations, 326-332;
  mortality in, 334;
  physique in, 336;
  intelligence in, 338;
  morals in, 339, 340

Toynbee, _The Industrial Revolution_, 24, 42, 79

Trade unions, 357;
  among women, 313, 317

Transport, machinery of, 173, 325;
  monopolies in, 139, 140;
  cheapening of, 347

Truck, 152, 346

Trust, 126, 141;
  definition of, 130, 131;
  Standard Oil, 131-137;
  conditions of, 139 etc.;
  economic power of, chap. vi.


Under-consumption, 182, etc.

Unemployment, 241

United States of America, 75, 76, 81, 91, 93, 130, 140, 141, 172, 231,
  269, 274, 275, 296;
  colonial policy, 67;
  women's wages in, 306 (note), 308, 309;
  growth of town life, 330

Ure, _History of the Cotton Manufacture_, 36, 37, 55, 63, 64, 77, 79;
  _Philosophy of Manufactures_, 258, 262, 263, 274


Wade, _Fibre and Fabric_, 296

Wages, "natural," 261;
  economy of low, 264, 298;
  economy of high, 266-275;
  women's, 299, etc.

Walker, F., _Political Economy_, 211

Waste, utilisation of, 52

Watch-making, 94, 96, 301 (note)

Watt, 65, 75

Weaving, 32, 56;
  power-loom, 63;
  survival of hand weaving, 70, 236;
  comparative statistics of, 81, 268, 269;
  labour in weaving, 248, 276;
  women and children in, 297, 300

Webb, S., _Economic Journal_, 298, 300

Wells, D.A., _Contemporary Review_, 91, 171, 173, 254, 296

Women, employment of, 259, 290-321

Woollen trade, 23, 26, 34, 54-57, 61, 73;
  report of committee on manufacture 39;
  statistics for Great Britain, 90

Working classes, condition of, 289, 379;
  legal protection of, 322, 323

Wright, Carroll D., _Report on Industrial Depressions_, 171, 224


Yeats, _The Growth and Vicissitudes of Commerce_, 72, 74;
  _The Golden Gates of Trade_, 106, 109

Young, Arthur, Tours, 22, 25, 39, 262, 326




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The Makers of British Art.

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Edited by

James A. Manson.

Illustrated with Photogravure Portraits; Half-tone and Line
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_Square Crown 8vo, Cloth, $1.25 net._

Nothing in the social history of the later Victorian era was more
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=ROMNEY=, GEORGE. By Sir HERBERT MAXWELL, BART., F.R.S., M.P.

_IN PREPARATION._

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NEW IDEAS ON BRIDGE.

BY ARCHIBALD DUNN, JUN.

The universal reception given to _Bridge, and How to Play it_, is a
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CONTENTS:--Common-sense in Bridge Declarations--Science of Bridge
Declarations--Doubling and Re-doubling--Some Points of the
Game--Bridge _v_. Whist--Chaos of Bridge--Great Imperfection of
Bridge.




The Contemporary Science Series.

Edited by Havelock Ellis.

_12mo. Cloth. Price $1.50 per Volume._

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XIII. THE EVOLUTION OF MARRIAGE. By Professor LETOURNEAU.

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XVI. THE MAN OF GENIUS. By Prof. LOMBROSO. Illustrated.

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XVII. THE HISTORY OF THE EUROPEAN FAUNA. By R.F. SCHARFF, B.Sc, Ph.D.,
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in the School of Anthropology, Paris.

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CONDITION OF SOME BRANCHES OF METEOROLOGICAL SCIENCE. By FRANK WALDO,
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Illustrations.

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    that we have seen."--_Daily Telegraph_ (London).

XXII. THE GERM-PLASM: A THEORY OF HEREDITY. By AUGUST WEISMANN,
Professor in the University of Freiburg-in-Breisgau. With 24
Illustrations. $2.50.

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    which has so thoroughly handled the matter treated by him, or
    has done so much to place in order and clearness the immense
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    to light so many new facts and considerations bearing on the
    subject."--_British Medical Journal._

XXIII. INDUSTRIES OF ANIMALS. By E.F. HOUSSAY. With numerous
Illustrations.

    "His accuracy is undoubted, yet his facts out-marvel all
    romance. These facts are here made use of as materials
    wherewith to form the mighty fabric of
    evolution."--_Manchester Guardian._

XXIV. MAN AND WOMAN. By HAVELOCK ELLIS. Illustrated. Second Edition.

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    write. His book is a sane and impartial consideration, from a
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XXV. THE EVOLUTION OF MODERN CAPITALISM. By JOHN A. HOBSON, M.A.

    "Every page affords evidence of wide and minute study, a
    weighing of facts as conscientious as it is acute, a keen
    sense of the importance of certain points as to which
    economists of all schools have hitherto been confused and
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    indication of his [Mr. Hobson's] personal sympathies."--_Pall
    Mall Gazette._

XXVI. APPARITIONS AND THOUGHT-TRANSFERENCE. By FRANK PODMORE, M.A.

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    thought-transference is a real thing, though not perhaps a
    very common thing, he certainly shows."--_Spectator._

XXVII. AN INTRODUCTION TO COMPARATIVE PSYCHOLOGY. By Professor C.
LLOYD MORGAN. With Diagrams.

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    shape in a mind previously informed with biological
    science.... Well written, extremely entertaining, and
    intrinsically valuable."--_Saturday Review._

XXVIII. THE ORIGINS OF INVENTION: A STUDY OF INDUSTRY AMONG PRIMITIVE
PEOPLES. By OTIS T. MASON, Curator of the Department of Ethnology in
the United States National Museum.

    "A valuable history of the development of the inventive
    faculty."--_Nature._

XXIX. THE GROWTH OF THE BRAIN: A STUDY OF THE NERVOUS SYSTEM IN
RELATION TO EDUCATION. By HENRY HERBERT DONALDSON, Professor of
Neurology in the University of Chicago.

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    executed his work with much care, judgment, and
    discrimination."--_The Lancet._

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DESIGNS. By Professor ALFRED C. HADDON. With 130 Illustrations.

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124 Illustrations.

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MARIE DE MANACEÏNE (St. Petersburg). Illustrated.

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M.D., F.R.C.P. ED., F.R.S. ED. With a large number of Illustrations
and Diagrams.

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    phenomenal."--_British Medical Journal._

XXXVIII. THE PSYCHOLOGY OF RELIGION. AN EMPIRICAL STUDY OF THE GROWTH
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XXXIX. THE CHILD: A STUDY IN THE EVOLUTION OF MAN. By Dr. ALEXANDER
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in the University of Pennsylvania.

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CENTURY. By KARL VON ZITTEL.

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XLIII. THE MAKING OF CITIZENS: A STUDY IN COMPARATIVE EDUCATION. By
R.E. HUGHES, M.A. (Oxon.), B.Sc. (Lond.).




IBSEN'S DRAMAS.

Edited by William Archer.

12mo, CLOTH, PRICE $1.25 PER VOLUME.


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to reveal themselves. There never was such a mirror held up to nature
before: it is too terrible.... Yet we must return to Ibsen, with his
remorseless surgery, his remorseless electric-light, until we, too,
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generation."--_Academy._

"We have seldom, if ever, met with a translation so absolutely
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New York: CHARLES SCRIBNER'S SONS.


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