Front Page Titles (by Subject) CHAPTER II: The Distribution of Industries in the United States - Socialistic Fallacies
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CHAPTER II: The Distribution of Industries in the United States - Yves Guyot, Socialistic Fallacies 
Socialistic Fallacies (London: Cope and Fenwick, 1910).
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The Distribution of Industries in the United States
The management of the industrial census of the United States was entrusted to Mr. S. N. D. North, who is now Director-General of the Census, and it was conducted with all possible care. As a man who is convinced that the professional virtue of the statistician, like that of every man who devotes himself to scientific research, consists in the ascertainment of the truth, he loyally points out the difficulties and uncertainties presented by his labour in the important document entitled, “Plan, method and scope of the twelfth census of manufactures.” (vol. vii).
In former efforts the definition of an establishment was left to the discretion of each agent who contributed to the census. The census of 1900 makes a distinction between Manufacturers and Hand Trades. Mr. North sets up the following criterion by which to distinguish them—he treats every establishment which produces uniform types as belonging to the class of Manufacturers, while those in which every object has a special character are classed as Hand Trades. The maker of readymade clothes falls within the class of manufacturers, while the tailor who makes clothes to order falls within that of individual labour or hand trade. The same distinction is made between the manufacturer of wheels, axles and hoods, and the putting them together in small shops at the places where they are used, according to the convenience of the purchaser. The building trades are included in the Hand Trades because what they produce is for local consumption according to the taste of the building-owner, and their operations are distributed among a number of trades. Dentists, to the number of 3,214, who make artificial teeth, had originally been classed by the census of 1900 with manufacturers, but they protested energetically that their occupation was not mechanical but personal, and they claimed to rank among the “professionals” in the category of the “liberal professions.”
The relations between hand trades, shops and workshops, and retail shops are very close. In 1900 the agents of the census were instructed to pay no attention to restaurants and cafés, funeral undertakers, retail druggists, butchers, laundrymen, carpet beaters, dentists, tailors, milliners, dressmakers, hairdressers, etc. Some of the agents conformed to their instructions, others interpreted them in various ways, so that if the number of hand trades referred to in the census is uncertain, it is undoubtedly very much below the actual number.
It is not known how they are dealt with in earlier census. Under their separate classification in the census of 1900, they are taken as numbering 215,800 establishments. For the census of 1840, 1850, 1860 and 1870 the agents were not to refer to any establishment whose total profits did not exceed $500. In 1890 the returns which deal with smaller incomes than this are disregarded, but what accuracy does this limitation carry with it? Every small trader gives the figure he pleases, generally a smaller one than that of his actual income, for fear of the revenue.
In 1900, 127,419 industrial establishments out of the 640,000 referred to in the census lists fell below the 500 dollar limit. In order to preserve a comparison with the earlier census, they are dealt with separately. But the word “establishment” does not represent units of the same degree; a factory employing 7,000 workmen ranks as one “establishment” as well as a workshop employing five.
The distribution of industries according to the census of 1900, is as follows:—
Leaving out of account classes (b), (d) and (e) the figures for 1850 to 1900 are:—
But it is obvious that the number of small establishments under the 500 dollar limit and of hand trades is less than it is in fact, and that the difficulty and expenses of including them in the census will cause them to be eliminated, a measure which is formally suggested by Mr. North.
In his analysis of the census, Mr. North says: “It is obviously impossible to determine from the census dates how the actual number of establishments engaged in productive industry in the United States has been affected by the consolidation of industries and the concentration of employment in large mills and factories.” Undoubtedly small establishments are closed; one sees deserted mills on the river banks. Changes in the place of production and of destination involve disturbances to the advantage or disadvantage of particular localities. New establishments spring up in the same industry every day. Many employers, instead of renewing their old establishments, put up entirely new ones. Nevertheless the number of establishments, in fact, increases in every one of the States of the Union.
Table XI. gives us the number of existing establishments and the total number of new ones opened in 1900:—
Mr. North, in putting forward this table, further states that some of the agents of the census did not exercise sufficient care in the collection of their information. Nevertheless, we gather that the new enterprises opened in 1900 represent 8 or 9 per cent. of the total existing enterprises, and that there is an increase without exception in every industry as well as an increase in every State of the Union.
Table XII. gives us the number of establishments and their output, classified according to the nature of their ownership. The 512,254 are distributed as follows:—
The number of establishments owned by individuals represents 72.8 of the total, i.e., nearly three-fourths; of this number 183,500, or nearly one half, were engaged in hand trades. Their output represents 20.6 per cent. of the total, and the average output of each establishment is $7,176. Firms with two or three partners represent 18.9 per cent. of the total, with an output of 19.7 per cent. These two forms of establishment therefore constitute 91.7 per cent. of the total number, with an output of 40.3 per cent. Co-operative societies may be disregarded, their number as well as their output being insignificant.
Limited companies, which represent 8 per cent. of the number of establishments, produce 59.5 per cent. of the output.
The four great industries which are concerned with foodstuffs, textiles, iron and steel, and lumber are primarily represented by limited companies. Nevertheless in the cotton trade 72.8 per cent. of the establishments are owned by individuals or private firms; in the silk trade 27.3 per cent. are owned by individuals and 31.9 by firms, so that only 40.8 per cent. are owned by companies; similarly in the hosiery and lace trade 38.3 per cent. are owned by individuals and 27.4 per cent. by firms.
In the iron and steel industries, only 4,843 establishments out of 13,896, or 34.9 per cent., are owned by companies; but they produce $1,508,493,000 or 84 per cent. of the total output of $1,793,490,000.
In the timber trade, 28,470 establishments are owned by individuals, 13,906 by firms, and only 4,675 by companies, the value of the output of the first two classes being 521 million dollars and that of the third 508,383 millions.
Of the 16,989 establishments in the leather trade, 12,906 are owned by individuals, 2,990 by firms, and 1,091 by companies. The output of the latter is $257,808,000, that of the firms $208,571,000. The census does not state the output of the establishments owned by individuals.
The paper and printing trades comprise 26,747 establishments, of which 16,332 are owned by individuals, 5,682 by firms and only 4,490 by companies. The output of the first two classes is 233 million dollars out of a total of 606 millions, or 38 per cent.
The manufacture of wood pulp is almost entirely in the hands of companies; it is otherwise in the case of printing works and periodical publications.
The liquor trade numbers 7,861 establishments, of which 1,333 are owned by companies, with an output of 305 million dollars, or 81 per cent. of a total of 425 millions.
The number of establishments in the chemical industries includes 2,206 companies out of a total of 5,444, with an output of 450 million dollars, out of a total of 553 millions.
In the pottery and glass trades, the small establishments predominate, 8,760 being owned by individuals, 3,890 by firms and only 2,200 by companies, out of a total of 14,800. The output of the companies is $157,336,000, or 53 per cent. of the total output of $293,564,000.
In the metal trades, other than iron and steel, out of 16,300 establishments there are 10,060 owned by individuals and 4,167 by firms. The census does not state the output of the privately-owned establishments, but the companies produce 578 million dollars out of an estimated total output of 749 millions.
Of 15,520 establishments dealing with tobacco, 12,800 are owned by individuals, 2,080 by firms, and 358 by companies, producing 128 million dollars, or 45 per cent. of a total of 283 millions.
Carriage builders and wheelwrights, including builders of railway waggons, number 10,113 establishments, of which 2,283 are companies producing $430,885,000 out of a total of 508 millions. The astonishing thing is not that these 2,283 companies have an output of 84 per cent. of the total, but that there should still be more than 7,000 establishments owned by individuals or by firms. Anyone possessed by the idea of concentration would imagine that there was only one waggon builder, Pullman, in the United States. It is to be observed that there are competitors.
Shipbuilding comprises 1,116 establishments, of which 151 are companies with an output in 1900 of $55,571,000 out of a total of $74,578,000.
Of the miscellaneous industries, numbering 29,479 establishments, 4,750 are owned by companies with an output of 641 million dollars out of a total of 1,004 millions.
The hand trades only number 2,690 establishments owned by companies out of a total of 215,800, with an output of $100,646,000 out of a total of $1,183,615,000, but, as Mr. North explains, a considerable number of these establishments are unknown, so that their output is still more decidedly an unknown quantity.
Marx' theory of concentration premises a decrease in the number of establishments. Now out of seventeen classes of industry, grouped without refining upon the character of an establishment in 1850 as compared with 1900, we find that there has been a decrease in only five—agricultural implements, boots, tobacco, woollens and worsteds, and, to an inconsiderable degree, cotton. In every other instance there has been a concurrent increase in the number of establishments, and in the output of each, except in the case of worsteds. According to Marx and his followers, all industry is bound to become concentrated in a small number of establishments. The worsted industry presents a phenomenon of a precisely opposite character. The number of establishments increases, but the number of employees per establishment decreases. In 1850 there were only three, each with a capital of 35 per cent. more than the capital of each of the existing establishments, and a staff which is more numerous by 60 per cent.
Mr. North puts forward a table (p. lxxii.) of sixteen industries. I take the two extreme periods, 1850 and 1900. This is what we find.
In the twelve other industrial classes we see the extent of the establishments growing larger, while their capital and the number of their employees increases as well as their output, but so far from establishments, which existed in 1850, having monopolised production, they have stimulated competition, since we find a greater number of establishments in 1900 than in 1850. The industries which employ the largest number of workmen per establishment are those which already employed the greatest number in 1850, such as the woollen trade, the metal trade, and the cotton and cloth factories.
According to Table XXXIV. (p. civ.) the total number of wage-earners is:—
Dividing this total by 640,000, the number of establishments, we have 8.90 per establishment. Deducting the 127,000 establishments with an output of less than $500, we have 5,705,000/513f000 = 11 workmen and clerks for each establishment.
While in the eyes of those who only judge by appearances the whole of the industries of the United States are concentrated in a few gigantic establishments, the average number of wage-earners—clerks and workmen—is 11 per establishment, after eliminating the quite small ones and including the trusts.
The total number of wage-earners—clerks and workmen—is distributed among the different establishments as follows:—
In the 215,814 hand trades, 68,800 employ no hands; 106,000 employ from 1 to 5; 32,000 employ from 5 to 20; and 7,700 employ more than 20. The latter include the building trade and its allied trades. In the manufacturing industries properly so called, there were 41,700 establishments out of 246,000 whose owners employed no workmen at all.
Of the 443 establishments employing more than 1,000 wage-earners, the class of textile industries contains 120, of which the one with the greatest number of workmen is a cotton-mill in New Hampshire, employing 7,268.
The second class of those in which each establishment employs the greatest number of workmen is the metal trades, in which 103 employ more than 1,000. We find one in Ohio with more than 7,400; two in Pennsylvania, which includes Pittsburg, with more than 5,800 and 4,537 respectively; one in Massachusetts with 5,190, and another in Illinois with 5,119.
If we add to these establishments employing more than 1,000 workmen, the 245 others which are distributed among various classes, we find a total of 468 employing more than 1,000 workmen. There are only a few isolated ones which exceed 7,000.
So few arguments in favour of the theory of the concentration of industries can be drawn from the industrial census of the United States, that the lamented Mr. Edward Atkinson finds in it a tendency to individualism,1 a result at which he arrived by supplementing the results of the census by the industrial census of the State of Massachusetts. This is the State which contains the greatest number of industrial establishments owned by limited companies. It also contains a much larger proportion of textile establishments than the other States; they are 438 in number, and employ on an average 322 persons. But the total of 250 classes of industry in Massachusetts comprises 29,180 establishments, each of them employing on an average 17 persons, including women and children.
In the State of Pennsylvania, which includes the Baldwin locomotive works with an average number of 18,000 workmen, and Pittsburg with its blast furnaces and steel works, the average is 14.06; in the State of New York the average is only 10.79, and we have seen that for the whole of the United States it is 10.50 for workmen and 11 for workmen and clerks combined.
And yet the emigrants, ordinary workmen who arrive at the rate of a million per annum, present the great industries with a supply of labour ready to hand; and, in fact, Mr. Atkinson pointed out that in a cotton mill in Massachusetts, with which he was familiar, the 2,000 operatives of either sex belonged to sixteen different nationalities. But had they taken away work from the American workman? By no means, for the daughters of the agricultural labourers who had previously been employed in the cotton mills select occupations of a higher order, and leave the mills to the new-comers. They have risen to a higher sphere in the scale of occupations.
Possibly some of the displaced workmen have opened a workshop on their own account, for what is it that nearly all the large establishments supply? They supply manufactured products which have to pass through a workshop before they reach the consumer. The tanner works, not for the public, but for the shoemaker and the saddler; the cloth manufacturer works for the tailor and the upholsterer. The element of individual labour, which requires men and women with an awakened spirit, an observant and accurate eye, and a skilful hand, will not cease to grow in proportion as the tastes of the consumer become refined and his purchasing power increases.
We may therefore conclude that:—
Despite these gaps, which tend to underrate the apparent importance of the smaller industries, these industries are distributed among a number of establishments which is sufficiently considerable to cause the whole of the establishments, large and small, taken together, to employ an average of only eleven wage-earners, including both clerks and workmen.
Report No. 57 of the American census, entitled “Census of Manufacturers, 1905,” was published in 1907. It deals in fact with the year 1904. Between 1899 and 1904 there was an astonishing explosion of activity in the United States. This is the period which witnessed the genesis of the great trusts. Was the new census of a nature calculated to invalidate the foregoing conclusions? I devoted myself with curiosity to an examination of this question.
To begin with, I gather from Table No. 2 that the number of establishments rose from 512,000 in 1900 to 533,000 in 1905. The number, instead of decreasing, has increased. This first indication is not an indication of concentration. But Mr. S. N. D. North, the Director of the Census, explained in 1900 that the enumeration of small establishments presented considerable difficulties. In 1900 the agents had already been instructed not to include butchers, laundrymen, tailors, milliners, dressmakers, hairdressers, etc., while undertakings whose output was estimated as less than $500 were also excluded. I foresaw that all the small establishments whose inclusion occupied much time and was onerous and not easily controlled, would be omitted, and although the figure of 533,000 occurs in the census of 1905, it really concerns itself with only 216,000 undertakings. (Table I).
Mr. North says that a comparison of these establishments with those of a similar nature included in the census of 1900, yields the result that the number of 207,500 in 1900 has increased to 216,200 in 1905, or an increase of 4.2 per cent.—a fact which is not in accordance with the alleged phenomenon of concentration. Table IX. gives us the position of 14 classes of industrial establishments in 1900 and in 1905. In eight classes the number has increased by 14,500.
In six classes the number has decreased by 5,500.
This shows a total increase of 9,000. We have included shipbuilding among the classes in which the number of establishments has declined; the decrease is only one of ten units, of whose size we are ignorant. The figures, therefore, show that the development of industry in the United States has not contracted them within a small number of establishments from 1900 to 1905 any more than in the preceding period. I may add that Table XVI., dealing with textiles, shows a larger figure for 1905 than for 1900, the manufactures included being cotton, wool, silk, hosiery, linen, hemp, and jute. The figures are 4,312 in 1900 and 4,563 in 1905. Blast furnaces suffered a slight decrease, from 668 to 605, but other metallurgical establishments increased from 215 to 443.
The number of industrial establishments has notdecreased, so that the phenomenon of the concentration of industries has not manifested itself in the United States in the period from 1900 to 1905.
The metallurgical industry is one of the most highly concentrated. The figures for blast furnaces and rolling mills are as follows:—
Now, comparing these various elements in 1890 and in 1905, we find that capital has increased 125 per cent. and output 100 per cent. In 1890 output exceeded capital by more than 19 per cent., in 1905 it was 3 per cent. less. The value of raw material as compared with output has remained constant at 68 per cent. In relation to the total output, wages paid to workmen were 18 per cent. in 1890 and 15 per cent. in 1905. The number of workmen has increased by 63 per cent. and the amount of wages by 78 per cent. Compared with the number of workmen, the latter figure shows an increase of 15 per cent.
Taking workmen and clerks together we find that their wages were 19 per cent. in relation to output in 1890 and 17 per cent. in 1905. Their numbers have increased by 70 per cent. and the amount of their wages by 93 per cent.
Despite Mr. Carnegie's United States Steel Corporation, the number of establishments has re mained much about the same. Its promoters claimed that it “controlled” 82 per cent. of the metallurgical output of the United States; it does not at present represent half.
The number of industrial establishments in the United States has not decreased; the phenomenon of the concentration of industries, according to Karl Marx' formula, has not, therefore, manifested itself in that country.
See his “Facts and Figures, the Basis of Economic Science,” 1904.