Front Page Titles (by Subject) BOOK IV: THE AGENTS OF PRODUCTION. Land, Labour, Capital and Organization. - Principles of Economics (8th ed.)
The Online Library of Liberty
A project of Liberty Fund, Inc.
BOOK IV: THE AGENTS OF PRODUCTION. Land, Labour, Capital and Organization. - Alfred Marshall, Principles of Economics (8th ed.) 
Principles of Economics (London: Macmillan and Co. 8th ed. 1920).
About Liberty Fund:
Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.
The text is in the public domain.
Fair use statement:
This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
THE AGENTS OF PRODUCTION.
|Country and Author of Estimate.||Land.|
|Wealth. per cap.|
|1690 (Gregory King)||180||45||25||70||320||58|
|1892 (de Foville)||3,000||2,000||400||4,000||9,400||247|
Sir R. Giffen estimates the wealth of the British Empire in 1903 (Statistical Journal, Vol. 66, p. 584) thus:
|United Kingdom||...||...||£m. 15,000|
|Canada ...||...||...||" 1,350|
|Australasia ...||...||...||" 1,100|
|India ......||...||...||" 3,000|
|South Africa ...||...||...||" 600|
|Remainder of Empire||...||" 1,200|
A tentative history of changes in the relative wealth of different parts of England has been deduced by Rogers from the assessment of the several counties for the purpose of taxation. Le Vicomte d'Avenel's great work L'Histoire Économique de la Propriété 8c. 1200–1800 contains a rich store of materials as to France; and comparative studies of the growth of wealth in France and other nations have been made by Levasseur, Leroy Beaulieu, Neymarck and de Foville.
Mr Crammond, addressing the Institute of Bankers in March 1919, estimated the national wealth of the United Kingdom to be £m. 24,000, and the national income to be £m. 3,600. He reckoned the net value of the country's foreign investments to have fallen to £m. 1,600, she having recently sold securities amounting to £m. 1,600; and borrowed another £m. 1,400. On the balance she appeared to be a creditor to the amount of £m. 2,600: but a great part of this amount cannot be reckoned as adequately secured.
BOOK IV, CHAPTER VIII
§ 1. Writers on social science from the time of Plato downwards have delighted to dwell on the increased efficiency which labour derives from organization. But in this, as in other cases, Adam Smith gave a new and larger significance to an old doctrine by the philosophic thoroughness with which he explained it, and the practical knowledge with which he illustrated it. After insisting on the advantages of the division of labour, and pointing out how they render it possible for increased numbers to live in comfort on a limited territory, he argued that the pressure of population on the means of subsistence tends to weed out those races who through want of organization or for any other cause are unable to turn to the best account the advantages of the place in which they live.
Before Adam Smith's book had yet found many readers, biologists were already beginning to make great advances towards understanding the real nature of the differences in organization which separate the higher from the lower animals; and before two more generations had elapsed, Malthus' historical account of man's struggle for existence started Darwin on that inquiry as to the effects of the struggle for existence in the animal and vegetable world, which issued in his discovery of the selective influence constantly played by it. Since that time biology has more than repaid her debt; and economists have in their turn owed much to the many profound analogies which have been discovered between social and especially industrial organization on the one side and the physical organization of the higher animals on the other. In a few cases indeed the apparent analogies disappeared on closer inquiry: but many of those which seemed at first sight most fanciful, have gradually been supplemented by others, and have at last established their claim to illustrate a fundamental unity of action between the laws of nature in the physical and in the moral world. This central unity is set forth in the general rule, to which there are not very many exceptions, that the development of the organism, whether social or physical, involves an increasing subdivision of functions between its separate parts on the one hand, and on the other a more intimate connection between them101 . Each part gets to be less and less self-sufficient, to depend for its wellbeing more and more on other parts, so that any disorder in any part of a highly-developed organism will affect other parts also.
This increased subdivision of functions, or "differentiation," as it is called, manifests itself with regard to industry in such forms as the division of labour, and the development of specialized skill, knowledge and machinery: while "integration," that is, a growing intimacy and firmness of the connections between the separate parts of the industrial organism, shows itself in such forms as the increase of security of commercial credit, and of the means and habits of communication by sea and road, by railway and telegraph, by post and printing-press.
The doctrine that those organisms which are the most highly developed, in the sense in which we have just used the phrase, are those which are most likely to survive in the struggle for existence, is itself in process of development. It is not yet completely thought out either in its biological or its economic relations. But we may pass to consider the main bearings in economics of the law that the struggle for existence causes those organisms to multiply which are best fitted to derive benefit from their environment.
The law requires to be interpreted carefully: for the fact that a thing is beneficial to its environment will not by itself secure its survival either in the physical or in the moral world. The law of "survival of the fittest" states that those organisms tend to survive which are best fitted to utilize the environment for their own purposes. Those that utilize the environment most, often turn out to be those that benefit those around them most; but sometimes they are injurious.
Conversely, the struggle for survival may fail to bring into existence organisms that would be highly beneficial: and in the economic world the demand for any industrial arrangement is not certain to call forth a supply, unless it is something more than a mere desire for the arrangement, or a need for it. It must be an efficient demand; that is, it must take effect by offering adequate payment or some other benefit to those who supply it102 . A mere desire on the part of employees for a share in the management and the profits of the factory in which they work, or the need on the part of clever youths for a good technical education, is not a demand in the sense in which the term is used when it is said that supply naturally and surely follows demand. This seems a hard truth: but some of its harshest features are softened down by the fact that those races, whose members render services to one another without exacting direct recompense are not only the most likely to flourish for the time, but most likely to rear a large number of descendants who inherit their beneficial habits.
§ 2. Even in the vegetable world a species of plants, however vigorous in its growth, which should be neglectful of the interests of its seeds, would soon perish from the earth. The standard of family and race duty is often high in the animal kingdom; and even those predatory animals which we are accustomed to regard as the types of cruelty, which fiercely utilize the environment and do nothing for it in return, must yet be willing as individuals to exert themselves for the benefit of their offspring. And going beyond the narrower interests of the family to those of the race, we find that among so-called social animals, such as bees and ants, those races survive in which the individual is most energetic in performing varied services for the society without the prompting of direct gain to himself.
But when we come to human beings, endowed with reason and speech, the influence of a tribal sense of duty in strengthening the tribe takes a more varied form. It is true that in the ruder stages of human life many of the services rendered by the individual to others are nearly as much due to hereditary habit and unreasoning impulse, as are those of the bees and ants. But deliberate, and therefore moral, self-sacrifice soon makes its appearance; it is fostered by the far-seeing guidance of prophets and priests and legislators, and is inculcated by parable and legend. Gradually the unreasoning sympathy, of which there are germs in the lower animals, extends its area and gets to be deliberately adopted as a basis of action: tribal affection, starting from a level hardly higher than that which prevails in a pack of wolves or a horde of banditti, gradually grows into a noble patriotism; and religious ideals are raised and purified. The races in which these qualities are the most highly developed are sure, other things being equal, to be stronger than others in war and in contests with famine and disease; and ultimately to prevail. Thus the struggle for existence causes in the long run those races of men to survive in which the individual is most willing to sacrifice himself for the benefit of those around him; and which are consequently the best adapted collectively to make use of their environment.
Unfortunately however not all the qualities which enable one race to prevail over another benefit mankind as a whole. It would no doubt be wrong to lay very much stress on the fact that warlike habits have often enabled half-savage races to reduce to submission others who were their superiors in every peaceful virtue; for such conquests have gradually increased the physical vigour of the world, and its capacity for great things, and ultimately perhaps have done more good than harm. But there is no such qualification to the statement that a race does not establish its claim to deserve well of the world by the mere fact that it flourishes in the midst or on the surface of another race. For, though biology and social science alike show that parasites sometimes benefit in unexpected ways the race on which they thrive; yet in many cases they turn the peculiarities of that race to good account for their own purposes without giving any good return. The fact that there is an economic demand for the services of Jewish and Armenian money-dealers in Eastern Europe and Asia, or for Chinese labour in California, is not by itself a proof, nor even a very strong ground for believing, that such arrangements tend to raise the quality of human life as a whole. For, though a race entirely dependent on its own resources can scarcely prosper unless it is fairly endowed with the most important social virtues; yet a race, which has not these virtues and which is not capable of independent greatness, may be able to thrive on its relations with another race. But on the whole, and subject to grave exceptions, those races survive and predominate in which the best qualities are most strongly developed.
§ 3. This influence of heredity shows itself nowhere more markedly than in social organization. For that must necessarily be a slow growth, the product of many generations: it must be based on those customs and aptitudes of the great mass of the people which are incapable of quick change. In early times when religious, ceremonial, political, military and industrial organization were intimately connected, and were indeed but different sides of the same thing, nearly all those nations which were leading the van of the world's progress were found to agree in having adopted a more or less strict system of caste: and this fact by itself proved that the distinction of castes was well suited to its environment, and that on the whole it strengthened the races or nations which adopted it. For since it was a controlling factor of life, the nations which adopted it could not have generally prevailed over others, if the influence exerted by it had not been in the main beneficial. Their pre-eminence proved not that it was free from defects, but that its excellences, relatively to that particular stage of progress, outweighed its defects.
Again we know that an animal or a vegetable species may differ from its competitors by having two qualities, one of which is of great advantage to it; while the other is unimportant, perhaps even slightly injurious, and that the former of these qualities will make the species succeed in spite of its having the latter: the survival of which will then be no proof that it is beneficial. Similarly the struggle for existence has kept alive many qualities and habits in the human race which were in themselves of no advantage, but which are associated by a more or less permanent bond with others that are great sources of strength. Such instances are found in the tendency to an overbearing demeanour and a scorn for patient industry among nations that owe their advance chiefly to military victories; and again in the tendency among commercial nations to think too much of wealth and to use it for the purposes of display. But the most striking instances are found in matters of organization; the excellent adaptation of the system of caste for the special work which it had to do, enabled it to flourish in spite of its great faults, the chief of which were its rigidity, and its sacrifice of the individual to the interests of society, or rather to certain special exigencies of society.
Passing over intermediate stages and coming at once to the modern organization of the Western world, we find it offering a striking contrast, and a no less striking resemblance, to the system of caste. On the one hand, rigidity has been succeeded by plasticity: the methods of industry which were then stereotyped, now change with bewildering quickness; the social relations of classes, and the position of the individual in his class, which were then definitely fixed by traditional rules, are now perfectly variable and change their forms with the changing circumstances of the day. But on the other hand, the sacrifice of the individual to the exigencies of society as regards the production of material wealth seems in some respects to be a case of atavism, a reversion to conditions which prevailed in the far-away times of the rule of caste. For the division of labour between the different ranks of industry and between different individuals in the same rank is so thorough and uncompromising, that the real interests of the producer are sometimes in danger of being sacrificed for the sake of increasing the addition which his work makes to the aggregate production of material wealth.
§ 4. Adam Smith, while insisting on the general advantages of that minute division of labour and of that subtle industrial organization which were being developed with unexampled rapidity in his time, was yet careful to indicate many points in which the system failed, and many incidental evils which it involved103 . But many of his followers with less philosophic insight, and in some cases with less real knowledge of the world, argued boldly that whatever is, is right. They argued for instance that, if a man had a talent for managing business, he would be surely led to use that talent for the benefit of mankind: that meanwhile a like pursuit of their own interests would lead others to provide for his use such capital as he could turn to best account; and that his own interest would lead him so to arrange those in his employment that everyone should do the highest work of which he was capable, and no other; and that it would lead him to purchase and use all machinery and other aids to production, which could in his hands contribute more than the equivalent of their own cost towards supplying the wants of the world.
This doctrine of natural organization contains more truth of the highest importance to humanity than almost any other which is equally likely to evade the comprehension of those who discuss grave social problems without adequate study: and it had a singular fascination for earnest and thoughtful minds. But its exaggeration worked much harm, especially to those who delighted most in it. For it prevented them from seeing and removing the evil that was intertwined with the good in the changes that were going on around them. It hindered them from inquiring whether many even of the broader features of modern industry might not be transitional, having indeed good work to do in their time, as the caste system had in its time; but being, like it, serviceable chiefly in leading the way towards better arrangements for a happier age. And it did harm by preparing the way for exaggerated reaction against it.
§ 5. Moreover the doctrine took no account of the manner in which organs are strengthened by being used. Herbert Spencer has insisted with much force on the rule that, if any physical or mental exercise gives pleasure and is therefore frequent, those physical or mental organs which are used in it are likely to grow rapidly. Among the lower animals indeed the action of this rule is so intimately interwoven with that of the survival of the fittest, that the distinction between the two need not often be emphasized. For as it might be guessed a priori, and as seems to be proved by observation, the struggle for survival tends to prevent animals from taking much pleasure in the exercise of functions which do not contribute to their wellbeing.
But man, with his strong individuality, has greater freedom. He delights in the use of his faculties for their own sake; sometimes using them nobly, whether with the abandon of the great Greek burst of life, or under the control of a deliberate and steadfast striving towards important ends; sometimes ignobly, as in the case of a morbid development of the taste for drink. The religious, the moral, the intellectual and the artistic faculties on which the progress of industry depends, are not acquired solely for the sake of the things that may be got by them; but are developed by exercise for the sake of the pleasure and the happiness which they themselves bring: and, in the same way, that greater factor of economic prosperity, the organization of a well-ordered state, is the product of an infinite variety of motives; many of which have no direct connection with the pursuit of national wealth104 .
No doubt it is true that physical peculiarities acquired by the parents during their life-time are seldom if ever transmitted to their offspring. But no conclusive case seems to have been made out for the assertion that the children of those who have led healthy lives, physically and morally, will not be born with a firmer fibre than they would have been had the same parents grown up under unwholesome influences which had enfeebled the fibre of their minds and their bodies. And it is certain that in the former case the children are likely after birth to be better nourished, and better trained; to acquire more wholesome instincts; and to have more of that regard for others and that self-respect, which are the mainsprings of human progress, than in the latter case105 .
It is needful then diligently to inquire whether the present industrial organization might not with advantage be so modified as to increase the opportunities, which the lower grades of industry have for using latent mental faculties, for deriving pleasure from their use, and for strengthening them by use; since the argument that if such a change had been beneficial, it would have been already brought about by the struggle for survival, must be rejected as invalid. Man's prerogative extends to a limited but effective control over natural development by forecasting the future and preparing the way for the next step.
Thus progress may be hastened by thought and work; by the application of the principles of Eugenics to the replenishment of the race from its higher rather than its lower strains, and by the appropriate education of the faculties of either sex: but however hastened it must be gradual and relatively slow. It must be slow relatively to man's growing command over technique and the forces of nature; a command which is making ever growing calls for courage and caution, for resource and steadfastness, for penetrating insight and for breadth of view. And it must be very much too slow to keep pace with the rapid inflow of proposals for the prompt reorganization of society on a new basis. In fact our new command over nature, while opening the door to much larger schemes for industrial organization than were physically possible even a short time ago, places greater responsibilities on those who would advocate new developments of social and industrial structure. For though, institutions may be changed rapidly; yet if they are to endure they must be appropriate to man: they cannot retain their stability if they change very much faster than he does. Thus progress itself increases the urgency of the warning that in the economic world, Natura non facit saltum106 .
Progress must be slow; but even from the merely material point of view it is to be remembered that changes, which add only a little to the immediate efficiency of production, may be worth having if they make mankind ready and fit for an organization, which will be more effective in the production of wealth and more equal in its distribution; and that every system, which allows the higher faculties of the lower grades of industry to go to waste, is open to grave suspicion.
BOOK IV, CHAPTER IX
INDUSTRIAL ORGANIZATION, CONTINUED. DIVISION OF LABOUR. THE INFLUENCE OF MACHINERY.
§ 1. The first condition of an efficient organization of industry is that it should keep everyone employed at such work as his abilities and training fit him to do well, and should equip him with the best machinery and other appliances for his work. We shall leave on one side for the present the distribution of work between those who carry out the details of production on the one hand, and those who manage its general arrangement and undertake its risk on the other; and confine ourselves to the division of labour between different classes of operatives, with special reference to the influence of machinery. In the following chapter we shall consider the reciprocal effects of division of labour and localization of industry; in a third chapter we shall inquire how far the advantages of division of labour depend upon the aggregation of large capitals into the hands of single individuals or firms, or, as is commonly said, on production on a large scale; and lastly, we shall examine the growing specialization of the work of business management.
Everyone is familiar with the fact that "practice makes perfect," that it enables an operation, which at first seemed difficult, to be done after a time with comparatively little exertion, and yet much better than before; and physiology in some measure explains this fact. For it gives reasons for believing that the change is due to the gradual growth of new habits of more or less "reflex" or automatic action. Perfectly reflex actions, such as that of breathing during sleep, are performed by the responsibility of the local nerve centres without any reference to the supreme central authority of the thinking power, which is supposed to reside in the cerebrum. But all deliberate movements require the attention of the chief central authority: it receives information from the nerve centres or local authorities and perhaps in some cases direct from the sentient nerves, and sends back detailed and complex instructions to the local authorities, or in some cases direct to the muscular nerves, and so co-ordinates their action as to bring about the required results107 .
The physiological basis of purely mental work is not yet well understood; but what little we do know of the growth of brain structure seems to indicate that practice in any kind of thinking develops new connections between different parts of the brain. Anyhow we know for a fact that practice will enable a person to solve quickly, and without any considerable exertion, questions which he could have dealt with but very imperfectly a little while before, even by the greatest effort. The mind of the merchant, the lawyer, the physician, and the man of science, becomes gradually equipped with a store of knowledge and a faculty of intuition, which can be obtained in no other way than by the continual application of the best efforts of a powerful thinker for many years together to one more or less narrow class of questions. Of course the mind cannot work hard for many hours a day in one direction: and a hard-worked man will sometimes find recreation in work that does not belong to his business, but would be fatiguing enough to a person who had to do it all day long.
Some social reformers have indeed maintained that those who do the most important brain work might do a fair share of manual work also, without diminishing their power of acquiring knowledge or thinking out hard questions. But experience seems to show that the best relief from overstrain is in occupations taken up to suit the mood of the moment and stopped when the mood is passed, that is, in what popular instinct classes as "relaxation." Any occupation which is so far business-like that a person must sometimes force himself by an effort of the will to go on with it, draws on his nervous force and is not perfect relaxation: and therefore it is not economical from the point of view of the community unless its value is sufficient to outweigh a considerable injury to his main work108 .
§ 2. It is a difficult and unsettled question how far specialization should be carried in the highest branches of work. In science it seems to be a sound rule that the area of study should be broad during youth, and should gradually be narrowed as years go on. A medical man who has always given his attention exclusively to one class of diseases, may perhaps give less wise advice even in his special subject than another who, having learnt by wider experience to think of those diseases in relation to general health, gradually concentrates his study more and more on them, and accumulates a vast store of special experiences and subtle instincts. But there is no doubt that greatly increased efficiency can be attained through division of labour in those occupations in which there is much demand for mere manual skill.
Adam Smith pointed out that a lad who had made nothing but nails all his life could make them twice as quickly as a first-rate smith who only took to nail-making occasionally. Anyone who has to perform exactly the same set of operations day after day on things of exactly the same shape, gradually learns to move his fingers exactly as they are wanted, by almost automatic action and with greater rapidity than would be possible if every movement had to wait for a deliberate instruction of the will. One familiar instance is seen in the tying of threads by children in a cotton-mill. Again, in a clothing or a boot factory, a person who sews, whether by hand or machinery, just the same seam on a piece of leather or cloth of just the same size, hour after hour, day after day, is able to do it with far less effort and far more quickly than a worker with much greater quickness of eye and hand, and of a much higher order of general skill, who was accustomed to make the whole of a coat or the whole of a boot109 .
Again, in the wood and the metal industries, if a man has to perform exactly the same operations over and over again on the same piece of material, he gets into the habit of holding it exactly in the way in which it is wanted, and of arranging the tools and other things which he has to handle in such positions that he is able to bring them to work on one another with the least possible loss of time and of force in the movements of his own body. Accustomed to find them always in the same position and to take them in the same order, his hands work in harmony with one another almost automatically: and with increased practice his expenditure of nervous force diminishes even more rapidly than his expenditure of muscular force.
But when the action has thus been reduced to routine it has nearly arrived at the stage at which it can be taken over by machinery. The chief difficulty to be overcome is that of getting the machinery to hold the material firmly in exactly the position in which the machine tool can be brought to bear on it in the right way, and without wasting too much time in taking grip of it. But this can generally be contrived when it is worth while to spend some labour and expense on it; and then the whole operation can often be controlled by a worker who, sitting before a machine, takes with the left hand a piece of wood or metal from a heap and puts it in a socket, while with the right he draws down a lever, or in some other way sets the machine tool at work, and finally with his left hand throws on to another heap the material which has been cut or punched or drilled or planed exactly after a given pattern. It is in these industries especially that we find the reports of modern trades-unions to be full of complaints that unskilled labourers, and even their wives and children, are put to do work which used to require the skill and judgment of a trained mechanic, but which has been reduced to mere routine by the improvement of machinery and the ever-increasing minuteness of the subdivision of labour.
§ 3. We are thus led to a general rule, the action of which is more prominent in some branches of manufacture than others, but which applies to all. It is, that any manufacturing operation that can be reduced to uniformity, so that exactly the same thing has to be done over and over again in the same way, is sure to be taken over sooner or later by machinery. There may be delays and difficulties; but if the work to be done by it is on a sufficient scale, money and inventive power will be spent without stint on the task till it is achieved110 .
Thus the two movements of the improvement of machinery and the growing subdivision of labour have gone together and are in some measure connected. But the connection is not so close as is generally supposed. It is the largeness of markets, the increased demand for great numbers of things of the same kind, and in some cases of things made with great accuracy, that leads to subdivision of labour; the chief effect of the improvement of machinery is to cheapen and make more accurate the work which would anyhow have been subdivided. For instance, "in organizing the works at Soho, Boulton and Watt found it necessary to carry division of labour to the furthest practicable point. There were no slide-lathes, planing machines or boring tools, such as now render mechanical accuracy of construction almost a matter of certainty. Everything depended on the individual mechanic's accuracy of hand and eye; yet mechanics generally were much less skilled then than they are now. The way in which Boulton and Watt contrived partially to get over the difficulty was to confine their workmen to special classes of work, and make them as expert in them as possible. By continued practice in handling the same tools and fabricating the same articles, they thus acquired great individual proficiency111 ." Thus machinery constantly supplants and renders unnecessary that purely manual skill, the attainment of which was, even up to Adam Smith's time, the chief advantage of division of labour. But this influence is more than countervailed by its tendency to increase the scale of manufactures and to make them more complex; and therefore to increase the opportunities for division of labour of all kinds, and especially in the matter of business management.
§ 4. The powers of machinery to do work that requires too much accuracy to be done by hand are perhaps best seen in some branches of the metal industries in which the system of Interchangeable Parts is being rapidly developed. It is only after long training and with much care and labour that the hand can make one piece of metal accurately to resemble or to fit into another: and after all the accuracy is not perfect. But this is just the work which a well made machine can do most easily and most perfectly. For instance, if sowing and reaping machines had to be made by hand, their first cost would be very high; and when any part of them was broken, it could be replaced only at great cost by sending the machine back to the manufacturer or by bringing a highly skilled mechanic to the machine. But as it is, the manufacturer keeps in store many facsimiles of the broken part, which were made by the same machinery, and are therefore interchangeable with it. A farmer in the North-West of America, perhaps a hundred miles away from any good mechanic's shop, can yet use complicated machinery with confidence; since he knows that by telegraphing the number of the machine and the number of any part of it which he has broken, he will get by the next train a new piece which he can himself fit into its place. The importance of this principle of interchangeable parts has been but recently grasped; there are however many signs that it will do more than any other to extend the use of machine-made machinery to every branch of production, including even domestic and agricultural work112 .
The influences which machinery exerts over the character of modern industry are well illustrated in the manufacture of watches. Some years ago the chief seat of this business was in French Switzerland; where the subdivision of labour was carried far, though a great part of the work was done by a more or less scattered population. There were about fifty distinct branches of trade each of which did one small part of the work. In almost all of them a highly specialized manual skill was required, but very little judgment; the earnings were generally low, because the trade had been established too long for those in it to have anything like a monopoly, and there was no difficulty in bringing up to it any child with ordinary intelligence. But this industry is now yielding ground to the American system of making watches by machinery, which requires very little specialized manual skill. In fact the machinery is becoming every year more and more automatic, and is getting to require less and less assistance from the human hand. But the more delicate the machine's power, the greater is the judgment and carefulness which is called for from those who see after it. Take for instance a beautiful machine which feeds itself with steel wire at one end, and delivers at the other tiny screws of exquisite form; it displaces a great many operatives who had indeed acquired a very high and specialized manual skill, but who lived sedentary lives, straining their eyesight through microscopes, and finding in their work very little scope for any faculty except a mere command over the use of their fingers. But the machine is intricate and costly, and the person who minds it must have an intelligence, and an energetic sense of responsibility, which go a long way towards making a fine character; and which, though more common than they were, are yet sufficiently rare to be able to earn a very high rate of pay. No doubt this is an extreme case; and the greater part of the work done in a watch factory is much simpler. But much of it requires higher faculties than the old system did, and those engaged in it earn on the average higher wages; at the same time it has already brought the price of a trustworthy watch within the range of the poorest classes of the community, and it is showing signs of being able soon to accomplish the very highest class of work113 .
Those who finish and put together the different parts of a watch must always have highly specialized skill: but most of the machines which are in use in a watch factory are not different in general character from those which are used in any other of the lighter metal trades: in fact many of them are mere modifications of the turning lathes and of the slotting, punching, drilling, planing, shaping, milling machines and a few others, which are familiar to all engineering trades. This is a good illustration of the fact that while there is a constantly increasing subdivision of labour, many of the lines of division between trades which are nominally distinct are becoming narrower and less difficult to be passed. In old times it would have been very small comfort to watch-makers, who happened to be suffering from a diminished demand for their wares, to be told that the gun-making trade was in want of extra hands; but 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: almost the only condition would be that in the new factory no one should be put to work which required a higher order of general intelligence, than that to which he was already accustomed.
§ 5. The printing trade affords another instance of the way in which an improvement of machinery and an increase in the volume of production causes an elaborate subdivision of labour. Everyone is familiar with the pioneer newspaper editor of newly settled districts of America, who sets up the type of his articles as he composes them; and with the aid of a boy prints off his sheets and distributes them to his scattered neighbours. When however the mystery of printing was new, the printer had to do all this for himself, and in addition to make all his own appliances114 . These are now provided for him by separate "subsidiary" trades, from whom even the printer in the backwoods can obtain everything that he wants to use. But in spite of the assistance which it thus gets from outside, a large printing establishment has to find room for many different classes of workers within its walls. To say nothing of those who organize and superintend the business, of those who do its office work and keep its stores, of the skilled "readers" who correct any errors that may have crept into the "proofs," of its engineers and repairers of machinery, of those who cast, and who correct and prepare its stereotype plates; of the warehousemen and the boys and girls who assist them, and several other minor classes; there are the two great groups of the compositors who set up the type, and the machinists and pressmen who print impressions from them. Each of these two groups is divided into many smaller groups, especially in the large centres of the printing trade. In London, for instance, a minder who was accustomed to one class of machine, or a compositor who was accustomed to one class of work, if thrown out of employment would not willingly abandon the advantage of his specialized skill, and falling back on his general knowledge of the trade seek work at another kind of machine or in another class of work115 . These barriers between minute subdivisions of a trade count for a great deal in many descriptions of the modern tendency towards specialization of industry; and to some extent rightly, because though many of them are so slight that a man thrown out of work in one subdivision could pass into one of its neighbours without any great loss of efficiency, yet he does not do so until he has tried for a while to get employment in his old lines; and therefore the barriers are as effective as stronger ones would be so far as the minor fluctuations of trade from week to week are concerned. But they are of an altogether different kind from the deep and broad partitions which divided one group of mediæval handicraftsmen from another, and which caused the lifelong suffering of the handloom-weavers when their trade had left them116 .
In the printing trades, as in the watch trade, we see mechanical and scientific appliances attaining results that would be impossible without them; at the same time that they persistently take over work that used to require manual skill and dexterity, but not much judgment; while they leave for man's hand all those parts which do require the use of judgment, and open up all sorts of new occupations in which there is a great demand for it. Every improvement and cheapening of the printer's appliances increases the demand for the judgment and discretion and literary knowledge of the reader, for the skill and taste of those who know how to set up a good title-page, or how to make ready a sheet on which an engraving is to be printed, so that light and shade will be distributed properly. It increases the demand for the gifted and highly-trained artists who draw or engrave on wood and stone and metal, and for those who know how to give an accurate report in ten lines of the substance of a speech that occupied ten minutes—an intellectual feat the difficulty of which we underrate, because it is so frequently performed. And again, it tends to increase the work of photographers and electrotypers, and stereotypers, of the makers of printer's machinery, and many others who get a higher training and a higher income from their work than did those layers on and takers off, and those folders of newspapers who have found their work taken over by iron fingers and iron arms.
§ 6. We may now pass to consider the effects which machinery has in relieving that excessive muscular strain which a few generations ago was the common lot of more than half the working men even in such a country as England. The most marvellous instances of the power of machinery are seen in large iron-works, and especially in those for making armour plates, where the force to be exerted is so great that man's muscles count for nothing, and where every movement, whether horizontal or vertical, has to be effected by hydraulic or steam force, and man stands by ready to govern the machinery and clear away ashes or perform some such secondary task.
Machinery of this class has increased our command over nature, but it has not directly altered the character of man's work very much; for that which it does he could not have done without it. But in other trades machinery has lightened man's labours. The house carpenters, for instance, make things of the same kind as those used by our forefathers, with much less toil for themselves. They now give themselves chiefly to those parts of the task which are most pleasant and most interesting; while in every country town and almost every village there are found steam mills for sawing, planing and moulding, which relieve them of that grievous fatigue which not very long ago used to make them prematurely old117 .
New machinery, when just invented, generally requires a great deal of care and attention. But the work of its attendant is always being sifted; that which is uniform and monotonous is gradually taken over by the machine, which thus becomes steadily more and more automatic and self-acting; till at last there is nothing for the hand to do, but to supply the material at certain intervals and to take away the work when finished. There still remains the responsibility for seeing that the machinery is in good order and working smoothly; but even this task is often made light by the introduction of an automatic movement, which brings the machine to a stop the instant anything goes wrong.
Nothing could be more narrow or monotonous than the occupation of a weaver of plain stuffs in the old time. But now one woman will manage four or more looms, each of which does many times as much work in the course of the day as the old hand-loom did; and her work is much less monotonous and calls for much more judgment than his did. So that for every hundred yards of cloth that are woven, the purely monotonous work done by human beings is probably not a twentieth part of what it was118 .
Facts of this kind are to be found in the recent history of many trades: and they are of great importance when we are considering the way in which the modern organization of industry is tending to narrow the scope of each person's work, and thereby to render it monotonous. For those trades in which the work is most subdivided are those in which the chief muscular strain is most certain to be taken off by machinery; and thus the chief evil of monotonous work is much diminished. As Roscher says, it is monotony of life much more than monotony of work that is to be dreaded: monotony of work is an evil of the first order only when it involves monotony of life. Now when a person's employment requires much physical exertion, he is fit for nothing after his work; and unless his mental faculties are called forth in his work, they have little chance of being developed at all. But the nervous force is not very much exhausted in the ordinary work of a factory, at all events where there is not excessive noise, and where the hours of labour are not too long. The social surroundings of factory life stimulate mental activity in and out of working hours; and many of those factory workers, whose occupations are seemingly the most monotonous, have considerable intelligence and mental resource119 .
It is true that the American agriculturist is an able man, and that his children rise rapidly in the world. But partly because land is plentiful, and he generally owns the farm that he cultivates, he has better social conditions than the English; he has always had to think for himself, and has long had to use and to repair complex machines. The English agricultural labourer has had many great disadvantages to contend with. Till recently he had little education; and he was in a great measure under a semi-feudal rule, which was not without its advantages, but which repressed enterprise and even in some degree self-respect. These narrowing causes are removed. He is now fairly well educated in youth. He learns to handle various machinery; he is less dependent on the good-will of any particular squire or group of farmers; and, since his work is more various, and educates intelligence more than the lowest grades of town work do, he is tending to rise both absolutely and relatively.
§ 7. We must now proceed to consider what are the conditions under which the economies in production arising from division of labour can best be secured. It is obvious that the efficiency of specialized machinery or specialized skill is but one condition of its economic use; the other is that sufficient work should be found to keep it well employed. As Babbage pointed out, in a large factory "the master manufacturer by dividing the work to be executed into different processes, each requiring different degrees of skill or force, can purchase exactly that precise quantity of both which is necessary for each process; whereas if the whole work were executed by one workman that person must possess sufficient skill to perform the most difficult and sufficient strength to execute the most laborious of the operations into which the work is divided." The economy of production requires not only that each person should be employed constantly in a narrow range of work, but also that, when it is necessary for him to undertake different tasks, each of these tasks should be such as to call forth as much as possible of his skill and ability. Just in the same way the economy of machinery requires that a powerful turning-lathe when specially arranged for one class of work should be kept employed as long as possible on that work; and if there is occasion to employ it on other work, that should be such as to be worthy of the lathe, and not such as could have been done equally well by a much smaller machine.
Here then, so far as the economy of production goes, men and machines stand on much the same footing: but while machinery is a mere implement of production, man's welfare is also its ultimate aim. We have already been occupied with the question whether the human race as a whole gains by carrying to an extreme that specialization of function which causes all the most difficult work to be done by a few people: but we have now to consider it more nearly with special reference to the work of business management. The main drift of the next three chapters is to inquire what are the causes which make different forms of business management the fittest to profit by their environment, and the most likely to prevail over others; but it is well that meanwhile we should have in our minds the question, how far they are severally fitted to benefit their environment.
Many of those economies in the use of specialized skill and machinery which are commonly regarded as within the reach of very large establishments, do not depend on the size of individual factories. Some depend on the aggregate volume of production of the kind in the neighbourhood; while others again, especially those connected with the growth of knowledge and the progress of the arts, depend chiefly on the aggregate volume of production in the whole civilized world. And here we may introduce two technical terms.
We may divide the economies arising from an increase in the scale of production of any kind of goods, into two classes—firstly, those dependent on the general development of the industry; and, secondly, those dependent on the resources of the individual houses of business engaged in it, on their organization and the efficiency of their management. We may call the former external economies, and the latter internal economies. In the present chapter we have been chiefly discussing internal economies; but we now proceed to examine those very important external economies which can often be secured by the concentration of many small businesses of a similar character in particular localities: or, as is commonly said, by the localization of industry.
BOOK IV, CHAPTER X
INDUSTRIAL ORGANIZATION, CONTINUED. THE CONCENTRATION OF SPECIALIZED INDUSTRIES IN PARTICULAR LOCALITIES.
§ 1. In an early stage of civilization every place had to depend on its own resources for most of the heavy wares which it consumed; unless indeed it happened to have special facilities for water carriage. But wants and customs changed slowly: and this made it easy for producers to meet the wants even of consumers with whom they had little communication; and it enabled comparatively poor people to buy a few expensive goods from a distance, in the security that they would add to the pleasure of festivals and holidays during a life-time, or perhaps even during two or three lifetimes. Consequently the lighter and more expensive articles of dress and personal adornment, together with spices and some kinds of metal implements used by all classes, and many other things for the special use of the rich, often came from astonishing distances. Some of these were produced only in a few places, or even only in one place; and they were diffused all over Europe partly by the agency of fairs120 and professional pedlers, and partly by the producers themselves, who would vary their work by travelling on foot for many thousand miles to sell their goods and see the world. These sturdy travellers took on themselves the risks of their little businesses; they enabled the production of certain classes of goods to be kept on the right track for satisfying the needs of purchasers far away; and they created new wants among consumers, by showing them at fairs or at their own houses new goods from distant lands. An industry concentrated in certain localities is commonly, though perhaps not quite accurately, described as a localized industry121 .
This elementary localization of industry gradually prepared the way for many of the modern developments of division of labour in the mechanical arts and in the task of business management. Even now we find industries of a primitive fashion localized in retired villages of central Europe, and sending their simple wares even to the busiest haunts of modern industry. In Russia the expansion of a family group into a village has often been the cause of a localized industry; and there are an immense number of villages each of which carries on only one branch of production, or even only a part of one122 .
§ 2. Many various causes have led to the localization of industries; but the chief causes have been physical conditions; such as the character of the climate and the soil, the existence of mines and quarries in the neighbourhood, or within easy access by land or water. Thus metallic industries have generally been either near mines or in places where fuel was cheap. The iron industries in England first sought those districts in which charcoal was plentiful, and afterwards they went to the neighbourhood of collieries.123 . Staffordshire makes many kinds of pottery, all the materials of which are imported from a long distance; but she has cheap coal and excellent clay for making the heavy "seggars" or boxes in which the pottery is placed while being fired. Straw plaiting has its chief home in Bedfordshire, where straw has just the right proportion of silex to give strength without brittleness; and Buckinghamshire beeches have afforded the material for the Wycombe chairmaking. The Sheffield cutlery trade is due chiefly to the excellent grit of which its grindstones are made.
Another chief cause has been the patronage of a court. The rich fold there assembled make a demand for goods of specially high quality, and this attracts skilled workmen from a distance, and educates those on the spot. When an Eastern potentate changed his residence—and, partly for sanitary reasons, this was constantly done—the deserted town was apt to take refuge in the development of a specialized industry, which had owed its origin to the presence of the court. But very often the rulers deliberately invited artisans from a distance and settled them in a group together. Thus the mechanical faculty of Lancashire is said to be due to the influence of Norman smiths who were settled at Warrington by Hugo de Lupus in William the Conqueror's time. And the greater part of England's manufacturing industry before the era of cotton and steam had its course directed by settlements of Flemish and other artisans; many of which were made under the immediate direction of Plantagenet and Tudor kings. These immigrants taught us how to weave woollen and worsted stuffs, though for a long time we sent our cloths to the Netherlands to be fulled and dyed. They taught us how to cure herrings, how to manufacture silk, how to make lace, glass, and paper, and to provide for many other of our wants124 .
But how did these immigrants learn their skill? Their ancestors had no doubt profited by the traditional arts of earlier civilizations on the shores of the Mediterranean and in the far East: for nearly all important knowledge has long deep roots stretching downwards to distant times; and so widely spread have been these roots, so ready to send up shoots of vigorous life, that there is perhaps no part of the old world in which there might not long ago have flourished many beautiful and highly skilled industries, if their growth had been favoured by the character of the people, and by their social and political institutions. This accident or that may have determined whether any particular industry flourished in any one town; the industrial character of a whole country even may have been largely influenced by the richness of her soil and her mines, and her facilities for commerce. Such natural advantages may themselves have stimulated free industry and enterprise: but it is the existence of these last, by whatever means they may have been promoted, which has been the supreme condition for the growth of noble forms of the arts of life. In sketching the history of free industry and enterprise we have already incidentally traced the outlines of the causes which have localized the industrial leadership of the world now in this country and now in that. We have seen how physical nature acts on man's energies, how he is stimulated by an invigorating climate, and how he is encouraged to bold ventures by the opening out of rich fields for his work: but we have also seen how the use he makes of these advantages depends on his ideals of life, and how inextricably therefore the religious, political and economic threads of the world's history are interwoven; while together they have been bent this way or that by great political events and the influence of the strong personalities of individuals.
The causes which determine the economic progress of nations belong to the study of international trade and therefore lie outside of our present view. But for the present we must turn aside from these broader movements of the localization of industry, and follow the fortunes of groups of skilled workers who are gathered within the narrow boundaries of a manufacturing town or a thickly peopled industrial district.
§ 3. When an industry has thus chosen a locality for itself, it is likely to stay there long: so great are the advantages which people following the same skilled trade get from near neighbourhood to one another. The mysteries of the trade become no mysteries; but are as it were in the air, and children learn many of them unconsciously. Good work is rightly appreciated, inventions and improvements in machinery, in processes and the general organization of the business have their merits promptly discussed: if one man starts a new idea, it is taken up by others and combined with suggestions of their own; and thus it becomes the source of further new ideas. And presently subsidiary trades grow up in the neighbourhood, supplying it with implements and materials, organizing its traffic, and in many ways conducing to the economy of its material.
Again, the economic use of expensive machinery can sometimes be attained in a very high degree in a district in which there is a large aggregate production of the same kind, even though no individual capital employed in the trade be very large. For subsidiary industries devoting themselves each to one small branch of the process of production, and working it for a great many of their neighbours, are able to keep in constant use machinery of the most highly specialized character, and to make it pay its expenses, though its original cost may have been high, and its rate of depreciation very rapid.
Again, in all but the earliest stages of economic development a localized industry gains a great advantage from the fact that it offers a constant market for skill. Employers are apt to resort to any place where they are likely to find a good choice of workers with the special skill which they require; while men seeking employment naturally go to places where there are many employers who need such skill as theirs and where therefore it is likely to find a good market. The owner of an isolated factory, even if he has access to a plentiful supply of general labour, is often put to great shifts for want of some special skilled labour; and a skilled workman, when thrown out of employment in it, has no easy refuge. Social forces here co-operate with economic: there are often strong friendships between employers and employed: but neither side likes to feel that in case of any disagreeable incident happening between them, they must go on rubbing against one another: both sides like to be able easily to break off old associations should they become irksome. These difficulties are still a great obstacle to the success of any business in which special skill is needed, but which is not in the neighbourhood of others like it: they are however being diminished by the railway, the printing-press and the telegraph.
On the other hand a localized industry has some disadvantages as a market for labour if the work done in it is chiefly of one kind, such for instance as can be done only by strong men. In those iron districts in which there are no textile or other factories to give employment to women and children, wages are high and the cost of labour dear to the employer, while the average money earnings of each family are low. But the remedy for this evil is obvious, and is found in the growth in the same neighbourhood of industries of a supplementary character. Thus textile industries are constantly found congregated in the neighbourhood of mining and engineering industries, in some cases having been attracted by almost imperceptible steps; in others, as for instance at Barrow, having been started deliberately on a large scale in order to give variety of employment in a place where previously there had been but little demand for the work of women and children.
The advantages of variety of employment are combined with those of localized industries in some of our manufacturing towns, and this is a chief cause of their continued growth. But on the other hand the value which the central sites of a large town have for trading purposes, enables them to command much higher ground-rents than the situations are worth for factories, even when account is taken of this combination of advantages: and there is a similar competition for dwelling space between the employees of the trading houses and the factory workers. The result is that factories now congregate in the outskirts of large towns and in manufacturing districts in their neighbourhood rather than in the towns themselves125 .
A district which is dependent chiefly on one industry is liable to extreme depression, in case of a falling-off in the demand for its produce, or of a failure in the supply of the raw material which it uses. This evil again is in a great measure avoided by those large towns or large industrial districts in which several distinct industries are strongly developed. If one of them fails for a time, the others are likely to support it indirectly; and they enable local shopkeepers to continue their assistance to workpeople in it.
So far we have discussed localization from the point of view of the economy of production. But there is also the convenience of the customer to be considered. He will go to the nearest shop for a trifling purchase; but for an important purchase he will take the trouble of visiting any part of the town where he knows that there are specially good shops for his purpose. Consequently shops which deal in expensive and choice objects tend to congregate together; and those which supply ordinary domestic needs do not126 .
§ 4. Every cheapening of the means of communication, every new facility for the free interchange of ideas between distant places alters the action of the forces which tend to localize industries. Speaking generally we must say that a lowering of tariffs, or of freights for the transport of goods, tends to make each locality buy more largely from a distance what it requires; and thus tends to concentrate particular industries in special localities: but on the other hand everything that increases people's readiness to migrate from one place to another tends to bring skilled artisans to ply their crafts near to the consumers who will purchase their wares. These two opposing tendencies are well illustrated by the recent history of the English people.
On the one hand the steady cheapening of freights, the opening of railways from the agricultural districts of America and India to the sea-board, and the adoption by England of a free-trade policy, have led to a great increase in her importation of raw produce. But on the other hand the growing cheapness, rapidity and comfort of foreign travel, are inducing her trained business men and her skilled artisans to pioneer the way for new industries in other lands, and to help them to manufacture for themselves goods which they have been wont to buy from England. English mechanics have taught people in almost every part of the world how to use English machinery, and even how to make similar machinery; and English miners have opened out mines of ore which have diminished the foreign demand for many of England's products.
One of the most striking movements towards the specialization of a country's industries, which history records, is the rapid increase of the non-agricultural population of England in recent times. The exact nature of this change is however liable to be misunderstood; and its interest is so great, both for its own sake, and on account of the illustrations it affords of the general principles which we have been discussing in the preceding chapter and in this, that we may with advantage pause here to consider it a little.
In the first place, the real diminution of England's agricultural industries is not so great as at first sight appears. It is true that in the Middle Ages three-fourths of the people were reckoned as agriculturists; that only one in nine was returned to the last census as engaged in agriculture, and that perhaps not more than one in twelve will be so returned at the next census. But it must be remembered that the so-called agricultural population of the Middle Ages were not exclusively occupied with agriculture; they did for themselves a great part of the work that is now done by brewers and bakers, by spinners and weavers, by bricklayers and carpenters, by dressmakers and tailors and by many other trades. These self-sufficing habits died slowly; but most of them had nearly disappeared by the beginning of the last century; and it is probable that the labour spent on the land at this time was not a much less part of the whole industry of the country than in the Middle Ages: for, in spite of her ceasing to export wool and wheat, there was so great an increase in the produce forced from her soil, that the rapid improvement in the arts of her agriculturists scarcely availed to hold in check the action of the law of diminishing return. But gradually a great deal of labour has been diverted from the fields to making expensive machinery for agricultural purposes. This change did not exert its full influence upon the numbers of those who were reckoned as agriculturists so long as the machinery was drawn by horses: for the work of tending them and supplying them with food was regarded as agricultural. But in recent years a rapid growth of the use of steam power in the fields has coincided with the increased importation of farm produce. The coal-miners who supply these steam-engines with fuel, and the mechanics who make them and manage them in the fields are not reckoned as occupied on the land, though the ultimate aim of their labour is to promote its cultivation. The real diminution then of England's agriculture is not so great as at first sight appears; but there has been a change in its distribution. Many tasks which used once to be performed by agricultural labourers are now done by specialized workers who are classed as in the building, or road-making industries, as carriers and so on. And, partly for this reason the number of people who reside in purely agricultural districts has seldom diminished fast; and has often increased, even though the number of those engaged in agriculture has been diminishing rapidly.
Attention has already been called to the influence which the importation of agricultural produce exerts in altering the relative values of different soils: those falling most in value which depended chiefly on their wheat crops, and which were not naturally fertile, though they were capable of being made to yield fairly good crops by expensive methods of cultivation. Districts in which such soils predominate, have contributed more than their share to the crowds of agricultural labourers who have migrated to the large towns; and thus the geographical distribution of industries within the country has been still further altered. A striking instance of the influence of the new means of transport is seen in those pastoral districts in the remoter parts of the United Kingdom, which send dairy products by special express trains to London and other large towns, meanwhile drawing their own supplies of wheat from the further shores of the Atlantic or even the Pacific Ocean.
But next, the changes of recent years have not, as would at first sight appear probable, increased the proportion of the English people who are occupied in manufactures. The output of England's manufactures is certainly many times as great now as it was at the middle of the last century; but those occupied in manufacture of every kind were as large a percentage of the population in 1851 as in 1901; although those who make the machinery and implements which do a great part of the work of English agriculture, swell the numbers of the manufacturers.
The chief explanation of this result lies in the wonderful increase in recent years of the power of machinery. This has enabled us to produce ever increasing supplies of manufactures of almost every kind both for our own use and for exportation without requiring any considerable increase in the number of people who tend the machines. And therefore we have been able to devote the labour set free from agriculture chiefly to supplying those wants in regard to which the improvements of machinery help us but little: the efficiency of machinery has prevented the industries localized in England from becoming as exclusively mechanical as they otherwise would. Prominent among the occupations which have increased rapidly since 1851 in England at the expense of agriculture are the service of Government, central and local; education of all grades; medical service; musical, theatrical and other entertainments, besides mining, building, dealing and transport by road and railway. In none of these is very much direct help got from new inventions: man's labour is not much more efficient in them now than it was a century ago: and therefore if the wants for which they make provision increase in proportion to our general wealth, it is only to be expected that they should absorb a constantly growing proportion of the industrial population. Domestic servants increased rapidly for some years; and the total amount of work which used to fall to them is now increasing faster than ever. But much of it is now done, often with the aid of machinery, by persons in the employment of clothiers of all kinds, of hotel proprietors, confectioners, and even by various messengers from grocers, fishmongers and others who call for orders, unless they are sent by telephone. These changes have tended to increase the specialization and the localization of industries.
Passing away from this illustration of the action of modern forces on the geographical distribution of industries, we will resume our inquiry as to how far the full economies of division of labour can be obtained by the concentration of large numbers of small businesses of a similar kind in the same locality; and how far they are attainable only by the aggregation of a large part of the business of the country into the hands of a comparatively small number of rich and powerful firms, or, as is commonly said, by production on a large scale; or, in other words, how far the economies of production on a large scale must needs be internal, and how far they can be external127 .
BOOK IV, CHAPTER XI
INDUSTRIAL ORGANIZATION, CONTINUED. PRODUCTION ON A LARGE SCALE.
§ 1. The advantages of production on a large scale are best shown in manufacture; under which head we may include all businesses engaged in working up material into forms in which it will be adapted for sale in distant markets. The characteristic of manufacturing industries which makes them offer generally the best illustrations of the advantages of production on a large scale, is their power of choosing freely the locality in which they will do their work. They are thus contrasted on the one hand with agriculture and other extractive industries (mining, quarrying, fishing, etc.), the geographical distribution of which is determined by nature; and on the other hand with industries that make or repair things to suit the special needs of individual consumers, from whom they cannot be far removed, at all events without great loss128 .
The chief advantages of production on a large scale are economy of skill, economy of machinery and economy of materials: but the last of these is rapidly losing importance relatively to the other two. It is true that an isolated workman often throws away a number of small things which would have been collected and turned to good account in a factory129 ; but waste of this kind can scarcely occur in a localized manufacture even if it is in the hands of small men; and there is not very much of it in any branch of industry in modern England, except agriculture and domestic cooking. No doubt many of the most important advances of recent years have been due to the utilizing of what had been a waste product; but this has been generally due to a distinct invention, either chemical or mechanical, the use of which has been indeed promoted by minute subdivision of labour, but has not been directly dependent on it130 .
Again, it is true that when a hundred sets of furniture, or of clothing, have to be cut out on exactly the same pattern, it is worth while to spend great care on so planning the cutting out of the boards or the cloth, that only a few small pieces are wasted. But this is properly an economy of skill; one planning is made to suffice for many tasks, and therefore can be done well and carefully. We may pass then to the economy of machinery.
§ 2. In spite of the aid which subsidiary industries can give to small manufactures, where many in the same branch of trade are collected in one neighbourhood131 , they are still placed under a great disadvantage by the growing variety and expensiveness of machinery. For in a large establishment there are often many expensive machines each made specially for one small use. Each of them requires space in a good light, and thus stands for something considerable in the rent and general expenses of the factory; and independently of interest and the expense of keeping it in repair, a heavy allowance must be made for depreciation in consequence of its being probably improved upon before long132 . A small manufacturer must therefore have many things done by hand or by imperfect machinery, though he knows how to have them done better and cheaper by special machinery, if only he could find constant employment for it.
But next, a small manufacturer may not always be acquainted with the best machinery for his purpose. It is true that if the industry in which he is engaged has been long established on a large scale, his machinery will be well up to the mark, provided he can afford to buy the best in the market. In agriculture and the cotton industries, for instance, improvements in machinery are devised almost exclusively by machine makers; and they are accessible to all, at any rate on the payment of a royalty for patent right. But this is not the case in industries that are as yet in an early stage of development or are rapidly changing their form; such as the chemical industries, the watchmaking industry and some branches of the jute and silk manufactures; and in a host of trades that are constantly springing up to supply some new want or to work up some new material.
In all such trades new machinery and new processes are for the greater part devised by manufacturers for their own use. Each new departure is an experiment which may fail; those which succeed must pay for themselves and for the failure of others; and though a small manufacturer may think he sees his way to an improvement, he must reckon on having to work it out tentatively, at considerable risk and expense and with much interruption to his other work: and even if he should be able to perfect it, he is not likely to be able to make the most of it. For instance, he may have devised a new speciality, which would get a large sale if it could be brought under general notice: but to do this would perhaps cost many thousand pounds; and, if so, he will probably have to turn his back on it. For it is almost impossible for him to discharge, what Roscher calls a characteristic task of the modern manufacturer, that of creating new wants by showing people something which they had never thought of having before; but which they want to have as soon as the notion is suggested to them: in the pottery trade for example the small manufacturer cannot afford even to make experiments with new patterns and designs except in a very tentative way. His chance is better with regard to an improvement in making things for which there is already a good market. But even here he cannot get the full benefit of his invention unless he patents it; and sells the right to use it; or borrows some capital and extends his business; or lastly changes the character of his business and devotes his capital to that particular stage of the manufacture to which his improvement applies. But after all such cases are exceptional: the growth of machinery in variety and expensiveness presses hard on the small manufacturer everywhere. It has already driven him completely out of some trades and is fast driving him out of others133 .
There are however some trades in which the advantages which a large factory derives from the economy of machinery almost vanish as soon as a moderate size has been reached. For instance in cotton spinning, and calico weaving, a comparatively small factory will hold its own and give constant employment to the best known machines for every process: so that a large factory is only several parallel smaller factories under one roof; and indeed some cotton-spinners, when enlarging their works, think it best to add a weaving department. In such cases the large business gains little or no economy in machinery; and even then it generally saves something in building, particularly as regards chimneys, and in the economy of steam power, and in the management and repairs of engines and machinery. Large soft-goods factories have carpenters' and mechanics' shops, which diminish the cost of repairs, and prevent delays from accidents to the plant134 .
Akin to these last, there are a great many advantages which a large factory, or indeed a large business of almost any kind, nearly always has over a small one. A large business buys in great quantities and therefore cheaply; it pays low freights and saves on carriage in many ways, particularly if it has a railway siding. It often sells in large quantities, and thus saves itself trouble; and yet at the same time it gets a good price, because it offers conveniences to the customer by having a large stock from which he can select and at once fill up a varied order; while its reputation gives him confidence. It can spend large sums on advertising by commercial travellers and in other ways; its agents give it trustworthy information on trade and personal matters in distant places, and its own goods advertise one another.
The economies of highly organized buying and selling are among the chief causes of the present tendency towards the fusion of many businesses in the same industry or trade into single huge aggregates; and also of trading federations of various kinds, including German cartels and centralized co-operative associations. They have also always promoted the concentration of business risks in the hands of large capitalists who put out the work to be done by smaller men135 .
§ 3. Next, with regard to the economy of skill. Everything that has been said with regard to the advantages which a large establishment has in being able to afford highly specialized machinery applies equally with regard to highly specialized skill. It can contrive to keep each of its employees constantly engaged in the most difficult work of which he is capable, and yet so to narrow the range of his work that he can attain that facility and excellence which come from long-continued practice. But enough has already been said on the advantage of division of labour: and we may pass to an important though indirect advantage which a manufacturer derives from having a great many men in his employment.
The large manufacturer has a much better chance than a small one has, of getting hold of men with exceptional natural abilities, to do the most difficult part of his work—that on which the reputation of his establishment chiefly depends. This is occasionally important as regards mere handiwork in trades which require much taste and originality, as for instance that of a house decorator, and in those which require exceptionally fine workmanship, as for instance that of a manufacturer of delicate mechanism136 . But in most businesses its chief importance lies in the facilities which it gives to the employer for the selection of able and tried men, men whom he trusts and who trust him, to be his foremen and heads of departments. We are thus brought to the central problem of the modern organization of industry, viz. that which relates to the advantages and disadvantages of the subdivision of the work of business management.
§ 4. The head of a large business can reserve all his strength for the broadest and most fundamental problems of his trade: he must indeed assure himself that his managers, clerks and foremen are the right men for their work, and are doing their work well; but beyond this he need not trouble himself much about details. He can keep his mind fresh and clear for thinking out the most difficult and vital problems of his business; for studying the broader movements of the markets, the yet undeveloped results of current events at home and abroad; and for contriving how to improve the organization of the internal and external relations of his business.
For much of this work the small employer has not the time if he has the ability; he cannot take so broad a survey of his trade, or look so far ahead; he must often be content to follow the lead of others. And he must spend much of his time on work that is below him; for if he is to succeed at all, his mind must be in some respects of a high quality, and must have a good deal of originating and organizing force; and yet he must do much routine work.
On the other hand the small employer has advantages of his own. The master's eye is everywhere; there is no shirking by his foremen or workmen, no divided responsibility, no sending half-understood messages backwards and forwards from one department to another. He saves much of the book-keeping, and nearly all of the cumbrous system of checks that are necessary in the business of a large firm; and the gain from this source is of very great importance in trades which use the more valuable metals and other expensive materials.
And though he must always remain at a great disadvantage in getting information and in making experiments, yet in this matter the general course of progress is on his side. For External economies are constantly growing in importance relatively to Internal in all matters of Trade-knowledge: newspapers, and trade and technical publications of all kinds are perpetually scouting for him and bringing him much of the knowledge he wants—knowledge which a little while ago would have been beyond the reach of anyone who could not afford to have well-paid agents in many distant places. Again, it is to his interest also that the secrecy of business is on the whole diminishing, and that the most important improvements in method seldom remain secret for long after they have passed from the experimental stage. It is to his advantage that changes in manufacture depend less on mere rules of thumb and more on broad developments of scientific principle; and that many of these are made by students in the pursuit of knowledge for its own sake, and are promptly published in the general interest. Although therefore the small manufacturer can seldom be in the front of the race of progress, he need not be far from it, if he has the time and the ability for availing himself of the modern facilities for obtaining knowledge. But it is true that he must be exceptionally strong if he can do this without neglecting the minor but necessary details of the business.
§ 5. In agriculture and other trades in which a man gains no very great new economies by increasing the scale of his production, it often happens that a business remains of about the same size for many years, if not for many generations. But it is otherwise in trades in which a large business can command very important advantages, which are beyond the reach of a small business. A new man, working his way up in such a trade, has to set his energy and flexibility, his industry and care for small details, against the broader economies of his rivals with their larger capital, their higher specialization of machinery and labour, and their larger trade connection. If then he can double his production, and sell at anything like his old rate, he will have more than doubled his profits. This will raise his credit with bankers and other shrewd lenders; and will enable him to increase his business further, and to attain yet further economies, and yet higher profits: and this again will increase his business and so on. It seems at first that no point is marked out at which he need stop. And it is true that, if, as his business increased, his faculties adapted themselves to his larger sphere, as they had done to his smaller; if he retained his originality, and versatility and power of initiation, his perseverance, his tact and his good luck for very many years together; he might then gather into his hands the whole volume of production in his branch of trade for his district. And if his goods were not very difficult of transport, nor of marketing, he might extend this district very wide, and attain something like a limited monopoly; that is, of a monopoly limited by the consideration that a very high price would bring rival producers into the field.
But long before this end is reached, his progress is likely to be arrested by the decay, if not of his faculties, yet of his liking for energetic work. The rise of his firm may be prolonged if he can hand down his business to a successor almost as energetic as himself137 . But the continued very rapid growth of his firm requires the presence of two conditions which are seldom combined in the same industry. There are many trades in which an individual producer could secure much increased "internal" economies by a great increase of his output; and there are many in which he could market that output easily; yet there are few in which he could do both. And this is not an accidental, but almost a necessary result.
For in most of those trades in which the economies of production on a large scale are of first-rate importance, marketing is difficult. There are, no doubt, important exceptions. A producer may, for instance, obtain access to the whole of a large market in the case of goods which are so simple and uniform that they can be sold wholesale in vast quantities. But, most goods of this kind are raw produce; and nearly all the rest are plain and common, such as steel rails or calico; and their production can be reduced to routine, for the very reason that they are plain and common. Therefore in the industries which produce them, no firm can hold its own at all unless equipped with expensive appliances of nearly the latest type for its main work; while subordinate operations can be performed by subsidiary industries; and in short there remains no very great difference between the economies available by a large and by a very large firm; and the tendency of large firms to drive out small ones has already gone so far as to exhaust most of the strength of those forces by which it was originally promoted.
But many commodities with regard to which the tendency to increasing return acts strongly are, more or less, specialities: some of them aim at creating a new want, or at meeting an old want in a new way. Some of them are adapted to special tastes, and can never have a very large market; and some have merits that are not easily tested, and must win their way to general favour slowly. In all such cases the sales of each business are limited, more or less according to circumstances, to the particular market which it has slowly and expensively acquired; and though the production itself might be economically increased very fast, the sale could not.
Lastly, the very conditions of an industry which enable a new firm to attain quickly command over new economies of production, render that firm liable to be supplanted quickly by still younger firms with yet newer methods. Especially where the powerful economies of production on a large scale are associated with the use of new appliances and new methods, a firm which has lost the exceptional energy which enabled it to rise, is likely ere long quickly to decay; and the full life of a large firm seldom lasts very long.
§ 6. The advantages which a large business has over a small one are conspicuous in manufacture, because, as we have noticed, it has special facilities for concentrating a great deal of work in a small area. But there is a strong tendency for large establishments to drive out small ones in many other industries. In particular the retail trade is being transformed, the small shopkeeper is losing ground daily.
Let us look at the advantages which a large retail shop or store has in competing with its smaller neighbours. To begin with, it can obviously buy on better terms, it can get its goods carried more cheaply, and can offer a larger variety to meet the taste of customers. Next, it has a great economy of skill: the small shopkeeper, like the small manufacturer, must spend much of his time in routine work that requires no judgment: whereas the head of a large establishment, and even in some cases his chief assistants, spend their whole time in using their judgment. Until lately these advantages have been generally outweighed by the greater facilities which the small shopkeeper has for bringing his goods to the door of his customers; for humouring their several tastes; and for knowing enough of them individually to be able safely to lend them capital, in the form of selling them goods on credit.
But within recent years there have been many changes all telling on the side of large establishments. The habit of buying on credit is passing away; and the personal relations between shopkeeper and customer are becoming more distant. The first change is a great step forwards: the second is on some accounts to be regretted, but not on all; for it is partly due to the fact that the increase of true self-respect among the wealthier classes is making them no longer care for the subservient personal attentions they used to require. Again, the growing value of time makes people less willing than they were to spend several hours in shopping; they now often prefer to spend a few minutes in writing out a long list of orders from a varied and detailed price-list; and this they are enabled to do easily by the growing facilities for ordering and receiving parcels by post and in other ways. And when they do go shopping, tramcars and local trains are often at hand to take them easily and cheaply to the large central shops of a neighbouring town. All these changes render it more difficult than it was for the small shopkeeper to hold his own even in the provision trade, and others in which no great variety of stock is required.
But in many trades the ever-growing variety of commodities, and those rapid changes of fashion which now extend their baneful influence through almost every rank of society, weight the balance even more heavily against the small dealer, for he cannot keep a sufficient stock to offer much variety of choice, and if he tries to follow any movement of fashion closely, a larger proportion of his stock will be left stranded by the receding tide than in the case of a large shopkeeper. Again, in some branches of the clothing and furniture and other trades the increasing cheapness of machine-made goods is leading people to buy ready-made things from a large store instead of having them made to order by some small maker and dealer in their neighbourhood. Again, the large shopkeeper, not content with receiving travellers from the manufacturers, makes tours either himself or by his agent in the most important manufacturing districts at home and abroad; and he thus often dispenses with middlemen between him and the manufacturer. A tailor with moderate capital shows his customers specimens of many hundreds of the newest cloths, and perhaps orders by telegraph the selected cloth to be sent by parcels' post. Again, ladies often buy their materials direct from the manufacturer, and get them made up by dressmakers who have scarcely any capital. Small shopkeepers seem likely always to retain some hold of the minor repairing trades: and they keep their own fairly well in the sale of perishable food, especially to the working classes, partly in consequence of their being able to sell goods on credit and to collect small debts. In many trades however a firm with a large capital prefers having many small shops to one large one. Buying, and whatever production is desirable, is concentrated under a central management; and exceptional demands are met from a central reserve, so that each branch has large resources, without the expense of keeping a large stock. The branch manager has nothing to divert his attention from his customers; and, if an active man, with direct interest in the success of his branch, may prove himself a formidable rival to the small shopkeeper; as has been shown in many trades connected with clothing and food.
§ 7. We may next consider those industries whose geographical position is determined by the nature of their work.
Country carriers and a few cabmen are almost the only survivals of small industry in the carrying trade. Railways and tramways are constantly increasing in size, and the capital required to work them is increasing at an even greater rate. The growing intricacy and variety of commerce is adding to the advantages which a large fleet of ships under one management derives from its power of delivering goods promptly, and without breach of responsibility, in many different ports; and as regards the vessels themselves time is on the side of large ships, especially in the passenger trade138 . As a consequence the arguments in favour of the State's undertaking business are stronger in some branches of the carrying trade than in any other, except the allied undertakings of carrying away refuse, and bringing in water, gas, etc.139
The contest between large and small mines and quarries has not so clearly marked a tendency. The history of the State management of mines is full of very dark shadows; for the business of mining depends too much on the probity of its managers and their energy and judgment in matters of detail as well as of general principle, to be well managed by State officials: and for the same reason the small mine or quarry may fairly be expected, other things being equal, to hold its own against the large one. But in some cases the cost of deep shafts, of machinery and of establishing means of communication, are too great to be borne by any but a very large business.
In agriculture there is not much division of labour, and there is no production on a very large scale; for a so-called "large farm" does not employ a tenth part of the labour which is collected in a factory of moderate dimensions. This is partly due to natural causes, to the changes of the seasons and to the difficulty of concentrating a great deal of labour in any one place; but it is partly also due to causes connected with varieties of land tenure. And it will be best to postpone discussion of all of them till we come to study demand and supply in relation to land in the sixth Book.
BOOK IV, CHAPTER XII
INDUSTRIAL ORGANIZATION, CONTINUED. BUSINESS MANAGEMENT.
§ 1. Hitherto we have been considering the work of management chiefly in regard to the operations of a manufacturing or other business employing a good deal of manual labour. But we now have to consider more carefully the variety of the functions which business men discharge; the manner in which they are distributed among the heads of a large business, and again between different classes of business which co-operate in allied branches of production and marketing. And incidentally we have to inquire how it occurs that, though in manufacturing at least nearly every individual business, so long as it is well managed, tends to become stronger the larger it has grown; and though primâ facie we might therefore expect to see large firms driving their smaller rivals completely out of many branches of industry, yet they do not in fact do so.
"Business" is taken here broadly to include all provision for the wants of others which is made in the expectation of payment direct or indirect from those who are to be benefited. It is thus contrasted with the provision for his wants which each one makes for himself, and with those kindly services which are prompted by friendship and family affection.
The primitive handicraftsman managed his whole business for himself; but since his customers were with few exceptions his immediate neighbours, since he required very little capital, since the plan of production was arranged for him by custom, and since he had no labour to superintend outside of his own household, these tasks did not involve any very great mental strain. He was far from enjoying unbroken prosperity; war and scarcity were constantly pressing on him and his neighbours, hindering his work and stopping their demand for his wares. But he was inclined to take good and evil fortune, like sunshine and rain, as things beyond his control: his fingers worked on, but his brain was seldom weary.
Even in modern England we find now and then a village artisan who adheres to primitive methods, and makes things on his own account for sale to his neighbours; managing his own business and undertaking all its risks. But such cases are rare: the most striking instances of an adherence to old-fashioned methods of business are supplied by the learned professions; for a physician or a solicitor manages as a rule his own business and does all its work. This plan is not without its disadvantages: much valuable activity is wasted or turned to but slight account by some professional men of first-rate ability, who have not the special aptitude required for obtaining a business connection; they would be better paid, would lead happier lives, and would do more good service for the world if their work could be arranged for them by some sort of a middleman. But yet on the whole things are probably best as they are: there are sound reasons behind the popular instinct which distrusts the intrusion of the middleman in the supply of those services which require the highest and most delicate mental qualities, and which can have their full value only where there is complete personal confidence.
English solicitors however act, if not as employers or undertakers, yet as agents for hiring that branch of the legal profession which ranks highest, and whose work involves the hardest mental strain. Again, many of the best instructors of youth sell their services, not directly to the consumer, but to the governing body of a college or school, or to a head master, who arranges for their purchase: the employer supplies to the teacher a market for his labour; and is supposed to give to the purchaser, who may not be a good judge himself, some sort of guarantee as to the quality of the teaching supplied.
Again, artists of every kind, however eminent, often find it to their advantage to employ someone else to arrange for them with customers; while those of less established repute are sometimes dependent for their living on capitalist traders, who are not themselves artists, but who understand how to sell artistic work to the best advantage.
§ 2. But in the greater part of the business of the modern world the task of so directing production that a given effort may be most effective in supplying human wants has to be broken up and given into the hands of a specialized body of employers, or to use a more general term, of business men. They "adventure" or "undertake" its risks; they bring together the capital and the labour required for the work; they arrange or "engineer" its general plan, and superintend its minor details. Looking at business men from one point of view we may regard them as a highly skilled industrial grade, from another as middlemen intervening between the manual worker and the consumer.
There are some kinds of business men who undertake great risks, and exercise a large influence over the welfare both of the producers and of the consumers of the wares in which they deal, but who are not to any considerable extent direct employers of labour. The extreme type of these is the dealer on the stock exchange or the produce markets, whose daily purchases and sales are of vast dimensions, and who yet has neither factory nor warehouse, but at most an office with a few clerks in it. The good and the evil effects of the action of speculators such as these are however very complex; and we may give our attention at present to those forms of business in which administration counts for most and the subtler forms of speculation for least. Let us then take some illustrations of the more common types of business, and watch the relations in which the undertaking of risks stands to the rest of the work of the business man.
§ 3. The building trade will serve our purpose well, partly because it adheres in some respects to primitive methods of business. Late in the Middle Ages it was quite common for a private person to build a house for himself without the aid of a master builder; and the habit is not even now altogether extinct. A person who undertakes his own building must hire separately all his workmen, he must watch them and check their demands for payment; he must buy his materials from many quarters, and he must hire, or dispense with the use of, expensive machinery. He probably pays more than the current wages; but here others gain what he loses. There is however great waste in the time he spends in bargaining with the men and testing and directing their work by his imperfect knowledge; and again in the time that he spends in finding out what kinds and quantities he wants of different materials, and where to get them best, and so on. This waste is avoided by that division of labour which assigns to the professional builder the task of superintending details, and to the professional architect the task of drawing plans.
The division of labour is often carried still further when houses are built not at the expense of those who are to live in them, but as a building speculation. When this is done on a large scale, as for instance in opening out a new suburb, the stakes at issue are so large as to offer an attractive field to powerful capitalists with a very high order of general business ability, but perhaps with not much technical knowledge of the building trade. They rely on their own judgment for the decision as to what are likely to be the coming relations of demand and supply for different kinds of houses; but they entrust to others the management of details. They employ architects and surveyors to make plans in accordance with their general directions; and then enter into contracts with professional builders for carrying them out. But they themselves undertake the chief risks of the business, and control its general direction.
§ 4. It is well known that this division of responsibility prevailed in the woollen trade just before the beginning of the era of large factories: the more speculative work and the broader risks of buying and selling being taken over by the undertakers, who were not themselves employers of labour; while the detailed work of superintendence and the narrower risks of carrying out definite contracts were handed over to small masters140 . This plan is still extensively followed in some branches of the textile trades, especially those in which the difficulty of forecasting the future is very great. Manchester warehousemen give themselves to studying the movements of fashion, the markets for raw materials, the general state of trade, of the money market and of politics, and all other causes that are likely to influence the prices of different kinds of goods during the coming season; and after employing, if necessary, skilled designers to carry out their ideas (just as the building speculator in the previous case employed architects), they give out to manufacturers in different parts of the world contracts for making the goods on which they have determined to risk their capital.
In the clothing trades especially we see a revival of what has been called the "house industry," which prevailed long ago in the textile industries; that is, the system in which, large undertakers give out work to be done in cottages and very small workshops to persons who work alone or with the aid of some members of their family, or who perhaps employ two or three hired assistants141 . In remote villages in almost every county of England agents of large undertakers come round to give out to the cottagers partially prepared materials for goods of all sorts, but especially clothes such as shirts and collars and gloves; and take back with them the finished goods. It is however in the great capital cities of the world, and in other large towns, especially old towns, where there is a great deal of unskilled and unorganized labour, with a somewhat low physique and morale, that the system is most fully developed, especially in the clothing trades, which employ two hundred thousand people in London alone, and in the cheap furniture trades. There is a continual contest between the factory and the domestic system, now one gaining ground and now the other: for instance just at present the growing use of sewing machines worked by steam power is strengthening the position of the factories in the boot trade; while factories and workshops are getting an increased hold of the tailoring trade. On the other hand the hosiery trade is being tempted back to the dwelling-house by recent improvements in hand knitting machines; and it is possible that new methods of distributing power by gas and petroleum and electric engines may exercise a like influence on many other industries.
Or there may be a movement towards intermediate plans, similar to those which are largely followed in the Sheffield trades. Many cutlery firms for instance put out grinding and other parts of their work, at piece-work prices, to working men who rent the steam power which they require, either from the firm from whom they take their contract or from someone else: these workmen sometimes employing others to help them, sometimes working alone.
Again, the foreign merchant very often has no ships of his own, but gives his mind to studying the course of trade, and undertakes himself its chief risks; while he gets his carrying done for him by men who require more administrative ability, but need not have the same power of forecasting the subtler movements of trade; though it is true that as purchasers of ships they have great and difficult trade risks of their own. Again, the broader risks of publishing a book are borne by the publisher, perhaps in company with the author; while the printer is the employer of labour and supplies the expensive types and machinery required for the business. And a somewhat similar plan is adopted in many branches of the metal trades, and of those which supply furniture, clothing, etc.
Thus there are many ways in which those who undertake the chief risks of buying and selling may avoid the trouble of housing and superintending those who work for them. They all have their advantages; and when the workers are men of strong character, as at Sheffield, the results are on the whole not unsatisfactory. But unfortunately it is often the weakest class of workers, those with the least resource and the least self-control who drift into work of this kind. The elasticity of the system which recommends it to the undertaker, is really the means of enabling him to exercise, if he chooses, an undesirable pressure on those who do his work.
For while the success of a factory depends in a great measure on its having a set of operatives who adhere steadily to it, the capitalist who gives out work to be done at home has an interest in retaining a great many persons on his books; he is tempted to give each of them a little employment occasionally and play them off one against another; and this he can easily do because they do not know one another, and cannot arrange concerted action.
§ 5. When the profits of business are under discussion they are generally connected in people's minds with the employer of labour: "the employer" is often taken as a term practically coextensive with the receiver of business profits. But the instances which we have just considered are sufficient to illustrate the truth that the superintendence of labour is but one side, and often not the most important side of business work; and that the employer who undertakes the whole risks of his business really performs two entirely distinct services on behalf of the community, and requires a twofold ability.
To return to a class of considerations already noticed (IV. XI. 4 and 5), the manufacturer who makes goods not to meet special orders but for the general market, must, in his first rôle as merchant and organizer of production, have a thorough knowledge of things in his own trade. He must have the power of forecasting the broad movements of production and consumption, of seeing where there is an opportunity for supplying a new commodity that will meet a real want or improving the plan of producing an old commodity. He must be able to judge cautiously and undertake risks boldly; and he must of course understand the materials and machinery used in his trade.
But secondly in this rôle of employer he must be a natural leader of men. He must have a power of first choosing his assistants rightly and then trusting them fully; of interesting them in the business and of getting them to trust him, so as to bring out whatever enterprise and power of origination there is in them; while he himself exercises a general control over everything, and preserves order and unity in the main plan of the business.
The abilities required to make an ideal employer are so great and so numerous that very few persons can exhibit them all in a very high degree. Their relative importance however varies with the nature of the industry and the size of the business; and while one employer excels in one set of qualities, another excels in another; scarcely any two owe their success to exactly the same combination of advantages. Some men make their way by the use of none but noble qualities, while others owe their prosperity to qualities in which there is very little that is really admirable except sagacity and strength of purpose.
Such then being the general nature of the work of business management, we have next to inquire what opportunities different classes of people have of developing business ability; and, when they have obtained that, what opportunities they have of getting command over the capital required to give it scope. We may thus come a little closer to the problem stated at the beginning of the chapter, and examine the course of development of a business firm during several consecutive generations. And this inquiry may conveniently be combined with some examination of the different forms of business management. Hitherto we have considered almost exclusively that form in which the whole responsibility and control rests in the hands of a single individual. But this form is yielding ground to others in which the supreme authority is distributed among several partners or even a great number of shareholders. Private firms and joint-stock companies, co-operative societies and public corporations are taking a constantly increasing share in the management of business; and one chief reason of this is that they offer an attractive field to people who have good business abilities, but have not inherited any great business opportunities.
§ 6. It is obvious that the son of a man already established in business starts with very great advantages over others. He has from his youth up special facilities for obtaining the knowledge and developing the faculties that are required in the management of his father's business: he learns quietly and almost unconsciously about men and manners in his father's trade and in those from which that trade buys and to which it sells; he gets to know the relative importance and the real significance of the various problems and anxieties which occupy his father's mind: and he acquires a technical knowledge of the processes and the machinery of the trade142 . Some of what he learns will be applicable only to his father's trade; but the greater part will be serviceable in any trade that is in any way allied with that; while those general faculties of judgment and resource, of enterprise and caution, of firmness and courtesy, which are trained by association with those who control the larger issues of any one trade, will go a long way towards fitting him for managing almost any other trade. Further, the sons of successful business men start with more material capital than almost anyone else except those who by nurture and education are likely to be disinclined for business and unfitted for it: and if they continue their fathers' work, they have also the vantage ground of established trade connections.
It would therefore at first sight seem likely that business men should constitute a sort of caste; dividing out among their sons the chief posts of command, and founding hereditary dynasties, which should rule certain branches of trade for many generations together. But the actual state of things is very different. For when a man has got together a great business, his descendants often fail, in spite of their great advantages, to develop the high abilities and the special turn of mind and temperament required for carrying it on with equal success. He himself was probably brought up by parents of strong earnest character; and was educated by their personal influence and by struggle with difficulties in early life. But his children, at all events if they were born after he became rich, and in any case his grandchildren, are perhaps left a good deal to the care of domestic servants who are not of the same strong fibre as the parents by whose influence he was educated. And while his highest ambition was probably success in business, they are likely to be at least equally anxious for social or academic distinction143 .
For a time indeed all may go well. His sons find a firmly established trade connection, and what is perhaps even more important, a well-chosen staff of subordinates with a generous interest in the business. By mere assiduity and caution, availing themselves of the traditions of the firm, they may hold together for a long time. But when a full generation has passed, when the old traditions are no longer a safe guide, and when the bonds that held together the old staff have been dissolved, then the business almost invariably falls to pieces unless it is practically handed over to the management of new men who have meanwhile risen to partnership in the firm.
But in most cases his descendants arrive at this result by a shorter route. They prefer an abundant income coming to them without effort on their part, to one which though twice as large could be earned only by incessant toil and anxiety; and they sell the business to private persons or a joint-stock company; or they become sleeping partners in it; that is sharing in its risks and in its profits, but not taking part in its management: in either case the active control over their capital falls chiefly into the hands of new men.
§ 7. The oldest and simplest plan for renovating the energies of a business is that of taking into partnership some of its ablest employees. The autocratic owner and manager of a large manufacturing or trading concern finds that, as years go on, he has to delegate more and more responsibility to his chief subordinates; partly because the work to be done is growing heavier, and partly because his own strength is becoming less than it was. He still exercises a supreme control, but much must depend on their energy and probity: so, if his sons are not old enough, or for any other reason are not ready to take part of the burden off his shoulders, he decides to take one of his trusted assistants into partnership: he thus lightens his own labours, at the same time that he secures that the task of his life will be carried on by those whose habits he has moulded, and for whom he has perhaps acquired something like a fatherly affection144 .
But there are now, and there always have been, private partnerships on more equal terms, two or more people of about equal wealth and ability combining their resources for a large and difficult undertaking. In such cases there is often a distinct partition of the work of management: in manufactures for instance one partner will sometimes give himself almost exclusively to the work of buying raw material and selling the finished product, while the other is responsible for the management of the factory: and in a trading establishment one partner will control the wholesale and the other the retail department. In these and other ways private partnership is capable of adapting itself to a great variety of problems: it is very strong and very elastic; it has played a great part in the past, and it is full of vitality now.
§ 8. But from the end of the Middle Ages to the present time there has been in some classes of trades a movement towards the substitution of public joint-stock companies, the shares of which can be sold to anybody in the open market, for private companies, the shares in which are not transferable without the leave of all concerned. The effect of this change has been to induce people, many of whom have no special knowledge of trade, to give their capital into the hands of others employed by them: and there has thus arisen a new distribution of the various parts of the work of business management.
The ultimate undertakers of the risks incurred by a joint-stock company are the shareholders; but as a rule they do not take much active part in engineering the business and controlling its general policy; and they take no part in superintending its details. After the business has once got out of the hands of its original promoters, the control of it is left chiefly in the hands of Directors; who, if the company is a very large one, probably own but a very small proportion of its shares, while the greater part of them have not much technical knowledge of the work to be done. They are not generally expected to give their whole time to it; but they are supposed to bring wide general knowledge and sound judgment to bear on the broader problems of its policy; and at the same time to make sure that the "Managers" of the company are doing their work thoroughly145 . To the Managers and their assistants is left a great part of the work of engineering the business, and the whole of the work of superintending it: but they are not required to bring any capital into it; and they are supposed to be promoted from the lower ranks to the higher according to their zeal and ability. Since the joint-stock companies in the United Kingdom do a very great part of the business of all kinds that is done in the country, they offer very large opportunities to men with natural talents for business management, who have not inherited any material capital, or any business connection.
§ 9. Joint-stock companies have great elasticity and can expand themselves without limit when the work to which they have set themselves offers a wide scope; and they are gaining ground in nearly all directions. But they have one great source of weakness in the absence of any adequate knowledge of the business on the part of the shareholders who undertake its chief risks. It is true that the head of a large private firm undertakes the chief risks of the business, while he entrusts many of its details to others; but his position is secured by his power of forming a direct judgment as to whether his subordinates serve his interests faithfully and discreetly. If those to whom he has entrusted the buying or selling of goods for him take commissions from those with whom they deal, he is in a position to discover and punish the fraud. If they show favouritism and promote incompetent relations or friends of their own, or if they themselves become idle and shirk their work, or even if they do not fulfil the promise of exceptional ability which induced him to give them their first lift, he can discover what is going wrong and set it right.
But in all these matters the great body of the shareholders of a joint-stock company are, save in a few exceptional instances, almost powerless; though a few of the larger shareholders often exert themselves to find out what is going on; and are thus able to exercise an effective and wise control over the general management of the business. It is a strong proof of the marvellous growth in recent times of a spirit of honesty and uprightness in commercial matters, that the leading officers of great public companies yield as little as they do to the vast temptations to fraud which lie in their way. If they showed an eagerness to avail themselves of opportunities for wrong-doing at all approaching that of which we read in the commercial history of earlier civilization, their wrong uses of the trusts imposed in them would have been on so great a scale as to prevent the development of this democratic form of business. There is every reason to hope that the progress of trade morality will continue, aided in the future as it has been in the past, by a diminution of trade secrecy and by increased publicity in every form; and thus collective and democratic forms of business management may be able to extend themselves safely in many directions in which they have hitherto failed, and may far exceed the great services they already render in opening a large career to those who have no advantages of birth.
The same may be said of the undertakings of Governments imperial and local: they also may have a great future before them, but up to the present time the tax-payer who undertakes the ultimate risks has not generally succeeded in exercising an efficient control over the businesses, and in securing officers who will do their work with as much energy and enterprise as is shown in private establishments.
The problems of large joint-stock company administration, as well as of Governmental business, involve however many complex issues into which we cannot enter here. They are urgent, because very large businesses have recently increased fast, though perhaps not quite so fast as is commonly supposed. The change has been brought about chiefly by the development of processes and methods in manufacture and mining, in transport and banking, which are beyond the reach of any but very large capitals; and by the increase in the scope and functions of markets, and in the technical facilities for handling large masses of goods. The democratic element in Governmental enterprise was at first almost wholly vivifying: but experience shows creative ideas and experiments in business technique, and in business organization, to be very rare in Governmental undertakings, and not very common in private enterprises which have drifted towards bureaucratic methods as the result of their great age and large size. A new danger is thus threatened by the narrowing of the field of industry which is open to the vigorous initiative of smaller businesses.
Production on the largest scale of all is to be seen chiefly in the United States, where giant businesses, with some touch of monopoly, are commonly called "trusts." Some of these trusts have grown from a single root. But most of them have been developed by the amalgamation of many independent businesses; and a first step towards this combination was generally an association, or "cartel" to use a German term, of a rather loose kind.
§ 10. The system of co-operation aims at avoiding the evils of these two methods of business management. In that ideal form of co-operative society, for which many still fondly hope, but which as yet has been scantily realized in practice, a part or the whole of those shareholders who undertake the risks of the business are themselves employed by it. The employees, whether they contribute towards the material capital of the business or not, have a share in its profits, and some power of voting at the general meetings at which the broad lines of its policy are laid down, and the officers appointed who are to carry that policy into effect. They are thus the employers and masters of their own managers and foremen; they have fairly good means of judging whether the higher work of engineering the business is conducted honestly and efficiently, and they have the best possible opportunities for detecting any laxity or incompetence in its detailed administration. And lastly they render unnecessary some of the minor work of superintendence that is required in other establishments; for their own pecuniary interests and the pride they take in the success of their own business make each of them averse to any shirking of work either by himself or by his fellow-workmen.
But unfortunately the system has very great difficulties of its own. For human nature being what it is, the employees themselves are not always the best possible masters of their own foremen and managers; jealousies and frettings at reproof are apt to act like sand, that has got mixed with the oil in the bearings of a great and complex machinery. The hardest work of business management is generally that which makes the least outward show; those who work with their hands are apt to underrate the intensity of the strain involved in the highest work of engineering the business, and to grudge its being paid for at anything like as high a rate as it could earn elsewhere. And in fact the managers of a co-operative society seldom have the alertness, the inventiveness and the ready versatility of the ablest of those men who have been selected by the struggle for survival, and who have been trained by the free and unfettered responsibility of private business. Partly for these reasons the co-operative system has seldom been carried out in its entirety; and its partial application has not yet attained a conspicuous success except in retailing commodities consumed by working men. But within the last few years more hopeful signs have appeared of the success of bonâ fide productive associations, or "co-partnerships."
Those working men indeed whose tempers are strongly individualistic, and whose minds are concentrated almost wholly on their own affairs, will perhaps always find their quickest and most congenial path to material success by commencing business as small independent "undertakers," or by working their way upwards in a private firm or a public company. But co-operation has a special charm for those in whose tempers the social element is stronger, and who desire not to separate themselves from their old comrades, but to work among them as their leaders. Its aspirations may in some respects be higher than its practice; but it undoubtedly does rest in a great measure on ethical motives. The true co-operator combines a keen business intellect with a spirit full of an earnest faith; and some co-operative societies have been served excellently by men of great genius both mentally and morally—men who for the sake of the co-operative faith that is in them, have worked with great ability and energy, and with perfect uprightness, being all the time content with lower pay than they could have got as business managers on their own account or for a private firm. Men of this stamp are more common among the officers of co-operative societies than in other occupations; and though they are not very common even there, yet it may be hoped that the diffusion of a better knowledge of the true principles of co-operation, and the increase of general education, are every day fitting a larger number of co-operators for the complex problems of business management.
Meanwhile many partial applications of the co-operative principle are being tried under various conditions, each of which presents some new aspect of business management. Thus under the scheme of Profit-Sharing, a private firm while retaining the unfettered management of its business, pays its employees the full market rate of wages, whether by Time or Piece-work, and agrees in addition to divide among them a certain share of any profits that may be made above a fixed minimum; it being hoped that the firm will find a material as well as a moral reward in the diminution of friction, in the increased willingness of its employees to go out of their way to do little things that may be of great benefit comparatively to the firm, and lastly in attracting to itself workers of more than average ability and industry146 .
Another partially co-operative scheme is that of some Oldham cotton-mills: they are really joint-stock companies; but among their shareholders are many working men who have a special knowledge of the trade, though they often prefer not to be employed in the mills of which they are part owners. And another is that of the Productive establishments, owned by the main body of co-operative stores, through their agents, the co-operative Wholesale Societies. In the Scotch Wholesale, but not in the English, the workers, as such, have some share in the management and in the profits of the works.
At a later stage we shall have to study all those various co-operative and semi-co-operative forms of business more in detail, and to inquire into the causes of their success or failure in different classes of business, wholesale and retail, agricultural, manufacturing and trading. But we must not pursue this inquiry further now. Enough has been said to show that the world is only just beginning to be ready for the higher work of the co-operative movement; and that its many different forms may therefore be reasonably expected to attain a larger success in the future than in the past; and to offer excellent opportunities for working men to practise themselves in the work of business management, to grow into the trust and confidence of others, and gradually rise to posts in which their business abilities will find scope.
§ 11. In speaking of the difficulty that a working man has in rising to a post in which he can turn his business ability to full account, the chief stress is commonly laid upon his want of capital: but this is not always his chief difficulty. For instance the co-operative distributive societies have accumulated a vast capital, on which they find it difficult to get a good rate of interest; and which they would be rejoiced to lend to any set of working men who could show that they had the capacity for dealing with difficult business problems. Co-operators who have firstly a high order of business ability and probity, and secondly the "personal capital" of a great reputation among their fellows for these qualities, will have no difficulty in getting command of enough material capital for a considerable undertaking: the real difficulty is to convince a sufficient number of those around them that they have these rare qualities. And the case is not very different when an individual endeavours to obtain from the ordinary sources the loan of the capital required to start him in business.
It is true that in almost every business there is a constant increase in the amount of capital required to make a fair start; but there is a much more rapid increase in the amount of capital which is owned by people who do not want to use it themselves, and are so eager to lend it out that they will accept a constantly lower and lower rate of interest for it. Much of this capital passes into the hands of bankers who promptly lend it to anyone of whose business ability and honesty they are convinced. To say nothing of the credit that can be got in many businesses from those who supply the requisite raw material or stock in trade, the opportunities for direct borrowing are now so great that a moderate increase in the amount of capital required for a start in business is no very serious obstacle in the way of a person who has once got over the initial difficulty of earning a reputation for being likely to use it well.
But perhaps a greater though less conspicuous hindrance to the rise of the working man is the growing complexity of business. The head of a business has now to think of many things about which he never used to trouble himself in earlier days; and these are just the kind of difficulties for which the training of the workshop affords the least preparation. Against this must be set the rapid improvement of the education of the working man not only at school, but what is more important, in after life by newspapers, and from the work of co-operative societies and trades-unions, and in other ways.
About three-fourths of the whole population of England belong to the wage-earning classes; and at all events when they are well fed, properly housed and educated, they have their fair share of that nervous strength which is the raw material of business ability. Without going out of their way they are all consciously or unconsciously competitors for posts of business command. The ordinary workman if he shows ability generally becomes a foreman, from that he may rise to be a manager, and to be taken into partnership with his employer. Or having saved a little of his own he may start one of those small shops which still can hold their own in a working man's quarter, stock it chiefly on credit, and let his wife attend to it by day, while he gives his evenings to it. In these or in other ways he may increase his capital till he can start a small workshop, or factory. Once having made a good beginning he will find the banks eager to give him generous credit. He must have time; and since he is not likely to start in business till after middle age he must have a long as well as a strong life; but if he has this and has also "patience, genius and good fortune" he is pretty sure to command a goodly capital before he dies147 . In a factory those who work with their hands have better opportunities of rising to posts of command than the book-keepers and many others to whom social tradition has assigned a higher place. But in trading concerns it is otherwise; what manual work is done in them has as a rule no educating character, while the experience of the office is better adapted for preparing a man to manage a commercial than a manufacturing business.
There is then on the whole a broad movement from below upwards. Perhaps not so many as formerly rise at once from the position of working men to that of employers: but there are more who get on sufficiently far to give their sons a good chance of attaining to the highest posts. The complete rise is not so very often accomplished in one generation; it is more often spread over two; but the total volume of the movement upwards is probably greater than it has ever been. And perhaps it is better for society as a whole that the rise should be distributed over two generations. The workmen who at the beginning of the last century rose in such large numbers to become employers were seldom fit for posts of command: they were too often harsh and tyrannical; they lost their self-control, and were neither truly noble nor truly happy; while their children were often haughty, extravagant, and self-indulgent, squandering their wealth on low and vulgar amusements, having the worst faults of the older aristocracy without their virtues. The foreman or superintendent who has still to obey as well as to command, but who is rising and sees his children likely to rise further, is in some ways more to be envied than the small master. His success is less conspicuous, but his work is often higher and more important for the world, while his character is more gentle and refined and not less strong. His children are well-trained; and if they get wealth, they are likely to make a fairly good use of it.
It must however be admitted that the rapid extension of vast businesses, and especially of joint-stock companies in many branches of industry, is tending to make the able and thrifty workman, with high ambitions for his sons, seek to put them to office work. There they are in danger of losing the physical vigour and the force of character which attaches to constructive work with the hands, and to become commonplace members of the lower middle classes. But, if they can keep their force unimpaired, they are likely to become leaders in the world, though not generally in their father's industry; and therefore without the benefit of specially appropriate traditions and aptitude.
§ 12. When a man of great ability is once at the head of an independent business, whatever be the route by which he has got there, he will with moderate good fortune soon be able to show such evidence of his power of turning capital to good account as to enable him to borrow in one way or another almost any amount that he may need. Making good profits he adds to his own capital, and this extra capital of his own is a material security for further borrowings; while the fact that he has made it himself tends to make lenders less careful to insist on a full security for their loans. Of course fortune tells for much in business: a very able man may find things going against him; the fact that he is losing money may diminish his power of borrowing. If he is working partly on borrowed capital, it may even make those who have lent it refuse to renew their loans, and may thus cause him to succumb to what would have been but a passing misfortune, if he had been using no capital but his own148 : and in fighting his way upwards he may have a chequered life full of great anxieties, and even misfortunes. But he can show his ability in misfortune as well as in success: human nature is sanguine; and it is notorious that men are abundantly willing to lend to those who have passed through commercial disaster without loss to their business reputation. Thus, in spite of vicissitudes, the able business man generally finds that in the long run the capital at his command grows in proportion to his ability.
Meanwhile, as we have seen, he, who with small ability is in command of a large capital, speedily loses it: he may perhaps be one who could and would have managed a small business with credit, and left it stronger than he had found it: but if he has not the genius for dealing with great problems, the larger it is the more speedily will he break it up. For as a rule a large business can be kept going only by transactions which, after allowing for ordinary risks, leave but a very small percentage of gain. A small profit on a large turn-over quickly made, will yield a rich income to able men: and in those businesses which are of such a nature as to give scope to very large capitals, competition generally cuts the rate of profits on the turn-over very fine. A village trader may make five per cent. less profits on his turn-over than his able rival, and yet be able to hold his head above water. But in those large manufacturing and trading businesses in which there is a quick return and a straightforward routine, the whole profits on the turn-over are often so very small that a person who falls behind his rivals by even a small percentage loses a large sum at every turn-over; while in those large businesses which are difficult and do not rely on routine, and which afford high profits on the turn-over to really able management, there are no profits at all to be got by anyone who attempts the task with only ordinary ability.
These two sets of forces, the one increasing the capital at the command of able men, and the other destroying the capital that is in the hands of weaker men, bring about the result that there is a far more close correspondence between the ability of business men and the size of the businesses which they own than at first sight would appear probable. And when to this fact we add all the many routes, which we have already discussed, by which a man of great natural business ability can work his way up high in some private firm or public company, we may conclude that wherever there is work on a large scale to be done in such a country as England, the ability and the capital required for it are pretty sure to be speedily forthcoming.
Further, just as industrial skill and ability are getting every day to depend more and more on the broad faculties of judgment, promptness, resource, carefulness and steadfastness of purpose—faculties which are not specialized to any one trade, but which are more or less useful in all—so it is with regard to business ability. In fact business ability consists more of these non-specialized faculties than do industrial skill and ability in the lower grades: and the higher the grade of business ability the more various are its applications.
Since then business ability in command of capital moves with great ease horizontally from a trade which is overcrowded to one which offers good openings for it: and since it moves with great ease vertically, the abler men rising to the higher posts in their own trade, we see, even at this early stage of our inquiry, some good reasons for believing that in modern England the supply of business ability in command of capital accommodates itself, as a general rule, to the demand for it; and thus has a fairly defined supply price.
Finally, we may regard this supply price of business ability in command of capital as composed of three elements. The first is the supply price of capital; the second is the supply price of business ability and energy; and the third is the supply price of that organization by which the appropriate business ability and the requisite capital are brought together. We have called the price of the first of these three elements interest; we may call the price of the second taken by itself net earnings of management, and that of the second and third, taken together, gross earnings of management.
BOOK IV, CHAPTER XIII
CONCLUSION. CORRELATION OF THE TENDENCIES TO INCREASING AND TO DIMINISHING RETURN.
§ 1. At the beginning of this Book we saw how the extra return of raw produce which nature affords to an increased application of capital and labour, other things being equal, tends in the long run to diminish. In the remainder of the Book and especially in the last four chapters we have looked at the other side of the shield, and seen how man's power of productive work increases with the volume of the work that he does. Considering first the causes that govern the supply of labour, we saw how every increase in the physical, mental and moral vigour of a people makes them more likely, other things being equal, to rear to adult age a large number of vigorous children. Turning next to the growth of wealth, we observed how every increase of wealth tends in many ways to make a greater increase more easy than before. And lastly we saw how every increase of wealth and every increase in the numbers and intelligence of the people increased the facilities for a highly developed industrial organization, which in its turn adds much to the collective efficiency of capital and labour.
Looking more closely at the economies arising from an increase in the scale of production of any kind of goods, we found that they fell into two classes—those dependent on the general development of the industry, and those dependent on the resources of the individual houses of business engaged in it and the efficiency of their management; that is, into external and internal economies.
We saw how these latter economies are liable to constant fluctuations so far as any particular house is concerned. An able man, assisted perhaps by some strokes of good fortune, gets a firm footing in the trade, he works hard and lives sparely, his own capital grows fast, and the credit that enables him to borrow more capital grows still faster; he collects around him subordinates of more than ordinary zeal and ability; as his business increases they rise with him, they trust him and he trusts them, each of them devotes himself with energy to just that work for which he is specially fitted, so that no high ability is wasted on easy work, and no difficult work is entrusted to unskilful hands. Corresponding to this steadily increasing economy of skill, the growth of his business brings with it similar economies of specialized machines and plant of all kinds; every improved process is quickly adopted and made the basis of further improvements; success brings credit and credit brings success; credit and success help to retain old customers and to bring new ones; the increase of his trade gives him great advantages in buying; his goods advertise one another, and thus diminish his difficulty in finding a vent for them. The increase in the scale of his business increases rapidly the advantages which he has over his competitors, and lowers the price at which he can afford to sell. This process may go on as long as his energy and enterprise, his inventive and organizing power retain their full strength and freshness, and so long as the risks which are inseparable from business do not cause him exceptional losses; and if it could endure for a hundred years, he and one or two others like him would divide between them the whole of that branch of industry in which he is engaged. The large scale of their production would put great economies within their reach; and provided they competed to their utmost with one another, the public would derive the chief benefit of these economies, and the price of the commodity would fall very low.
But here we may read a lesson from the young trees of the forest as they struggle upwards through the benumbing shade of their older rivals. Many succumb on the way, and a few only survive; those few become stronger with every year, they get a larger share of light and air with every increase of their height, and at last in their turn they tower above their neighbours, and seem as though they would grow on for ever, and for ever become stronger as they grow. But they do not. One tree will last longer in full vigour and attain a greater size than another; but sooner or later age tells on them all. Though the taller ones have a better access to light and air than their rivals, they gradually lose vitality; and one after another they give place to others, which, though of less material strength, have on their side the vigour of youth.
And as with the growth of trees, so was it with the growth of businesses as a general rule before the great recent development of vast joint-stock companies, which often stagnate, but do not readily die. Now that rule is far from universal, but it still holds in many industries and trades. Nature still presses on the private business by limiting the length of the life of its original founders, and by limiting even more narrowly that part of their lives in which their faculties retain full vigour. And so, after a while, the guidance of the business falls into the hands of people with less energy and less creative genius, if not with less active interest in its prosperity. If it is turned into a joint-stock company, it may retain the advantages of division of labour, of specialized skill and machinery: it may even increase them by a further increase of its capital; and under favourable conditions it may secure a permanent and prominent place in the work of production. But it is likely to have lost so much of its elasticity and progressive force, that the advantages are no longer exclusively on its side in its competition with younger and smaller rivals.
When therefore we are considering the broad results which the growth of wealth and population exert on the economies of production, the general character of our conclusions is not very much affected by the facts that many of these economies depend directly on the size of the individual establishments engaged in the production, and that in almost every trade there is a constant rise and fall of large businesses, at any one moment some firms being in the ascending phase and others in the descending. For in times of average prosperity decay in one direction is sure to be more than balanced by growth in another.
Meanwhile an increase in the aggregate scale of production of course increases those economies, which do not directly depend on the size of individual houses of business. The most important of these result from the growth of correlated branches of industry which mutually assist one another, perhaps being concentrated in the same localities, but anyhow availing themselves of the modern facilities for communication offered by steam transport, by the telegraph and by the printing-press. The economies arising from such sources as this, which are accessible to any branch of production, do not depend exclusively upon its own growth: but yet they are sure to grow rapidly and steadily with that growth; and they are sure to dwindle in some, though not in all respects, if it decays.
§ 2. These results will be of great importance when we come to discuss the causes which govern the supply price of a commodity. We shall have to analyse carefully the normal cost of producing a commodity, relatively to a given aggregate volume of production; and for this purpose we shall have to study the expenses of a representative producer for that aggregate volume. On the one hand we shall not want to select some new producer just struggling into business, who works under many disadvantages, and has to be content for a time with little or no profits, but who is satisfied with the fact that he is establishing a connection and taking the first steps towards building up a successful business; nor on the other hand shall we want to take a firm which by exceptionally long-sustained ability and good fortune has got together a vast business, and huge well-ordered workshops that give it a superiority over almost all its rivals. But our representative firm must be one which has had a fairly long life, and fair success, which is managed with normal ability, and which has normal access to the economies, external and internal, which belong to that aggregate volume of production; account being taken of the class of goods produced, the conditions of marketing them and the economic environment generally.
Thus a representative firm is in a sense an average firm. But there are many ways in which the term "average" might be interpreted in connection with a business. And a Representative firm is that particular sort of average firm, at which we need to look in order to see how far the economies, internal and external, of production on a large scale have extended generally in the industry and country in question. We cannot see this by looking at one or two firms taken at random: but we can see it fairly well by selecting, after a broad survey, a firm, whether in private or joint-stock management (or better still, more than one), that represents, to the best of our judgment, this particular average.
The general argument of the present Book shows that an increase in the aggregate volume of production of anything will generally increase the size, and therefore the internal economies possessed by such a representative firm; that it will always increase the external economies to which the firm has access; and thus will enable it to manufacture at a less proportionate cost of labour and sacrifice than before.
In other words, we say broadly that while the part which nature plays in production shows a tendency to diminishing return, the part which man plays shows a tendency to increasing return. The law of increasing return may be worded thus:—An increase of labour and capital leads generally to improved organization, which increases the efficiency of the work of labour and capital.
Therefore in those industries which are not engaged in raising raw produce an increase of labour and capital generally gives a return increased more than in proportion; and further this improved organization tends to diminish or even override any increased resistance which nature may offer to raising increased amounts of raw produce. If the actions of the laws of increasing and diminishing return are balanced we have the law of constant return, and an increased produce is obtained by labour and sacrifice increased just in proportion.
For the two tendencies towards increasing and diminishing return press constantly against one another. In the production of wheat and wool, for instance, the latter tendency has almost exclusive sway in an old country, which cannot import freely. In turning the wheat into flour, or the wool into blankets, an increase in the aggregate volume of production brings some new economies, but not many; for the trades of grinding wheat and making blankets are already on so great a scale that any new economies that they may attain are more likely to be the result of new inventions than of improved organization. In a country however in which the blanket trade is but slightly developed, these latter may be important; and then it may happen that an increase in the aggregate production of blankets diminishes the proportionate difficulty of manufacturing by just as much as it increases that of raising the raw material. In that case the actions of the laws of diminishing and of increasing return would just neutralize one another; and blankets would conform to the law of constant return. But in most of the more delicate branches of manufacturing, where the cost of raw material counts for little, and in most of the modern transport industries the law of increasing return acts almost unopposed149 .
Increasing Return is a relation between a quantity of effort and sacrifice on the one hand, and a quantity of product on the other. The quantities cannot be taken out exactly, because changing methods of production call for machinery, and for unskilled and skilled labour of new kinds and in new proportions. But, taking a broad view, we may perhaps say vaguely that the output of a certain amount of labour and capital in an industry has increased by perhaps a quarter or a third in the last twenty years. To measure outlay and output in terms of money is a tempting, but a dangerous resource: for a comparison of money outlay with money returns is apt to slide into an estimate of the rate of profit on capital150 .
§ 3. We may now sum up provisionally the relations of industrial expansion to social wellbeing. A rapid growth of population has often been accompanied by unhealthy and enervating habits of life in overcrowded towns. And sometimes it has started badly, outrunning the material resources of the people, causing them with imperfect appliances to make excessive demands on the soil; and so to call forth the stern action of the law of diminishing return as regards raw produce, without having the power of minimizing its effects. Having thus begun with poverty, an increase in numbers may go on to its too frequent consequences in that weakness of character which unfits a people for developing a highly organized industry.
These are serious perils: but yet it remains true that the collective efficiency of a people with a given average of individual strength and energy may increase more than in proportion to their numbers. If they can for a time escape from the pressure of the law of diminishing return by importing food and other raw produce on easy terms; if their wealth is not consumed in great wars, and increases at least as fast as their numbers; and if they avoid habits of life that would enfeeble them; then every increase in their numbers is likely for the time to be accompanied by a more than proportionate increase in their power of obtaining material goods. For it enables them to secure the many various economies of specialized skill and specialized machinery, of localized industries and production on a large scale: it enables them to have increased facilities of communication of all kinds; while the very closeness of their neighbourhood diminishes the expense of time and effort involved in every sort of traffic between them, and gives them new opportunities of getting social enjoyments and the comforts and luxuries of culture in every form. No doubt deduction must be made for the growing difficulty of finding solitude and quiet and even fresh air: but there is in most cases some balance of good151 .
Taking account of the fact that an increasing density of population generally brings with it access to new social enjoyments we may give a rather broader scope to this statement and say:—An increase of population accompanied by an equal increase in the material sources of enjoyment and aids to production is likely to lead to a more than proportionate increase in the aggregate income of enjoyment of all kinds; provided firstly, an adequate supply of raw produce can be obtained without great difficulty, and secondly there is no such overcrowding as causes physical and moral vigour to be impaired by the want of fresh air and light and of healthy and joyous recreation for the young.
The accumulated wealth of civilized countries is at present growing faster than the population: and though it may be true that the wealth per head would increase somewhat faster if the population did not increase quite so fast; yet as a matter of fact an increase of population is likely to continue to be accompanied by a more than proportionate increase of the material aids to production: and in England at the present time, with easy access to abundant foreign supplies of raw material, an increase of population is accompanied by a more than proportionate increase of the means of satisfying human wants other than the need for light, fresh air, etc. Much of this increase is however attributable not to the increase of industrial efficiency but to the increase of wealth by which it is accompanied: and therefore it does not necessarily benefit those who have no share in that wealth. And further, England's foreign supplies of raw produce may at any time be checked by changes in the trade regulations of other countries, and may be almost cut off by a great war, while the naval and military expenditure which would be necessary to make the country fairly secure against this last risk, would appreciably diminish the benefits that she derives from the action of the law of increasing return.
[1.]Labour is classed as economic when it is "undergone partly or wholly with a view to some good other than the pleasure directly derived from it." See p. 65 and footnote. Such labour with the head as does not tend directly or indirectly to promote material production, as for instance the work of the schoolboy at his tasks, is left out of account, so long as we are confining our attention to production in the ordinary sense of the term. From some points of view, but not from all, the phrase Land, Labour, Capital would be more symmetrical if labour were interpreted to mean the labourers, i.e. mankind. See Walras, Économic Politique Pure, Leçon 17, and Prof. Fisher, Economic Journal, VI. p. 529.
[2.]We have seen (p. 124) that, if a person makes the whole of his purchases at the price which he would be just willing to pay for his last purchases, he gains a surplus of satisfaction on his earlier purchases; since he gets them for less than he would have paid rather than go without them. So, if the price paid to him for doing any work is an adequate reward for that part which he does most unwillingly; and if, as generally happens, the same payment is given for that part of the work which he does less unwillingly and at less real cost to himself; then from that part he obtains a producer's surplus. Some difficulties connected with this notion are considered in Appendix K.
[3.]Theory of Political Economy, Ch. V. This doctrine has been emphasized and developed in much detail by Austrian and American economists.
[4.]See above III. III. 4.
[5.]See Book II. Chapter III.
[6.]In Ricardo's famous phrase "the original and indestructible powers of the soil." Von Thünen, in a noteworthy discussion of the basis of the theory of rent, and of the positions which Adam Smith and Ricardo took with regard to it, speaks of "Der Boden an sich"; a phrase which unfortunately cannot be translated, but which means the soil as it would be by itself, if not altered by the action of man (Der Isolirte Staat, I. i. 5).
[7.]But see the latter part of IV. III. 8; also IV. XIII. 2.
[8.]Increasing return in the earlier stages arises partly from economy of organization, similar to that which gives an advantage to manufacture on a large scale. But it is also partly due to the fact that where land is very slightly cultivated the farmer's crops are apt to be smothered by nature's crops of weeds. The relation between Diminishing and Increasing Return is discussed further in the last chapter of this Book.
[9.]"The land was not able to bear them, that they might dwell together: for their substance was great, so that they could not dwell together." Genesis xiii. 6.
[10.]As to this term see the Note at the end of the chapter.
[11.]Ricardo was well aware of this: though he did not emphasize it enough. Those opponents of his doctrine who have supposed that it has no application to places where all the land pays a rent, have mistaken the nature of his argument.
[12.]An illustration from recorded experiments may help to make clearer the notion of the return to a marginal dose of capital and labour. The Arkansas experimental station (see The Times, 18 Nov. 1889) reported that four plots of an acre each were treated exactly alike except in the matter of ploughing and harrowing, with the following result:—
|Plot.||Cultivation.||Crop yields bushels per acre.|
|2||Ploughed once and harrowed once||18½|
|3||Ploughed twice and harrowed once||21 2/3|
|4||Ploughed twice and harrowed twice||23¼|
[13.]Let us seek a graphical illustration. It is to be remembered that graphical illustrations are not proofs. They are merely pictures corresponding very roughly to the main conditions of certain real problems. They obtain clearness of outline, by leaving out of account many considerations which vary from one practical problem to another, and of which the farmer must take full account in his own special case. If on any given field there were expended a capital of £50, a certain amount of produce would be raised from it: a certain amount larger than the former would be raised if there were expended on it a capital of £51. The difference between these two amounts may be regarded as the produce due to the fifty-first pound; and if we suppose the capital to be applied in successive doses of £1 each we may speak of this difference as the produce due to the fifty-first dose. Let the doses be represented in order by successive equal divisions of the line OD. Let there now be drawn from the division of this line representing the fifty-first dose M, a line MP at right angles to OD, in thickness equal to the length of one of the divisions, and such that its length represents the amount of the produce due to the fifty-first dose. Suppose this done for each separate division up to that corresponding to the last dose which it is found profitable to put on the land. Let this last dose be the 110th at D, and DC the corresponding return that only just remunerates the farmer. The extremities of such lines will lie on a curve APC. The gross produce will be represented by the sum of these lines: i.e., since the thickness of each line is equal to the length of the division on which it stands, by the area ODCA. Let CGH be drawn parallel to DO, cutting PM in G; then MG is equal to CD; and since DC just remunerates the farmer for one dose, MG will just remunerate him for another: and so for all the portions of the thick vertical lines cut off between OD and HC. Therefore the sum of these, that is, the area ODCH, represents the share of the produce that is required to remunerate him; while the remainder, AHGCPA, is the surplus produce, which under certain conditions becomes the rent.
[14.]That is, we may substitute (fig. 11) the dotted line BA' for BA and regard A'BPC as the typical curve for the return to capital and labour applied in English agriculture. No doubt crops of wheat and some other annuals cannot be raised at all without some considerable labour. But natural grasses which sow themselves will yield a good return of rough cattle to scarcely any labour.
[15.]This case may be represented by diagrams. If the produce rises in real value in the ratio of OH' to OH (so that the amount required to remunerate the farmer for a dose of capital and labour has fallen from OH to OH'), the surplus produce rises only to AH'C', which is not very much greater than its old amount AHC, fig. 12, representing the first case.
[16.]In such a case as this the earlier doses are pretty sure to be sunk in the land; and the actual rent paid, if the land is hired out, will then include profits on them in addition to the surplus produce or true rent thus shown. Provision can easily be made in the diagrams for the returns due to the landlord's capital.
[17.]Of course his return may diminish and then increase and then diminish again; and yet again increase when he is in a position to carry out some further extensive change, as was represented by fig. 11. But more extreme instances, of the kind represented by fig. 15, are not very rare.
[18.]If the price of produce is such that an amount of it OH (figs. 12, 13, 14) is required to pay the cultivator for one dose of capital and labour, the cultivation will be carried as far as D; and the produce raised, AODC, will be greatest in fig. 12, next greatest in fig. 13, and least in fig. 14. But if the demand for agricultural produce so rises that OH' is enough to repay the cultivator for a dose, the cultivation will be carried as far as D', and the produce raised will be AOD'C', which is greatest in fig. 14, next in fig. 13, and least in fig. 12. The contrast would have been even stronger if we had considered the surplus produce which remains after deducting what is sufficient to repay the cultivator, and which becomes under some conditions the rent of the land. For this is AHCin figs. 12 and 13 in the first case and AH'C' in the second; while in fig. 14 it is in the first case the excess of AODCPA over ODCH, i.e. the excess of PEC over AHE; and in the second case the excess of PE'C' over AH'E'.
[19.]Rogers (Six Centuries of Work and Wages, p. 73) calculates that rich meadow had about the same value, estimated in grain, five or six centuries ago as it has now; but that the value of arable land, similarly estimated, has increased about fivefold in the same time. This is partly due to the great importance of hay at a time when roots and other modern kinds of winter food for cattle were unknown.
[20.]Thus we may compare two pieces of land represented in figs. 16 and 17, with regard to which the law of diminishing return acts in a similar way, so that their produce curves have similar shapes, but the former has a higher fertility than the other for all degrees of intensity of cultivation. The value of the land may generally be represented by its surplus produce or rent, which is in each case represented by AHC when OH is required to repay a dose of capital and labour; and by AH'C' when the growth of numbers and wealth have made OH' sufficient. It is clear that AH'C' in fig. 17 bears a more favourable comparison with AH'C' in fig. 16 than does AHC in fig. 17 with AHC in fig. 16. In the same way, though not to the same extent, the total produce AOD'C' in fig. 17 bears a more favourable comparison with AOD'C' in fig. 16, than does AODC in fig. 17 with AODC in fig. 16. (It is ingeniously argued in Wicksteed's Coordinates of Laws of Distribution, pp. 51, 2 that rent may be negative. Of course taxes may absorb rent: but land which will not reward the plough will grow trees or rough grass. See above, pp. 157, 8.)
|Class I.||Class II.||Class III.||Class IV.||Class V.|
[21.]As Roscher says (Political Economy, Sect. CLV.), "In judging Ricardo, it must not be forgotten that it was not his intention to write a text-book on the science of Political Economy, but only to communicate to those versed in it the result of his researches in as brief a manner as possible. Hence he writes so frequently making certain assumptions, and his words are to be extended to other cases only after due consideration, or rather re-written to suit the changed case."
[22.]Carey claims to have proved that "in every quarter of the world cultivation has commenced on the sides of the hills where the soil was poorest, and where the natural advantages of situation were the least. With the growth of wealth and population, men have been seen descending from the high lands bounding the valley on either side, and coming together at its feet." (Principles of Social Science, chap. IV. § 4.) He has even argued that whenever a thickly peopled country is laid waste, "whenever population, wealth, and the power of association decline, it is the rich soil that is abandoned by men who fly again to the poor ones" (Ib. ch. V. § 3); the rich soils being rendered difficult and dangerous by the rapid growth of jungles which harbour wild beasts and banditti, and perhaps by malaria. The experience of more recent settlers in South Africa and elsewhere does not however generally support his conclusions, which are indeed based largely on facts relating to warm countries. But much of the apparent attractiveness of tropical countries is delusive: they would give a very rich return to hard work: but hard work in them is impossible at present, though some change in this respect may be made by the progress of medical and especially bacteriological science. A cool refreshing breeze is as much a necessary of vigorous life as food itself. Land that offers plenty of food but whose climate destroys energy, is not more productive of the raw material of human wellbeing, than land that supplies less food but has an invigorating climate.
[23.]In a new country an important form of this assistance is to enable him to venture on rich land that he would have otherwise shunned, through fear of enemies or of malaria.
[24.]As Ricardo says (Principles, chap. II.) "The compensation given (by the lessee) for the mine or quarry is paid for the value of the coal or stone which can be removed from them, and has no connection with the original or indestructible powers of the land." But both he and others seem sometimes to lose sight of these distinctions in discussing the law of diminishing return in its application to mines. Especially is this the case in Ricardo's criticism of Adam Smith's theory of rent (Principles, chap. XXIV.).
[25.]Of course the return to capital spent in building increases for the earlier doses. Even where land can be had for almost nothing, it is cheaper to build houses two stories high than one; and hitherto it has been thought cheapest to build factories about four stories high. But a belief is growing up in America, that where land is not very dear factories should be only two stories high, partly in order to avoid the evil effects of vibration, and of the expensive foundations and walls required to prevent it in a high building: that is, it is found that the return of accommodation diminishes perceptibly after the capital and labour required to raise two stories have been spent on the land.
[26.]See also the writings of Professors Bullock and Landry.
[27.]In this he will make large use of what is called below the "Substitution" of more for less appropriate means. Discussions bearing directly on this paragraph will be found in III. V. 1-3: IV. VII. 8; and XIII. 2: V. III. 3; IV. 1-4; V. 6-8; VIII. 1-5; X. 3: VI. I. 7; and II. 5.
[28.]The labour-part of the dose is of course current agricultural labour; the capital-part is itself also the product of labour in past times rendered by workers of many kinds and degrees, accompanied by "waiting."
[29.]See IV. I. 1.
[30.]Thus Aristotle (Politics, II. 6) objects to Plato's scheme for equalizing property and abolishing poverty on the ground that it would be unworkable unless the State exercised a firm control over the growth of numbers. And as Jowett points out, Plato himself was aware of this (see Laws, v. 740: also Aristotle, Politics, VII. 16). The opinion, formerly held that the population of Greece declined from the seventh century B.C., and that of Rome from the third, has recently been called in question, see "Die Bevölkerung des Altertums" by Edouard Meyer in the Handwörterbuch der Staatswissenschaften.
[31.]Political Economy, § 254.
[32.]He argues that Holland is richer than it appears to be relatively to France, because its people have access to many advantages that cannot be had by those who live on poorer land, and are therefore more scattered. "Rich land is better than coarse land of the same Rent." Political Arithmetick, ch. I.
[33.]Discourses on Trade, ch. X. Harris, Essay on Coins, pp. 32, 3, argues to a similar effect, and proposes to "encourage matrimony among the lower classes by giving some privileges to those who have children," etc.
[34.]"Let us," said Pitt, "make relief, in cases where there are a large number of children, a matter of right and an honour, instead of a ground for opprobrium and contempt. This will make a large family a blessing and not a curse, and this will draw a proper line of distinction between those who are able to provide for themselves by labour, and those who after having enriched their country with a number of children have a claim on its assistance for their support." Of course he desired "to discourage relief where it was not wanted." Napoleon the First had offered to take under his own charge one member of any family which contained seven male children; and Louis XIV., his predecessor in the slaughter of men, had exempted from public taxes all those who married before the age of 20 or had more than ten legitimate children. A comparison of the rapid increase in the population of Germany with that of France was a chief motive of the order of the French Chamber in 1885 that education and board should be provided at the public expense for every seventh child in necessitous families: and in 1913 a law was passed giving bounties under certain conditions to parents of large families. The British Budget Bill of 1909 allowed a small abatement of income tax for fathers of families.
[35.]The Physiocratic doctrine with regard to the tendency of population to increase up to the margin of subsistence may be given in Turgot's words:—the employer "since he always has his choice of a great number of working men, will choose that one who will work most cheaply. Thus then the workers are compelled by mutual competition to lower their price; and with regard to every kind of labour the result is bound to be reached—and it is reached as a matter of fact—that the wages of the worker are limited to that which is necessary to procure his subsistence." (Sur la formation et la distribution des richesses, § VI.)
[36.]See Wealth of Nations, Bk. I. Ch. VIII. and Bk. V. ch. II. See also supra, Bk. II ch. IV.
[37.]The average price of wheat in the decade 1771-1780 in which Adam Smith wrote was 34s. 7d.; in 1781-1790 it was 37s. 1d.; in 1791-1800 it was 63s. 6d.; in 1801-1810 it was 83s. 11d.; and in 1811-1820 it was 87s. 6d.
[38.]Early in the last century the Imperial taxes—for the greater part war taxes—amounted to one-fifth of the whole income of the country; whereas now they are not much more than a twentieth, and even of this a great part is spent on education and other benefits which Government did not then afford.
[39.]See below § 7 and above Bk. I. ch. III. §§ 5, 6.
[40.]Especially Godwin in his Inquiry concerning Political Justice (1792). It is interesting to compare Malthus' criticism of this Essay (Bk. III. ch. II.) with Aristotle's comments on Plato's Republic (see especially Politics, II. 6).
[41.]But many of his critics suppose him to have stated his position much less unreservedly than he did; they have forgotten such passages as this:—"From a review of the state of society in former periods compared with the present I should certainly say that the evils resulting from the principle of population have rather diminished than increased, even under the disadvantage of an almost total ignorance of their real cause. And if we can indulge the hope that this ignorance will be gradually dissipated, it does not seem unreasonable to hope that they will be still further diminished. The increase of absolute population, which will of course take place, will evidently tend but little to weaken this expectation, as everything depends on the relative proportions between population and food, and not on the absolute number of the people. In the former part of this work it appeared that the countries which possessed the fewest people often suffered the most from the effects of the principle of population." Essay, Bk. IV. ch. XII.
[42.]In the first edition of his essay, 1798, Malthus gave his argument without any detailed statement of facts, though from the first he regarded it as needing to be treated in direct connection with a study of facts; as is shown by his having told Pryme (who afterwards became the first Professor of Political Economy at Cambridge) "that his theory was first suggested to his mind in an argumentative conversation which he had with his father on the state of some other countries" (Pryme's Recollections, p. 66). American experience showed that population if unchecked would double at least once in twenty-five years. He argued that a doubled population might, even in a country as thickly peopled as England was with its seven million inhabitants, conceivably though not probably double the subsistence raised from the English soil: but that labour doubled again would not suffice to double the produce again. "Let us then take this for our rule, though certainly far beyond the truth; and allow that the whole produce of the island might be increased every twenty-five years [that is with every doubling of the population] by a quantity of subsistence equal to that which it at present produces"; or in other words, in an arithmetical progression. His desire to make himself clearly understood made him, as Wagner says in his excellent introduction to the study of Population (Grundlegung, Ed. 3, p. 453), "put too sharp a point on his doctrine, and formulate it too absolutely." Thus he got into the habit of speaking of production as capable of increasing in an arithmetical ratio: and many writers think that he attached importance to the phrase itself: whereas it was really only a short way of stating the utmost that he thought any reasonable person could ask him to concede. What he meant, stated in modern language, was that the tendency to diminishing return, which is assumed throughout his argument, would begin to operate sharply after the produce of the island had been doubled. Doubled labour might give doubled produce: but quadrupled labour would hardly treble it: octupled labour would not quadruple it.
[43.]Taking the present population of the world at one and a half thousand millions; and assuming that its present rate of increase (about 8 per 1000 annually, see Ravenstein's paper before the British Association in 1890) will continue, we find that in less than two hundred years it will amount to six thousand millions; or at the rate of about 200 to the square mile of fairly fertile land (Ravenstein reckons 28 million square miles of fairly fertile land, and 14 millions of poor grass lands. The first estimate is thought by many to be too high: but, allowing for this, if the less fertile land be reckoned in for what it is worth, the result will be about thirty million square miles as assumed above). Meanwhile there will probably be great improvements in the arts of agriculture; and, if so, the pressure of population on the means of subsistence may be held in check for about two hundred years, but not longer.
[44.]Of course the length of a generation has itself some influence on the growth of population. If it is 25 years in one place and 20 in another; and if in each place population doubles once in two generations during a thousand years, the increase will be a million-fold in the first place, but thirty million-fold in the second.
[45.]Dr Ogle (Statistical Journal, Vol. 53) calculates that if the average age of marriage of women in England were postponed five years, the number of children to a marriage, which is now 4.2 would fall to 3.1. Korösi, basing himself on the facts of the relatively warm climate of Buda Pest, finds 18-20 the most prolific age for women, 24-26 that for men. But he concludes that a slight postponement of weddings beyond these ages is advisable mainly on the ground that the vitality of the children of women under 20 is generally small. See Proceedings of Congress of Hygiene and Demography, London 1892, and Statistical Journal, Vol. 57.
[46.]The term marriage in the text must be taken in a wide sense so as to include not only legal marriages, but all those informal unions which are sufficiently permanent in character to involve for several years at least the practical responsibilities of married life. They are often contracted at an early age, and not infrequently lead up to legal marriages after the lapse of some years. For this reason the average age at marriage in the broad sense of the term, with which alone we are here concerned, is below the average age at legal marriage. The allowance to be made on this head for the whole of the working classes is probably considerable; but it is very much greater in the case of unskilled labourers than of any other class. The following statistics must be interpreted in the light of this remark, and of the fact that all English industrial statistics are vitiated by the want of sufficient care in the classification of the working classes in our official returns. The Registrar-General's forty-ninth Annual Report states that in certain selected districts the returns of marriages for 1884-5 were examined with the following results; the number after each occupation being the average age of bachelors in it at marriage, and the following number, in brackets, being the average age of spinsters who married men of that occupation:—Miners 24.06 (22.46); Textile hands 24.38 (23.43); Shoemakers, Tailors 24.92 (24.31); Artisans 25.35 (23.70); Labourers 25.56 (23.66); Commercial Clerks 26.25 (24.43); Shopkeepers, Shopmen 26.67 (24.22); Farmers and sons 29.23 (26.91); Professional and Independent Class 31.22 (26.40).
[47.]Thus a visit to the valley Jachenau in the Bavarian Alps about 1880 found this custom still in full force. Aided by a great recent rise in the value of their woods, with regard to which they had pursued a farseeing policy, the inhabitants lived prosperously in large houses, the younger brothers and sisters acting as servants in their old homes or elsewhere. They were of a different race from the workpeople in the neighbouring valleys, who lived poor and hard lives, but seemed to think that the Jachenau purchased its material prosperity at too great a cost.
[48.]See e.g. Rogers, Six Centuries, pp. 106, 7.
[49.]The extreme prudence of peasant proprietors under stationary conditions was noticed by Malthus; see his account of Switzerland (Essay, Bk. II. ch. V.). Adam Smith remarked that poor Highland women frequently had twenty children of whom not more than two reached maturity (Wealth of Nations, Bk. I. ch. VIII.); and the notion that want stimulated fertility was insisted on by Doubleday, True Law of Population. See also Sadler, Law of Population. Herbert Spencer seemed to think it probable that the progress of civilization will of itself hold the growth of population completely in check. But Malthus' remark, that the reproductive power is less in barbarous than in civilized races, has been extended by Darwin to the animal and vegetable kingdom generally.
The birth-rate in England and Wales is nominally diminishing at about an equal rate in both town and country. But the continuous migration of young persons from rural to industrial areas has considerably depleted the ranks of young married women in the rural districts; and, when allowance is made for this fact, we find that the percentage of births to women of childbearing ages is much higher in them than in the towns: as is shown in the following table published by the Registrar-General in 1907.
|20 large towns, with an aggregate population of 9,742,404 persons at the date of the Census of 1901.|
|Calculated on the total population.||Calculated on the female population, aged 15-45 years.|
|Period.||Rate per 1000||Compared with rate in 1870-72 taken as 100||Rate per 1000||Compared with rate in 1870-72 taken as 100|
|112 entirely rural registration districts, with an aggregate population of 1,330,319 persons at the date of the Census of 1901.|
The movements of the population of France have been studied with exceptiona care: and the great work on the subject by Levasseur, La Population Française, is a mine of valuable information as regards other nations besides France. Montesquieu, reasoning perhaps rather a priori, accused the law of primogeniture which ruled in his time in France of reducing the number of children in a family: and le Play brought the same charge against the law of compulsory division. Levasseur (l.c. Vol. III. pp. 171-7) calls attention to the contrast; and remarks that Malthus' expectations of the effect of the Civil Code on population were in harmony with Montesquieu's rather than le Play's diagnosis. But in fact the birthrate varies much from one part of France to another. It is generally lower where a large part of the population owns land than where it does not. If however the Departments of France be arranged in groups in ascending order of the property left at death (valeurs successorales par tête d'habitant), the corresponding birth-rate descends almost uniformly, being 23 per hundred married women between 15 and 50 years for the ten Departments in which the property left is 48-57 fr.; and 13.2 for the Seine, where it is 412 fr. And in Paris itself the arrondissements inhabited by the well-to-do show a smaller percentage of families with more than two children than the poorer arrondissements show. There is much interest in the careful analysis which Levasseur gives of the connection between economic conditions and birth-rate; his general conclusion being that it is not direct but indirect, through the mutual influence of the two on manners and the habit of life (mœurs). He appears to hold that, however much the decline in the numbers of the French relatively to surrounding nations may be regretted from the political and military points of view, there is much good mixed with the evil in its influences on material comfort and even social progress.
[50.]Thus we are told that after the Black Death of 1349 most marriages were very fertile (Rogers, History of Agriculture and Prices. Vol. I. p. 301).
[51.]There is no certain knowledge to be had as to the density of population in England before the eighteenth century; but the following estimates, reproduced from Steffen (Geschichte der englischen Lohn-arbeiter, I. pp. 463 ff.), are probably the best as yet available. Domesday Book suggests that in 1086 the population of England was between two, and two-and-a-half millions. Just before the Black Death (1348) it may have been between three-and-a-half, and four-and-a-half millions; and just afterwards two-and-a-half millions. It began to recover quickly; but made slow progress between 1400 and 1550: it increased rather fast in the next hundred years, and reached five-and-a-half millions in 1700.
The Black Death was England's only very great calamity. She was not, like the rest of Europe, liable to devastating wars, such as the Thirty Years' War, which destroyed more than half the population of Germany, a loss which it required a full century to recover. (See Rümelin's instructive article on Bevölkerungslehre in Schönberg's Handbuch.)
[52.]Adam Smith is justly indignant at this. (See Wealth of Nations, Bk. I. ch. X. Part II. and Book IV. ch. II.) The Act recites (14 Charles II. c. 12, A.D. 1662) that "by reason of some defects in the law, poor people are not restrained from going from one parish to another, and thereby do endeavour to settle themselves in those parishes where there is the best stock, the largest wastes or commons to build cottages, and the most woods for them to burn and destroy: etc." and it is therefore ordered "that upon complaint made ... within forty days after any such person or persons coming, so as to settle as aforesaid, in any tenement under the yearly value of ten pounds ... it shall be lawful for any two justices of the Peace ... to remove and convey such person or persons to such parish where he or they were last legally settled." Several Acts purporting to soften its harshness had been passed before Adam Smith's time; but they had been ineffective. In 1795 however it was ordered that no one should be removed until he became actually chargeable.
[53.]Some interesting remarks on this subject are made by Eden, History of the Poor, I. pp. 560-4.
[54.]But this increase in the figures shown is partly due to improved registration of births. (Farr, Vital Statistics, p. 97.)
[55.]The following tables show the growth of the population of England and Wales from the beginning of the eighteenth century. The figures before 1801 are computed from the registers of births and deaths, and the poll and hearth tax returns: those since 1801 from Census returns. It will be noticed that the numbers increased nearly as much in the twenty years following 1760 as in the preceding sixty years. The pressure of the great war and the high price of corn is shown in the slow growth between 1790 and 1801; and the effects of indiscriminate poor law allowances, in spite of greater pressure, is shown by the rapid increase in the next ten years, and the still greater increase when that pressure was removed in the decade ending 1821. The third column shows the percentage which the increase during the preceding decade was of the population at the beginning of that decade.
|* Decrease; but these early figures are untrustworthy.|
[56.]See Farr's 17th Annual Report for 1854 as Registrar-General, or the abstract of it in Vital Statistics (pp. 72-5).
[57.]For instance, representing the price of wheat in shillings and the number of marriages in England and Wales in thousands, we have for 1801 wheat at 119 and marriages at 67, for 1803 wheat at 59 and marriages at 94; for 1805 the numbers are 90 and 80, for 1807 they are 75 and 84, for 1812 they are 126 and 82, for 1815 they are 66 and 100, for 1817 they are 97 and 88, for 1822 they are 45 and 99.
[58.]Since 1820 the average price of wheat has seldom exceeded 60s. and never 75s.: and the successive inflations of commerce which culminated and broke in 1826, 1836-9, 1848, 1856, 1866 and 1873 exercised an influence on the marriage-rate about equal with changes in the price of corn. When the two causes act together the effects are very striking: thus between 1829 and 1834, there was a recovery of prosperity accompanied by a steady fall in the price of wheat and marriages rose from a hundred and four to a hundred and twenty-one thousand. The marriage-rate rose again rapidly between 1842 and 1845 when the price of wheat was a little lower than in the preceding years, and the business of the country was reviving; and again under similar circumstances between 1847 and 1853 and between 1862 and 1865.
[59.]Statistics of exports are among the most convenient indications of the fluctuations of commercial credit and industrial activity: and in the article already quoted, Ogle has shown a correspondence between the marriage-rate and the exports per head. Compare diagrams in Vol. II. p. 12 of Levasseur's La Population Française; and with regard to Massachusetts by Willcox in the Political Science Quarterly, Vol. VIII. pp. 76-82. Ogle's inquiries have been extended and corrected in a paper read by R. H. Hooker before the Manchester Statistical Society, in January 1898; who points out that if the marriage-rate fluctuates, the birth-rate during an ascending phase of the marriage-rate is apt to correspond to the marriage-rate not for that phase, but for the preceding phase when the marriage-rate was declining: and vice versâ. "Hence the ratio of births to marriages declines when the marriage-rate is rising and rises when the marriage-rate falls. A curve representing the ratio of births to marriages will move inversely to the marriage-rate." He points out that the decline in the ratio of births to marriages is not great, and is accounted for by the rapid decline of illegitimate births. The ratio of legitimate births to marriages is not declining perceptibly.
[60.]The following statements are based chiefly on statistics arranged by the late Signor Bodio, by M. Levasseur, La Population Française, and by the English Registrar-General in his Report for 1907.
[61.]Much instructive and suggestive matter connected with the subject of this chapter is contained in the Statistical Memoranda and Charts relating to Public Health and Social Conditions published by the Local Government Board in 1909 [Cd. 4671.].
[62.]This measure can be applied directly to most kinds of navvies' and porters' work, and indirectly to many kinds of agricultural work. In a controversy that was waged after the great agricultural lock-out as to the relative efficiency of unskilled labour in the South and North of England, the most trustworthy measure was found in the number of tons of material that a man would load into a cart in a day. Other measures have been found in the number of acres reaped or mown, or the number of bushels of corn reaped, etc.: but these are unsatisfactory, particularly for comparing different conditions of agriculture: since the implements used, the nature of the crop and the mode of doing the work all vary widely. Thus nearly all comparisons between mediæval and modern work and wages based on the wages of reaping, mowing, etc. are valueless until we have found means to allow for the effects of changes in the methods of agriculture. It costs for instance less labour than it did to reap by hand a crop that yields a hundred bushels of corn; because the implements used are better than they were: but it may not cost less labour to reap an acre of corn; because the crops are heavier than they were.
[63.]This must be distinguished from nervousness, which, as a rule, indicates a general deficiency of nervous strength; though sometimes it proceeds from nervous irritability or want of balance. A man who has great nervous strength in some directions may have but little in others; the artistic temperament in particular often develops one set of nerves at the expense of others: but it is the weakness of some of the nerves, not the strength of the others, that leads to nervousness. The most perfect artistic natures seem not to have been nervous: Leonardo da Vinci and Shakespeare for example. The term "nervous strength" corresponds in some measure to Heart in Engel's great division of the elements of efficiency into (a) Body, (b) Reason, and (c) Heart (Leib, Verstand und Herz). He classifies activities according to the permutations a, ab, ac, abc, acb; b, ba, bc, bca, bac; c, ca, cb, cab, cba: the order in each case being that of relative importance, and a letter being omitted where the corresponding element plays only a very small part.
[64.]A warm climate impairs vigour. It is not altogether hostile to high intellectual and artistic work: but it prevents people from being able to endure very hard exertion of any kind for a long time. More sustained hard work can be done in the cooler half of the temperate zone than anywhere else; and most of all in places such as England and her counterpart New Zealand, where sea-breezes keep the temperature nearly uniform. The summer heats and winter colds of many parts of Europe and America, where the mean temperature is moderate, have the effect of shortening the year for working purposes by about two months. Extreme and sustained cold is found to dull the energies, partly perhaps because it causes people to spend much of their time in close and confined quarters: inhabitants of the Arctic regions are generally incapable of long-continued severe exertion. In England popular opinion has insisted that a "warm Yule-tide makes a fat churchyard"; but statistics prove beyond question that it has the opposite effect: the average mortality is highest in the coldest quarter of the year, and higher in cold winters than in warm.
[65.]Race history is a fascinating but disappointing study for the economist: for conquering races generally incorporated the women of the conquered; they often carried with them many slaves of both sexes during their migrations, and slaves were less likely than freemen to be killed in battle or to adopt a monastic life. In consequence nearly every race had much servile, that is mixed blood in it: and as the share of servile blood was largest in the industrial classes, a race history of industrial habits seems impossible.
[66.]This was proved by Farr, who eliminated disturbing causes by an instructive statistical device (Vital Statistics, p. 139).
[67.]Freedom and hope increase not only man's willingness but also his power for work; physiologists tell us that a given exertion consumes less of the store of nervous energy if done under the stimulus of pleasure than of pain: and without hope there is no enterprise. Security of person and property are two conditions of this hopefulness and freedom; but security always involves restraints on freedom, and it is one of the most difficult problems of civilization to discover how to obtain the security which is a condition of freedom without too great a sacrifice of freedom itself. Changes of work, of scene, and of personal associations bring new thoughts, call attention to the imperfections of old methods, stimulate a "divine discontent," and in every way develop creative energy.
[68.]By converse with others who come from different places, and have different customs, travellers learn to put on its trial many a habit of thought or action which otherwise they would have always acquiesced in as though it were a law of nature. Moreover, a shifting of places enables the more powerful and original minds to find full scope for their energies and to rise to important positions: whereas those who stay at home are often over much kept in their places. Few men are prophets in their own land; neighbours and relations are generally the last to pardon the faults and to recognize the merits of those who are less docile and more enterprising than those around them. It is doubtless chiefly for this reason that in almost every part of England a disproportionately large share of the best energy and enterprise is to be found among those who were born elsewhere.
[69.]The rate of mortality is low among ministers of religion and schoolmasters; among the agricultural classes, and in some other industries such as those of wheelwrights, shipwrights and coal-miners. It is high in lead and tin mining, in file-making and earthenware manufacture. But neither these nor any other regular trade show as high a rate of mortality as is found among London general labourers and costermongers; while the highest of all is that of servants in inns. Such occupations are not directly injurious to health, but they attract those who are weak in physique and in character and they encourage irregular habits. A good account of the influence of occupation on death-rates is given in the supplement to the forty-fifth (1885) Annual Report of the Registrar-General, pp. xxv-lxiii. See also Farr's Vital Statistics, pp. 392-411, Humphreys' paper on Class Mortality Statistics in the Statistical Journal for June 1887, and the literature of the Factory Acts generally.
[70.]Davenant (Balance of Trade, A.D. 1699, p. 20), following Gregory King, proves that according to official figures. London has an excess of deaths over births of 2000 a year, but an immigration of 5000; which is more than half of what he calculates, by a rather risky method, to be the true net increase of the population of the country. He reckons that 530,000 people live in London, 870,000 in the other cities and market towns, and 4,100,000 in villages and hamlets. Compare these figures with the census of 1901 for England and Wales; where we find London with a population of over 4,500,000; five more towns with an average of over 500,000; and sixty-nine more exceeding 50,000 with an average of over 100,000. Nor is this all: for many suburbs whose population is not counted in, are often really parts of the big towns; and in some cases the suburbs of several adjacent towns run into one another, making them all into one gigantic, though rather scattered town. A suburb of Manchester is counted as a large town with 220,000 inhabitants; and the same is true of West Ham, a suburb of London with 275,000. The boundaries of some large towns are extended at irregular intervals to include such suburbs: and consequently the true population of a large town may be growing fast, while its nominal population grows slowly or even recedes, and then suddenly leaps forwards. Thus the nominal population of Liverpool was 552,000 in 1881; 518,000 in 1891; and 685,000 in 1901.
It must be recollected that the characteristics of town life increase in intensity for good and for evil with every increase in the size of a town, and its suburbs. Fresh country air has to pass over many more sources of noisome vapour before it reaches the average Londoner than before it reaches the average inhabitant of a small town. The Londoner has generally to go far before he can reach the freedom and the restful sounds and sights of the country. London therefore with 4,500,000 inhabitants adds to the urban character of England's life far more than a hundred times as much as a town of 45,000 inhabitants.
[71.]For reason of this kind Welton (Statistical Journal, 1897) makes the extreme proposal to omit all persons between 15 and 35 years of age in comparing the rates of mortality in different towns. The mortality of females in London between the ages of fifteen and thirty-five is, chiefly for this reason, abnormally low. If however a town has a stationary population its vital statistics are more easily interpreted; and selecting Coventry as a typical town, Galton has calculated that the adult children of artisan townsfolk are little more than half as numerous as those of labouring people who live in healthy country districts. When a place is decaying, the young and strong and hearty drift away from it; leaving the old and the infirm behind them, and consequently the birth-rate is generally low. On the other hand, a centre of industry that is attracting population is likely to have a very high birth-rate, because it has more than its share of people in the full vigour of life. This is especially the case in the coal and iron towns, partly because they do not suffer, as the textile towns do, from a deficiency of males; and partly because miners as a class marry early. In some of them, though the death-rate is high, the excess of the birth-rate over it exceeds 20 per thousand of the population. The death-rate is generally highest in towns of the second order, chiefly because their sanitary arrangements are not yet as good as those of the very largest towns.
[72.]See an article entitled "Where to House the London Poor" by the present writer in the Contemporary Review, Feb. 1884.
[73.]In the Southern States of America, manual work became disgraceful to the white man; so that, if unable to have slaves himself, he led a paltry degenerate life, and seldom married. Again, on the Pacific Slope, there were at one time just grounds for fearing that all but highly skilled work would be left to the Chinese; and that the white men would live in an artificial way in which a family became a great expense. In this case Chinese lives would have been substituted for American, and the average quality of the human race would have been lowered.
[74.]The extent of the infant mortality that arises from preventable causes may be inferred from the facts that the percentage of deaths under one year of age to births is generally about a third as much again in urban as in rural districts; and yet in many urban districts which have a well-to-do population it is lower than the average for the whole country (Registrar-General's Report for 1905, pp. xlii-xlv). A few years ago it was found that, while the annual death-rate of children under five years of age was only about two per cent. in the families of peers and was less than three per cent. for the whole of the upper classes, it was between six and seven per cent. for the whole of England. On the other hand Prof. Leroy Beaulieu says that in France the parents of but one or two children are apt to indulge them, and be over-careful about them to the detriment of their boldness, enterprise and endurance. (See Statistical Journal, Vol. 54, pp. 378, 9.)
[75.]In this connection it is worth while to notice that the full importance of an epoch-making idea is often not perceived in the generation in which it is made: it starts the thoughts of the world on a new track, but the change of direction is not obvious until the turning-point has been left some way behind. In the same way the mechanical inventions of every age are apt to be underrated relatively to those of earlier times. For a new discovery is seldom fully effective for practical purposes till many minor improvements and subsidiary discoveries have gathered themselves around it: an invention that makes an epoch is very often a generation older than the epoch which it makes. Thus it is that each generation seems to be chiefly occupied in working out the thoughts of the preceding one; while the full importance of its own thoughts is as yet not clearly seen.
[76.]According to Galton the statement that all great men have had great mothers goes too far: but that shows only that the mother's influence does not outweigh all others; not that it is not greater than any one of them. He says that the mother's influence is most easily traceable among theologians and men of science, because an earnest mother leads her child to feel deeply about great things; and a thoughtful mother does not repress, but encourages that childish curiosity which is the raw material of scientific habits of thought.
[77.]There are many fine natures among domestic servants. But those who live in very rich houses are apt to get self-indulgent habits, to overestimate the importance of wealth, and generally to put the lower aims of life above the higher, in a way that is not common with independent working people. The company in which the children of some of our best houses spend much of their time, is less ennobling than that of the average cottage. Yet in these very houses, no servant who is not specially qualified, is allowed to take charge of a young retriever or a young horse.
[78.]The absence of a careful general education for the children of the working classes, has been hardly less detrimental to industrial progress than the narrow range of the old grammar-school education of the middle classes. Till recently indeed it was the only one by which the average schoolmaster could induce his pupils to use their minds in anything higher than the absorption of knowledge. It was therefore rightly called liberal, because it was the best that was to be had. But it failed in its aim of familiarizing the citizen with the great thoughts of antiquity; it was generally forgotten as soon as school-time was over; and it raised an injurious antagonism between business and culture. Now however the advance of knowledge is enabling us to use science and art to supplement the curriculum of the grammar-school, and to give to those who can afford it an education that develops their best faculties, and starts them on the track of thoughts which will most stimulate the higher activities of their minds in after-life. The time spent on learning to spell is almost wasted: if spelling and pronunciation are brought into harmony in the English language as in most others, about a year will be added to the effective school education without any additional cost.
[79.]As Nasmyth says; if a lad, having dropped two peas at random on a table, can readily put a third pea midway in a line between them, he is on the way to become a good mechanic. Command over eye and hand is gained in the ordinary English games, no less than in the playful work of the Kinder-garten. Drawing has always been on the border line between work and play.
[80.]One of the weakest points of technical education is that it does not educate the sense of proportion and the desire for simplicity of detail. The English, and to an even greater extent, the Americans, have acquired in actual business the faculty of rejecting intricacies in machinery and processes, which are not worth what they cost, and practical instinct of this kind often enables them to succeed in competition with Continental rivals who are much better educated.
[81.]A good plan is that of spending the six winter months of several years after leaving school in learning science in College, and the six summer months as articled pupils in large workshops. The present writer introduced this plan about forty years ago at University College, Bristol (now the University of Bristol). But it has practical difficulties which can be overcome only by the cordial and generous co-operation of the heads of large firms with the College authorities. Another excellent plan is that adopted in the school attached to the works of Messrs Mather and Platt at Manchester. "The drawings made in the school are of work actually in progress in the shops. One day the teacher gives the necessary explanations and calculations, and the next day the scholars see, as it were on the anvil, the very thing which has been the subject of his lecture."
[82.]The employer binds himself to see that the apprentice is thoroughly taught in the workshop all the subdivisions of one great division of his trade, instead of letting him learn only one of these subdivisions, as too often happens now. The apprentice's training would then often be as broad as if he had been taught the whole of the trade as it existed a few generations ago; and it might be supplemented by a theoretical knowledge of all branches of the trade, acquired in a technical school. Something resembling the old apprenticeship system has recently come into vogue for young Englishmen who desire to learn the business of farming under the peculiar conditions of a new country: and there are some signs that the plan may be extended to the business of farming in this country, for which it is in many respects admirably adapted. But there remains a great deal of education suitable to the farmer and to the farm-labourer which can best be given in agricultural colleges and dairy schools.
[83.]The heads of almost every progressive firm on the Continent have carefully studied processes and machinery in foreign lands. The English are great travellers; but partly perhaps on account of their ignorance of other languages they seem hardly to set enough store on the technical education that can be gained by the wise use of travel.
[84.]In fact every designer in a primitive age is governed by precedent: only very daring people depart from it; even they do not depart far, and their innovations are subjected to the test of experience, which, in the long run, is infallible. For though the crudest and most ridiculous fashions in art and in literature will be accepted by the people for a time at the bidding of their social superiors, nothing but true artistic excellence has enabled a ballad or a melody, a style of dress or a pattern of furniture to retain its popularity among a whole nation for many generations together. These innovations, then, which were inconsistent with the true spirit of art were suppressed, and those that were on the right track were retained, and became the starting-point for further progress; and thus traditional instincts played a great part in preserving the purity of the industrial arts in Oriental countries, and to a less extent in mediæval Europe.
[85.]French designers find it best to live in Paris: if they stay for long out of contact with the central movements of fashion they seem to fall behindhand. Most of them have been educated as artists, but have failed of their highest ambition. It is only in exceptional cases, as for instance for the Sèvres china, that those who have succeeded as artists find it worth their while to design. Englishmen can, however, hold their own in designing for Oriental markets, and there is evidence that the English are at least equal to the French in originality, though they are inferior in quickness in seeing how to group forms and colours so as to obtain an effective result. (See the Report on Technical Education, Vol. I. pp. 256, 261, 324, 325 and Vol. III. pp. 151, 152, 202, 203, 211 and passim.) It is probable that the profession of the modern designer has not yet risen to the best position which it is capable of holding. For it has been to a disproportionate extent under the influence of one nation; and that nation is one whose works in the highest branches of art have seldom borne to be transplanted. They have indeed often been applauded and imitated at the time by other nations, but they have as yet seldom struck a key-note for the best work of later generations.
[86.]The painters themselves have put on record in the portrait-galleries the fact that in mediæval times, and even later, their art attracted a larger share of the best intellect than it does now; when the ambition of youth is tempted by the excitement of modern business, when its zeal for imperishable achievements finds a field in the discoveries of modern science, and, lastly, when a great deal of excellent talent is insensibly diverted from high aims by the ready pay to be got by hastily writing half-thoughts for periodical literature.
[87.]Mill was so much impressed by the difficulties that beset a parent in the attempt to bring up his son to an occupation widely different in character from his own, that he said (Principles, II. XIV. 2):—"So complete, indeed, has hitherto been the separation, so strongly marked the line of demarcation, between the different grades of labourers, as to be almost equivalent to an hereditary distinction of caste; each employment being chiefly recruited from the children of those already employed in it, or in employments of the same rank with it in social estimation, or from the children of persons who, if originally of a lower rank, have succeeded in raising themselves by their exertions. The liberal professions are mostly supplied by the sons of either the professional or the idle classes: the more highly skilled manual employments are filled up from the sons of skilled artisans or the class of tradesmen who rank with them: the lower classes of skilled employments are in a similar case; and unskilled labourers, with occasional exceptions, remain from father to son in their pristine condition. Consequently the wages of each class have hitherto been regulated by the increase of its own population, rather than that of the general population of the country." But he goes on, "The changes, however, now so rapidly taking place in usages and ideas are undermining all these distinctions."
Mill's classification had lost a great part of its value when Cairnes adopted it (Leading Principles, p. 72). A classification more suited to our existing conditions is offered by Giddings (Political Science Quarterly, Vol. II. pp. 69-71). It is open to the objection that it draws broad lines of division where nature has made no broad lines; but it is perhaps as good as any division of industry into four grades can be. His divisions are (i) automatic manual labour, including common labourers and machine tenders; (ii) responsible manual labour, including those who can be entrusted with some responsibility and labour of self-direction; (iii) automatic brain workers, such as book-keepers, and (iv) responsible brain workers, including the superintendents and directors.
The conditions and methods of the large and incessant movement of the population upwards and downwards from grade to grade are studied more fully below, VI. IV. V. and VII.
The growing demand for boys to run errands, and to do other work that has no educational value, has increased the danger that parents may send their sons into avenues that have no outlook for good employment in later years: and something is being done by public agency, and more by the devotion and energy of men and women in unofficial association, in giving out notes of warning against such "blind alley" occupations, and assisting lads to prepare themselves for skilled work. These efforts may be of great national value. But care must be taken that this guidance and help is as accessible to the higher strains of the working class population when in need of it as to the lower; lest the race should degenerate.
Book IV, Chapter VII
[88.]A short but suggestive study of the growth of wealth in its early forms, and of the arts of life, is given in Tylor's Anthropology.
[89.]Bagehot (Economic Studies, pp. 163-5), after quoting the evidence which Galton has collected on the keeping of pet animals by savage tribes, points out that we find here a good illustration of the fact that however careless a savage race may be for the future, it cannot avoid making some provision for it. A bow, a fishing-net, which will do its work well in getting food for to-day must be of service for many days to come: a horse or a canoe that will carry one well to-day, must be a stored-up source of many future enjoyments. The least provident of barbaric despots may raise a massive pile of buildings, because it is the most palpable proof of his present wealth and power.
[90.]The farm implements for a first class Ryot family, including six or seven adult males, are a few light ploughs and hoes chiefly of wood, of the total value of about 13 rupees (Sir G. Phear, Aryan Village, p. 233) or the equivalent of their work for about a month; while the value of the machinery alone on a well equipped large modern arable farm amounts to £3 an acre (Equipment of the Farm, edited by J. C. Morton) or say a year's work for each person employed. They include steam-engines, trench, subsoil and ordinary ploughs, some to be worked by steam and some by horse power; various grubbers, harrows, rollers, clod-crushers, seed and manure drills, horse hoes, rakes, hay-making, mowing and reaping machines, steam or horse threshing, chaff cutting, turnip cutting, hay-pressing machines and a multitude of others. Meanwhile there is an increasing use of silos and covered yards, and constant improvements in the fittings of the dairy and other farm buildings, all of which give great economy of effort in the long run, but require a larger share of it to be spent in preparing the way for the direct work of the farmer in raising agricultural produce.
[91.]For instance, improvements which have recently been made in some American cities indicate that by a sufficient outlay of capital each house could be supplied with what it does require, and relieved of what it does not, much more effectively than now, so as to enable a large part of the population to live in towns and yet be free from many of the present evils of town life. The first step is to make under all the streets large tunnels, in which many pipes and wires can be laid side by side, and repaired when they get out of order, without any interruption of the general traffic and without great expense. Motive power, and possibly even heat, might then be generated at great distances from the towns (in some cases in coal-mines), and laid on wherever wanted. Soft water and spring water, and perhaps even sea water and ozonized air, might be laid on in separate pipes to nearly every house; while steam-pipes might be used for giving warmth in winter, and compressed air for lowering the heat of summer; or the heat might be supplied by gas of great heating power laid on in special pipes, while light was derived from gas specially suited for the purpose or from electricity; and every house might be in electric communication with the rest of the town. All unwholesome vapours, including those given off by any domestic fires which were still used, might be carried away by strong draughts through long conduits, to be purified by passing through large furnaces and thence away through huge chimneys into the higher air. To carry out such a scheme in the towns of England would require the outlay of a much larger capital than has been absorbed by our railways. This conjecture as to the ultimate course of town improvement may be wide of the truth; but it serves to indicate one of very many ways in which the experience of the past foreshadows broad openings for investing present effort in providing the means of satisfying our wants in the future.
[92.]Comp. Appendix A.
[93.]They "discount" future benefits (comp. Book III. ch. v. § 3) at the rate of many thousands per cent. per annum.
[94.]Comp. III. v. 2.
[95.]Comp. Principles of Political Economy, by Richard Jones.
[96.]It must however be admitted that what passes by the name of public property is often only private wealth borrowed on a mortgage of future public revenue. Municipal gas-works for instance are not generally the results of public accumulations. They were built with wealth saved by private persons, and borrowed on public account.
[97.]Above, III. v.
[98.]The suggestion that the rate of interest may conceivably become a negative quantity was discussed by Foxwell in a paper on Some Social Aspects of Banking, read before the Bankers' Institute in January, 1886.
[99.]Karl Marx and his followers have found much amusement in contemplating the accumulations of wealth which result from the abstinence of Baron Rothschild, which they contrast with the extravagance of a labourer who feeds a family of seven on seven shillings a week; and who, living up to his full income, practises no economic abstinence at all. The argument that it is Waiting rather than Abstinence, which is rewarded by Interest and is a factor of production, was given by Macvane in the Harvard Jóurnal of Economics for July, 1887.
[100.]See also VI. VI. It may however be observed here that the dependence of the growth of capital on the high estimation of "future goods" appears to have been over-estimated by earlier writers; not under-estimated, as is argued by Prof. Böhm-Bawerk.
[101.]See a brilliant paper by Häckel on Arbeitstheilung in Menschen- und Thierleben and Schäffle's Bau und Leben des socialen Körpers.
[102.]Like all other doctrines of the same class, this requires to be interpreted in the light of the fact that the effective demand of a purchaser depends on his means, as well as on his wants: a small want on the part of a rich man often has more effective force in controlling the business arrangements of the world than a great want on the part of a poor man.
[103.]See above I. IV. 8; and below Appendix B, 3 and 6.
[104.]Man with his many motives, as he may set himself deliberately to encourage the growth of one peculiarity, may equally set himself to check the growth of another: the slowness of progress during the Middle Ages was partly due to a deliberate detestation of learning.
[105.]See Note XI. in the Mathematical Appendix. Considerations of this class have little application to the development of mere animals, such as mice; and none at all to that of peas and other vegetables. And therefore the marvellous arithmetical results which have been established, provisionally at all events, in regard to heredity in such cases, have very little bearing on the full problems of inheritance with which students of social science are concerned: and some negative utterances on this subject by eminent Mendelians seem to lack due reserve. Excellent remarks on the subject will be found in Prof. Pigou's Wealth and Welfare, Part I, ch. IV.
[106.]Compare Appendix A, 16.
[107.]For instance, the first time a man attempts to skate he must give his whole attention to keeping his balance, his cerebrum has to exercise a direct control over every movement, and he has not much mental energy left for other things. But after a good deal of practice the action becomes semi-automatic, the local nerve centres undertake nearly all the work of regulating the muscles, the cerebrum is set free, and the man can carry on an independent train of thought; he can even alter his course to avoid an obstacle in his path, or to recover his balance after it has been disturbed by a slight unevenness, without in any way interrupting the course of his thoughts. It seems that the exercise of nerve force under the immediate direction of the thinking power residing in the cerebrum has gradually built up a set of connections, involving probably distinct physical change, between the nerves and nerve centres concerned; and these new connections may be regarded as a sort of capital of nerve force. There is probably something like an organized bureaucracy of the local nerve centres: the medulla, the spinal axis, and the larger ganglia generally acting the part of provincial authorities, and being able after a time to regulate the district and village authorities without troubling the supreme government. Very likely they send up messages as to what is going on: but if nothing much out of the way has happened, these are very little attended to. When however a new feat has to be accomplished, as for instance learning to skate backwards, the whole thinking force will be called into requisition for the time; and will now be able by aid of the special skating-organization of the nerves and nerve centres, which has been built up in ordinary skating, to do what would have been altogether impossible without such aid.
[108.]J. S. Mill went so far as to maintain that his occupations at the India Office did not interfere with his pursuit of philosophical inquiries. But it seems probable that this diversion of his freshest powers lowered the quality of his best thought more than he was aware; and though it may have diminished but little his remarkable usefulness in his own generation, it probably affected very much his power of doing that kind of work which influences the course of thought in future generations. It was by husbanding every atom of his small physical strength that Darwin was enabled to do so much work of just that kind: and a social reformer who had succeeded in exploiting Darwin's leisure hours in useful work on behalf of the community, would have done a very bad piece of business for it.
[109.]The best and most expensive clothes are made by highly skilled and highly paid tailors, each of whom works right through first one garment and then another: while the cheapest and worst clothes are made for starvation wages by unskilled women who take the cloth to their own homes and do every part of the sewing themselves. But clothes of intermediate qualities are made in workshops or factories, in which the division and subdivision of labour are carried as far as the size of the staff will permit; and this method is rapidly gaining ground at both ends at the expense of the rival method. Lord Lauderdale (Inquiry, p. 282) quotes Xenophon's argument that the best work is done when each confines himself to one simple department, as when one man makes shoes for men, and another for women; or better when one man only sews shoes or garments, another cuts them out: the king's cooking is much better than anybody else's, because he has one cook who only boils, another who only roasts meat; one who only boils fish, another who only fries it: there is not one man to make all sorts of bread but a special man for special qualities.
[110.]One great inventor is rumoured to have spent £300,000 on experiments relating to textile machinery, and his outlay is said to have been abundantly returned to him. Some of his inventions were of such a kind as can be made only by a man of genius; and however great the need, they must have waited till the right man was found for them. He charged not unreasonably £1000 as royalty for each of his combing machines; and a worsted manufacturer, being full of work, found it worth his while to buy an additional machine, and pay this extra charge for it, only six months before the expiry of the patent. But such cases are exceptional: as a rule, patented machines are not very dear. In some cases the economy of having them all produced at one place by special machinery has been so great that the patentee has found it to his advantage to sell them at a price lower than the old price of the inferior machines which they displaced: for that old price gave him so high a profit, that it was worth his while to lower the price still further in order to induce the use of the machines for new purposes and in new markets. In almost every trade many things are done by hand, though it is well known that they could easily be done by some adaptations of machines that are already in use in that or some other trade, and which are not made only because there would not as yet be enough employment for them to remunerate the trouble and expense of making them.
[111.]Smiles' Boulton and Watt, pp. 170, 1.
[112.]The system owes its origin in great measure to Sir Joseph Whitworth's standard gauges; but it has been worked out with most enterprise and thoroughness in America. Standardization is most helpful in regard to things which are to be built up with others into complex machines, buildings, bridges, etc.
[113.]The perfection which the machinery has already attained is shown by the fact that at the Inventions Exhibition held in London in 1885, the representative of an American watch factory took to pieces fifty watches before some English representatives of the older system of manufacture, and after throwing the different parts into different heaps, asked them to select for him one piece from each heap in succession; he then set these pieces up in one of the watch-cases and handed them back a watch in perfect order.
[114.]"The type-founder was probably the first to secede from the concern; then printers delegated to others the making of presses; afterwards the ink and the rollers found separate and distinct manufacturers; and there arose a class of persons who, though belonging to other trades, made printing appliances a speciality, such as printers' smiths, printers' joiners and printers' engineers" (Mr Southward in the Article on Typography in the Encyclopædia Britannica).
[115.]For instance, Mr Southward tells us "a minder may understand only book machines or only news machines; he may know all about" machines that print from flat surfaces or those that print from cylinders; "or of cylinders he may know only one kind. Entirely novel machines create a new class of artisans. There are men perfectly competent to manage a Walter press who are ignorant how to work two-colour or fine book-work machines. In the compositor's department division of labour is carried out to a still minuter degree. An old-fashioned printer would set up indifferently a placard, a title-page, or a book. At the present day we have jobbing hands, book hands, and news hands, the word 'hand' suggesting the factory-like nature of the business. There are jobbing hands who confine themselves to posters. Book hands comprise those who set up the titles and those who set up the body of the work. Of these latter again, while one man composes, another, the 'maker-up,' arranges the pages."
[116.]Let us follow still further the progress of machinery in supplanting manual labour in some directions and opening out new fields for its employment in others. Let us watch the process by which large editions of a great newspaper are set up and printed off in a few hours. To begin with, a good part of the type-setting is itself often done by a machine; but in any case the types are in the first instance on a plane surface, from which it is impossible to print very rapidly. The next step therefore is to make a papier-maché cast of them, which is bent on to a cylinder, and is then used as the mould from which a new metal plate is cast that fits the cylinders of the printing machine. Fixed on these it rotates alternately against the inking cylinders and the paper. The paper is arranged in a huge roll at the bottom of the machine and unrolls itself automatically, first against the damping cylinders and then against the printing cylinders, the first of which prints it on one side, and the second on the other: thence to the cutting cylinders, which cut it into equal lengths, and thence to the folding apparatus, which folds it ready for sale.
[117.]The jack-plane, used for making smooth large boards for floors and other purposes, used to cause heart disease, making carpenters as a rule old men by the time they were forty. Adam Smith tells us that "workmen, when they are liberally paid, are very apt to overwork themselves and to ruin their health and constitution in a few years. A carpenter in London, and in some other places, is not supposed to last in his utmost vigour above eight years.... Almost every class of artificers is subject to some particular infirmity occasioned by excessive application to their peculiar species of work." Wealth of Nations, Book I. chapter VII.
[118.]The efficiency of labour in weaving has been increased twelve-fold and that in spinning six-fold during the last seventy years. In the preceding seventy years the improvements in spinning had already increased the efficiency of labour two-hundred-fold (see Ellison's Cotton Trade of Great Britain, ch. IV. and V.).
[119.]Perhaps the textile industries afford the best instance of work that used to be done by hand and is now done by machinery. They are especially prominent in England, where they give employment to nearly half a million males and more than half a million females, or more than one in ten of those persons who are earning independent incomes. The strain that is taken off human muscles in dealing even with those soft materials is shown by the fact that for every one of these million operatives there is used about one horse-power of steam, that is, about ten times as much as they would themselves exert if they were all strong men; and the history of these industries will serve to remind us that many of those who perform the more monotonous parts of manufacturing work are as a rule not skilled workers who have come down to it from a higher class of work, but unskilled workers who have risen to it. A great number of those who work in the Lancashire cotton-mills have come there from poverty-stricken districts of Ireland, while others are the descendants of paupers and people of weak physique, who were sent there in large numbers early in the last century from the most miserable conditions of life in the poorest agricultural districts, where the labourers were fed and housed almost worse than the animals whom they tended. Again, when regret is expressed that the cotton factory hands of New England have not the high standard of culture which prevailed among them a century ago, we must remember that the descendants of those factory workers have moved up to higher and more responsible posts, and include many of the ablest and wealthiest of the citizens of America. Those who have taken their places are in the process of being raised; they are chiefly French Canadians and Irish, who though they may learn in their new homes some of the vices of civilization, are yet much better off and have on the whole better opportunities of developing the higher faculties of themselves and their children than they had in their old homes.
[120.]Thus in the records of the Stourbridge Fair held near Cambridge we find an endless variety of light and precious goods from the older seats of civilization in the East and on the Mediterranean; some having been brought in Italian ships, and others having travelled by land as far as the shores of the North Sea.
[121.]Not very long ago travellers in western Tyrol could find a strange and characteristic relic of this habit in a village called Imst. The villagers had somehow acquired a special art in breeding canaries: and their young men started for a tour to distant parts of Europe each with about fifty small cages hung from a pole over his shoulder, and walked on till they had sold all.
[122.]There are for instance over 500 villages devoted to various branches of woodwork; one village makes nothing but spokes for the wheels of vehicles, another nothing but the bodies and so on; and indications of a like state of things are found in the histories of oriental civilizations and in the chronicles of mediæval Europe. Thus for instance we read (Rogers' Six Centuries of Work and Wages, ch. IV.) of a lawyer's handy book written about 1250, which makes note of scarlet at Lincoln; blanket at Bligh; burnet at Beverley; russet at Colchester; linen fabrics at Shaftesbury, Lewes, and Aylsham; cord at Warwick and Bridport; knives at Marstead; needles at Wilton; razors at Leicester; soap at Coventry; horse girths at Doncaster; skins and furs at Chester and Shrewsbury and so on.
[123.]The later wanderings of the iron industry from Wales, Staffordshire and Shropshire to Scotland and the North of England are well shown in the tables submitted by Sir Lowthian Bell to the recent Commission on the Depression of Trade and Industry. See their Second Report, Part I. p. 320.
[124.]Fuller says that Flemings started manufactures of cloths and fustians in Norwich, of baizes in Sudbury, of serges in Colchester and Taunton, of cloths in Kent, Gloucestershire, Worcestershire, Westmorland, Yorkshire, Hants, Berks and Sussex, of kerseys in Devonshire and of Levant cottons in Lancashire. Smiles' Huguenots in England and Ireland, p. 109. See also Lecky's History of England in the eighteenth century, ch. II.
[125.]The movement has been specially conspicuous in the case of the textile manufacturers. Manchester, Leeds and Lyons are still chief centres of the trade in cotton, woollen and silk stuffs, but they do not now themselves produce any great part of the goods to which they owe their chief fame. On the other hand London and Paris retain their positions as the two largest manufacturing towns of the world, Philadelphia coming third. The mutual influences of the localization of industry, the growth of towns and habits of town life, and the development of machinery are well discussed in Hobson's Evolution of Capitalism.
[126.]Comp. Hobson, l. c. p. 114.
[127.]The percentage of the population occupied in the textile industries in the United Kingdom fell from 3.13 in 1881 to 2.43 in 1901; partly because much of the work done by them has been rendered so simple by semi-automatic machinery that it can be done fairly well by peoples that are in a relatively backward industrial condition; and partly because the chief textile goods retain nearly the same simple character as they had thirty or even three thousand years ago. On the other hand manufactures of iron and steel (including shipbuilding) have increased so greatly in complexity as well as in volume of output, that the percentage of the population occupied in them rose from 2.39 in 1881 to 3.01 in 1901; although much greater advance has been meanwhile made in the machinery and methods employed in them than in the textile group. The remaining manufacturing industries employed about the same percentage of the people in 1901 as in 1881. In the same time the tonnage of British shipping cleared from British ports increased by one half; and the number of dock labourers doubled, but that of seamen has slightly diminished. These facts are to be explained partly by vast improvements in the construction of ships and all appliances connected with them, and partly by the transference to dock labourers of nearly all tasks connected with handling the cargo some of which were even recently performed by the crew. Another marked change is the increased aggregate occupation of women in manufactures, though that of married women appears to have diminished, and that of children has certainly diminished greatly.
The Summary Tables of the Census of 1911, published in 1915, show so many changes in classification since 1901 that no general view of recent developments can be safely made. But Table 64 of that Report and Prof. D. Caradog Jones' paper read before the Royal Statistical Society in December 1914 show that the developments of 1901-1911 differ from their predecessors in detail rather than in general character.
[128.]"Manufacture" is a term which has long lost any connection with its original use: and is now applied to those branches of production where machine and not hand work is most prominent. Roscher made the attempt to bring it back nearer to its old use by applying it to domestic as opposed to factory industries: but it is too late to do this now.
[129.]See Babbage's instance of the manufacture of horn. Economy of Manufactures, ch. XXII.
[130.]Instances are the utilization of the waste from cotton, wool, silk and other textile materials; and of the by-products in the metallurgical industries, in the manufacture of soda and gas, and in the American mineral oil and meat packing industries.
[131.]See the preceding chapter, § 3.
[132.]The average time which a machine will last before being superseded is in many trades not more than fifteen years, while in some it is ten years or even less. There is often a loss on the use of a machine unless it earns every year twenty per cent. on its cost; and when the operation performed by such a machine costing £500 adds only a hundredth part to the value of the material that passes through it—and this is not an extreme case—there will be a loss on its use unless it can be applied in producing at least £10,000 worth of goods annually.
[133.]In many businesses only a small percentage of improvements are patented. They consist of many small steps, which it would not be worth while to patent one at a time. Or their chief point lies in noticing that a certain thing ought to be done; and to patent one way of doing it, is only to set other people to work to find out other ways of doing it against which the patent cannot guard. If one patent is taken out, it is often necessary to "block" it, by patenting other methods of arriving at the same result; the patentee does not expect to use them himself, but he wants to prevent others from using them. All this involves worry and loss of time and money: and the large manufacturer prefers to keep his improvement to himself and get what benefit he can by using it. While if the small manufacturer takes out a patent, he is likely to be harassed by infringements: and even though he may win "with costs" the actions in which he tries to defend himself, he is sure to be ruined by them if they are numerous. It is generally in the public interest that an improvement should be published, even though it is at the same time patented. But if it is patented in England and not in other countries, as is often the case, English manufacturers may not use it, even though they were just on the point of finding it out for themselves before it was patented; while foreign manufacturers learn all about it and can use it freely.
[134.]It is a remarkable fact that cotton and some other textile factories form an exception to the general rule that the capital required per head of the workers is generally greater in a large factory than in a small one. The reason is that in most other businesses the large factory has many things done by expensive machines which are done by hand in a small factory; so that while the wages bill is less in proportion to the output in a large factory than in a small one, the value of the machinery and the factory space occupied by the machinery is much greater. But in the simpler branches of the textile trades, small works have the same machinery as large works have; and since small steam-engines, etc. are proportionately more expensive than large ones, they require a greater fixed capital in proportion to their output than larger factories do; and they are likely to require a floating capital also rather greater in proportion.
[135.]See below IV. XII. 3.
[136.]Thus Boulton writing in 1770 when he had 700 or 800 persons employed as metallic artists and workers in tortoiseshell, stones, glass, and enamel, says:—"I have trained up many, and am training up more, plain country lads into good workmen; and wherever I find indications of skill and ability, I encourage them. I have likewise established correspondence with almost every mercantile town in Europe, and am thus regularly supplied with orders for the grosser articles in common demand, by which I am enabled to employ such a number of hands as to provide me with an ample choice of artists for the finer branches of work: and I am thus encouraged to erect and employ a more extensive apparatus than it would be prudent to employ for the production of the finer articles only." Smiles' Life of Boulton, p. 128.
[137.]Means to this end and their practical limitations are discussed in the latter half of the following chapter.
[138.]A ship's carrying power varies as the cube of her dimensions, while the resistance offered by the water increases only a little faster than the square of her dimensions; so that a large ship requires less coal in proportion to its tonnage than a small one. It also requires less labour, especially that of navigation: while to passengers it offers greater safety and comfort, more choice of company and better professional attendance. In short, the small ship has no chance of competing with the large ship between ports which large ships can easily enter, and between which the traffic is sufficient to enable them to fill up quickly.
[139.]It is characteristic of the great economic change of the last hundred years that when the first railway bills were passed, provision was made for allowing private individuals to run their own conveyances on them, just as they do on a highway or a canal; and now we find it difficult to imagine how people could have expected, as they certainly did, that this plan would prove a practicable one
[140.]Compare Appendix A, 13.
[141.]German economists call this "factory like" (fabrikmässig) house industry, as distinguished from the "national" house industry, which uses the intervals of other work (especially the winter interruptions of agriculture) for subsidiary work in making textile and other goods. (See Schönberg on Gewerbe in his Handbuch.) Domestic workers of this last class were common all over Europe in the Middle Ages but are now becoming rare except in the mountains and in eastern Europe. They are not always well advised in their choice of work; and much of what they make could be made better with far less labour in factories, so that it cannot be sold profitably in the open market: but for the most part they make for their own or their neighbours' use, and thus save the profits of a series of middlemen. Compare Survival of domestic industries by Gonner in the Economic Journal, Vol. II.
[142.]We have already noticed how almost the only perfect apprenticeships of modern times are those of the sons of manufacturers, who practice almost every important operation that is carried on in the works sufficiently to be able in after years to enter into the difficulties of all their employees and form a fair judgment on their work.
[143.]Until lately there has ever been in England a kind of antagonism between academic studies and business. This is now being diminished by the broadening of the spirit of our great universities, and by the growth of colleges in our chief business centres. The sons of business men when sent to the universities do not learn to despise their fathers' trades as often as they used to do even a generation ago. Many of them indeed are drawn away from business by the desire to extend the boundaries of knowledge. But the higher forms of mental activity, those which are constructive and not merely critical, tend to promote a just appreciation of the nobility of business work rightly done.
[144.]Much of the happiest romance of life, much that is most pleasant to dwell upon in the social history of England from the Middle Ages up to our own day is connected with the story of private partnerships of this class. Many a youth has been stimulated to a brave career by the influence of ballads and tales which narrate the difficulties and the ultimate triumph of the faithful apprentice, who has at length been taken into partnership, perhaps on marrying his employer's daughter. There are no influences on national character more far-reaching than those which thus give shape to the aims of aspiring youth.
[145.]Bagehot delighted to argue (see for instance English Constitution, ch. VII.) that a Cabinet Minister often derives some advantage from his want of technical knowledge of the business of his Department. For he can get information on matters of detail from the Permanent Secretary and other officials who are under his authority; and, while he is not likely to set his judgment against theirs on matters where their knowledge gives them the advantage, his unprejudiced common sense may well overrule the traditions of officialism in broad questions of public policy: and in like manner the interests of a company may possibly sometimes be most advanced by those Directors who have the least technical knowledge of the details of its business.
[146.]Compare Schloss, Methods of Industrial Remuneration; and Gilman, A dividend to labour.
[147.]The Germans say that success in business requires "Geld, Geduld, Genie und Glück." The chances that a working man has of rising vary somewhat with the nature of the work, being greatest in those trades in which a careful attention to details counts for most, and a wide knowledge, whether of science or of the world movements of speculation, counts for least. Thus for instance "thrift and the knowledge of practical details" are the most important elements of success in the ordinary work of the pottery trade; and in consequence most of those who have done well in it "have risen from the bench like Josiah Wedgwood" (see G. Wedgwood's evidence before the Commission on Technical Education); and a similar statement might be made about many of the Sheffield trades. But some of the working classes develop a great faculty for taking speculative risks; and if the knowledge of facts by which successful speculation must be guided, comes within their reach, they will often push their way through competitors who have started above them. Some of the most successful wholesale dealers in perishable commodities such as fish and fruit have begun life as market porters.
[148.]The danger of not being able to renew his borrowings just at the time when he wants them most, puts him at a disadvantage relatively to those who use only their own capital, much greater than is represented by the mere interest on his borrowings: and, when we come to that part of the doctrine of distribution which deals with earnings of management, we shall find that, for this among other reasons, profits are something more than interest in addition to net earnings of management, i.e. those earnings which are properly to be ascribed to the abilities of business men.
[149.]In an article on "The variation of productive forces" in the Quarterly Journal of Economics 1902, Professor Bullock suggests that the term "Economy of Organization" should be substituted for Increasing Return. He shows clearly that the forces which make for Increasing Return are not of the same order as those that make for Diminishing Return: and there are undoubtedly cases in which it is better to emphasize this difference by describing causes rather than results, and contrasting Economy of Organization with the Inelasticity of Nature's response to intensive cultivation.
[150.]There is no general rule that industries which yield increasing returns show also rising profits. No doubt a vigorous firm, which increases its scale of operations and obtains important (internal) economies which are peculiar to it, will show an increasing return and a rising rate of profit; because its increasing output will not materially affect the price of its produce. But profits tend to be low, as we shall see below (VI. VIII. 1, 2), in such industries as plain weaving, because their vast scale has enabled organization in production and marketing to be carried so far as to be almost dominated by routine.
[151.]The Englishman Mill bursts into unwonted enthusiasm when speaking (Political Economy, Book IV. ch. VI. ŧ 2) of the pleasures of wandering alone in beautiful scenery: and many American writers give fervid descriptions of the growing richness of human life as the backwoodsman finds neighbours settling around him, as the backwoods settlement developes into a village, the village into a town, and the town into a vast city. (See for instance Carey's Principles of Social Science and Henry George's Progress and Poverty.)