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4. He may save the excess of products due to increased efficiency
in production. Sec. 355.

The laborer will ordinarily work until the satisfaction nearly
equals the pain. Sec. 356.

While Webster's law, that increased consumption yields dimin-
ished satisfaction applied in some measure, the rapidity of diminu-
tion is different with the four cases of food, comforts, luxuries,
and social advancements. With food the diminution is rapid ; com-
forts less ; luxuries still less ; expenditures for social advancement
are accompanied with almost undiminished enjoyment. Sec. 357.

If a man gets the same food in three hours instead of five, he will
spend the extra two hours on luxuries and social advancement.
Sec. 358.

The greater the wages the smaller the percentage for food, is
Engel's law. An increase in food products is accompanied by a de-
crease in price more than corresponding to the increase in the sup-
ply. In manufactured articles of luxury an increase in the supply
is accompanied by less than a corresponding fall in price. A
moderate reduction in transportation rates increases the net income
of the company. This shows that consumers when they can obtain
more products for the same amount of labor, increase their con-
sumption so as to devote more labor instead of less to procuring
products of this kind. Sec. 359.

An increase in real wages generally decreases the hours of labor.
The low-grade labor stops working through sheer laziness. The
high-grade labor works a little less so as to get more time for enjoy-
ment and get more pay besides. Sec. 360.

Sometimes the gain to the laborers is accompanied by a loss due
to the increase in numbers. Sec. 361.

Well-paid labor pays with increased efficiency. Sec. 362-363.

An influx of labor often raises the labor a step above the lowest.
The new labor does the low work. Every increase increases the
supply and lowers the demand. Sec. 365.

The general standard of consumption determines whether a
country be rich or poor. A high standard of living is gained by
high wages. Sec. 366.

High standard of living is accompanied by a higher standard
morally. This is good for the country. Sec. 367.

Education and restriction of the liquor traffic are good. Sec. 368.



Some people, who admit that the laborer gains by an increase of
his own powers, doubt whether a similar gain is possible when the
means of increased production are in the hands of the capitalist.
Sec. 369.

There are three evils charged against machinery.

1. That it displaces a large amount of human labor, thus taking
income from the laborers and giving it to tha employers.

2. That when it does not drive labor out of use it employs it in
unfavorable circumstances.

3. That under the best conditions it makes the man a specialized
machine instead of a broad-minded man. It deprives him of his
independence. Sec. 370.

The first evU is obviously untrue. Instead of making the same
products with fewer men the fact has been that more products are
made with the same or more men. Sec. 371.

Atkinson has shown that in cotton, while the actual profits on the
increased product had not increased the profits on the total capital,
the wages per operative per year had increased 64 per cent, between
the years 1840 and 1883. Sec. 372.

The growing contract betwen wealth and poverty seems to indi-
cate that the rich are growing richer and the poor are growing
poorer. This is held to prove that the capitalists have been the
gainers in industrial progress. Differences of accumulated wealth
prove nothing as to the ratios of income of different classes. The
enjoyment of different classes is measured by their expenditure, not
by their accumulation. The most careful calculations show that^
side by side with the increase of accumulations and the resultant
competition on the part of the employers for labor, the proportion
of enjoyment which goes to labor is becoming larger, and the pro-
portion which accrues to capital relatively smaller. The public in-
come going to labor has steadily increased. Sec. 373.

It is urged that, while the rate of profit has doubtless fallen, this
fall is not proportionate to the increase in the average duration of
the process ; and that the ratio of total profits to total wages must
therefore have increased. The rate of profit (as distinct from the
rate of interest) has fallen most conspiculously in large industries
with much fixed capital. Goods are sold on narrow margins. The
scale on which the work is done really gives publicity to the facts,


with regard to production and sale, in a way to insure more fully,
both to laborers and consumers, the benefit of the one-price system.
Mistaken investment in machinery tends also to reduce the gains of
the capitalist classes to a far greater degree than any one would as-
sume who did not make the calculation in detail. Sec. 374.

It has been urged that the hours of labor have not been reduced
in proportion to the increased efficiency which the new mechanical
methods have given. Marx claims that if, in spite of the improve-
ment the laborer continues to work ten or eleven hours for starva-
vation wages, it shows that the result of six or seven hours has been
quietly appropriated by the capitalist, since now the laborer can
secure as much in four hours as he could before in twelve.

The answer to this has been stated in the previous chapter. Gen-
erally the laborer reduces his hours of labor a little, and uses the
difference to make himself better off. Some laborers have increased
their numbers and have fallen into those lines of industry, where the
maximum economy is obtained by employing much labor at a small
daily wage. The effect of machinery on the laboring class is not to
be judged by its effect on those sections which, either by fault or mis-
fortune, have placed themselves in a position to obtain the minimum
benefit, either as producers or consumers. Sec. 375.

In times of commercial distress great distress is found in those
lines where there has been great duplication of machinery. This is
due to variations in the rate of the introduction itself. In a short
period it works its own cure. Sec. 376.

A commercial panic stops investment in new machinery. This
throws the laborers who make machinery out of employment. This
checks consumption, because this large body of laborers have no
money to spend. The lessening of the demand stops the mills, and
there is a widespread suffering among the laborers. Sec. 377.

This is the most serious indictment of the socialists against the
capitalistic system of production. It depends on the variations in
the rate of the introduction of machinery, which may be due to in-
flation of the currency, unwise tariff legislation, and sometimes by
the abuse of commercial credit. Sec. 378.

The second charge against the factory system is that it displaces
a higher grade of labor by a lower grade. Sec. 379.

The introduction of machinery has, in point of fact, been attended
with a diminution in the proportion of labor done by women and
children. In the United States the proportion of men is ncreasingr


that of women is stationary, and that of children is decreasing.
Sec. 380.

The introduction of machinery demands less physical strength but
more intelligent care and continuity of attention than children can
possibly offer. Sec. 381.

The mortality of children is high in cities, not because women
work in factories and fail to look after their children, but to the lack
of air and sunlight in the crowded cities. Sec. 382.

The charge that factory life is unhealthful is difficult to discuss.
Colonel Wright says that the trouble is not in the air of the factory
but in that of the homes. Sec. 383.

The moral results are not so bad as the system it superseded-
The intemperance of manufacturing employees is due to town life
rather than manufacturing. Drunkenness is less common among
factory operatives than among laborers of other kinds. The factory
system does not promote prostitution. The number of prostitutes
coming from the ranks of factory operatives is conspicuously small.
Sec. 384.

The larger the factory the more concentrated the evils and the
easier to deal with them. The factory system has not created the
evils, but has concentrated them. It has created the opportunity of
holding employers responsible for their prevention. Sec. 385.

The manufacturers have done much to protect themselves and
their employees in the way of protection from fire and accidents.
Female and infant labor has been regulated by law much more
effectively. The number of hours has decreased for adult men.
Sec. 386.

The laborer is protected by law against accidents. Sec. 387.

It is undeniable that labor is becoming specialized, and that many
of the occupations have a narrowing effect on those who practice
them. Sec. 388.

The gain in opportunities for travel and varied enjoyment has out-
weighed the loss in opportunities for changes of occupation. Sec.


This improvement tends to stimulate the movements toward
combination of labor, which may seem necessary to insure the
laborer against the loss of all industrial and social power. Sec. 390.

The old labor guilds were organizations of capital and labor. The
modern trade union is a combination of labor. Sec. 391.

At the beginning of the present century public sentiment and the


law were opposed to labor organizations. To-day it is not so. Sec.

The change in public sentiment has not kept pace with the
changes of the law. Many believe that labor organizations exist for
the purpose of striking and that industrial peace would be secured
if they were suppressed. The first is a distorted idea ; the second
is wholly unfounded. Legal proctection of labor organizations has
made them more rational, and therefore more dangerous to those
who resist them. Sec. 393.

Nearly all the older trade unions are conservative responsible
bodies, prepared to make contracts with capital as well as fight
against it. This permanence of organization makes them reluctant
to engage a conflict. Those unions are so exclusive and conserva-
tive that a new unionism has sprung up which aims to look after
labor as a whole. This is not a trade organization but a local one.
Sec. 394.

With new unionism, insurance and benefit systems count for little
or nothing. They rely less on the power of the individual strikers
and more on the collective power to influence public sentiment and
legislation which the laborers have as a class. Sec. 395.

The most important object is the attainment of compulsory arbi-
tration in lieu of protracted strikes. This is a wise move. Sec. 396.

They urge that the capitalist should serve the public continuously,
that he should not inconvenience the public by stopping to haggle
over a few cents wages. The court should determine the fair rate
of wages. Sec. 397.

This would be one-sided. The laborer would get all the advan-
tage. It would tend to make the capitalists hesitate to invest their
money in new enterprises. The consumer would suffer for lack of
sources of supply. The producers would suffer from lack of fields
of employment. The capitalist could be forced to arbitrate by boy-
cotting. The advantage would be all the laborers. It can be en-
forced to their advantage and not to their disadvantage If to their
advantage industry may be checked. Sec. 398.

If we have compulsory arbitration investment is stopped, but we
are not liable to interruptions in the public service. If we do not
adopt it we suffer from the interruptions of public service. Sec. 399.

Government ownership does not meet the exigencies of the case.
If it yields to the labor demands in every instance the want of disci-
pline will be destructive. If it resists the demands of labor it will


have no more effective means of maintaining its ground than the
capitalists. Sec. 400.

As time goes on the leaders on both sides become sufficiently wise
to reduce disputes to a minimum. Sect. 401.

A board of conciliation at an early stage of a strike can accom-
plish much. Often strikes are due to misunderstandings. Sect. 402.

The division of earnings according to the selling price of the pro-
duct, is known as the sliding system. This is agreed to before
hand and prevents much trouble. Sect. 403.

From the workers' standpoint this may prove serious as the selling
price may be such as to make their income less than their needs.
According to the living wage view, labor should be paid enough to
maintain a good grade of efficiency. Sect. 404.

The evils of treating labor as a commodity and not as a com-
modity are both great. Sect. 405.

The living wage may be good. But it is a hard thing to work.
Some would insist on a living wage which the employer might think
unfair. It would make a man work for something or nothing, there
would be no intermediate steps. The consumer might be unwilling
to pay the something and there you are. It is absolutely necessary
that the living wage be just. Sect. 406.

The competition of labor and the competition of capital are to-day
very effective in gaining good results to the laborer. Sect. 407.

Under the living wage system the laborer must resort to bargain-
ing in which the capitalists, superior strength and intelligence must
tell against him. Sect. 408.

Monopolies of capital and labor are bound to fail. Sect. 409.
Many trade unions discourage industrial efficiency. This is a
grave tendency. It handicaps themselves as well as society. Sect.


Labor and capital are most compatible when there are no sharp
distinctions between them. This is the state of affairs in young
countries. Sect. 411.

At present there is a sharp distinction. To become a capitalist
requires large saving, this involves serious dangers.

I. It increases strikes which involve the economic distinction of


2. It neutralizes much of the inventive, giving advantage of pri-
vate property.

3. It involves a contradiction between our political theories and
the fact of the industrial world. The warring of labor against
capital menaces our political and industrial order. Sect. 412.

The paternal policy on the part of the employers does not meet
the second and third dangers. It leads to violation of the doctrine
of social equality unless very carefully carried out. Sect. 413.

The policy of letting the workmen take shares leads to abuse in
large factories. It does not make the laborer independent, but
merely helps him to elect his own governors. This amounts to
little. Sect. 414.

Profit sharing is not always successful although it is fairly good.
Sect. 415.

Usually the workmen are unwilling to heartily enter such a
scheme. Sect. 416.

The bonus of profit to the labor must increase his efficiency or he
must be prepared to accept low or high wages as the business turns
out. Sect. 417.

Workmen cannot be forced or urged to work harder by the pros-
pect of these distant returns. The increased efficiency of one helps
all. This the laborer soon sees. If there is little or no profit the
suspicions of the laborer are aroused. Sect. 418.

If laborers are not working near their maximum rate, profit sharing
may be good. Sect. 419.

Under other circumstances it should be condemned as it involves
the laborer in the risks of the employer. Sect. 420.

It is often possible to enable the workman to gain a bonus by
superior efficiency and care. Sect. 421.

Co-operation is either consumptive or productive in its manage-
ment. In the latter case it is controlled by the investors, in the
former by the consumers. Sect. 422.

The more completely the workman is in the habit of using his
powers, the least promising the field for co-operation. It needs a
field of industry that demands little management, Sect. 424.

Lasalle wanted the government to lend capital to the co-operators.
This would increase the likelihood of poor investments. The failure
of co-operation is generally due to the lack of business ability of its
managers. Sect. 425.

Consumers co-operation is much better than the productive one.


The essential difference is that one knows the demand the other
does not. For this reason the productive co-operation needs a very
good manager. There are three forms of consumers co-operation,
co-operative purchase, insurance and banking. Sect. 426.

The first form, co-operative purchase is very successful. Sect. 427.

This is mainly due to the cash system on which the stores are
run. Sect. 428.

The business is regular and needs little advertising. Sect. 429.

Co-operative insurance prevents over insurance which is burden-
some on the poor and leads to fraud in order to get the insurance.
It is cheaper because there are no high salaried agents. Sect. 430.

Mutual insurance prevents fraud and lowers the rate. Sect. 431.

Co-operative mutual life insurance has been considerably success-
ful. Sec. 432.

The idea of the co-operative banking is that labor may enable
itself to obtain credit by collecting a small capital in the hands of
the association, shall attract outside investors by the offer of a fair
rate of interest, and shall then loan funds to its members after direct
personal examination of the circumstances of the borrowers. The
educational effect of this is splendid. Sec. 433.

In England and this country co-operative banking has been con-
fined to building. The loans are made to the offerer of highest in-
terest. Every month the borrower pays his interest and the amount
due on each share. The interest on paid-up money accrues to his
advantage. Sec. 434.

This kind of saving is compulsory. Often the interest is too high.
It is cheaper and better to go to a savings bank. But it tends to in-
crease the number of men who own their homes. This is educational.
Sec. 435.

Government management of industrial enterprise is not good.
Sec. 436.

Taxation was inaugurated to support the government. Sec. 437.

Every tension of government activity to new fields restricts pri-
vate enterprise in two ways. It limits the field of investment. It
may appropriate through taxation a part of the returns from private
enterprise in all other fields. Sec. 438.

The more the government undertakes the greater the taxation.
Sec. 439.

Bridges, lighthouses and public forests are best controlled by the
government. Sec. 440.


If taxpayers do not realize that taxes are for their own good, the
good to be obtained is hindered. Many fancy that if they spend
money they are doing good in that they are employing labor. This
is obviously not true unless it is devoted to the increase of public
wealth. Sec. 441.

-Many monopolies are such that it is doubtful whether the gov-
ernment had best take them. Sec. 442.

Jevons gave these criteria for government ownership.

1. Where numberless operations can be converted into a great
government system.

2. Where the operations are routine-like.

3. Where they are under the public eye or the gaze of individuals,
ready to detect and expose failures.

4. When there is little capital expenditure these principles are
restrictive, not positive. Sec. 443.

State ownership of railroads is not very good. Sec. 444.

Private ownership fosters development and gives better service.
Sec. 445.

No general propositions can be maintained with regard to tha
rates under the respective managements. Sec. 446.

The whole value of state ownership depends on the kind of gov-
ernment. Sec. 447.

The chance of securing the benefits and avoiding the evils is
greater in a community than in a state. Sec. 44S.

Non-partisan civil service is absolutely necessary for state busi-
ness. Sec. 449.


Many plans have been offered to make the number of adult
laborers less. Sec. 450.

One claim is that the reduction of the number of hours would
create a demand for labor. This would increase the price of labor
per hour. Sec. 451.

The wages will not rise to the ten-hour price for eight hours.
This would cause much hardship if it were widespread. Sec. 452.

There is something in the argument that increased efficiency, due
to shorter hours, would make up the difference. In certain indus-
tries recourse would have to be had to legislation, in order to secure
horter hours. Sec. 453.


The eight-hour law falls heavily on those who cannot increase
their speed of labor. Sec. 454.

The restriction of child labor is farsighted. Sec. 455.

A certain amount of regulation of the labor of women seems
necessary ; but the growing equality of the two sexes is likely to re-
duce such special legislation to a minimum. Sec. 456.

The need of legislation in the sweating system is obvious. Sec.


The sweating system is a remnant of the old domestic system.
The evils of it are due to the lack of open competition. Sec. 458.

Convict labor is under the lease, the contract, and the piece-price
systems. Under the first the convicts are leased out to the pro-
ducers. This is bad for the convicts. Under the contract system
the labor within the prison is put at the disposal of a contractor.
Under the third the results of the labor are offered to the contractor
at a fixed price per unit of product. This is the best for the convict.
But it fails, because the wardens usually lack the qualities necessary
for a good manufacturer and a good warden. Sec. 459.

Convict labor depresses wages, because it increases the supply of
labor. Sec. 460.

The abolition of convict labor burdens the community by raising
taxes higher. This would lower general wages by diminishing the
amount of funds available for production. It would also have a bad
effect on the convicts themselves. Hand labor would not help the
convict when he got out. A public prison as a producer would be
liable to be run at a loss to the state. It would tend to be run
at less profit than would be possible. There would be little incentive
to good management. The best means of convict labor is to divide
it among different industries. Sec. 461.

It is good to restrict the immigration of foreign labor. Sec. 462.

The worst form of immigration is the " assisted." Paupers are
bad. The law against pauper and convict labor amply justifies the
facts. Sec. 463.

Immigration is more objectionable in a country which admits the
immigrants to political power. As long as the country can assimi-
late it all is well. Sec. 464.

Unrestricted immigration is good. Those who come are generally
of a high class.

More attention is paid to the protection of home industry than to
immigration, because the capitalists favors it. Sect. 466.


Many countries have had many experiences with free trade and
protection. Sect. 467.

There are three kinds of arguments for protection. The first
claims that protection makes high wages by keeping money at home
and by creating an increased demand for labor. The second urges
the indirect advantages of the diversification of industry. The third
looks on protection as a military necessity. Sect. 46S.

The first argument is a survival of the mercantile theory. Money
spent at home is not economy when you can spend it abroad to so
much greater advantage. The same result would be obtained more
cheaply by paying a bounty to those industries which need it. This
of course would come out of the taxation. The people don't want
that because it would cost too much. Sect. 469.
Limitation of imports limits exports. Sec. 470.
These efforts to accumulate money swell the currency. Wages
are higher nominally but not really. The best thing is to sell
all you can and buy more. Sec. 471.

The country should pay more attention to extending her resources
than to paying off old debts. It would be better to tax the country
directly. Sec. 472.

International trade will of necessity make exports equal to imports.
Sec. 473.

The application of capital to industry which can't stand alone is
poor economy. Sec. 474.

By protection we really lose money. Sec. 475.
The cost per unit of product is what counts. The cost per unit
here is less than in most countries. Sec. 476.

The nation should devote itself to producing those things in which
she is most efficient. Sec. 477.

The second argument is more plausible. The advantage of such
policy warrants the sacrifice, is maintained by the upholders.
There are some industries which are exhausting the resources of
the country. By a protective tariff on certain industries the capital
would go to them ; then the resources of the country would not
be diminished so fast. It is conceivable that this might actually
increase the amount distributed to labor. Sec. 479.

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Online LibraryArthur Twining HadleyEconomics I → online text (page 4 of 5)