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Fairfax Harrison.

Are we ready for industrial co-operation? An address before the State convention of the Indiana Y. M. C. A., Hammond, Ind., November 22, 1912 online

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Are We Ready For
Industrial Co-operation?




An Address before

The State Convention of the Indiana Y M. C. A.,
Hammond, Ind. , November 22, 1912.



By

FAIRFAX HARRISON

President, Chicago, Indianapolis & Louisville Railway Co.



ARE WE READY FOR INDUSTRIAL CO-OPERATION?



I. The Industrial Conflict.

Conflict seems to be necessary to the human animal with red
blood in his veins. It keeps him from stagnation, it develops him
mentally and physically, stimulates him to invention and sustained
effort; in a word, it creates in him ambition. Our whole social sys-
tem, and, indeed, many of our laws, have been built upon the recog-
nition of conflict as a natural regulative force: to illustrate from
contemporary politics, we insist upon industrial competition and
prohibit monopoly; the law prescribes war, not peace. For this rea-
son the social theories and experiments, which have rested without
qualification upon the principle that all men are equal, have failed;
equality before the law is a great and enduring achievement of our
ancestors, but equality of career is almost a contradiction in terms;
the right to fight for such reward as his individual equipment and in-
dustry may earn, to take his chance of success or failure, is as much
as a virile man ever asks,. but he does ask that. It was the assertion
of this right which precipitated the conflict, now a century old, in
.which our American railroad industry is still engaged, but under
conditions almost reversed. It is the conflict between Capital and
Labor which has been waged since the organization of modern in-
dustrial society, and it represents the most important phase of the
railroad question today, more important than what freight rates are
or are to be, more important than car supply and the volume of
traffic, more important than the relation of public opinion to the
railroads. It is the vital question, and on the proper solution of it,
which means the substitution for the existing civil strife of some
other and more economic conflict with a common competitor, depends
the future of the American railway industry.

At the beginning of the Nineteenth Century capital was all-
powerful and soon abused its power. It controlled the machinery of
government and it made public opinion. The economic literature of
the day was all capitalistic and some of its conclusions are as re-
volting to 118^ who are engaged in industry today, as are the other
extremes of the contemporary Syndicalists. The pendulum soon
began to swing. To secure a just recognition of its rights, both as
human beings and with respect to its contribution to the success of
industry, Labor found and put to its service the principle of collective
bargaining. It was an effective weapon. With its aid the labor
unions grew in power until the conflict became an equal one. Occa-
sionally war was necessary, but usually diplomacy was sufficient
as the parties grew to respect one another, and at that moment sub-
stantial justice was probably done by both. The next stage marked
a change in the balance of power, and today the condition of the rail-
way industry in the United States illustrates a tendency to abuse

257156



of power by that cue of the parties who was at first abused. He who
was despised now despises. \Ve are living in the midst of a process
of steadily increasing transfer of the fruits of the railway industry
from capital, which once enjoyed them, to labor: not to all labor
engaged in the industry, it may be noted, but to certain powerful
classes of labor. The honours of war may be said to be even : there
are those on both sides who have suffered, and both parties are today
faced by a common risk. It behooves both Capital and Labor, there-
fore, to find a new vent for the human appetite for conflict and to
join forces for their common good.

II. The Evil Consequences to Industry of the Existing Conflict.

Perhaps the greatest evil of this conflict is visited actually or
potentially upon the public, which is entitled to a uniform and un-
interrupted conduct of the transportation facilities on which it de-
pends more and more every year, but it is not proposed to go into
that important phase of the question here. Our subject is the effect
upon the parties to the conflict.

There are three recognizable consequences of this conflict which
have had an evil effect upon the capital invested in railroads and as
many of injurious effect upon labor. Let us examine them in turn.

Not the least element of the growing strength of labor in this
conflict, is that labor is today popular, in the sense in which control
of political policy is accomplished in a progressive democracy by
what is popular. It represents votes and is heeded by legislatures.
Its attitude of conflict with the management of the railways, which
represent the capital invested in them, was not the cause of the
assumption of the power of regulation of the railways by government ;
the managers themselves are responsible for that, but, since regula-
tion became an accomplished fact, the activity of labor in the legis-
lature has been the inspiration of many of the laws of unnecessary
and oppressive regulation which have been enacted. I am myself an
advocate of regulation of the railways by government, but- 1 am un-
able to blink the fact that what we have had has not always been
what we may fairly expect to have, the -regulation which considers
all alike. In the period of adjustment of the last few years the
experience of every railway manager has been that many of the
measures of regulation of railways have been futile and merely
wasteful of money sorely needed for improvement of facilities which
have in consequence been postponed. Many of these measures
have originated in mere opportunism of the politician, who, seeking
to commend himself to his constituents by adroit insistence upon
minor wrongs, secures the enactment of a general law prescribing an
invariable and expensive practice for the operation of all railroads, the
suggestion for which had its origin in the failure of a particular rail-
road in respect of its handling of a particular shipment; but there are
those also, and they are not few, which have been the direct conse-
quence of the conflict of Labor and Capital. The managements of the
railways ha^ r e not been esteemed by legislatures in recent years for
historical reasons which are not creditable to either of them, and it
has been as easy for organized labor as for the ambitious politician
to secure the passage of a law to make a railroad wince.



But more serious than this is the effect upon the railroads of
the steady demands of labor for fixed and invariable increases of
wages. 1 here is no railway manager today, I venture to assert, who
does not want all his employees to be well paid, to share in pros-
perity when prosperity exists, and to be rewarded by promotion for
efficient and loyal services. If he is not able to give this feeling ex-
pression in all deserving cases it is because his constant__cost for
the numerically most important classes of labor has increased in
greater proportion than the increases of revenue out of which that
cost must come. The margin necessary for the successful administra-
tion of any industry has been thereby progressively narrowed, until
the point of danger to credit even of the most prosperous roads is now
distinctly visible, as any one can testify who has railroad securities for
sale which he bought ten years ago. This is a situation which would be
difficult in an industry which could stand still, but in an industry of
which the life is growth, it discourages those who are invited to risk
the new capital .necessary to, make even the improvements which, by in-
creasing efficiency, will reduce expenses and so widen the margin again :
much less will the funds be forthcoming for the improvements de-
manded by 'the public for comfort and convenience. In the end the
tendency jeopards the very capital already invested.

Another consequence of the conflict in its effect upon Capital is
perhaps irrevocably accomplished already. It is the change which
uncertainty of income has had upon the point of view of investors.
Time was when railroad stocks were a favorite form of investment,
not only because they promised substantial profit by increment of
value, but because they spelled stability of income. Today railroad
stocks are not in favor, and whenever money is now invested in rail-
roads (except in extraordinary cases, each of which has its historical
explanation), the form of investment is the bond. In other words,
the investor is no longer a partner in the business, or, to use the good
old Elizabethan word, an adventurer; but has become a money lender.
He prefers the right to foreclose a mortgage to an uncertain chance
of a profit secured by good management and efficient operation. The
capital already invested in the original construction of a railway
suffers the consequence of this change of investing opinion, for it
must now stand as the margin of the new investor and must risk
being wiped out for his benefit and security. Whenever, as has hap-
pened in recent years, a railroad is faced by unconcerned and unyield-
ing demands of labor at a time when it is unable both to respond
to them and to maintain its credit, this risk is imminent. It is a
consequence of war.

As it concerns labor, the conflict is not less dangerous* in its con-
sequences. We hear much today of the increased cost of living. It
is urged as a ground for advancing wages, even when the inability of
the industry to do so and continue to prosper is apparent. The argu-
ment is that those who produce what the industry markets are en-
titled to the first consideration in the provision of the necessaries of
life, and where that argument is supported by facts it is most per-
suasive. It is not, however, as sound an argument in the railway
industry today as it was some years ago. While the cost of certain

5



necessaries of life has indubitably increased, the scale of living of the
railway employee has increased in greater ratio, and not the least
factor in this has been the increases in railway wages. This is the
vicious circle of prosperity. I read the other day an old book, Rob-
ert Wallace's "Dissertation on the Numbers of Mankind," published
in 1753, before the days of political economy, and there came upon a
suggestive comment on this subject:

"Operose manufactures of linen, wool and silk, toys and
curiosities of wood, metals or earth, elegant furniture, paintings,
statues, and all the refinements of an opulent trading nation,
tend," he says, "to multiply men's wants, make the most neces-
sary and substantial things dearer and in general increase the
expences of living."

This is an Eighteenth Century expression of a thought which an
American of our time, who represents in his own life the success of
individual initiative, industry and economy, has well phrased in the
notable epigram that "It is not the high cost of living from which we
suffer but the cost of high living." There is many an American rail-
way employee w,ho, if he searches his heart, will admit that the large
increases in wages which have been secured for him in recent years
have brought him very little real comfort. I was talking the other
day with a locomotive engineer who was thirty-five years old and
has drawn handsome pay for most of his industrial life. He
told me that his father, who had been a runner on the same road,
had saved and left behind him $6,000, living meanwhile a self -
respecting life on very much less wages than his son now gets. "Not
only have I been unable to save anything," said the son to me, "but
I have spent some of the old man's savings."

"What did you do with your last increase in pay?" I asked.
"Well, my wife said that the neighbors thought she should have
a silk dress, and the girls wanted a piano, and so it went; in the end
I did not find myself any better off than I was before."

This means, if it means anything, that the present position of
labor in its conflict with capital is deemed to justify the expectation
of continued increases in pay without regard to industrial conditions,
an assurance which breeds habits of extravagance which are harmful
to the individual. In other words, the increased pay is a factor in
creating the high cost of living.

As the conflict is now waged, the lion's share goes to the most
powerful organization, and the weak among the employees alone
suffer. It is an indisputable fact that some classes of railway em-
ployees are now highly paid, both actually and relatively, and that
other classes are not on the same basis in proportion to the value of
their services. This is an inequality in the same industry which one
can understand is intolerable to a spirited man, and indeed produces
some of the worst consequences of the present system, both upon
the employer and employee, but chiefly upon the latter.

Finally, the present system which required in the beginning a
well disciplined and cohesive organization for self protection, now
results sometimes in stifling the ambition of the individual by an
assurance of drab unformity of treatment. It is not necessary to



press the point. The warmest advocates of conservatively managed
labor unions, and I am proud to include myself in the number, recog-
nize the danger and the risk of this necessity of the system.

What then of the future, if the present conflict continues?

For the management of industry the conflict has been a stimulus
to greater efficiency and the economical investment of new capital.
As the wages of labor increased, an attempt to offset the increased
expense by economy in operation has resulted, and vast sums have
been spent, for example, in reducing grades and increasing power,
to secure greater unit train loads, but the limit to this kind of econ-
omy is in sight, if it has not been reached. The candid fact is that,
although other branches of industry are at this moment enjoying
great prosperity, the railroads, doing the largest business in their
history and passing through their treasuries the largest revenues
they have ever realized, are in a more precarious condition than ever
they have been, such is the burden of their expenses. It is abso-
lutely necessary to the railroads that something shall be done to
relieve the present tense situation and enable them to face the future
with confidence, and I believe that the way to accomplish this is to
settle the conflict of Labor and Capital in the railway industry on an
enduring basis. Other remedies are mere salves on that sore.

For labor also the future is not assured under existing condi-
tions. Already there have been expressions of discontent on the part
of other classes of the community with what they call the preferred
position of railroad labor. The most industrious and successful
farmers and storekeepers in the country along the line seldom make
as much net money in the year as do the railway employees stationed
at those towns, and nothing like as much as those they see going by
on the trains. They are, however, a large numerical majority of
those who pay freight charges, and they now complain against the
freight rates fergely because they think these rates might be less if
such relatively high wages were not paid to certain classes of rail-
road employees. If that class of the community speaks it is likely
to be heard in the legislatures more sympathetically than the rail-
road managements are heard. All it lacks at the moment is organiza-
tion and this it can learn from the successful experience of labor.

This brings us to the next point.

Whenever any class of society becomes so powerful as in the
abuse of its power to affect injuriously the lives, liberty or the pur-
suit of happiness of or by any other considerable class or classes
of society, the consequence, under the existing regime, is for govern-
ment to lay the heavy hand of Regulating Authority upon it. This
may happen sooner or later, but it is inevitable. Eighteen months
ago, in a public address, reasoning from the same premises, I ventured
to predict that the public press could not escape such legislation;
and we find today an act of Congress regulating newspapers on the
statute books. It is not impossible that organized labor may here-



after be faced with a strong and sustained public control of its
activities. It would be the logic of the last phase of the present con-
flict.

III. The Remedy: Industrial Co-operation.

It is interesting, and perhaps instructive, to think out these
things, but it serves little purpose unless it leads to the suggestion of
a remedy. We cannot stand still, for "stand pat" policies are not
popular at the moment and only serve to prolong the conflict. We
cannot revert to the former conditions : the old arguments which con-
vinced men a generation ago may still be listened to respectfully, but
.they are no longer heeded. We must progress.

The most tragic intellectual life of the last generation was that
of 'the 'English philosopher Herbert Spencer. About the middle of
the Nineteenth Century he began the compilation of a synthetic sys-
tem :of philosophy based upon the opinions of that time, and, with ex-
traordinary persistence, learning and intellectual vigor, he labored on,
despite physical handicaps, until he completed his self-appointed task
in 1896. It wais an achievement which, in a previous century, might
have had enduring effect upon the opinions of mankind, but while he
was writing -the world was moving with an increasing velocity, and
the opinions which -actuated men's political and social life in 1896
were utterly different from those of 1850. His work of a life time was
out of date before it was complete, and the tragedy is that he saw
this. Yet he had the vision of a seer into the future. His last word
was a sturdy maintenance of his belief that in 1850 there was reached
in England "a degree of individual freedom greater than ever before
existed since nations began to be formed," and that this was the
highest state to which man could attain, but he had observed the
reaction against too much 'individual liberty and the abuses which
it bred, and marked the growing tale of statutes by which the gov-
ernment was given authority to interfere with the daijy life of the
citizen; in other words, he foresaw the growth of Regulation which
is now a rooted policy of statesmanship, and he saw that this principle
must continue to expand until the government controlled and oper-
ated all the industries in which the individual citizen is employed :
the only alternative was a compromise, on which the conflicting
forces of society, Capital and Labor, might provide for the continu-
ance of private initiative in industrial opportunity. Dreading social-
ism, Herbert Spencer found this refuge in Industrial Co-operation.

This economic principle has found many expressions. Under it
Labor and Capital have united in the ownership of a business and
have failed. Under it labor has attempted to dispense with invested
capital and do business on the aggregate credit of a number of in-
dividuals : in what we call merchandizing, and the economists call
distribution, as in money lending, success has been accomplished
through co-operation, but in the co-operation of production, such as
manufacturing, there has been failure for lack of the capital neces-
sary to carry the business over times of stress. Capital itself, rep-
resented by conscientious and enlightened men, has from time to time

8



sought to apply the principle of "co-ope lation' id mdusicry in the form
of profit sharing; here again there has been little real success in
accomplishing the prime object, which was an identification of inter-
est between Capital and Labor, because even -the' best laid plans of
profit sharing have been regarded as a sort of tea : table distribution
of cake among men who work for bread. The dole is often accepted
with a sneer.

I do not now propose any of these forms of co-operation for the
railway industry, but one which seeks their object and attempts to
avoid the causes of their failure. At the moment, that .industry is in
a precarious condition, everyone engaged in it has his stake at risk.
In order to identify and co-ordinate all the interests involved, and to
secure the success which is not only possible but almost inevitable
if that result is attained, all must share in the results of the business
according to the fluctuation of the industrial barometer : the spur
must be the expectation of loss sharing as well as profit sharing.

Specifically, I propose, therefore, that a railway wage schedule
shall be prepared as follows :

Calculate on experience what has been the percentage of the total
pay roll of all classes of employees to the operating revenue in a given
year or average series of years, and apply this percentage to current
operating revenues to fix thereby the appropriation for pay of em-
ployees. The total appropriation, so made, would then be distributed
among .the several classes of employees in the percentages of their
participation in the pay roll which was taken as the standard, and
the individual would share in the appropriation for his class accord-
ing to his services measured by agreed units.

Under this meter wages would increase automatically as reve-
nues increased, but would decrease automatically as revenues de-
creased. The prosperity of the individual would be that of the road.
Capital, controlling management, would alone be interested in ex-
penses, as now: Labor's interest would be in increasing revenue,
or what has been heretofore called gross earnings.

While there are many details which would have to be worked
out to make this suggestion practically effective, the beneficial conse-
quences of the acceptance of its principle might be far reaching.

The railroad industry would be a united industry: there would
be a common interest between employer and employee. The intelli-
gence and energy which is now devoted to the effort, on the one
hand, to get wages increased, and, on the other, to resist increases
might be expected to be applied to promoting the industry itself.
The result would soon be reflected, not only in the income account,
but in the statute book. If rates were too low to yield a fair wage
to all, as well as a fair return to capital, there would be a united
demand for their readjustment which would have the backing of



votes as well as 'argument. " The human lust for conflict would find
its expression as between railroad and railroad : officer and em-
ployee would have a common loyalty, and the healthiest kind of
competition would be promoted, that of efficient service. The in-
dividual would control his household expenses and would follow the
expansion and depression of trade with his own economies : he wouki
indeed be in business, a true unit in the current industrial life of the
nation, rather than the beneficiary of the plunder of a successful war.

This is the purpose of Industrial Co-operation.

Is it not worth considering ways and means to bring it about?



10



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Online LibraryFairfax HarrisonAre we ready for industrial co-operation? An address before the State convention of the Indiana Y. M. C. A., Hammond, Ind., November 22, 1912 → online text (page 1 of 1)