Henry William Macrosty.

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THE LIBRARY
OF

THE UNIVERSITY

OF CALIFORNIA

LOS ANGELES






tlbe jfabtan Series

Edited by FREDERICK. WHELEN



I

TRUSTS AND THE STATE



THE FABIAN SERIES.

II.

CONSTRUCTIVE SOCIALISM. Essays in

Contemporary Politics. By Sidney Webb,

Bernard Shaw, and others, and the Fabian

Society. {In preparation.)



TRUSTS AND THE STATE



A Sketch of Competition



BY



HENRY W. MACROSTY, B.A.



LONDON
GRANT RICHARDS

I 90 I



HI)



EDITOR'S NOTE

Since the establishment of the Fabian Society in 1883,
it has published " Fabian Essays in Socialism^^ now in
its thirty-fifth thousand^ and a great number of Tracts
and Leaflets on contemporary politics.

The Fabian Series, of which this is the first issue,
will be written mainly by active members of the Society,
and will consist of volumes dealing from the Fabian
point of view with politics and economics in a more
detailed manner than is possible within the narrow
limits of a Tract, a Leaflet, or an Essay. The respon-
sibility for each volume rests with its author.



oof?-;i -s ji



CONTENTS



CHAPTER I

PAGE

The Conflicting Philosophies ... I



CHAPTER II
The Early Achievements of Competition . . i6

CHAPTER III

The Reverse of the Shield . . . -35

CHAPTER IV

The Revolutionary Era . . . .50

CHAPTER V
State Interference . . . . .74

CHAPTER VI

Modern Aspects of Competition . . .100



viii Trusts and the State

CHAPTER VII

PAGE

Companies and Honesty . . . .125

CHAPTER VIII

The Growth of Combination in Industry . . 147

CHAPTER IX

The Growth and Effects of Combination in Industry 183

CHAPTER X

Trade Unionism . . . . .218

CHAPTER XI

The Co-operative Movement .... 247

CHAPTER XII

Collectivisation . . . . .277

CHAPTER XIII
The Standard of Life .... 306



CHAPTER I

THE CONFLICTING PHILOSOPHIES

The history of British trade may be roughly divided into
three eras — the mediaeval, the laisse'z-faire^ and the modern
— and the dominant ideas of each of those periods have been
privilege, competition, and association. By a natural process
of growth, successive forms of trade and national organisa-
tion have been evolved by the modification of previous forms
found to be faulty, and under a conscious or unconscious
adaptation to the new economic philosophy taking the place
of the old. The old craft-gilds were originally unions of
handicraftsmen who banded themselves together for mutual
protection, and, establishing themselves firmly, succeeded in
obtaining from impecunious monarchs the benefit of incor-
poration and the right to frame rules for their trades. The
feudal conception of society as a series of rigidly demarcated
castes, each in a condition of dependence on the rank
immediately higher, necessarily found its way into these
trade regulations. The relations of the different members
of the gild to one another, to their dependents, and to the
public were strictly defined. "The crafts have been devised,"
ran a decree of the Emperor Sigismund in 1434, "that
everybody by them should earn his daily bread, and nobody
shall interfere with the craft of another." Having chosen
his " mystery," a man had to stick to it, and thereafter his

B



2 Trusts and the State

training as an apprentice and the conduct of his business as
a master were strictly prescribed. His tools, his materials,
the quality of his goods, the number of apprentices, the
hours of labour, wages, and sometimes prices, were the sub-
ject of gild regulations. On the other hand, gild members
were supported in sickness and poverty, and defended against
injustice. The growth of wealth led to the conversion of
the gilds into close corporations, and ultimately to their
decay. The appearance of a separate servant class, which
attained economic power after the Black Death, led to the
intervention of the State powers for the assistance of the
masters, especially of the landed proprietors. Previously
the Government had only looked upon industry from a
revenue standpoint, but now its avowed poHcy for a couple
of centuries was to be the keeping of the labourer in that
position to which it had pleased God to call him. All
persons were to be compelled to work first at the wages
which were customary before the Plague, and later at the
wages fixed by the justices, and were not to move from their
county.

The quintessence of the medieval system is embodied
in full legal form in the Statute of Apprentices of 1562
(5 Eliz. c, 4). No person could lawfully exercise any
"trade, craft, or mystery" except he had served an appren-
ticeship of at least seven years therein. Every householder
in a city, town - corporate, or market-town might take
apprentices, but only the children of persons of a certain
fortune and under twenty-one years of age. One journey-
man had to be kept for every three apprentices, on a yearly
engagement, terminable at a quarter's notice. The hours
of labour were to be twelve per day in summer and from
dawn till nightfall in winter. Wages were to be assessed
yearly by the justices of the peace, so as to "yield unto the
hired person, both in the time of scarcity and in the time
of plenty, a convenient proportion of wages." In intention,
at all events, this Act was the bulwark of the labourer's



The Conflicting Philosophies 3

standard of life, and when afterwards times of strife came it
was to it that the nascent trade unions appealed. Legal inter-
pretation, however, robbed it of much efficiency by restricting
its operation only to trades established and to towns incor-
porated at the time of its enactment ; but when the Frame-
work Knitters' Company was incorporated in 1663, it was
brought under this statute. The neglect and prejudice of
the justices also brought the regulation of wages into
disuse.

The settled policy of the State at the end of the sixteenth
century was the recognition of the vested interests of
incorporated trades and the maintenance of the system of
small masters. Thus in the woollen trade the use of
machinery was regulated, and the number of looms which
one weaver might have restricted, and only " loyal cloth "
of specified quality and length, and stamped with the magis-
terial seal, might be sold— restrictions of which Josiah Child
bitterly complained as late as 1693. ^^ ^^^ typical that
Ehzabeth should have refused the present of the first pair of
stockings knitted on a frame invented by William Lyle,
because it would throw so many of her poor stocking-
knitters out of work.

The Poor Law of 1601 completed the Elizabethan system
by admitting that every one had a right to subsistence at
the cost of the State, a concession which at one and the
same time placed the labourer beyond the fear of starvation
and reduced him to slavery. As the law was subsequently
interpreted in rural districts, employers paid the lowest
possible wages, which were then made up to a sufficient
amount out of the parish rates. No personal responsibility
was demanded from the labourer, and his sense of independ-
ence was sapped to such a degree that he came to look upon
the parish as a kind of Benefit Society, the best sort of relief
club, indeed, for it required no contribution, enforced no
adequate return of work, put no limit to its grants, and
never became insolvent. The gigantic expense of wholesale



4 Trusts and the State

relief soon led the parishes to try to shift the burdens, and
the celebrated Act of 1662 made the labourer in effect once
more a serf by empowering the removal of any incomer to
a parish who occupied a house of less than ten pounds'
annual value. " To remove a man who has committed no
misdemeanour from the parish where he chooses to reside
is," says Adam Smith, "an evident violation of natural
liberty and justice." Further, it completed the immobility
of labour which had been begun by the apprenticeship
laws.

The final effect of the mediaeval system was to erect an
impassable barrier against the improvement of industry by
giving a quasi-sacred character to the immovable obstacles
of custom and privilege. Additional tiers to this Chinese
Wall were built by the adherents of the Mercantile System,
which governed trade from the sixteenth to the end of the
eighteenth century. Starting from the fact that money is
the most advantageous form of wealth, since it is the means
of acquiring all other useful articles and is in perpetual
demand everywhere, the mercantilists directed their policy
towards the accumulation of the precious metals. To secure
a favourable balance of trade by exporting as much and
importing as little as possible became the ideal of commercial
legislation. Home industries were fostered by bounties and
by special privileges to corporations and trading companies.
Foreign goods were kept out either by prohibition or by
heavy duties, lest they might compete with native articles.
Even goods not made in England were prohibited, lest they
might interfere with established manufactures ; for example,
the import of printed Indian calicoes was forbidden in
1700, lest it should injure the production of woollen goods.
The exportation of machinery and the emigration of skilled
artisans were prohibited, lest by the establishment of manu-
factures abroad foreign markets for English produce might
be curtailed. The export of gold and silver was severely
restricted j the colonies were treated as estates to be worked



The Conflicting Philosophies 5

for the sole profit of the home country ; and the carrying
trade was confined to EngHsh vessels or to ships belonging
to the same country as the goods they carried. There is no
doubt that this fostering gave a great impulse to manufacture
and commerce, but, to quote Dr. Ingram,^ " Industry
was forced by such systematic regulation to follow invari-
able courses, instead of adapting itself to changing tastes and
popular demand. Nor was it free to simplify the processes
of production, or to introduce increased division of labour
and improved appliances. Spontaneity, initiation, and inven-
tion were repressed or discouraged, and thus ulterior sacrificed
in a great measure to immediate results." The basal error
of the theory was the small shopkeeper's idea that trade
cannot be carried on without making one man's gain
another's loss. To use the delightful phrases of Adam
Smith, "that insidious and crafty animal, vulgarly called a
statesman or politician," erected "the sneaking arts of
underling tradesmen into political maxims for the conduct
of a great empire."

Such was the condition of things during the first half
of the eighteenth century, when industry was slowly passing
out of the handicraft stage. Many causes contributed to
the decay of the domestic system, where the worker laboured
in his own cottage with his own tools on his own material,
even before the advent of power-machinery. The cost of
the raw material as in the case of silk, the need for extensive
commercial knowledge as in the West of England wool
trade, the cost of the tools as among the stocking-frame
knitters, led to a separation of the capitalist from the
operative class. Cotton cloth was still woven in the
weavers' cottages, but the weavers worked for large
merchants who gave out the yarn and collected it when
woven — a change which took place about 1740-60. A
little later the merchant proper separated himself from the
giver -out or middleman, who was soon to develop into

•* History of Political Economy, p. 42. A. and C. Black, 1893.



6 Trusts and the State

the factory - owner. The modern factory system may be
said to have begun with the setting-up of Lombe's silk-
throwing mill at Derby in 17 19, the success of which set
men's minds at work to devise improvements in cotton
and woollen manufacture ; and Wyatt and Kay were the
forerunners of the great inventors. As trade expanded
and factories grew more numerous, the new capitalists
felt the crippling effects of the mediaeval regulations, and
habitually evaded the law. The workmen organised in a
rude fashion, and appealed to Parliament to maintain the
old customs of a legal wage and the limitation of apprentices.
The woollen weavers of the West of England secured an
Act in 1756 directing the justices to fix piecework rates,
but a storm of capitalist opposition brought about its
headlong repeal a year later. The Spitalfields weavers
were more fortunate, for, being of a turbulent disposition,
they found a means of bringing home the force of their
complaints to individual members of Parliament, and so
gained an Act enforcing the legal fixing of their wages as
late as 1773. But the old system was already dead, and
the industrial revolution which began with the great
inventions of Arkwright (1768), Crompton (1779), and
Cartwright (1787) marked the passing away of the rule
of custom and privilege in industry. Gild rules and steam
engines could not go well together. Naturally, since
Parliament was not representative of the working classes,
it was the regulations which defended the workers which
were first attacked. The masters could always show that
the new machinery was necessary if the export trade was
to be maintained and extended, and that the limitation of
apprentices meant the ruin of the factory. The new
processes did not require the old skill, and should not be
remunerated with the old pay, while wages should be fixed
not by ignorant and too sympathetic justices, but by master
and man, who knew what they were about. The arguments
were irrefutable, and when Adam Smith published his



The Conflicting Philosophies 7

Inquiry into the Nature and Causes of the Wealth of
Nations in 1776, he found a public seekina; for a new
intellectual basis for the altered state of things. As the
last years of the century went on, his doctrine of " free
contract" won more and more acceptance among the
governing classes. Complete conversion was announced
in the Report of a Select Committee of the House ot
Commons in 181 1, that "no interference of the legislature
with the freedom of trade, or with the perfect liberty of
every individual to dispose of his time and of his labour
in the way and on the terms which he may judge most con-
ducive to his own interest, can take place without violating
general principles of the first importance to the prosperity
and happiness of the community, without establishing the
most pernicious precedent, or even without aggravating,
after a very short time, the pressure of the general distress,
and imposing obstacles against that distress being ever
removed." The consequence was the repeal of the wage
clauses of the Statute of Apprentices in 18 13, and of the
apprenticeship clauses in 18 14.

The doctrine so succinctly set forth by the Select Com-
mittee, and destined to exercise so important an influence
on politics and trade, requires a closer examination. Living
in an age when artificial restrictions impeded all political
and industrial development, Adam Smith followed the
physiocrats in going back to "nature," to "the natural
order of things," and in finding out what were men's
"natural inclinations." The natural order was the free
exchange of labour, free competition. " The property
which every man has in his own labour, as it is the original
foundation of all other property, so it is the most sacred
and inviolable. The patrimony of a poor man lies in the
strength and dexterity of his hands, and to hinder him
from employing this strength and dexterity in what manner
he thinks proper, without injury to his neighbour, is a
plain violation of this most sacred property." The principle



8 Trusts and the State

of individual liberty is guided in industrial matters by the
inducement of self-interest: "it is only for the sake of
profit that any man employs a capital in the support of
industry." Governed by that motive, every individual is
the best judge of his ovi^n advantage ; and since the nation
is made up of individuals, the public interest is fully
subserved by individuals acting in this way. " Every
individual is continually exerting himself to find out the
most advantageous employment for whatever capital he
can command. It is his own advantage, indeed, and not
that of the society, which he has in view. But the study
of his own advantage naturally, or rather necessarily, leads
him to prefer that employment which is most advantageous
to the society." n he conclusion, as drawn by Smith's
followers, is that the State must not interfere in human
affairs except to keep the peace ; the world will move well
enough on the ideas of free trade, free contract, free com-
petition, laissez-faire^ laissez- passer. In fact, the ideal
state was to be, as Carlyle said, "Anarchy plus a police-
constable."

From the combination of the metaphysical conception of
natural liberty with the Hobbesian notion of self-interest as
the sole spur to action — both eminently characteristic of the
eighteenth century— arose the abstraction of the "economic
man," a being that never walked on sea or land, and whose
idea was not laid up in Plato's heaven. This personage, it
/- appears from the circumstances in which the economists
represent him, was possessed of all wisdom and all knowledge
to discern wherein his true advantage lay, and was always
able to act accordingly. He could at any time move his
labour or his capital to any place or to any business, and
could in the twinkling of an eye acquire a new occupation.
Of such individuals as he society was made up, all men
were industrially equal ; and though they were moved solely
by the desire for gain, the public advantage was the summa-
tion of the pluses and minuses of their conflicting interests.



The Conflicting Philosophies 9

It is obvious upon consideration that if such an abstraction
from reality was justifiable for the sake of simplifying the
treatment of complex phenomena, the results were pro-
portionately useless for the practical purposes of legislation.
Yet not only did the economists repeatedly forget the
unreality of their creation, but those unrealities were eagerly
taken by the business and governing classes as transcripts
from the actual world. It was indeed the facility with
which the theory allowed itself to be used as a palliation of
the worst effects of the industrial revolution which led to its
prompt adoption. Only in this way could the Government
and the manufacturers justify themselves before the world.
Yet all the assumptions were supremely unwarrantable. In
the real world men did not always know their true interest,
nor did they always follow it ; labour and capital were not
freely mobile, nor could an occupation be changed at will ;
the interest of the individual was not only not always
identical with the interest of the community, but frequently
destructive of it, as in the cases of adulteration, fraud, and
speculation. Above all, the industrial world did not consist
of equal units ; in the negotiations between poverty and
wealth, between starvation and greed, there could be no free
contract. But despite all its untruths, the theory of free
competition won the day ; for while the remains of the
outworn feudal notions were obstructing the road to im-
provement, the supreme need of the time was personal liberty.
The new forms of industry had swept away the old world
and had thrown men back on their personal relations with
one another. As Arnold Toynbee says, " the essence of the
Industrial Revolution is the substitution or competition for
the mediaeval regulations which had previously controlled
the production and distribution of wealth." ^ Malthus in
1798 strengthened the theory by founding it on natural law,
and proving, as it seemed, that the tendency of population
to outstrip the means of subsistence would defeat all attempts

^ Industrial Re-volutkn, p. 85. Longmans, 1887.



lo Trusts and the State

at the improvement of the condition of the people. When

^ Ricardo in 1817 completed the body of doctrine by showing

1,(91 that capital was the principal factor in production, and that

yUffU wages must necessarily fall to the subsistence level, the

economic fabric was regarded as impregnable. Yet the

wages -fund and the population theory have followed the

/ economic man into the limbo of forgotten errors.

The doctrine of free competition is essentially negative,
as suited the critical century which gave it birth. Its work
was destructive, to clear the ground for a fresh svnthesis.
As soon as its deleterious results began to be felt, it called
into life a new principle, the constructive conception of
association or co-operation. In biology we recognise the
adaptation to environment whereby animals and plants
threatened by any noxious element assume a corresponding
means of defence. Similarly, when the welfare of society
was imperilled by the embodiment of individualist theories
into practice, men spontaneously sought in combined action
a means of protection. They did this not in pursuance or
a new philosophy — that came later to explain their action —
but they acted unconsciously on a theory in every respect
contradictory of that which held the field. In this, as in
many other departments of political science, the working
classes had to struggle towards the enunciation of the truth
in opposition to the pundits of the day. Yet they were not
without valuable assistance from outside their own ranks.
Carlyle, perhaps, was the first to make an efi'ective breach
in the individualist stronghold by opposing the collective to
the atomist view of society. "Such is Society,"' he wrote
in 1831,^ "the vital articulation of many individuals into a
new collective individual : greatly the most important of
man's attainments on this earth ; that in which, and by
virtue of which, all his other attainments and attempts find
their arena, and have their value." And his fervent de-
nunciations of the evils he saw in industry were the natural

^ "Characteristics," Essays, vol. iv. p. ii.



The Conflicting Philosophies 1 1

result of the application of this general view to particular
phenomena. I'o the old notion that Society is a mere
aggregate of individuals, each by natural right a law unto
himself, we now oppose the conception of Society as a
corporation of citizens associated together for the satisfaction
of their needs. Hitherto it has seemed good to rely upon
individual effort and private interest for the fulfilment of
the ends of the partnership, but the interest of Society is
something beyond and apart from the interests of its
members, and it has the power and the duty to act corpo-
rately when its welfare is threatened by the antagonism of
its component parts. This denial of the old atomistic view
is powerfully supported by the application of evolutionary
ideas to political science. Said Professor Huxley : ^ " I am
unable to see that civil society is anything but a corporation
established for a moral object — namely, the good of its
members — and therefore that it may take such measures as
seem fitting for the attainment of that which the general
voice decides to be the general good. ... I conceive it to
be demonstrable that the higher and the more complex the
organisation of the social body, the more closely is the life of
each member bound up with that of the whole ; and the
larger becomes the category of acts which cease to be
merely self-regarding, and which interfere with the freedom
of others more or less seriously."

In the language of modern science Society is an organism
which can only be healthy when all its parts are healthy,
and whose component parts can only find their proper sphere
of action in due subordination to the whole and in fitting
co-ordination with one another. We may carry the analogy
further and say that just as the cells of the human body act
in concert locally to repel any attack from injurious elements,
so, too, do the human cells of the social organism associate
themselves together with a more or less wide scope of action
to meet any danger threatening their common existence,

^ "The Struggle for Existence," Nineteenth Century, February 1888.



12 Trusts and the State

while in supreme cases the forces of the whole body are
brought into play. Thus in the evolution of the State we
find the separate groups of the family, the tribe, and the
nation organised to meet a widening series of necessities.
Similarly in the sphere of industry we find the workers
banding themselves together locally and nationally into
trade unions, with a regular progression from the shop club
through the district union to the federation. Consumers,



Online LibraryHenry William MacrostyTrusts and the state, a sketch of competition; → online text (page 1 of 27)