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will be work tomorrow or not. When he goes to work in the morning
he does not know whether he will have two, three, four, five, or



4 TRADE UNIONISM AND LABOR PROBLEMS

eight hours of work. Living in this state of uncertainty, not simply
for the year but for twenty or thirty years, the mine-worker has
been brought up on the conviction that each time he reduces the
hours of labor he forces the employer to distribute the work more
evenly. He is not asking for less work, he is asking for steady work.
The administration at Washington should have known these con-
ditions and circumstances. They had the correct statistical informa-
tion, they knew the conditions in the industry, and at the time when
the administration lifted the ban on the operators' price of coal they
should have negotiated with the operators to bring about an adjust-
ment of wages so as to meet accurately the cost of living.
! This fluctuation of prices, this changing cost of living, has been
going on for an entire century. It is not a new phenomenon. One
hundred years ago, at the close of the Napoleonic Wars, we had the
same situation. We had it again in the thirties owing to wildcat
banking at that time. We had it during the Civil War, and now we
have it repeated. We have had in all of these periods quite the same
crude explanation of the facts — the rise of prices has always been
charged up to monopolies and profiteering. It has now been charged
up to restrictions by the laborers. It may be true, and no doubt it
is, that there is profiteering and that there is "laying down" on the
job by wage-earners, but if we try to figure out how much influence
either profiteering or restrictions by labor has on the elevation of
prices, I think we will have to conclude that if we could stop all of
the profiteering ^nd stop all of the restrictions by labor, it would not

/ affect the total result very materially. Profiteering and restrictions
are mainly results, not causes, of rising prices. The high cost of living

: is something that neither the employer nor the employee can prevent.
It does not come from anything under the power of capital and labor
to overcome, and yet it is the one great cause of uncertainty and
unrest, and has been for a whole century.
(" The fluctuation of "currency is the greatest of all the labor problems.
It throws a red brick continually into capital and labor. The first
great method of importance in bringing about industrial peace is the
^stabilizing of the dollar. If we could have a system of currency in
which the great price movements which have been occurring in all
these years could be stabilized, we would do more to stabilize in-
dustry, to bring about industrial peace, than any other one thing..



INDUSTRIAL RELATIONS S

In times of rising prices we have restrictions, aggressive movements ;

[in times of falling prices we have unemployment, bankruptcy, and
depression. The whole situation is rendered unstable, and we are

lliving continuously in a period of uncertainty.

I know of no way of reaching that question, which to me seems
the most fundamental of all, except that remedy proposed by Irving
Fisher, of stabilizing the dollar.^ Yet we know that a remedy of this

,kind will not come very soon. Consequently the best that can be
done is for employers and employees to adjust themselves to the
situation. Capital and labor alone cannot prevent this fluctuation.
There is, apparently, only one great constructive plan in this
country on a national scale which has attempted to bring about i
industrial peace by meeting the situation of the currency, and that
is the plan which is now being worked out in the book and job print-
ing business with the labor organizations. With the increased cost of
living, the printing business did not raise wages. They had their
agreements that had not expired and did not provide for raising
wages. But in two or three places in the country — in New York,
Chicago, and Seattle — the local unions violated their agreements and
went after the increased wages by direct action. And, although the
employing printers contended that they could not pay the increase,
yet when they came to it they not only paid the increase but they
paid more than the increased cost of living. The only places in the
United States where labor actually secured, in the book and job
printing business, an increase in wages corresponding to the increase
in the cost of living were where the local unions defied their own
national unions. What a lesson that was to labor in the United
States ! The only way we can keep up with the cost of living is by
violating our agreements, by resorting to methods which we have
promised not to adopt, by defying our own organizations.

Consequently we find that the book and job printing business has
come together on a national scale and is in the process of adopting
the principle that employers will not wait until demands and strikes
are upon them, but will automatically change the level of wages as
the changing price curve moves up or down. Every six months, or
at periodic intervals, a change is proposed to be made throughout the
entire United States, on the initiative of the employer — not waiting
1 Fisher, Stabilizing the Dollar. New York, igig.



6 TRADE UNIONISM AND LABOR PROBLEMS

for labor to make the demand, — thus heading off this unrest m
the localities. In doing that the employing printers throughout the
United States for the first time have joined with the national or-
ganizations of labor where their interests are alike, and we see on a
new national scale the largest expansion of scientific management
capital and labor combining to look ahead to the future in order to
prevent industrial conflict by remedying the conditions in advance.

Of course we have the objection that if an increase in wages causes
prices to go up, and if an increase in prices provokes a further de-
mand on the part of labor for wages to go up, we have that vicious
circle. But that vicious circle cannot be avoided as long as we have
, inflation of currency. If we had a stabilized dollar, no matter what
the relations are, the prices and wages would be stabilized in ac-
cordance with the general level of the price curve. It is a mistaken
view that it is this pyramiding of wages and prices that keeps prices
up. It is not the pyramiding of wages and prices, it is the inflation
of the world's currency ; and no matter what adjustment might be
made between employers and laborers, a correction of the currency
of the world could stabilize prices and prevent the need of this
pyramiding. That is the first and most important fundamental
condition to be recognized in the conflict of capital and labor, as it
appears to me.

What about restrictions of output? Everybody knows that in
good times working people "lay down" on the job, no matter
whether organized workers or not. People do not work as hard in
good times as they do in hard times. We have the curious paradox
that in good times, when we ought to increase the output, labor
restricts the output ; and in hard times, when we don't want people
to work so hard and increase the supply of production, then they
work the hardest. A business man does not conduct his business
in that way. In good times, when prices are going up, he tries to
increase his output ; in hard times, when prices are falling, he tries
to restrict his output — he does not buy more than he can sell. In
other words, labor works just the opposite of business. In good
times, when prices are up, then is when labor "lays down" on the
job and refuses to increase the output and keep up the supply. In
hard times, when the demand has fallen off, then is when labor works
the hardest and turns out the most production. It surely seems that



INDUSTRIAL RELATIONS 7

we have been going on a wrong hypothesis in dealing with labor.
It works out all right in dealing with marketing and commodities,
but labor seems to work just the opposite.

We have been going on the theory that in order to get efficiency,
in order to get output, in order to get laborers to work, there must
be some kind of a penalty held over the workingman — the penalty of
unemployment, the penalty of being discharged if he does not work,
if he does not do his duty, if he is not on the job. It is then
that he suffers the penalty of being discharged from his job. Our
method has been the rough method of disciplining labor by the
penalty of unemployment.

That penalty does not work in good times ; it works too much in
hard times. In good times the workman is not afraid of unemploy-
ment. What 's the use ? If he is discharged, he can go across the
street and get another job. In hard times, when we don't want so
much produced, then he works hard because he is afraid of unem-
ployment and cannot go across the street and get another job.
The psychology of labor, both in good and in hard times, is funda-
mentally the psychology of a class of people whose life is insecure,
who are subject to rough methods of discipline. We cannot under-
stand the problem of dealing with labor unless we understand that
fundamental fact of insecurity of employment. It is just as vicious
in good times as it is in hard times. In good times the workingman's
high wages are an injury to him ; he gets too much money, and he
does not know what to do with it and spends it extravagantly, —
burns it up, — and when the hard times come he has nothing to fall
back upon. The fluctuation of earnings — great earnings in good
times, falling off in hard times— is demoralizing to the character of
working people.

If we have to depend upon the rough method of discharge for get-
ting 'efficiency, then we are going to keep labor continually unstable
and uncertain, and the character of the workingman will not rise to
the occasion of modern industry.

Modern capitalism is not based upon the ownership of physical
things. We might see much of our machinery and our buildings de-
stroyed by earthquake or war, but we all know that if we retain the
credit system it will not be very long until all of our machinery and
buildings are restored. We usually consider that the production



8 TRADE UNIONISM AND LABOR PROBLEMS

of wealth is brought about by the union of capital, management,
and labor. Capital is the physical machinery and the tools ; man-
agement is the organizing element ; labor produces the physical
product. The three must, indeed, be combined, but the greatest
instrument of production — the thing that really produces modern
wealth — is not physical things, is not labor, is not management ;
ic is confidence in the future, it is a credit system based on
the expectation of industrial continuity — an expectation that debts
will be paid. The capitalistic system is security of expectations.
If we could not offer security to the investor, we might still have
production of wealth. Physical things, management, and labor might
go on producing wealth, but you know how much wealth could be pro-
duced if it were not for our credit system. The production of wealth
would fall back to what it was in colonial times ; nobody could ship
his product to anybody else, and we would not trust one another.
Capital is based upon security of expectations. The investor has con-
fidence that his investment will be returned to him, that promises will
be kept. That is the great producing factor in modern industry.

Now capitalism is to blame because it has not offered, as yet, to
labor that security of the job which it has offered to the investors in
the security of their investments. Capitalism is threatened because
it has not furnished the working people a similar security to that
which it has furnished to the investors. The workingmen are getting
the idea throughout the world that the elements that produce wealth
are the workingmen and the management ; and we have the Plumb
plan, in which two million workers in the United States come
forth to oust the credit system and let simply management and labor
produce the wealth of the country. They would destroy the thing
upon which the credit of the railroads is built, because they think
that the producing elements are management and labor.

Well, that is much the same idea that they have in Russia and
that is the fundamental notion of modern laboring people spreading
throughout the world. They do not appreciate that modern capital-
ism is based on faith in the future ; they have not themselves been
given that same security. Capitalism to them is autocracy and in-
security. They have tried to get security by rough methods. Trade-
unionism, closed shop, union shop, and so on are their methods of
obtaining security of the job. Not until the capitalistic system not



INDUSTRIAL RELATIONS 9

until the great financial interests that control this country, have
learned that it is just as important to furnish security for the job as
it is to furnish security for the investment will we have a permanent
provision for industrial peace.

We have only begun in recent years to try to establish security
of the job. The first effort made was eight or ten years ago in the
workmen's compensation law — the accident-compensation law. That
was the first comprehensive effort to establish security for the job.
Unemployment no longer damages, as it did, the man who is hurt
during employment. The next step is probably the similar treatment
of sickness insurance.

In the case of accident compensation this curious thing developed :
employers vigorously fought the legislation at first because it was
going to increase the cost of production and the expenses of business ;
but after the law was enacted and the employers were compelled by
law to pay compensation, they introduced a new element in industry
— they introduced a safety expert. They developed a new depart-
ment of industry. I knew of an establishment that figured that if
the compensation law was enacted, their premium on insurance would
increase from $5000 to $22,000 a year. That was what they were
told by the insurance people and by their claim agent, and they were
dreadfully scared. After the law was enacted, however, they changed
their claim agent into a safety expert, and the very first year, instead
of paying $22,000 for compensation, or even $5000, it cost them
only about $2500.

The accident-compensation law has accomplished the first little
step toward giving security to the job. It has shown that the only
way to establish security is by making it financially profitable. And
so we shall make it financially profitable to business to eliminate
unemployment on account of sickness, on account of changes in
seasons, on account of fluctuations in business. Labor can never ac-
complish this result. The only possible accomplishment of it will
come when the employer puts in his personnel department, his
personal-relations department, his safety men, his welfare men, and
his men who stabilize' employment. We know that employers, who
have done this have made their jobs regular — they have regularized
their work, and there is good reason to believe that all can do it if
the inducements are adequate.



10 TRADE UNIONISM AND LABOR PROBLEMS

There are many ingenious methods that can be adcipted. Yet it
appears to me that we cannot get the large capitalistic interests
awake to this subject of stabilizing employment unless the gov-
ernment takes hold of it. If we had a tax on unemployment of
$1 a day for every man who is laid off, we should soon find that
capitalism would put its personnel experts at work to regularize the
business, and they would have no tax to pay, because they would
have stabilized the work.

The fundamental lines along which industrial peace is to be brought
about are those which go to the psychology of the workingman and
substitute in his mind sornething like that which we liave in the mind
of the investor. The employer who is willing to pay compensation
for unemployment, who is willing to furnish what the workingman
needs, knows that the workingman needs to have something to wait
for and needs to have confidence in the future.

I visited a number of establishments this summer, making a
special study of the circumstances under which efficiency had been
increasing or decreasing, and found that notwithstanding some were
complaining about labor's laying down on the job, yet in particular
establishments the output had increased. What is the secret of it?
It seems to me that in all these cases this was found to be truei:
a new priiiciple had come into the business, — management had ob-
tained a new view of labor, — ^and I may contrast it by the history
of scientific management.

Mr. Taylor, as you know, started his wonderful development
in scientific management by offering to the industrial workers a
chance to better their condition. He appealed to the individual
worker. But the modern scientific management of personnel appeals
to the collective interest of all the workers in the business. It is be-
ginning to recognize that the workingman does not want to have high
wages for himself if by doing so he seems to deprive his fellow
workers of high wages. It is as though we are upon a ship on the
ocean — there is only a limited amount of products to go around;
the man who saves his own life and lets the others go down cannot
live with his fellows afterward. So it is with the modern working-
man ; he is continually haunted by the feeling that there is only a
limited product to be distributed, and consequently even the better
men, when appealed to individually to increase their wages, cannot



INDUSTRIAL RELATIONS ii

stand it to go ahead too far amongst their fellow workers. If they
get out of the class of ordinary workmen and become foremen and
superintendents, that is one thing ; but to stay in the ranks of labor
and to earn much more than the others seems to be taking bread out
of the mouths of their fellow laborers.

Modern management is learning to deal collectively with the work-
men in the shop ; whatever one worker does to benefit that shop will
benefit all of us— we are all going to be lifted up together. We are
not going to set workingmen competing with each other and try to
get one ahead of the others and appeal only to his self-interest. That
was all right in times past, when the world seemed to be full of un-
occupied resources, when anybody could go out and get all he wanted
and yet not take it from anybody else. Now, as we are getting closer
together, as business .is getting on a large scale, the man who gets
more for himself seems to be taking it from the others, and so we
have that solidarity of labor which is a psychology that must be
recognized by all management.

This psychology should be combined with the idea that the busi-
ness itself is the place where we shall have our living — our confidence
in the future. I visited Mr. Ford's factory recently. Mr. Ford does
not have an idea there of cultivating the efficiency of his laborers.
His great profit-sharing system, as you know, is a distribution not to
men who are efficient, ih order to increase the output, but to men
who lead a "clean and wholesome" life — they get the profit. The
men who do not lead a clean and wholesome life do not get profits.
John D. Rockefeller, the senior, says that Ford's plan is the indus-
trial miracle of the age. Well, the Ford plant is the psychological
miracle of the age. It has not gone after efficiency first ; it has gone
after the clean and wholesome life. Efficiency is a by-product of the
clean and wholesome life.

When I visited the White Motor Company I was impressed with
the fact that it is not in detailed methods of piece and bonus pay-
ments that they try to reach the individual and increase his pro-
duction, but it is in creating the conviction in every man in that
industry that that is his industry, that the future of that concern
is his future. Thinking and planning for the future is the White
Motor's big efficient machinery of production, just as security for
investment is. Get capital to think of the security of the job and it



12 TRADE UNIONISM AND LABOR PROBLEMS

begets efficiency of labor. We must look upon efficiency as a by-
product and not as the main thing in industry.

It seems to me, to transfer this to the national scale, here is where
capitalists have fallen down. Mr. Gary has fallen down representing
the capitalistic system ; labor organizations have fallen down ;
Mr. Gompers, representing trade unionism, has fallen down ; the
politicians have fallen down in bringing about industrial peace .^
Where shall we look for any people in the United States who have
the preventive idea ? who can look forward and plan for the future ?
who will base the bringing about of industrial peace on knowledge of
labor and on knowledge of security ? We must look for it in placing
the personal-relations department ahead of the engineering, com-
mercial, and production departments of industry. It is only in the
personnel department that we find the beginnings of true scientific
management — the department of scientific human relations, which
appreciates and knows what are the fundamental things for labor's
efficiency. If we can have our modern industry conducted as a
personal-relations industry, above the commercial department,
above the engineering department, above the manufacturing depart-
ment, above the production department, and if we could bring to-
gether on a national scale, instead of our great financiers, instead of
our great labor unions, instead of our politicians, — if we could bring
together those who are developing the modern personal-relations
method, then I think we might work out some plan for bringing about
industrial peace.

Yet it is because, and to the extent that, personal-relations depart-
ments are coming to recognize some form of collective bargaining or
collective government that they are fit to come forward as national
leaders at this time. Socialism has no need of personal relations in
management, because, according to Marx's theory, "social labor
power" moves on to its historic goal regardless of the individual
will. Capitalism had no need of personal relations, because Capitalism
was but adjustment to the laws of demand and supply, over which
individuals and classes have no control. But with our great cor-
porations and associations on the one hand and organized labor on
the other it is only by a science of collective management that capital

1 Referring to the first Industrial Conference called together by President
Wilson, which split on the question of collective bargaining.



INDUSTRIAL RELATIONS 13

and labor can work in harmony and security. It becomes then a
science of political economy as well as a science of business.

The science of political economy began with individual bargaining.
Adam Smith, its founder, in 1776, laid its foundation, and in an
interesting and important chapter pointed out the great evil of
collective action. One of the most serious things, he thought, that
industry had to contend with was association of capitalists. The
great evil of an association of capitalists was that when they combine
they deprive the minority of their liberty. The majority vote of the
association binds the minority. Consequently the combination — ■
the association of capital in corporations — was condemned by him
as intruding upon the liberty of the individual. He even went so
far as to condemn social gatherings of merchants, for he said : " When
your merchants come together, what does their conversation turn
to? It does not turn to increasing efficiency. It turns to hatching
up some conspiracy against the public."

Adam Smith started political economy upon the individualistic
basis. He spoke at a time when industry was throttled by guilds
and governments. The French Revolution overthrew that system.
The French Revolution was an attack by the small manufacturers
and merchants, the small capitalists and workers, against the govern-
ment and the governmental regulations of the time. One of the
great statutes of the French Revolution was that statute which pro-
vided that no association, either of merchants, manufacturers, or
laborers, should be permitted. That statute stood on the statute
books of France until the year 1884, when it was finally repealed.
Meanwhile, there had grown up, unknown to Adam Smith, unknown
to the French Revolution, our modern system of corporations. When
it came to the middle of the nineteenth century, about the year 1850,
for the first time, with our general incorporation laws, it was made



Online LibraryJohn Rogers CommonsTrade unionism and labor problems; → online text (page 2 of 83)