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laborers and their employers, the laborers are at a disadvan-
tage. The reasons why they are at a disadvantage have been
variously stated. It is argued, for example, that the capitalist
can wait longer than the laboring man, and thus wear the
laboring man out and force him to give in and accept the
capitalist's terms. The capitalist, it is said, having an accu-
mulation of wealth, can live on that accumulation. There is
doubtless something in this argument, though it is easy to
exaggerate it. If the capitalist's accumulation is in the form
of buildings and machinery, it is difficult to see how he can
live on these things. He might borrow money on the basis
of the security which they furnish, and with this borrowed
money buy consumers' goods.

It is not so much the fact that he is a capitalist as it is the
fact that he has greater borrowing facility that gives him this
advantage. If, instead of owning capital, he owned consumers'
goods in considerable quantities, if he owned, for example,
his own house, if he had insurance policies or deposits in the
savings bank, he would have the same or even greater waiting
power than he has when he owns capital of equal commercial
value. It is therefore frequently argued that one remedy for
this situation is for the laborer himself, as far as possible, to
acquire his own home, life-insurance policies, and deposits in
savings banks. This would help, at any rate, to give him the
power to wait, and would thus help to even up the advan-
tages in bargaining. But the objection to this is the simple



observed fact that the laborers have less property of any kind
than their employers ; otherwise they would not be laborers.
This being the fact, it does not help much to point out what
the laborer might do if the facts were otherwise.

Another reason given for the disadvantage of the laborer
in the bargaining process is that he is usually less skillful in
the matter of bargaining than his employer. His expertness is
more likely to consist of manual skill than of skill in bargain-
ing. The entrepreneur is peculiarly a bargaining person. He
literally bargains for everything. If he borrows capital, if he
rents land, if he buys raw materials, secures transportation
rates, and hires labor, and also organizes a selling department,
every part of his work has to do with bargaining. He be-
comes, therefore, the bargainer par excellence. Those whose
expertness lies in other directions are therefore at a disad-
vantage when they come to deal with him. This argument
is undoubtedly correct as far as it goes.

Employers are few, but laborers are numerous. The third
fact, however, which militates to the disadvantage of the
laborer and the advantage of the employer is that laborers
are numerous and employers are few. There is more competi-
tion among laborers for jobs than among employers for men.
Wherever this fact does not exist, there is no great advantage
on the part of the employer. One conspicuous example would
be that of domestic servants. The employer in this case
doubtless has more power to wait than the maid. The em-
ployer may, on the average, be somewhat more intelligent than
the maid. Nevertheless there is no great advantage in bar-
gaining, for the simple reason that there are approximately as
many employers as there are employees. Observation seems
to show that, in this part of the country at least, it is far more
difficult for an employer to find a maid than for a maid to find
an employer. When they meet to arrange terms, there is no
visible advantage on the side of the employer or disadvantage
on the side of the employee. In fact, it sometimes appears


that the advantage and disadvantage are of the opposite kind.
There are at least a reasonable number of cases where the
employee is very independent and must be placated by an
almost obsequious attitude on the part of the employer. A mul-
titude of other illustrations might be given, which in the aggre-
gate seem rather important, though as compared with the number
of cases where the employer is at an advantage and the em-
ployee is at a disadvantage they are probably insignificant.

It appears, therefore, that the fundamental and permanent
remedy for the laborer's disadvantage in bargaining would be
such a reduction of the number of laborers and such an in-
crease of the number of employers as would give the laborer
at least an equal advantage in the bargaining process. This
remedy, however, like all fundamental and permanent remedies,
is slow and difficult to bring about. It is slow in the sense
that it would take a generation or so to bring it about ; it is
difficult, not for economic but for political and social reasons.
Economically it is perfectly easy ; politically it is difficult
simply because it would be difficult to get a majority of the
voters to vote for such a policy. It may take several genera-
tions before a majority vote could be secured for a constructive
policy of this kind. Meanwhile the existing laborers would
still be at a disadvantage and in need of relief. It would be
cold comfort to them to point out that future generations of
laborers may be exceedingly well off if the right policy is
adopted. Therefore they are inclined to take matters into their
own hands and adopt a more speedy remedy, even though it
be less fundamental and less permanent.

Collective bargaining. This remedy is that which is known
as collective bargaining as against individual bargaining. In a
trade where laborers are oversupplied, each individual laborer
is in a weak position, because he can easily be spared. He is
almost superfluous ; he is certainly not indispensable. If he
stops working or leaves the community, he will scarcely be
missed. Industry will go on approximately as well without him


as with him. Because there is a superfluity of labor his place
can easily be filled. Under such conditions his bargaining
power is very weak; he is practically compelled to take what-
ever terms are offered to him. His kind of labor as a whole,
however, may be absolutely indispensable. While he as an
individual could be spared without much inconvenience, all
the members of his trade are absolutely indispensable when
considered as a whole. If they were all to stop work, business
would have to stop ; if they were all to emigrate, the whole
business in which they were engaged would be permanently

The group may be indispensable, while the individual could
easily be spared. The fundamental principle involved in the
trade-union policy of the present is the substitution of the
indispensable group as a bargaining unit for the dispensable
individual. Since the group as a whole is indispensable to
industry, if they can bargain as a whole the laborers are in a
strong position. As a group they cannot possibly be spared.
The difficulty, however, has always been to hold the group
together and get them to bargain absolutely as an indispen-
sable group and to refrain from making individual bargains
independently of group action.

The trade union. This underlying principle has given rise
to one of the largest social movements of modern times ;
namely, the organization of laborers. Several types of organi-
zation, however, have entered the field, and there is still some
rivalry among them. In the first place, there is the trade
union pure and simple ; this is an organization of the men
who ply the same trade ; that is, the men whose work is of the
same kind. The Brotherhood of Locomotive Engineers is an
example of this kind of organization.

The industrial union. In the second place, there is the in-
dustrial union, which includes all the laborers plying various
trades who are engaged in the same general line of industry.
The United Mine Workers of America is one example of this


type of organization ; the Brotherhood of Railroad Trainmen
of America, which attempts to take in all the railroad workers,
is another.

The labor union. A third type of organization is what may
be called the labor union, which attempts to organize all
laborers, of whatever trade or occupation and in whatever in-
dustry they may be engaged. The Knights of Labor form an
organization of this type and lately the Industrial Workers
of the World have attempted a similar type of organization.

The federation of trade unions. The trade union seems in
recent years to have been somewhat stronger than either the
industrial union or the labor union, but it has felt the need
of some larger and more nearly universal type of organization.
This has been secured by the federation of trade unions into a
national organization known as the American Federation of
Labor. This type of organization recognizes that each trade
has certain special and peculiar interests of its own and there-
fore has a special reason for organizing as a trade. This is a
principle which seems to be ignored by the labor union espe-
cially. By organizing the special and peculiar interests of each
trade the federation becomes stronger at this most vital point.
By federating the different trades for the furthering of the
interests which are common to all it becomes stronger at
another important point ; namely, the need of concerted action
on a nation-wide scale.

The attempt to ignore the special interests of each trade
and to unite all workers, of whatever trade or industry, into one
universal, undifferentiated organization, has had certain ideal-
istic features which make a strong appeal to men of idealistic
temperament. There is the attempt to ignore any possible
rivalry of interests among different classes of laboring men.
While this sounds attractive, it hardly accords with the observed
facts. It is perhaps a little more humanitarian in its philos-
ophy but a little less effective in its methods of work. It
might be compared to an attempt to create a unified nation by


ignoring all local interests and internal conflicts, whereas the
federation idea might be compared to a system of government
which would recognize local and state interests, and allow a
certain amount of self-government to the local units, but which
would unite them all under a national government for the
carrying out of national aims.

Necessity of controlling the supply of labor in its own
market. Like all attempts in all fields to bargain to better
advantage for the sale of either a commodity or a service, an
organization of laborers must get control of the supply of the
service which it is trying to sell. This leads to the policy of
the closed shop. That is the policy under which none but
members of the organization are to be employed in a given
shop or series of shops. If any considerable number of out-
siders are permitted to work in these shops, they will of course
bargain independently and be in a weak position. That very
fact also tends to weaken the power of the organization in
the bargaining process. Unless the organization can control
the supply of labor which is permitted to work in a given
trade, can withdraw them as a body or put them back as a
body, it will find itself unable to secure advantageous terms.
If, for example, there were so many nonunion laborers avail-
able as to make the employer more or less indifferent as to
whether the members of the union worked as a body or with-
drew as a body, he would not be likely to pay much attention
to the demands of the union. If he knew that, even though
the union as a body withdrew from his shop, he could easily
fill places with nonunion men, the bargaining power of the
union would at once be destroyed.

The closed shop. An absolutely closed shop is very difficult
to maintain when there is a surplus of laborers available for a
given occupation. So long, for example, as indefinite numbers
of foreign-born laborers can be had for the recruiting of the
ranks of any trade, nothing but the most drastic measures on
the part of the organization of laborers can preserve its control.


It is sometimes necessary, from their point of view, to use a
good deal of persuasion, and this persuasion is sometimes of a
rather severe nature and often virtually amounts to compulsion.

The strike. The strike has become one of the drastic methods
through which an organization of laborers may enforce its con-
trol over the labor supply. Theoretically the strike is merely
the suspension of work by the laborers of a given trade or
group of trades. If there were no waiting list and no avail-
able mass of laborers from which to fill the shops which they
have vacated, a mere quiet suspension of work would be all
that would be involved in a strike. This, however, is seldom
the situation. There is generally such an oversupply of labor,
especially of the unskilled kinds, as to force the strikers to do
something else besides the mere suspension of work. They
must manage somehow to keep others from taking their places.
This may take the form of peaceful picketing and persuasion ;
it may take the form of threats ; and, in extreme cases, it may
even take the form of violence and terrorism. It is to be re-
membered, however, that threats, violence, and terrorism are
only necessary, even from the laborer's point of view, when
there is an oversupply of labor available for the jobs of the
strikers. The ultimate cure for this situation is that which was
suggested earlier in this chapter, such a thinning out of the
number of laborers, especially in the unskilled occupations, as
to reduce the number of men to an approximate equality with
the number of jobs.

In justification of the strike, even when accompanied by
threats and violence, it is sometimes euphemistically stated that
the laboring man has a right to his job and no other laboring
man has a right to take it away from him. Or, as it is some-
times put, the labor unionist's eleventh commandment is,
Thou shalt not steal thy neighbor's job. This, however, is not
quite complete ; it really should read, Thou shalt not steal thy
neighbor's job unless he is a nonunion man, and in that case
thou shalt go after it with a club.


Numbers make for weakness in bargaining but for strength
in fighting and voting. One large fact which complicates
the whole problem of the organization of laborers and their
methods is that those who, because of their numbers, are weak
in the bargaining process become, by virtue of those same
numbers, strong in the making of public opinion and in the
election of candidates for office. Roughly speaking, one may
say that the more people there are of a certain individual type,
the weaker they are in the process of individual bargaining
but the stronger they are in making public opinion and con-
trolling elections. It is pretty certain, therefore, that they will
use their strength in controlling public opinion and politics to
compensate for their weakness in the bargaining process.
Whatever our views on the purely ethical aspects of such ques-
tions as the closed shop, the strike, picketing, threats, and vio-
lence, we must realize once and for all that in a republic, where
majorities control, there is absolutely nothing to be done about
it. Those who realize that they are weak in the process of
peaceful individual bargaining but strong in other ways can be
depended upon to use that strength to their own advantage.
On the other hand, those who, because their numbers are few,
are very strong in the process of peaceful and individual bar-
gaining, must realize that politically they are very weak, since
they have very few votes. It would be as futile, therefore, to
expect that, when there is an oversupply of labor, the laboring
men will go on indefinitely, bargaining individually for jobs
and accepting the disadvantages under which they labor and
refraining from using the strength of numbers in their own
interests, as to expect that the tides should cease to rise and
fall or the winds to blow.

When a numerous class realizes that its numbers count
against it in bargaining but for it in fighting and voting, it is
pretty certain, sooner or later, to try to win back, by fighting or
by voting, what it has lost in bargaining. Therefore there
are two very good reasons why we should try to maintain a


balanced population. By a well-balanced population is meant a
population in which, among other things, each occupational
group is no more numerous than is necessary to combine with
other occupational groups. If, for example, there are no more
spinners than are needed to supply yarn for the weavers, no
more of both than are required to combine satisfactorily with
other groups, no more unskilled laborers than are necessary
to work in combination with the skilled laborers, no more of
both than are necessary to work in combination with salesmen,
accountants, managers, etc., the population is well balanced so
far as these groups are concerned. When this is the case, no
group will be at a disadvantage in the bargaining process. That
is one reason. The other is that no group would have the
motive or the power to win back, by fighting or by voting,
what it was losing by bargaining. Such a balancing of our
population would eliminate the more- acute phases of our
labor problem.



Rent the price paid for the use of land. The rent of land
originally meant the price paid for its use during a given
period of time. Its meaning is now extended to cover the
income which the owner derives from it, whether he uses it
himself or lets it out to someone else. The selling price of
land is the price paid as a lump sum for its permanent pos-
session, which includes its use through all future time. Its
value is the present estimate of all its future utilities, whether
they are sold or kept by the present owner and his heirs.
There is thus a very close connection between the value, or
price, of land, on the one hand, and its rent, on the other. The
rent is the value, or the price, of the flow of utilities which it
yields during a given period of time, such as a month or a
year. Both the value and the rent of land come under the
general law of value ; both are determined by utility and
scarcity, as is the case with all forms of value.

Why rent is paid. The utility of land is of various kinds
and degrees. In some cases land yields its utilities directly,
and thus is a consumers' good, or at least resembles con-
sumers' goods in this respect. Parks, pleasure grounds, and
residence sites yield their utilities in this way instead of yield-
ing tangible products. In other cases land yields its utilities
indirectly ; that is, it produces or helps to produce tangible
products which are themselves useful. In these cases the
utility of land, like that of all producers' goods, is a derived
utility. Its utility is derived from that of its products.

There are great differences in the utility or desirability of
different pieces of land, whether they are used for one purpose



or for another. In the chapter on land it was pointed out
that these differences are mainly in location and fertility. The
other qualities which make land usable, such as extension and
solidity, all land possesses in equal degree, so that these quali-
ties do not make one piece more desirable than another ; but
in the qualities of location and fertility there are great differ-
ences, and these differences powerfully affect its desirability
and its value.

Differences in the desirability of land. The problem of rent
may be approached in several ways. In the first place, we may
concentrate our attention on the differences in rent or the dif-
ferences in the desirability of different pieces of land. There
is always land somewhere the use of which can be had free of
charge. Nevertheless, men will be found paying high rents
for other land which is more desirable than that which can be
had free of charge. The fact that it is more desirable than the
free land is what makes it command a rent. In the case of
land which is useful for production only, its desirability is of
course determined by its productivity. He who secures the use
of a superior piece of land can either produce more at the same
cost than would be possible on the kind of land which is free
or he can produce the same amount at lower cost. This differ-
ence in productivity gives its owner a rent when he cultivates
or uses it himself, and enables a tenant to pay rent, in case
the land is worked by a tenant.

Location as an element in desirability. That the location of
a piece of land will affect its productivity will be clear to any-
one who will consider that the cost of transporting goods to
market is a part of the cost of production. If one farm is so
badly located with respect to railroads and markets that it costs
ten cents a bushel to haul the wheat to the nearest railroad,
while another farm is so well located that the hauling costs
only two cents a bushel, it is evident that if the two farms
are equally fertile, the former will be worth considerably less
than the latter. The difference of eight cents a bushel in the


cost of haulage would make a difference of $2.40 per acre
if the average crop on the two farms was thirty bushels per
acre. A tenant could afford to pay that much more for the
well-situated than for the badly situated farm.

If land were so abundant that the badly situated farm in
the above illustration, and other land equally desirable, could
be had rent free, and if it were the most desirable land which
could be had free, then land of this type might be called
marginal land, or land on the margin of cultivation. By
marginal land is meant land which, under the conditions of
the market, men would be induced to cultivate if it cost them
nothing, but which they would abandon and leave unused if
they were required to pay even the lowest conceivable rent for
its use. Under these conditions the rent of the well-located
farm of the above illustration would be $2.40 per acre, assum-
ing that wheat is the only crop.

The margin of cultivation. Aside from the productivity of
the land, two other factors help to determine the margin of
cultivation. These are the demand for products and the de-
mand for labor, or the opportunities for the employment of
labor. An increase in the demand for products will generally
bring land into cultivation which would otherwise have re-
mained idle, whereas a decrease in the demand for products
will cause some poor land to be abandoned which would other-
wise have remained in use. The margin of cultivation may
change, however, for other reasons. When the prairies of the
West were brought into cultivation, the margin was extended
in that direction ; but this threw so many products on the
market that some of the less productive lands of New England
could no longer be advantageously cultivated. Much of this
land was abandoned, and the margin of cultivation was con-
tracted in this section. The extension of the margin on the
western frontier and the contraction on the rocky hillsides of
New England tended to counteract one another. There was,
however, at the same time a growing demand for products,


so that the expansion in one direction more than made up for
the contraction in the other. In other words, the total pro-
duction actually increased, despite the diminution on some of
the New England farms.

Factors which extend the margin of cultivation. An in-
crease in the supply of labor which is seeking employment,
unless counteracted by a corresponding increase in the demand
for it elsewhere, will generally extend the margin of cultivation
and cause land to be cultivated which would otherwise have
remained idle. This problem may be approached from two
points of view. In the first place, idle land may be regarded
as an opportunity for idle men. When the supply of labor in-
creases faster than the demand for it, the number of idle men
increases. Some of these idle men are then crowded out onto
the idle land. Even if they are not actually thrown out of work,
the results are much the same. There is always a current of
migration from the farms to the towns. When the labor mar-
ket in the towns is overcrowded, country boys find fewer
inducements to leave the country. Therefore they must per-
force remain on the farms and cultivate the land. When

Online LibraryThomas Nixon CarverPrinciples of political economy → online text (page 33 of 48)