_Great combinations._—The tendency toward improvement by combination of
laborers through the possibilities of division of labor leads to still
larger combinations in so-called factory systems, and even to a
combination of factories in large corporations. This tendency has been
especially marked since the multiplication of labor-saving machines and
more perfect systems of transportation. Indeed, the possibility of
extensive machine using, as well as extended division of labor, rests upon
a combination of many forces under one general management. Beyond these
advantages, saving is found in the necessary care for waste products,
which often may be turned into profit, greater freedom of action from
closer community of interests, greatly enlarged facilities for marketing,
and the best possible devices for handling and transporting products.
All these advantages in great establishments are readily perceived, yet
some have doubted whether the gains are so distributed as actually to
increase the general welfare. Farmers, perhaps, as readily as any persons,
distrust the power of great corporations. Wage earners, generally, in the
expression, “corporations have no souls,” express their distrust of
results. Yet so far as they actually introduce improvement in production
so that variety of products is increased and the cost of production
reduced, the whole community gains in large measure the total saving. Any
one can realize the advantage by study of a single article of every-day
use. In the middle ages the cloth in a garment was worth eight times the
wool from which it was made. Now the value is chiefly in the raw product.
The price of iron affects every farmer through the cost of his tools and
implements or the quality of either. Compare the modern steel hoe, first
in quality and then in cost, with the hoe of fifty years since. Then
measure that cost in its relation to a day’s work, as compared with the
same measure in 1850. All are in this way benefited by reducing the
exertion needed to procure any one article of use, since more exertion may
be left for meeting other wants. If machinery and improved methods have
entered less into the farmer’s home life, he can find his own advantage
from the range of such improvements in other directions by thinking what a
pound of butter will buy for him today as compared with what it would buy
before the period of machinery. (Chart No. XIV, p. 106.)
The introduction of labor-saving machines is a direct addition to human
power and economy of time, and a means of converting useless material to
meet human wants. That a new machine throws out of employment workers in
that particular field brings a hardship which ought to be shared by the
multitude who are benefited; but the probabilities are great that the
improved method of manufacture will so increase the uses for the product
as to bring into employment a far larger number of laborers. The spinning
jenny threw out of employment several thousand spinners in the old way,
but in twenty-five years the cloth-makers in England had increased from
less than eight thousand to three hundred and twenty thousand. The
machines which in 1760 were thought to have ruined some eight thousand
cloth-makers, in 1833 employed two million persons. This is only a
striking illustration of what has happened in every direction. It is
perfectly evident that communities using the most machinery pay larger
wages and far larger welfare to every laborer. It is not too much to say
that the actual comforts within the reach of every laborer have been more
than doubled within the last hundred years.
A few illustrations of the actual saving in cost of production and
distribution may be interesting. Complicated machinery can never be used
in producing upon a small scale, just as a small farmer can never afford
the use of a harvester. All the benefits of invention applied to machinery
have come through its use on a large scale. A factory making a thousand
pairs of shoes each year cannot use such machinery as the one making a
million pairs will need. Each one of the million pairs, therefore, costs
the world less than each one of the thousand pairs. Again the large
establishment, like an immense saw mill, being obliged to care for its
sawdust, may devise a way of making this waste product of use in pressed
blocks for kindling, or possibly in buttons or wood ornaments. The waste
of the shoe shop is only a nuisance, but the waste of a great shoe factory
is ground and pressed into all sorts of useful forms. All such saving of
waste is so much added to the world’s store of wealth.
That the large establishment saves unnecessary friction is shown in the
order of any great mercantile establishment. It is still more noticeable
in immense iron works separated from every other form of industry for the
sake of freedom of motion. In these ways, principally, there is a saving
of labor in the huge department stores, although the facilities for
advertising, advantages for transportation in large bulk and the
employment of expert salesmen in every department contribute to the same
result. The general expenses of an ordinary store are estimated at nearly
40 per cent of the difference between wholesale and retail prices. The
same expenses in the great coöperative store at Paris, the Bon Marché, are
only 14 per cent. While the controllers of capital in the large
enterprises have the first advantage of such saving, the very necessities
of their business compel a sharing with their employés and with the
public.
Even the so-called trusts, supposed to be contrivances for controlling the
market, have really served in many instances the welfare of the whole
community. A biscuit trust, in handling the most of the crackers in the
market, saves great expense of advertising, a still greater expense in
sales by traveling salesmen, or drummers, and immense waste of stock on
hand through condensation into fewer warehouses, reduces its insurance to
actual cost, and has brought to the public by means of all these savings a
greater variety of crackers of almost uniform quality suited to the
fluctuations of demand at a reduced price. No one doubts that even the
Standard Oil Company, by means of its savings through consolidation, has
at the same time preserved the general supply of oil from waste and
brought it to every man’s door, with a great improvement in quality,
comparative safety in use, and an almost constantly diminishing price.
The record of facts shows that with all the tendency to great
aggregations, and so to concentration of power, masses of wage-earners
have had their hours of labor shortened, have gained facilities for
culture in libraries, lectures and voluntary associations, have gained
habits more systematic, and regular methods of life with greater constancy
of employment, have better protection of civil rights, better provision
for education of children, a larger insurance against accident, and a
better provision for hospital care when disabled. The same system has
provided methods for economical use of savings in joint stock companies,
and cultivated a general unity of purpose and appreciation of others’
welfare. Withal it has given to the mothers of families an immense
increase of leisure for home-making, and at the same time has opened
ranges of employment for women without homes. Even the rate of wages has
not been diminished, but rather increased, as is shown also by actual
records. That the great establishments cannot pay less than average rates
is evident from the multitudes seeking to enter their employment.
Moreover, they must pay their workmen regularly or appear bankrupt.
Employers on a small scale can easily postpone upon all sorts of
pretences, and failures are frequent. Suppose the distribution of milk in
New York city were under a single management. A systematic division of
territory would at once reduce the number of milk wagons by at least
one-half. The certainty of responsibility would insure uniform purity, and
means of transportation could be brought to perfection, so that the amount
now delivered would actually cost perhaps not more than two-thirds the
present price. While at present prices the profit would be large, the
necessity for investing those profits would at once call for extension of
the trade by reducing the price, and at the same time increasing the
proceeds to farmers somewhere who furnish the larger supply. The better
quality and larger quantity for the same money would certainly increase
the demand, and probably with direct benefit to the milk-raisers. The
essential element of distrust of individual management in large
enterprises as to fair distribution of the profits stands in the way of
such a combination.
_Limits to aggregation._—It is easy to see that the advantages of great
establishments cannot always be gained. The limits of demand restrict the
possibility of profit in supply. The element of space in connection with
the market and in relation to the buyers makes an important limit. Special
advantages of location on a small scale may outweigh the advantages of
aggregation. Utilization of forces in nature, like pure water or water
power, or special qualities of raw materials, may outweigh all other
considerations. In general the requirement of interested oversight in a
single superintendent has checked such growth. The more perfect, however,
the system of management, the less effective is such a limitation. It is
possible with extreme division of labor to make distinct rules take the
place of personal direction, and oversight is reduced to a minimum. All
these limitations serve to check the too rapid growth of this factory
system and to hold in check the tendency to misuse of power in possible
monopolies. Any raising of prices which diminishes the demand destroys the
advantage of a great combination. It makes its profits by the quantity of
its products sold. A reduction of the quantity much more certainly than a
reduction in price destroys the advantage. Hence a monopoly gained in the
ordinary progress of trade can seldom operate for any long time to advance
prices, though it may destroy the competition of smaller establishments
completely.
_Disadvantages of aggregation._—It is impossible to overlook a
considerable number of disadvantages to the welfare of a community in a
too rapid aggregation of its industrial enterprises. It changes large
numbers of laborers from independent workers to wage earners, and thus
makes them a part of the great machine, with an immense momentum in
production which does not so readily yield to the fluctuations of demand.
An independent worker is not worried if he has a leisure day. The great
establishment cannot adjust its machinery to a lessened demand without a
uniformity of reduction in wages or time of employment, or else the
discharge of numbers of employés. This is one of the causes of
over-production so evident in certain directions upon the coming of
financial crises. Another great disadvantage is seen in the breakdown of
any such enterprise. Then its employés, trained for its particular uses,
find themselves not only without employment, but unfitted to drop into
other niches of usefulness. The absolute routine of the great
establishment so fixes habits as to make very difficult a change of work
except in line of promotion in a similar organization. The dissatisfaction
and distress from such absence of employment is more apparent than in
ordinary poverty.
The strongest objections, however, to the great aggregations are found in
the possibility of oppression through a monopoly of business, and
therefore almost absolute control by a few persons of the interests not
only of a large body of employés, but of every competitor upon a smaller
scale. A large combination practically compels all to yield to its
methods. The certain economy of methods has led to the statement, “Where
combination is possible, competition ceases.” The common saying,
“Competition is the life of trade,” becomes untrue whenever that
competition implies a costly service. Competition is supposed to reduce
cost by stimulating energy and ingenuity. But when that ingenuity can be
better applied in combination, the result is the destruction of
competition. Competition may drive the milk wagon faster, but combination
will deliver more quarts of milk in the same time. The natural opposition
to combination rests upon the same ground as the opposition to improved
machinery. It certainly throws out of their ordinary employment a
considerable number of independent workers.
This power of the combination is a constant temptation to unscrupulous and
grasping managers to increase their advantage by vicious discrimination
and false competition, expecting the destruction of others’ business to
increase their own. The largeness of the operation makes more plain the
injustice of the maxim, “All is fair in trade.” The final dangers of
combination are thus likely to be overestimated. It is not true that any
larger proportion of false methods of business enters into the large
establishment than into the small, and the possibility of profit in a
great combination is quite as truly dependent upon the universal welfare
as anywhere. The same extremes of prices mark the range for these
establishments as for any others. The price cannot continue higher than
buyers will pay with an increasing disposition to buy more. It cannot
remain lower, of course, than will enable sellers to continue living as
well as in any other business. Checks upon increased price come as
certainly from substitutes as from rival production, and the ability of
the people will always gauge the amount of sales. The expression “What the
trade will bear,” means a price such as not to diminish consumption.
Indeed, the business principles of a great trust are essentially the same
as those in any single manufactory. A trust which stops the work of
certain factories in a combination for the sake of diminishing the output,
because of danger to prices from too rapid production, follows the same
principle as a farmer who stops raising wheat from the probability of too
much wheat in the market. The farmer would better lose the use of his land
for a time than lose the advantage of both land and labor by
over-production of wheat. In the same way a trust may wisely hold its
fixed capital unproductive till the consumption of the community reaches
the full extent of its power to produce. The power of one combination to
interfere with the workings of another by indirect methods, like
investment in the other’s stock, is an evil to be treated like any fraud.
Laws and courts are in the power of the people, and should preserve the
rights of all.
One great danger of large combinations is the tendency to govern by iron
rule instead of by fair judgment of individual cases. This is a difficulty
always connected with great enterprises, to be cured as growth advances
through establishing well trained experts whose judgment makes the rules
not only good in themselves, but well executed. The government itself is
subject to the same difficulty, as seen in the handling of an army, and is
obliged to meet it in the same way. Even the abuses often referred to from
enormous difference of wages between the executive officers and the
inferior operatives are quite possibly only a natural method for solving
these difficulties. A first-class officer has no difficulty with his men.
In general those institutions whose management is costly do better for
their workmen than the weaker institutions with weaker men at the head.
The supposed dangers from too rapid improvement in the machinery of
production are scarcely to be credited in the light of improvements during
the last hundred years. Every improvement has certainly given a larger
enjoyment and better employment to the masses of people. The enterprise
which invents better ways of accomplishing anything is the best possible
means for enlarging and stimulating the wants and abilities of the whole
people. The very profits themselves are sure to awaken larger enterprise,
and even if the accumulated surplus is distributed in so-called watered
stock, it does not cease to promote production. The wider the distribution
of stock, the more permanent and more generally satisfactory is the
working of the great combination. If employés themselves become sharers in
the business, the true interests of all are likely to be promoted. When
the savings of the multitude can be perfectly united in a joint stock
company, to furnish the capital with which the same people work, the
general conditions of wealth production for all the community are fairly
met.
_Bonanza farms._—An illustration of some effects of aggregation may be
seen in the enormous farms of the wheat regions of America. There
machinery is introduced as far as possible, all work is methodically
planned and executed, and wholesale rates in purchases and in
transportation are secured. The result is that certain staple products,
especially wheat, are raised at a cost far below the average cost to
moderate farmers. The result is large profits upon the capital invested,
in spite of the fact that such farms do not make best use of soil
fertility and certainly do not maintain the best condition of soil for
future use. This, however, is due rather to the nature of pioneer farming,
which makes immediate use of the powers of the soil, than to the nature of
the management. It is conceivable that the same ingenuity may continue the
development of large farms under greatly improved agriculture. In that
case the general effect will be much more widely felt than now. So far it
seems that bonanza farming is confined to a very few lines of production,
where everything is bent in the direction of lessening labor instead of
benefiting the soil or making homes.
There is no question as to the general advantage of small farms in making
farm homes. It is a question whether the general improvements in
agriculture, except in machinery and its use, have not come from the
diligent ingenuity of the small farmer in making most of his own acres.
Ben Franklin said, “The best manure for the farm is the foot of its
owner.” The interested constancy among small farmers certainly develops
both character and ability in any country. This fact has probably been one
reason for the small farms of large parts of Europe. One-third of France
is cultivated by owners of farms averaging 7-½ acres. Four-fifths of
Bavaria, Belgium and Switzerland are in farms of less than twelve acres.
Even Prussia has 900,000 farms of less than four acres. These farms vary
in quality from poorest to richest, and peasant farmers are not able to
boast of their wealth. Yet some of the most fertile regions are made so
and kept so by the labor employed upon the small farm. Some of them also
involve large capital. The Isle of Jersey, where land is worth $1,000 an
acre, is so divided that an average farm is eight acres. Of course, but
little labor-saving machinery reaches these places. Tillage with the spade
costs five times as much as tillage by plough; yet the small farmer finds
such advantage from its use as to call it gold mining. It is probable that
the strong competition of immense farms in grain raising, possibly also in
sugar raising from either cane or beets, and in seed raising, will awaken
among the smaller farmers attention to finer grades of farming and more
care for the fertility of their fewer acres.
On the whole, the tendency with increasing population is toward smaller
farms with more intensive farming. Whether our country, with its stronger
commercial energy, will follow this tendency as exhibited in northern
Europe seems doubtful. It is not likely that we shall ever admit the legal
restrictions under which division and subdivision have made their way in
that region. The question will doubtless be settled by economic conditions
independent of legislation. At present we are far from either extreme, as
can be seen by reference to Chart No. I, p. 9.
_Department stores._—Increasing application of the principles of
aggregation is seen in the so-called department stores, which not only
deal in everything but with everybody, extending their trade by mail over
large territory. The very evident economy of such aggregation of capital
for purposes of exchange appeals so directly to the customers as to make
the sufferers in competition cry out in vain for restrictions. Such stores
seem sure to maintain their advantage in exchange, except with reference
to mere local distribution of every-day necessities and expert handling of
specialties. The community does well to give attention not so much to
restrictions upon this trade as to reduction of opportunity for abuse of
power over the mass of employés under control. The great establishment
will certainly bring more satisfactory conditions in time than the
multitude of small ones beyond the reach of public inspection.
_Trusts._—Of late years the advance of combination in so-called trusts has
been enormous. The underlying principles of economy already illustrated
furnish the occasion for such combinations, but the immediate advantage to
promoters of such enterprises, because of the supposed power in control of
the market, is found in the speculative interest in stocks. In this
respect the multiplication of trusts will furnish the principal weapon
against them. Yet the dangers to the industry of the country, as well as
to the safety of exchanges, from such rapid consolidation of management
are easily perceived. It is certainly necessary that responsibility for
such enterprises be definitely fixed upon the share-holders. And it is
more than probable that government inspection of such business may become
as necessary as it now is of the banking systems of our country. Some
students of the subject foresee a final assumption of absolute control by
the government of all industrial enterprises as a result of this tendency
to aggregation. The question cannot be discussed in this connection, since
it involves a wider range of welfare than can be considered under
production.
_Possible combinations for farming._—It is proper to close this chapter
with suggestions as to the possibility of gaining the advantages of
combination for farming communities without disturbing the present
condition of ownership of land. When our farmers generally shall have
outgrown the disposition to make money by emigration, so that each farming
community is made up of farm homes with a stable population, more intimate
associations for farm operations than now are possible ought to become the
rule. Suggestions have already been made as to the possibilities of
greater division of labor, but other advantages of combination in the way
of labor saving can certainly be secured. More definite business methods
and mutual confidence in a neighborhood of farmers make possible enormous
economies in the way of mutual protection and advantage. The removal of
fences, with possible combination in seeding and tillage, a universal
method of dealing with insects, blights, rusts and similar plant diseases,
the handling of products in company, and above all a perfect sympathy in
all methods of improvement, education and development of enterprise, will
accomplish wonders.