We shall probably get the clearest idea of the complexity of our
modern industrial society if we contrast it briefly with the simpler
state of social organization which preceded it. For this purpose we
may take the English manor of the eleventh century. At that time
England was a purely agricultural country, and the whole country 2
was divided into manors, of which the lord was regarded as the owner,
under feudal conditions, while those who cultivated the land were his
tenants. These tenants--villeins and cotters--worked on the lord’s
land two or three days in the week, and the rest of the time
cultivated their own holdings. The whole of the land of the manor,
both that of the lord and that of the tenants, was cultivated on an
elaborate system of joint labor. The land was divided into strips of
about half an acre each, and a man’s holding might consist of a dozen
or more of these strips scattered about in different parts of the
manor. This was done in order to secure equality in the fertility and
location of each man’s land. At that time the prevailing method of
agriculture was known as the three-field system, in which one field,
comprising about one-third of the manor and containing a portion of
the scattered strips of the lord and every tenant, was planted with
wheat, a second field comprising another third of the cultivated land
was planted with barley or oats, while the third field was left
fallow. The second year saw the second stage of this three-year
rotation, one-third of the manor lying fallow each year to recuperate
from this exhausting method of cropping; artificial manures were
unknown.
Now the significant characteristics of such a manorial society were
three. First, it was economically self-sufficient, that is,
practically everything that was needed or was consumed on the manor
was produced there. There was no need of intercourse with the outside
world and there was little contact with it. Salt, iron, and millstones
were almost the only things that the inhabitants of such a manor had
to buy from outsiders. Consequently there was no production of goods
for a market, little money, and almost no trade. The few things that
were purchased were paid for at prices fixed by custom. Secondly,
agriculture was carried on under a system of joint labor, and
under customary methods which did not change from generation to 3
generation. It is clear that as long as all the land of the manor was
thrown together, for purposes of cultivation, into fields on which
were planted wheat or barley or which lay fallow, no one individual
could cultivate his land differently from his neighbors. Indeed, the
holdings of the different tenants were not even separated by fences,
but only by ridges of grass. On the land which lay fallow the cattle
were turned out to graze; if any man had attempted to plant a new crop
the third year, his neighbors’ cattle would have devoured it under
such a system. Production was regulated absolutely by custom, and no
opportunity was given for the development of the inventiveness or
initiative of the progressive individual. Thirdly, the tenants were
personally unfree, that is, they did not have the liberty of moving
freely from place to place, but were bound to the soil which they
cultivated. A man could not freely choose either his occupation or his
residence. There was no mobility or freedom of movement. Labor was
wholly or partly compulsory, and on terms rigidly fixed by custom or
by superior authority.
Such a society differs from that of today in almost every point, and
offers a startling proof of how far we have progressed in the past
eight or nine hundred years. For many of these characteristics,
however, we do not need to go back to the English mediaeval manor; the
plantation of the South two generations ago, with its system of slave
labor, furnishes an illustration more familiar to most of us. With
such a condition of industrial development we may now profitably
contrast our own of the twentieth century. The chief characteristics
of the modern industrial system are the institutions of private
property, of competition, and of personal liberty.
The institution of private property is so familiar to us and so
fundamental in modern economic life, that we commonly regard it as
a natural right. Nevertheless, private property, like most other 4
economic institutions, is the result of a long evolution. Primitive
man can hardly have had the conception of private property, and when
it did begin to emerge, it was at first confined to movables. Indeed
we may say that on the mediaeval English manor the private ownership
of land did not yet exist in the modern sense. It was found however
that, when each cultivator was permitted to fence in his holding and
to call it his own, he cultivated it much more carefully and produced
much more. Inclosure led to private property in land and to individual
freedom in its use. Today in the United States the possession and
transfer of landed property is almost as easy as that of movables.
Private property must be justified on the ground of social utility,
because under this method of control so much more is produced than
under any system of commercial ownership yet tried. But there are not
wanting objectors who contend that limits should be placed upon this
institution, and that the right of use, of bequest, and possibly of
unlimited acquisition should be brought under social control. The
beneficence of private property turns largely upon the existence of
competition and individual liberty and to these we must now turn.
Competition is defined as “the act of seeking or endeavoring to gain
what another is endeavoring to gain at the same time.” But competition
in modern industrial life is not merely a struggle to appropriate an
existing good. The very contest, as over the control of a market, may
and probably will lead to cheaper and larger production, and thus to
the benefit of society. Competition is a selective process in our
modern economic society, and through it we have the survival of the
fittest. “Competition,” so runs the proverb, “is the soul of trade.”
There is, to be sure, a dark side to the picture, for economic
competition involves the defeat of the weaker party, but this does not
necessarily mean his destruction, for his very failure may sharpen 5
his faculties and secure his ultimate success, or at worst he may find
employment under his successful rival. But here again it is being
urged that competition is brutal and that we should go back to the
mediaeval method of regulation by custom, or resort to combination and
monopoly. We are now witnessing experiments in both directions, but
competition still remains the controlling force of modern economic
society, and bids fair to continue so. It should however be the
function of society to raise the ethical level of competition.
Industrial liberty has been developed even more slowly and painfully
than the institution of private property, and has in some instances
not yet been wholly won. Slavery and serfdom have given way before the
higher and more beneficent conception of freedom or liberty. We
believe today that a man generally knows what is best for him and will
utilize his opportunities to the best advantage; that by giving him a
maximum of freedom the welfare of society will at the same time be
best promoted. Consequently, in our modern industrial society, a man
is given not only social and religious liberty, but is free to move,
to choose his occupation, to produce and to trade, to associate with
his fellows, and to expend his income as he will. But here again,
while the prevailing rule is liberty, society has found it necessary
to lay restrictions upon the abuse of this liberty. It is not enough
even to regard the industrial world as a great game in which each may
act as he pleases provided only he observes the rules of the game. A
higher conception of responsibility and duty must accompany freedom of
action if we are to secure the best results.
The term “industrial society” has already been frequently used and
needs a somewhat fuller explanation. About the year 1760 there took
place in England what is usually called the Industrial Revolution. A
number of inventions were made which rendered it possible to use 6
steam-driven machinery in the manufacture, first of textile and then
of other goods. Manufactures were removed from the home, where they
had hitherto been carried on, to the factory. Capital began to be used
in large masses, machinery displaced hand tools, and the laborer
ceased to own the implements with which he worked. Men, machines, and
capital were massed in the factory and organized under the management
of a new set of industrial organizers for the purpose of producing
goods for a world market. The development of such an industrial
society has been attended by the minute division of labor, by a
growing separation of classes, by concentration of the population in
urban centers, by the increasing cost and complexity of machinery, by
the development of improved methods of transportation and of credit,
by the combination of labor and of capital, by the enormous increase
of production, and by the growing concentration of wealth.
The introduction of power manufacture completely revolutionized
industry. The independent workman with his own tools was superseded by
the factory, the small producer has given way in turn to the trust.
With the introduction of expensive machinery it became necessary to
organize capital on a large scale. Corporations with limited liability
were organized for the manufacture of goods, the exploitation of
mines, the building of railroads, and the carrying on of trade. As
methods of production improved industry became more and more
concentrated, and finally huge trusts took over the operation of
combined plants. The business unit has grown increasingly larger, and
the need and power of capital have become increasingly important.
Capital has played a role of growing significance and has become more
and more powerful in modern economic life. Indeed the name
“capitalistic production” has been applied to modern industry because
of the predominant importance of capital in all lines of wealth 7
production. Impersonal, growing by sheer force of its own momentum,
capital is often thought of as intensely selfish and even cruel.
Abuses which have arisen in the development of modern capitalistic
industry must be remedied, but attacks upon capital itself are
misguided and rest upon a mistaken analysis of methods of production.
Before the introduction of the factory system, under the so-called
“domestic” system of industry, the laborer carried on his work in his
own home, where he provided the raw material, owned his own tools,
furnished the motive power--his muscles--and was his own master. Today
every one of these conditions is changed--the work is carried on in
the factory, the raw material, the tools, the motive power are all
provided by the capitalist, the laborer contributing only his own more
or less skilled labor, while the conditions under which he carries on
his work are largely determined for him. He is no longer his own
master. To protect himself against the growing power of capital the
worker has organized with his fellows into trade unions. These seek to
meet the monopolistic power of capital by exerting a monopolistic
control over labor. While they realize that modern productive
processes cannot be carried on without capital, they also insist that
labor is equally essential. They claim that capital has received more
than its fair share of their joint production and has exploited labor;
consequently they insist that labor must now demand its just reward
and enforce the claim by strikes and by raising wages. To enforce
their monopoly, the policy of the closed shop is often enforced. The
interests of capital and labor have thus often been made to appear
antagonistic instead of complementary to one another. Frequently in
their struggles the interests of the consumer have been entirely lost
sight of.
These conflicts in the productive processes of modern economic society
have led many people to look to the state as the regulator of industry 8
and to invoke state aid or state interference along many lines.
Maladjustments in the labor contract, mistaken production, leading
perhaps to speculation and financial panics, abuses of power by
corporate interests, discriminations by railroads, and similar
irregularities are made the excuse for an appeal to state authority.
Some would even go so far as to have the state take over and manage
all productive enterprises; but socialism is as yet a protest rather
than a constructive force. In the last analysis the state is the
regulator of all industrial undertakings, for they all concern
society. The state must hold the balance even and see that fair play
is given to all groups and all classes; but the greatest amount of
freedom compatible with economic justice must be sought for. It is a
difficult question how far the state must interfere in the conduct or
management of industrial enterprises in order to secure social
justice. There is a decided tendency at present to a strengthening of
the regulative power of the state for the protection of the weaker
classes of society. And yet on the whole the institution of private
property, free competition, and a maximum of individual liberty remain
the fundamental conditions of our economic life.
But while under the system of individualism, industrial activities
have been multiplied, wealth has been enormously increased, and human
progress has been greatly advanced, many abuses and evils still
remain. Many practical economic problems still await solution. Some of
these have already been suggested in the preceding paragraphs; others
remain to be presented. It is the purpose of this text to apply to
some of the more important practical current problems of our modern
industrial life the principles of economic science, and to endeavor to
reach fair and just conclusions on controverted points.