We have already characterized the modern system of industry as
capitalistic, that is, as involving the use of expensive and complex
machinery in factories under the control of the capitalist managers of
industry. As we have seen, such a system has caused an enormous
increase in the production of wealth; it has also raised the general
standard of comfort and the level of wages, and has relieved labor to
a considerable extent of the deadly strain of hard manual toil that
was characteristic of preceding systems. The factory system, under
which capitalistic production is now carried on, may also fairly be
credited with other beneficial results: as steadiness and punctuality 61
are essential, it has on the whole led to increased sobriety and
temperance; the work in general is healthier, being performed under
better sanitary conditions than under the old domestic system; the
intellectual status of the workingman has been raised, as vastly more
intelligence is required of a skilled machine operator than of the
old-time hand laborer; and finally the general well-being of the
working class has been improved, as they have shared in the larger
production made possible by machine methods. But, on the other hand,
the new processes and methods have been accompanied by great abuses,
though never so great in this country as in England. Long hours, the
employment of women and children, the weakened economic position of
the laborer, fluctuations in production, liability to be without
employment, industrial accidents, the abolition of personal ties
between employer and employe, the crowding of workmen into a small
space to work by day and their concentration in city tenements by
night--these are some of the problems for which the factory system
must be held responsible. The condition and position of labor have
been vitally affected. So far we have considered mainly the problems
connected with the organization and use of capital. We must now take
up the various questions connected with the relation of labor to
capital and to the capitalistic system of production.
One of the most vital factors in the situation--which we must frankly
admit at the start--is the existence in modern industrial society of a
distinct wage-earning class. It is perfectly obvious that under
present conditions of production great capital or great ability is
necessary in order to become the manager of an industrial enterprise.
Most laborers do not possess either the one or the other of these, and
although there are fortunate examples of industrial leaders who have
risen from the ranks, the general rule is, once a wage-earner always a
wage-earner. The number of those who can achieve industrial 62
independence is moreover growing smaller as business becomes more
specialized and centralized. The laborer therefore belongs to a class,
which is rapidly developing what the German socialists call
class-consciousness, that is, the feeling that he belongs to a
distinct industrial group with interests different from and often
antagonistic to those of other groups or classes. In his struggles
with employers over wages this antagonism of immediate aims obscures
the deeper mutuality and interdependence of their really complementary
interests and not infrequently leads to a feeling of hostility,
finding expression in strikes and labor agitation.
In the transition to the factory system Mr. John A. Hobson[9] points
out that the position of the laborer has been one of increasing
dependence in the following five important points: (1) The ownership
of material--at first the worker owned this and made it into the
finished product, but now he has only a passing interest in a small
part of the process of working it up. (2) Ownership of tools--he
retained these up to the time of the introduction of machinery, but
now seldom owns them. (3) Control of productive power--with the
displacement of hand labor and muscular power by steam-driven
machinery, he no longer owns even this. (4) Relations between workers
and employers--they were formerly on an equality; under the guild
system the master and the apprentice had the same social position; now
the laborer has sunk in the scale, or the employer has risen, until
the only bond between them is, as Carlyle said, the “cash nexus.” A
case was recently instanced where a workingman who had been working in
a factory met his employer for the first time at the end of seventeen
years. (5) Workplace--until the establishment of the factory system
this had always been the home; now it is the factory, and there is a 63
complete divorcement between work and the home.
Another characteristic of modern industry from the labor point of view
is the existence not merely of a wage-earning class, but, more
fundamental, of the wage system. “It is characteristic of the modern
industrial system,” writes President Hadley,[10] “that a laborer who
owns no capital, though nominally free to do what he pleases, must
actually find some property owner who will give him enough to keep him
alive during the period which must elapse between the rendering of the
labor and the sale of the finished product. Under such circumstances,
the laborer almost inevitably submits to the direction of the property
owner in deciding how his labor shall be applied. Laborers without
capital must necessarily work on this basis; even those who have small
amounts of capital habitually do so. Such advances of capital are
known as wages.” Here we have the essence of the wage system in a nut
shell. The laborer sells his labor to an employer for a stipulated
wage. He has a commodity, his labor, consisting of a certain amount of
strength and skill, which he is free to dispose of on the market to
the best advantage, as the owner of any other commodity might do.
Legally, labor is property. Owing, however, to the fact that all
modern production requires capital, the only buyer of his labor is a
capitalist, who directs the way in which the labor shall be applied.
Such a condition, as well as some peculiarities of the commodity labor
leave the laborer, indeed, only “nominally” free. In theory the labor
contract is a perfectly free contract, entered into voluntarily by
both employer and wage-earner, and the courts have generally insisted
that this theoretical freedom must be maintained. In practice various
modifications of the theory have taken place: legislation has been
passed protecting laborers from bargaining away their rights, and 64
trade unions have been formed to bargain collectively for a group of
laborers. In the last analysis, however, the laborer must support
himself by the sale of his labor; society guarantees him neither a
living nor even the right to work. He is a bargainer in a competitive
industrial world and he must assume the responsibility of providing
for himself and his family by securing work. Just what is involved in
such a statement is perhaps best brought out by comparing the modern
wage system with previous systems of labor.
The first historical system of labor, aside from that in the family,
was that of slaves. In this case the labor was forced, and being given
under coercion was probably very inefficient; but the laborer was at
least assured of a minimum of food, clothes and shelter. Slavery was
the main source of manual labor in the ancient world, and did not
disappear in England until the eleventh century. The feudal system of
the Middle Ages was characterized by serfdom, according to which the
laborer was bound to the soil and was compelled to render his lord
certain services. Gradually serfdom was broken down and the wage
system took its place, although remnants of serfdom remained in
England until the eighteenth century. Four centuries before this,
however, the disintegration of the feudal society had already begun,
the serfdom of the agricultural laborer was commuted into regular
money payments, and the artisan bought or otherwise secured his
freedom from feudal exactions. In the towns industry was regulated by
the guilds, and while at first they were distinctly beneficial, in
time they became monopolistic and oppressive. Power was lodged in the
hands of the wealthy traders and merchants and they legislated in
their own behalf against the growing class of laborers, as did the
wealthy land owners against the agricultural laborers. The Statute of
Laborers and other acts sought to fix wages and to prevent the freedom
of the laborer in moving about or choosing his own occupation. Not 65
indeed until the nineteenth century were the last of these old
regulative laws repealed and the modern labor contract recognized in
law and practice as a free contract. “The growth of labor,” says
Brentano, has been “from the system of authority to the system of
contract.” The system of authority, by which rates of wages, length of
apprenticeship, and other details of industry were fixed by some
superior authority, was found to be restrictive, uneconomic and
unjust, and it gave way to the principle of economic freedom.
According to the newer theory, first given effective voice by Adam
Smith, in 1776, the individual should be left to himself, as he knows
his own interest better than does the most enlightened government. The
freest scope was given to the powers of individuals and each was to be
the unlimited master of himself and his possessions.
It has since been found necessary, however, to modify both the theory
and practice of this extreme individualism in order to protect the
interests of various classes of society, especially the laborer. The
legal theory still is that “today the labor contract is perfectly
free: either side may make whatever contract he can get the other side
to sign. Not only this, but either side may freely combine to demand
any form of contract from the other side, as mere combinations alone
are now made perfectly legal.”[11] In practice, however, this complete
freedom has been greatly modified by factory acts, acts restricting
the hours and conditions of employment of women and children,
anti-truck acts, laws providing for weekly payments, guarding of
machinery, limiting the hours of labor, and on the other hand
prohibiting intimidation and molesting. For the most part these laws
have applied to women and children, who are thought less capable of
guarding their own interests, and to a much less degree to labor 66
contracts made by men, who have been considered better able to make
equal contracts with employers. But concerning certain conditions of
employment it has been realized that even adult males are not capable
of securing equitable bargains, and along these lines the nominal
freedom of the labor contract has been decidedly abridged. The
attitude of the courts toward such legislation shows that they have
declared many laws unconstitutional on the ground that they infringe
upon the right of free contract, but in the long run seem inclined to
uphold as much of this restrictive legislation as seems necessary to
obviate the undoubtedly evil results that flow from this real
inequality of employer and laborer.
It is a very vital and important practical economic problem that
presents itself in this connection. How far shall we carry this
regulative principle, or how far shall we insist upon the principle of
freedom? Many labor leaders are again asking for an effectual control
of the labor contract, not by the action of trade unions, but by the
direct legislation of the state. What shall be our attitude to this
demand? Before we can fairly answer this question we must consider
somewhat more fully the character of the bargain that takes place
between an employer and an individual workman, and the nature of the
commodity that the laborer has to sell.
It has already been stated that the commodity which the laborer brings
upon the market is his labor, that is, himself, his time, and his
energies. But these wares are peculiar and differ in several important
respects from ordinary marketable commodities. In the first place,
labor is like a perishable commodity which must be sold at once if the
owner is not to incur loss. The laborer has usually little if any
capital by which to support himself in case he cannot find work, and
may be compelled to make a forced sale of his labor, that is, to
accept unduly low wages. In this respect then he is at a disadvantage 67
in bargaining with his employer. A second peculiarity of the sale of
labor is that the laborer and his work are inseparable. The seller of
an ordinary commodity disposes of it absolutely when he makes a sale.
“It matters nothing to the seller of bricks whether they are to be
used in building a palace or a sewer; but it matters a great deal to
the seller of labor, who undertakes to perform a task of given
difficulty, whether or not the place in which it is to be done is a
wholesome and a pleasant one, or whether or not his associates will be
such as he cares to have.” The person who buys this labor necessarily
directs the application of it to the task in hand, and thus controls
very largely the place, the sanitary and social conditions, the hours,
the character, and safety of the work. In the third place, the
superior knowledge and intelligence of the employers gives them an
advantage in bargaining with their employes, while the reluctance of
employers to “spoil the labor market” often prevents that freedom of
competition which is supposed to secure to the laborer his full share
of the product he helps to produce.
In view of these facts we may fairly conclude that workmen are
inferior to employers as bargainers and that protective legislation is
necessary in order to put them on a real equality. “When laborers have
to make a forced sale of their labor, their freedom of contract is
more nominal than real. When women and children stand individually
before the manager of hundreds of thousands of capital, it is possible
that there may be little freedom and less equality in the contract by
which they sell their services.”[12] It is clear that between two
parties of such unequal knowledge, resources and ability as a laborer
and his employer the labor contract cannot be entirely free and equal.
While trade unions, by combining isolated workmen into formidable
and unified groups, have immeasurably increased their bargaining 68
strength, yet legislation has also been found necessary to remedy the
disadvantages already enumerated. It is realized that “there is no
greater inequality than the equal treatment of unequals.” In the
opening section of this text attention was called to the fact that
economic freedom or liberty was one of the corner stones of our modern
industrial society. But freedom can best be secured by securing
equality and responsibility. Factory legislation and labor laws are
designed to correct the inequalities imposed by nature or involved in
the very nature of capitalistic production. Direct interference by the
state in the freedom of contract is justified as leading to a more
real and certain equality and liberty. But while we may thoroughly
approve the principle of labor legislation it is difficult to know at
what point we should stop. A leading American authority on the law of
labor has stated[13] that “the industrial laborer at least is
beginning to be a privileged class in the law.” On the other hand, it
was possible for Disraeli to say as late as 1875, after the passage of
the Employers and Workmen Act by the British Parliament, “for the
first time in the history of this country employer and employed sit
under equal laws”--so recently were the legal disabilities removed
under which the English workmen had suffered up to this time.[14] The
pendulum has swung so rapidly and so far in labor’s direction in the
last generation that it is a fair question how far it will--or
should--continue to go.