Another factor which entered into the modern system of production, and
a very important one, was that of capital. The factory could not be
established or operated without considerable amounts of money or its
equivalent, credit. The machinery which transformed the raw material
into the finished product, the material itself, the very buildings in
which the work was performed, the payment for the transportation which
brought it together, the wages of the men and women engaged in the
work, all required capital, and in large sums. The accumulation of
this capital, its management, the keeping of accounts of cost of
material and labor and of the finished product, required financial
skill and acquaintance in the markets in which this capital could be
obtained; for often the sums required were in excess of the quantity
possessed by the individual who had invested his all in the buildings
and machinery, and must needs borrow of some other capitalist the
additional sums required for purchasing material and paying the wages
of his workmen. Sometimes the owner of the capital preferred to supply
it and take a proportionate share in the earnings of the factory, and
thus developed the company. Then, as the business grew and the
investments of various men in a single establishment increased, it
became necessary for them to take an active share in the management 215
either in person or by representatives who became known as the
“directors” of the work.
Thus arose the successors of the individual manufacturer, the company,
and the corporation. Man must die and the death of an individual
manufacturer, or the manager of a manufacturing firm or partnership,
must affect disadvantageously the interests of the factory and its
employes. Thus the importance of organizations which would continue
unchanged in form and general management in case of the absence or
death of any individual. This was one of the reasons for the
establishment of the corporation. More important than this was the
facility which it offered to holders of capital in sums large or small
to invest their money in manufacturing without being compelled to give
their individual attention to the industry in which the money was
invested. The board of directors, which the investors might choose,
managed the business either by personal attention or by the selection
of competent and experienced persons for that service, and the
investor felt assured that his money would be properly managed by the
competent business men forming the board of directors and the experts
whom these directors might employ to manage the details. Hence the
corporation, under which the manufacturing establishments grew to
enormous proportions, employing thousands and tens of thousands of
people, and bringing material from the places in which it could be
most cheaply obtained, investing money if need be in facilities for
transporting and even producing the raw material, and cheapening the
cost of production.
Another step which increased the importance of capital as a factor in
the great manufacturing industries of the world came in more recent
combinations of great corporations, in which a number of great
manufacturing establishments agree to operate under one general
management, thus adjusting production in the various lines of 216
manufacture to the general demand, existing supply and prospective
consuming power of the markets, establishing systematic methods for
exploiting and selling the finished product, and so further minimizing
cost of production and distribution. This last combination, the
corporation of corporations, is generally known as the “trust” or
“combine,” and under it the great manufacturing industries of the
world have reached their greatest development, the cost of production
has been minimized, the field for the selection of the materials has
been enlarged, and the area in which the products are offered for sale
also greatly extended.
While these great organizations, made up by placing under one general
management a number of great establishments manufacturing articles of
like character, are doubtless able to reduce the cost of production
and distribution and prevent production in excess of probable demand,
it is also true that they are in many cases able to exercise a greater
control over prices of labor, of material and of finished product than
when operating singly.
Meantime the world’s supply of money for investing in manufacturing,
and the industries which contribute thereto, greatly increased. The
world’s gold production in the decade ending with 1840 averaged but
13½ million dollars per annum. Then, owing to the gold discoveries
in California and a little later in Australia, the production so much
increased that the annual average in the decade ending with 1860 was
135 million dollars per annum, or ten times as much as on the average
in the decade ending with 1840. For the next 35 years the production
averaged about 125 million per annum. Then, suddenly, through the
discoveries of great gold deposits in Africa and Alaska, the
production began to exceed 200 million per annum, then 300 million,
and in 1906, 1907, 1908 and 1909 averaged more than 400 million per 217
annum, or as much in a single year as in the 40 years from 1800 to
1840.
Gold, unlike most other productions prized by man, is not consumed. It
has enduring qualities; and the facility with which it can be
transformed without material loss from one form for use to any other
required form enables man to retain and accumulate a large part of the
products of a long period. The wheat produced in one year is eaten
before the next year is ended. The cotton crop of one summer is turned
into clothing and worn to rags by the time another crop is ready for
the factory and workshop. But the gold is conserved and utilized as
money or the basis of money, and the accumulations of the recurring
years merely increase the stock of that generally accepted medium of
exchange. To be sure a small share, perhaps one-fifth, is used in
manufacturing and the arts, and a small percentage lost in various
ways; but probably three-fourths of the gold product enters
circulation in the form of money or its equivalent, and thus increases
very rapidly the world’s money supply.
Meantime the systems built up in the business world by which business
is performed with mere pieces of paper which represent the gold and
silver accumulations have greatly multiplied the available stock of
money; and the ease with which it may be transferred from place to
place, from country to country, and from continent to continent also
adds to its availability and frequency of use in the world’s
transactions. The supply of that article which the manufacturing and
business world terms “money,” whether in the form of gold, silver,
paper, credits, instruments of exchange, or otherwise, has increased
beyond accurate computation. The world’s stock of gold has, according
to the estimates of experts, doubled in the last 25 years; and it is
probable that the supplies of other forms of currency; which serve as
money; have increased quite as rapidly.
All of this increase in the world’s supply of money has increased the 218
amount available for investment in manufacturing, and the increased
use of machinery meantime in that industry has required great
increases in the investment. While there are no ways of accurately
measuring the world’s investments in manufacturing, it is practicable
to do so in the case of the United States, the only country which
regularly takes a census of its manufacturing industries. Its figures
for the census years from 1850 to 1905, as to number of
establishments, persons employed, wages paid, capital invested and
value of product, are as follows:
======+==========+=========+===========+========+=========+=========
| | | | Wages | Cost of |Value of
Census|Establish-| Capital,| Wage- | Paid, |Material,|Product,
year.| ments, | million | earners, |million | million |million
| number. | dollars.| number. |dollars.| dollars.|dollars.
------+----------+---------+-----------+--------+---------+---------
1850 | 123,025 | 533 | 957,059 | 237 | 555 | 1,019
1860 | 140,433 | 1,010 | 1,311,246 | 379 | 1,032 | 1,886
1870 | 252,148 | 2,118 | 2,053,996 | 776 | 2,488 | 4,232
1880 | 253,852 | 2,790 | 2,732,595 | 948 | 3,397 | 5,370
1890 | 355,415 | 6,525 | 4,251,613 | 1,891 | 5,162 | 9,372
1900 | 512,254 | 9,817 | 5,308,406 | 2,322 | 7,345 | 13,004
1905 | 533,769 | 13,872 | 6,157,751 | 3,017 | 9,498 | 16,867
------+----------+---------+-----------+--------+---------+---------
It will be seen from a study of this statement, which compares
conditions in the manufacturing industries at each recurring census
from 1850 to 1905, that while the number of establishments in 1905 was
four and one-third times as many as in 1850 the number of wage-earners
was six and one-half times as many, the wages paid twelve and
one-third times as much, the value of the product sixteen and one-half
times as much and the capital employed twenty-six times as much.
This gives at least a suggestion as to the growth of investment in
manufacturing. So far as relates to the United States, the only
country for which we have statistics on this subject, the enormous
increase in the use of costly machinery in manufacturing has increased
the sums required for carrying on the industry, and machinery has in a
marked degree been substituted for man in the factory operations. 219
The number of wage-earners employed increased, it will be seen, a
little more than fivefold while the capital employed increased
twenty-fivefold. The tendency to bring the manufacturing industries
into large establishments is also shown in some degree in the fact
that while the number of establishments increased but about threefold
the number of employes increased fivefold and the value of the
manufactures turned out increased twelvefold.
Even these figures do not, however, give a complete view of the
relative growth in the number of large manufacturing establishments,
the capital invested and the product turned out, because of the fact
that the census enumeration of “manufacturing establishments” includes
hand and household industries, such as blacksmith shops, wheelwright
and wagon repair shops, boot and shoe repairers, harness makers,
tailor shops, dress making, millinery, carpenter shops, custom, saw
and gristmills, etc., etc., in all of which the capital invested or
the product per establishment at this time averages probably little
more than formerly. It is in the greater establishments, the
factories, that the increase in investment and in producing power per
factory has occurred. The Census of 1905, which was by law confined to
manufacturing establishments conducted under the factory system, and
that exclusive of neighborhood and mechanical industries, found that
the number of establishments manufacturing for the general market and
not merely for local orders or neighborhood consumption, and which
could thus be considered as manufacturing establishments conducted
under the factory system, was but 216,262, while under the former
method of including hand and neighborhood industries the number of
establishments would, it is estimated by the census, have been in
1905, 533,769. The 216,262 establishments enumerated as “conducted
under the factory system” employed $12,686,000,000 capital and
5,470,321 wage-earners, or an average of 25 each, and turned out 220
$14,802,000,000 worth of manufactures; while the 317,506 smaller
establishments, the “hand and neighborhood industries” formerly
included in the general census returns, are estimated as having
employed $1,186,000,000 of capital and 687,430 wage-earners, or an
average of about 2 employes each, and turned out $2,066,000,000 worth
of manufactures.
It will thus be seen that the larger manufacturing establishments,
those “conducted under the factory system producing articles for the
general market as distinguished from the product made upon order for a
customer,” are those proper to be included in a study of the
development, capital invested, persons employed, wages paid, material
used and value of the product turned out. Unfortunately a study in
this form cannot be extended over any considerable term of years,
because of the fact that the United States census only began in 1905
to make this distinction or separation of the true “factory” from the
great mass of establishments turning out manufactured products. It
did, however, present in 1905 an estimate for the year 1900 of the
number of establishments properly comparable with those enumerated in
the factory census of 1905. This estimate puts the total number of
“establishments conducted under the factory system” in 1900 at
207,562, and in 1905 at 216,262, an increase of but 4.2 per cent in
the number, while the capital employed in 1900 was $8,979,000,000, and
in 1905, $12,686,000,000, an increase of 41.3 per cent; the
wage-earners in 1900, 4,715,023, and in 1905, 5,470,321, an increase
of 16 per cent; wages paid in 1900, $1,736,000,000, and in 1905,
$2,266,000,000, an increase of 30.5 per cent; materials used in 1900,
$6,578,000,000, and in 1905, $8,504,000,000, an increase of 29.3 per
cent; value of product in 1900, $11,411,000,000, and in 1905,
$14,802,000,000, an increase of 29.7 per cent.
It will thus be seen that even in the recent period, 1900 to 1905, the
percentage of growth in “capital invested” was greater than in any 221
other important branches of the industry, the increases being: in
capital 41.3 per cent, in wages paid 30.5 per cent, in value of
product 29.7 per cent, and in number of wage-earners 16 per cent,
while the number of establishments increased meantime but 4.2 per
cent. It is thus apparent that although the tendency of the past
thirty years has been distinctly toward an enlargement of the factory
through the increase in capitalization rather than an increase in the
number of establishments, that tendency still continues as the most
distinctly marked characteristic of the development of the period 1900
to 1905.
Unfortunately the facilities for comparing the capitalization,
product, etc., in 1905 with that of earlier years only extends, in its
relation to all the factory industries, to the Census of 1900. In a
few of the important industries, however, it is possible to compare
conditions in 1900 with those of earlier censuses. The Census of 1900
shows that the number of boot and shoe factories in the United States
fell from 1,959 in 1880 to 1,600 in the year 1900, while the
capitalization increased from an average of $21,957 per factory to
$63,622 per factory, the number of wage-earners from 57 to 89 per
factory, the wages paid from $21,951 to $36,985 per factory, and the
value of the year’s product turned out from $84,763 per factory to
$163,142 per factory. In cotton goods the number of establishments in
1880 was 1,005, and in 1900, 1,055, the capital per establishment in
1880, $218,412, and in 1900, $442,882, the number of wage-earners in
1880, 185 per establishment, and in 1900, 287, the wages paid in 1880,
$45,387 per establishment, and in 1900, $80,180, the value of product
in 1880, $209,901 per establishment, and in 1900, $362,349. In iron
and steel the number of establishments was in 1880, 699, and in 1900,
668, average capital per establishment in 1880, $294,652, and in 1900,
$858,371, wage-earners per establishment in 1880, 197, and in 1900,
333, wages paid per establishment in 1880, $78,020, and in 1900, 222
$180,869, value of product turned out per establishment in 1880,
$418,583, and in 1900, $1,203,545. In woolen goods the number of
factories fell from 1,990 in 1880 to 1,035 in 1900, the capital per
establishment increased from $48,289 in 1880 to $120,180 in 1900, and
the value of the product increased from $53,755 per establishment in
1880 to $114,425 in 1900.
It will be seen from the figures above presented that in these four
great industries the tendency from 1880 to 1900 was distinctly in the
direction of reduction of the number of factories, and a greater
increase in capitalization than in that of persons employed, wages
paid or in value of product turned out; while the figures covering the
operations of the entire factory system for the period 1900 to 1905
also show a continuation of this same tendency toward a greater growth
in capital than in persons employed, wages paid or value of product
turned out.