Principles of Political Economy · Part 35

It is scarcely necessary to remark that a stationary condition of capital and population implies no stationary state of human improvement. Even the industrial arts might be as earnestly and as successfully cultivated, with this sole difference, that instead of serving no purpose but the increase of wealth, industrial improvements would produce their legitimate effect, that of abridging labor. Hitherto it is questionable if all the mechanical inventions yet made have lightened the day’s toil of any human being. They have enabled a greater population to live the same life of drudgery and imprisonment, and an increased number of manufacturers and others to make fortunes. They have increased the comforts of the middle classes.

The statement that inventions have not “lightened the day’s toil of any human being” has been persistently misquoted by many persons and has been taken out of its connection. Mr. Mill distinctly holds that the laborer’s lot could have been improved had there been any limitation of population; that it is the constant growth of population as society progresses which destroys the gains afforded to the laboring-classes by improvements. But it is quite certain that the material facts of Mr. Mill’s statement are no longer true. In the United States wages have risen, with an additional gain in lower prices; and Mr. Giffen shows the same progress in England. Moreover, travelers on the Continent speak of a similar movement already noticeable there. Mr. Giffen’s statement in his comparison(305) with fifty years ago, is as follows:

“While the money wages have increased as we have seen, the hours of labor have diminished. It is difficult to estimate what the extent of this diminution has been, but collecting one or two scattered notices I should be inclined to say very nearly 20 per cent. There has been at least this reduction in the textile, engineering, and house-building trades. The workman gets from 50 to 100 per cent more money for 20 per cent less work; in round figures he has gained from 70 to 120 per cent in fifty years in money return. It is just possible, of course, that the workman may do as much, or nearly as much, in the shorter period as he did in his longer hours. Still, there is the positive gain in his being less time at his task, which many of the classes still tugging lengthily day by day at the oar would appreciate.”

Chapter V. On The Possible Futurity Of The Laboring-Classes.

§ 1. The possibility of improvement while Laborers remain merely receivers of Wages.

There has probably never been a time when more attention has been called to the material and social conditions of the working-classes than in the last few years. The great increase of literature and the extension of the newspaper has brought to every reader, even where public and private charities have not sent eye-witnesses into direct contact with distress, a more explicit knowledge of the working-classes than ever before. The revelation of existing poverty and misery is, often wrongly, taken to be a proof of the increasing degradation of the working-men, and the cause has been ascribed to the grasping cruelty of capitalists. Instances of injustice arising from the relations of employers and employed will occur so long as human nature remains imperfect. But the world hopes that some other relation than that of master and workman may be evolved in which not only many admitted wrongs may be avoided, but also new forces may be applied to raise the laborer out of his dependence on other classes in the community.

We are, at present, living under a régime of private property and competition. But certainly the progress of the laborer is not that which can excite enthusiastic hopes for the future, so long as he remains a mere receiver of wages. The progress of industrial improvements has resulted, says Mr. Cairnes, in “a temporary improvement of the laborer’s condition, followed by an increase of population and an enlarged demand for the cheapened commodity.... Laborers’ commodities, however, are for the most part commodities of raw produce, or in which the raw material constitutes the chief element of the value (clothing is, in truth, the only important exception); and of all such commodities it is the well-known law that an augmentation of quantity can only be obtained, other things being the same, at an increasing proportional cost. Thus, it has happened that the gain in productiveness obtained by improved processes has, after a generation, to a great extent been lost—lost, that is to say, for any benefit that can be derived from it in favor of wages and profits.... The large addition to the wealth of the country has gone neither to profits nor to wages, nor yet to the public at large [as consumers], but to swell a fund ever growing even while its proprietors sleep—the rent-roll of the owners of the soil.... The aggregate return from the land has immensely increased; but the cost of the costliest portion of the produce, which is that which determines the price of the whole, remains pretty nearly as it was. Profits, therefore, have not risen at all, and the real remuneration of the laborer, taking the whole field of labor, in but a slight degree—at all events in a degree very far from commensurate with the general progress of industry.”(306)

Under these conditions, it seems that the only hope of an improvement for the laboring-classes lies in the limitation of population—or at least in an increase of numbers less than the increase of capital and improvements. It is possible, however, that Mr. Cairnes, with many others, has failed to recognize the full extent of the improvement which is taking place in the wages of the laborer under the existing social order. Although we hear much of the wrongs of the working-men—and they no doubt exist—yet it is unquestionable that their condition has vastly improved within the last fifty years; largely, in my opinion, because improvements have outstripped population, and because wide areas of fertile land in new and peaceful countries have drawn off the surplus population in the older countries, and because the available spots in the newer countries like the United States have not yet been covered over with a population sufficiently dense to keep real wages anything below a relatively high standard. The facts to substantiate this opinion, so far as regards Great Britain, are to be found in a recent investigation(307) by Mr. Giffen, the statistician of the English Board of Trade. For a very considerable reduction in hours of daily labor, the workman now receives wages on an average about 70 per cent higher than fifty years ago, as may be seen by the following table:

Occupation. Place. Wages Wages, Increase fifty present or years ago, time, per decrease, per week. week. amount, per cent. Carpenters Manchester 24 0 34 0 10 0 (+) 42 Glasgow 14 0 26 0 12 0 (+) 85 Bricklayers Manchester(308) 24 0 36 0 12 0 (+) 50 Glasgow 15 0 27 0 12 0 (+) 80 Masons Manchester(309) 24 0 29 10 5 10 (+) 24 Glasgow 14 0 23 8 9 8 (+) 69 Miners Staffordshire 2 8(310) 4 0(311) 1 4 (+) 50 Pattern-weavers Huddersfield 16 0 25 0 9 0 (+) 55 Wool-scourers " 17 0 22 0 5 0 (+) 30 Mule-spinners " 25 6 30 0 4 6 (+) 20 Weavers " 12 0 26 0 14 0 (+) 115 Warpers and " 17 0 27 0 10 0 (+) beamers 58 Winders and " 6 0 11 0 5 0 (+) 83 reelers Weavers (men) Bradford 8 3 20 6 12 3 (+) 150 Reeling and " 7 9 15 6 7 9 (+) warping 100 Spinning " 4 5 11 6 7 1 (+) (children) 160

With increased wages, prices are not much higher than fifty years ago. But the clearest evidence as to their bettered material condition is to be found in the following table, which shows the amount of food consumed per head by the total population of Great Britain:

Articles. 1840. 1881. Bacon and hams, 0.01 13.93 Pounds. Butter, Pounds. 1.05 6.36 Cheese, Pounds. 0.92 5.77 Currants and 1.45 4.34 raisins, Pounds. Eggs, No. 3.63 21.65 Potatoes, Pounds. 0.01 12.5 Rice, Pounds. 0.90 16.32 Cocoa, Pounds. 0.08 0.31 Coffee, Pounds. 1.08 0.89 Corn, wheat, and 42.47 216.92 wheat-flour, Pounds. Raw sugar, Pounds. 15.20 58.92 Refined sugar, Nil. 8.44 Pounds. Tea, Pounds. 1.22 4.58 Tobacco, Pounds. 0.86 1.41 Wine, Gallons. 0.25 0.45 Spirits, Gallons. 0.97 1.08 Malt, Bushels. 1.59 1.91(312)

The question then at once arises, whether capital has been shown by the statistics to have gained accordingly, or whether there has been a proportionally less increase than in wages. Says Mr. Giffen: “If the return to capital had doubled, as the wages of the working-classes appear to have doubled, the aggregate income of the capitalist classes returned to the income-tax would now be £800,000,000 instead of £400,000,000.... The capitalist, as such, gets a low interest for his money, and the aggregate returns to capital is not a third part of the aggregate income of the country, which may be put at not less than £1,200,000,000.” It is found, moreover—as a suggestion that property is more generally diffused—that while there were 25,368 estates entered to probate in 1838, of an average value of £2,160 each, there were 55,359 estates in 1882 of an average value of £2,500 each.

But yet the vast increase of wealth made possible by improvements and the growth of capital would have bettered the condition of all still more had population been somewhat more limited. As it is, the material gain has been large in spite of an increase in the population from 16,500,000 in 1831 to nearly 30,000,000 in 1881. In other words, the landlords have been great gainers, while the laborers have intercepted much more than Mr. Cairnes supposed.

There are at hand some very striking data relating to the United States which point in the same direction as those of Mr. Giffen. Charts No. XIX and XX show vividly how far the increased productiveness of an industry, arising from greater skill and greater efficiency of labor in the connection of improved machinery, has enabled manufacturers to steadily lower the price of their goods, and yet increase the wages paid to their operatives. What was true of these two cotton-mills was true of others within New England; for the rate of wages paid by these mills was the rate current in the country in 1830 and in 1884. While each spindle and loom has become vastly more effective, we see by Chart No. XIX that the average production of each operative constantly increased from 4,321 yards per year in 1830, to 28,032 yards in 1884; and this it was which made possible the corresponding increase in the rate of wages from $164 in 1830, to $290 in 1884. The sum of $290 a year as an average for each operative, is a stipend too small to cause any general satisfaction; but he must be gloomy indeed who does not see that $290 is a cheerful possession as compared with $164. There is, then, abundant ground for believing that in the past fifty years the condition of the working-classes in the United States has been materially improved. The diminishing proportion of the price which goes to the capital is a significant fact, and illustrates the tendency of profits to fall with the increase of capital.(313) The same truth seems to be seen in the table given in a previous chapter,(314) where the wages have been increased, but the hours have fallen per day from thirteen to eleven since 1840.

§ 2.—through small holdings, by which the landlord’s gain is shared.

So far we have considered the chances for improvement in an industrial order in which the present separation of capitalists from laborers is maintained. But this does not take into account that future time when cultivation in the United States shall be forced down upon inferior land, and no more remains to be occupied, and when capital may no longer increase as fast as population. What must be the ultimate outlook for wages-receivers? Or, more practically, what is the outlook now for those who are wages-receivers, and for whom a more equitable distribution of the product seems desirable? How can they escape the thralldom of dependence on the accumulations of others?

In this connection, and of primary importance, is the avenue opened to all holders of small properties to share in the increase which goes to owners of land. It has been seen that owners of the soil constantly gain from the inevitable tendencies of industrial progress. If one large owner gains, why should not the increment be the same if ten owners held the property instead of one? The more the land is subdivided, the more the vast increase arising from rent will be shared by a larger number. This, in my opinion, is the strongest reason for the encouragement of small holdings in every country. The greater the extension of small properties among the working-class, the more will they gain a share of that part of the product which goes to the owner of land by the persistent increase of population. If, then, the gain arising from improvements is largely passed to the credit of land-owners, as Mr. Cairnes believes, it should be absolutely necessary to spread among the working-classes the doctrine that if they own their own homes, and buy the land they live on, to that extent will they “grow rich while they sleep,” independently of their other exertions. Land worth $500 to-day when bought by the savings of a laborer, besides the self-respect(315) it gives him, will increase in value with the density of population, and become worth $600 or more without other sacrifice of his.

§ 3. —through co-operation, by which the manager’s wages are shared.

It will be found, however, that, of the various industrial rewards, profits tend to diminish, meaning by “profits” only the interest and insurance given for abstinence and risk in the use of capital; but that the manager’s wages (wages of superintendence) are larger than is commonly supposed in relation to other industrial rewards, owing to the position of monopoly practically held by such executive ability as is competent to successfully manage large business interests. To the laborer this large payment to the manager seems to be paid for the possession of capital. This we now know to be wrong. The manager’s wages are payments of exactly the same nature as any laborer’s wages. It makes no difference whether wages are paid for manual or mental labor. The payment to capital, purely as such, known as interest (with insurance for risk), is unmistakably decreasing, even in the United States. And yet we see men gain by industrial operations enormous rewards; but these returns are in their essence solely manager’s wages. For in many instances, as hitherto discussed, we have seen that the manager is not the owner of the capital he employs. To what does this lead us? Inevitably to the conclusion that the laborer, if he would become something more than a receiver of wages, in the ordinary sense, must himself move up in the scale of laborers until he reaches the skill and power also to command manager’s wages. The importance of this principle to the working-man can not be exaggerated, and there flows from it important consequences to the whole social condition of the lower classes. It leads us directly to the means by which the lower classes may raise themselves to a higher position—the actual details of which, of course, are difficult, but, as they are not included in political economy, they must be left to sociology—and forms the essential basis of hope for any proper extension of productive co-operation. In short, co-operation owes its existence to the possibility of dividing the manager’s wages, to a greater or less degree, among the so-called wages-receivers, or the “laboring-class.” And it is from this point of view that co-operation is seen more truly and fitly than in any other way. For it is to be said that in some of its forms co-operation gives the most promising economic results as regards the condition of the laborer which have yet been reached in the long discussion upon the relations of labor and capital.

§ 4. Distributive Co-operation.

It will be my object, then, to describe the chief forms in which the co-operative principle has manifested itself. These may be said, in general, to be four: (1) distributive co-operation, by which goods already produced are bought and sold to members without the aid of retail dealers; (2) productive co-operation, by which associations are formed for producing and manufacturing goods for the market; (3) partial productive co-operation in the form of industrial partnerships between laborers and employers, without dispensing with the latter; and (4) co-operative, or People’s, banks. There are, of course, many other forms in which the principle of co-operation has been applied; but these four are probably the most characteristic.

Distributive co-operation is at once the simplest and the most successful form, not merely because it requires less for capital than any other for its inception, but also because it calls for less business and executive capacity. The number of persons capable of managing a small retail store is vastly greater than the class fit to assume control of the very complex duties involved in the care of wholesale houses—or, at all events, of mills and factories. Distributive co-operation has its origin in the fact that the expenses of a middle-man between the producer and consumer may be entirely dispensed with, and in the fact that more capital had collected in the business of distribution than could economically be so employed. Its educating power on the men concerned in teaching them to save, in showing the need of business methods, and in instilling the elements of industrial management, is of no little importance. It is, therefore, the best gateway to any further or more difficult co-operative experiments—such experiments as can be attempted only after the proper capital is saved, and the necessary executive capacity is discovered, or developed by training. In England co-operation began its history in distributive stores, and has finally led to such a stimulus of self-help in the laborer, that now co-operative gymnasiums, libraries, gardens, and other results have proved the wisdom of calling upon the laborers for their own exertions. Under the system which separates employers and the employed, high wages are not found to be the only boon which the receivers could wish; for it is sometimes found that the best-paid workmen are the most unwise and intemperate.(316) For the most ignorant and unskilled of the workmen in the lowest strata the object would seem to be to give not merely more wages, but give more in such a way as might excite new and better motives, a desire as well as a possibility of improvement. Self-help must be stimulated, not deadened by stifling dependence on a class of superiors, or on the state. The extraordinary growth of co-operation is one of the most cheering signs of modern times. Distributive co-operation originated in Rochdale, in England, about 1844, with a few laborers desirous of saving themselves from the high prices paid for poor provisions. By uniting, they purchased tea by the chest, sugar by the hogshead, which they sold to each member at market prices. They were surprised to find a large profit by the operation, which they divided proportionally to the capital subscribed. Others soon joined them; they took a store-room, and in 1882 there were 10,894 members, with a share capital of $1,576,215, and with realized profits in that year of $162,885. They have erected expensive steam flour-mills, and the society occupies eighteen branch establishments in Rochdale. Libraries containing more than 15,000 volumes, and classes in science, language, and the technical arts, attended by 500 students, have been maintained. The extension of the Rochdale store led to the necessity of a wholesale establishment of their own. It is now a large institution with branches in London and Newcastle. “It owns manufactories in London, Manchester, Newcastle, Leicester, Durham, and Crumpsall; and it has depots in Cork, Limerick, Kilmallock, Waterford, Tipperary, Tralee, and Armagh, for the purchase of butter, potatoes, and eggs. It has buyers in New York and Copenhagen, and it owns two steamships. It has a banking department with a turn-over of more than £12,000,000 annually.”(317)

The following figures for England and Wales tell their own story as to the progress of co-operation:(318)

1862. 1881. Number of members 90,000 525,000 Capital: Share 428,000 5,881,000 Capital: Loan 55,000 1,267,000 Sales 2,333,000 20,901,000 Net profit 165,000 1,617,000

Several persons each subscribe a sum to make up the share capital of a store, and a person is selected to take charge of the purchase and care of the goods. The advantages of the plan are: (1) A division among the co-operators of all the net profits of the retail trade; (2) a saving in advertisements, since members are always purchasers without solicitation; (3) no loss by bad debts, since only cash sales are permitted; and (4) security against fraud as to the character of the goods, because there is no inducement to make gains by adulterations. It is often found that the capital is turned over ten times in the course of a year; while the cost of management in the wholesale Rochdale stores does not amount to one per cent on the returns.

The arrangement of obligations in due order of their priority, which has been recommended by Mr. Holyoake,(319) is as follows: of funds in the store, payment should be made, (1) of the expenses of management; (2) of interest due on all loans; (3) of an amount equivalent to ten per cent of the value of the fixed stock to cover the annual depreciation from wear and tear; (4) of dividends on the subscribed capital of the members;(320) (5) of such a sum as may be necessary for an extension of the business; (6) of two and a half per cent of the remaining profit, after all the above items are provided for, for educational purposes; (7) of the residue, and that only, among all the persons employed, and members of the store, in proportion to the amount of their wages, or of their respective purchases during the quarter.(321) The payment of dividends to customers on their purchases seems now to be considered an essential element of success.

§ 5. Productive Co-Operation.

Productive co-operation presents many serious difficulties, the chief of which is the need of managing ability. Some one in the association must know the wholesale markets well, the expectation of crops connected with his materials used, the proper time to buy; he must know the processes of the special production thoroughly, the best machinery, the best adaptation of labor to the given end; he must know the whims of purchasers, and be ready to change his products accordingly—in short, a man eminently fitted for success in his own factory is essential to the profitable management of one belonging to a body of co-operators. It has been already seen how large a variation in profit is due to manager’s wages; and it is very often only his skill, prudence, and experience that make the difference between a failure and a success in business. Unless co-operators are willing to pay as large a sum for the services of a good manager as he could get in his own establishment, they can not secure the talent which will make their venture succeed.(322)

In France the national workshops of Louis Blanc, established in 1848, were a failure. Nowhere has it been more clearly seen that state help has been disastrous than in France, where the Constituent Assembly voted 3,000,000 francs for co-operative experiments, all of which failed. Curiously enough, distributive co-operation has not succeeded in France, because, owing to a wide-spread dislike of the wages system, workmen will try nothing less than productive schemes. And their success in this has been no greater than might be expected, when inexperience is put to a task beyond its powers.(323)

In Great Britain and the United States there have been some successful experiments in production; and Mr. Holyoake(324) holds that, although workmen certainly do begrudge the manager’s salary, productive associations are possible when managed by a board of elected directors. He urges, moreover, that, as in distributive co-operation, if profits are shared with customers, there will be insured both popularity and continuity of custom without the cost of advertising, and such expenses as those of travelers and commissions. The plan of actual operations upon which successes have been reached in England seems to be briefly this: (1) To save capital, chiefly through co-operative associations; (2) to purchase or lease premises; (3) to engage managers, accountants, and officers at the ordinary salaries which such men can command in the market according to their ability; (4) to borrow capital on the credit of the association; (5) to pay upon capital subscribed by members the same rate of interest as that upon borrowed capital; (6) to regard as profit only that which remains after making payment for rent, materials, wages, all business outlays, and interest on capital; and (7) to divide the profits according to the salaries of all officers, wages of workmen, and purchases of customers. Those mills and factories which have sprung out of the extension of distributive associations, as at Rochdale, seem, and naturally so, to have been most successful. They have gradually trained themselves somewhat for the work, and their customers were beforehand secured. That is, where the difficulties of the manager’s function have been lessened, they have a better chance of success. And yet it must be said that productive associations will gain largely from the efficiency of the labor when working for its own interest; and this is an important consideration to be urged in favor of such associations.

The Sun Mill,(325) at Oldham, England, was established for spinning cotton in 1861 by the exertions of some co-operative bodies. Beginning with a share capital of $250,000, and a loan capital of a like amount, it set 80,000 spindles in operation. In 1874 they had a share capital of $375,000 (all subscribed except $1,000), and an equal amount of loan capital, while the whole plant was estimated as worth $615,000. Two and a half per cent per annum has been set apart for the depreciation in the value of the mill, and seven and a half per cent for the machinery; so that in the first ten years a total sum of $160,000 was set aside for depreciation of the property. The profits have varied from two to forty per cent; and, while only five per cent interest was paid on the loan capital, large dividends were made on the share capital. During the last few years the Sun Mill has on an average realized a profit of 12-½ per cent, although it is known that the cotton trade has suffered during this time from a serious depression.

Many experiments, however, have proved failures; and sometimes, when they are successful (as in the case of the Hatters’ Association in Newark, New Jersey(326)), the workmen have no desire to share their benefits with others, and practically form a corporation by themselves. The mere fact that they do sometimes succeed is an important thing. Then, too, they have an opportunity of securing by salaries that executive ability in the community which exists separate from the possession of capital. And in these days, in large corporations, the manager is not necessarily (although he often is) a large owner of capital. The last annual report of the Co-operative Congress (1882) shows the existence in England and Scotland of productive associations for the manufacture of cloth, flannel, fustian, hosiery, quilts, worsted, nails, watches, linen, and silk, as well as those for engineering, printing, and quarrying; and these were but a few of them.(327)

In the United States there have been some successes as well as failures. In January, 1872, a number of machinists and other working-men organized in the town of Beaver Falls, Pennsylvania, a Co-operative Foundry Association for the manufacture of stoves, hollow-ware, and fine castings. On a small capital of only $4,000 they have steadily prospered, paid the market rate of wages, and also paid annual dividends, over and above all expenses and interest on the plant, of from twelve to fifteen per cent. In 1867 thirty workmen started a co-operative foundry in Somerset, Massachusetts, with a capital of about $14,000. In the years 1874-1875 the company spent $5,400 for new flasks and patterns, and yet showed a net gain of $11,914. In 1876 it had a capital of $30,000, and a surplus fund of $28,924.(328)

§ 6. Industrial Partnership.

The difficulties of productive co-operation arising from the need of skilled management, together with the existing unsatisfactory relation between employers and laborers when wholly separate from each other, have led to a most promising plan of industrial partnership by which the manager retains the control of the business operations, but shares his profits with the workmen. The gain through increased efficiency, greater economy, and superior workmanship, recoups the manager for the voluntary subtraction from his share, and yet the laborers receive an additional share; but more than this, it educates the laborer in industrial methods, discloses the difficulties of management, and stimulates him to saving habits and greater regularity of work. This system is particularly adapted to reaching those laborers who would not themselves rise to the demands of productive co-operation.