IIITHE LAW OF MACHINES
Nolonger do we speak of machines. They are too numerous and too different. We speak of industrial equipment, which means machine-power in general.
As you may know, the industrial equipment of the world is increasing by terrific momentum. The machine is spreading over the face of the earth like an idea new truth. And this is so notwithstanding the fact that the industrial equipment already existing in the world is so great that if for one year it were worked at ideal capacity the product could not be sold for enough to pay the wages of labour, to say nothing of the cost of material, overhead charges, or profit. Markets would be glutted with goods. Producers would be ruined.
It follows that the pressing anxiety of industry is how to regulate and limit production in order not to overwhelm itsmarkets. Its chronic nightmare is overproduction, meaning a quantity of divisible products in excess of the immediate sum of effective desire. Hence combines, pools, rings, cartels, committees, and associations of manufacturers, which the courts are powerless to prevent even where they are forbidden by law. These are a vital measure of mutual preservation. Yet they are but protocols of truce. They very soon break down and have to be made all over again.
Control of production, save here and there for a little while, is a myth. It could be managed only in case there was a monopoly of machine-power. Once there was. There is no longer, and never will be again. Industrial production, taking it broadly, increases in an uncontrollable manner.
The evidence is notorious, first in the efforts of national industry to increase the sale of goods in its own country, and then in the strife among industrial nations for access to foreign markets.
A steam calliope jamming its way through the crowded street of New York City to advertize a new model of a popular motor-car at a reduced price is a spectacleto bear reflection. It is a symptom of saturation in the home market. When Henry Ford was making only a thousand cars a day, he did not advertize. There was a ready cash-demand for the whole of his product. When his output passed five thousand cars a day, he began to advertize on billboards and to sell on the instalment plan.
As the natural cash-demand for a thing is overtaken, it begins to be pressed for sale on credit. At this point finance steps in. Credit companies with millions of capital are formed expressly for the purpose of lending buyers the money with which to buy. Desire shall be made effective. Selling on credit in this manner has latterly and suddenly assumed such proportions as to represent in the affair of business a new pattern. Some old-fashioned minds have been debating it as an evil. They attack it on the ground that it betrays the virtue of thrift. But thrift has ceased to be a virtue. To consume—to consume more and more progressively—to be able to say in the evening “I have consumed more to-day than I consumed yesterday”, this now is a duty the individual owes to industrial society.
For see what would happen if people all over the world should return of a sudden to the former ways of thrift—to the habit of doing without? There would be depression in industry. Machines would stop. Millions who tend them would be disemployed. Nothing would be safe, not even your own money, for there would be panic on the exchange and trouble at the bank.
One is not speaking of the United States alone. The multiplication of things is greater here than anywhere else because we make machines faster and work them harder; but you will find the same necessity acting also in France, the very cradle of thrift, where now cheap motors are sold on credit: anyone who will buy may borrow the money to buy with. Why is this in France? To stimulate the motor habit? To serve a private profit-motive? The habit will follow; the profit may. But there is another reason, touching foreign trade, which we are coming to elucidate.
In order to sell abroad, an industrial nation must be able to produce cheaply. To produce cheaply, it must produce in large quantities by a multiple methodcalled mass-production. And you can safely manage this mass-production only provided you have a fairly large and constant base of domestic demand. So the sale of French motor-cars in France, though it be on credit, must be large enough to support the method of mass-production, for otherwise France would be unable to meet the competition of Ford, who now exports motor-cars to Europe—even builds them there. Then the British manufacturers, to meet the competition of both France and Ford, also undertake against their genius to produce motor-cars by the quantity method, and, having achieved the method, their next dilemma is what to do with the product. They advertize at home to create a popular motor-car habit and at the same time press their cars for sale in foreign markets, even in France and Germany, as these countries press theirs for sale in Great Britain.
Competition among industrial nations to exploit one another’s internal markets is but one profile of all that dangerous activity taking place in the name of foreign trade. The industrial powers holding their feet in China’s doorway and France fightingthe native in Morocco are other aspects of the same thing. China so long as possible shall be an open market for the surplus product of western machines; there shall be more wanting in Morocco.
The industrial equipment of the world meanwhile goes on increasing, though it is already so great that its capacity cannot be fully utilized. In the United States alone there is probably enough surplus machine-capacity to satisfy the whole demand of Great Britain’s foreign customers for staple merchandise, such as textiles, iron and steel manufacturers, rubber tires, motor-cars, electrical apparatus, machinery, glass, garments, shoes, cutlery, and so on. Great Britain not only has a surplus of machine-power; she has besides an excess of man-power represented by say one and one-quarter millions unemployed. She could easily take on the entire foreign trade of France; but in France also there is a surplus of machine-power. Both Great Britain and France dread the competition of Germany, whose production of goods with her existing equipment could be increased, under incentive, nobody knows how much.
The exterior facts do not make sense.They represent industry to be witless, in that, while dreading surplus as the evil that devoureth profit, it is at the same time bent to push supply to a point beyond saturation. Industry does not do this. Necessity does it. There is an interior fact. The tendency of the divisible product of machines to exceed the sum of effective desire is the last thing that industry wishes for. It is owing to a principle hitherto mentioned, namely, the principle that the cheapness of things is in proportion to the quantity produced. Which now is to be explained.
It is the economic function of the machine to cheapen production. There is otherwise no point to it. But, if we say things are more cheaply made by machine than by hand, we speak very loosely. What we mean is that a quantity of things is more cheaply made by machine than by hand.
For example, the cost of a single yard of cloth produced by machine is hundreds of times greater than the cost of a single yard of it produced by hand. Obviously, the power-loom is a very costly piece of machinery to build, and so is the engine that drives it. If you producedon a power-loom only the amount of cloth a weaver could make by hand, nobody could afford to buy it. But when you produce on the power-loom a quantity of cloth one hundred times greater than a weaver can make by hand, then, of course it is much cheaper. And the more you produce the cheaper it is. So with anything. The greater the quantity, the lower the cost. Hence the terms quantity, or mass-production, meaning, first, to standardize the product, as to make it all black, all one texture, all one width or shape, and then to bring a chain of machine-power continuously to bear upon its multiple production.
Observe the working of this principle. Take watches. At one time they were made by hand, slowly, laboriously, in stances being not uncommon of a craftsman spending half his lifetime to make a very fine one. Under these conditions watches are rare and costly. Only the very rich can buy them. Suddenly they began to be made by machines. A very good watch can be made for fifty dollars. There are a million people who want watches at that price. This is an original demand, a kind of vacuum, represented bya million people who have never had watches and now for the first time may possess them. Watches cannot be made fast enough to meet this want. The industry, for that reason, expands very fast. Then all at once the demand is satisfied. The million have watches. The vacuum has been filled. Hereafter the demand will tend to be static: it will increase slowly as the population increases or as people in general grow richer, little by little. The watch-making industry, therefore, is depressed. It has to limit production. Now comes someone with the idea that by carrying the machine method further a watch can be made for ten dollars. There are twenty million people who can afford to buy watches at that price. The ten-dollar watch appears. The demand again is like a vacuum, twenty times greater than the first. For a while ten-dollar watches cannot be made fast enough. The makers of fifty-dollar watches throw away their old machines, install new ones, increase their production, reduce their costs, and not only make what was a fifty dollar watch for twenty-five but contribute also, in a competitive manner, to the supply of ten-dollar watches. Suddenlywhat happened before happens again. The twenty million have watches. The vacuum is filled. Then someone says: “But there are one hundred million who would buy watches at two dollars”. So the process is repeated, still lower in the pyramid. The two-dollar watch is not a fine watch, but it will keep time; and as you would know, with the improvement that has taken place in machine practice the cost of making any kind of watch, even the finest, has been greatly reduced. A watch ceases to be a luxury or a token of caste. It is a necessary part of man’s personal equipment, all the way down to the base of the pyramid.
There you have the cycle. The use of the machine is to cheapen the cost of production. The sign is quantity. When the supply at a given price has overtaken the effective demand you have either to idle your machinery, in which case your cost of production will rise, or open a wider demand at a lower price. To lower the price and keep a profit you have to cheapen the cost of production still more. This you can do only by increasing the quantity, which again overtakes the demand, creating again the same necessity to cheapen the cost by increasing the quantity in order tobe able to make a lower price for greater demand. Thus supply pursues demand, downward through the social structure.
There is at last a base to the pyramid—its very widest point. When that is reached—what? Well, then you need bazaars in a foreign sun, heathen races of your own to train up in the way of wanting the products of your machines, new worlds of demand. You turn to foreign trade. And if you are an aggressive country that has come late to this business, as Germany was, and find that most of the promising heathen races are already adopted and that all the best bazaar-sites are taken, you may easily work yourself into a panic of fear and become a menace to the peace.