Chapter XI.The Industrial Outlook of Low-Skilled Labour.§ 1.The Concentration of Capital.--It must be remembered that we have been concerned with what is only a portion of the great industrial movement of to-day. Perhaps it may serve to make the industrial position of the poor low-skilled workers more distinct if we attempt to set this portion in its true relation to the larger Labour Problem, by giving a brief outline of the size and relation of the main industrial forces of the day.If we look at the two great industrial factors, Capital and Labour, we see a corresponding change taking place in each. This change signifies a constant endeavour to escape the rigour of competition by a co-operation which grows ever closer towards fusion of interests previously separate.Look first at Capital. We saw how the application of machinery and mechanical power to productive industries replaced the independent citizen, or small capitalist, who worked with a handful of assistants, by the mill and factory owner with his numerous "hands." The economic use of machinery led to production on a larger scale. But new, complex, and expensive machinery is continually being invented, which, for those who can afford to purchase and use it, represents a fresh economy in production, and enables them both to produce larger quantities of goods more rapidly, and to get rid of them by underselling those of their trade competitors who are working with old-fashioned and less effective machinery. As this process is continually going on, it signifies a constant advantage which the owner of a large business capital has over the owner of a smaller capital. In earlier times, when trade was more localized, and the small manufacturer or merchant had his steady customers, and stood on a slowly and carefully acquired reputation, it was not so easy for a new competitor to take his trade by the offer of some small additional advantage. But the opening up of wider communication by cheap postage, the newspaper, the railway, the telegraph, the general and rapid knowledge of prices, the enormous growth of touting and advertising, have broken up the local and personal character of commerce, and tend to make the whole world one complete and even arena of competition. Thus the fortunate possessor of some commercial advantage, however trifling, which enables him to produce more cheaply or sell more effectively than his fellows, can rapidly acquire their trade, unless they are able to avail themselves of the new machinery, or special skill, or other economy which he possesses. This consideration enables the large capitalist in all businesses where large capital contains these advantages, or the owner of some large natural monopoly, who can most cheaply extract large quantities of raw material, to crush in free competition the smaller businesses. In proportion as business is becoming wider and more cosmopolitan, these natural advantages of large capital over small are able to assert themselves more and more effectively. In certain branches of trade, which have not yet been taken over by elaborate machinery, or where everything depends upon the personal activity and intelligence, and the detailed supervision of a fully interested owner, the small capitalist may still hold his own, as in certain branches of retail trade. But the general movement is in favour of large businesses. Everywhere the big business is swallowing up the smaller, and in its turn is liable to be swallowed by a bigger one. In manufacture, where the cosmopolitan character is strongest, and where machinery plays so large a part, the movement towards vast businesses is most marked; each year makes it more rapid, and more general. But in wholesale and retail distribution, though somewhat slower, the tendency is the same. Even in agriculture, where close personal care and the limitations of a local market temper the larger tendency, the recent annals of Western America and Australia supply startling evidence of the concentrative force of machinery. The meaning of this movement in capital must not be mistaken. It is not merely that among competing businesses, the larger showing themselves the stronger survive, and the smaller, out-competed disappear. This of course often happens. The big screw-manufacturer able to provide some new labour-saving machinery, to advertise more effectively, or even to sell at a loss for a period of time, can drown his weaker competitors and take their trade. The small tradesman can no longer hold his own in the fight with the universal provider, or the co-operative store.But this destruction of the small business, though an essential factor in the movement, is not perhaps the most important aspect. The industrial superiority of the large business over the small makes for the concentration both of small capitals and of business ability. The monster millionaire, who owns the whole or the bulk of his great business, is after all a very rare specimen. The typical business form of to-day is the joint stock company. This simply means that a number of capitalists, who might otherwise have been competing with one another on a small scale of business, recognizing the advantage of size, agree to mass their capital into one large lump, and to entrust its manipulation to the best business ability they can muster among them, or procure from outside. This process in its simplest form is seen in the amalgamation of existing and competing businesses, notable examples of which have recently occurred in the London publishing trade. But the ordinary Company, whether it grows by the expansion of some large existent business, or, like most railways or other new enterprises, is formed out of money subscribed in order to form a business, represents the same concentrating tendency. These share-owners put their capital together into one concern, in order to reap some advantage which they think they would not reap if they placed the capital in small competing businesses. But though it has been calculated that about one-third of English commerce is now in the hands of joint stock companies, this by no means exhausts the significance of the centralizing force in capital. Almost all large businesses, and many small businesses, are recognized to be conducted largely with borrowed capitals. The owners of these debentures are in fact joint capitalists with the nominal owner of the business. They prefer to lend their capital, because they hope to enjoy a portion of the gain and security which belongs to a large business as compared with a small one. Along with this coming together of small capitals to make a large capital, there is a constant centralization and organization of business ability. It is not uncommon for the owner of a small and therefore failing business to accept a salaried post in the office of some great business firm. So too we find the son of a small tradesman, recognizing the hopelessness of maintaining his father's business, takes his place behind the counter of some monster house.§ 2. How Competition affects Capital.--Now the force which brings about all these movements is the force of competition. Every increase of knowledge, every improvement of communication, every breakdown of international or local barriers, increases the advantage of the big business, and makes the struggle for existence among small businesses more keen and more hopeless. It is the desire to escape from the heavy and harassing strain of trade competition, which practically drives small businesses to suspend their mutual hostilities, and to combine. It is true that most of the large private businesses or joint stock companies are not formed by this direct process of pacification. But for all that, theirraison d'êtreis found in the desire to escape the friction and waste of competition which would take place if each shareholder set up business separately on his own account. We shall not be surprised that the competition of small businesses has given way before co-operation, when we perceive the force and fierceness of the competition between the larger consolidated masses of capital. With the development of the arts of advertising, touting, adulteration, political jobbery, and speculation, acting over an ever-widening area of competition, the fight between the large joint stock businesses grows always more cruel and complex. Business failures tend to become more frequent and more disastrous. A recent French economist reckons that ten out of every hundred who enter business succeed, fifty vegetate, and forty go into bankruptcy. In America, where internal competition is still keener and speculation more rife, it has been lately calculated that ninety-five per cent, of those who enter business "fail of success." Just as in the growth of political society the private individual has given up the right of private war to the State, with the result that as States grow stronger and better organized, the war between them becomes fiercer and more destructive, so is it with the concentration of capital. The small capitalist, seeking to avoid the strain of personal competition, amalgamates with others, and the competition between these masses of capital waxes every day fiercer. We have no accurate data for measuring the diminution of the number of separate competitors which has attended the growing concentration of capital, but we know that the average magnitude of a successful business is continually increasing. The following figures illustrate the meaning of this movement from the American cotton trade, which is not one of the industries most susceptible to the concentrative pressure. "It will be seen that in 756 large establishments in 1880, in which the aggregate capital invested was five times as great as that in the 801 establishments in 1830, the capital invested per spindle was one-third less, the number of spindles operated by each labourer nearly three times as large, the product per spindle one-fourth greater, the product per dollar invested twice as large, the price of the cotton cloth nearly sixty per cent, less, the consumptionper capitaof the population over one hundred per cent greater, and the wages more than double. What is true of this industry is true of all industries where the concentration of capital has taken place."[38]It is needless to add that these large works are conducted, not by single owners, but in nearly all cases by the managers of associated capitals. Regarded from the large standpoint of industrial development, all these phenomena denote a change in the sphere of competition. From the competition of private capitals owned by individuals we have passed to the competition of associated capitals. The question now arises, "Will not the same forces, which, in order to avoid the waste and destruction of ever keener competition, compelled the private capitalists to suspension of hostility and to combination, act upon the larger masses of associated capital?" The answer is already working itself clearly out in industrial history. The concentrative adhesive forces are everywhere driving the competing masses of capital to seek safety, and escape waste and destruction, by welding themselves into still larger masses, renouncing the competition with one another in order to compete more successfully with other large bodies. Thus, wherever these forces are in free operation, the number of competing firms is continually growing less; the surviving competitors have crushed or absorbed their weaker rivals, and have grown big by feeding on their carcases.But the struggle between these few big survivors becomes more fierce than ever. Fitted out with enormous capital, provided with the latest, most complex, and most expensive machinery, producing with a reckless disregard for one another or the wants of the consuming public, advertising on a prodigious scale in order to force new markets, or steal the markets of one another, they are constantly driven to lower their prices in order to effect sales; profits are driven to a minimum; all the business energy at their command is absorbed by the strain of the fight; any unforeseen fluctuations in the market brings on a crisis, ruins the weaker combatants, and causes heavy losses all round. In trades where the concentrative process has proceeded furthest this warfare is naturally fiercest. But as the number of competing units grows smaller, arbitration or union becomes more feasible. Close and successful united action among a large number of scattered competitors of different scales of importance, such as exist during the earlier stage of capitalism, would be impossible. But where the number is small, combination presents itself as possible, and in so much as the competition is fiercer, the direct motive to such combination is stronger. Hence we find that attempts are made to relieve the strain among the largest businesses. The fiercest combatants weary of incessant war and patch up treaties. The weapon of capitalist warfare is the power of under-selling--"cutting prices." The most powerful firms consent to sheathe this weapon, i.e. agree not to undersell one another, but to adopt a common scale of prices. This action, in direct restraint of competition, corresponds to the action of a trades union, and is attained by many trades whose capital is not large or business highly developed. Neither does it imply close union of friendly relations between the combining parties. It is a policy dictated by the barest instinct of self-preservation. We see it regularly applied in certain local trades, especially in the production and distribution of perishable commodities. Our bakers, butchers, dairy-men, are everywhere in a constant state of suspended hostility, each endeavouring indeed to get the largest trade for himself, but abiding generally by a common scale of prices. Wherever the local merchants are not easily able to be interfered with by outsiders, as in the coal-trade, they form a more or less closely compacted ring for the maintenance of common terms, raising and lowering prices by agreement. The possibility of successfully maintaining these compacts depends on the ability to resist outside pressure, the element of monopoly in the trade. When this power is strong, a local ring of competing tradesmen may succeed in maintaining enormous prices. To take a humble example--In many a remote Swiss village, rapidly grown into a fashionable resort, the local washerwomen are able to charge prices twice as high as those paid in London, probably four times as high as the normal price of the neighbourhood.Grocers or clothiers are not able to combine with the same effect, for the consumer is far less dependent on local distribution for these wares. But wherever such retail combinations are possible they are found. Among large producers and large distributing agencies the same tendency prevails, especially in cases where the market is largely local. Free competition of prices among coal-owners or iron-masters gives way under the pressure of common interests, to a schedule of prices; competing railways come to terms. Even among large businesses which enjoy no local monopoly, there are constant endeavours to maintain a common scale of prices. This condition of loose, irregular, and partial co-operation among competing industrial units is the characteristic condition of trade in such a commercial country as England to-day. Competitors give up the combatà outrance, and fight with blunted lances.§ 3. Syndicates and Trusts.--But it is of course extremely difficult to maintain these loose agreements among merchants and producers engaged in intricate and far-reaching trades. A big opportunity is constantly tempting one of them to undersell; new firms are constantly springing up with new machinery, willing to trade upon the artificially raised prices, by under-selling so as to secure a business; over-production and a glut of goods tempts weaker firms to "cut rates," and this breaks down the compact. A score of different causes interfere with these delicate combinations, and plunge the different firms into the full heat and waste of the conflict. The renewed "free competition" proves once more fatal to the smaller businesses; the waste inflicted on the "leviathans" who survive forms a fresh motive to a closer combination.These new closer combinations are known by the names of Syndicate and Trust. This marks another stage in the evolution of capital. In the United States, where the growth is most clearly marked, the Standard Oil Trust forms the leading example of a successful Trust. In 1881, this Standard Oil Company having maintained for some ten years tolerably close informal relations with its leading competitors in the Eastern States, and having crushed out the smaller companies, entered into a close arrangement with the remaining competitors, with the view of a practical consolidation of the businesses into one, though the formal identity of the several firms was still maintained. The various companies which entered into this union, comprising nearly all the chief oil-mills, submitted their businesses to valuation, and placed themselves in the hands of a board of trustees, with an absolute power to regulate the quantity of production, and if necessary to close mills, to raise and lower prices, and to work the whole number as a joint concern. Each company gave up its shares to the Trust, receiving notes of acknowledgment for the worth of the shares, and the total profits were to be divided as dividend each half-year. This Trust has continued to exist, and has now a practical monopoly of the oil trade in America, controlling, it is reckoned, more than 90 per cent. of the whole market, and regulating production and prices.Everywhere this process is at work. Competing firms are in every trade, where their small numbers permit, striving to come to closer terms than formerly, and either secretly or openly joining forces so as to get full control over the production or distribution of some product, in order to manipulate prices for their own profit. From railways and corn-stores down to slate-pencils, coffins, and sticking-plaster, everything is tending to fall under the power of a Trust. Many of these Trusts fail to secure the union of a sufficient proportion of the large competitors, or quarrels spring up among the combining firms, or some new firms enter into competition too strong to be fought or bought over. In these ways a large number of the Trusts have hitherto broken down, and will doubtless continue to break down. In England, this step in capitalist evolution is only beginning to be taken. In glass, paper, salt, coal, and a few other commodities, combinations more permanent than the mere Ring or Corner, and closer than the ordinary masters' unions, have been formed. But Free Trade, which leaves us open to the less calculable and controllable element of foreign competition, and the fact that the earlier stages of concentration of capital are not yet completed here in most trades, have hitherto retarded the growth of the successful Trust in England. Even in America there is no case where the monopoly of a Trust reigns absolute through the whole country, though many of them enjoy a local control of production and prices which is practically unrestricted. Excepting in the case of the Standard Oil Trust, and a few less important bodies which enjoy the control of some local monopoly, such as anthracite coal, the supremacy of the leading Trust or Syndicate is brought in certain places into direct conflict with other more or less independent competing bodies. In other words, the evolution of capital, which tends ever to the establishment of competition between a smaller number of larger masses, has nowhere worked out the logical conclusion which means the condensation of the few large competing bodies into a single mass. This final step, which presents a completely organized trade with the element of competition utterly eliminated under the control of a single body of mere joint-owners of the capital engaged, must be regarded as the goal, the ideal culmination of the concentrative movement of modern capital. It is said that more than one-third of the business in the United States is already controlled by Trusts. But most of them have only in part succeeded in their effort to escape from competition by integrating their personal interests into a single homogeneous mass. Even in cases where they do rule the market untrammelled by the direct interference of any competitors, they are still deterred from a free use of their control over prices by the possibility of competition which any full use of this control might give rise to. For it does not follow that even where a Trust holds an absolute monopoly of the market of a locality, that it will be able to maintain that monopoly were it to raise its prices beyond a certain point. In proportion, however, as experience yields a greater skill in the management of Trusts, and their growing strength enables them to more successfully defy outside attempts at competition, their power to raise prices and increase their rates of profit would rise accordingly.Regarding, then, the development of the capitalist system from the first establishment of the capitalist-employer as a distinct industrial class, we trace the massing of capital in larger and larger competing forms, the number of which represents a pyramid growing narrower as it ascends towards an ideal apex, represented by the absolute unity or identity of interests of the capital in a given trade. In so far as the interests of different trades may clash, we might carry on this movement further, and trace the gradual agreement, integration, and fusion of the capitals represented in various trades. There is, in fact, an ever-growing understanding and union between the various forms of capital in a country. The recognition of this ultimate identity of interest must be regarded as a constant force making for the unification of the whole capital of a country, in the same way as the common interests of directly competing capitals in the same trade leads to a union for mutual support and ultimate identification.§ 4. Uses and Abuses of the Trust.--This, however, carries us beyond the immediate industrial outlook. The successful formation of the Trust represents the highest reach of capitalistic evolution. Although the subject is too involved for any lengthy discussion here, a few points bearing on the nature of the Trust deserve attention.The Trust is clearly seen to be a natural step in the evolution of capital. It belongs to the industrial progress of the day, and must not be condemned as if it were a retrograde or evil thing. It is distinctly an attempt to introduce order into chaos, to save the waste of war, to organize an industry. The Trust-makers often claim that their line of action is both necessary and socially beneficial, and urge the following points--The low rates of profit, owing to the miscalculation of competitors who establish too many factories and glut the market; the waste of energy in the work of competition; the adulteration of goods induced by the desire to undersell; the enormous royalties which must be paid to a competitor who has secured some new invention--these and other causes necessitate some common action. By the united action of the Trust the following economic advantages are gained--The saving of the labour and the waste of competition.Economy in buying and selling, in discovering and establishing new markets.The maintenance of a good quality of wares without fear of being undersold.Mutual guarantee and insurance against losses.The closing of works which are disadvantageously placed or are otherwise unnecessary to furnish the requisite supply at profitable prices.The raising of prices to a level which will give a living basis of steady production and profit.That all these economies are useful to the capitalists who form Trusts will be obvious. How far they are socially useful is a more difficult question. Reflection, however, will make one thing evident, viz. that though the public may share that part of the advantage derived from the more economical use of large capitals, it cannot share that portion which is derived from the absence of competition. If two or more Trusts or aggregations of capital are still in actual or even in potential competition, the public will be enabled to reap what gain belongs to larger efficient production, for it will be for the interest of each severally to sell at the lowest prices; but if a single Trust rule the market, though the economic advantage of the Trust will be greater in so far as it escapes the labour of all competition, there will be no force to secure for the public any share in this advantage. The advantageous position enjoyed by a Trust will certainly enable its owners at the same time to pay high profits, give high wages, and sell at low prices. But while the force of self-interest will secure the first result, there is nothing to guarantee the second and third. There is no adequate security that in the culminating product of capitalistic growth, the single dominant Trust or Syndicate self-interest will keep down prices, as is often urged by the advocates of Trust. It is true that "they have a direct interest in keeping prices at least sufficiently low not to invite the organization of counter-enterprises which may destroy their existing profits."[39] But this consideration is qualified in two ways:--a. Where Trust is formed or assisted by the possession of a natural monopoly, i.e. land, or some content of land, absolutely limited in quality, such potential competition does not exist, and nothing, save the possibility of substituting another commodity, places a limit on the rise of price which a Trust may impose on the public.. Although the fear of potential competition will prevent the maintenance of an indefinitely high price it will not necessarily prevent such a rise of price as will yield enormous profits, and form a grievous burden on consumers. For a strongly-constituted Trust will be able to crush any competing combination of ordinary size and strength by a temporary lowering of its prices below the margin of profitable production, the weapon which a strong rich company can always use successfully against a weaker new competitor.But though a Trust with a really strong monopoly, and rid of all effective competition, will be able to impose exorbitant and oppressive prices on consumers, it must be observed that it is not necessarily to its interest to do so. Every rise of price implies a fall off in quantity sold; and it may therefore pay a Trust better to sell a large quantity at a moderate profit than a smaller quantity at an enormous profit. The exercise of the power possessed by the owners of a monopoly depends upon the proportionate effect a rise of price will have upon the sale. This again depends upon the nature and uses of the commodity in which the Trust deals. In proportion as an article belongs to the "necessaries" of life, a rise of price will have a small effect on the purchase of it, as compared with the effect of a similar rise of price on articles which belong to the "comforts" or "luxuries" of life, or which may be readily replaced by some cheaper substitute. Thus it will appear that the power of a Trust or monopoly of capital is liable to be detrimental to the public interest--1st. In proportion as there is a want of effective existing competition, and a difficulty of potential competition. 2nd. In proportion as the commodity dealt in by the Trust belongs to the necessaries of life.§ 5. Steps in the Organization of labour.--The movements of labour show an order closely correspondent with those of capital. As the units of capital seek relief from the strain and waste of competition by uniting into masses, and as the fiercer competition of these masses force them into ever larger and closer aggregates, until they are enabled to obtain partial or total relief from the competitive strife, so is it with labour. The formation of individual units of labour-power into Trades Unions, the amalgamation of these Unions on a larger scale and in closer co-operation, are movements analogous to the concentration of small units of capital traced above. It is not necessary to follow in detail the concentrative process which is gradually welding labour into larger units of competition. The uneven pace at which this process works in different places and in various trades has prevented a clear recognition of the law of the movement. The following steps, not always taken however in precisely the same order, mark the progress--1. Workers in the same trade in a town or locality form a "Union," or limited co-operative society, the economic essence of which consists in the fact that in regard to the price and other conditions of their labour they act as a complex unit. Where such unions are strongly formed, the employer or body of employers deals not with individual workmen, but with the Union of workmen, in matters which the Union considers to be of common interest.2. Next comes the establishment of provincial or national relations between these local Unions. The Northumberland and Durham miners will connect their various branches, and will, if necessary, enter into relations with the Unions of other mining districts. The local Unions of engineers, of carpenters, &c., are related closely by means of elected representatives in national Unions. In the strongest Unions the central control is absolute in reference to the more important objects of union, the pressure for higher wages, shorter hours, and other industrial advantages, or the resistance of attempts to impose reductions of wages, &c.3. Along with the movement towards a national organization of the workers in a trade, or in some cases prior to it, is the growth of combined action between allied industries, that is to say, trades which are closely related in work and interests. In the building trades, for example, bricklayers, masons, carpenters, plasterers, plumbers, painters and decorators, find that their respective trade interests meet, and are interwoven at a score of different points. The sympathetic action thus set up is beginning to find its way to the establishment of closer co-operation between the Unions of these several trades. The different industries engaged in river-side work are rapidly forming into closer union. So also the various mining classes, the railway workers, civil servants, are moving gradually but surely towards a recognition of common interests, and of the advantage of close common action.4. The fact of the innumerable delicate but important relations which subsist among classes of workers, whose work appears on the surface but distantly related, is leading to Trade Councils representative of all the Trade Unions in a district. In the midland counties and in London these general Trade Councils are engaged in the gigantic task of welding into some single unity the complex conflicting interests of large bodies of workmen.5. An allusion to the attempts to establish international relations between the Unions of English workmen and those of foreign countries is important, more as indicating the probable line of future labour movement, than as indicating the early probability of effective international union of labour. Though slight spasmodic international co-operation of workers may even now be possible, especially among members of English-speaking races, the divergent immediate interests, the different stages of industrial development reached in the various industrial countries, seem likely for a long time at any rate to preclude the possibility of close co-operation between the united workers of different nations.§ 6. Parallelism of the Movements in Capital and Labour.--Now this movement in labour, irregular, partial, and incomplete as it is, is strictly parallel with the movement of capital. In both, the smaller units become merged and concentrated into larger units, driven by self-interest to combine for more effective competition in larger masses. The fact that in the case of capital the concentration is more complete, does not really impair the accuracy of the analogy. Small capitals, when they have co-operated or formed a union, are absolutely merged, and cease to exist or act as individual units at all. A "share" in a business has no separate existence so long as it is kept in that business. But the small units of labour cannot so absolutely merge their individuality. The capital-unit being impersonal can be absolutely merged for common action with like units. The labour-unit being personal only surrenders part of his freedom of action and competition to the Union, which henceforth represents the social side of his industrial self. How far the necessity of close social action between labour-units in the future may compel the labourer to merge more of his industrial individuality in the Union, is an open question which the future history of labour-movements will decide.The slow, intermittent, and fragmentary manner in which labour-unions have been hitherto conducted even in the stronger trades, is a fact which has perhaps done more to hide the true parallelism in the evolution of capital and labour. The path traced above has not yet been traversed by the bulk of English working men, while, as has been shown, working women have hardly begun to contemplate the first step. But the uneven rate of development, in the case of capital and labour, should not blind us to the law which is operating in both movements. The representative relation between capital and labour is no longer that between a single employer and a number of individual working men, each of the latter making his own terms with the former for the sale of his labour, but between a large company or union of employers on the one hand, and a union of workmen on the other. The last few years have consolidated and secured this relation in the case of such powerful staple industries in England as mining, ship-building, iron-work, and even in the weaker low-skilled industries the relation is gradually winning recognition.§ 7. Probabilities of Industrial Peace.--This concentrative process at work in both capital and labour, consolidating the smaller industrial units into larger ones, and tending to a unification of the masses of capital and of labour engaged respectively in the several industries, is at the present time by far the most important factor of industrial history. How far these two movements in capital and in labour react on one another for peace or for strife is a delicate and difficult question. Consideration of the common interest of capital and labour dependent on their necessary co-operation in industry might lead us to suppose that along with the growing organization of the two forces there would come an increased recognition of this community of interest which would make constantly and rapidly for industrial peace. But we must not be misled by the stress which is rightly laid on the identity of interest between capital and labour. The identity which is based on the general consideration that capital and labour are both required in the conduct of a given business, is no effective guarantee against a genuine clash of interests between the actual forms of capital and the labourers engaged at a given time in that particular business. To a body of employés who are seeking to extract a rise of wages from their employers, or to resist a reduction of wages, it is no argument to point out that if they gain their point the fall of profit in their employers' business will have some effect in lowering the average interest on invested capital, and will thus prevent the accumulation of some capital which would have helped to find employment for some more working men. The immediate direct interests of a particular body of workmen and a particular company of employers may, and frequently will, impel them to a course directly opposed to the wider interests of their fellow-capitalists or fellow-workers. But it is evident that the smaller the industrial unit, the more frequent will these conflicts between the immediate special interest and the wider class interest be. Since this is so, it would follow that the establishment of larger industrial units, such as workmen's unions and employers' unions, based on a cancelling of minor conflicting interests, will diminish the aggregate quantity of friction between capital and labour. If there were a close union between all the river-side and carrying trades of the country, it is far less likely that a particular local body of dock-labourers would, in order to seize some temporary advantage for themselves, be allowed to take a course which might throw out of work, or otherwise injure, the other workers concerned in the industries allied to theirs. One of the important educative effects of labour organizations will be a growing recognition of the intricaterapportwhich subsists not only between the interests of different classes of workers, but between capital and labour in its more general aspect. This lesson again is driven home by the dramatic scale of the terrible though less frequent conflicts which still occur between capital and labour. Industrial war seems to follow the same law of change as military war. As the incessant bickering of private guerilla warfare has given way in modern times to occasional, large, organized, brief, and terribly destructive campaigns, so it is in trade. In both cases the aggregate of friction and waste is probably much less under the modernrégime, but the dread of these dramatic lessons is growing ever greater, and the tendency to postponement and conciliation grows apace. But just as the fact of a growing identity in the interest of different nations, the growing recognition of that fact, and the growing horror of war, potent factors as they seem to reasonable men, make very slow progress towards the substitution of international arbitration for appeals to the sword, so in industry we cannot presume that the existence of reasonable grounds for conciliation will speedily rid us of the terror and waste of industrial conflicts. It is even possible that just as the speedy formation of a strong national unity, like that of Prussia under Frederick the Great, out of weak, disordered, smaller units, may engender for a time a bellicose spirit which works itself out in strife, so the rapid rise and union of weak and oppressed bodies of poorer labourers make for a shortsighted policy of blind aggression. Such considerations as this must, at any rate, temper the hopes of speedy industrial pacification we may form from dwelling on the more reasonable effects and teaching of organization. Although the very growth and existence of the larger industrial units implies, as we saw, a laying aside of smaller conflicts, we cannot assume that the forces at present working directly for the pacification of capital and labour, and for their ultimate fusion, are at all commensurate in importance with the concentrative forces operating in the two industrial elements respectively. It is indisputably true that the recent development of organization, especially of labour unions, acts as a direct restraint of industrial warfare, and a facilitation of peaceable settlements of trade disputes. Mr. Burnett, in his Report to the Board of Trade, on Strikes and Lock-outs in 1888, remarksà proposof the various modes of arbitration, that "these methods of arranging difficulties have only been made possible by organization of the forces on both sides, and have, as it were, been gradually evolved from the general progress of the combination movement."[40]Speaking of Trade Unions, he sums up--"In fact the executive committees of all the chief Unions are to a very large extent hostile to strikes, and exercise a restraining influence"--a judgment the truth of which has been largely exemplified during the last two or three years. But our hopes and desires must not lead us to exaggerate the size of these peaceable factors.Conseils de prud'hommeson the continent, boards of arbitration and conciliation in this country, profit-sharing schemes in Europe and America, are laudable attempts to bridge over the antagonism which exists between separate concrete masses of capital and labour. The growth of piecework and of sliding scales has effected something. But the success of the Board of Conciliation and Arbitration in the manufactured iron trade of the north of England has not yet led to much successful imitation in other industries. Recent experience of formal methods of conciliation and of sliding scales, especially in the mining, engineering, and metal industries, as well as the failure of some of the most important profit-sharing experiments, shows that we must be satisfied with slow progress in these direct endeavours after arbitration. The difficulty of finding an enduring scale of values which will retain the adherence of both interests amidst industrial movements which continually tend to upset the previously accepted "fair rates," is the deeper economic cause which breaks down many of these attempts. The direct fusion of the interests of employers and employed, and in some measure of capital and labour, which is the object of the co-operative movement, is a steadily growing force, whose successes may serve perhaps better than any other landmark as a measure of the improvingmoraleof the several grades of workers who show themselves able to adopt its methods. But while co-operative distribution has thriven, the success of co-operative workshops and mills has hitherto been extremely slow. A considerable expansion of the productive work of the co-operative wholesale societies within the last few years offers indeed more encouragement. But at present only about 21/4 per cent. of English industry and commerce, as tested by profits, is under the conduct of co-operative societies. Hence, while it seems possible that the slow growth in productive co-operation, and the more rapid progress of distributive co-operation, may serve to point the true line of successful advance in the future, the present condition of the co-operative movement does not entitle it to rank as one of the most powerful and prominent industrial forces. Though it may be hoped and even predicted that each movement in the agglomerative development of capital and labour which presents the two agents in larger and more organized shape, will render the work of conciliation more peremptory and more feasible, it must be admitted that all these conciliatory movements making for the direct fusion of capital and labour, are of an importance subordinate to the larger evolutionary force on which we have laid stress.We see then the multitudinous units of capital and labour crystallizing ever into larger and larger masses, moving towards an ideal goal which would present a single body of organized capital and a single body of organized labour. The process in each case is stimulated by the similar process in the other. Each step in the organization of labour forces a corresponding move towards organization of capital, andvice versâ. Striking examples of this imitative strategic movement have been presented by the rapid temporary organization of Australian capital, and by the effect of Dock Labourers' Unions in England in promoting the closer co-operation of the capital of shipowners. By this interaction of the two forces, the development in the organization of capital and labour presents itself as apari passuprogress; or perhaps more strictly it goes by the analogy of a game of draughts; the normal state is a series of alternate moves; but when one side has gained a victory, that is, taken a piece, it can make another move.§ 8. Relation of Low-skilled Labour to the wider Movement.--The relation in which this large industrial evolution stands to our problem of the poor low-skilled worker is not obscure. In comparing the movement of capital with that of labour we saw that in one respect the former was clearer and more perfect. The weaker capitalist, he who fails to keep pace with industrial progress, and will not avail himself of the advantage which union gives to contending pieces of capital, is simply snuffed out; that is, he ceases to have an independent existence as a capitalist when he can no longer make profit. The laggard, ill-managed piece of capital is swept off the board. This is possible, for the capital is a property separable from its owner. The case of labour is different. The labour-power is not separable from the person of the labourer. So the labourer left behind in the evolution of labour organization does not at once perish, but continues to struggle on in a position which is ever becoming weaker. "Organize or starve," is the law of modern labour movements. The mass of low-skilled workers find themselves fighting the industrial battle for existence, each for himself, in the old-fashioned way, without any of the advantages which organization gives their more prosperous brothers. They represent the survival of an earlier industrial stage. If the crudest form of the struggle were permitted to rage with unabated force, large numbers of them would be swept out of life, thereby rendering successful organization and industrial advance more possible to the survivors. But modern notions of humanity insist upon the retention of these superfluous, low-skilled workers, while at the same time failing to recognize, and making no real attempt to provide against, the inevitable result of that retention. By allowing the continuance of the crude struggle for existence which is the form industrial competition takes when applied to the low-skilled workers, and at the same time forbidding the proved "unfittest" to be cleared out of the world, we seem to perpetuate and intensify the struggle. The elimination of the "unfit" is the necessary means of progress enforced by the law of competition. An insistence on the survival, and a permission of continued struggle to the unfit, cuts off the natural avenue of progress for their more fit competitors. So long as the crude industrial struggle is permitted on these unnatural terms, the effective organization and progress of the main body of low-skilled workers seems a logical impossibility. If the upper strata of low-class workers are enabled to organize, and, what is more difficult, to protect themselves against incursions of outsiders, the position of the lower strata will become even more hopeless and helpless. If one by one all the avenues of regular low-skilled labour are closed by securing a practical monopoly of this and that work for the members of a Union, the superfluous body of labourers will be driven more and more to depend on irregular jobs, and forced more and more into concentrated masses of city dwellers, will present an ever-growing difficulty and danger to national order and national health. Consideration of the general progress of the working-classes has no force to set aside this problem. It seems not unlikely that we are entering on a new phase of the poverty question. The upper strata of low-skilled labour are learning to organize. If they succeed in forming and maintaining strong Unions, that is to say, in lifting themselves from the chaotic struggle of an earlier industrial epoch, so as to get fairly on the road of modern industrial progress, the condition of those left behind will press the illogicality of our present national economy upon us with a dramatic force which will be more convincing than logic, for it will appeal to a growing national sentiment of pity and humanity which will take no denial, and will find itself driven for the first time to a serious recognition of poverty as a national, industrial disease, requiring a national, industrial remedy.The great problem of poverty thus resides in the conditions of the low-skilled workman. To live industrially under the new order he must organize. He cannot organize because he is so poor, so ignorant, so weak. Because he is not organized he continues to be poor, ignorant, weak. Here is a great dilemma, of which whoever shall have found the key will have done much to solve the problem of poverty.
§ 1.The Concentration of Capital.--It must be remembered that we have been concerned with what is only a portion of the great industrial movement of to-day. Perhaps it may serve to make the industrial position of the poor low-skilled workers more distinct if we attempt to set this portion in its true relation to the larger Labour Problem, by giving a brief outline of the size and relation of the main industrial forces of the day.
If we look at the two great industrial factors, Capital and Labour, we see a corresponding change taking place in each. This change signifies a constant endeavour to escape the rigour of competition by a co-operation which grows ever closer towards fusion of interests previously separate.
Look first at Capital. We saw how the application of machinery and mechanical power to productive industries replaced the independent citizen, or small capitalist, who worked with a handful of assistants, by the mill and factory owner with his numerous "hands." The economic use of machinery led to production on a larger scale. But new, complex, and expensive machinery is continually being invented, which, for those who can afford to purchase and use it, represents a fresh economy in production, and enables them both to produce larger quantities of goods more rapidly, and to get rid of them by underselling those of their trade competitors who are working with old-fashioned and less effective machinery. As this process is continually going on, it signifies a constant advantage which the owner of a large business capital has over the owner of a smaller capital. In earlier times, when trade was more localized, and the small manufacturer or merchant had his steady customers, and stood on a slowly and carefully acquired reputation, it was not so easy for a new competitor to take his trade by the offer of some small additional advantage. But the opening up of wider communication by cheap postage, the newspaper, the railway, the telegraph, the general and rapid knowledge of prices, the enormous growth of touting and advertising, have broken up the local and personal character of commerce, and tend to make the whole world one complete and even arena of competition. Thus the fortunate possessor of some commercial advantage, however trifling, which enables him to produce more cheaply or sell more effectively than his fellows, can rapidly acquire their trade, unless they are able to avail themselves of the new machinery, or special skill, or other economy which he possesses. This consideration enables the large capitalist in all businesses where large capital contains these advantages, or the owner of some large natural monopoly, who can most cheaply extract large quantities of raw material, to crush in free competition the smaller businesses. In proportion as business is becoming wider and more cosmopolitan, these natural advantages of large capital over small are able to assert themselves more and more effectively. In certain branches of trade, which have not yet been taken over by elaborate machinery, or where everything depends upon the personal activity and intelligence, and the detailed supervision of a fully interested owner, the small capitalist may still hold his own, as in certain branches of retail trade. But the general movement is in favour of large businesses. Everywhere the big business is swallowing up the smaller, and in its turn is liable to be swallowed by a bigger one. In manufacture, where the cosmopolitan character is strongest, and where machinery plays so large a part, the movement towards vast businesses is most marked; each year makes it more rapid, and more general. But in wholesale and retail distribution, though somewhat slower, the tendency is the same. Even in agriculture, where close personal care and the limitations of a local market temper the larger tendency, the recent annals of Western America and Australia supply startling evidence of the concentrative force of machinery. The meaning of this movement in capital must not be mistaken. It is not merely that among competing businesses, the larger showing themselves the stronger survive, and the smaller, out-competed disappear. This of course often happens. The big screw-manufacturer able to provide some new labour-saving machinery, to advertise more effectively, or even to sell at a loss for a period of time, can drown his weaker competitors and take their trade. The small tradesman can no longer hold his own in the fight with the universal provider, or the co-operative store.
But this destruction of the small business, though an essential factor in the movement, is not perhaps the most important aspect. The industrial superiority of the large business over the small makes for the concentration both of small capitals and of business ability. The monster millionaire, who owns the whole or the bulk of his great business, is after all a very rare specimen. The typical business form of to-day is the joint stock company. This simply means that a number of capitalists, who might otherwise have been competing with one another on a small scale of business, recognizing the advantage of size, agree to mass their capital into one large lump, and to entrust its manipulation to the best business ability they can muster among them, or procure from outside. This process in its simplest form is seen in the amalgamation of existing and competing businesses, notable examples of which have recently occurred in the London publishing trade. But the ordinary Company, whether it grows by the expansion of some large existent business, or, like most railways or other new enterprises, is formed out of money subscribed in order to form a business, represents the same concentrating tendency. These share-owners put their capital together into one concern, in order to reap some advantage which they think they would not reap if they placed the capital in small competing businesses. But though it has been calculated that about one-third of English commerce is now in the hands of joint stock companies, this by no means exhausts the significance of the centralizing force in capital. Almost all large businesses, and many small businesses, are recognized to be conducted largely with borrowed capitals. The owners of these debentures are in fact joint capitalists with the nominal owner of the business. They prefer to lend their capital, because they hope to enjoy a portion of the gain and security which belongs to a large business as compared with a small one. Along with this coming together of small capitals to make a large capital, there is a constant centralization and organization of business ability. It is not uncommon for the owner of a small and therefore failing business to accept a salaried post in the office of some great business firm. So too we find the son of a small tradesman, recognizing the hopelessness of maintaining his father's business, takes his place behind the counter of some monster house.
§ 2. How Competition affects Capital.--Now the force which brings about all these movements is the force of competition. Every increase of knowledge, every improvement of communication, every breakdown of international or local barriers, increases the advantage of the big business, and makes the struggle for existence among small businesses more keen and more hopeless. It is the desire to escape from the heavy and harassing strain of trade competition, which practically drives small businesses to suspend their mutual hostilities, and to combine. It is true that most of the large private businesses or joint stock companies are not formed by this direct process of pacification. But for all that, theirraison d'êtreis found in the desire to escape the friction and waste of competition which would take place if each shareholder set up business separately on his own account. We shall not be surprised that the competition of small businesses has given way before co-operation, when we perceive the force and fierceness of the competition between the larger consolidated masses of capital. With the development of the arts of advertising, touting, adulteration, political jobbery, and speculation, acting over an ever-widening area of competition, the fight between the large joint stock businesses grows always more cruel and complex. Business failures tend to become more frequent and more disastrous. A recent French economist reckons that ten out of every hundred who enter business succeed, fifty vegetate, and forty go into bankruptcy. In America, where internal competition is still keener and speculation more rife, it has been lately calculated that ninety-five per cent, of those who enter business "fail of success." Just as in the growth of political society the private individual has given up the right of private war to the State, with the result that as States grow stronger and better organized, the war between them becomes fiercer and more destructive, so is it with the concentration of capital. The small capitalist, seeking to avoid the strain of personal competition, amalgamates with others, and the competition between these masses of capital waxes every day fiercer. We have no accurate data for measuring the diminution of the number of separate competitors which has attended the growing concentration of capital, but we know that the average magnitude of a successful business is continually increasing. The following figures illustrate the meaning of this movement from the American cotton trade, which is not one of the industries most susceptible to the concentrative pressure. "It will be seen that in 756 large establishments in 1880, in which the aggregate capital invested was five times as great as that in the 801 establishments in 1830, the capital invested per spindle was one-third less, the number of spindles operated by each labourer nearly three times as large, the product per spindle one-fourth greater, the product per dollar invested twice as large, the price of the cotton cloth nearly sixty per cent, less, the consumptionper capitaof the population over one hundred per cent greater, and the wages more than double. What is true of this industry is true of all industries where the concentration of capital has taken place."[38]
It is needless to add that these large works are conducted, not by single owners, but in nearly all cases by the managers of associated capitals. Regarded from the large standpoint of industrial development, all these phenomena denote a change in the sphere of competition. From the competition of private capitals owned by individuals we have passed to the competition of associated capitals. The question now arises, "Will not the same forces, which, in order to avoid the waste and destruction of ever keener competition, compelled the private capitalists to suspension of hostility and to combination, act upon the larger masses of associated capital?" The answer is already working itself clearly out in industrial history. The concentrative adhesive forces are everywhere driving the competing masses of capital to seek safety, and escape waste and destruction, by welding themselves into still larger masses, renouncing the competition with one another in order to compete more successfully with other large bodies. Thus, wherever these forces are in free operation, the number of competing firms is continually growing less; the surviving competitors have crushed or absorbed their weaker rivals, and have grown big by feeding on their carcases.
But the struggle between these few big survivors becomes more fierce than ever. Fitted out with enormous capital, provided with the latest, most complex, and most expensive machinery, producing with a reckless disregard for one another or the wants of the consuming public, advertising on a prodigious scale in order to force new markets, or steal the markets of one another, they are constantly driven to lower their prices in order to effect sales; profits are driven to a minimum; all the business energy at their command is absorbed by the strain of the fight; any unforeseen fluctuations in the market brings on a crisis, ruins the weaker combatants, and causes heavy losses all round. In trades where the concentrative process has proceeded furthest this warfare is naturally fiercest. But as the number of competing units grows smaller, arbitration or union becomes more feasible. Close and successful united action among a large number of scattered competitors of different scales of importance, such as exist during the earlier stage of capitalism, would be impossible. But where the number is small, combination presents itself as possible, and in so much as the competition is fiercer, the direct motive to such combination is stronger. Hence we find that attempts are made to relieve the strain among the largest businesses. The fiercest combatants weary of incessant war and patch up treaties. The weapon of capitalist warfare is the power of under-selling--"cutting prices." The most powerful firms consent to sheathe this weapon, i.e. agree not to undersell one another, but to adopt a common scale of prices. This action, in direct restraint of competition, corresponds to the action of a trades union, and is attained by many trades whose capital is not large or business highly developed. Neither does it imply close union of friendly relations between the combining parties. It is a policy dictated by the barest instinct of self-preservation. We see it regularly applied in certain local trades, especially in the production and distribution of perishable commodities. Our bakers, butchers, dairy-men, are everywhere in a constant state of suspended hostility, each endeavouring indeed to get the largest trade for himself, but abiding generally by a common scale of prices. Wherever the local merchants are not easily able to be interfered with by outsiders, as in the coal-trade, they form a more or less closely compacted ring for the maintenance of common terms, raising and lowering prices by agreement. The possibility of successfully maintaining these compacts depends on the ability to resist outside pressure, the element of monopoly in the trade. When this power is strong, a local ring of competing tradesmen may succeed in maintaining enormous prices. To take a humble example--In many a remote Swiss village, rapidly grown into a fashionable resort, the local washerwomen are able to charge prices twice as high as those paid in London, probably four times as high as the normal price of the neighbourhood.
Grocers or clothiers are not able to combine with the same effect, for the consumer is far less dependent on local distribution for these wares. But wherever such retail combinations are possible they are found. Among large producers and large distributing agencies the same tendency prevails, especially in cases where the market is largely local. Free competition of prices among coal-owners or iron-masters gives way under the pressure of common interests, to a schedule of prices; competing railways come to terms. Even among large businesses which enjoy no local monopoly, there are constant endeavours to maintain a common scale of prices. This condition of loose, irregular, and partial co-operation among competing industrial units is the characteristic condition of trade in such a commercial country as England to-day. Competitors give up the combatà outrance, and fight with blunted lances.
§ 3. Syndicates and Trusts.--But it is of course extremely difficult to maintain these loose agreements among merchants and producers engaged in intricate and far-reaching trades. A big opportunity is constantly tempting one of them to undersell; new firms are constantly springing up with new machinery, willing to trade upon the artificially raised prices, by under-selling so as to secure a business; over-production and a glut of goods tempts weaker firms to "cut rates," and this breaks down the compact. A score of different causes interfere with these delicate combinations, and plunge the different firms into the full heat and waste of the conflict. The renewed "free competition" proves once more fatal to the smaller businesses; the waste inflicted on the "leviathans" who survive forms a fresh motive to a closer combination.
These new closer combinations are known by the names of Syndicate and Trust. This marks another stage in the evolution of capital. In the United States, where the growth is most clearly marked, the Standard Oil Trust forms the leading example of a successful Trust. In 1881, this Standard Oil Company having maintained for some ten years tolerably close informal relations with its leading competitors in the Eastern States, and having crushed out the smaller companies, entered into a close arrangement with the remaining competitors, with the view of a practical consolidation of the businesses into one, though the formal identity of the several firms was still maintained. The various companies which entered into this union, comprising nearly all the chief oil-mills, submitted their businesses to valuation, and placed themselves in the hands of a board of trustees, with an absolute power to regulate the quantity of production, and if necessary to close mills, to raise and lower prices, and to work the whole number as a joint concern. Each company gave up its shares to the Trust, receiving notes of acknowledgment for the worth of the shares, and the total profits were to be divided as dividend each half-year. This Trust has continued to exist, and has now a practical monopoly of the oil trade in America, controlling, it is reckoned, more than 90 per cent. of the whole market, and regulating production and prices.
Everywhere this process is at work. Competing firms are in every trade, where their small numbers permit, striving to come to closer terms than formerly, and either secretly or openly joining forces so as to get full control over the production or distribution of some product, in order to manipulate prices for their own profit. From railways and corn-stores down to slate-pencils, coffins, and sticking-plaster, everything is tending to fall under the power of a Trust. Many of these Trusts fail to secure the union of a sufficient proportion of the large competitors, or quarrels spring up among the combining firms, or some new firms enter into competition too strong to be fought or bought over. In these ways a large number of the Trusts have hitherto broken down, and will doubtless continue to break down. In England, this step in capitalist evolution is only beginning to be taken. In glass, paper, salt, coal, and a few other commodities, combinations more permanent than the mere Ring or Corner, and closer than the ordinary masters' unions, have been formed. But Free Trade, which leaves us open to the less calculable and controllable element of foreign competition, and the fact that the earlier stages of concentration of capital are not yet completed here in most trades, have hitherto retarded the growth of the successful Trust in England. Even in America there is no case where the monopoly of a Trust reigns absolute through the whole country, though many of them enjoy a local control of production and prices which is practically unrestricted. Excepting in the case of the Standard Oil Trust, and a few less important bodies which enjoy the control of some local monopoly, such as anthracite coal, the supremacy of the leading Trust or Syndicate is brought in certain places into direct conflict with other more or less independent competing bodies. In other words, the evolution of capital, which tends ever to the establishment of competition between a smaller number of larger masses, has nowhere worked out the logical conclusion which means the condensation of the few large competing bodies into a single mass. This final step, which presents a completely organized trade with the element of competition utterly eliminated under the control of a single body of mere joint-owners of the capital engaged, must be regarded as the goal, the ideal culmination of the concentrative movement of modern capital. It is said that more than one-third of the business in the United States is already controlled by Trusts. But most of them have only in part succeeded in their effort to escape from competition by integrating their personal interests into a single homogeneous mass. Even in cases where they do rule the market untrammelled by the direct interference of any competitors, they are still deterred from a free use of their control over prices by the possibility of competition which any full use of this control might give rise to. For it does not follow that even where a Trust holds an absolute monopoly of the market of a locality, that it will be able to maintain that monopoly were it to raise its prices beyond a certain point. In proportion, however, as experience yields a greater skill in the management of Trusts, and their growing strength enables them to more successfully defy outside attempts at competition, their power to raise prices and increase their rates of profit would rise accordingly.
Regarding, then, the development of the capitalist system from the first establishment of the capitalist-employer as a distinct industrial class, we trace the massing of capital in larger and larger competing forms, the number of which represents a pyramid growing narrower as it ascends towards an ideal apex, represented by the absolute unity or identity of interests of the capital in a given trade. In so far as the interests of different trades may clash, we might carry on this movement further, and trace the gradual agreement, integration, and fusion of the capitals represented in various trades. There is, in fact, an ever-growing understanding and union between the various forms of capital in a country. The recognition of this ultimate identity of interest must be regarded as a constant force making for the unification of the whole capital of a country, in the same way as the common interests of directly competing capitals in the same trade leads to a union for mutual support and ultimate identification.
§ 4. Uses and Abuses of the Trust.--This, however, carries us beyond the immediate industrial outlook. The successful formation of the Trust represents the highest reach of capitalistic evolution. Although the subject is too involved for any lengthy discussion here, a few points bearing on the nature of the Trust deserve attention.
The Trust is clearly seen to be a natural step in the evolution of capital. It belongs to the industrial progress of the day, and must not be condemned as if it were a retrograde or evil thing. It is distinctly an attempt to introduce order into chaos, to save the waste of war, to organize an industry. The Trust-makers often claim that their line of action is both necessary and socially beneficial, and urge the following points--
The low rates of profit, owing to the miscalculation of competitors who establish too many factories and glut the market; the waste of energy in the work of competition; the adulteration of goods induced by the desire to undersell; the enormous royalties which must be paid to a competitor who has secured some new invention--these and other causes necessitate some common action. By the united action of the Trust the following economic advantages are gained--
That all these economies are useful to the capitalists who form Trusts will be obvious. How far they are socially useful is a more difficult question. Reflection, however, will make one thing evident, viz. that though the public may share that part of the advantage derived from the more economical use of large capitals, it cannot share that portion which is derived from the absence of competition. If two or more Trusts or aggregations of capital are still in actual or even in potential competition, the public will be enabled to reap what gain belongs to larger efficient production, for it will be for the interest of each severally to sell at the lowest prices; but if a single Trust rule the market, though the economic advantage of the Trust will be greater in so far as it escapes the labour of all competition, there will be no force to secure for the public any share in this advantage. The advantageous position enjoyed by a Trust will certainly enable its owners at the same time to pay high profits, give high wages, and sell at low prices. But while the force of self-interest will secure the first result, there is nothing to guarantee the second and third. There is no adequate security that in the culminating product of capitalistic growth, the single dominant Trust or Syndicate self-interest will keep down prices, as is often urged by the advocates of Trust. It is true that "they have a direct interest in keeping prices at least sufficiently low not to invite the organization of counter-enterprises which may destroy their existing profits."[39] But this consideration is qualified in two ways:--a. Where Trust is formed or assisted by the possession of a natural monopoly, i.e. land, or some content of land, absolutely limited in quality, such potential competition does not exist, and nothing, save the possibility of substituting another commodity, places a limit on the rise of price which a Trust may impose on the public.. Although the fear of potential competition will prevent the maintenance of an indefinitely high price it will not necessarily prevent such a rise of price as will yield enormous profits, and form a grievous burden on consumers. For a strongly-constituted Trust will be able to crush any competing combination of ordinary size and strength by a temporary lowering of its prices below the margin of profitable production, the weapon which a strong rich company can always use successfully against a weaker new competitor.
But though a Trust with a really strong monopoly, and rid of all effective competition, will be able to impose exorbitant and oppressive prices on consumers, it must be observed that it is not necessarily to its interest to do so. Every rise of price implies a fall off in quantity sold; and it may therefore pay a Trust better to sell a large quantity at a moderate profit than a smaller quantity at an enormous profit. The exercise of the power possessed by the owners of a monopoly depends upon the proportionate effect a rise of price will have upon the sale. This again depends upon the nature and uses of the commodity in which the Trust deals. In proportion as an article belongs to the "necessaries" of life, a rise of price will have a small effect on the purchase of it, as compared with the effect of a similar rise of price on articles which belong to the "comforts" or "luxuries" of life, or which may be readily replaced by some cheaper substitute. Thus it will appear that the power of a Trust or monopoly of capital is liable to be detrimental to the public interest--1st. In proportion as there is a want of effective existing competition, and a difficulty of potential competition. 2nd. In proportion as the commodity dealt in by the Trust belongs to the necessaries of life.
§ 5. Steps in the Organization of labour.--The movements of labour show an order closely correspondent with those of capital. As the units of capital seek relief from the strain and waste of competition by uniting into masses, and as the fiercer competition of these masses force them into ever larger and closer aggregates, until they are enabled to obtain partial or total relief from the competitive strife, so is it with labour. The formation of individual units of labour-power into Trades Unions, the amalgamation of these Unions on a larger scale and in closer co-operation, are movements analogous to the concentration of small units of capital traced above. It is not necessary to follow in detail the concentrative process which is gradually welding labour into larger units of competition. The uneven pace at which this process works in different places and in various trades has prevented a clear recognition of the law of the movement. The following steps, not always taken however in precisely the same order, mark the progress--
1. Workers in the same trade in a town or locality form a "Union," or limited co-operative society, the economic essence of which consists in the fact that in regard to the price and other conditions of their labour they act as a complex unit. Where such unions are strongly formed, the employer or body of employers deals not with individual workmen, but with the Union of workmen, in matters which the Union considers to be of common interest.
2. Next comes the establishment of provincial or national relations between these local Unions. The Northumberland and Durham miners will connect their various branches, and will, if necessary, enter into relations with the Unions of other mining districts. The local Unions of engineers, of carpenters, &c., are related closely by means of elected representatives in national Unions. In the strongest Unions the central control is absolute in reference to the more important objects of union, the pressure for higher wages, shorter hours, and other industrial advantages, or the resistance of attempts to impose reductions of wages, &c.
3. Along with the movement towards a national organization of the workers in a trade, or in some cases prior to it, is the growth of combined action between allied industries, that is to say, trades which are closely related in work and interests. In the building trades, for example, bricklayers, masons, carpenters, plasterers, plumbers, painters and decorators, find that their respective trade interests meet, and are interwoven at a score of different points. The sympathetic action thus set up is beginning to find its way to the establishment of closer co-operation between the Unions of these several trades. The different industries engaged in river-side work are rapidly forming into closer union. So also the various mining classes, the railway workers, civil servants, are moving gradually but surely towards a recognition of common interests, and of the advantage of close common action.
4. The fact of the innumerable delicate but important relations which subsist among classes of workers, whose work appears on the surface but distantly related, is leading to Trade Councils representative of all the Trade Unions in a district. In the midland counties and in London these general Trade Councils are engaged in the gigantic task of welding into some single unity the complex conflicting interests of large bodies of workmen.
5. An allusion to the attempts to establish international relations between the Unions of English workmen and those of foreign countries is important, more as indicating the probable line of future labour movement, than as indicating the early probability of effective international union of labour. Though slight spasmodic international co-operation of workers may even now be possible, especially among members of English-speaking races, the divergent immediate interests, the different stages of industrial development reached in the various industrial countries, seem likely for a long time at any rate to preclude the possibility of close co-operation between the united workers of different nations.
§ 6. Parallelism of the Movements in Capital and Labour.--Now this movement in labour, irregular, partial, and incomplete as it is, is strictly parallel with the movement of capital. In both, the smaller units become merged and concentrated into larger units, driven by self-interest to combine for more effective competition in larger masses. The fact that in the case of capital the concentration is more complete, does not really impair the accuracy of the analogy. Small capitals, when they have co-operated or formed a union, are absolutely merged, and cease to exist or act as individual units at all. A "share" in a business has no separate existence so long as it is kept in that business. But the small units of labour cannot so absolutely merge their individuality. The capital-unit being impersonal can be absolutely merged for common action with like units. The labour-unit being personal only surrenders part of his freedom of action and competition to the Union, which henceforth represents the social side of his industrial self. How far the necessity of close social action between labour-units in the future may compel the labourer to merge more of his industrial individuality in the Union, is an open question which the future history of labour-movements will decide.
The slow, intermittent, and fragmentary manner in which labour-unions have been hitherto conducted even in the stronger trades, is a fact which has perhaps done more to hide the true parallelism in the evolution of capital and labour. The path traced above has not yet been traversed by the bulk of English working men, while, as has been shown, working women have hardly begun to contemplate the first step. But the uneven rate of development, in the case of capital and labour, should not blind us to the law which is operating in both movements. The representative relation between capital and labour is no longer that between a single employer and a number of individual working men, each of the latter making his own terms with the former for the sale of his labour, but between a large company or union of employers on the one hand, and a union of workmen on the other. The last few years have consolidated and secured this relation in the case of such powerful staple industries in England as mining, ship-building, iron-work, and even in the weaker low-skilled industries the relation is gradually winning recognition.
§ 7. Probabilities of Industrial Peace.--This concentrative process at work in both capital and labour, consolidating the smaller industrial units into larger ones, and tending to a unification of the masses of capital and of labour engaged respectively in the several industries, is at the present time by far the most important factor of industrial history. How far these two movements in capital and in labour react on one another for peace or for strife is a delicate and difficult question. Consideration of the common interest of capital and labour dependent on their necessary co-operation in industry might lead us to suppose that along with the growing organization of the two forces there would come an increased recognition of this community of interest which would make constantly and rapidly for industrial peace. But we must not be misled by the stress which is rightly laid on the identity of interest between capital and labour. The identity which is based on the general consideration that capital and labour are both required in the conduct of a given business, is no effective guarantee against a genuine clash of interests between the actual forms of capital and the labourers engaged at a given time in that particular business. To a body of employés who are seeking to extract a rise of wages from their employers, or to resist a reduction of wages, it is no argument to point out that if they gain their point the fall of profit in their employers' business will have some effect in lowering the average interest on invested capital, and will thus prevent the accumulation of some capital which would have helped to find employment for some more working men. The immediate direct interests of a particular body of workmen and a particular company of employers may, and frequently will, impel them to a course directly opposed to the wider interests of their fellow-capitalists or fellow-workers. But it is evident that the smaller the industrial unit, the more frequent will these conflicts between the immediate special interest and the wider class interest be. Since this is so, it would follow that the establishment of larger industrial units, such as workmen's unions and employers' unions, based on a cancelling of minor conflicting interests, will diminish the aggregate quantity of friction between capital and labour. If there were a close union between all the river-side and carrying trades of the country, it is far less likely that a particular local body of dock-labourers would, in order to seize some temporary advantage for themselves, be allowed to take a course which might throw out of work, or otherwise injure, the other workers concerned in the industries allied to theirs. One of the important educative effects of labour organizations will be a growing recognition of the intricaterapportwhich subsists not only between the interests of different classes of workers, but between capital and labour in its more general aspect. This lesson again is driven home by the dramatic scale of the terrible though less frequent conflicts which still occur between capital and labour. Industrial war seems to follow the same law of change as military war. As the incessant bickering of private guerilla warfare has given way in modern times to occasional, large, organized, brief, and terribly destructive campaigns, so it is in trade. In both cases the aggregate of friction and waste is probably much less under the modernrégime, but the dread of these dramatic lessons is growing ever greater, and the tendency to postponement and conciliation grows apace. But just as the fact of a growing identity in the interest of different nations, the growing recognition of that fact, and the growing horror of war, potent factors as they seem to reasonable men, make very slow progress towards the substitution of international arbitration for appeals to the sword, so in industry we cannot presume that the existence of reasonable grounds for conciliation will speedily rid us of the terror and waste of industrial conflicts. It is even possible that just as the speedy formation of a strong national unity, like that of Prussia under Frederick the Great, out of weak, disordered, smaller units, may engender for a time a bellicose spirit which works itself out in strife, so the rapid rise and union of weak and oppressed bodies of poorer labourers make for a shortsighted policy of blind aggression. Such considerations as this must, at any rate, temper the hopes of speedy industrial pacification we may form from dwelling on the more reasonable effects and teaching of organization. Although the very growth and existence of the larger industrial units implies, as we saw, a laying aside of smaller conflicts, we cannot assume that the forces at present working directly for the pacification of capital and labour, and for their ultimate fusion, are at all commensurate in importance with the concentrative forces operating in the two industrial elements respectively. It is indisputably true that the recent development of organization, especially of labour unions, acts as a direct restraint of industrial warfare, and a facilitation of peaceable settlements of trade disputes. Mr. Burnett, in his Report to the Board of Trade, on Strikes and Lock-outs in 1888, remarksà proposof the various modes of arbitration, that "these methods of arranging difficulties have only been made possible by organization of the forces on both sides, and have, as it were, been gradually evolved from the general progress of the combination movement."[40]
Speaking of Trade Unions, he sums up--"In fact the executive committees of all the chief Unions are to a very large extent hostile to strikes, and exercise a restraining influence"--a judgment the truth of which has been largely exemplified during the last two or three years. But our hopes and desires must not lead us to exaggerate the size of these peaceable factors.Conseils de prud'hommeson the continent, boards of arbitration and conciliation in this country, profit-sharing schemes in Europe and America, are laudable attempts to bridge over the antagonism which exists between separate concrete masses of capital and labour. The growth of piecework and of sliding scales has effected something. But the success of the Board of Conciliation and Arbitration in the manufactured iron trade of the north of England has not yet led to much successful imitation in other industries. Recent experience of formal methods of conciliation and of sliding scales, especially in the mining, engineering, and metal industries, as well as the failure of some of the most important profit-sharing experiments, shows that we must be satisfied with slow progress in these direct endeavours after arbitration. The difficulty of finding an enduring scale of values which will retain the adherence of both interests amidst industrial movements which continually tend to upset the previously accepted "fair rates," is the deeper economic cause which breaks down many of these attempts. The direct fusion of the interests of employers and employed, and in some measure of capital and labour, which is the object of the co-operative movement, is a steadily growing force, whose successes may serve perhaps better than any other landmark as a measure of the improvingmoraleof the several grades of workers who show themselves able to adopt its methods. But while co-operative distribution has thriven, the success of co-operative workshops and mills has hitherto been extremely slow. A considerable expansion of the productive work of the co-operative wholesale societies within the last few years offers indeed more encouragement. But at present only about 21/4 per cent. of English industry and commerce, as tested by profits, is under the conduct of co-operative societies. Hence, while it seems possible that the slow growth in productive co-operation, and the more rapid progress of distributive co-operation, may serve to point the true line of successful advance in the future, the present condition of the co-operative movement does not entitle it to rank as one of the most powerful and prominent industrial forces. Though it may be hoped and even predicted that each movement in the agglomerative development of capital and labour which presents the two agents in larger and more organized shape, will render the work of conciliation more peremptory and more feasible, it must be admitted that all these conciliatory movements making for the direct fusion of capital and labour, are of an importance subordinate to the larger evolutionary force on which we have laid stress.
We see then the multitudinous units of capital and labour crystallizing ever into larger and larger masses, moving towards an ideal goal which would present a single body of organized capital and a single body of organized labour. The process in each case is stimulated by the similar process in the other. Each step in the organization of labour forces a corresponding move towards organization of capital, andvice versâ. Striking examples of this imitative strategic movement have been presented by the rapid temporary organization of Australian capital, and by the effect of Dock Labourers' Unions in England in promoting the closer co-operation of the capital of shipowners. By this interaction of the two forces, the development in the organization of capital and labour presents itself as apari passuprogress; or perhaps more strictly it goes by the analogy of a game of draughts; the normal state is a series of alternate moves; but when one side has gained a victory, that is, taken a piece, it can make another move.
§ 8. Relation of Low-skilled Labour to the wider Movement.--The relation in which this large industrial evolution stands to our problem of the poor low-skilled worker is not obscure. In comparing the movement of capital with that of labour we saw that in one respect the former was clearer and more perfect. The weaker capitalist, he who fails to keep pace with industrial progress, and will not avail himself of the advantage which union gives to contending pieces of capital, is simply snuffed out; that is, he ceases to have an independent existence as a capitalist when he can no longer make profit. The laggard, ill-managed piece of capital is swept off the board. This is possible, for the capital is a property separable from its owner. The case of labour is different. The labour-power is not separable from the person of the labourer. So the labourer left behind in the evolution of labour organization does not at once perish, but continues to struggle on in a position which is ever becoming weaker. "Organize or starve," is the law of modern labour movements. The mass of low-skilled workers find themselves fighting the industrial battle for existence, each for himself, in the old-fashioned way, without any of the advantages which organization gives their more prosperous brothers. They represent the survival of an earlier industrial stage. If the crudest form of the struggle were permitted to rage with unabated force, large numbers of them would be swept out of life, thereby rendering successful organization and industrial advance more possible to the survivors. But modern notions of humanity insist upon the retention of these superfluous, low-skilled workers, while at the same time failing to recognize, and making no real attempt to provide against, the inevitable result of that retention. By allowing the continuance of the crude struggle for existence which is the form industrial competition takes when applied to the low-skilled workers, and at the same time forbidding the proved "unfittest" to be cleared out of the world, we seem to perpetuate and intensify the struggle. The elimination of the "unfit" is the necessary means of progress enforced by the law of competition. An insistence on the survival, and a permission of continued struggle to the unfit, cuts off the natural avenue of progress for their more fit competitors. So long as the crude industrial struggle is permitted on these unnatural terms, the effective organization and progress of the main body of low-skilled workers seems a logical impossibility. If the upper strata of low-class workers are enabled to organize, and, what is more difficult, to protect themselves against incursions of outsiders, the position of the lower strata will become even more hopeless and helpless. If one by one all the avenues of regular low-skilled labour are closed by securing a practical monopoly of this and that work for the members of a Union, the superfluous body of labourers will be driven more and more to depend on irregular jobs, and forced more and more into concentrated masses of city dwellers, will present an ever-growing difficulty and danger to national order and national health. Consideration of the general progress of the working-classes has no force to set aside this problem. It seems not unlikely that we are entering on a new phase of the poverty question. The upper strata of low-skilled labour are learning to organize. If they succeed in forming and maintaining strong Unions, that is to say, in lifting themselves from the chaotic struggle of an earlier industrial epoch, so as to get fairly on the road of modern industrial progress, the condition of those left behind will press the illogicality of our present national economy upon us with a dramatic force which will be more convincing than logic, for it will appeal to a growing national sentiment of pity and humanity which will take no denial, and will find itself driven for the first time to a serious recognition of poverty as a national, industrial disease, requiring a national, industrial remedy.
The great problem of poverty thus resides in the conditions of the low-skilled workman. To live industrially under the new order he must organize. He cannot organize because he is so poor, so ignorant, so weak. Because he is not organized he continues to be poor, ignorant, weak. Here is a great dilemma, of which whoever shall have found the key will have done much to solve the problem of poverty.