CHAPTER IV.ToC

Spindles.England and Wales15,554,619Scotland1,727,871Ireland215,503Austria and Italy1,500,000France3,500,000Belgium420,000Switzerland650,000Russia7,585,000United States3,500,000States of the Zollverein815,00035,467,993

The development of the cotton industry in 1888 in the chief industrial countries, as indicated by the consumption of raw cotton, is expressed in the accompanying diagram.

Lastly, the national trade policy of England was of signal advantage in her machine development. Her early protective system had, by the enlargement of her carrying trade and the increase of her colonial possessions, laid the foundation of a large complex trade with the more distant parts of the world, though for a time it crippled our European commerce. While we doubtless sacrificed other interests by this course of policy, it must be generally admitted that "English industries would not have advanced so rapidly without Protection."[94]But as we built up our manufacturing industries by Protection, so we undoubtedly conserved and strengthened them by Free Trade—first, by the remission of tariffs upon the raw materials of manufacture and machine-making, and later on by the free admission of food stuffs, which were a prime essential to a nation destined to specialise in manufacture. France, our chief national competitor, weakened her position by a double protective policy, not merely refusing admittance to foreign manufactures in her markets, but retaining heavy duties upon the importation of foreign coal and iron, the foundational constituents of machine-production. This protective policy, adopted by nations whose skill, industry, and natural resources would have rendered them formidable competitorsto English manufacturers, has hindered considerably the operation of those economic forces which impel old and thickly-peopled countries to specialise in manufacture and trade, and so has retarded the general development of modern machine-production. But while protective tariffs indisputably operate in this way, it is not possible to determine the extent of their influence. In a large country of rich resources a high degree of specialisation in manufacture is possible in spite of a protective policy. The pressure of high wages is an economic force more powerfully operative than any other in stimulating the adoption of elaborate machinery.[95]Both in the textile and the iron industries the United States present examples of factory development more advanced even than those of England. Certain processes of warping and winding are done by machinery in America which are still done by hand labour in England.[96]The chain and nail-making trades, which employ large numbers of women in South Staffordshire and Worcestershire, are made more cheaply by machinery in America.[97]Moreover, the high standard of living and the greater skill of the American operatives enables them to tend more machines. In German factories a weaver tends two, or rarely three looms; in Lancashire women weavers undertake four, and in Massachusetts often six looms, and sometimes eight.[98]

Consumption of Raw Cotton, 1887-88CONSUMPTION OF RAW COTTON, 1887-88. (Millions of lbs.)

CONSUMPTION OF RAW COTTON, 1887-88. (Millions of lbs.)

Thus we see how the new industrial forces were determined in the order of their operation by the character and conditions of the several countries, their geographical position and physical resources, the elements of racial character, political and industrial institutions, deliberate economic policies, and, above all, by the absorbing nature of the military and political events contemporary with the outburst of inventive ingenuity. The composition of these forces determined the several lines of less resistance along which the new industry moved.

The exact measurement of so multiform a force isimpossible. The appended tables and diagrams may, however, serve to indicate the progress of the several industrial nations as measured by (i.) development of railway and merchant shipping; (ii.) consumption of coal and iron; (iii.) application of steam-power; (iv.) estimated annual value of manufactures:—

1840.1850.1860.1870.1880.1890.United Kingdom8006,60010,40015,50017,90019,800Continent of Europe8007,80021,40047,80083,800110,200United States2,8009,00030,60053,40093,600156,000India——8004,8009,30016,000Australia——2001,2005,40010,100Rest of the World——2,8005,50018,40042,300

Area.Square Miles.Density of Population per Square Mile (1890).Railway Mileage (1888).United Kingdom120,84932019,810France204,09218420,900Germany208,73823324,270Russia1,902,2274217,700Austria240,94216615,610Italy110,6232607,830Spain197,670865,930Portugal34,0381361,190Sweden170,979284,670Norway124,49516970Denmark15,2891331,220Holland12,6483501,700Belgium11,3735302,760Switzerland15,9761901,870Greece25,04188370Turkey65,90973900U.S.A. (excluding Alaska and Indian territory)1,175,55021156,080Japan145,655274910India964,99222915,250Australia3,030,7711.2010,140Canada3,315,6471.4512,700Egypt (cultiv. area)12,9766381,260

Tonnage of Merchant Shipping.TONNAGE OF MERCHANT SHIPPING.

TONNAGE OF MERCHANT SHIPPING.

Coal and Iron ConsumptionCOMPARATIVE TABLE OF CONSUMPTION OF COAL AND IRON PER INHABITANT IN DIFFERENT COUNTRIES.

COMPARATIVE TABLE OF CONSUMPTION OF COAL AND IRON PER INHABITANT IN DIFFERENT COUNTRIES.

Steam Power of European Countries.STEAM POWER OF EUROPEAN COUNTRIES.

STEAM POWER OF EUROPEAN COUNTRIES.

Steam and Other Power in Different Countries.STEAM AND OTHER POWER IN DIFFERENT COUNTRIES.

STEAM AND OTHER POWER IN DIFFERENT COUNTRIES.

Estimated Annual Value of Manufactures.ESTIMATED ANNUAL VALUE OF MANUFACTURES.

ESTIMATED ANNUAL VALUE OF MANUFACTURES.

[58]Karl Marx,Capital, p. 367.

[59]Marx points out how in many of the most highly evolved machines the original tool survives, illustrating this from the original power-loom. (Capital, p. 368.)

[60]Cooke Taylor,History of the Factory System, p. 422.

[61]Cf. Babbage, p. 15.

[62]Burnley,Wool and Wool-combing, p. 417.

[63]Economy of Machinery, p. 6.

[64]Economy of Machinery, p. 39.

[65]Vide infra, p. 249.

[66]Scrivener,History of the Iron Trade, pp. 296, 297.

[67]Sir Lyon Playfair,North American Review, Nov. 1892.

[68]Der Grossbetrieb, p. 85.

[69]The important part which the cotton and iron industries play in the export trade of England entitles them to special consideration as representatives of world-industry. Out of £263,530,585 value of English exports in 1890, cotton comprised £74,430,749; iron and steel, £31,565,337.

[70]Cunningham, chap. ii. p. 450.

[71]Schulze-Gaevernitz,Der Grossbetrieb, p. 34.

[72]Ure,The Cotton Manufacture, p. 187.

[73]Modern economy now favours the specialisation of a factory and often of a business in a single group of processes—e.g., spinning or weaving or dyeing, both in the cotton and woollen industries. This, however, is applicable chiefly to the main branches of textile work. In minor branches, such as cotton thread, the tendency is still towards an aggregation of all the different processes under a single roof, both in England and in the United States.

[74]P.R. Hodge, civil engineer—evidence before House of Lords Committee in 1857.In Germany a spinning-wheel had been long in use for flax-spinning, which in effect was an anticipation of the throstle (cf. Karmarch,Technologie, vol. ii. p. 844, quoted Schulze-Gaevernitz, p. 30), and machine-weaving is said to have been discovered in Danzig as early as 1579.

[74]P.R. Hodge, civil engineer—evidence before House of Lords Committee in 1857.

In Germany a spinning-wheel had been long in use for flax-spinning, which in effect was an anticipation of the throstle (cf. Karmarch,Technologie, vol. ii. p. 844, quoted Schulze-Gaevernitz, p. 30), and machine-weaving is said to have been discovered in Danzig as early as 1579.

[75]Cf. Brentano,Uber die Ursachen der heutigen socialen Noth; Der Grossbetrieb, p. 30.

[76]Porter,Progress of the Nation, p. 219.

[77]Selected from Porter, p. 218.

[78]In 1824 Mr. Huskisson introduced the principle of free trade, securing a reduction of the duties on raw and thrown silks, and in 1825, 1826, considerable further reductions were made. (Cf. Ure,Philosophy of Manufactures, p. 454, etc.) But protection of English silk manufactured goods was maintained until the French Treaty of 1860.

[79]Cf. Ure,History of the Cotton Manufacture, vol. i. p. 223.

[80]Scrivener,History of the Iron Trade, p. 56.

[81]Cooke Taylor,Modern Factory System, p. 164; cf. also Karl Marx,Capital, p. 381.

[82]Schulze-Gaevernitz, p. 140.

[83]Yeats,The Growth and Vicissitudes of Commerce, p. 284.

[84]The average income for England in 1688 he puts at £7 18s; for Holland, £8 1s. 4d.; France, £6—p. 47. Such an estimate, however, has little value.

[85]In 1810 the total produce was 140,000 tons.In 1818 the total produce was 114,000 tons.In 1824 the total produce was 164,000 tons.(Scrivener,History of the Iron Trade, p. 153.)

[85]In 1810 the total produce was 140,000 tons.In 1818 the total produce was 114,000 tons.In 1824 the total produce was 164,000 tons.

(Scrivener,History of the Iron Trade, p. 153.)

[86]Yeats,Growth and Vicissitudes of Commerce, p. 285.

[87]Schulze-Gaevernitz,Der Grossbetrieb, p. 48.

[88]Ellison,History of the Cotton Trade, presents the following interesting table (yarn, 40 hanks to the lb.):—1779.1784.1799.1812.1830.1882.s. d.s. d.s. d.s. d.s. d.s. d.Selling price16 010 117 62 61 2-1/20 10-1/2Cost of Cotton (18 oz.)2 02 03 41 60 7-3/40 7-1/8Labour & Capital14 08 114 21 00 6-3/40 3-3/8

[88]Ellison,History of the Cotton Trade, presents the following interesting table (yarn, 40 hanks to the lb.):—

1779.1784.1799.1812.1830.1882.s. d.s. d.s. d.s. d.s. d.s. d.Selling price16 010 117 62 61 2-1/20 10-1/2Cost of Cotton (18 oz.)2 02 03 41 60 7-3/40 7-1/8Labour & Capital14 08 114 21 00 6-3/40 3-3/8

[89]Porter,Progress of the Nation, p. 13. Eighteenth century figures are, however, not trustworthy. The first census was in 1801.

[90]Ure,Philosophy of Manufactures, p. 531.

[91]Schulze-Gaevernitz,Der Grossbetrieb, p. 34.

[92]In 1882 42 per cent. of the German textile industry was still conducted in the home or domestic workshop, while only 38 per cent. was carried on in factories employing more than 50 persons. More weavers were still engaged with hand-looms than with power-looms, and the latter was so little developed that the hand-loom could still hold its own in many articles. Knitting, lace-making, and other minor textile industries are still in the main home industries.—(Social Peace, p. 113.) "While in England in 1885 each spinning or weaving mill had an average of 191 operatives, each spinning mill in Germany in 1882 employed an average of 10 persons only."—(Brentano,Hours, Wages, and Production, p. 64.)

[93]Ure,Philosophy of Manufactures, p. 515.

[94]Toynbee,Industrial Revolution, p. 79.

[95]The highly elaborate American machine industry of watch-making is a striking example of this influence of high wages. Cf. Schulze-Gaevernitz,Social Peace, p. 125.

[96]Schoenhof,Economy of High Wages, p. 279.

[97]Ibid., pp. 225, 226.

[98]Schulze-Gaevernitz, p. 66 (note). This six and eight-loom weaving is, however, at a lower speed.

§ 1.Growing Size of the Business-Unit.§ 2.Relative Increase of Capital and Labour in the Business.§ 3.Increased Complexity and Integration of Business Structure.§ 4.Structure and Size of the Market for different Commodities.§ 5.Machinery a direct Agent in expanding Market Areas.§ 6.Expanded Time-area of the Market.§ 7.Interdependency of Markets.§ 8.Sympathetic and Antagonistic Relations between Trades.§ 9.National and Local Specialisation in Industry.§ 10.Influences determining Localisation of Industry under World-Competition.§ 11.Impossibility of Final Settlement of Industry.§ 12.Specialisation in Districts and Towns.§ 13.Specialisation within the Town.

§ 1.Growing Size of the Business-Unit.

§ 2.Relative Increase of Capital and Labour in the Business.

§ 3.Increased Complexity and Integration of Business Structure.

§ 4.Structure and Size of the Market for different Commodities.

§ 5.Machinery a direct Agent in expanding Market Areas.

§ 6.Expanded Time-area of the Market.

§ 7.Interdependency of Markets.

§ 8.Sympathetic and Antagonistic Relations between Trades.

§ 9.National and Local Specialisation in Industry.

§ 10.Influences determining Localisation of Industry under World-Competition.

§ 11.Impossibility of Final Settlement of Industry.

§ 12.Specialisation in Districts and Towns.

§ 13.Specialisation within the Town.

§ 1. Turning once more to the unit of industry, the Business, and thence to the Trade and the Market, or area of competition, it is necessary to examine the structural and functional changes brought about by the action of the new industrial forces.

In considering the effect of modern machine-production upon the Business, the most obvious external change is a great increase in size. The typical unit of production is no longer a single family or a small group of persons working with a few cheap simple tools upon small quantities of material, but a compact and closely organised mass of labour composed of hundreds or thousands of individuals,co-operating with large quantities of expensive and intricate machinery, through which passes a continuous and mighty volume of raw material on its journey to the hands of the consuming public.

The expansion in mass of labour and capital composing the industrial unit does not, however, proceed at the same pace in the different industries.

The largest growths are found in two classes of industry. First, those which close dependence on monopoly of land, or other privilege conferred by state or municipal government, has placed outside competition. The size here is determined by that amount of capital required to achieve the most profitable equation of supply and demand prices under terms of monopoly.[99]In this class are placed such large businesses as railways, gas, or water companies. Second, those industries where the net advantages of large-scale production over small scale in competitive industry are greatest. Generally speaking, those industries where the most expensive machinery is employed come under this head, or where, as in banking and financial business, a large capital is managed more economically, and enjoys a monopoly of certain profitable kinds of work.

In retail trade, where neither of these forces is so powerfully operative, the increase in mass of capital and labour is not so great, though here too the economies of large-scale production are giving more and more prominence to the Universal Provider, and a large number of local shops are falling into the hands of companies. Large syndicates of capital at Smithfield are owning butchers' shops in most large towns, the drapery, jewellery, shoe trade are more and more passing into the hands of large companies, while an increased proportion of tobacconists, publicans, grocers, and other retailers are practically but agents of large capitalist firms. In such branches of agriculture as have lent themselves most effectively to new machinery the same movement is visible in the prevalence of large farming. This is seen everywhere where land is placed on the same property footing as other forms of capital. Though small farms are for some purposes still capable of yielding a large net as well as gross product, it is for the most part the legal,customary, and sentimental restrictions on free transfer of land that impede the tendency towards large farming.

It is, however, in the manufacturing and transport industries that we trace the most general and rapid growth of the unit of production. And here machinery is the chief external cause. Gigantic railways and steamship companies are the successors of stage coach businesses and small shippers. The size and value of the modern cotton factory, iron works, sugar refinery, or brewery are incomparably greater than the units of which these industries were composed a century and a half ago. In certain highly-machined industries the size of the unit is so enlarged that the number of businesses engaged in turning out the ever-growing output is actually diminishing. Among textile industries the spinning mills of England and Wales show a marked diminution in numbers between 1870 and 1890, while a similar movement in weaving mills is only retarded by the capacity of small sweating masters to compete with the more developed factories in certain minor branches, such as tape manufacture, and by the survival of the home worker owning his loom and hiring his power in such trades as the ribbon weaving of Coventry.[100]

The following statistics[101]of the cotton and woollen industries in Great Britain serve to illustrate the growing size of the unit of production in the representative branches of textile work:—

Cotton.No. of Mills.No. of Spindles.Spinning.Weaving.Spinning and Weaving.Others.Total.Spinning.Doubling.Power-Looms.18701108693532150248333,995,2213,723,537440,6761890935990438175253840,511,9343,992,885615,714Woollen.187064810986021218292,531,768160,99348,140189049412489528017932,107,209299,79361,831

This increase of the number of spindles and looms in the average textile mill is more significant when the "speedingup" of modern machinery is taken into account. The increased size of the unit of industry as measured by productivity is even greater than appears from the statistics above quoted.

Schulze-Gaevernitz points out that in the thirty years between 1856 and 1885, while the factories in cotton spinning and weaving only increased from 2210 to 2633, the number of spindles increased from 28,010,217 to 44,348,921, the number of looms from 298,847 to 560,955, and that since both spindles and looms worked much faster in 1885 than in 1856, the output has increased in still greater proportion.[102]

Turning to another highly-developed machine industry, that of milling, we find a similar movement. Flour mills are diminishing in number both in England and in the United States. The period 1884-86 showed a diminution in the number of flour mills in the United States from 25,079 to 18,267, though the total productive power of the smaller number was greatly increased. Mr. Wells finds a similar tendency in the general manufacturing industry of the United States:—"Between 1850 and 1860 the number of manufacturing firms and corporations in the United States increased from 123,025 to 140,433, and the value of manufactured products increased from $1,019,106,616 to $1,885,861,876, so that in that decade there was an increase of 17,408 establishments, to an increase of $866,755,060 in the value of products. In 1870 there were 252,148 firms and corporations so employed, producing $4,232,325,442 in manufactured products; or an increase of 111,715 establishments in the decade of 1860 to 1870 gave an increase of $2,346,463,766 in the value of products. In 1880 the number of manufacturing establishments was returned at 253,852, producing articles valued at $5,365,579,191, or an addition of only 1704 firms and corporations was accompanied with an increase of product of $1,133,537,749. Here then is a demonstration that the average product of a manufacturing establishment in the United States in 1880 was just 60 per cent. greater than it was in 1860."[103]

§ 2. While the mass of capital and labour which constitutes a business is growing, the latter grows less rapidly than the former. That is to say, capital is in point of size becoming more and more the dominant factor in the business. With the effect of this upon the economic character and conditions of labour we are not here concerned. The subject requires a separate treatment. Here it suffices to recognise the quantitative change that has taken place. Under domestic industry the value of the implements used was, as a rule, equivalent only to a few months' wages. In 1845 McCulloch estimated that the fixed capital in well-appointed cotton mills amounted to about two years' wages of an operative.[104]In 1890 Professor Marshall assigns a capital in plant amounting to about £200 or five years' wages for every man, woman, and child in a fully-equipped spinning mill.[105]In the typical modern industry, that of cotton-spinning and weaving, the increasing size is both continuous and rapid. The average number of spindles and looms to the single factory in 1850 and 1885 are as follows:—

Spindles.Power-Looms.185010,858155188515,227213

Even these figures do not fully represent the facts, for they include considerable numbers of mills of the older sort, where spinning and weaving are carried on together. Taking the more highly specialised spinning mills in the Oldham district, the average is stated at 65,000, while the largest mills have as many as 185,000 spindles. So also the average number of power-looms in the North Lancashire district is placed at 600, the largest number in a single business amounting to 4500.[106]

"Again, the cost of a steamship is perhaps equivalent to the labour of ten years or more of those who work her, while a capital of about £900,000,000 invested in railways in England and Wales is equivalent to the work for about twenty years of the 400,000 people employed on them."[107]

This growth in the unit of capital is, as we perceive,largely due to the establishment of large and expensive machinery and other plant as a leading feature in modern production. The fact that modern methods are largely instrumental in increasing the quantity of products might lead us to suppose that the growth of the raw material or circulating part of the capital of a business would correspond with the growth of fixed forms of capital. This, however, is not the case. In the most highly organised machine industry an increasing proportion of the economy goes into the improved methods of manipulating material so as to prevent waste, and by improved quality of work and elaboration of manufacture to get a larger net amount of product out of a given quantity of raw material.

In cotton-spinning, for example, since 1834 the waste of raw material has been reduced from 1/7 to about 1/10; inferior material, once useless, is now mixed with better stuff; and more important still, modern machinery has, by adapting itself to the spinning of finer yarn, effected great saving in the quantity consumed by each spindle. In many other industries we shall find this same process going on, whereby the proportion of capital which consists of raw material is reduced, and the proportion which consists in machinery and other fixed capital enhanced.

The growth of the unit of capital in the developed modern manufacturing business entails also a growth in the unit of labour, though not a corresponding growth. The number of employees in a business is larger in proportion as the business passes into the stage of highest industrial organisation. In the United States in 1880 it was estimated that the average number of employees in a manufacturing business for the whole country was a little less than 11, but in the chief manufacturing states of Massachusetts, Connecticut, and Rhode Island it was about 25, while in Pittsburg, the great centre of iron industry, it was more than 33.

§ 3. In addition to increased size we find increased and ever-increasing complexity of structure in the business-unit. This has proceeded in two directions, horizontally and laterally—that is to say, by subdivision and accession of processes on the one hand, and by an increased variety of products, and therefore of processes, upon the other hand. The constantly growing specialisation of fixed capital and oflabour in our factories and workshops is a commonplace. Adam Smith's famous pin manufactory, with its ten separate processes, has been left far behind. In a modern shoe factory in the United States there are sixty-four distinct processes. Grain, in the elaborate machinery of a steam flour mill, passes through a score of different stages, cleaning, winnowing, grinding, etc. The American machine-made watch is the product of 370 separate processes. The organisation of a modern textile factory provides a dozen different processes contributing to the spinning or weaving of cotton or silk. New processes of cleaning, finishing, and ornamenting are continually being added. The subsidiary process of packing, the manufacture of packing cases, the printing of labels, etc., are taken on in many factories.[108]Many branches of production which were formerly carried on in separate places and as separate business-units are grouped together under the factory roof, or if still separated locally, and executed by separate machinery and power, are related as forming part of the same business, and are under the same management. So in the woollen manufactures the preliminary processes of sorting and cleansing, carding or combing, as well as the main processes of spinning and weaving, fulling, dyeing, and finishing, each of which was once committed to a separate and independent group of workers, are now frequently found going on simultaneously in a single factory.[109]Thus a number of small simple business-units representing the various stages in the production of a commodity, come to group themselves into a large complex unit.

This complexity is further increased by constant demand for variety in size, quality, and character of goods to meet the growing variety of demand in a market of increasing area. Special classes of goods must be manufactured for Australia, for Egypt, for Burmah. Less civilised customers,including such countries as China and Persia, insist upon their imported goods being made up and packed in some familiar form long after the use or convenience of this form has passed away. The exigencies of close competition require constant experiment in new lines of goods to benefit the fancy of a newly-opened market, or to get away the trade of some competitor. Moreover, the increasingly important part which is played by advertising in the trades where competition is keenest is followed by a very singular result, which seems at first sight to contravene the growing specialism or differentiation of function that marks modern trade. Finding that goods advertise one another, manufacturers are frequently induced to add new departments to their business, expanding the scope and variety of their productions. In retail trade this tendency is widely operative. The modern grocer sells tinned meats, cakes, wine, tea-pots, and Christmas cards, the draper sells every sort of ornamental ware, the stationer, the oil shop, the china shop set out an increasing and miscellaneous number of differing wares, moving towards the position of a general dealer. The Stores and the Universal Providers represent the culmination of this movement in the retail business, returning to an enlarged and more complex form of the primitive little "general shop" of the village. But this same economy is strong enough in certain classes of manufacture to overpower the advantages of an expansion of business in the older form. Up to a certain point the economies of production upon a large scale will make it advantageous to a manufacturer to employ all the capital at his command in producing increased quantities of the same class of goods. But after the market for these goods is fairly supplied it may pay better to appeal to a variety of wants by new species of goods of the same generic character, than by attempting to force new markets, or to effect an increased sale in the old markets at such reduced prices as the increased scale of production may permit. The business of Messrs. Huntley & Palmer is a striking example of this enterprise, issuing in a large variety of products and of processes which, though generically related, cover a widening range of food luxuries. The new products which are taken on will of course not only reap the advantage of being effectively advertised by the earlier products, butconsisting largely of new adaptations of the same kind of raw material, the economies of purchase and transport will be almost as great as attend an increased production of the same goods, while much of the machinery of management, and even of manufacture, can be utilised for the new processes. This tendency not merely to multiply processes in the manufacture of a single commodity, but to increase the variety of commodities turned out by analogous processes in a single business, is also operative in certain textile and metal industries, where an increasing proportion of the expensive machinery and skilled labour is engaged, not in narrowly specific processes of manufacture, but in generating power and in transmitting it for a number of later uses to be governed by specific machinery. There is in many factories an increasing facility to take on new processes, and to transfer a large portion of the plant from the manufacture of one class of goods to another class.

"Most of the operatives in a watch factory would find machines very similar to those with which they were familiar if they strayed into a gun-making factory or sewing-machine factory, or a factory for making textile machinery. A watch factory, with those who worked in it, could be converted without any overwhelming loss into a sewing-machine factory."[110]Thus in the evolution of the modern business we see not only a number of processes in the production of a commodity, each of which constituted a separate business-unit in the earlier division of labour, growing together into a large complex whole, but a growing together of analogous processes in the production of different commodities, a lateral aggregation of processes. So we recognise that the growing complexity of the business-unit, whether we regard it from the point of view of capital or of labour, arises in large measure from an increased integration of productive processes. The business-unit is larger, more heterogeneous, and more highly integrated.

§ 4. Ascending from the business-unit to the larger unit in the structure of industry, the Market, or groups of directly competing businesses, we find similar changes have taken place. In considering these changes the relationbetween Market and Trade should be clearly grasped. The mere fact that two persons or groups of persons in different places are engaged in similar processes of production, that is to say, belong to the same trade, has no significance for us. The trade or aggregate of productive units of a particular sort receives industrial unity only in so far as there is competition of the units in buying the raw materials, tools, and labour for carrying on their trade, and in selling the results of their activity. Weavers of cotton goods in Central China belong to the same trade as weavers in Lancashire, and conduct their craft with similar implements to those which still prevail in the cottage industries of France and Germany, but such competition as may exist between them is so indirect and slight that it may be neglected in considering industrial structure. It is in the competition of a market that businesses meet and are vitally related. In a trade there may be several markets whose connection is distant and indirect. Market is the name given to a number of directly competing businesses. "Economists understand by the term market not any particular market-place in which things are bought and sold, but the whole of any region in which buyers and sellers are in such free intercourse with one another that the prices of the same goods tend to equalise easily and quickly."[111]

A single competitive price is then the essential feature and the test of a market. Businesses in such close relation with one another that the prices at which they buy and sell are the same, or differ only by reason of and in correspondence with certain local advantages or disadvantages, are members of a single market. The money market is a single market throughout the world. The price of money in London, Rome, Rio de Janeiro, may differ, but this difference will correspond to certain differences of risk. There will be a tendency towards a single price, or, putting the case in other words, wherever in the world £100 of money represents the same commodity the same price will be paid for its use, while any difference in its value as a commodity will be accurately reflected in the difference of price.

Absolute freedom of intercourse is not essential to the establishment of a common market. Market tariffs and other advantages and disadvantages may place the competitors on an unequal footing. Moreover, in order to form part of a market as helping to determine the price, a business need not actively enter the field of competition. Fear of the potential competition of outsiders often keeps down prices to a level above which they would rise were it not for the belief that such a rise would bring into active, effective competition the outsider. England had until recently a monopoly of the market for cotton goods in certain Eastern countries, but the price at which she sold was determined by the possibility of rival French or German merchants, as well as by the direct competition of the several English firms. In certain commodities the market is conterminous with the trade, that is, we have a world-market. This is the case with many of the forms of money, the most abstract form of wealth, and the most highly competitive.

Dealers in Stock Exchange securities, in the precious metals, are in active, constant competition at all the great commercial centres of the world. Other staple commodities, whose value is great, durable, and portable, such as jewels, wheat, cotton, wool, have to all intents and purposes a single market.

This world-market represents the fullest expansion due to modern machinery of transport and exchange, the railway, steamship, newspaper, telegraph, and the system of credit built up and maintained by the assistance of these material agents.

The market-area for various commodities varies with the character of these commodities, from the world-market for stock exchange securities down to the minimum market consisting of a few neighbouring farmers competing to sell their over-ripe plums or their skim-milk. The chief qualities which determine the market-area are—

(a)Extent of demand.—Things in universal or very wide demand, which are at the same time durable, such as money, wool, wheat, compete over very wide areas. Things specially accommodated to the taste or use of a particular locality or a small class of individuals will have a narrow market. This is the case with clothes of a particular cut, and with many kinds of fabrics out of which clothes aremade. The market for certain classes of topographical books will be confined to the limits of a county, though the book market for many books is a world-market.

(b)Portability.—Even where the demand is far from a general one, the market-area may be very wide where high value is stored in small bulk. Smoking tobacco and more highly valued wines and liqueurs are examples of this order. The market for common bricks is local, though Portland marble finds a national market.

(c)Durability.—Durable objects and objects which can easily be brought within reach of modern means of rapid transport have a wide market. Perishable goods, as, for example, many fruits and vegetables, have for these reasons a narrow market.

§ 5. Modern machinery has in almost all cases raised the size of the market. The space-area of competition has been immensely widened, especially for the more durable classes of goods. It is machinery of transport—the transport of goods and news—that is chiefly responsible for this expansion. Cheaper, quicker, safer, and more calculable journeys have shrunk space for competing purposes. Improved means of rapid and reliable information about methods of production, markets, changes in price and trade have practically annihilated the element of distance.

Machinery of manufacture as well as of transport has a levelling tendency which makes directly for expansion of the area of competition. As the spread of knowledge places each part of the industrial world more closelyen rapportwith the rest, the newest and best methods of manufacture are more rapidly and effectively adopted. Thus in all production where less and less depends on the skill of the workers, and more and more upon the character of the machinery, every change which gives more prominence to the latter tends to equalise the cost of production in different countries, and thus to facilitate effective competition.

§ 6. Modern methods of production have also brought about a great expansion in the time-area of the market. Competition covers a wider range of time as well as of space. Production is no longer directed by the quantity and quality of present needs alone, but is more and more dependentupon calculation of future consumption. A larger proportion of the brain power of the business man is devoted to forecasting future conditions of the market, and a larger proportion of the mechanical and human labour to providing future goods to meet calculated demands. This expansion of the time-market, or growth of speculative production, is partly cause, partly effect of the improved mechanical appliances in manufacture and in transport. The multiplication of productive power under the new machinery has in many branches of industry far outstripped the requirements of present known consumption at remunerative prices, while increased knowledge of the widening market has given a basis of calculation which leads manufacturers to utilise their spare productive power in providing against future wants. So long as industry was limited by the labour of the human body, assisted but slightly by natural forces and working with simple tools, the output of productive energy could seldom outstrip the present demand for consumable goods.

But machinery has changed all this. Modern industrial nations are able to produce consumables far faster than those who have the power to consume them are willing to exercise it. Hence there is an ever-increasing margin of productive power redundant so far as the production of present consumptive goods is concerned. This excess of productive power is saved. It can only be saved by being stored up in some material forms which are required not for direct consumption but for assisting to increase the rate at which consumables may be produced in the future. In order to make a place for these new forms of saving it is necessary to interpose a constantly increasing number of mechanical processes between the earliest extractive process which removes the raw material from the earth and the final or retailing process which places it in the consumer's hands. New machinery, more elaborate and costly, is applied; special workshops, with machines to make this machinery—other machinery to make these machines; there is an expansion of the mechanism of credit, the system of agents and representatives is expanded, new modes of advertising are adopted. Thus an ever-widening field of investment is provided for the spare energy of machine-production. The change is commonly described by saying that production ismore "roundabout."[112]A larger number of steps are inserted in the ladder of production. This increased complexity in the mechanism of production is not, however, the central point of importance. We must realise that the change is one which is essentially an increase in the "speculative" character of commerce. The "roundabout" method of production signifies a continual increase in the proportion of productive forces devoted to making "future goods" as Now future goods, plant, machinery, raw material of commodities, are essentially "contingent goods": their worth or waste depends largely upon conditions yet unborn: their social utility and the value based upon it depend entirely upon the future powers and desires of those unknown persons who are expected to purchase and consume the commodities which shall come into existence as results of the existence and activity of these future goods.

The actual time which elapses between the extractive stage and the final retail stage of a commodity may not be greater and is in many cases far less under the new methods of industry. The raw cotton of South Carolina gets on the wearer's back more quickly than it did a century and a half ago. But when we add in the time-elements involved in the provision of the various forms of intricate plant and machinery whose utility entirely consists in forwarding these cotton goods, and whose existence in the industrial mechanism depends upon them, we shall perceive that the "roundabout" method signifies a great extension of the speculative or time-element in the market.[113]

§ 7. The growing interdependency of trades and markets, the ever closer sympathy which exists between them, the increased rapidity with which a movement affecting one communicates itself to others, is another striking characteristic of modern trade. This interdependency is in large measure one of growing structural attachment between tradesand markets formerly in faint and distant sympathetic relationship. Formerly, agriculture was the one important foundational industry, and from the feebleness of the transport system the vital connections and the unity it supplied was local rather than national or international. Now the agricultural industries no longer occupy this position of prominence. The coal and iron industries engaged in furnishing the raw material of machinery and steam-motor, the machine manufacture, and the transport services, are the common feeders and regulators of all industries, including that of agriculture. They form a system corresponding to the alimentary system of the human body, any quickening or slackening of whose functional activities is directly and speedily communicated to the several parts. Any disturbance of price, of efficiency, or regularity of production in these foundational industries is reflected at once and automatically in the several industries which are engaged in the production and distribution of the several commodities. The mining and metal industries, shipbuilding, and the railway services are recognised more and more as furnishing the true measure and test of modern trade; their labour enters in ever larger proportion into the production of all the consumptive goods.

Besides the general integration or unification of industry implied by the common dependency of the specific trades upon these great industries, there are other forces engaged in integrating groups of trades. Foremost is the "roundabout" method of production, to which our attention has been already directed. Not merely does this capitalist system bring a number of trades and processes under the control of a single capital, as a single complex business, but it establishes close identity of trade-life and interests among businesses, trades, and markets which remain distinct so far as ownership and management are concerned.

§ 8. If we take the mass of capital and labour composing one of our staple productive industries, we shall find that it is related in four different ways to a number of other industries.

(1) It has a number of trades which are directly co-ordinate—i.e., engaged in the earlier or later processes ofproducing the same consumptive goods. Thus the manufacture of shoes is related co-ordinately to the import trades of hides and bark, to tanning, to the export trade in shoes, and to the retail shoe trade. A common stream of produce is flowing through these several processes, and though from the point of view of ownership and management there may be no connection, there is a close identity of trade interest and a quick sympathy of commercial life at these several points.

(2) Each important manufacturing industry has a number of industries which in their relation to it are secondary, although in some cases, having similar relations to a number of other trades, they may in themselves be large and important. In the large textile centres are found a number of minor industries, planers, sawyers, turners, fitters, smiths, engaged in irregular work of alteration and repairs upon the plant and machinery of the textile factories. The same holds of all important manufactures, especially those which are closely localised.

A somewhat similar relation appertains between those manufactures engaged in producing the main body of any product and the minor industries, which supply some slighter and essentially subsidiary part. In relation to the main textile and clothing industries, the manufacture of buttons, of tape, feathers, and other elements of ornament or trimmings may be regarded as subsidiary. In the same way the manufacture of wall-papers or house paint may be considered subsidiary to the building trades, that of blacking to the shoe manufacture. These subsidiary trades are related to the primary one more or less closely, and are affected by the condition of the latter more or less powerfully in proportion as the subsidiary elements they furnish are more or less indispensable in character. The fur and feather trades are far more dependent upon direct forces of fashion than upon any changes of price or character in the main branches of the clothing trade. On the other hand, any cause which affected considerably the price of sugar would have a great and direct influence on the jam manufacture, while the rise in price of tin due to the M'Kinley tariff caused serious apprehension to the Chicago manufacturers and exporters of preserved meats.

(3) The relations between one of the great arterialindustries, such as coal-mining, railway transport, or machine-making, and a specific manufacture may be regarded as auxiliary. The extent to which the price of coal, railway rates, etc., enters into the price of the goods and affects the condition of profits in the trade measures the closeness of this auxiliary connection. In the case of the smelting industries or in the steam transport trades, even in the pottery trades, the part played by coal is so important that the relation is rather that of a primary than an auxiliary connection—i.e., coal-mining must be ranked as co-ordinate to smelting. But where heat is not the direct agent of manufacture, but is required to furnish steam-motor alone, as in the textile factories, the connection may be termed auxiliary.

(4) The relationship between some industries is "sympathetic" in the sense that the commodities they produce appeal to closely related tastes, or are members of a group whose consumption is related harmoniously. In foods we have the relations between bread, butter, and cheese; the relation in which sugar and salt stand to a large number of consumables. Some of these are natural relations in the sense that one supplies a corrective to some defect of the other, or that the combination enhances the satisfaction or advantage which would accrue from the consumption of each severally. In other cases the connection is more conventional, as that between alcohol and tobacco. The sporting tastes of man supply a strong sympathetic bond between many trades. The same is true of literary, artistic, or other tastes, which by the simultaneous demand which they make upon several industries, in some proportion determined by the harmonious satisfaction of their desires, throw these industries into sympathetic groups.[114]These four bonds mark an identity of interest between different industries.

The relationship is sometimes one of divergency or competition of trades. Where the same service may be supplied by two or more different commodities the trades are related by direct competition. Oil, gas, electricity, as illuminants, are a familiar example of this relationship. Many trades whichproduce commodities that are similar, but far from identical in character, feel this relationship very closely. The competition between various kinds of food, which with different kinds and degrees of satisfaction may produce the same substantial effects, between fish and meat, between various kinds of vegetables and drinks, enables us to realise something of the intricacy of the relations of this kind. In clothing we have antagonism of interests between the various fabrics which has led to great industrial changes. The most signal example is the rise of cotton, its triumph over woollen clothes by the earlier application of the new machinery, and over silk by the early superiority of its dyeing and printing processes.[115]So in recent years in the conflict among beverages, tea, and in a less measure cocoa, have materially damaged the growth of the coffee industry so far as English consumption is concerned. Where such rivalry exists, an industry may be as powerfully and immediately affected by a force which raises or depresses its competitor as by a force which directly affects itself.

§ 9. The growth of numerous and strongly-built structural attachments between different trades and markets related to different localities implies the existence of a large system of channels of communication throughout our industrial society. By the increased number and complexity of these channels connecting different markets and businesses, and relating the most distant classes of consumers, we can measure the evolution of the industrial organism. Through these channels flow the currents of modern industrial life, whose pace, length, and regularity contrast with the feeble, short, and spasmodic flow of commerce in earlier times. This advance in functional activity of distribution is thus expressed by Mr. Spencer:—"In early English times the great fairs, annual and other, formed the chief means of distribution, and remained important down to the seventeenth century, when not only villages, but even small towns, devoid of shops, were irregularly supplied by hawkers who had obtained their stocks at these gatherings. Along with increased population, larger industrial centres, and improved channels of communication, local supply became easier;and so frequent markets more and more fulfilled the purpose of infrequent fairs. Afterwards, in chief places and for chief commodities, markets themselves multiplied, becoming in some cases daily. Finally came a constant distribution, such that of some foods there is to each town an influx every morning; and of milk even more than once in the day. The transition from times when the movements of people and goods between places were private, slow, and infrequent, to times when there began to run at intervals of several days public vehicles moving at four miles an hour, and then to times when these shortened their intervals and increased their speed, while their lines of movement multiplied, ending in our own times, when along each line of rails there go at full speed a dozen waves daily that are relatively vast, sufficiently show us how the social circulation progresses from feeble, slow, irregular movements to a rapid, regular, and powerful pulse."[116]

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