Principles of Political Economy

by Arthur Latham Perry

Whenever there is a broad and constant and profitable market for all the commodities the capitalists and the laborers can jointly produce,—that is to say, whenever profits are steady and remunerative and wages are high and growing in their purchasing-power,—the Demand for skilled laborers must always be such as puts the laborers on a footing of equality as over against the capitalists, because under such circumstances the purchasers of services are many and eager, two bosses will be likely to be bidding for one skilled laborer, and then wages are always growing in dollars and each dollar growing in effective purchasing-power.

It is of the last importance in this connection to notice, that everything in Profits and Wages turns in the last resort upon the breadth and freedom of Markets. It is out of the return-service received from the sale of the commodities produced jointly by the capitalists and laborers, that both wages and profits must ultimately be paid. There is no other possible source of them. When the Market fails, everything fails that leads up to a market. Particularly fails the Demand for laborers for the next industrial cycle, and of course drops also the prospective wages for that cycle. The public folly and universal loss of shutting off foreign markets for our own commodities by lofty tariff-barriers, as has been conspicuously done by the United States for thirty years past, follows of course from this radical truth; and the Wages of laborers, instead of being lifted by tariff-taxes, as has been so often falsely and wickedly asserted, are inevitably depressed by them, because they effectually forbid to capitalists and laborers their best and freely chosen markets for the sale of their joint products.

Another vastly important matter, constantly affecting the Demand for laborers of the second class, is the Competency or otherwise of the practical managers of the Capital invested in industrial enterprises. Capital cannot manage itself. It is of itself wholly inert. It is always either a Commodity or a Credit. Conscious of their inability to handle wisely their own bits of Capital, or else taught it through a bitter experience, by far the larger number of individual owners of it loan it to others to manage; they invest it in some industrial corporation, in a bank or a mill or a railroad. Some one person, or at least a small body of persons, must practically manage now all specific accumulations of capital. It is they in their capacity of manipulating-capitalists, who constitute in large measure the Demand for laborers. But such managers, who are at once skilful and long-headed and honest, do not grow upon a chance bush. They are rare. Most of them in this country at least have been those, who started in a small way in the control of their own earned or small-inherited properties, and rose through practice and knowledge and conscience to the ability to handle profitably to all concerned large masses of Capital. In the hands of such men, given a tolerable chance by public law and private circumstances, both Profits and Wages are sure to come in satisfactorily. They are Captains of Industry. They are an honor to human nature. They are a blessing to the whole community. They have no need and no will to ask to be bolstered up in their business by unjust taxes enforced upon a whole people.

Such men sometimes have sons or protégés, who possess similar capacities and similar integrity, and these by experience become able to carry on the business to similar successful issues. This is happy, but it is unusual. More commonly, in the second, and pretty certainly in the third, generation, the line of royal succession fails. There comes in a lieutenant rather than a captain of Industry. Likely enough he mistakes the nature of capital, and thinks that it will go along of itself without that eternal vigilance that is the one price of its maintenance and increase; likely enough he lacks the touch and rule of men, and his laborers become demoralized and refractory; more likely still he thinks he sees other operators around him getting quicker rich by speculating in enterprises outside the legitimate business, and takes some of his own and of what is not his own and throws it out of its proper channels; and, as the result of one or all of these, things soon go wrong, profits and wages fall off, poor work is done and finds slow sale, and Demand for laborers (which is their life-blood) slackens or goes out in that establishment. No wonder the Paper-makers in their annual gathering at Saratoga of 1889, resolved as the main outcome of their meeting, that they would bring up their sons (or somebody's sons) to succeed them in their business by a thorough practical training in the paper-mill itself, beginning early and continuing long. Industrial higher education in this or some other form is the secondary hope of manufacturing business in the United States, the primary hope being in a decent commercial liberty to buy their supplies and to sell their products in the best markets wherever these are to be found.

There is one other important item that bears directly upon the Demand for laborers of the second class, and consequently upon their Wages, namely, the constant introduction of more and better Machinery. At first blush it would seem, and it has often been stated so, that the use of machinery takes just so much work from human hands, reduces by so much the Demand for laborers, and tends to lessen by so much their wages. All this is the opposite of the truth; but before we explain why it is the opposite of the truth, let us attend carefully to the truth itself, as stated in 1889 by the highest living authority on these special points, Sir Edwin Chadwick, the octogenarian pioneer in sanitary and economic reforms. Fifty-six years ago Chadwick joined with his colleagues of the English Factory Inspection Board in recommending reduced hours of labor and other improvements which have now become general in England. In a paper recently read before the Political Economy Club, he calls attention to the greatly increased production which follows improved machinery and shortened hours.

He says: "Spinning machines which formerly turned 8000 in a minute, now turn 11,000; and in Lancashire not more than half the hands are now employed to produce the same amount with new machinery as were employed on the machinery of 1833. As an example of the extent of the reduction of hands by these improvements, it may be mentioned that one large family of cotton spinners in Manchester, which 40 years ago employed 11,000 hands, could not now muster one half that number. Yet the mill population has increased, as well as the general population, the hands discharged being absorbed in other employments. At the beginning of the century the cost of spinning a pound of yarn was a shilling. The pound of that same yarn is now spun for a half-penny by hands earning double wages for their increased energetic attention and skill. It is now found, however, that the strain of the increased responsible attention cannot be so long sustained as the slow, semi-automatic pace by the old working of the old mills with the long hours. Hence there is a tendency to a further voluntary reduction of the working hours in the best mills, first to nine hours. In one mill, in which 2000 men are employed a voluntary reduction has been effected to about eight hours with a more equable production; and I have heard of other examples. As showing the cost of working with inferior hands and loose regulations, a recent report from the Manchester Chamber of Commerce states that 20s. worth of bundled yarn may be produced at a cost of from 2d. to 3d. per pound less in Manchester than in Bombay, notwithstanding the hours of working are 80 hours per week, while in Manchester they are only 50. At the present time Lancashire, with its short hours, will meet Germany or any other country, in neutral markets, in the world. In Germany the spinners and weavers still work 13 hours a day as they once did in England; France has only come down to 12 hours; whereas the English rate has long been 10 hours, and may soon be 9 or even 8. And this reduction improves the health of the wage-workers, while the reduced cost of production allows them higher wages; yet Germany with its long hours and high tariff maintains a system of low pay, dear production, high cost of distribution, and limited sales."

The accuracy of these important statements of fact is confirmed on every hand. Committees of British spinners and weavers have repeatedly visited the United States, and then reported to their fellows at home, that wages, all things considered, were equal for spinners and weavers in Great Britain and the United States, and in some cases and respects higher in the former. Many times before his late lamented death, John Bright publicly testified that wages in England during his parliamentary life had risen in general 50%, and in some of the manufacturing lines 100%. A few months before these statements of Chadwick were made, Sir Richard Temple reported to his section of the British Association, "That the average earnings per head in the United Kingdom, taking the whole population without division into classes, is £35, 4s., and exceeds the average of the United States, which is £27, 4s., and of Canada, which is £26, 18s., and of the Continent, which is £18, 1s.; while it falls below that of Australia, which is £43, 4s. per head."

According to this, the average earnings in Great Britain per head of the population are 30% higher than in the United States, and 81% higher than on the Continent of Europe. Truly, Britain is a prosperous and profitable country so far as average earnings of the whole people by the year is concerned. Sir Richard goes on in the same statistical paper to show, that the average annual profit on British Capital is 14%, and that Capital yields about the same rate for the United States.

Now, can we easily give the grounds on which the introduction of more and better machinery, instead of displacing laborers, tends to lift and actually does lift the wages of those concerned, who continue to work with their hands and heads? We will try it.

(a) It takes the hands and heads of laborers to invent and construct and keep in repair the machinery itself, that is often supposed to displace laborers, and so far forth opens a vent for the more profitable employment of some of the laborers, who before performed the cruder and more repetitive and automatic parts of the processes, which parts alone machinery can be made to perform.