CHAPTER II[ToC]
CAPITALISM IS WASTEFUL
Under the system of free competition in the beginning and middle of the last century, every investor who saw a profit in refining oil or sugar, or making steel, put up a refinery or factory. The aim of every factory was to manufacture the largest amount possible and sell it at the highest price possible; and this is what Herbert Spencer[65] and the Manchester School regard as the ideal system of production. Now let us see just what happens as a result of this system of unlimited competition.
§ 1. Getting the Market
Every manufacturer and refiner has to find purchasers for his product. This effort to find purchasers is called in the trade, "getting the market."
The expression "getting the market" covers all the expenses attending the bringing of goods to the attention of the public, and they may be roughly divided into two principal categories—advertising and commercial travellers. The public little appreciates the enormous cost which attends the work of finding a purchaser. Mr. Bradley, after a careful calculation, estimates that "somewhere between the distiller and the consumer in this country forty millions of dollars are lost; this goes primarily to the attempt to secure trade."[66] Mr. Dowe[67] the President of the Commercial Travellers' National League, testifies that 35,000 salesmen have been thrown out of employment by the organization of trusts, and 25,000 reduced to two-thirds of their previous salaries. This would represent a loss of $60,000,000 in salaries on a basis of $1200 each. He cites, as instances of trusts that have dismissed salesmen, the baking powder, bicycle, chair, paper-bag, rubber, tin-plate, steel and rod, sugar, coffee, thread and type-founders' combinations. Not only do trusts dismiss salesmen, they substitute for salesmen who, prior to the organization of the trust had been earning $4000 to $5000 a year, cheaper salesmen who receive $18 a week. He also estimates that the dismissal of commercial travellers means a loss to railways of about $250 per day, 240 days in the year; in all, $25,000,000. The loss to hotels is about as much, and "many hotels are likely to become bankrupt if any more travellers are taken off."
§ 2. Cross Freights
Another waste attending the competitive system results from "cross freights," the double freight a refiner sometimes pays for hauling oil from the well, or sugar from the nearest seaboard and back over exactly the same ground, when refined, to the customer. So also the steel manufacturer sometimes pays freight for hauling ore to the coal mine or coal to the ore, and back, after smelting, to the customer.