What a finish for the morning hope of the machine-age!—if it were. Monotonous tending of the machine on the lowest standard of living; alternative, starvation.
Suppose it were true. Suppose the Italian people did accept the terms and acquired the knack and skill. Then Italian manufactures, being cheaper than any other, would sweep the markets of the world. The older industrial nations—Great Britain, Germany, France, the United States, et al.—could protect their domestic markets by tariff-barriers, but they would find themselves losing their foreign markets to the Italians. For such industrial countries as are obliged to exchange a machine-surplus abroad for food the loss of foreign markets would be fatal. They would have to meet the Italian competition. They would have to say, as the Italians now are saying: “It is that or starve.” They would have to let down the standard of living to meet Italy’s wage-cost. This would oblige Italy to make her standard lower still, and thus, in a cycle, until all of them were sunk in misery.
And this is by no means an impossible progression of events. It has once taken place on a lesser scale. Beginning about 1870, there was a sudden and uncontrollable increase in the output of industry from two principal causes. One was the rapid rise of competitive industry in Germany and the United States; the other—much more potent—was the discovery of a new and cheaper way of making steel. This one discovery transformed the aspect of industry by increasing its potential power as much, perhaps, as one-hundred fold. Until then people spoke of the iron age; after that it was the steel age. For a quarter of a century prices fell continuously, while solemn economic bodies sat pondering the phenomenon. In that time all the capital employed in industry was lost at least once, probably twice or three times. The producer’s only hope was to improve his machines and increase production, for as he did that his cost per unit fell and for a little while he could undersell his competitor. In methods of production and in the efficiency of machines there was necessarily amazing progress; nevertheless, when all other means of reducing costs had failed, it had to be taken out of labour. In the United States it was not so bad because here the domestic demand for manufactures was unlimited, and a tariff-wall protected industry from foreign competition. In Germany it was very bad.
Germany then was where Italy now is. Her advantage was that the German people would work harder and longer for less money than the British. The competition was between these two. The British Government, disturbed by her new rival’s success in foreign trade, made a study of labour conditions in Germany. It found Sunday labour very prevalent in the factories. “Only the hours of divine service are excluded”, said a report from Saxony.
Commenting, The (London) Economist said: “The question of Sunday labour is one of considerable interest for England, for it is unquestionable that among the causes of Germany’s ability to compete with England as a mercantile and industrial country the fact that here more hours are worked for less money is not the least important. The prohibition of Sunday labour would, of course, mean increased cost of production, and every increase in the cost of production will render it more difficult for Germany to outrival older manufacturing countries in the markets of the world.”
What might have happened does not detain us. What did happen was very fortunate.
First, the food-supply from free virgin land in North and South America increased at the same time in a prodigious manner, so that, notwithstanding the wild energy of the machine, the equilibrium between agriculture and industry was fairly well maintained.
Second, there was still room in the world for colonial development on a vast scale. This occurred, and the outlets thereby created for the surplus product of machines were most timely.
Third—and this is very important—finance, to save itself from deluge, got control of industry. It was unable to buy industry out. All the banks in the world had not money enough to do that. This apparently insuperable difficulty it solved in a simple manner. It formed industry by groups into great joint-stock corporations and sold the stock to the public. And, although generally finance did not keep control in a literal sense, it did so centre it as to make the management responsive thereafter to financial counsel. The classic instance in the United States was the formation of the Steel Trust, which was in very earnest a measure of desperation. The steel-making machine had become a demon whose pastime was panic. By this feat of finance, which occurred in all industrial countries, a new rhythm was established. It was most imperfect: absolute control of production was impossible. But panics from overproduction were thereafter episodic, not continuous, and this was a great improvement.
And now a second time the machine has got away. But how much more powerful it is and widely planted than before. The industrial capacity of the United States alone is greater than that of all Europe twenty-five years ago. There are no more such virgin continents as North and South America to be exploited for food; and, besides, countries that were then content to play an agricultural part, exchanging meat and grain and raw materials for machine-made wares, now are resolved to have industries of their own—nay! more, to have an industrial surplus for sale abroad, engaging in that game themselves. Colonies are no longer docile. And as to finance, there is little probability that it will be able again to lay its hand upon the throttle. There are several reasons why.