Fifty years in Wall Street

by Henry Clews

There appears to be an idea, in certain quarters, that the modern concentration of capital into large masses has made it necessary for workmen also to organize themselves into large bodies, sinking their individual rights and liberties and selling their labor en masse. For my part, I am unable to see the force of this reasoning, although I cannot but respect the ability of some authorities by which it is sanctioned. It seems to assume that large employers of labor have more power to depress wages than smaller ones; and from this it is inferred that it is necessary for workmen to combine to protect themselves against this supposed increased exposure to aggression from capital. But is either the premise or the conclusion sound? In order to concede the assumption we must suppose that large employers can cease to be competitors for labor; for in no other way can they depress wages. But this can never happen; for capitalists will always produce to the fullest extent compatible with an average rate of profit, and this ensures the largest possible demand for labor and, therefore, the highest possible rate of wages. If employers combined to force the rate of wages down, as workmen do to force it up, they would undoubtedly be able to compel a temporary reduction in the remuneration of labor.

But, of necessity, such an artificial depression of wages could only be temporary; for what was thus taken by force from labor would make manufacturing so unusually profitable that new capital would be immediately attracted to it, and the consequent additional demand for labor would necessitate an advance in wages, which the combined manufacturers would be compelled to pay. As a matter of fact, manufacturers do not combine to regulate wages, not only because of the reasons just stated, but also because they know that no such combination could be maintained in the face of the jealousies and conflicting interests that always exist among them. If, then, it is true that manufacturers are compelled by the necessities of competition to pay as much for labor as it is for the time-being worth, and, if they do not and cannot combine to depress wages, I am unable to see where arises the necessity for the workmen to combine for the purpose of protecting themselves against capital.

The workingmen are taken care of by the natural laws of trade far more perfectly than they can be by any artificial arrangement; and trades unions are simply an intrusion upon the domain of those laws, without the power to supplement or perfect their operation, and with a certainty of obstructing and perverting their tendency, with the inevitable result of mischief to all parties. If the unions do occasionally get an advance in wages, it would have come by the natural laws of competition among the capitalists. It might be delayed for a time, but if you calculate the loss of wages and suffering entailed by the strike, I think the workmen would be safer in the end to wait for the natural advance. I am clearly borne out in this view of the case of the capitalist by that great political economist, philosopher and thinker, John Stuart Mill, who was certainly no enthusiastic friend of the capitalist, and is an acknowledged friend of labor as widely as his writings are known, which is almost as extensive as civilization itself.

After laying down the principles of Socialism, Mill says:

“Next, it must be observed that Socialists generally, and even the most enlightened of them, have a very imperfect and one sided notion of the operation of competition. They see half its effects, and overlook the other half; they regard it as an agency for grinding down every one’s remuneration—for obliging every one to accept less wages for his labor, or a less price for his commodities, which would be true only if every one had to dispose of his labor or his commodities to some great monopolist, and the competition were all on one side. They forget that competition is the cause of high prices and values as well as of low; that the buyers of labor and of commodities compete with one another as well as the sellers; and that if it is competition which keeps the prices of labor and commodities as low as they are, it is competition which prevents them from falling still lower. In truth, when competition is perfectly free on both sides, its tendency is not specially either to raise or to lower the price of articles, but to equalize it; to level inequalities of remuneration, and to reduce all to a general average, a result which, in so far as realized (no doubt very imperfectly), is, on Socialistic principles, desirable. But if, disregarding for the time that part of the effects of competition which consists in keeping up prices, we fix our attention on its effect in keeping them down, and contemplate this effect in reference solely to the interest of the laboring classes, it would seem that if competition keeps down wages, and so gives a motive to the laboring classes to withdraw the labor market from the full influence of competition, if they can, it must on the other hand have credit for keeping down the prices of the articles on which wages are expended, to the great advantage of those who depend on wages. To meet this consideration Socialists, as we said in our quotation from M. Louis Blanc, are reduced to affirm that the low prices of commodities produced by competition are delusive, and lead in the end to higher prices than before, because when the richest competitor has got rid of all his rivals, he commands the market and can demand any price he pleases. Now, the commonest experience shows that this state of things, under really free competition, is wholly imaginary. The richest competitor neither does nor can get rid of all his rivals, and establish himself in the exclusive possession of the market; and it is not the fact that any important branch of industry or commerce formerly divided among many has become, or shows any tendency to become, the monopoly of a few.

“The kind of policy described is sometimes possible where, as in the case of railways, the only competition possible is between two or three great companies, the operations being on too vast a scale to be within the reach of individual capitalists; and this is one of the reasons why businesses which require to be carried on by great joint-stock enterprises cannot be trusted to competition, but, when not reserved by the State to itself, ought to be carried on under conditions prescribed, and from time to time, varied by the State, for the purpose of insuring to the public a cheaper supply of its wants than would be afforded by private interest in the absence of sufficient competition. But in the ordinary branches of industry no one rich competitor has it in his power to drive out all the smaller ones. Some businesses show a tendency to pass out of the hands of many small producers and dealers into a smaller number of larger ones; but the cases in which this happens are those in which the possession of a larger capital permits the adoption of more powerful machinery, more efficient, by more expensive processes, or a better organized and more economical mode of carrying on business, and thus enables the large dealer legitimately and permanently to supply the commodity cheaper than can be done on the small scale; to the great advantage of the consumers, and therefore of the laboring classes, and diminishing, pro tanto, the waste of the resources of the community so much complained of by Socialists, the unnecessary multiplication of mere distributors, and of the various other classes whom Fourier calls the parasites of industry. When this change is effected, the larger capitalists, either individual or joint-stock, among which the business is divided, are seldom, if ever, in any considerable branch of commerce, so few as that competition shall not continue to act between them; so that the saving in cost, which enabled them to undersell the small dealers, continues afterwards, as at first, to be passed on, in lower prices, to their customers. The operation, therefore, of competition in keeping down the prices of commodities, including those on which wages are expended, is not illusive but real, and we may add, is a growing, not a declining fact.”

One principle of the unions is exceedingly unjust to the workingmen to the last degree. It starts with the assumption that all workmen are equal in their capacity as to the quality of service or work and the quantity of production; and upon this false assumption is based the injustice of compelling all members to bind themselves to a uniform rate of pay. A greater injustice and a more flagrant inequity cannot be found in the whole range of the world’s social institutions; nor is the wrong the less culpable because the members voluntarily inflict it upon themselves; for as “no man liveth unto himself” but has dependents for whom he is bound to do the best in his power, so no man is free to throw away to the less industrious or less competent what his superior abilities and industry have earned for himself.

This levelling system is not only in defiance of the law of varied endowment which the Creator has incorporated into the constitution of humanity, but it tends to bind into one cast-iron man the entire working community, debarring them from all chances of progress and consigning them to a degrading condition of semi-slavery or serfdom. Time was when the way was clear to any workingman in this country to the highest positions of wealth, or of social standing or political influence. As a matter of fact, a large proportion of our present successful merchants, and not a few even of our millionaires, are men who have risen from the ranks of labor. The first steps in their progress were won by the superiority of their skill or faithfulness as workmen, which qualified them to rise step by step to higher achievements. Then, the workman was free to rise according to his abilities and his character; he was the free ruler of his own destiny. Now, it seems the tendency of the trades unions is to obliterate all such distinctions and virtually debar the workman from the possibility of earning a rank among his fellowmen proportioned to his merits; and on this plan the American workman would be as completely cut off from the chances of social elevation, as was the American slave twenty-five years ago. This would be a terrible degradation, of which every man who enjoys the rights of American citizenship should deem himself incapable and feel ashamed.

However much political leaders, and even some who rejoice in the reputation of economists, may feel disposed to regard these combinations as a social necessity of the time, and an institution that has come to stay, I cannot resist the conviction that the trades-union movement has already seen its culmination and is destined to a steady disintegration, unless the system is greatly modified. The principle of combination is useless unless it can be successfully employed to compel employers to accept the terms of the employees. In fact, it has been almost the sole object of the unions to employ it, through the agency of strikes, to compel the acquiescence of capital. Up to a recent period, it has been largely successful in this sense. So long as employers could at all afford to comply with the demands of labor, they would make considerable sacrifices to avoid the inconvenience and loss connected with the interruption of their operations involved in a strike. At last, however, the workingmen advanced their demands to a pitch so seriously threatening to industry and so vitally dangerous to the material interests of the country at large, that employers saw, with common consent, that the time had come when a square issue must be made with this modern invasion on their rights.

The spring of 1886 will always be memorable, for its having brought to a fair test the power and principles of trades-unionism. Strikes were suddenly initiated on a stupendous scale, upon the railroads, among the western factories, and among the larger employers in the Middle States, partly to enforce demands for higher wages, partly to shorten the time of work to eight hours a day, and above all, to compel employers to recognize the leaders of the unions in determining the conditions of employment and to submit all disputes between the two parties to arbitration. Employers, simultaneously, but without any concert of action, met the challenge squarely. They refused to concede the demands made; they in many instances declined to recognize the officers of the unions; they proceeded promptly to fill the places of the strikers with non-union men, and refused to make formal conditions with returning strikers; they brought to bear upon the leaders of the strikes the laws against conspiracy; and they took the “boycotters” before the courts. The result of this treatment was an almost universal failure of the strikers; the declaration by the courts that the compulsory methods of the unions are illegal, and in the nature of conspiracies; the throwing out of employment of tens of thousands of union employees, and the exhaustion of the funds raised by the unions for enforcing their coercive tactics.