The Settlement of Wage Disputes

by Herbert Feis

It is the test of all great popular movements, however, that they show they possess the ability to pursue a just and generous policy even while they are hard pressed, provoked by injustice, and maligned. That is the trial which trade unionism faces in the United States to-day; it is the example trade unionism must set before it can expect willing acceptance as a fundamental industrial institution. Unless the union movement proves itself intelligent, disciplined, and aware of ethical considerations, a continuance of industrial conflict will be inevitable; for any practicable policy of wage settlement for industrial peace will require union participation.

4.—Let us pass now to the economic position of "capital" (the owners of capital) in the industrial order which uses it (of which they are a part). In a society where labor works upon the gifts of nature almost unaided by instruments invented by man and fashioned by previous human labor, the society must content itself with small numbers or little product or both. Modern industry has been shaped, perhaps predominantly, by the effort to support large numbers at a high standard of economic existence. Production has become greatly subdivided among specialized groups. In industry to-day, the wage earners of various kinds perform their tasks with the assistance of such equipment, machinery, and general organization as will serve to make their labor result in a large product. The means which make possible this effective employment of labor in industry are what we mean by the term "capital."[9] The section of the community which owns and directs the investment of the bulk of these means has received the name of capitalists.

Almost all the capital accumulated within the United States is privately owned. Since the beginning of our industrial history the opportunities for accumulation have been left to individuals and the capital which industry has used has been provided by private owners. We have depended upon the personal motives of individuals to persuade them to refrain from the immediate consumption of some part of the product of industry which has come into their possession, and to lead them to put their savings at the further command of industry.

The circumstances which have governed the course and direction of this accumulation, and the question of the amount of economic cost that it involved have been the subjects of much capable exposition and of very violent differences. Much accumulation has resulted from the fact that industrial or rent incomes have been at certain times distinct surpluses over the possible consumption of the individuals in receipt of them. Much has been prompted and maintained by the efforts of men to move ahead to success and power—that is by ambition and rivalry; much by the idea that pecuniary success is itself an achievement, a mark of ability and leadership. The ordinary hopes of the multitude of men, such as the desire for a secure existence for themselves and their family, and the wish to figure among their friends as an equal, have been the steadiest motives of all. Saving is not one of the most deeply implanted habits. It is a habit that is closely bound up with the qualities of personal ambition, calculation and the desire for responsibility. That is the reason why rich men are so seldom very likable. It is the reason also why those who are the most needy are at times least disposed to save when they have a chance. And if in the immediate future, the responsibility for accumulation is to be more widely diffused than at present, there will have to be a general cultivation of these qualities—qualities, indeed, most requisite for a complex, mechanical civilization like our own.

The accumulation of capital, as has been said, enables industry to utilize such methods of production as result in a high volume of product for a given expenditure of effort. Much of the hopefulness and energy which has characterized our industrial life arose out of the belief that the continuous course of capital accumulation, since it made possible the utilization of new inventions and improved methods of production, was preparing the way for a future that would be marked by even a wider distribution of comfort than men saw around them. Thus it has been urged that by devotion to industry and by consuming less than was produced, the time would come when the world would be so well equipped that none of its workers would have to be in want of the economic essentials of a satisfactory life. In Mr. Keynes words, "Society was working not for the small pleasures of to-day, but for the future security and improvement of the race,—in fact for 'progress.' If only the cake were not cut, but was allowed to grow in the geometrical proportion predicted by Malthus of population, but not less true of compound interest, perhaps a day might come when there would be at last the enjoyment of our labors. In that day, overwork, overcrowding and underfeeding would come to an end and men secure of the comforts and necessities of the body could proceed to the nobler exercise of their faculties."[10]

Under the guiding force of this conviction, and in the United States, with the extra stimulus of the belief that individual effort was throwing open vast new resources to the world, the course of accumulation has been viewed with approval and in the spirit of emulation.

We, however, have recently been assailed by growing doubts in regard to the idea of economic progress based upon capital accumulation. We have witnessed the growth of severe tensions between those who receive the greatest share of the income from accumulated wealth and the other groups engaged in production. It is pertinent to inquire into the reasons for this change of feeling; for, within the sphere of its operation, any policy of wage settlement must aim to lessen or eliminate this cause of discontent.

First of all it must be observed that the bulk of the accumulation has been accomplished by a relatively small number of individuals. If this concentration of wealth were peculiar to the United States it might be attributed to the fact that this country has undergone exceptionally rapid expansion, during which the opportunities for accumulation were both unusual and irregularly distributed. But the explanation seems to lie deeper, for the same condition is to be found in all advanced industrial nations. The opinion may be ventured that it is characteristic of such industrial arrangements as have prevailed in the United States, that the tendency towards diffusion of the results of advances in production (obscured, besides, by the growth of population) should lag seriously behind the tendency towards concentration.[11]

The condition of inequality of wealth, heretofore a condition of the process of capital accumulation, is one of the chief causes of the embitterment of industrial relations. Firstly, it is one of the factors which tend to the creation of separate group interests. A high degree of inequality of accumulated wealth leads to a concentration of the control of the larger industrial enterprises within the hands of a small section of the community. The interest in high returns from accumulated wealth appears to be a group interest. And, indeed, if the lag of diffusion behind concentration passes a certain point it is in reality a group interest—in the sense of being opposed to the general interest. Secondly, great inequality of wealth leads to the growth of institutions incompatible with the purposes of a democracy. These are a cause of economic antagonism, which has its reflection in industrial relations. Thirdly, it has evil psychological effects. In a country bred upon the general ideas of democracy, not even political equality and a wide distribution of economic necessities and comforts will suffice to produce general contentment, if a top stratum of the community is possessed of the social advantages of vast wealth. Few are satisfied with their lot as long as they see others, often through no qualities of their own, more satisfactorily endowed with worldly goods. Lastly, although great inequality of wealth makes possible a high level of production, it also makes great waste possible.

Thus, grave dissatisfaction surrounds that very process of capital accumulation which has been regarded as the high road of economic progress. Grave doubts have arisen as to the ultimate attainment of the vision at its end. The task is presented of directing and safeguarding the course of capital accumulation. It is evident that no policy of wage settlement can, of itself, do a great deal in this regard. Something it can do. That, it is ventured, should be along the following lines: it must aim to effect a distribution of the product of industry in which the return to the owners of accumulated capital does not exceed a point determined by weighing the following considerations: