The Evolution of Modern Capitalism: A Study of Machine Production

by J. A. Hobson

Capitalist ownership of extra-human industrial "power" was of course narrowly restricted before the age of steam. Water-power, horse-power, and to a much smaller extent, wind-power, were utilised. But the most important services water rendered to industry prior to the great inventions were in facilitating the transport of goods, and in certain subsidiary processes of manufacture such as dyeing. Though a considerable number of water-mills existed early in the century, they played no large part in manufacture. A natural force so strictly confined in quantity and in local application, and subject to such great waste from the backward condition of mechanical art, was not able to serve to any great extent as a substitute for or aid to the muscular activity of man.

But although the economy of mechanical power was not yet operative to any appreciable extent in concentrating labour, certain other notable economics of large-scale production were beginning to assert themselves in all the leading manufactures. Indeed so powerful are some of the economies of division of labour and co-operation even in a primitive condition of the industrial arts, that Professor Ashley considers it not improbable that the great manufactory might have become an important or even a dominant feature of the woollen trade as early as the sixteenth century, if legislative enactments had not stood in the way.[49] As it was, these earlier centralising forces, while they drove the workers to work and live in closer and compacter masses, did not at first dispose them in factories to any great extent. They continued for the most part to work in their own houses, though for material and sometimes for the implements of their craft they were dependent upon some merchant or large master-manufacturer. This was the condition of industry in the neighbourhood of Leeds in 1725. "The houses are not scattered and dispersed as in the vicarage of Halifax, one by one, but in villages, and those houses thronged with people and the whole country infinitely populous."[50] In the more highly-developed branches of the cloth trade, however, where the best looms were a relatively costly form of capital, the foundation of the factory system was clearly laid. In Norwich, Frome, Taunton, Devizes, Stourbridge, and other clothing centres, Defoe found the weaving industry highly concentrated, and rich employers owning considerable numbers of looms. Some of this work was put out by the master-manufacturers, but other work was done in large sheds or other premises owned by the master. This large organised "business," half factory, half domestic, continued to prevail in the important West of England clothing industry up to the close of the eighteenth century. "The master clothier of the West of England buys his wool from the importer, if it be foreign, or in the fleece if it be of domestic growth; after which, in all the different processes through which it passes, he is under the necessity of employing as many distinct classes of persons; sometimes working in their own houses, sometimes in that of the master clothier, but none of them going out of their proper line. Each class of workman, however, acquires great skill in performing its particular operation, and hence may have arisen the acknowledged excellence, and, till of late, the superiority of the cloths of the West of England."[51]

So again, in the cotton industry of Lancashire, the hold which the merchants had got over the weavers by supplying them with warp and weft led in some cases, before the middle of the century, to the establishment of small factories containing a score or two of looms, in which hired men were employed to weave. A little later, though long before steam power, Arthur Young finds a factory at Darlington with over fifty looms, a factory at Boynton with 150 workers, and a silk mill at Sheffield with 152 workers. Even where the final step of substituting the factory for the home had not been taken the subordination of the handicraftsman to the master who provided the materials and paid the wages was tolerably complete. By the middle of the century the free artisan was gradually passing into the condition of a hired "hand." Improved means of communication were beginning to expand the area of the market, enlarged businesses enabled labour to be profitably divided, and required a more effective control over the workers than could be obtained over a scattered population of agricultural manufacturers.

§ 13. Regarding the Business as a combination of Labour and Capital, we perceive that one strongly distinctive characteristic of the pre-machinery age is the small proportion which capital bears to labour in the industrial unit. It is this fact that enabled the "domestic" worker to hold his own so long in so many industries as the owner of a separate business. So long as the mechanical arts are slightly developed and tools are simple, the proportion of "fixed capital" to the business is small and falls within the means of the artisan who plies his craft in his home. So long as tools are simple, the processes of manufacture are slow, therefore the quantity of raw material and other "circulating capital" is small and can also be owned by the worker. The growing divorcement in the ownership of capital and labour in the industrial unit will be found to be a direct and most important result of those improvements in mechanical arts which, by continually increasing the proportion of capital to labour in a business, placed capital more and more beyond the possession of those who supplied the labour power required to co-operate in production.

In the middle of last century there were very few instances of a manufacturing business in which a large capital was engaged, or in which the capital stood to the labour in anything like modern proportion. It was indeed the merchant and not the manufacturer who represented the most advanced form of Capitalism in the eighteenth century. Long before Dr. Johnson's discovery that "an English merchant is a new species of gentleman," Defoe had noted the rise of merchant-princes in the Western clothing trades, observing that "many of the great families who now pass for gentry in these counties have been originally raised from and built out of this truly noble manufacture."[52] These wealthy entrepreneurs were sometimes spoken of as "manufacturers," though they had no claim either upon the old or the new signification of that name. They neither wrought with their hands nor did they own machinery and supervise the labour which worked with it. They were, as has been shown above, merchant-middlemen. The clothing trade being the most highly developed, evolved several species of middlemen, including under that term all collectors and distributors of the raw material or finished goods.

(a) One important class of "factors" engaged themselves in buying wool from farmers and selling it to clothiers, and appear to have sometimes exercised an undue and tyrannous control over the latter by an unscrupulous manipulation of the credit system which was growing up in trade.[53]

(b) The "clothiers" themselves must be regarded in large measure as middleman-collectors, analogous in function to the distributors, who still rank as one of the grades of middlemen in the cheap clothing trade of London to-day.[54]

(c) After the cloth was made three classes of middlemen were engaged in forwarding it to the retailer—(1) travelling merchants or wholesale dealers who attended the big fairs or the markets at Leeds, Halifax, Exeter, etc., and made large purchases, conveying the goods on pack-horses over the country to the retail trader; (2) middlemen who sold on commission through London factors and warehousemen, who in their turn disposed of the goods to shopkeepers or to exporters; (3) merchants directly engaged in the export trade.

With the exception of shipping and canal transport (which became important after the middle of the century) there were no considerable industries related to manufacture where large capitals were laid down in fixed plant. Even the capital sunk in permanent improvements of land, which played so important a part in the development of agriculture, belonged chiefly to the latter years of the eighteenth century. Almost the only persons who wielded large capitals within the country were those merchants, dealers, or middlemen, whose capital at any given time consisted of a large stock of raw material or finished goods. Even the latter were considerably restricted in the magnitude of their transactions by the imperfect development of the machinery of finance and the credit system. In 1750 there were not more than twelve bankers' shops out of London.[55] Until 1759 the Bank of England issued no notes of less value than £20.

Joint-ownership of capital and effective combination of the labour units in a business were only beginning to make progress. The Funded Debt, the Bank of England, the East India Company were the only examples of really large and safe investments at the opening of the eighteenth century. Joint-ownership of large capitals for business purposes made no great progress before the middle of the eighteenth century, except in the case of chartered companies for foreign trade, such as the East India Company, the Hudson's Bay Company, the Turkish, Russian, Eastland, and African companies. Insurance business became a favourite form of joint-stock speculation in the reign of George I. The extraordinary burst of joint-stock enterprise culminating in the downfall of the South Sea Company shows clearly the narrow limitations for sound capitalist co-operation. Even foreign trade on joint-stock lines could only be maintained successfully on condition that the competition of private adventurers was precluded.