This complexity is further increased by constant demand for variety in size, quality, and character of goods to meet the growing variety of demand in a market of increasing area. Special classes of goods must be manufactured for Australia, for Egypt, for Burmah. Less civilised customers, including such countries as China and Persia, insist upon their imported goods being made up and packed in some familiar form long after the use or convenience of this form has passed away. The exigencies of close competition require constant experiment in new lines of goods to benefit the fancy of a newly-opened market, or to get away the trade of some competitor. Moreover, the increasingly important part which is played by advertising in the trades where competition is keenest is followed by a very singular result, which seems at first sight to contravene the growing specialism or differentiation of function that marks modern trade. Finding that goods advertise one another, manufacturers are frequently induced to add new departments to their business, expanding the scope and variety of their productions. In retail trade this tendency is widely operative. The modern grocer sells tinned meats, cakes, wine, tea-pots, and Christmas cards, the draper sells every sort of ornamental ware, the stationer, the oil shop, the china shop set out an increasing and miscellaneous number of differing wares, moving towards the position of a general dealer. The Stores and the Universal Providers represent the culmination of this movement in the retail business, returning to an enlarged and more complex form of the primitive little "general shop" of the village. But this same economy is strong enough in certain classes of manufacture to overpower the advantages of an expansion of business in the older form. Up to a certain point the economies of production upon a large scale will make it advantageous to a manufacturer to employ all the capital at his command in producing increased quantities of the same class of goods. But after the market for these goods is fairly supplied it may pay better to appeal to a variety of wants by new species of goods of the same generic character, than by attempting to force new markets, or to effect an increased sale in the old markets at such reduced prices as the increased scale of production may permit. The business of Messrs. Huntley & Palmer is a striking example of this enterprise, issuing in a large variety of products and of processes which, though generically related, cover a widening range of food luxuries. The new products which are taken on will of course not only reap the advantage of being effectively advertised by the earlier products, but consisting largely of new adaptations of the same kind of raw material, the economies of purchase and transport will be almost as great as attend an increased production of the same goods, while much of the machinery of management, and even of manufacture, can be utilised for the new processes. This tendency not merely to multiply processes in the manufacture of a single commodity, but to increase the variety of commodities turned out by analogous processes in a single business, is also operative in certain textile and metal industries, where an increasing proportion of the expensive machinery and skilled labour is engaged, not in narrowly specific processes of manufacture, but in generating power and in transmitting it for a number of later uses to be governed by specific machinery. There is in many factories an increasing facility to take on new processes, and to transfer a large portion of the plant from the manufacture of one class of goods to another class.
"Most of the operatives in a watch factory would find machines very similar to those with which they were familiar if they strayed into a gun-making factory or sewing-machine factory, or a factory for making textile machinery. A watch factory, with those who worked in it, could be converted without any overwhelming loss into a sewing-machine factory."[110] Thus in the evolution of the modern business we see not only a number of processes in the production of a commodity, each of which constituted a separate business-unit in the earlier division of labour, growing together into a large complex whole, but a growing together of analogous processes in the production of different commodities, a lateral aggregation of processes. So we recognise that the growing complexity of the business-unit, whether we regard it from the point of view of capital or of labour, arises in large measure from an increased integration of productive processes. The business-unit is larger, more heterogeneous, and more highly integrated.
§ 4. Ascending from the business-unit to the larger unit in the structure of industry, the Market, or groups of directly competing businesses, we find similar changes have taken place. In considering these changes the relation between Market and Trade should be clearly grasped. The mere fact that two persons or groups of persons in different places are engaged in similar processes of production, that is to say, belong to the same trade, has no significance for us. The trade or aggregate of productive units of a particular sort receives industrial unity only in so far as there is competition of the units in buying the raw materials, tools, and labour for carrying on their trade, and in selling the results of their activity. Weavers of cotton goods in Central China belong to the same trade as weavers in Lancashire, and conduct their craft with similar implements to those which still prevail in the cottage industries of France and Germany, but such competition as may exist between them is so indirect and slight that it may be neglected in considering industrial structure. It is in the competition of a market that businesses meet and are vitally related. In a trade there may be several markets whose connection is distant and indirect. Market is the name given to a number of directly competing businesses. "Economists understand by the term market not any particular market-place in which things are bought and sold, but the whole of any region in which buyers and sellers are in such free intercourse with one another that the prices of the same goods tend to equalise easily and quickly."[111]
A single competitive price is then the essential feature and the test of a market. Businesses in such close relation with one another that the prices at which they buy and sell are the same, or differ only by reason of and in correspondence with certain local advantages or disadvantages, are members of a single market. The money market is a single market throughout the world. The price of money in London, Rome, Rio de Janeiro, may differ, but this difference will correspond to certain differences of risk. There will be a tendency towards a single price, or, putting the case in other words, wherever in the world £100 of money represents the same commodity the same price will be paid for its use, while any difference in its value as a commodity will be accurately reflected in the difference of price.
Absolute freedom of intercourse is not essential to the establishment of a common market. Market tariffs and other advantages and disadvantages may place the competitors on an unequal footing. Moreover, in order to form part of a market as helping to determine the price, a business need not actively enter the field of competition. Fear of the potential competition of outsiders often keeps down prices to a level above which they would rise were it not for the belief that such a rise would bring into active, effective competition the outsider. England had until recently a monopoly of the market for cotton goods in certain Eastern countries, but the price at which she sold was determined by the possibility of rival French or German merchants, as well as by the direct competition of the several English firms. In certain commodities the market is conterminous with the trade, that is, we have a world-market. This is the case with many of the forms of money, the most abstract form of wealth, and the most highly competitive.
Dealers in Stock Exchange securities, in the precious metals, are in active, constant competition at all the great commercial centres of the world. Other staple commodities, whose value is great, durable, and portable, such as jewels, wheat, cotton, wool, have to all intents and purposes a single market.
This world-market represents the fullest expansion due to modern machinery of transport and exchange, the railway, steamship, newspaper, telegraph, and the system of credit built up and maintained by the assistance of these material agents.
The market-area for various commodities varies with the character of these commodities, from the world-market for stock exchange securities down to the minimum market consisting of a few neighbouring farmers competing to sell their over-ripe plums or their skim-milk. The chief qualities which determine the market-area are—
(a) Extent of demand.—Things in universal or very wide demand, which are at the same time durable, such as money, wool, wheat, compete over very wide areas. Things specially accommodated to the taste or use of a particular locality or a small class of individuals will have a narrow market. This is the case with clothes of a particular cut, and with many kinds of fabrics out of which clothes are made. The market for certain classes of topographical books will be confined to the limits of a county, though the book market for many books is a world-market.
(b) Portability.—Even where the demand is far from a general one, the market-area may be very wide where high value is stored in small bulk. Smoking tobacco and more highly valued wines and liqueurs are examples of this order. The market for common bricks is local, though Portland marble finds a national market.