The Evolution of Modern Capitalism: A Study of Machine Production

by J. A. Hobson

The only exercise of power by a Trust or Monopoly in its dealings with competing capital which deserves to be placed in a separate category of infamy, is the use of money to debauch the legislature into the granting of protective tariffs, special charters or concessions, or other privileges which enable a monopoly company to get the better of their rivals, to secure contracts, to check outside competition, and to tax the consuming public for the benefit of the trust-maker's pocket. Under this head we may also reckon the tampering with the administration of justice which is attributed, apparently not without good reason, to certain of the Trusts, the use of the Trust's money to purchase immunity from legal interference, or, in the last resort, to buy a judgment in the Courts.

How far the more or less definite allegations upon this subject are capable of substantiation it is beyond our scope to inquire, but certain disclosures in connection with the Tweed Ring, the Standard Oil Company, the Anthracite Coal Trust, and other syndicates induce the belief that the more unscrupulous capitalists seek to influence the Courts of Justice as well as the Houses of Legislature in the pursuance of their business interests.

§ 3. (c) The more or less complete control of the capital engaged in an industry, and of the market, involves an enormous power over the labour engaged in that industry. So long as competition survives, the employee or group of employees are able to obtain wages and other terms of employment determined in some measure by the conflicting interests of different employers. But when there is only one employer, the Trust, the workman who seeks employment has no option but to accept the terms offered by the Trust. His only alternative is to abandon the use of the special skill of his trade and to enter the ever-swollen unskilled labour market. This applies with special force to factory employees who have acquired great skill by incessant practice in some narrow routine of machine-tending. The average employee in a highly-elaborated modern factory is on the whole less competent than any other worker to transfer his labour-power without loss to another kind of work.[141] Now, as we have seen, it is precisely in these manufactures that many of the strongest Trusts spring up. The Standard Oil Company or the Linseed Oil Trust are the owners of their employees almost to the same extent as they are owners of their mills and machinery, so subservient has modern labour become to the fixed capital under which it works. It has been claimed as one of the advantages of a Trust that the economies attending its working enable it to pay wages higher than the market rate. There can be no question as to the ability of the stronger Trusts to pay high wages. But there is no power to compel them to do so, and it would be pure hypocrisy to pretend that the interests of the labourers formed any part of the motive which led a body of keen business men to acquire a monopoly. One of the special economies which a large capital possesses over a small, and which a Trust possesses par excellence, is the power of making advantageous bargains with its employees.

It is possible that a firm like the Standard Oil Trust may to some limited extent practise a cheap philanthropy of profit-sharing in order to deceive the public into supposing that its huge profits enrich many instead of few. But there is no evidence that the employees of a Trust have gained in any way from the economies of industrial monopoly, nor, as we see, is there any à priori likelihood they should so gain.[142]

But the practical ownership of its employees involved in the position of a monopoly is by no means the full measure of the oppressive power exercised by the Trust over labour. Since the means by which Trust prices are maintained is the regulation of production, the interests of the Trust often require that a large part of the fixed capital of the companies entering the Trust shall stand idle. "When competition has become so fierce that there is frequently in the market a supply of goods so great that all cannot be sold at remunerative prices, it is necessary that the competing establishments, in order to continue business at all (of course, under perfectly free competition many will fail), check their production. Now an ordinary pool makes provision for each establishment to run in one of the two ways suggested. Manifestly a stronger organisation like the Trust, by selecting the best establishments, and running them continuously at their full capacity, while closing the others, or selling them, and making other use of the capital thus set free, will make a great saving. The most striking example of this kind in the recent history of the Trusts is furnished by the Whisky Trust. More than eighty distilleries joined the Trust. Formerly, when organised as a pool, as has been said, each establishment ran at part capacity, one year at 40 per cent., one year at only 28 per cent. A year after the organisation of the Trust only twelve were running; but these were producing at about their full capacity, and the total output of alcohol was not at all lessened. The saving is to be reckoned by the labour and running capital which had formerly been employed in nearly sixty distilleries. It must be borne in mind that on the product of these twelve distilleries good profits were made on the capital represented in more than eighty plants. All the greater Trusts, such as the Standard Oil, the Cotton Oil, the Cotton Bagging, and the Sugar Trust, have followed this plan of closing entirely the weaker establishments and running only the stronger, thereby effecting a saving in capital and labour."[143]

Here we see a Trust exercising its economic power of regulating production. That power, as we shall see below, is not merely confined to closing the inferior mills in order that the same aggregate output may be obtained by a full working of the more efficient plant. Where over-production has occurred it is to the interest of the Trust to lessen production. With this end in view it will suddenly close half the mills, or works, or elevators in a district. The owners of these closed plants get their interest from the Trust just as if they were working. But the labour of these works suddenly, and without any compensation for disturbance, is "saved"—that is to say, the employees are deprived of the services of the only kind of plant and material to which their skilled efforts are applicable. It is probable that one result of the formation of each of these larger trusts has been to throw out of employment several thousands of workers, and to place them either in the ranks of the unemployed or in some other branch of industry where their previously acquired skill is of little service, and where their wages are correspondingly depressed. From the account given above of the changes in organisation of production under the Trust it might appear that the effect upon labour was not to reduce the net employment, but to give full, regular employment to a smaller number instead of partial and irregular employment to many, and that thus labour, considered as a whole, might be the gainer. An industrial movement which substitutes the regular employment of a few for the irregular employment of many is so far a progressive movement. But it must be borne in mind first that there is usually a net reduction of employment, a substitution not of 50 workers at full-time for 100 at half-time, but of 30 only. For not only will there be a net saving of labour in relation to the same output, the result of using exclusively the best equipped and best situated factories, but since the Trust came into existence in order to restrict production and so raise prices, the aggregate output of the business will be either reduced or its rate of increase will be less than under open competition. The chief economy of the Trust will in fact arise from the net diminution of employment of labour. As the Trust grows stronger and absorbs a larger and larger proportion of the total supply for the market, the reduction of employment will as a rule continue. Of course, if the scale of prices which the Trust finds most profitable happens to be such as induce a large increase of consumption, and therefore to permit an expansion of the machinery of production, the aggregate of employment may be maintained or even increased. But, as we shall see below, there is nothing in the nature of a Trust to guarantee such a result. The normal result of placing the ordering of an industry in the hands of a monopoly company is to give them a power which it is their interest to exercise, to narrow the scope of industry, to change its locale, to abandon certain branches and take up others, to substitute machinery for hand labour, without any regard to the welfare of the employees who have been associated with the fixed capital formerly in use. When to this we add the reflection that the ability to choose its workmen out of an artificially made over-supply of labour, rid of the competition of other employers, gives the Trust a well-nigh absolute power to fix wages, hours of work, to pay in truck, and generally to dictate terms of employment and conditions of life, we understand the feeling of distrust and antagonism with which the working classes regard the growth of these great monopolies on both sides of the Atlantic.

The following is a short summary of the findings of a Committee of Congress with reference to the relations existing between the railroad and coal companies which control the anthracite coal-fields in Pennsylvania and the coal-miners:—"Congress has found (Document No. 4) that the coal companies in the anthracite regions keep thousands of surplus labourers in hand to underbid each other for employment and for submission to all exactions; hold them purposely ignorant when the mines are to be worked and when closed, so that they cannot seek employment elsewhere; bind them as tenants by compulsion in the companies' houses, so that the rent shall run against them whether wages run or not, and under leases by which they can be turned out with their wives and children on the mountain-side in mid-winter if they strike; compel them to fill cars of larger capacity than agreed upon; make them buy their powder and other working outfit of the companies at an enormous advance on the cost; compel them to buy coal of the company at the company's price, and in many cases to buy a fixed quantity more than they need; compel them to employ the doctor named by the company and to pay him whether sick or well; 'pluck' them at the company's store, so that when pay-day comes round the company owes the men nothing, there being authentic cases where 'sober, hard-working miners toiled for years, or even a lifetime, without having been able to draw a single dollar, or but few dollars in actual cash,' in 'debt until the day they died;' refuse to fix the wages in advance, but pay them upon some hocus-pocus sliding-scale, varying with the selling price in New York, which the railway slides to suit itself; and most extraordinary of all, refuse to let the miners know the prices on which their living slides, a 'fraud,'" says the report of Congress, "on its face" (pp. 71 and 72). The companies dock the miners' output arbitrarily for slate and other impurities, and so can take from their men 5 to 50 tons more in every 100 than they pay for (p. 76). In order to keep the miners disciplined and the coal market under supplied, the railroads restrict work, so that the miners often have to live for a month on what they can earn in six or eight days, and these restrictions are enforced upon their miners by holding cars from them to fill, as upon competitors by withholding cars to go to market. (Document No. 4, p. 77.)

Labour organisations are forbidden, and the men intentionally provoked to strike to affect the coal market. The labouring population of the local regions, finally, is kept "down" by special policemen, enrolled under special laws, and often in violation of law, by the railroads and coal and iron companies, practically when and in what number they choose, and practically without responsibility to any one but their employers, armed as the Corporation see fit with army revolvers or Winchester rifles, or both; made detectives by statute, and not required to wear their shields, provoking the public to riot (pp. 9 and 93-98), and then shooting them legally. "By the percentage of wages," says the report of Congress, "by false measurements, by rents, stores, and other methods the workman is virtually a chattel of the operator."[144]

§ 4. (d) Those who admit that a Trust is in its essence a monopoly, and that it is able, by virtue of its position, to sell commodities at high prices, sometimes affirm that it is not to the interest of a Trust to maintain high prices, and that in fact Trusts have generally lowered prices. We have here a question of fact and a question of theory. Of these the former presents the greater difficulty. It seems a simple matter to compare prices before and after the formation of the Trust, and to observe the tendencies to rise or fall. This comparison has been made in a good many cases, with the result that some Trusts seem to lower prices, others to raise them. The growth of the Standard Oil Company and the strengthening of its power was attended, as we saw, by a considerable fall of price. So also we are told respecting the Cotton Seed Oil Trust, formed in 1883, that "during these four years the price of cotton seed oil fell more than eight times as much as it did during the five years before the Trust was formed."[145] The rates of the most absolute monopoly, the Western Union Telegraph Company, are very little higher than those which prevail in England, where the Government works the telegraph system at a considerable loss each year. The Sugar Trust, on the other hand, directly it was formed, raised prices considerably. The same is true of several of the other most conspicuous combinations.

Now, it is argued, if it be admitted that prices have in fact fallen under the administration of some of the strongest Trusts, it cannot be maintained that Trusts have a tendency to raise prices. In reply, it is pointed out that in almost all highly-organised modern industries improved methods of production are rapidly lowering the expenses of production and prices, and that therefore the statement that Trusts tend to maintain high prices is quite consistent with the fact of an absolute fall, the question at issue being whether the fall of prices under the Trust was as great as it would have been under free competition. Moreover, a comparison of dates appears to indicate that the Trust's prices, as we saw in the Standard Oil Company, fluctuate with the degree of their monopoly, falling rapidly under the pressure of actual or threatened competition, rising when the danger is past. Finally, opponents of the Trust allude to certain Trusts which, in spite of the greater economies of production they possess, have raised prices.