[CHAPTER FOUR]
THEORY OF INDUSTRIAL ORGANIZATION
Modern industrial conditions may be considered either a priori or a posteriori, either theoretically or de facto. We may examine the principles of economic organization, and conclude that they will or will not lead to low wages; or we can go to the facts themselves, and decide from an examination of actual conditions whether or not wages are low, etc., always remembering the standard we have adopted.
Beginning with the first method, we may, speaking roughly and with sufficient allowance for monopolies, say that we live under a competitive system. Men compete with others for their share in the product of industry. Goods are not put in one general fund and distributed according to each one's needs. Nor are they awarded to suit the whim of some ruler. Undoubtedly our present industrial organization is individualistic rather than socialistic, and its chief characteristic is probably a rivalry between its various members. Some assume that competition is universal and unrestrained. Then they draw conclusions as to the present system from what would happen if such competition prevailed. Others forget that competition is as universal as it really is, and that it exists not only between laborer and laborer to get the job, but between capitalist and capitalist to secure the laborer.
To subscribe to either of these errors will vitiate any conclusions as to social policy. For if unrestrained competition have certain evil tendencies, we cannot therefore assume that the present restricted form will have such results. And the fact that competition exists between capitalists as well as between laborers has very wide-reaching implications. It means no less than that competition may raise wages as well as lower them.
The average person is apt to look upon an object as drawn only to the earth by gravitation. He forgets that the same force is also pulling at it in an opposite direction. And in the same way the average person is likely to forget that competition is continually pulling wages both up and down. If we imagine some object suspended between the earth and the moon, and being constantly drawn towards each according to some power inherent in them which varies from time to time so that the object now approaches one and now the other, we shall have a rough illustration of how competition affects wages.
We can look upon the amount of wages as the object of attraction between competition on the part of laborers and competition on the part of capitalists. According as competition among capitalists is keen as compared with that among laborers, wages will rise, and vice versa; just as when, in our illustration, gravity was strong in the moon, the object rose towards it, and when it was stronger in the earth the object fell towards that body. But in both cases the result is due to the same force, though acting from different points. It would be an error, therefore, to attribute all the evils of our present system to competition, and all the good to some other agency. Competition has good results as well as bad, and this two-fold influence must always be remembered.
Doubtless absolutely unrestrained competition between laborers with no corresponding rivalry between capitalists would depress wages. But such competition does not exist. Competition is not absolutely unrestricted. It is limited by organization among the workmen, by legislation, by natural ability, and in various other ways. As a result, the effects are limited in various ways. If a bricklayers' union is strong enough practically to eliminate competition between this class of laborers while capitalists compete with each other to obtain their services, then the working out of competition has been modified in such a way as to have an upward effect upon wages.