Essentials of Economic Theory / As Applied to Modern Problems of Industry and Public Policy

by John Bates Clark

Capital as well as Labor Apportioned.—As we have said, there is a corresponding division of capital or an assignment of different parts of the total fund to different employments; and this is made in the same way as is the division of labor and results in an equally nice adjustment. Each bit of capital, like each workman, becomes, as it were, a specialist. It may take the shape of an instrument which is capable of performing only its one service, like the loom, which is capable of doing nothing except weaving; but even if the tool is somewhat adaptable, like a hammer which can be used in several trades, it is, as it were, stationed in one trade and held, by economic influences, at that one point in the system. The house carpenter keeps his hammer though the cabinet maker could use it. Each bit of capital helps to create a particular utility, and the number of units of the fund that each subgroup contains is, as we shall see, so arranged as to enable the fund as a whole to do its utmost for the general good. It is all without the use of force, since each bit of capital does what its owner pleases to have it do.

A Government Presupposed.—Of course there must be a government over it all. Such a method of producing wealth could never continue unless property were secure and unless it were made so without much effort on the part of its owners. A blacksmith who should have at one moment to use his hammer as a tool and at another to wield it as a weapon of defense could make but poor headway, and a society in which such a state of things existed in various trades would be too anarchic to permit the elaborate division of trades which is the key to success in industry. The most noticeable fact about organized production is that man is forever letting go the thing he has made or helped to make and allowing it to pass out of sight and reach without losing or greatly imperiling his title to the amount of wealth it represents. He casts his bread on the waters, but they bring him a return for it. Under these circumstances it is impossible for him to protect his product as the savage protects his tools, his clothing, and his hut. What a modern worker makes passes into the hands of other men and gets completely out of the maker's direct personal control. If he wanted it again, he could never find it; and if he could find it, it would be in a new shape and other men would have claims upon it. The man who has sold some hides that in the end have become shoes can hardly identify his product on the shelves of retail shoe dealers all over the country, or perhaps all over the world. If by a miracle he could find the particular bits of leather that in their raw stage he himself has furnished, they would be in new and far more valuable forms than they were when he had possession of them. The shoes contain utilities which the man who furnished the hides cannot claim to have created. They have been changed and improved by elements contributed by many other persons, such as manufacturers, carriers, merchants, etc., and he could never carry away the concrete thing that he himself produced without carrying with it other men's property.

The Surrendering of Goods and the Retention of Values Features of Social Industry.—Socialization of industry means, then, that individuals forego all effort to retain their own concrete products, but that they retain certain parts of the value of the products to which they have made contributions. The value of A´´´ when it is sold is claimed by men at A´´´, A´´, A´, and A according to some principle. The values of B´´´ and C´´´ can be followed until they reach the pockets of the men who have contributed their several shares to the making of these things. All this requires a government and a well-developed system of laws and courts for the protection of property, including the protection of it in the form of a claim to a value that is embodied in things which have gone beyond the maker's reach. Property here takes a refined form which requires that the man should forego all desire to keep the literal thing he has made and should make it his aim to retain the value of it in some other form. It is a comparatively simple matter to guard a concrete article which a man has in his possession, though even that requires some energy on the part of the police force and is never quite perfectly accomplished; but it is a far more difficult matter to enforce a claim that a man has against other men, in consequence of some utility that has been created by him but has gone away from him and mingled with utilities created by many other persons in a product that the man will never see. It is the problem of guaranteeing to the shoemaker the due return for the stitches he has put into shoes when the shoes themselves have gone to buyers and wearers in every quarter of the land and many quarters of the globe.

Groups under a Socialistic State.—In political economy as distinct from general economy we take one premise from sociology and another from politics. We assume that society exists and that it has taken on a political character, by establishing laws with courts to interpret them and officials to enforce them. We do not, however, assume that the direction of industrial affairs is in the hands of such officials. In the main industry is organized in a spontaneous way. Men choose such occupations as they like, and when there are too many of them in one group and too few in another, the rewards naturally increase in the group where a larger force is needed, and this lures men in that direction.

In a socialistic society such adjustments would be made under the direction of the state. Officials would have to decide when more workers are needed in the A series and less in the B series and would have to use either inducements or some kind of compulsion in order to move them from the one group to the other. What we actually have to deal with is a society that shapes itself by the free acts of individuals, and we have to see how, in this way, it organizes itself for production and divides among different claimants the product that, by the joint action of all of them, it creates.

Gains from the Organization of Industry.—The advantages of the division of labor consist in an increase in the quantity of products and in an improvement in their quality, and the quantitative gain is almost beyond computing. The advantage appears mainly in the middle and upper subgroups of the series, which transform the materials, rather than in the lower subgroups, which produce them; and yet there is a gain everywhere from such organization. A man produces far more when he performs the same operation many times than when he goes through a whole series of unlike operations. Moreover, he can perform the single operation far more accurately and can thus attain a more perfect result. He can learn his minute trade more easily than he could a complex one. Where unusual strength or skill is required, the work may be given to persons who have the requisite quality so that a good product can be insured, and none of the labor of these superior workers will need to be wasted on work which inferior labor can perfectly well perform.

Improvement in the Forms of Capital.—The greatest of all the advantages that come from this division and subdivision of wealth-creating processes comes in the way of applying machinery. A machine is a hopeless specialist and can, as a rule, put only a single minute touch on the material submitted to it; and the introduction of machines differentiates capital in a way that is parallel to the minute subdivision of labor. If the machine is to work at all economically, it must put its touch quickly on one after another of a series of articles, as they are submitted to it in uninterrupted succession. If only one kind of machine were employed in the making of shoes—if, for instance, the sewing of the uppers to the soles were done on sewing machines, even though all the rest were done by hand—it would be natural and almost necessary to have one class of workers to prepare the uppers, another to prepare the soles, and a third to sew them together by aid of the machine. When the several stages of the process are thus given over to different classes of workers, the situation is ripe for the application of more machines, and inventors readily devise apparatus that will perform one or another minute part of the manufacturing process. In the end most branches of manufacture take such shapes that the raw material is intrusted to a series of machines and passes from one to another by a nearly continuous movement, till it emerges from the hands of these automata as complete as any manipulation can make it and ready for the merchants who will convey it to their customers.

Economy of Capital.—There is an economy of capital involved in the fact that instruments can be used thus continuously. A worker does not have to have several sets of tools, many of which would be idle the greater part of the time, as would be the case if the man performed several unlike operations; but the greatest economy comes from the energy, rapidity, and accuracy with which the new instruments act. The tools are far more efficient than they could be if human muscles furnished the power and eyes and nerves supplied the deftness and accuracy that the making of the goods requires. Automata which men set working excel hand tools with men wielding them by a greater ratio than can be calculated.

FOOTNOTES

[1] We use this term in a broad sense, including agriculture and commerce as well as manufacturing.