| A´´´ | B´´´ | C´´´ |
| A´´ | B´´ | C´´ |
| A´ | B´ | C´ |
| A | B | C |
Causes of Downward Flow of Labor in the Group System.—A larger population means, of course, not merely an increase in the amount of labor performed, but also an increase in the number of consumers. It means more mouths to feed and more bodies to clothe. It entails also, according to principles that we have already studied, a lower earning power and a lower rate of pay for labor. This means that simple food, cheap clothing, inexpensive houses, furnishings, etc., constitute a larger element in the consumers' wealth of society than they have heretofore done. Society uses fewer luxuries and more necessaries, and the necessaries of life are products in which raw materials predominate and costly form utilities are wanting. This makes a heavier draft upon the land than does the production of highly wrought articles of the same value.
Luxurious articles are fashioned with a great amount of artisan's or artist's labor and a relatively small amount of the labor of cultivators and miners. The subgroups A, B, and C are the ones that furnish the rawest materials, and it is they, therefore, that receive the largest portions of the new labor that enters the field.
How Economic Friction works to the Disadvantage of Immigrants.—Unless capital grows more rapidly than population, there is a certain friction to be overcome in obtaining places for new laborers. If they come largely as immigrants, they are crowded at the points of disembarkation and are then scattered over a large territory. They may have to gain employment by offering to entrepreneurs some inducement to take them. If capital has not increased, and the entrepreneurs are in no special need of new men, they will take them only at a rate of pay which is low enough to afford of itself a slight margin of profit. If the capital has already grown larger and the new men are needed, the situation favors them, and their pay is likely to be as high as it was before, or higher.
The Effect of Increasing Capital.—The growth of capital has an opposite effect. It means a lower rate of interest, though it means more interest in the aggregate, since it insures a larger fund on which the interest is received. The rate does not decline as rapidly as the amount of the fund increases, and this insures a larger gross income from the fund; and it also insures larger individual incomes for many persons. There is, then, a large number of people who are in a position to make their consumption more luxurious, and this causes an upward movement of labor and capital in the group system. More workers will be needed in the subgroups A´´´, B´´´, and C´´´, where raw materials receive the finishing touches, and also in the other subgroups above the lowest tier. It is to these subgroups that a large portion of the new capital itself will come, and the labor will come with it. Larger incomes, more luxury, more labor spent in elaborating goods as compared with that required for procuring crude materials,—such is the order.
Effect of an Increase of Both Labor and Capital.—It is clear that a certain increase of capital might practically neutralize the increase of population, in so far as the movements thus far considered are concerned, and a greater increase of capital would reverse the original downward movement caused by the increase of labor and result in a permanent upward movement toward the subgroups A´´´, B´´´, and C´´´. In this case the men occupy themselves more and more in making the higher form utilities. They make finer clothing, costlier furniture, etc., and the new production requires proportionately less raw material than did the old. This is the supposition which corresponds to the actual facts. Capital is increasing faster than labor, and consumption is growing relatively more luxurious; dwellings, furnishings, equipage, clothing, and food are improving in quality more than they are increasing in quantity. Goods of high cost are predominating more and more, and the subgroups that produce them are getting larger shares of both labor and capital. Population drifts locally toward centers of manufacturing and commerce. It moves toward cities and villages in order to get into the subgroups which have there their principal abodes. The growth of cities is the visible sign of an upward movement of labor in the subgroup series.
A Change in the Relative Size of General Groups.—If all the steady movements of labor and capital were stated, it would appear that a relative increase in the amount of labor, as compared with the amount of capital, would enlarge the three general groups, AA´´´, BB´´´, and CC´´´, and reduce the comparative size of the general group HH´´´, which maintains the fund of capital by making good the waste of active instruments. Gain in capital estimated per capita would cause relatively more of the labor and more of the fund of capital to betake itself to the group HH´´´. The movement toward the upper subgroups which is actually going on is attended by a drift toward this general group. An increase of luxurious consumption and an enlargement of the permanent stock of capital goods go together.
Regularity and Slowness of Movements caused by Changes in the Amounts of Labor and Capital.—The important fact about the movements thus far traced is that they are steady and slow. They do not often call for taking out of one part of the system mature men who have been trained to work there. They are movements of labor which do not, in the main, involve any considerable moving of laborers from group to group. The sons of the men in the subgroup A do not all succeed to their fathers' occupations, but many of them enter A´, A´´, and A´´´, so that labor moves from the lowest subgroup to higher ones. Such a transfer of labor entails few hardships for any one, and in general it is to be said that all the movements of labor and capital which are occasioned by quantitative changes in the supply of these agents are of this comparatively painless and frictionless kind. About changes caused by new methods of production there is a different story to tell. The transformation of the world does not go on without some disquieting results, however inspiring is the remote outlook which they afford. The irregularity of the general movement, the fact that it goes by forward impulses followed by partial halts, is a further serious fact. Hard times present their grave problems, and we need to know whether it is necessary that dynamics—the natural and forward movement of the industrial system—should produce them. This problem is for later consideration.
Movements caused by Changes in the Processes of Production.—Mechanical inventions are typical movers of labor and capital—constant disturbers of what would otherwise be a comparatively tranquil state. Dynamos for generating electricity and devices for conducting it to great distances from its sources have done much to rearrange the society of a score of years ago, as economical steam engines had done at an earlier date. Every device that "saves labor" calls for a rearrangement of labor in the system of organized industry.
In a perfectly static condition there would be, as we have seen, a standard shape for all society, which means a normal apportionment of labor and capital among the producing groups and subgroups and also among the local divisions of the general area. The elements would subside to a state of equilibrium and become motionless, as water finds its level and becomes still in a sheltered pool. The body of fluid takes its standard shape and retains it, so long as no disturbing force appears. Now, society would have such a standard shape and would require, in the absence of dynamic changes, a relatively short time in order to conform more or less closely to it, if it were not for the unnatural apportionment of population in different parts of the area that the society inhabits and the obstacles which wholesale migrations encounter. For the solution of problems of the present and the near future we must accept as a standard the quasi-static adjustment of the population and the consequent quasi-static selection of industries in the different local divisions of the broad area—the arrangement that we have described as locating an excess of manufacturing in the more densely peopled areas and an excess of agriculture in the more sparsely settled ones. With this qualification it may be said that there is a standard apportionment of labor and capital among the producing groups, and that these agents gravitate powerfully and even rapidly toward it. If there were a certain amount of labor and capital at A, a certain amount at B, and so throughout the system, this standard shape would be attained, and the elements would not move, except as a very slow movement would be caused by changes in the comparative density of population of different regions.[1] This standard shape would long remain nearly fixed if it were not for the appearance of the dynamic influences which are so active within the area we are studying.