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

by John Bates Clark

The General Demand for Labor not Lessened.—It is a matter of common experience that new machines are labor displacers. At its introduction an economical device often forces some men to seek new occupations, but it never reduces the general demand for labor. As progress closes one field of employment it opens others, and it has come about that after a century and a quarter of brilliant invention and of rapid and general substitution of machine work for hand work, there is no larger proportion of the laboring population in idleness now than there was at the beginning of the period.

A Voluntary Reduction of Toil Desirable and Probable.—A full study of the effects of technical progress will show that there is never a reduction of the general field for employment in consequence of it. There is an increase of pay, and this causes a certain unwillingness to work for as many hours as men formerly worked; and there is also a change in the nature of the operations that labor performs, which tends in the direction of more comfort and less painful toil. For the famous statement of J. S. Mill that "It is questionable if all the mechanical inventions yet made have lightened the day's toil of any human being" we may safely substitute, "It is the natural tendency of useful inventions to lighten the toil of workers and to give them, withal, a greater reward for their work." Mechanical progress is the largest single ground for hope for the future of laboring humanity, and by its effects, direct and indirect, it has already insured a great alleviation of toil, with an increase in its rewards. It has helped to counteract the world crowding that for a century has gone on and the diminishing returns from agriculture which the crowding entails. Inventions may make disturbances, and their better effects may be temporarily and locally counteracted; but a society where competition rules is sure to secure the benefits in the end and does, in fact, secure them in greater and greater measure as the years go by. Such are some of the theses which research will justify.

Facts concerning Disturbances incidental to Progress.—We have first to take account of the disturbances. They are prominent in economic discussion and constitute the subject of one of the grave indictments brought against the system of competitive industry. They have actually caused great hardships in the past, as skilled handicraftsmen have seen machines come into use which, for rapidity and accuracy of work, excel the best results that long apprenticeships formerly gave. Now that machinery has possession of most of the field, there is no longer the former opportunity for displacing hand workers; but the remainder of hardships incidental to progress is not to be overlooked. This part of the dynamic movement involves present local sacrifices for the sake of future general gains. Here, therefore, there are developed antagonisms of interest which may hinder progress and, if they were extensive enough, might conceivably throw a doubt over the future of the working class. While there is no great disposition to question the ultimate benefit which mechanical progress insures, there is some uncertainty as to the process by which this benefit is extended to workers and there is a struggle to avoid the immediate cost. There is, in some quarters, a disposition to rate the cost so highly as to draw the inference that we need to adopt a socialistic plan of living for the sake of enabling workers to avoid the hardships and secure the benefits of "labor saving." It will appear, however, if we grasp the essential facts of what we may call the dynamics of method, that the tendency of it is to reduce the burdens which progress entails, and to diffuse a large share of the benefits of it among the working class. It will further appear that the socialistic plan of organizing industry would at least throw a doubt over the progress itself. Nothing, on the whole, puts the future of industry conducted on the competitive plan in a more optimistic light than the fact of the progress in productive methods which it insures. It is the strongest guaranty of a "good time coming," in which all humanity will rejoice when it comes and should rejoice by anticipation.

The Law that insures the Survival of Beneficial Processes Only.—It is self-evident that wherever there is a saving of labor needed to make a given amount and kind of product, there is an increase in the possible product that is created by the aid of a given amount of labor. If workers themselves get a share of the gains, this fact will show itself through that beneficent shortening of the working day to which we have alluded. The men will be unwilling to stand the weariness and the confinement of working through too many hours and will be inclined to take more holidays and vacations; all of which, when it comes about in a natural way, is an indication that the industrial organism as a whole has put its hand on a new and powerful lever and is enriching its members by means of it. It does, however, have to change the character of its work, and this means that some labor has to be transferred from one subgroup to another. The laborer displaced by an invention at a particular point continues to be wanted somewhere. When he and others have found their new employments, the good result appears,—the increase and improvement of goods produced,—and society as a whole then gets the benefit which would come to an isolated worker who, without remitting his labor, finds his appliances growing better and the fruits of his labor growing larger. The collective body gets a greater income than before, and the workers share in the gain.

Importance of the New Forms which the Social Income Takes.—This increasing income takes the form in which society now requires it, and it is this which brings about the readjustment of labor—or the changes in the amounts of labor used in particular subgroups—which have caused hardship in the past.

Nature of the Incidental Evils to be Dreaded.—The problem we have to face is a danger that labor may be displaced either (1) from the particular point within a productive establishment at which it is now working, or (2) from the productive establishment as a whole, or (3) from a subgroup, or (4) from the general group of which the subgroup is a part. Out of industrial society in its entirety it cannot thus be forced. There is a case in which the men whose crafts are supplanted by machines may all stay where they are and operate the machines; but that involves forcing other men to change their occupations. There are more cases in which these men may stay in the mill or shop that employs them, but not in the same department of it. There are still more cases in which they may stay in their original subgroups, and in a majority of cases they may stay in their general groups. In every instance there are places for them in the working society.

Local Expulsions of Labor.—When a single employer who is one of many competitors in an industry adopts an important labor-saving device, it may be possible for him to keep all his men employed and to let the improvement show itself wholly as a means of increasing the output. He may secure a machine which will do what twenty men formerly did. If it were possible to cut the uppers of a dozen shoes by the quick stroke of a single die, the machine that carried this armature would do the work of perhaps twelve knives handled by that number of skillful workmen. If the original number of men were retained in the cutting department, and if each of them were furnished with the new appliance, it would mean that twelve times as many uppers would be cut as were cut before the change was made. There would, of course, be no use in trying to do so much cutting of uppers for shoes, without doing twelve times as much sewing, welting, making soles and heels, etc., and to secure all this at once would require a twelve-fold enlargement of the manufacturer's plant. This is too much to secure at once. The manufacturer might perhaps double the output of his mill and nearly double the number of his employees, but that would require only two of the twelve cutters he formerly had. The new workers would be in parts of the mill other than the one where the great saving of labor was effected. Ten men would be removed from the cutting department, and the two left there would cut, by the aid of the new machines, twice as many uppers as the whole number cut before, and that would require the furnishing of a double number of all other parts of the shoes and a double working force to make them. The ten men liberated from the cutting department would be available for this purpose, and new ones would be brought in and set sewing, pegging, lasting, welting, etc. Within a single establishment, therefore, a radical saving of labor at one point usually involves some shifting of labor from that point to others, though it may increase the total number employed in the establishment which secures the economical device.

The Effect on a Subgroup of an Improvement by One Entrepreneur.—If an employer who has this experience is one of a hundred in the shoemaking industry and the only one who secures the cutting machine, the market will receive as large an increase of the product as would be involved by multiplying the output of his mill by two, without requiring that the price should be more than slightly reduced. An improvement which is monopolized for a time by a single entrepreneur seldom renders it necessary to reduce the aggregate of the labor in his employment. Far more often it makes it for his interest to increase the number and to put new labor in every part of the plant where no improvement in method has been made. It is often the fact, however, that labor has to abandon other establishments in this subgroup, and enough of it may do so to cause the amount in the entire subgroup to become somewhat smaller by reason of an improvement. In the case of a single employer there is a bare possibility that no one should be moved, in consequence of an economical invention, even from one part of the mill to another. The manufacturer of our illustration might even keep his twelve cutters at work after the introduction of the machines referred to and do twelve times as much cutting, provided that he could quickly increase his output of finished shoes to twelvefold its former amount. There are practical reasons why he could almost never do this; but if he actually did it, he might, by some reduction in the price of shoes, find a market for this increased product. If the reduction of price were great, some competitors would probably go at once out of the business; but it is never the policy of a successful producer to make unnecessary haste in reducing prices, and, as a rule, the reduction is gradual. The increase of product from the very efficient mill must cause a certain reduction in the rate at which it sells its goods, and this is apt to force manufacturers who are particularly ill equipped and cannot keep pace with the rate of improvement which their enterprising competitor establishes to go out of business. They thus relieve the market of so much of the product as they have contributed and make a place for the increased output of the newly equipped mill. In such a case the total output from the subgroup is not very greatly increased, and the price of the product does not need to be greatly reduced.

Standard Prices fixed by Cost in the most Economical Establishment.—It is a vitally important fact, as we shall soon see, that the price of an article is, in a dynamic society, always tending toward the cost of making it, not in the most inefficient establishment, where it is produced "at the greatest disadvantage," but in the most efficient one of all. The ultimate effect of any great improvement is naturally to close the shops of all employers who do not adopt it or get an equivalent advantage of some kind. Ultimately the whole subgroup will be in the state of efficiency it would have reached if the improvement had been adopted by every entrepreneur on its first appearance.

The Effect of an Improvement in Production which is quickly adopted by a Whole Subgroup.—When an improvement is immediately adopted, not by one employer merely, but by all employers in a subgroup, it is likely to cause a quicker displacement of labor from the subgroup as a whole. A very economical machine introduced by its inventor or manufacturer and quickly adopted by all employers at A´´ would nearly always force a certain number of laborers to leave that industry and find employment elsewhere, if it were not for one commercial fact, namely, the reduction in the price of the product and the consequent enlargement of the demand for it.