There is no doubt as to the truth contained in this last theory. It helps to explain the rhythmic periodicity of
crises. After every period of business depression confidence revives and hope is renewed; overestimation of the success of new ventures is inevitable. Then follows a mistaken investment of capital in certain lines of production, as in railroads in 1884, and a relative over-production at profitable prices of certain commodities. The true explanation seems to be found in a combination of the over-production and over-capitalization theories.
The practical problem that presents itself in this connection is the question as to whether it is possible to prevent the recurrence of crises. In view of the explanation just given it would seem that they must be regarded as unpreventable as long as industry is carried on under the competitive capitalistic system of production and the modern credit system. Moreover, crops differ in amount from year to year and probably always will. Human production and human genius are unequal. Crises may be regarded as the price a progressive society pays for its advance, and they may be expected to recur pretty regularly at periodic intervals. Their disastrous effects may, however, be greatly lessened by wise currency legislation, by greater care in granting credit, and by greater wisdom in the direction of individual effort.
VII. THE MODERN WAGE SYSTEM.
We have already characterized the modern system of industry as capitalistic, that is, as involving the use of expensive and complex machinery in factories under the control of the capitalist managers of industry. As we have seen, such a system has caused an enormous increase in the production of wealth; it has also raised the general standard of comfort and the level of wages, and has relieved labor to a considerable extent of the deadly strain of hard manual toil that was characteristic of preceding systems. The factory system, under which capitalistic production is now carried on, may also fairly be credited
with other beneficial results: as steadiness and punctuality are essential, it has on the whole led to increased sobriety and temperance; the work in general is healthier, being performed under better sanitary conditions than under the old domestic system; the intellectual status of the workingman has been raised, as vastly more intelligence is required of a skilled machine operator than of the old-time hand laborer; and finally the general well-being of the working class has been improved, as they have shared in the larger production made possible by machine methods. But, on the other hand, the new processes and methods have been accompanied by great abuses, though never so great in this country as in England. Long hours, the employment of women and children, the weakened economic position of the laborer, fluctuations in production, liability to be without employment, industrial accidents, the abolition of personal ties between employer and employe, the crowding of workmen into a small space to work by day and their concentration in city tenements by night—these are some of the problems for which the factory system must be held responsible. The condition and position of labor have been vitally affected. So far we have considered mainly the problems connected with the organization and use of capital. We must now take up the various questions connected with the relation of labor to capital and to the capitalistic system of production.
One of the most vital factors in the situation—which we must frankly admit at the start—is the existence in modern industrial society of a distinct wage-earning class. It is perfectly obvious that under present conditions of production great capital or great ability is necessary in order to become the manager of an industrial enterprise. Most laborers do not possess either the one or the other of these, and although there are fortunate examples of industrial leaders who have risen from the ranks, the general rule is, once a wage-earner always a wage-earner.
The number of those who can achieve industrial independence is moreover growing smaller as business becomes more specialized and centralized. The laborer therefore belongs to a class, which is rapidly developing what the German socialists call class-consciousness, that is, the feeling that he belongs to a distinct industrial group with interests different from and often antagonistic to those of other groups or classes. In his struggles with employers over wages this antagonism of immediate aims obscures the deeper mutuality and interdependence of their really complementary interests and not infrequently leads to a feeling of hostility, finding expression in strikes and labor agitation.
In the transition to the factory system Mr. John A. Hobson[9] points out that the position of the laborer has been one of increasing dependence in the following five important points: (1) The ownership of material—at first the worker owned this and made it into the finished product, but now he has only a passing interest in a small part of the process of working it up. (2) Ownership of tools—he retained these up to the time of the introduction of machinery, but now seldom owns them. (3) Control of productive power—with the displacement of hand labor and muscular power by steam-driven machinery, he no longer owns even this. (4) Relations between workers and employers—they were formerly on an equality; under the guild system the master and the apprentice had the same social position; now the laborer has sunk in the scale, or the employer has risen, until the only bond between them is, as Carlyle said, the “cash nexus.” A case was recently instanced where a workingman who had been working in a factory met his employer for the first time at the end of seventeen years. (5) Workplace—until the establishment of the factory system this had always been the home; now
it is the factory, and there is a complete divorcement between work and the home.