The growth of the manufacturing industry in the United States has been phenomenal. Stated in the methods of valuation followed by the census above referred to—the gross valuation—the value of manufactures produced in the United States has been, speaking in round terms, in 1850, 1 billion dollars, in 1860, a little less than 2 billion, in 1870, 4¼ billion, in 1880, 5⅓ billion, in 1890, 9⅓ billion, in 1900, 13 billion, and in 1905, a little less than 17 billion, though the figures usually quoted for 1905 are 14.8 billion, owing to the fact that the Census of 1905 only included factory products, and added parenthetically an estimate of 2 billion as the probable value of the “mechanical and neighborhood industries,” thus bringing up to nearly 17 billion the total properly comparable with
the totals of earlier periods, which in all cases included the mechanical and neighborhood industries.
That this rapid growth in the value of manufactures has been far in excess of the consuming capacity of the home population is evidenced by the growth in exportation of manufactures, which aggregated in 1880, 122 million dollars, in 1890, 179 million, in 1900, 484 million, and in 1908, 750 million. Manufactures formed in 1880 but 15 per cent of the total exports, in 1890, 23 per cent, in 1900, 35 per cent, and in 1908, 41 per cent of the total merchandise exported from the United States.
IV. CAPITAL IN MANUFACTURING.
Another factor which entered into the modern system of production, and a very important one, was that of capital. The factory could not be established or operated without considerable amounts of money or its equivalent, credit. The machinery which transformed the raw material into the finished product, the material itself, the very buildings in which the work was performed, the payment for the transportation which brought it together, the wages of the men and women engaged in the work, all required capital, and in large sums. The accumulation of this capital, its management, the keeping of accounts of cost of material and labor and of the finished product, required financial skill and acquaintance in the markets in which this capital could be obtained; for often the sums required were in excess of the quantity possessed by the individual who had invested his all in the buildings and machinery, and must needs borrow of some other capitalist the additional sums required for purchasing material and paying the wages of his workmen. Sometimes the owner of the capital preferred to supply it and take a proportionate share in the earnings of the factory, and thus developed the company. Then, as the business grew and the investments of various men in a single establishment increased,
it became necessary for them to take an active share in the management either in person or by representatives who became known as the “directors” of the work.
Thus arose the successors of the individual manufacturer, the company, and the corporation. Man must die and the death of an individual manufacturer, or the manager of a manufacturing firm or partnership, must affect disadvantageously the interests of the factory and its employes. Thus the importance of organizations which would continue unchanged in form and general management in case of the absence or death of any individual. This was one of the reasons for the establishment of the corporation. More important than this was the facility which it offered to holders of capital in sums large or small to invest their money in manufacturing without being compelled to give their individual attention to the industry in which the money was invested. The board of directors, which the investors might choose, managed the business either by personal attention or by the selection of competent and experienced persons for that service, and the investor felt assured that his money would be properly managed by the competent business men forming the board of directors and the experts whom these directors might employ to manage the details. Hence the corporation, under which the manufacturing establishments grew to enormous proportions, employing thousands and tens of thousands of people, and bringing material from the places in which it could be most cheaply obtained, investing money if need be in facilities for transporting and even producing the raw material, and cheapening the cost of production.
Another step which increased the importance of capital as a factor in the great manufacturing industries of the world came in more recent combinations of great corporations, in which a number of great manufacturing establishments agree to operate under one general management,
thus adjusting production in the various lines of manufacture to the general demand, existing supply and prospective consuming power of the markets, establishing systematic methods for exploiting and selling the finished product, and so further minimizing cost of production and distribution. This last combination, the corporation of corporations, is generally known as the “trust” or “combine,” and under it the great manufacturing industries of the world have reached their greatest development, the cost of production has been minimized, the field for the selection of the materials has been enlarged, and the area in which the products are offered for sale also greatly extended.
While these great organizations, made up by placing under one general management a number of great establishments manufacturing articles of like character, are doubtless able to reduce the cost of production and distribution and prevent production in excess of probable demand, it is also true that they are in many cases able to exercise a greater control over prices of labor, of material and of finished product than when operating singly.