Industrial Democracy/Part III Trade Union Theory

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Industrial Democracy Part III Trade Union Theory
by Sidney Webb and Beatrice Webb
Part III



Down to within the last thirty years it would have been taken for granted, by every educated man, that Trade Unionism, as a means of bettering the condition of the work- man, was " against Political Economy." ^ This impression was derived, not so much from any explicit declaration of the economists, as from the general view of wages which enlightened public opinion had accepted from them. The*, Theory of the Wage Fund, in conjunction with closely'; related theories of the accumulation of capital and the increase of population, seemed definitely to contradict the fundamental assumptions on which Trade Unionism de- pended. If Political Economy was understood to demon- strate it was plainly impossible, in any given state of capital and population, to bring about any genuine and permanent rise of wages, otherwise than in the slow course of generations, it was clearly not worth while troubling about the pretensions of workmen ignorant of economic science. Accordingly, for the first three quarters of the century we find, beyond the accustomed denunciation of outrages and strikes, practically nothing but a general and undiscriminating hostility to Trade Unionism in the

/i Even the Christian Socialists, the Positivists, and the champions of labor in Parliament usually regarded the pretensions of Trade Unionism as being in contradiction to the orthodox Political Economy, in which they accordingly did not believe I

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abstract, couched in the language of theoretical economics. And although the theory, with all its corollaries, has now been abandoned by economic authority, it still lingers in the public mind, and lies at the root of most of the current middle-class objections to Trade Unionism. We must there- fore clear the ground of this obsolete criticism before we can proceed to estimate Trade Union pretensions in the light of the economic science of to-day.

We need not here enter into any detailed history or elaborate analysis of the celebrated Theory of the Wage Fund.^ As widely popularised by J. R. M'CuUoch, from 1823 onward, this theory declared that " wa ges depend at any particular moment on the magnitude of the Fund or Capital appropriated to the pay mSniTot wa'gesTom par'ed with the number of laborers. . . . Laborers are everywhere the divisor, capital the dividend."^ Nor was this statement confined to the truism that the average wages of the wage- receiving class was to be found by dividing the aggregate

' The most recent, and in many respects the best, account of this celebrated theory is to be found in Wages and Capital ; an Examination of the Wages Fund Doctrine (London, 1896), by F. W. Taussig, Professor of Political Economy in Harvard University. A History of the Theories of Production and Distribution in English Political Economy from iyy6 to 184.8, by Edwin Cannan (Ljpdon, 1893), contains an acutely critical analysis. The fullest exposition of the modem economic view is, perhaps. The Wages Question : a Treatise on Wages and the Wages Class (New York, 1876; London, 1891), by F. A. Walker. In the Principles of Economics (Book VL ch. ii. page 618 of 3rd edition, London, 189s) Professor Marshall explains in a long note what Ricardo and Mill really meant by their statements on the wage-fund.

2 Article on "Wages" in Encyclopedia Britannica (4th edition, 1823), republished with additions as A Treatise on the Circumstances which determine the Rate of Wages and the Condition of the Labouring Classes (London, 1851). A widely read American follower of Ricardo and M'CuUoch put the case as follows : " That which pays for labor in every country is a certain portion of actually accumulated ca|^tal, which cannot be increased by the proposed action of Govern- ment, nor by the influence of public opinion, nor by combinations among the workmen themselves. There is also in every country a certain number of laborers, and this number cannot be diminished by the proposed action of Govern- ment, nor by public opinion, nor by combinations among themselves. There is to be a division now among all these laborers of the portion of capital actually there present " (Elements of Political Economy, by A. L. Perry, New York, 1866, p. 122). We understand that this work has run through about twenty editions, and is still a popular text-book in the United States. An edition was published in London in i8gi.

The Verdict of the Economists 605

" fund devoted to their payment " by the number of the laborers for the time being'. What was insisted on was that the amount of this " fund " was necessarily predetermined by the economic circumstances of the community at any given time. The amount of the " capital " depended on the extent of the savings from the product of the past. The extent of the fund to be appropriated to the payment of wages depended on how much of that capital was required for plant and materials. Hence the amount of the Wage Fund at any particular moment was absolutely predetermined, partly by the action of the community in the past, and, as suggested by Cairnes, partly by the technical character of the industries of the present.^ " There is supposed to be," wrote J. S. Mill, " at any given instant a sum of wealth which is unconditionally devoted to the payment of wages of labor. This sum is not regarded as unalterable, for it is augmented by saving and increases with the progress of society ; but it is reasoned upon as at any given moment a predetermined amount More than that amount it is assumed that 'the wage-receiving class cannot possibly divide among them ; that amount and no less they cannot but obtain. So that the sum to be divided being fixed the wages of each depend solely on the divisor, the number of participants." ^ It was a plain inference from this view that, whatever might automatically occur in the future if one factor increased faster than the other, the terms of the current bargain for

• Some Leading Principles of Political Economy newly expounded (London, 1874), PP- 199-200.

2 Mill's review of W. T. Thornton's book On Labour, in Fortnightly Review, May 1869 ; reprinted in Dissertations and Discussions (London, 1875), ^'^• iv. p. 43.

V'This conception of a definitely limited wage-fund, all in hand at the beginning of the year, and all replaced at its close, seems to have been derived from the case of the English wheat -growing farmer, who was supposed to calculate, when he had reaped his harvest, how much he could lay out in wages until the next harvest was gathered in. A closer analogy would have been the practice of English Government Departments, such as the Admiralty Shipbuilding ,j[aidsr which have allottedtothem, at the beginnmg of^each tinancial year, definite sums, theoretically insusceptible of increase, to be expended in wages during the year.

6o6 Trade Union Theory

the hire of labor at any particular moment were, as regards the wage-earning class as a whole, absolutely unalterable, whether by law or by negotiation. " There is no use," the workmen were told, " in arguing against any one of the four fundamental rules of arithmetic. The question of wages is a question of division. It is complained that the quotient is too small. Well, then, how many ways are there to make a quotient larger? Two ways. Enlarge your dividend, the divisor remaining the same, and the quotient will be larger ; lessen your divisor, the dividend remaining the same, and the quotient will be larger." ^ The wage -earners in the aggregate were at any moment already obtaining all that could possibly be conceded to them at that moment, and any gain made by one section of them could only be made at the expense of their weaker colleagues. Conversely, any reduction suffered by one section of the wage-earners was necessarily and contemporaneously balanced by gain to some other section. " All the capital," declared M'Culloch, "through the higgling of the market will be equitably distributed among all the laborers. Hence it is idle to suppose that the efforts of the capitalists to cheapen labor can have the smallest influence on its medium price." ^ It followed with no less logic that any efforts of laborers in the opposite direction were equally futile. Public opinion

' Elements of Political Economy, by A. L. Perry, p. 123. A* Even after a lifetime of economic study, M'CuUoch could deliberately repeat that " all the wealth of the country applicable to the payment of wages is uniformly, in all ordinary cases, divided among the laborers. , . . It is impossible for the employers of labor artificially to reduce the rate of wages " {A Treatise on the Circumstances which determine the Rate of Wages and the Condition of the Labouring Classes, London, 185 1, pp. 48-49). "A single rich man may take advantage of a single poor man by availing himself of the necessities or simplicity of the latter. But the body of capitalists in any country will always pay away in wages to the body of working men all the funds which they have applicable to the employment of labor " {An Essay on the Relations of Labour and Capital, London, 1854, by C. Morrison, p. 18). Fawcett apparently retained the same view down to his death. " The capital of the country provides its wage- fund. This wage-fund is distributed amongst the whole wage-receiving popula- tion, and therefore the average of each individual's wages cannot increase unless either the number of those who receive wages is diminished, or the wage-fund is augmented." — Mantial of Political Economy, by Henry Fawcett (London, 1869), pp. 206-207 ; ^«/<, by Leslie Stephen (London, 1886), p. 157.

The Verdict of the Economists 607

accordingly unhfesitatingly refuted Trade Unionism, to use the words of one of the most eminent of modern economists, " with a summary reference to the doctrine of the wage-fund. Strikes could not increase the wage -fund, therefore theyj could not enhance wages. If they should appear to raise the ' rate in any trade, this must be due either to a corresponding loss in the regularity of employment or to an equivalent loss, in regularity or in rate, by some other trade or trades occupying a position of economical disadvantage. Hence strikes could not benefit the wages class." ^ But the theory went much further than the mere negativing of strikes and combinations. It left no room for any elevation of the wage-earners even if the improvement justified itself by an increase in productive capacity. If one section of the wage-earners succeeded, by peaceful negotiation or law, in so bettering their own conditions of employment as positively to increase their productive efficiency, this would still bring no greater reward to the class as a whole. Though the increase in the cost of their labor might soon be made up to their employers by its greater product, yet this increased drain on the wage-fund must automatically have depressed the condition, and so lowered the efficiency of other sections, with the result that, though the inequality between the sections would have increased, the aggregate efficiency of the wage-earners as a whole would not have risen. Thus every factory act, which increased the immediate cost of woman or child labor, had to be paid for by a contemporaneous decrease in somebody's wages; and every time a new expense for sanitation or precautions against accidents was imposed on the capitalists, some of the wage-earners had automatically to suffer a diminution of income.^

X> The fVagxs Question, by F. A. Walker, p. 387. M'CuUoch had expressly observed in his article on "Combinations" in the Encyclopedia Britannica (1823) that "nothing but the merest ignorance could make it supposed that wages could really be increased by such proceedings. They depend on the principle which tiey cannot aflfect, that is on the proportion between capital and population ; and cannot be increased except by the increase of the former as compared with the latter." Jf * It followed logically that bad legislation could not depress, and good

6o8 Trade Union Theory

.Though public opinion accepted the statical view of the wage -fund as conclusive against the possibility of any general alteration of the terms of the labor contract, this crude conception supplied no answer to the assertion that the workmen in any particular trade might need to defend their own wages against special encroachment, or that they might find it possible, if only at the expense of other sections of wage-earners, to exact better conditions for themselves. But here the Trade Unionists found themselves confronted with the economic " laws " determining the employment of capital. " If," observed M'Culloch, " the wages paid to the laborers engaged in any particular employment be improperly reduced, the capitalists who carry it on will obviously gain the whole amount of this reduction over and above the common and ordinary rate of profit obtained by the capitalists engaged

legislation could not raise, the condition of the wage-earners. M'Culloch and Harriet Martineau went this length with regard to Combination Laws and Factory Acts respectively. " Looking generally to the whole of the employments carried on in the country, wrote the former in 1823, and again in 1851, "we do not believe that the Combination Laws had any sensible influence on the average and usual rate of wages. That they occasionally kept wages at a lower rate in some very confined businesses than they would otherwise have sunk to may be true, though for that very reason they mttst have equally elevated them in others" (article on "Combinations" in Etuyclopadia Britannica, 4th edition, 1823 ; Treatise on the Circumstances which determine the Rate of Wages, London, 1851, p. 80). In 1833 Harriet Martineau wrote: "Mrs. Marcet is sorry to find that Mr. E. R[omUly] and I are of the same opinion about the Factory Bill, and I am very glad. She ought to hold the same, namely that legislation cannot interfere eflfectually between parents and children in the present state of the labor-market. Our operations must be directed towards proportioning the labor and capital, and not upon restricting the exchange of the one for the other ; an exchange which must be voluntary, whatever the law may say about it. We cannot make parents give their children a half-holiday every day in the year, unless we also give compensation for the loss of the children's labor. The case of those wretched factory children seems desperate ; the only hope seems to be that the race will die out in two or three generations, by which time machinery may be found to do their work better than their miserable selves. Every one's countenance falls at the very mention of the evidence which has lately appeared in the papers " [Harriet Martineau's Autobiography, by Maria Weston Chapman, London, 1877, vol. iii. p. 87). It is only fair to add that Harriet Martineau, unlike M'Culloch, was converted by a wider knowledge of the facts of industrial life. She herself records how what she saw in America brought her, not only to appreciate the value of Robert Owen's ideas and to retract her former economic dogmatism, but also to believe that the fiiture possibly lay with 1 CoUectivist organisation of society. — Ibid. vol. i. p. 232.

The Verdict oj the Economists 609

in other businesses. But a discrepancy of this kind could not , possibly continue. Additional capital would immediately begin to be attracted to the department where wages are low and profits high, and its owners would be obliged, in order to obtain laborers, to offer them higher wages. It is clear, therefore, that if wages be unduly reduced in any branch of industry, they will be raised to their proper level, without any effort on the part of the workmen, by the competition of capitalists."^ Similarly, if the laborers insisted on better terms in a particular trade, this must reduce its profitableness to the employers. And capital being assumed to be both ^mobile**, and omniscient, it at once began to " flow " out of this less profitable industry, in order to " flowl'^in to the other trades in which the cost of labor would Simultaneously and (^utomaticalTy) have been reduced. TheTaborers who had raliedTEeif conditions above the " proper " level found themselves therefore between the horns of a dilemma. If they all wished to be employed at their trade, wages must go back to the old level, and (seeing that part of the previous wage- fund had been diverted away) even temporarily below it. If, on the other hand, they insisted on preserving their newly- won better conditions, it was obvious that only a smaller number of them could find employment, the more so as the portion of the wage -fund invested in that trade would positively have diminished. The displaced workmen, as it was often explained to them, would thus have killed the goose which laid the golden eggs. The few who continued to find full employment at their trade might have gained, but taking the trade as a whole, the men would clearly have lost by the transaction.^ " And hence the fundamental prin- ciple, that there are no means by which wages can be raised,

  • Article on "Combinations," by J. R. 'WCxXS.oAi,'vD. Encyclopedia Briiannica,

4th edition (Edinburgh, 1823), repeated in his Treatise of 1851.

' If the attempt to get the better conditions were made by means of Mutual Insurance or Collectiye Bargaining — as the economists always assumed would be the case — it would therefore almost certainly fail, as the displaced workmen would, sooner or later, be driven to compete for employment with those who succeeded in getting work, with the result that things would revert to the old level.


6io Trade Union Theory

other than by accelerating the increase of capital as compared with population, or by retarding the increase of population as compared with capital, and every scheme for raising wages which is not bottomed on this principle, or which has not an increase of the ratio of capital to population for its object, must be completely nugatory and ineffectual." ^

And when the Trade Unionists turned from the question ,of wages to-day, to the possibility of raising them in the following year, middle-class opinion had a no less conclusive answer to their claim. The future wage-fund that would be applicable for the payment of laborers in the ensuing year was, of course, necessarily limited by the available posses- sions of the community. But within that limit its amount depended on the will of the owners. They might, if they chose, consume any part of it for their own enjoyment, or they might be tempted to abstain from this consumption, and employ a larger or smaller proportion of their total possessions in productive industry. Ricardo had incidentally observed that the " motive for accumulation will diminish with every diminution of profit," ^ and it was assumed without hesitation that, whatever might be the various motives for saving, these motives would be stimulated or depressed according to the rate of interest which might be expected to be gained from the capital so invested. " The higher the rate of profit in any community, the greater will be the pro- portion of the annual savings which is added to capital, and the greater will be the inducement to save."^ It thus followed that the rate^ at which capital, and there fore the wage;JundjL,_wo,uld_bs,. increased would_vary accorHing to profit, rising when the rate of profit rose, and fallingwhen the rate of profit fell. " The greater the proportion of

1 Article on" Wages," by J. R. M'Culloch, in Encyclopadia Britannica, 4th edition (Edinburgh, ^823) ; see his Principles of Political Ecoftomy (Edinburgh, 1825), part iii. sec. 7.

2 On the Principles of Political Economy and Taxation (London, 1817), p. 136.

2 Article on the effects of machinery in the Westminster Review, January 1826, "by W. Ellis, quoted by J. S. Mill (Principles of Political Economy, Book IV. chap. iv. p. 441 of 1865 edition).

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wages to profits the smaller the tendency to national accumulation." ^ Any rise of wages could, therefore, only be temporary, and must quickly counteract itself, for "an increase in wages reduces the profits, and reduces the induce- ment to save and extend business, and this again tends to a reduction of wages." * (^ajmes, in an unguarded moment, went even further. " Pr ofits." he s a id. " are already at or wi thin a hand's breadth of the minimum . . . below which, if the return on capital fall, accumulation, at least for the purpose of investment, will cease for want of adequate inducement." ^ This autoinatic check on the wage-earners' pretensions applies, it is clear, to more than the money wages. If by means of a Factory Act they had secured for the future shor ter hours or better, sanitation, this prospect of a reduction of profits would instantly limit the capitalists' desire to accumulate, and would induce them as a class to spend more of their incomes on personal enjoyment. " There is only a certain produce," wrote one widely-read critic of Trade Unionism, " to be divided between capitalist and laborer. If more be given to the laborer than nature awards, a smaller amount will remain for the capitalist ; the spirit of accumulation will be checked ; less will be devoted to pro- ductive purposes ; the wage-fund will dwindle, and the wage of the laborer will inevitably fall. For a time, indeed, a natural influence may be dammed back ; but only to act, ultimately, with accumulated force. In the long run, God's laws will overwhelm all human obstructions."* On the

  • Trade Unionism, by James Stirling, p. 29.
  • T. S. Cree, A Criticism of the Theory of Trades Unions (Glasgow, 1 89 1 ), p. 25.

' Some Leading Principles of Political Economy newly expounded, by J. E.

Cairaes (London, 1874), pp. 256-258. This unlucky prophecy was written in that year, of colossal business profits, 1873 ! At that date the yield on good "trustee " securities in England was about £^ per ;^I00. It has since fallen (1897) by no less than 25 per cent, yet accumulation and investment have gone on faster than ever.

  • Trade Unionism, with Remarks on the Report of the Commissioners on

Trades Unions, hy James Stirling (Glasgow, 1869), 2nd edition, 1869; new edition, 1889, pp. 26-27. This sapient work was translated into French by T. N. Bernard, and published as L'Unionisme des Ouvriers en Angleterre. See also the article by the same author in Recess Studies (Edinburgh, 1870).

6i2 Trade Union Theory

other hand, if wages remained low, and the rate of profit, high, the capitaHsts would as a class be tempted to limit their personal expenditure, in order to take advantage of the high profits by accumulating as much capital as possible. Thus, as a recent opponent of Trade Unionism quite logically explained, the laborer's " policy should be to make the position of employers as pleasant and profitable as possible, and to coax them into trade, just as a shopkeeper tries to entice customers into his shop." * If wages relatively ' to profits were low one year, they would tend automatically to rise next year ; if they were high one year, they would automatically be depressed in the following year.^

This theory of the rate of accumulation of capital, taken in conjunction with the Theory of the Wage Fund, appeared finally to dispose of every part of the Trade Union case. But enlightened public opinion had yet another argument to adduce, one which cut at the root, not of Trade Unionism only, but of all genuine improvement of the condition of the present generation of laborers, even if the capitalists actually desired to share their own profits with them. This was the celebrated " principle_of ^population." Malthus had proved

^ T. S. Cree, A Criticism of the Theory of Trades Unions, p. 30.

^ " While the terms of a particular bargain are of importance to the individual workman and employer concerned, they are not of much importance to the work- men and employers as a whole, as there is always a compensating action going on which is bringing wages to a true economical point." — Ibid, p. 10.

"The price of labor, at any given time and place, is not a matter left to the volition of the contracting parties ; but is determined for them by a self-adjusting mechanism of natural forces. The amount of capital devoted to production — according to the prevalent strength of the effective desire of accumulation — deter- mines the force of the demand for labor : the number of laborers desirous of employment — in accordance with the prevalent strength of the instinct of popula- tion — regulates the supply. All unknown to the capitalist and laborer, the rate of wages is fixed for them, by the natural adjustment of these antagonist forces ; the amount of labor demanded by the whole body of capitalists on the one hand, the amount supplied by the whole body of laborers on the other. As Mr. Mill himself has tersely put it, in his Political Economy, 'Wages . . . depend on the ratio between population and capital.' When, therefore, the capitalist and the laborer come to divide the product of their joint industry, they find the division ready made to their hand. The profits due to the one, and the wages due to the other, have been apportioned, by the unerring agency of natural mfluences, and no room is left for cavil or coercion." — " Mr. Mill on Trades Unions," by James Stirling, in Recess Studies (Edinburgh, 1870), p. 311.

The Verdict of the Economists 613

that human fecundity was, as a matter of fact, far in excess of the actual increase of population, and that the numbers of mankind were kept down by the positive checks of vice and misery, notably by the privations and hardships suffered by the poor. It was the part of wisdom to substitute, for these positive checks, that prudential restraint which delayed marriage or forewent parentage, and the only hope for the laborers lay in a great extension of this prudential restraint, so that the ratio of capital to wage-earners might increase. This hope was at best a faint one, because the prudential restraint would have to extend to the whole wage-earning class, and would have to be maintained with ever-increasing rigor, as the resulting fall in the rate of profit slackened the rate of accumulation. And whatever degree of prudence might animate the wage-earning class at any particular time, it was t aken for granted that the rate of incre ase must h abitually rise when wages increased, and fall when wages w ere reduce d. " Thus, il [.\,combination were for a time' to raise wagps, thp g-rpwth nf ' the wage-fund wou ld be unnatur- all y retarded, whilst a fictitious stinmlus would be given to po pulation by the momentar y^ enrichment of the laboring, class. / A diminished demand for labor would coincide with an increased supply. The laborer's wages would be forced down to starvation-point ; and his last state would be worse than his first." ^ The ratio of population to capital was, indeed, effectively defended on both sides from any but transitory alteration. If capital fell behind population, wages fell, but this very fall automatically brought about a quickening of accumulation and a slackening of the increase of population. If population fell behind capital, wages rose, but this very rise caused a check to accumulation and a stimulus to the increase of population. " Should a union succeed," said the public opinion of the last generation, " in shutting out competition, and so unnaturally raising wages and lowering profits in some particular trade, a twofold reaction tends to restore the natural equilibrium. An

> Trade Unionism, by James Stirling, p. 29.

6i4 Trade Union Theory

increased population will add to the supply of labor, while a diminished wage-fund will lessen the demand for it. The joint action of these two principles will — sooner or later — overcome the power of any arbitrary organisation, and restore profits and wages to their natural level." ^ " Against these barriers," said Cairnes, " Trade Unions must dash themselves in vain. They are not to be broken through or eluded by any combinations however universal ; for they are the barriers set by Nature herself." ^

So firmly were the various parts of the economist's theory bolted together, that there was only one way in which it was even conceivable that a Trade Union could better the con- ditions of its members. If the workmen in any trade could, either by law or by an absolutely firm com bination extending ^ from one end of the kingdom to another, per manently restri ct^ the numbers entering that^ trade, they might, it was admitted. gradually force their emplo yers to offer them higher wages. Hencer"i j:~was habitu ally assumed ttiat~the7 whore~aim~'a nd purpose of Trade Unionism was to Jarmg-about this positio n

■^ 1 TVai/i i7mV«wm, by James Stirling, p. 27. " In a thickly populated country, which has no vent for its surplus population abroad, Political Economy has but one advice to give to the younger members of the poorer classes. The postponement of, or abstinence from, marriage, or from givingbirthto children, to a very great extent, is in such a case the only available preventive against the evils of too rapid an increase

'of numbers." — C. Morrison, The Rtlations between Labour and Capital, p. 51.

2 SoTne Leading Principles of Political' Economy newly expounded, by J. E. Cairnes (London, 1874), p. 338. In contrast with the methods of abstract reasoning, without inquiry into the fects of industry, which were pursued by the economists of the time, may be mentioned the interesting descriptions of the economic circumstances of the Sheffield trades published by Dr. G. Calvert Holland. In his Mortality, Sufferings, and Diseases of Grinders, part ii. (Sheffield, 1842), he gives as the result of actual observation (p. 46) that the longer a branch of the Sheffield trades has been in union, and the more perfectly it has been maintained, the higher is the rate of remuneration that the workmen receive, the lower is the degree of fluctuation in the trade, and the greater is the sobriety and thrift of the workers. He adds — " We would even go a step further and contend, that, with few exceptions, the respectability and substantial character of the manufacturers exhibit a strict relation to the same circumstances, viz. the degree to which the branch is associated. The system which gives unlimited play to competition not only lowers wages and degrades the condition of the masses, but ultimately reduces profits, narrows the liberality, and vitiates the moral tone of the manufacturers." Dr. Calvert Holland's observations upon the actual working of industrial competition appear to have been unknown, or at any rate unheeded, by the economists of the time.

The Verdict of the Economists 615

of rannnpnly nf a particular service . Such, a monopoly was pl ainly) inimical to thLeL-int£rest&-xi £ the rnmmunity . The increased drain on the wage-fund automatically depressed the wages of the rest of the wage-earners. Their exclusion from the ranks of the favored trade further intensified their own struggle for employment. Finally, as capital had to receive its normal rate of profit, the consumer found the price of the commodity raised against him. Fortunately, as the economists explained, such anti- social conduct could practically never succeed. Even if the monopolists managed rigidly to exclude new competitors from their trade, the rise in price would attract foreign producers, and lead to an importation of the commodity from abroad. If this were prohibited, the consumer vould begin to seek alternatives for a commodity which had become too dear for his enjoy- ment, and invention would set to work to produce the same result by new processes, employing possibly quite a different kind of labor. O ne way or another the monopolists would 'be certain to find their trade , .S-bj:ijQ.king up. so that a mere e xclusioDL ofLn&WrComers. would no Ipjager, j^rail _them. They would find it impossible to maintain their exceptional con- ditions except by progressively reducing their own numbers, to the point even of ultimate extinction.

With so complete a demonstration of the impossibility of "artificially" raising wages, it is not surprising that public opinion, from 1825 down to about 1875, condemned im- partially all the methods and all the regulations of Trade Unionism. To the ordinary middle-class man it seemed logically indisputable that the way of the Trade Unionists was^bloQked in all directions. They could not gain any 'immediate bettering of the condition of the whole wage- earning class, because the amount of the wage^ind at any:^ given time was predetermined. They could not(permanently secure better terms even for a particular section, BecauseTlifs ' would cause capital immediately to begin to desert that particular trade or town. They could not make any real progress in the near future, because they would thereby

6i6 Trade Union Theory

check the accumulation of capital. And finally, even if they could persuade a benevolent body of capitalists to augment wages by voluntarily sharing profits, the " principle of popula- tion " lay in wait to render nugatory any such new form of " out-door ^ relief." "The margin for the possible improve- ment of [the wage-earners'] lot," emphatically declared Cairnes in 1874, "is confined within narrow barriers which cannot be passed, and the problem of their elevation is hopeless. As a body they will not rise at all. A few, more energetic or more fortunate than the rest, will from time to time escape, as they do now, from the ranks of their fellows to the higher walks of industrial life, but the great majority will remain substantially where they are. The remuneration of labor as such, skilled or^ unskilled, can never rise much above its present level ^ ' Trade Unionism was, in fact, plainly "in 'this dilemma, that whether it fails or whether it succeeds in its immediate object, its ultimate tendency is hurtful to the laborer. If it fails, at once, in forcing higher terms on the employers of labor, the whole cost of the organisation, in money and exertion, is simply thrown away. ... If, on the contrary, it should attain, for a time, a seeming success, the ultimate result is even worse. . Nature's violated laws vindicate their authority by a sure reaction. The presumptuous mortal, who dares to set his selfish will against divine ordinances, brings on his head inevitable retribution ; his momentary prosperity disappears, and he pays, in prolonged suffering, the penalty of his suicidal success." ^

How far the current conceptions of economic theory

1 Some Leading Principles of Political Economy newly expounded (London, 1874), p. 348.

  • Trade Unionism, by James Stirling, p. 36. "The bitter hostility to trade

unions, which at any rate till very recent years, was felt by the 'upper' and enlightened classes, was doubtless chiefly due to dislike of that loss of the more petty delights of power which was involved in the substitution of the relation of buyer and seller of work for the old relation of master and servant, but it was fostered by the ' population and capital ' theory of wages, which really made many people believe that associations of wage-earners, however annoying and harmful to employers, must alwaj^ be powerless to effect any improvement in the general conditions of the employed." — Edwin Carinan, History of the Theories of Production and Distribution (London, 1893), p. 393.

The Verdict of the Economists 617

really corresponded with the views of the best economists of this period, we cannot here determine. Some of these economists seem to have possessed almost a genius for publishing what they did not mean to say, and the wage-fund theory, even as it appeared to M'Culloch and Nassau Senior, was probably very far from the mechanical figment of the imagination that it now seems to us. And it is only fair to point out that the theory of wages, which to-day fills so large a place in economic thought, formed only an incidental and wholly subordinate part of the teaching of the classic economists. Their minds were directed to other problems : to the evil that was being wrought by industrial and political restrictions, which the generation of statesmen whom they taught have since largely removed. Any fair appreciation of their teaching is, accordingly, as difficult for the democracy of to-day, as a balanced judgment on the Mercantile Theory was to Adam Smith and his immediate followers. Nor was the Wage Fund Theory a mere wanton invention. It expressed in a definite formula certain salient facts of the industry of that generation. The English farm laborer or factory operative was obviously dependent on the wages advanced to him week by week out of his employer's capital. It was a matter of common observation that the number of laborers taken on by the farmer, or of operatives by the mill- owner, depended on the amount of capital that he could command. At a time of rapidly growing population, and manifold new inventions, the utmost possible increase of capital was desirable, whilst the evils of the old Poor Law made almost inevitable the blind adhesion to a crude Mal-j thusianism. The theories of the economists corresponded with the prejudices of the rising middle class, and seemed toj be the outcome of every man's experience.

Meanwhile, the economists themselves were undermining the structure which they had hastily erected. Qualification \ after qualification was introduced, until after the last effort at rehabilitation by Cairnes in 1874, the whole notion of a wage-fund was abandoned. The economic text-books written VOL. II X 2

6i8 Trade Union Theory

since that date ' deal with it, if at all, only as a historical curiosity, and the theory of distribution which has taken its place, far from negativing the possibility of raising the con- dition of the wage-earners, does not afford even a presumption against wisely-directed Trade Union action. But the dis- coveries of the economists have penetrated only slowly and imperfectly into the public mind, and most of the current opposition to Trade Unionism is still implicitly based on the old theory. We must therefore, at the risk of wearying the economic student, explain, in some detail, how it breaks down at every point.^

Let us consider first the statical notion of a predetermined wage-fund. It does not seem to have occurred to the inventors of this figment that, whatever limit it might set to the advances made to the laborers during the year, it in no way determined the total amount of their remuneration for the year. Even if the farmer^s payments for labor up to the harvest, had„ to Jbe restricted; to a limited portioiToTlasryear's pr oduct, this did not preve nt h im from distrib uting among the laborers, __at_.Ms.ttJi?r5as. (the usual ^ nd of the ye arly hiriiig), in add|tionJto these advances, some part of th e harvest just reaped. As many economists have since pointed out

1 We may cite, for instance, the economic text-books or treatises of Professors Marshall, Nicholson, Conner, Mavor, Smart, and Symes.

  • It is pointed out by Cannan, Taussig, and F. A. Walker, that the Wage

Fund Theory was never accepted, to name only writers in English, by W. Thompson, R. Jones, T. C. Banfield, Montifort Longfield, H. D. Macleod, Cliffe Leslie, John Ruskin, or Thorold Rogers in our own country, or by Dr. Wayland, Amasa Walker, Bowen, Daniel Raymond, and Erasmus Peshine Smith in America. It was trenchantly attacked, not only by the Trade Unionists, the Christian Socialists, and the Positivists (see, for instance, T. J. Dunning's Trait Unions: their Philosophy and Intention (London, i860), a work read and praised, but not heeded, by J. S. Mill ; J. M. Ludlow's Christian Socialism (London, 1 85 1 ) ; and the admirable articles on Political Economy by Frederic Harrison in the Fortnightly Review for 1867), but also explicitly in the language of abstract economics by Fleeming Jenkin in March 1868, in an article in the North British Review ("Trade Unions : how far Legitimate"), and especially by F. D. Longe in 1866, in his Refutation of the Wages Fund Theory of Modem Political Economy, as enunciated by Mr. Mill and Mr. Fawcett (London, 1866) The well-known attack by W. T. Thornton, entitled On Laboicr, its Wrongful Claims atui Rightful Dues, its Actual Present and Possible Future (London, 1 869), and the immediate recantation of the Wage Fund Theory by J. S. Mill, first really attracted economic attention to the subject.

The Verdict of the Economists 619

no inconsiderable proportion of the world's laborers, especially in the whaling, fishing, and mining industries, are actually engaged on " shares," and find the amount of the last instal- ments of their wages for the whole venture both regulated by, and paid out of, the sum of utilities which they have themselves created.^ Thus, even if there existed any pre- determined portion of capital definitely ear-marked as the wage-fund, it would still be only the measure of advances, not of wages ; its amount would throw no light upon the proportion of the income of the community which is obtained by the wage-earning class ; and its limitation would in no wise stand in the way of the year's remuneration of the class as a whole being indefinitely augmented at the end of each year, or on the completion of each undertaking, not out of previously accumulated capital, but actually out of their own product.

But th ere is, in fact, no such predetermined amount ap plicable for the payment of wages, still less any fund set apart at the beginning of each year, or any other period. The wage-earners of the world are not, any more than the capitalists of the world, fed for the entire year out of a store of food and other necessaries, or paid out of an accumulated fund of capital, actually in hand at the beginning of the year. Whatever may be the tasks- on which the workmen are engaged, the y are, as a matter of fact, fed, week by week, b y pr oHiictq jiTqf- hroug-ht to market, exactly in the same wa y as the employer and his household are fed . They are paid their wages, week by week, out of the current cash balances of their employers, these cash balances being daily replenished by sales of the current product. The weekly drawings of the several partners in a firm come from precisely the same fund as the wages of their workpeople. Whether or not any assignable limits can be set to the possible expansion of this source of current income, it will be at once evident that there is n o arithmetical impossibility in the workmen obtaining ai

^ This supplies Mr. Henry George {Progress and Poverty) with some of his most telling demonstrations of the futility of the wage-fund theory.

620 Trade Union Theory

la rp^er. and the employers a smaller, proportio n of the total drawingsjor any particular week . If all the hired laborers in the world were, suddenly and simultaneously, to insist on a general rise of wages, there is no mathematical impossibility in the rise being contemporaneously balanced by an equal reduction in the aggregate current drawings of the employers. If the world's current supply of food and other necessaries be supposed to be the limit, whatis tljeie, to preeent':tfiie: con- sumption of the employers and their families from being diminished ? Accordingly we find Johfi St'tfaft Mill, in his celebrated review of Thornton's book, unreservedly abandon- ing the very notion of any predetermined wage-fund. " There is no law of nature making it inherently impossible for wages to rise to the point of absorbing, not only the funds which [the employer] had intended to devote to carrying on his business, but the whole of what he allows for his private expenses beyond the necessaries of life. ... In short, there is abstractedly available for the payment of wages, before an absolute limit is reached, not only the employer's capital, but the whole of what can possibly be re^endhyg^Jfeom-Jiis private expenditure, and: the law of wages on the side of demand amounts only to the obvious proposition that the emplayers cannot pay away in wages what they have not got. . . . The power of Trade Unions may, therefore, be so exercised as to obtain for the laboring classes collectively both a larger share and a larger positive amount of the produce of labor." '

But though it was thisf statical conception of a definitely limited special wage-fund) which gave the educated public its " cocksureness " against the workmen, most of the econo- mists themselves probably laid more stress on what we have termed the dynamic aspect of the theory. If the laborers compelled the employers to agree to give them better terms for the future, this very rise of wages, causing a correspond- ing fall in profits, would, it was argued, cause such a diminu-

1 J. S. Mill, Fortnightly Review, May 1869 ; Dissertations and Discussions, 7ol. iv. pp. 46, 48.

The Verdict of the Economists 62 1

tion of saving as would presently counteract the rise. Thus it followed that the rate of profit on capital, together with the rate of wages, was, in any given state of taind of the saving class, really unalterable. Any accidental variation in the general rate of profit, whether upward or downward, .'automatically set up a reaction which continued until the normal was again reached. " Two antaeonistic forces," it was said, " hold the industrial world in equilibrio. On the one hand, the principle of population regulate s the supply o^ labor ; _ _on_th£I^^EZthk-.J3rinciBle of "l^cumulation determin es the demandJbicJL"-^

Now, before examining this theory point by point, we note that it contains a series of assumptions which were neither explicitly stated nor in any way proved. It -takes for^gran ted. in the first place. tha t\ Trade Union action m ust nec essarily diminish profitsj /an assumption which simply ignores the Trade Union claim — considered at length in the next two chapters — that the enforcement of a Common Rule positively increases the efficiency of industry. Secondly, we have the ass umption that a Ndiminutiq n_of_profits nec essarily implies a fall in the rate of interest, p n capital, thus leaving out of account the possibility that a rise of wages might mean simply an alteration in the shares of different grades of producers, the entrepreneur class (and not the mere investor) losing what the manual workers gain. , _have_the assumption that the heaping up of .is. the only way of increasing the national ' The older economists," says Professor Marshall, "went too far in suggesting that a rise in interest (or of profits) at the expense of wages always increased the power of saving ; they forgot that from the national point of view the investment of wealth in the child of the working man is as productive as its investment in horses and machinery. . . . The middle, and especially the professional classes have always denied themselves much in order to invest capital in the education of their children, while a great part of the 1 Trade Unionism, by James Stirling, p. 26.

62 2 Trade Union Theory

wages of the working classes is invested in the physical health and strength of their children." ^

•y^ut is it true that the growth of capital depends on the rate of interest, so that " the greater the proportion of wages to profits, the smaller the tendency to national accumulation"?' Does the "motive for accumulation " diminish, a. s Ricardo incidentailv..jiexlamd... "with, every diminuti on of profil " ? ^ The great investigators who preceded Ricardo held an exactly opposite view. Sir Josiah Child remarked two centuries ago that the extremely low rate of interest in the Netherlands towards the close of the seventeenth century, far from diminishing accumulation, " was the causa causans of all the other causes of the riches of the Dutch people." In countries where the rate of interest was high, he observed that " merchants, when they have gotten great wealth, leave trading, and lend out their money at interest, the gain thereof being so easy, certain, and great ; whereas in other countries, where mterest is at a lower rate, they con- tinue merchants from- generation to generation, and enrich themselves and the State." * " Low interest," he emphatically

1 Principles of Economics, 3rd edition (London, 1895), Book IV. chap. viL pp. 31 1, 318. The Trade Unionist may very well complain that the economists had, at any rate, no warrant for the definiteness of their assumptions. Even if it be granted that a fall in the rate of interest tends to diminish the amount saved, no reason has been given for the supposition that any particular rise in the rate of wages would necessarily tend to slacken accumulation precisely to such an extent as to cause wages to fall hereafter by the amount of the rise. If, for instance, wages rose generally by 10 per cent, and the cost fell entirely on interest, by how much per cent would the rate be thereby lowered ? If it lowered the rate from 3 to 2\ per cent, by how much would the amount saved annually be reduced? If it 5 reduced the amount saved annually firom 200 millions to 175 millions, by how much would the general rate of wages be therefore lowered ? To none of these questions can even an approximate answer be given. The tacit assumption of the economists that, other things remaining equal, a rise in wages of 10 per cent would necessarily produce such a fall in the rate of interest as would result in such a diminution of the amount annually saved as would cause wages to fall again by at least 10 per cent, will probably be considered by fiiture ages as one! of the most extraordinary chains of hypothetical reasoning ever resorted to. '

^ Trade Unionism, by James Stirling, pp. 28, 29.

^ On the Principles of Political Economy and Taxation (London, 1 8 1 7 ), p. 1 36.

  • A New Discourse of Trade, 2nd edition (London, 1694), p. 8 ; quoted in

Principles of Economics, by Professor A. Marshall, Book IV. ch. vii. p. 316 of 3rd edition (London, 1895).

The Verdict of the Economists 623

declared, "is the natural mother of Frugality,} Industry, and the Arts." ^ In Adam Smith's opinion a high rat e of profit_wasJ n_many_waYS pos itively i njurious to nation al wealth, " But besides all the bad effects to the country in general," said he, " which have already been mentioned as resulting from a high rate of profit, there is one more fatal, perhaps, than all these put together, but which, if we may judge from experience, is inseparably connected with it The high rate of profit seems everywhere to destroy that parsimony which in other circumstances is natural to the character of the merchant. When profits are high that sober virtue seems to be superfluous, and expensive luxury to suit better the affluence of his situation. . . . Accumula- tion is thus prevented in the hands of all those who are naturally the most disposed to accumulate ; and the funds destined for the maintenance of productive labor receive no augmentation from the revenue of those who ought naturally to augment them the most. . . . Light come light go, says the proverb ; and the ordinary tone of expense seems every- where to be regulated, not so much according to the real ability of spending, as to the supposed facility of getting, money to spend."* Thus he infers that, af^sajbhe "profits on__sJtQckJLox_xapital .l^re diminished, stock may not only c ontinue ^-tQ-_ increase, but to increase much faster ' than before"!* '"" '"""' " ~ " """ ' '

1 A New Discourse of Trade, 2nd edition (London, 1694), preface.

2 Adam Smith, Wealth of Nations (London, 1776), Book IV. chap. vii. p. 276 of M'CuUoch's edition.

y^ Ibid. Book I. chap. ix. p. 42.

The contrary assumption, on which so much of the opposition to Trade Unionism is still based, was, until 1848, more often implied than explicitly stated in economic treatises. N assau Senior, who introduced to economics the ter m " re ward of abstinence." nowhere m akes thejjLaJj^entjfetJheamfiHEtol. savmg varie s with the rate ( 7f prnfit nr infprpst. " Capitals," he says in one™pK;e, "are generally formed from small beginnings by acts of accumulation which become in time habitual," and in the hypothetical example he gives he actually assumes that a decrease in the rate of profit will apply a new stimulus to accumu- lation (Political EcoTtomy, p. 192). M'Culloch, too, regarded the amoun t of accum ulation as depending only on t he extent oi the-maiain-for aajing. not ujjon the expectation of a, high rate of interest or profit- " Ths means of amassmg capital will be~greatestTT .where IKe net profits of stock are greatest . . .

624 Trade Union Theory

The modern economist finds, in the actual facts of industrial life, much that supports this view. It may be true that here and there a capitalist employer, especially a manufacturer or a farmer, will strive harder to increase his capital if he sees the prospect of exceptional profit, than if he can only just pay his way, though on the other side must be set the fact that in this class high profits notoriously lead to extravagant personal expenditure, and that it is, as Adam Smith pointed out, not during periods of high profits, but rather in bad times, that luxuries are retrenched. But there is reason to believe that a large part — in these days perhaps the greater part — of the saving of the world takes place quite irrespective of the rate of interest that can be obtained for iihe use of the capital. T hg-^ ron p-pst tnntivps fnr savin? —

fVip__Hpgi^rp f^ prmnHp fnr CauMf rjffg }gTirlC (^Irl agf^, inr fnrJ-Vie

fu ture maintenance oL c.h'^'^'"" — gO- on, as the hoards of t he French peasantry show, .whethet. profit or. .in terest is reape d or not. The whole history of popular savings banks demon- strates that what is sought by the great bulk of the investing population is security for their savings, not any particular rate of interest. It is, in fact, within the experience of every savings bank that some depositors, content to get this security only, persist in increasing their deposits over the maximum on which any interest is paid. No reduction in the rate of savings bank interest ever causes anything like a proportionate reduction in the amount of the deposits ; usually, indeed, it causes no visible reduction at all. jAt the other end of the social scale, though possibly for a different reason, accumulation appears to proceed with equal indiffer-

Give to any people the power of accumulating, and we may depend upon it they will not be disinclined to use it effectively. . . . No instance can be produced of any people having ever missed an opportunity to amass." — Principles of Political Economy, 1825, part ii. sec. 2.

y^ Mr. Cannan has drawn our attention to an article by W. Ellis in the Wat- , minster Review for January 1826, which contains the first clear expression of the other view. J^S^^ Mill seems to have been jthe first system atic economist in England to give definite form to the statement that the rate of accumulation Wp.uld*. in ariy'given state of wealth and habit of mind, vary with the rate of interest to - be expected from capital. — Principles of Political Economy, Book I. chap_xi.

The Verdict of the Economists 625

?nce to the rate of profit. The a nnual savings of the Asto rs and Vanderbilts, the periodical re-investment of income by the Cavendishes and Grosvenors, the automatic accumula- tions of the Rothschilds, do not, as a matter of fact, depend on how much per cent these millionaires expect to get for their new capital, b ut on the amount of sheer surplus ove r and above their current habits of expenditure. It is, to say the least of it, extremely doubtful, as regards all the j large class whose income is greatly in excess of what they need or desire to spend, whether the amount that they invest this year will be increased by any prospect that the rate of interest will be 4 instead of 3 per cent, or diminished if it is expected that the rate will be only 2 instead of 3 per cent. < Finally, there is a third type of saving where the effect of any change in the rate of profit is positively in the opposite direction, the amount pf accumulation being increased by a fall in the rate, and checked by a rise. A Jarge part of the sa ving^ of the world is done with the motive of obtaining, at s ome future time, an inco me upon which, to live without work. When a man saves in order to be able to retire from business or practice ; when it is desired to make provision for a widow or for daughters ; when the object is what is popularly known as "founding a family," it is some definite^ amount of annual income that is aimed at. This is especi- ally the case with the professional and upper middle class, by whom a considerable proportion of the world's accumula- tion is nowadays made. If it takes ;^S 000 a year to main- tain a family in a country mansion of the accepted stamp, or if the recognised portion for each daughter is ;^300 a year, there is a strong stimulus to go on accumulating until the necessary capital sum has been reached, and this capital sum becomes, of course, greater if the rate of interest falls. No observer of English life can doubt that the recent fall in the rate of interest on good investments from 4 to 2^ per cent has, in this way, in many families not only strengthened the motive to go on working, but also positively stimulated the accumulation of capital. " As the rate of interest falls,"

626 Trade Union Theory

says Professor Smart, " the motive of the richer classes to save , rather than to consume grows stronger." ^ And it must not be forgotten that every fall in the rate of interest, by affording new opportunities for its profitable investment in appliances for increasing the productivity of labor, stimulates the desire to invest and presently increases the power to save. Under this head must come, too, the large and ever -increasing form of com pulsory saving which is rei aesgnted- bv public niitjay on permanent works of utility . When a municipality engages in large public works, it does more than find useful investment for savings which would in any case have been made. By making arrangements for repaying the loan within a definite number of years — in England, on an average about thirty — the ratepayers, besides paying the interest, find themselves compelled to put by for the community, out of their individual incomes, before they can begin to save for themselves at all, a sum equal to the annual repayment of debt. It can scarcely be doubted that this compulsory saving, which no individual ratepayer regards as saving at all, is, like taxation generally, to a large extent retrenched from current personal expenditure, and is therefore, to this extent, a clear addition to the capital of the community. Now, th ^extent to w hich municipalities will raise loans for puWic jvorks»Ja_he._thus made-up by_,CQmpulsory~Hvings, de^Egads. in a very large_degree on the jca te of interestTri sing ^when that falls and falling when that .tises. " Accordingly," concludes Professor Nicholson, " we cannot strictly speak of a particular minimum rate in any society as necessary to accumulation in general ; and if Adam Smith's opinion is well founded, we cannot even say that a rise in the rate of interest will increase, or a fall check accumulation. . . . The grqw^^of material capital depends upon a number of v ari- ables, of which the rate of inte res t is only one^ and is. furthermore, .ii2«^(Sto!ffi^<Zife_i«, «^-y ja^££." * To put it con-

' Studies in Economics (London, 1895), p. 297.

^ J. S. Nicholson, Principles of Political Economy (Edinburgh, L893), p. 394 Sir Josiah Child went so far as to predict that " the bringing down of interest in this kingdom from six to four or three per cent will necessarily, in less than

The Verdict of the Economists 627

cretely, it is, to say the least of it, extremely doubtful whether the accumulated capital of the United Kingdom would be greater or less at the present time if the rate of interest on the best security, instead of falling to a little over 2 per cent, had remained at 5 or 6 per cent, the rate at which Pitt frequently issued Consols. Still less is it possible for the economist to predict whether, our national habits being as .they are, the growth in wealth during^ the next hmi^red y ears would be stimulated or depressed if the rate shoul d w ithin tha t period fall even to i per cent. Considering, there-s. fore, that the very poor and the very rich are, as regards ' the actual accumulation of material wealth, practically unin- fluenced either way ; that an increase of wages is likely positively to increase that highly productive form of the I nation's capital, the physical strength and mental training of the lAanual working class ; that the middle class is mainly bent on securing permanent incomes for future maintenance, and will therefore be induced to work longer and harder, and save more, the lower the rate of interest descends ; that a ^o w rate oLinterestJaoth stimulates inventions and promotes .t heir general adoption ; and that municipal and national enterprise, if favored by a low rate of interest, grows by leaps and bounds, economists are beginning to assert that a rise of wages at the expense of profits would probably result, not in less, but actually in more being produced, and taking all forms of national wealth into account, that it might be expected positively to increase the productive capital of the community in one form or another. We do not understand whether Professor Marshall goes this length, but " we may , conclude," he says, " in opposition to [the older economists], that any change in the distribution of wealth which gives more to the wage -receivers and less to the capitalists is likely, other things being equal, to hasten the increase of material production, and that it will not perceptibly retard the storing-up of material wealth." ^

twenty years' time, double the capital stock of the nation." — A New Discourse of Trade, 2nd edition (London, 1694), p. 14.

  • Principles of Economics, by Professor A. Marshall, 3rd edition (London,

628 Trade Union Theory

So far the modern economic criticism of the current middle-class view takes account only of a general bettering of the conditions of labor and a general fall in the rate of profit in all trades. If now we consider the more usual case of an alteration in the profitableness of a particular industry, the modern student finds it equally impossible to come to a dogmatic conclusion against Trade Unionism. The older economists made the convenient assumption that both capital and labor were freely mobile as between one trade and another, and that it was therefore impossible for any important variations between wages and profits in different trades to be of long continuance. Here, again, the popular argument against Trade Unionism ignored the all-important element of time. If t he employers in one industry happ ened to niake large profits, additional. capit^.L it was.said, would flQwJnto_that^tradej_and_tihe workmen would thus, sooner or '^t?IL§Iiilk£3s51SS^_i9lL.i^^^ services incre ased and th eir w ages raised. B ut why sh ould the workmen wait? On

■"the economist's own showing, there would be nothing to prevent a combination of all the workmen in the trade taking advantage of the golden opportunity when profits were high, and so increasing their wages as to absorb a l arge sha re of this surplus for themselves.-^ There would

khen be no attraction for additional capital to enter the

trade, and therefore no reason why the surplus should not

continue to exist, to the benefit of the workmen in that trade.

Their wages would have risen relatively to those in other

trades, with the result that new workmen would be attracted

to it. But h^ is not easy for men to change their trad es

1895), Book IV. chap. vii. p. 311. Some economists are beginning to suggest that the world's stock of capital is largely determined by the world's need of capital — accumulation beyond industrial requirements automatically causing destruction of other capital. See the, on this point, suggestive works of Mr. J. A. Hobson. ^1 <i ■\^en profits rise in any branch of trade above the usual rate, the masters evidently could, if they chose, afford to make over to the men as additional wages, the whole difference between their old and their new profits. They could do this if they pleased without reducing profits below the previously current and usual rate. And being able to do this it is conceivable that they might by a powerful union be constrained to do it." — W. T. Thornton, On Labour (London, 1870), pp. 284, 285. \

The Verdict of the Economists 629

with advantage, especially among the skilled crafts, and it would take some years before the increased attractiveness of the better-paid trade among boys choosing their occupations caused any appreciable increase in the number of journey- men. Moreover, this would be a clear case in which a Trade Union might by close combination or legal enactment better its conditions of employment without decreasing the amount of work for its own members, and without depriving the rest of the wage-earners of anything that they could otherwise have obtained. All that would then have happen ed w ould be that\an increase in profits, which wo uld otherwise h ^ive gone first to the capitalist s, and eventually to the con- su mers. would have been lastingl y secured by a section of the w orkpeople.. Hence the economist's own reasoning seems to bear out the workmen's empirical conclusion, that Trade Union action is most strikingly successful when it takes the form of claiming advances at the moment that trade is profitable.

XWhen we consider the country as a whole, in its com- petition with other countries, the argument, though more complicated, is equally inconclusive. If the wage-earners^f one country obtainT'Whether by law. orjjv negotiation^bettej ^nit5tion,^horter hours; ormigher wages tnan their colleagues nmther countries; and if these better terms for labor involve a lower rate of profit on capital, it is suggested that capital will " flow out of the relatively unprofitable country, in order to seek investment abroad. The improvement of the conditions of labor would, under these circumstances, be temporary only, as the resulting diminution of profits would bring about its own cure. To the modern financial expert, actually engaged in international transactions, this contention seems highly problematical. He sees the rates of business profits in different countries remain permanently divergent, two or three times as much being habitually earned by capitalist enterprises in one country, as compared with similar enterprises in another. I n spite ^of the assumed, iffltenjaJuoriaJ mobility of capital, even the rates of loan interest in different countrTes remain very far from equality. And though capital

630 Trade Union Theory

flows h ere and t here fro m time to t ime, the expert financier detects^ nothing in the] jature of "that promptly - flowing current from Jgw-rate countries t o high-rate countries which might be expectedf to bring the~dive rgence quickly to an" enJT and wfiich "was assumerwithout"evi3ence^^^amore theoretic generation. pJTs usual explariatioh is that7^ere as elsewhere, it is far m ore important to the investor of cap ital to obtain security than to gain an increased rat e of Jnte rest. This security depends upon a great va ri£tK.Qf consideration s, among which, in these democratic days, no t th e least i m- portant is the state of mind of the wage-earning class. I Hence an improvement in the conditions of employment, made at the cost of the capitalist, far from necessarily driving more capital abroad, as Cairnes imagined, may positively tend to keep it at home. Factory legislation, compulsory sanitation, short hours of labor, a high level of wages, freedom of combination, and generally the habit of treating the wage- earners with consideration, may seem to make capital yield a lower annual return to the investor than might be gained in other countries. But if these things result in political and social stability, if they increase the amenity of life, and especially if they promise to erect a bulwark against revolu- tion and spoliation, the in vestor will, as a matter o f fact, prefer _tCL_see_Majate.-^ of . mtarest ^gradually ^decline i f the reductioin is accompanied by an increase in p olitical security , rather than seek higher gams "in more discontented, and therefore less stable communities. Thus the reaction set up by a bettering of the condition of the English workmen at the cost of the capitalist may be quite in the reverse direction to that formerly imagined. Bui there is another, and, as we think, more important reason for the apparently inexplicable divergence between the rates earned by capital in different countries. Capital does not of itself produce either profit or interest, and can only really be used to advantage when it is employed in conjunction with an efficient organ- isation of industry, an adequate supply of skilled workmen, and the indispensable element of business ability. . It is

The Verdict of the Economists 631

probable that the profitableness of English industry would be far more endangered by the emigration of all its skilled craftsmen, or the desertion of its genuine captains of industry, than by any merely mechanical investments in foreign lands. An increase of wag;:es. bv keeping at home the most energetic and ingenious workmen, who mi^htother- wise have^ emigrated, Tfius'jEen^ positively ^ojncrease^grofits inr"Engrand . But the migration of skilled workmen, and still more, that of brain-power, from one country to another, depends on many other motives than the rate of pecuniary reward. Here, again, the reaction set up by a fall in the rate of profit may be quite in the contrary direction to that formerly supposed. If an improvement in the condition of the English working classes adds to the amenity of English life, it may increase the attractiveness of England to the able business man, and so in this way positively increase the profitableness of English industry, and hence the reward of the capitalist and brain-workef, by far more than the improve- ment has cost. Where the business capacity is to be found, there, in the long run, will be the capital. We need not therefore be surprised to learn that there is absolutely no evidence that the past fifty years' rise in the condition of the En glish wage-earni ng class, taken as a whole, has had any effect_a t all in making the a vailable capital of _England Jess th an it would have been made if the rise had not taken placg. The exceptionally great fall in the rate of interest which has been so marked a feature of the period, and especially of the last twenty years, is, in fact, a slight indica- tion that the current is nowadays rather in the opposite direction. England may have its Trade Unions, its growing regulation of private industry, and its income-tax and death- duties, but Germany has its revolutionary Social Democracy, France its political instability, the United States its tariff and curren fiiLJ roubles , India its famines, Cuba its chronic rebellion, and South America its revolutions. One of the greatest of the world's international financiers lately remarked, with some surprise, that, in spite of the growing pretensions

632 Trade Union Theory

of the English legislature and the English Trade Unions to interfere with private enterprise, and to enforce more liberal conditions of employment, other countries were showing a positively increasing desire to remit their savings for in- vestment in English enterprises, and London seemed " to be becoming more attractive than ever to the able business man.

The abstract theories of wages and profits, which public opinion once thought so conclusive against the Trade Unionist assumptions, are thus seen, in the light of economic science, to crumble away. B ut there were many educated men, especially in the world ofphysical science and natural history, who n^ver accepted the wire-drawn arguments of the Wage Fund, but who nevertheless saw, in the " princi^~of population," a biological barrier to any real success of Trade Unionism. Of what avail could it be for combinations of worlcmerTto struggle and strive for higher wages, when those higher wages would only lead automatically to an increase of population, which must inevitably pull down things again to the old level ? As one sympathetic friend of progress regretfully expressed it, it was "the devastating torrent of children " that blocked the way to any improvement of the conditions of labor.^

Now, it is interesting to observe that, whereas the Theory of the Wage Fund stood in opposition to every kind of improvement of the conditions of employment, the " principle of population " was supposed to negative only an increase in money wages, or, more precisely, in the amount of food obtained by the manual workers. No one s ug- ges ted that improved conditioria of sanitatJnP <" ^^^ fartniy had any tendency to raise tbO-JMCUidate ; and it would have needed a very fervid Malthusianism to prove that a shorten- ing of the hours of labor resulted in earlier marriages. ^— Ho argiirnptrtw-giild fViorofiirp ^6 founded On the " prioc lple of population 'Va^dn§Lj[£ade. Union efforts to improve the

1 " If only the devastating torrent of children could be arrested for a few years it would bring untold relief." — ^J. Cotter Morison, The Service of Man (London, 1887), preface, p. xxx.

The Verdict of the Economists 633

c onditions of sanitatinn anH safrfv. or to p rotect tht;; lynrmal Day. And the economists quickly found reason to doubt whether there was any greater cogency in the argument with regard to wages. Malthus and Ricardo had habitually written as if the fluctuations in wages meant merely more or less bread to the laborer's family, and the public assumed therefore that every rise of wages implied that more children would be brought up, and that every fall would result in a diminution. But the wage-earning population, in 1820 as now, included any number of separate grades, from the underfed agricultural laborer of Devonshire, whose wages were only eight shillings a week, to the London millwright who refused to accept a job under two guineas a week. Though it might be true that a rise in wage to the under- fed laborer enabled him to bring up more children to maturity, and might even induce him to marry at an earlier age, it did not at all follow that a:TiBe^f wages would hav£ the same effect on the^wn artisan or factory operative,^ who was already getting mbfe than the bare necessaries of existence. To the one class more wages meant chiefly more food ; to the other it meant new luxuries or additional amenities of life. T he econom ists, wexe. quickly convinc ed th at a new taste for luxuries or a desire_ for additional amenities had a dire ct effect in developing pri id eiiti al res traint.- TSSPCulTocIT himself emphatically declared, on this very ground, that " the best interests of society require that the rate of wages should be elevated as high as possible — that a taste for the comforts, luxuries, and enjoyments of human life should be widely diffused, and, if possible, inter- woven with the national habits and prejudices."^ Fromj the Malthusian point of view, the presumption was, as regards the artisans and factory operatives, always in favor of a rise in wages. For " in the vast majority of instances, before a rise of wages can be counteracted by the increased number of laborers it may be supposed to be the means of bringing into the market, time is afforded for the formation

' Principles of Political Ecoitomy, part iii. sec. 7.

634 Trade Union Theory

of those new and improved tastes and habits, which are not the hasty product of a day, a month, or a year, but the late result of a long series of continuous impressions. After the laborers have once acquired these tastes, population will advance in a slower ratio, as compared with capital, than formerly ; and the laborers will be disposed rather to defer the period of marriage, than, by entering on it prematurely, to depress their own condition and that of their children." ' In the same way, the presumption was strongly against any reduction of the wages of any classes who were receiving more than bare subsistence. " A fall of wages," continues M'Culloch, "has therefore a precisely opposite effect, and is, in most cases, as injurious to the laborer as their rise is beneficial. In whatever way wages may be restored to their former level after they have fallen, whether it be by a decrease in the number of marriages, or an increase in the number of deaths, or both, it is never, except in . . . exceedingly rare cases . . . suddenly effected. It must, generally speaking, require a considerable time before it can be brought about ; and an extreme risk arises in consequence lest the tastes and habits of the laborers, and their opinion respecting what is necessary for their comfortable subsistence, should be de- graded in the interim. . . . The lowering ofjhe opinions of t he laboring classes, with respect to the mode iTT^hich they ought to live, is perhaps the most serious qf^ all the evils that can befall them. . . . The example ^f_such individuals, or bodies of individuals, as submit quietly to have their wages reduced, and who are conteiSF if tE^ get~on^FTie mere necessaries of life, ought 'ne\^r7to~6e"heff ug^r public imitation. On the contrary, everything should be done to make such apathy be esteemed disgracefiiL" * There could not be a more emphatic justification of Trade Union effort. The ordinary middle-class view that the " principle of population" rendered nugatory all attempts to raise wages, otherwise than in the slow course of generations, was, in fact, based on sheer ignorance, not only of the facts 1 Principles of Political Economy, part iii. sec. 7.

The Verdict of the Economists 635

of working-class life, but even of the opinions of the very economists from whom it was supposed to be derived.* So far were the classic economists from believing it to be use- less to raise the wages even of the laborers, that M'Culloc h em ghaticallv declared that " an increase of wag es is the only, or at_.alL_events Jhe most^_effectu^ re^dy meaas.Jjy

w hich the condition of the poor can be really improved." ^

The modern student of the population question finds even less ground for apprehension than M'Culloch. The gen eral death-rate of^ Ae_United Kingdom, like that of all

riviltciPrl i;-.niintripg, ha^ fit-pgrHly Af^irWnfA'i^-^^x'm^ the past half-

cent ury of san itationi. but no connection can be traced bet ween this fall _and any r ise of wages ; there is, indeed, some slight reason to believFlEar the "3eath-rate has fallen most among some sections of the wage-earners (for instance, women of all ages) and in some districts (for instance, the great cities) where the rise in wages has been relatively less than elsewhere. But what the fanatical Malthusian most relied on was the increase in births. To him it seemed absolutely demonstrable that, in any given state of the working-class, an increase of wages must inevitably be followed by an increase of births. That the number of

' M'Culloch expressly de nied that, on a rise in wages , popu lation would nat ural'v increase proportionatelY to the rise. '^ as it is sometimes alleged it woul d. . . . It is not improbable merely, but next to impossible^Tfiat population should increase in the same proportion." — Note VI. to his edition of the Wealth of Nations (London, 1839), p. 473.

^ J. R. M'Culloch, A Treatise on the Circumstances which determine the Rate of Wages (London, 1851), p. 49.

Nassau Senior also protested against the public view. "Those whose acquaintance with Political Economy is superficial (and they form the great mass of even the educated classes) have been misled by the form in which the doctrine of population has been expressed. . . . Because increased means of subsistence may be followed and neutralised by a proportionate increase in the number of persons to be subsisted,' they suppose that such will necessarily be the case. . . . This doctrine . . . furnishes an easy escape from the trouble or expense im- plied by every project of improvement. ' What use would it be ? ' they ask. ' . . . If food were for a time more abundant, in a very short period the popula- tion would be again on a level vdth the means of subsistence, and we should be just as ill off as before.' We believe these misconceptions to be extensively pre- valent." — Nassau W. Senior, Political Economy, 2nd edition, in Encyclofadia Metropolitana (London, 1850), p. 50.

636 Trade Union Theory

marriages went up and down according to the price of wheat was a universally accepted generalisation. But that generalisation, whatever may have been its truth a hundred years ago, has long ceased to have any correspondence with fact. The marriage;;£ .tbe^England of this generation , drooping slo wly downw ards, bears no assig'nable relation either^ to the failing prices of commodities.lthft rising wagrps of piaie JLa,bQr4 or .^Q^ growin g prosperity of the countr y. What is more important, the birth-rate has ceased to have an^j^inifi ^rm rplatinn to the marriage-ra te. The ecMomists-- have always looked with longing eyes on the example of France, where the growth of population, and particularly the number of births to a marriage, had, even when J. S. Mill wrote in 1848, shown a steady decline, to which Mill , attributed much of the economic progress of the peasant proprietors. This decline in the birth-rate is now seen to be universal throughout North -Western Europe. Our own 'country is no exception. Down to 1877, the birth-rate of England and Wales had shown no sign of falling off, the rate for each year oscillating about the mean of 35 per thousand. But since 1877 the reduction has been great and continuous, the rate in 1895 being only 30.4 compared with 36.3 in 1876, a fall almost identical with that in France between 1800 and 1850, which filled J. S. Mill with so much hope.^ Unfortunately, though the decline in the English birth- rate has now continued for twenty years, there has been as yet no scientific investigation into its cause. It cannot be ascribed to increased poverty or privation of the nation, or of the working-class, for, as compared with previous times, there can be no doubt that the incomes of the English wage- earners have, on the whole, risen ; prices of commodities have fallen ; and the general prosperity of the country has greatly increased.** And the impression of statisticians is that the

■^ Principles of Political Economy, Book II. ch. vii. p. 178 of edition of 1865. The average birth-rate of France between 1801-10 and 1841-50 fell about. 5 per 1000.

^ For an estimate of this progress see Labor in the Longest Reign, by Sidney Webb (London, 1897).

The Verdict of the Economists 637

! di minution in the birth-rate throughout N orth- Western Europe - has not taken place among the ppQisstJSefltiaas of the com- munity. " After the researches of Quetelet in Brussels, Farr in London, Schwabe in Berlin, Villerm^ and Benoison de Chateauneuf in Paris, it is no longer possible to doubt that the maximum of births takes place among the poorer class, and that pover ty itself is an irresistible inducement to a n a bundant and disordered birth-rate ." ^ Such facts as are now beginning to be known point to the conclusion that the fall in the birth-rate is occurring, not in those sections of the community which have barely enough to live on, but in those which command some of the comforts of life — not in the "sweated trades," or among the casual laborers, but among the factory operatives and skilled artisans. We can adduce only one piece of statistical evidence in support of this hypo- thesis, but that one piece is, we think, full of significance.

The Hearts of Oak Friendly Society is the largest cen- tralised Benefit Society in this country, having now over two hundred thousand adult male members. No one is admitted who is not of good character, and in receipt of wages of twenty-four shillings a week, or upwards. The membership consists, therefore, of the artisan and skilled operative class, with some intermixture of the small shopkeeper, to the exclusion of the mere laborer. Among its provisions is

y'^ Population and the Social System, F. Nitti (London, 1894), pp. 153-162. Adam Smith had observed that poverty "seems even to be favorable to generation" (Wealth of Nations, Book I. chap. viii. p. 36). Professor Nitti has his own explanation of the fact : "The long working days of 12, 14, and 15 hours make their intellectual improvement impossible, and compel them to seek their sole enjoyments in those of the senses. Compelled to work for many hours in places heated to a great temperature, often promiscuously with women | obliged to live upon substances which, if insufficient for nutrition, frequently cause a per- manent excitability \ persuaded that no endeavor will better their condition, they are necessarily impelled to a. great fecundity] Add to this that the premature acceptance of children in workshops leads the parents to believe that a large family is much rather a good than an evil, even with respect to family comfortj ... It is clearly to be seen that a very high birth-rate always corresponds with slight wages, long days of work, bad food, and hence a bad distribution of wealth. . . . Nothing is more certain to fix limits to the birth-rate than high wages, and the diffusion of ease." "Poverty," Darwin had observed, "is not only a great evil, but tends to its own increase by leading to recklessness in marriage." — The Descent of Man (London, 1871), vol. ii. p. 403.

638 Trade Union Theory

the " Lying-in Benefit," a payment of thirty shillings for each confinement of a member's wife. From 1866 to 1880 the proportion of lying-in claims to membership slowly rose from 21.76 to 24.72 per 100. From 1880 to the present time it has continuously declined, until it is now only between 14 and 1 5 per 1 00.

The " devastating torrent of children " in this million of souls, forming 2\ per cent of the whole population of the United Kingdom, has accordingly fallen off by no less than two-fifths, only fourteen being born where formerly twenty- four would have seen the light. The reduction of the birthr-r ate in^tfds^ specially thrifty group of workmet^s -fa milies has b een more than twice, the reduction in the community^. as a whp le. The average age of the members has not appreciably changed, having remained throughout between 34 and 36. The well- known actuary of the Society, Mr. R. P. Hardy, watching the statistics year by year, and knowing intimately all the circumstances of the organisation, attributes this startling reduction in the number of births of children to these speci- ally prosperous and specially thrifty artisans entirely to their d eliberate de sire to li mit t he s ize of their f amilies.^

1 Our own impression, based on ten years' special investigation into English working-class life, coincides with Mr. Hardy's inference. There can be no doubt that the practice of deliberately taking steps to limit the size of the family has, during the last twenty years, spread widely among the factory operatives and skilled artisans of Great Britain. We may remind the reader that the Malthusian propaganda of Francis Place and J. S. Mill was greatly extended, and for the first time brought prominently before the mass of the people, by Charles Brad- laugh, M.P., and Mrs. Annie Besant. (In chap. iii. of his pamphlet, Die kiinstliche Beschrankung der Kinderzahl als sittliche Pflicht, 5th edition (Berlin, 1897), Dr. Hans Ferdy gives a careful history of this movement.) It^ j s a t any rate interesting to note that the beginning in the fall of the birtF-irate l"FSi7 y coincides closely with the enormous publicity given to the subject by the prose- cution of these propagandists in that vei^r year. ~ ~ 1 We attribute this adoption of neo-M&lthusian devices to prevent the burden of a large family (which have, of course, nothing to do with Trade Unionism) chiefly to the spread of education among working-class women, to their discontent with a life of constant ill-health and domestic worry under narrow circumstances, and to the growth among them of aspirations for a fuller and more independent existence of their own. This change implies, on the part of both husband and wife, a large measu re pf for^i^ ht, deliberateness, a nd self-control, w hich is out of the reach of the^less mteUigent'^n3i[more' s'eiT?n dulgent classes,} alBf difficult for the very poor, especiallyTor'tEe occupaiits'of one" roome3'Eomes7

The Verdict of the Economists


Table showing, for each year from 1866 to 1896 inclusive, the number of Members in the Hearts of Oak Friendly Society at the beginning of the year, the number of those who received Lying-in Benefit during the year, the percentage of these to the membership at the beginning of the year, and the birth-rate per 1000 of the whole population of England and Wales. {From the annual reports of the Committee of Management of the Hearts of Oak Friendly Society, and those of the Registrar-General.')


Benefit per

100 Members

of Hearts

of Oak.

lA^Tj-coroN w w w d d dv(>o6oo tN.t<vd\d iAiA-44to


The Verdict of the Economists


We reach here an aspect of the population question of which Malthus never dreamt, and on which further investiga- tion is imperatively demanded.^ There are many indications that the danger to be apprehended in North- Western Europe during the coming century is not over-population at all, but a deliberate restriction of population by the more prosperous, more intelligent, and more thrifty sections, brought about by the rise in the Standard of Life itself. This is not the place for any discussion of this momentous fact. For the present we are concerned only with the new light that it throws upon the relation between the increase of population and the rate of wages. Instead of " the principle of population " decisively negativing any possibility of the success of Trade Unionism,

1 There are indications that the same result is happening in New England. Thus, even as long ago as 1875, it was found that, of 393 working-class families of Massachusetts, those of the skilled mechanics (earning JSoo per annum) averaged from one to two children less than those of the laborers (earning less than %']00 per annum).

Eamitigs 0/ ■^^■^ families of Massachusetts in 1875, "'*' '^ number in family, averaged by groups of trades (rearranged).


Father's yearly wages.

Number in


Wife and chil- dren work- ing.

Total earnings of wife and chil- dren.

Total yearly earnings

Skilled workshop handicraftsmen . Metal workers .... Building trades ....


Mill operatives .... Shoe and Leather workers

Average of these six groups

Metal workers' laborers Workshop laborers Outdoor laborers .... Mill laborers ....

Average of these four groups


752-36 739-30 721.32 630.02 572.10 540.00
















250.35 209.00


821.40 829.81 794-32 735-02 822.45 749.00






458.09 433-06 424.13 386.04


64 6|




256.08 232.02

257.93 284.08

714.17 665.08 682.05 670.12






{Sixth Report on the Statistics of Labour of Massachusetts, 1876, p. 71,} VOL. II Y

642 Trade Union Theory

as is still often believed by otherwise well-educated people, the argument is all in the opposite direction. So far as we can draw any inference at all from the facts of English life, there is no reason to believe that a rise in wages, a reduction of , hours, or an improvement of the conditions of sanitation and safety among any class of workmen, would cause any increase in the birth-rate of that class ; and if the improvement in Conditions were to spread to section after section of workers who are now below the level of the skilled artisan, there is every reason to expect that it would result in a positive decline in the birth-rate among those sections.'^ To put the matter concretely, if we could, by Collective Bargaining or Legal Enactment, lift the London dock-laborers into an economic position equal to that of the railway porters, there would not only be no corresponding increase in the number of children born to them, but, in all probability, we should in a very few years find an actual diminution in the size of the average family of the class ; and if Trade Unionism could further raise both them and the railway porters to the

' What is needed is a thoroughly scientific investigation of the subject from all sides. First would come the statistical inquiry as to the exact extent and distribution of the decline in the birth-rate. An analysis of the registrations of births for selected years would show, for instance, whether the birth-rate was uniform among all occupations, or varied from trade to trade ; whether it bore- any relation to the wage-levels of different industries, or to the average number of rooms occupied by the families in these trades, as tabulated for London by Mr. Charles Booth ; or whether it corresponded with the degree of Trade Union membership. A similar analysis of births in the various friendly societies giving " Lying-in Benefit " would be even more suggestive. It would also be possible to use the Trade Union and Friendly Society machinery for taking voluntary censuses of the families of men in different social grades, different trades, or different dis- tricts. Such a diagnosis would prepare the way for a physiological inquiry into the means used, and their physical effects, direct and indirect. It would then be for the sociologist to discover the circumstances under the pressure of which these practices were adopted, and what effect they were having on the economic position of various classes, the institution of marriage, femily life, and the great social evil of prostitution ; most important of all, how sectional restriction of births affected, in extent and character, the breeding ground of subsequent genera- tions. Some preliminary investigations of this sort are being made by students of the London School of Economics and Political Science, but are stopped for lack of funds. We can imagine no way of spending a couple of thousand pounds more likely to be useful to the community than such an investigation. To us it seems, of all problems, the most momentous for the future of the civilised races.

The Verdict of the Economists 643

economic position of the "Amalgamated" Engineer, this result would be still more certain and conspicuous.

Accordingly, we do not find any modern economist, how- ever " orthodox " may be his bias, nowadays refuting Trade Unionism by a reference either to the Wage Fund or to the " Population Question." ^ The "Theor y of Distribution " which to-da y holds the field is of very .differenCcharacjg-. and one from which th e opponent of Trade-unionism can deriv e liftTe comfort. To begin with, it is declared that wages, like other incomes, depend upon the amount of the aggregate revenue of a community, not upon the amount of its capital. "The labour and capital of the country," says Professor Marshall, " acting on its natural resources, produce annually a certain net aggregate of commodities, material and im- material, including services of all kinds. This is the true net annual income or revenue of the country ; or the National Dividend ... it is divided up into Earnings of Labor, Interest of Capital, and lastly the Producer's Surplus, or Rent, of land, and of other differential advan- tages for production. It constitutes the whole of them, and the whole of it is distributed among them ; and the larger it is, the larger, other things being equal, will be the share of each agent of production." | The exten t and character of t he industries of Jhe. community,, and the ja.ver-Ghaja§iag fe vel of wage s and prices, are determined by the perpetual play ^f Supply and Demand, acting through Jhe_Maw__gf substitution." " The production of everything,-whether an agent of proHuction or a commodity ready for immediate 'consumption, is carried fotwacd, up to that limit or margin at which there is equilibrium between the. forces of demand and supply. The amount of the thing, and its price^the a"mounts"o rtEe several factors or agents~of~proHuction used in making it, and their prices — all these elements^ mutually

' Thus, Professor Marshall, though he elsewhere uses expressions which retain traces of the older view, observes, in the latest edition of his Principles of Economics (London, 1895), as corrected by the fly-leaf, "it is indeed true that a permanent rise of prosperity is quite as likely to lower as to raise the birth- rate" (p. 594).

644 Trade Union Theory

determine one another, and if an external cause sh ould alter any one of them, the etlect ofThe"dis turbance exte^ids to a ll the others." Kn6. n0Ge~Rent7It "wHT be seen, " is the excess value of fhe return which can be got by its aid where labor and capital are applied with normal ability up to the margin of profitableness over that which the same labor, capital, and ability would get if working without the aid of any such advantage." Nor is this confined to land rent (or to "a differential advantage not made by man "), for we are else- where told "that the rent of land is no unique fact, but simply the chief species of a large genus of economic pheno- mena ; and that the theory of the rent of land is no isolated economic doctrine, but merely one of the chief applications of a particular corollary from the general theory of demand and supply ; and that there is a continuous gradation from the true rent of those free gifts which have been appropriated by man, through the income derived from permanent im- provements of the soil, to those yielded by farm and factory buildings, steam engines, and less durable goods." The result is a constant tendency to equality, but only to equality of remuneration for the marginal use. " Other things being equal, the larger the supply of any agent of production, the further will it have to push its way into uses for which it is not specially fitted, and the lower will be the demand price with which it will have to be contented in those uses in which its employment is on the verge or margin of not being found profitable, and, in so far as completion equalises the price which it gets in all uses, this price will be its price for all uses." 1

^ Thus, the effect of perfectly free and unrestrained in- dividual competition among laborers and capitalists is, on the one hand, to secure to their owners the entire differential advantage of all those factors of production which are better than the worst in normal use, land, on the other, to reduce the personal remuneration for all the members of each class

1 Principles of Economics, by Professor Alfred Marshall, 3rd edition (London, 1895), Book VI. chap. i. pp. 588, 591, 609, and chap. ix. p. 705.

The Verdict of the Economists 645


of producers to the level of the last, and least advantageously situated, member of that class for the time being. The modern economist tells each class of producers plainly what will happen to their incomes if there is no interference with free competition. The total net produce of the class m ay be considerable ; the tot al utility and value of the seryices of the class as a whole to the employers may be immense ; the consumers_ti]£m^selves_mayb_e willing, rather than forego the commodity\^ to pay a higher pricey. Nevertheless, if the work- men in that particular class compete freely among them- selves fojL employment, and the employers are- unrestrained Jo takings advan tage of this "Perfect Comp etitio n," the price with which all the members of the class will have to be content will "Be^et by the last additional workman in the class whose ' ^^mploy ment is on the verge or margin of not being found profitable!^*' Under Perfect Competition , " t he wages of every class of labor tend to b e equal to the p roduce due to the additional labor'oT tK e marginal lab orer of JhaLclass^' ^ '" "Bu FwEatthe isolated ind ividual wage-earner thus fore- go es. the employer does not necessarily gain. For the same 'reasoning applies, as Professor Marshall points out, to capital in all its mobile forms. The demand -price is determined, not by the total utility of the advantages to be gained by the use of each unit of capital, but by the utility of the last unit of mobile capital, " in those uses in \vhich its employment is o n the verge or margin of not being found profitable." Co mpetiHorTamo ng capitalists wiH force them to cede to tihe cons umer anything above the net advantages of the last, or ma rginal, unit of mobile capital . ThusTunder Perfect Com - petition, it is on the one hand the landlord, or other owner of the rents or " quasi-rents " of superior instruments of pro- duction, and on the other the consumer, in proportion to the extent of his consumption, who is always getting the benefit of that " law of substitution " which pares down the incomes of laborers and capitalists alike, whenever these, in particular

' Principles of Economics, by Professor Alfred Marshall, 3rd edition (London, 1895), Book VI. chap. i. p. 584.

646 Trade Umon Theory

instances, rise above the level for the time being of the equivalent of the marginal use.^

All that abstract economics can nowadays tell us about the normal rate of wages is, therefore, that under perfectly free competition it will be always tending, for each dist inct and fairlj^ homogene ous clasTot workman, to be no more than can be got by "the marginal man" of that class, and in so far as labor may be regarded as freely mobile between the different grades, no more than would be given for the " marginal man " of the community as a whole. How much that will be cannot, even on the assumption of perfect com- pletion and frictionless mobility, be determined by any reasoning of abstract economics. "It appears, then, as the conclusion of the argument," sums up our latest systematic writer, " that t here is, no short and_ si mple rule by whic h^the normal rate,. of wages in any empJoxmenLt„jaiulie-deter- mined over a long period or in the Jong.^n. We cannot assign with any degree of precision the superior and the inferior limits between which it must lie, and thus we cannot fix upon any point about which the market rates must oscillate." " ________^^

>< This necessary s indeterminatenesj ^f the wage-contract, even under perfect competition, was insisted on by Thornton in 1869, and was thereupon mathematically demonstrated,

1 This Theory of Distribution would gain in logical completeness if, after the manner of the classic economists, (i) we could assume that this equivalent of the advantage of the marginal use of capital itself precisely determined, in any com- munity, how much capital would be saved and productively employed — the rate of accumulation being so affected by every variation from the "normal" rate of interest as eventually to counteract the variation ; and if (2) we might believe that the amount of the net produce of the marginal laborer determined how many laborers would exist — ^the increase of population varying in exact correspond- ence with these "normal" wages. But as we do not know whether, human nature being as it is, a rise in the rate of interest would on the whole augment the amount of productive capital or decrease it ; or whether u rise in wages would increase the birth-rate or diminish it, both the amount of capital and the number of the population must, as far as abstract economics is concerned, for the present be treated as indeterminate ; or, rather, as data which, for any particular time and coimtry, the abstract economist can only accept from the statistician.

^ J. S. 'ii'\c\io\soa. Principles of Political Economy CEdmhax^, 1893), p. 353.

The Verdict of the Economists 647

In a .comparatively unnoticed paper, Fleeming Jenkin, a physicist of rare power, showed the economists of 1870 that, on their own reasoning, it followed that the rate of wages would vary according as the wage-earners took steps for their own protection or not. In flat contradiction of the current middle-class opinion, he concluded that the case of " th e laborer who does not ba rgain ,a,3..i9.;his w,agas-.,.„j_i,J.s th e, case of a forced sale , as at a bankruptcy, and of any other sale by auction without a reserved price. . . . The knowledge that goods must be sold, that, in fact, there is no reserved price ... at once lowers the demand curve while it raises the supply, and by a double action lowers the price. . . . Both in a given market and on an average of years, the power of bargaining will enable a seller to obtain higher prices [than without that pov^er]." ^

The whole subject was minutely investigated in 1881 by Professor F. Y. Edgeworth , from the mathematical stand- point, in a work which has received too little attention. He sums up his argument as follows. " Suppose a market consisting of an equal number of masters and servants, offering respectively wages and service, subject to the condition that no man can serve two masters, no master employ more than one man ; or suppose equilibrium already established between such parties to be disturbed by any sudden influx of wealth into the hands of the masters. Then there is no determinate, and very generally [no] unique arrangement towards which the system tends under the operation of, may we say, a law of Nature, and which would be predictable if we knew beforehand the real requirements of each, or of the average dealer ; but there are an indefinite number of arrangements i priori possible, towards one of which the system is urged, not by the concurrence of innumerable (as it were) neuter atoms eliminating chance, but (abstraction being made of custom) by what has been called the Art of Bargaining — higgling dodges and designing

^ " Graphic Representation of the Laws of Supply and Demand," by Fleeming Jenkin, in Recess Studies (Edinburgh, 1870), pp. 173, 175.

648 Trade Union Theory

obstinacy, and other incalculable and often disreputable accidents." ^

\^But competition between individual producers and con- g/umers, laborers and capitalists, is, as the economist is now careful to explain, in actual life very far from perfect, and shows no tendency to become so.^ Combination, we are told,* " is as much a normal condition of modern industry " as competition, as, indeed, on the doctrine of frteedom of contract it is bound to be. When wage-earners combine to improve the conditions of their employment, or when employers, on the other hand, tacitly or formally unite to reduce wages, — when, again, a great capitalist undertaking enjoys a virtual monopoly of any kind of employment, abstract economics is frankly incapable of predicting the result. " If," say s Professor Marshall, " the employers i n any trade act togethgE^and, so do the emgjo yed, the-^scJutip n of the problem of wages becomes indeterminate. The trade as a whole may be regarded as receiving a surplus (or quasi- rent) consisting of the excess of the aggregate price which it can get for such wares as it produces, over what it has to pay to other trades for the raw materials, etc., which it buys ; and there is nothing but bargaining to decide the exact shares in which this should go to employers and employed. No lowering of wages will be permanently in the interest of employers which is unnecessary and drives many skilled workers to other markets, or even to other industries in which they abandon the special income derived from their ' particular skill ; and wages must be high enough in an average year to attract young people to the trade. This

' Mathematical Psychics (London, 188 1), p. 46, by F. Y. Edgeworth, now Drummond Professor of Political Economy in the University of Oxford.

^ " In practical life such frictional disturbances are innumerable. At no moment and in no branch of production are they entirely absent. And thus it is that the Law of Costs is recognised as a law that is only approximately valid ; a law riddled through and through with exceptions. These innumerable exceptions, small and great, are the inexhaustible source of the undertaker's profits, but also of the undertaker's losses." — The Positive Theory of CapUal, by E. v. Bohm- Bawerk, translated by W. Smart (London, 1891), p. 234.

' Studies in Economics, by W. Smart, Adam Smith Professor of Political Economy in the University of Glasgow (London, 1895), P- 259.

The Verdict of the Economists 649

sets lower limits to wages, and upper limits are set by corresponding necessities as to the supply of capital and business power. But what point within these limits should be taken at any time can be decided only by higgling and bargaining^ ^

We thus see that it is not only economically permissible, but in the view of our best authorities necessary for self-pro- tection, that the workmen should not simply acquiesce in what- ever conditions the , employer may propose, but that they should take deliberate steps to protect themselves by " higgling and bargaining," if they are not to suffer lower wages and worse conditions of employment than there is any economic necessity for. "If the workman," says Walker, " from any cause does not pursue his interest he loses his interest, whether he refrain from bodily fear, from poverty, from ignorance, from timidity, and dread of censure, or from the effects of bad political economy which assures him that if he does not seek his interest, his interest will seek him." ^ And if the workmen ask how they can strengthen themselves in this higgling and bargaining, how they are most effectually to pursue their own interest, the answer of abstract economics is now, positively, combination. "In that contest of endurance between buyer and seller [of labor]," wrote J. S. Mill in 1869, " nothing but a close combination among the employed can give them even a chance of successfully competing against the employers." ^ This was one of the conclusions that most ' shocked Mill's economic friends of 1869, but it is one which has since become an economic commonplace.* In 1881

' Elements of Economics of Industry , by Professor A. Marshall (London, 1892), p. 341. "Demand and supply are not physical agencies which thrust a given amount of wages into the laborer's hand without the participation of his own vrill and actions. The market rate is not fixed for him by some self-acting instrument, but is the result of bargaining between human beings — of what Adam Smith calls 'the higgling of the market.'" — ^J. S. Mill, Principles of Political Economy,^ Book V. ch. X. sec. J.

= The Wages Question, by F. A. Walker (New York, 1876 ; London, 1891),

pp. 364,411- ^ „. . ,r ^

3 Fortnightly Revievu, May 1869 ; Dissertations and Discussions (London, 1876), vol. iv. p. 42.

  • "Combination is, in fact, the only way by which the poor can place them-


650 Trade Union Theory

Professor Edgeworth, in the work which we have already quoted, placed it on the rock of mathematical analysis, Summing up a long mathematical argument as to "the general case in which numbers, natures, and combinations lare unequal," he declares that "combination tends to f introduce or increase indeterminateness ; and the final settle- ments thereby added are more favorable to the combiners than the (determinate or indeterminate) final settlements previously existing." In his opinion, in fact, " the one thing from an abstract point of view visible amidst the jumble of catallactic molecules, the jostle of competitive crowds, is that those who form themselves into compact bodies by combination do not tend to lose, but stand to gain." ^ Nor need the combination amount in any sense to a monopoly. " If, for instance," proceeds Professor Edgeworth, " powerful trade unions did not seek to fix the quid pro quo, the f amounts of labor exchanged for wealth (which they would ibe quite competent to seek), but only the rate of exchange, it^eing left to each capitalist to purchase as much labor as hie might demand at that rate, there would still be tjiat.sort lof indeterminateness favorable to unionists above described." And no trade need refrain, out of consideration for the interests of other trades, from doing the best it can for itself in its negotiations with its own particular employers. " It is safe to say," observes Professor Taussig, " that in concrete life it happens very rarely, probably never, that a specific rise in 1 wages, secured by strike or trade union pressure or simple ^agreement, can be shown to bring any ofT-setting loss in the yages of those not directly concerned. . . . The chances are against any traceable loss which would off-set the visible gain. Certainly an unbiassed and judicious adviser, having the interest of all laborers at heart, would hesitate long before counselling any particular set of laborers against an endeavor

selves on a par with the rich in bargaining." — H. Sidgwick, Elements of Politics, ch. xxviii. sec. 2, p. 579 of 2nd edition (London, 1897).

1 Mathematical Psychics (London, 1881), by Prof. F. Y. Edgeworth, pp. 43i 44-

The Verdict of the Economists 651

to get better terms from their employers, on the ground that as an ulterior result of success some of their fellows might suffer. If no other objection than this presented itself, he could safely assert that economic science had nothing to say against their endeavors, and much in favor of them." ^ Pro- fessor Sidgfwick has therefore no difficulty in reciting various typical circumstances under which abstract economics show it to be quite possible for Trade Unions to raise wages, and in concluding that " in all the above cases it is possible for a combination of workmen to secure, either temporarily or permanently, a rise in wages ; whilst in none of them, except the last, has such gain any manifest tendency to be counter- balanced by future loss. And it does not appear that these cases are in practice very exceptional, or that the proposition that ' Trade Unions cannot in the long run succeed in raising wages ' corresponds even approximately to the actual facts of industry," whilst there is really no ground for the conclusion of the older economists " that if one set of laborers obtain an increase of wages in this way, there must be a corresponding! reduct ion Th the wSgeS oroffierlaBorers." ^ finally, weTiavel the deliberate judgment of Professor Marshall, cautiously summing up his examination of the arguments for and against Trade Unionism. " In trades which have any sort of monopoly the workers, by limiting their numbers, may secure very high wages at the expense partly of the employers, but chiefly of the general community. But such action generally diminishes the number of skilled workers, and in this and other ways takes more in the aggregate from the real wages of workers outside Ithan it adds to those of workers inside ; and thus on the balance it lowers average wages.* . . . Passing from selfish and exclusive action of this

' Wages and Capital: an Examination of the Wages Fund Doctrine, by F. W. Taussig, Professor of Political Economy in Harvard University (London, 1896), pp. 103, 104.

  • Principles of Political Economy, by Henry Sidgwick, Professor of Moral

Philosophy at the University of Cambridge (London, 1883), p. 363.

' Other authorities doubt whether; on any reasoning of abstract economics, this drawback can be shown necessarily to result. " If," observes Professor Edgeworth, " it is attempted to enforce the argument against Trade Unionism by

652 Trade Union Theory

sort, we find that unions generally can so arrange their bargaining with employers as to remove the special disad- vantages under which workmen would lie if bargaining as indi- viduals and without reserve ; and in consequence employers may sometimes find the path of least resistance in paying somewhat higher wages than they would otherwise have 'done. In trades which use much fixed capital a strong union may for a time divert a great part of the aggregate net income (which is really a quasi-rent) to the workers ; but this injuiy to capital will be partly transmitted to consumers, and partly, by its rebound, reduce employment and lower wages, . . . 1 Other things being equal, the presence of a union in a trade {raises wages relatively to other trades. But the influence jwhich unions exert on the average level of wages is less than iwould be inferred by looking at the influence which they exert in each particular trade. When the measures which they take to raise wage5,.Jn_^e trnde-fewse th.e.,e£f«et--af rendering business ;inore difficulMor tanxlous. t iri impeding it) m any other wayj they are hkely to dimmish employment m "ofEertraHes", arrd*uius to cause a greater aggregate loss of wages to other trades than they gain for themselves, and to lower and not raise the average level of wages. . . . The power of unions to raise general wages by direct means is never great ; it is never sufficient to contend successfully with the general economic forces of the age, when their drift is against a rise of wages. But yet it is sufficient materially to benefit the worker, When- it is so directed as to co-operate with and to strengthen those general ^.agencies, which -are>-tending to improve his position Tmorally^ and Economically."^ No

the consideration that it tends to diminish the total national produce, the obvious reply is that Unionists, as ' Economic men,' are not concerned with the total produce. Because the total produce is diminished it does not follow that the . laborer's share is diminished (the loss may fall on the capitalist and the entrepreneur whose compressibility has been well shown by Mr. Sidgwick, Fortnightly Review, September 1879) ; much less does it follow that there should be diminished that quantity which alone the rational unionist is concerned to increase — the laborer's utility." — Mathematical Psychics, p. 45.

1 Elements of Economics of Industry, by Prof. A. Marshall (London, 1892), pp. 407, 408'.

The Verdict of the Economists 653

economist of the present day can therefore look forward, as the popular advisers of the middle class even within the present generation confidently could, to a time when "the fanatical faith of the working classes in the artificial mechanism of combination will give place to trust in the wiser, because more natural, system of individual competition ; and the hiring of labor, like the exchange of commodities, will be set free, to be regulated by the Heaven-ordained laws of Supply and Demand." ^

X^Thus, economic authority to-day, looking back on the confident assertions against Trade Unionism made by M'Culloch and Mill, Nassau Senior and Harriet Martineau, Fawcett and Cairnes, has humbly to admit, in the words of the present occupant of the chair once filled by Nassau Senior himself, that " in the matter of [Trade] Unionism, as well as in that of the predeterminate wage-fund, the untutored mind of the workman had gone more straight to the point than economic intelligence misled by a bad method." ^ The verdict of abstract economics is, in fact, decidedly in favor of the Trade Union contention, if only within certain limits. Whether this view of Trade Unionism in the abstract is worth any more, in relation to the actual problems of practical life, than the contrary verdict arrived at by the economists of a preceding generation, is a matter on which opinions will differ. For our own part, we are loth to pin our faith to any manipulation of economic abstractions, with or without the aid of mathematics. We are inclined to attach more weight to a consideration of the processes of industrial life as they actually exist. In the next chapter we shall accordingly seek to follow out the course of that " higgling and bargaining " upon which, as we have seen, the conditions of employment admittedly depend.

' Trade Unionism, by James Stirling, p. 55.

  • Mathematical Psychics (p. 45), by F. Y. Edgeworth.


It is often taken for granted that the higgling of the market, in which the workman is interested, is confined' to- the negotiation between himself and his employer. But the share of the aggregate product of the nation's industry which falls to the wage-earners as a class, or to any particular operative — notably the division of that portion which may be regarded as the " debatable land " — depends not merely on the strength or weakness of the workman's position towards the capitalist employer, but also on the strategic position of the employer towards the wh olesale trader, that of the wholesale trader towards the shopkeeper, and that of the^shopkeeper^ towards thie consumer. The hi^ilng of the market, which, under a'syitenTorTfee competition and Indi- vidual Bargaining, determines the conditions of employment, occurs in a chain of bargains linking together the manual worker, the capitalist employer, the wholesale trader, the shopkeeper, and the customer. Any addition to, or sub- traction from, this series of intermediaries between the manual worker and the consumer — the excision of the capitalist employer or of the wholesale or retail trader, the insertion of a sub-contractor at one end or of a " tallyman " *

' The "tallyman" is a drapery hawker, visiting the houses of his customers, and selling his wares upon a particularly objectionable system of credit. See the article on "Tally System" in Chambers's Encydopadia (London, 1874) ; and the excellent article under "Tally Trade" in M'CuUoch's Dictionary of

The Higgling of the Market 655

at the other — will be found, in practice, to materially alter the position of all the parties. We must therefore examine separately the conditions of each of these series of bargains.' It will be convenient to put on one side for the moment any consideration of gluts or scarcities — whether there is a surplus of workmen seeking situations or of vacancies to be filled ; whether manufacturers are heaping up stocks, or are unable to keep pace with the orders they receive ; whether the trader's " turn-over " is falling off or rapidly increasing. These variations in supply and demand will, of course, greatly affect the relative pressure of the forces which deter- mine particular bargains. But fluctuations of this kind, however important they may be to the parties concerned, and however much we may believe them, in the long run, to weight the scales in favor of one class or another, tend only to obscure the essential and permanent characteristics of the several relationships. To reveal these characteristics, we must assume a market ,^in a state of perfect equilibrium, where the supply is exactly equal in quantity to the demand.

I We begin with the bargain between the workman and the capitalist employer. We assume that there is only a single situation vacant and only one candidate for it. When the workman applies for the post to the employer's foreman, the two parties to the bargain differ considerably in strategic strength. There is first the difference of alternative. If the foreman, and the capitalist employer for whom he acts, fail to come to terms with the workman, they may be put to some inconvenience in arranging the work of the establish-

Commerce and Commercial Navigaiion (London, 1882), pp. 1357-58 ; also C. S. Devas's Groundwork of Economics (London, 1883), note to sec 213, p. 443. Jf ' It is, in our view, one of the most unsatisfactory features of the older economists, that they habitually ignored the actual structure of the industrial world around them, and usually confined their analysis- to the abstract 'figures of "the capitalist " and "the laborer." For a brief description of the main outline of English business structure see the article on " The House of Lords and the Sweating System," Nineteenth Century, May 1890, by Beatrice Potter (Mrs. Sidney Webb). A systematic economic analysis of the actual mechanism of English business life is badly needed.

656 Trade Union Theory

ment. They may have to persuade the other workmen to work harder or to work overtime ; they may even be com- pelled to leave a machine vacant, and thus run the risk of some delay in the completion of an order. Even if the jjw orkman remai n s obdurate, the worst that the capit alist |suffers is a fractional decrease_ of the year's,. profit.^ Mean- while, he and his foreman, with their wives and families, find their housekeeping quite unaffected ; they go on eating and drinking, working and enjoying themselves, whether the bargain with the individual workman has been made or not. Very different is the case with the wage-earner. If he refuses the foreman's terms even for a day, he irrevocably loses his whole day's subsistence. If he has absolutely no other resources than his labor, hunger brings him to his tnees the very next morning. Even if he has a little hoard, or a couple of rooms full of furniture, he and his family can only exist by the immediate sacrifice of their cherished provision against calamity, or the stripping of their home. Sooner or later he must come to terms, on pain of starvation or the workhouse.^ And since success in the higgling of the

' The latest critic of the theory of Trade Unionism denies this inequality, on the ground that whilst the wage-earners must starve if the employers stand out, the employers may be driven into bankruptcy if the workmen revolt {^A Criti- cism of the Theory of Traded Unions, by T. S. Cree, Glasgow, 1891, p. 20). But this very argument assumes " a stoppage of work through a strike " — that is to say, deliberately concerted action among the wage-earners — the very Trade Unionism which the writer declares to be unnecessary.

2 It is interesting to find this situation clearly seen by an unknown French writer of 1773: "Partout oil il y a de trfe-grandes propri^tes, et par conse- quent, beaucoup de journaliers, voici comment s'^tablit naturellement le prix des journ&s : le journalier demande une somme, le proprietaire en propose un moindre ; et comme il ajoute je puis me passer de vous plusieurs jours, voyez si vous pouvez vous passer de moi vingt-quatre heures, on sait que le marche est bient6t conclu au prejudice du journalier." — Jaloge dejean Baptiste Colbert, par Monsieur P. (Paris, 1773), p. 8. Three years later Adam Smith remarked that "in the long run the workman may be as necessary to his master as his master is to him, but the necessity is not so immediate" (Wealth of Nations, London, "4776, Book I. ch. viii. p. 30 of M'CuUochs edition). Du Cellier (Hisloire des Classes Laborieuses en France) observes that "^t- c»r»^prio in.ftia la cbor market too often ta kes placq , r" >^»ti.ragn f^y p equal co n tracting p arties, but betwe en a mnnpy-haR' a" " gtnmarh " (p. 324)] ' ' In the general course of human nature," remarked the shrewd founders of the American Constitu- tion, ' ' power over a man's subsistence amounts to a power over his will " {Federalist, No. Ixxix.).

The Higgling of the Market 657

market is largely determined by the relative eagerness of the parties to come to terms — especially if this eagerness cannot be hid-^it is now agreed, even if on this ground alone, " that«  m anual laborers as a class are at a disadvantage in bar-j gaining.

But there is also a marked difference between the parties in that knowledge of J;he circumstances which ^^i^ requisite fo r successful higgling . " The art of bargaining," observed Jevons, " mainly consists in the buyer ascertaining the lowest price at which the seller is willing to part with his object, without disclosing, if possible, the highest price which he, the buyer, is willing to give. . . . The power of reading another man's thoughts is of high importance in business." ^ Now the essential economic weakness of the isolated workman's posi- tion, as we have just described it, is necessarily known to the! employer and his foreman. T he isolated workman, on t hel ot her hand, is ignorant of the employer's position. Even in' the rare cases in which the absence of a single workman is seriously inconvenient to the capitalist employer, this is unknown to any one outside his office. What is even more important, the employer, knowing the state of the market for his product, can form a clear opinion of how much it is worth his while to give, rather than go without the labor altogether, or rather than postpone it for a few weeks. But the isolated workman, unaided by any Trade Union official, and unable to communicate even with the workmen in other towns, is wholly in the dark as to how much he might ask.

With these two important disadvantages, it is compara- tively a minor matter that the manual workei- is, from his

' Principles of Economics, by Professor A. Marshall, 3rd edition (London, •895), Book VI. ch. iv. p. 649. Professor Marshall adds that " the effects of the laborer's disadvantage in bargaining are therefore cumulative in two ways. It lowers his wages ; and, as we have seen, this lowers his efficiency as a worker, and thereby lowers the normal value of his labor. And in addition it diminishes his efficiency as a bargainer, and thus increases the chance that he will sell his labor for less than its normal value. "

2 W. S. Jevons, Theory of Political Economy, 3rd edition (London, 18 ch. iv. p. 124.

.658 Trade Union Theory

position and training, far less ^skilled than^t^ or

hij foreman in tlie art of bargaining itself. This art forms a large part of the daily life of the entrepreneur, whilst the foreman is specially selected for his skill in engaging and superintending workmen. The manual worker, on the con- trary, has the very smallest experience of, and practically no training in, what is essentially one of the arts of the capitalist employer. He never engages in any but one sort of bargaining, and that only on occasions which may be infre- quent, and which in any case make up only a tiny fraction of his life.

Thus, in the making of the labor contract the isolated individual workman, unprotected by any combination with his fellows, stands in all respects at a disadvantage compared with the capitalist employer. There is an even more serious disadvantage to come. The hiring of a workman, unlike a contract for the purchase of a commodity, necessarily leaves m any conditi ons not precisely determined , still less expressed in any definite form. This jndfitprminntfnp'in nf thr Jabnr contract is in some respects a drawback to the employer. In return for the specified wage, the workman has impliedly agreed to give work of the currently accepted standard of quantity and quality. The lack of definiteness in this respect leaves him free to skulk or to scamp. But against this the employer protects himself by providing supervision and by requiring obedience to his foreman, if not also by elaborate systems of fines and deductions. Whenever there is any dispute as to the speed of work, or the quality of the output, the foreman's decision is absolute. To the workman, how- ever, the indeterminateness of his contract is a far more fruitful source of personal hardship, against which he has no practicable remedy. When an additional " hand " is taken on in a manufacturing establishment, practically the only point explicitly agreed upon between him and the foreman is the amount of the weekly wage, or possibly the scale of piece- work rates. How_many hours he shall work, how quickly or how intensely he is to exert himself, what" intervals will

The Higgling of the Market 659

be allowe d for meals, w hat fines and deductions he will bei su^ect_to, what provision is made for warmth and shefter, the arrangements for ventilation and prevention of accidentsi the sanitary accommodation, the noise, the smell and the dirtl the foreman's temper and the comrades' manners — all thisi has to be taken for granted, it being always implied in the engagement that the workman accepts the conditions existing in the employer's establishment, and obeys all his lawful commands. It may be urged that, if the conditions are worse than is customary, the workman will not accept the situation, unless he is offered higher wages. But unti l he has made his contract and ac tually begun work, he caoQQtTcnbw w hat the conditions are, even if he could estimate their dis- advantage in terms of money, and stand out for the higher price. Moreover, unless fixed by law or Collective Bargain- ing, these conditions may at any moment be changed at the will of the employer, or the caprice of the fore- man. Thus, when the isolated atorJkman - has made- his bargain, he has o o._assurance that Jt.mll be a,dhered to, as regards any element other than the money wage, and even this may be eaten into by unforeseen fines and de- ductions. On all the other conditions of employment he is, under an unregulated industrial system, absolutely in the hands of the employer for the period of his engagement. The workman may, indeed, give up his situation, and throw himself again on the market, to incur once more the risk of losing his subsistence whilst seeking a new place, and to suffer afresh the perils of Individual Bargaining ; but even if he makes up his mind rather to lose his employment than to put up with intolerable conditions, he is not legally free to do so without proper notice,^ and for his sufferings during this period he has no redress.

Such are the disadvantages at which, when the labor

• Leaving work without giving the notice expressed or implied in the contract , renders the workman liable to be sued for damages ; and such actions by the employer against recalcitrant workmen are frequent, especially in the coal-mining industry.

66o Trade Union l^heory

market is in a state of perfect equilibrium, the isolated individual workman stands in bargaining with the capitalist employer. But it is, to say the least of it, unusual, in any trade in this country, for there to be no more workmen applying for situations than there are situations to be filled. Wh,enJhe_unemfilQj:S£L, '^'-f 'S'^^^'^'^Y, roi,'"^^ thp^.factnrY p-ates every morning, it is plain to each^ man__thatj unl ess he c an induce Ihe^foreman^to select ^W rather^ thaa.aafither, his chance of subsistence ifor weeks to come may bejrreteievably lost. Under these circumstances bargaining, in the case of isolated individual workmen, becomes absolutely impossible. The foreman has only to pick his man, and tell him the terms. Once inside the gates, the lucky workman knows that if he grumbles at any of the surroundings, however intolerable ; if he demurs to any speeding-up, lengthening of the hours, or deductions ; or if he hesitates to obey any order, however unreasonable, he condemns himself once more to the semi-starvation and misery of unemployment. For the alternative to the foreman is merely to pick another man from the eager crowd, whilst the difference to the employer becomes incalculably infinitesimal. And it is a mistake to suppose that the workman's essential disadvantages in bargaining disappear in times of good trade, or even when employers are complaining of a scarcity of hands. The workman, it is true, need not then fear starvation, for he may rely on finding another employer. But if he refuses the first employer's terms, he still irrevocably loses his day's subsistence, and runs a risk of seeing subsequent days pass in the same manner. Moreover, the tramp after another employer may often mean the breaking up of his home, removal from his friends, dislocation of his children's educa- tion, and all the hundred and one discomforts of migration or exile.^ The employer, on the other hand, will be induced

>C ^ Thus, in 1896, a year of exceptionally good trade, between five and six hundred members of the Associated Shipwrights' Society obtained advances of railway fares to enable them to move from their homes, where they were un- employed, to other towns where work was to be had ; see Fifteenth Annual Report of the Associated Shipwrights' Society (Newcastle, 1897), pp. 164-179.

The Higgling of the Market 66 1

to offer higher terms, rather than run the risk of foregoing some part of the increased profits of brisk times. But the extent of the " debatable land " is, in these times of high profits, enormously increased, and no one but the employer himself knows by how much. Here the difference in the knowledge of the circumstances becomes all-important, and fatally disadvantageous to the isolated workman. The employer knows about what other firms have been paying for their labor, and to what extent there is a real scarcity of workmen ; hence he can judge how little he need offer to make his place seem worth accepting to the unemployed workman. T he isolated workm an, on the other_haud, Jja^ n o knowledge whether the sca rcity of labor extends beyond his ^own to wn, o r is likely tO-]2£L prolong^ed ; whilst he" has noT the sUpitest idea of how much he might stand out for,^ and yet be taken on. In short, it would be easy to argue ' that, in spite of the actual rise of his wages in times of good trade, it is just when profits are largest that the isolated workman stands at the greatest economic disadvantage in the division of the " debatable land."

So far the argument that the isolated workman, unpro- tected by anything in the nature of Trade Unionism, must necessarily get the worst of the bargain, rests on the assump- tion that the capitalist employer will take full advantage of his strategic strength, and beat each class of wage-earners down to the lowest possible terms. In so far as this result depends upon the will and intention of each individual employer, the assumption is untrue. A capitalist employer who looks forward, not to one but to many years' produc- tion, and who regards his business as a valuable property to be handed down from one generation to another, will, if only for his own sake, bear in mind the probable effect of any reduction upon the permanent efficiency of the establish- ment. He will know that he cannot subject his work- people to bad conditions of employment without causing them imperceptibly to deteriorate in the quantity or quality of the service that they render. As an organiser of men, he

662 Trade Union Theory

will readily appreciate to how great an extent the smooth and expeditious working of a cbmplicated industrial concern depends on each man feeling that he is being treated with consideration, and that he is receiving at least as much as he might be earning elsewhere. But apart from these considerations of mere self-interest, the typical capitalist manufacturer of the present generation, with his increasing .education and refinement, his growji^ political interests and ipublic spirit, will, so long as hisi^own customary income is 'not interfered wi^Cjake a "positive "pTeasure' in ITu^enJuig the wages" and promoting the comfort of his workpeople. Unfortunately, the intelligent, far-sighted, and public-spirited [employer is not master of the situation. Unless he is pro- tected by one or other of the dykes or bulwarks presently to be described, he is constantly finding himself as powerless as the workman to withstand the pressure of competitive industry. How this competitive pressure pushes him, in sheer self-defence, to take as much advantage of his work- people as the most grasping and short-sighted of his rivals, we shall understand by examining the next link in the chain.

Paradoxical as it may appear, in the highly-developed commercial system of the England of to-day the capitalist man ufacturer , stands at as great a relative disadvantage to the wholesale trader as the isolate^, workman does to the capitalist manufacturer. In the higgling of the market with the whfolesale trader who takes his product, the capitalist manufacturer exhibits the same inferiority of strategic posi- tion with regard to the alternative, with regard to know- ledge of the circumstances, and with regard to bargaining capacity. First, we have the fact that the rr^ufacturer stands to lose mor e by failing to sell his p roduct-with absolute regularity, than th e wholesa le trade r d oes by temporarily abstaining_from buying. To the manufacturer, with his capital locked up in mills and plant, continuity of employment is all-important. If his mills have to stop even for a single day, he has irrevocably lost that day's gross

The Higgling of the Market 663

income, including out - of - pocket expenses for necessary salaries and maintenance. To the wholesale trader, on the other hand, it is comparatively a small matter that his stocks run low for a short time. His unemployed working-capital is, at worst, gaining deposit interest at the bank, and all he foregoes is a fraction of his profits for the year. Moreover, as the wholesale trader makes his income by a tiny profit per cent on a huge turnover, any particular transaction is comparatively unimportant to him. The manufacturer, earning a relatively large percentage on a small turnover, is much more concerned about each part of it. In short, whilst the capitalist manufacturer is " a combination in himself" compared with the thousand workmen whom he ' employs, the wholesale trader is "a combination in himself" compared with the hundreds of manufacturers from whom he buys. The disparity is no less great with regard to that knowledge of the market which is invaluable in bargaining. The manufacturer, even if he has a resident agent at the chief commercial centre, can never aspire to anything like the wide outlook over all the world, and the network of communications from retail traders and shipping agents in every town, which make up the business organisation of the wholesale trader. The trader, in short, alone possesses an up-to-date knowledge of the market in all its aspects ; he alone receives the latest information as to what shopkeepers find most in demand, and what native and foreign manu- facturers are offering for sale. With all this superiority of knowledge, it is a minor matter that, as compared with the manufacturer, immersed in the organisation of labor and the improvement of technical processes, the wholesale trader is a specialist in bargaining, trained by his whole life in the art of buying in the cheapest and selling in the dearest market.'

A- 1 Where, as is the case in many trades, the wholesale trader sends out travellers to visit the retail shopkeepers, the manufacturer is even more dependent on him. For these travellers have great power to " push " one line of goods rather than another, and if any wholesale house has a. well- established connection — still more, if its shopkeeping clients are in any way dependent on it — it can seriously injure a particular manufacturer by boycotting

664 Trade Union Theory

^ \s, within certain und efined limits, at the mercy ofj hg^whole- salej£aderr"~HeTs ¥oI3 that the price" of "his product is too high to attract customers ;| that the shopkeepers find no demand for it ;j that foreign producers are daily encroaching on the neutral markets ; I and, finally, that there has just come an offer from a rival manufacturer to supply the same kind of article at a lower price. The manufacturer may doubt these statements, but he has no means of disproving them. He is keenly alive to the fact that his brother manu- facturers are as eager as he is to get the order, and some of

ithem, he knows, are always striving to undercut prices. Unless he is a man of substance, able to wait for more profitable orders, or unless his product is a speciality of his own, which no one else makes, he is almost certain to be tempted, rather than lose the business, to accept a lower offer than he meant to. The price he has accepted can only work out in a profit by some lowering of the cost of production. He consults his partners and his foreman as to how this can be effected. Some slight improvement may be possible in the technical process, or a new machine may be introduced. But this takes both time and capital. If neither law nor combination stands ^In the'way, it is far easier to meet the emergency by extracting more work from his operatives for the same pay — by "speeding-up," by lengthening hours, by increased rigor in respect of fines and deductions, or by a positive reduction of time wages or piecework rates. Any idea of introducing , better sanitary accommodation or further fencing of machineiy is given up, and all the working expenses are reduced to t^eir lowest limit. Whatever reluctance the good manufacturer may have to take this course necessarily disappears when he finds

his pipduct. The manufacturer may, of course, put his own travellers on the road. But it is clearly more economical for the wholesale house to maintain the travellers, so that the little shopkeeper can get all his stock at once, than for the manufacturer of each article to have his own separate staflF. The continued exist- ence of the wholesale trader is thus as economically advantageous to all but the largest manufacturers as it is to all but the largest retailers.

The Higgling of the Market 665

his more necessitous or less scrupulous rivals actually fore- stalling him. For just as in every trade there are far-sighted and kindly-disposed employers who feel for their workpeople as for themselves, so there are others in whom the desire for personal gain is the dominating passion, and whose lack of intelligence, or financial "shadiness," shuts them out from any other policy than "grinding the faces of the poor." The manufacturer of this type needs no pressure from the wholesale trader to stimulate him to take the fullest possible advantage of the necessities of his workpeople ; and in face of competition of this kind the good employer has no choice but to yield. Anything, he says to himself, is better for his workpeople than stopping his own mill and driving the trade into such channels.

There is, moreover, another reason that makes the manufacturer yield to the constant nibbling at price, which forms so large a part of the art of the wholesale trader. In order that the manufacturer may make a profit on the year's trading he must obtain for his output, not only enough to cover the outgoings for wages and raw material — the " prime cost " of the finished product — but also the standing charges of the manufactory, termed by Professor Marshall the "supple- mentary cost." When a manufacturer is pressed to make a bargain at the lowest price, rather than see his mill stand idle, it is the " prime cost " which he thinks of as the minimum that he can accept without loss, since the standing charges will go on anyhow. E ach manufacturer in turn prefers to sell at " pri me cost " rather than not get an "order at a ll, with , the res ult, as the Sj^ yigg is. of " spoiljn gthemaTket " for them- sel ves and their rivals alike .' The standing charges have to be met somehow, and the harassed employer is forced to turn

' It was especially this effect of manufacturers' competition to secure orders — the frequent sales at prices covering " prime cost " only — that led to the formation of the remarkable " alliances " in the Birmingham hardware trades described in the chapter on " The Assumptions of Trade Unionism." To secure protection against the resulting constant degradation of price is the usual motive for manufacturers' rings and syndicates. The difference between " prime cost " and " supplementary cost " in English industry is worth further economic and statistical investigation ; see especially the chapter entitled " Cost Taking," in The New Trades Combina-

666 Trade Union Theory

for relief to any possible cutting-down of the expenses of production, wages not excluded. Meanwhile, the wholesale trader sees no possible objection to the reduction he has effected. To him it is of no pecuniary consequence that a large proportion of the manufacturers of a particular article are only just managing to cover its " prime cost," and are thus really losing money, or that the workpeople in the hardest pressed mills or the least fortunate districts are, owing to a worsening of conditions.jbeginning to degrade in^

character and efficiency.! If the product seriously tails orf' in quality relatively to the price demanded, he can go else- where ; and he makes, moreover, quite as large a percentage on low-grade goods as on those of standard excellence. And if he thinks about it at all, he regards himself as the representative, not of a particular class of producers, but of the whole world of consumers, to whom it is an obvious advantage that the price should be lowered.

We_jieed_not wonder, therefore, at th e chronic compla ints of manuia<^,urersjn_everjr^ trade, that pro fits are always be ing redu^d* so that business is scarcely worth carrying on. Even in years of national prosperity, when Income Tax and Death Duties show that vast fortunes are being made some- where, the employers who have no individual speciality, whose output is taken by the wholesale trader, and who are unable to form a " ring " or alliance " to keep up prices, bitterly complain that it is as much as they can do to cover the "prjme cost" of their products, or that, at best, they find themselves earning only the barest interest on capital.^ For the influences which we have

tion Mnvement, by E. J. Smith (Birmingham, 1895). For statistics relating to American industry the student may consult the Report of the Commissioner oj Labor in the United States for i8go (Washington, 1891) and the valuable series of Reports of Statistics of Manufactures of Massachusetts from 1886 to l8g6. Particulars of English factory usage will be found in Factory Accounts, by E. Garcke and J. M. Fells. The only English statistics consist of a briel Report on the Relation of Wages to the Cost of Production, C. 6535, 189:.

In his Principles of Economics, Book V. chaps, iv. and vii., Prof. Marshall has described the relative influence on exchange value of "prime" and "supple- mentary " cost.

» How keenly this pressure is felt by the manufacturers who are exposed to

The Higgling of the Market 667

described affect the higgling of the market when the real demand of the consumers is brisk as well as when it is restricted. They amount, in fact, under a sys tem , of free an'^ unregulated competition, to a permanent pressure on HlHlHlS££^£j|,Jo^;take^

3!Ja5&.^L.lhfeif.,.stratefflo^><suf>CTiertty ia.bargaJJTOg w^^ isolated workman.

^nStitweshould make a mistake if we imagined that the pressure originated with the wholesale trader. Just as the manufacturer is "conscious of his weakness in face of the

full competition, may be judged from the following speech from Lord Masham — the Samuel Lister who has made a colossal fortune from his legally protected patents. Having explained why the Manningham Mills had earned less than they were expected to earn, Lord Masham went on to argue that they had earned a great deal more than most other concerns. " Lister & Cb. had earned during the eight years it had been a company an average of 4 per cent on the entire capital — that was, throwing debentures, preference shares, and ordinary stock all into one pooL If the money had been invested in agriculture, what would have happened? He had invested the same amount in agriculture, for which he got 2 J per cent and he bought to receive 3. He had lost as much money nearly in agriculture as he had by his investment in Lister & Co, Then he would go on to cotton. He saw in the Saturday Review an article stating that the cotton spinning trade was paying, on the average of a large number of limited companies, \\ or i^ per cent That looked so outrageous that he could not believe it. He cut the statement out, and sent it to a gentleman who was in the cotton trade, and whose father was in the cotton trade before him. That gentleman sent it back again, saying that it was absolutely true, and he said, ' I will tell you something eke — I challenge the whole trade of Lancashire, and I will guarantee that the whole trade of Lancashire is not on the capital invested paying as much as Consols — not the spinning alone, but the whole manufacturing trade of Lancashire. ' So much with regard to two industries. Coming to iron, what was the state of the iron trade two or three years ago ? Three years ago, at any rate, half the iron concerns in England were standing, and those that were at work were making no profit. They were declaring no dividend, and therefore, if the two good years which they had had just recently were added to the back years, he •would guarantee that during the time of Lister & Co. the iron concerns had not made on their capital the 4 per cent that Manningham had. Then he came to another industry, on which he could speak with authority. It was one of the greatest industries in England, and employed over 800,000 persons. If it went on increasing as it had done it would be our greatest industry. He referred to coal. He had been in the coal hole (laughter), and he knew that for several years he made no interest, and he had very nearly as much money invested in it as in Manningham."

This speech was made in January 1897, at a time of roaring good trade, after leveral years of more than average prosperity, when the aggregate profits of Great Britain as a whole were apparently larger than they had been at any previous period of its history I

668 Trade Union Theory

wholesale trader, so the wholesale trader feels himself he lp- less before the retail shfiokeeper to whom he sells his stock. Here the inferiority is not in any greater loss lliil would arise if no business were done, for the retailer is impelled to buy by motives exactly as strong as those which impel the wholesale house to sell. Nor is it in any difference in bargain- ing power. In both these respects the wholesale house may leven have the advantage over the shopkeepers. But the shopkeepers have a closer and mor e up-to-date knowled ge lof exactly wh at it js that custome rs are asking for, and, jwhat is far more important, t hev can to some extent direc t [t his demand by placing, before the great ignorant body of consumers, one article rather than another. They have, therefore, to be courted by the wholesale trader, and induced to push the particular " lines " that he is interested in. There is, however, yet another, and even a more active, cause for the weakness in strategic position of the wholesale trader. His main economic function is to "nurse" the small shop- keeper. The little retailer, with a narrow range of clients, cannot buy sufficient of any one article to enable him to deal directly with the maker | he cannot, moreover, communicate with the large number of separate manufacturers whose products he sells f nor could he spare the capital to pay cash for his stock. The wholesale trader accordingly acts as his intermediary. In the large city warehouse, the shopkeeper finds collected before him the products of all the manufacturers in the various branches of his trade ; he can take as small a quantity of each as he chooses, and he is given as much credit as his turnover requires. As long as this state of things lasts the wholesale trader holds the field. But there has been, for the last half century, a constant tendency towards a revolution in retail trade. In one town or one district after another there grow up, instead of numberless little shop's, la rge ret ail bu sinesses , possessing as much capital and commercial knowledge as the wholesale house itself, and able to give orders that even the wealthiest manufacturers are glad to receive. Hence the wholesale

The Higgling of the Market 669

house stands in constant danger of losing his clients, the smaller ones because they cannot buy cheaply enough to. resist the cutting prices of their mammoth rivals, and these/ leviathans themselves because they are able to do withoulj their original intermediaries. The wholesale trader's only chance of retaining their custom is to show a greater capacity for screwing down the prices of the manufacturers than even the largest shopkeeper possesses. He is thereford driven, as a jnatter of life and death, to concentrate^ hig\ attention on extracting, from^onejnanufacturer after another, a contmual succ ession of heavy discounts^or special terms of I some kind. This, then, is the fundamental reason why the \ manuTger^r~firitfe'::the- wholesale trader So; relentless in j takingjidyantage of his strategic position. Though often performing a service of real economic advantage to the commumii^ jie^ can only continue to exist by a constant " squeezingj' of all the other agents in production.^

• We come now to the last link in the chain, the comjjgjtj- tion jjetwee n r^aiLshapJ5e.e£ers_to^^ecure customers. Here the superiority in knowledge and technicaPiEill" is on the side of the seller, but this is far outweighed by the excep- tional freedom of the buyer. The shopkeeper, it is true, is

f^ ' The effect of competitive pressure in reducing the percentage of profits to turnover is well seen in the extreme cases in which one of more of the stages are omitted. In the wholesale clothing trade, for instance, there may be, as we have seen, only a single grade of capitalists between the " sweated " woman trouser- hand and the purchasing consumer. This wholesale clothier, though he makes a huge income for himself, extracts only the most infinitesimal sum out of each pair of trousers or "juvenile suit." His success depends upon the fact that he"^ has a colossal trade, dealing every year in millions of garments, and turning over his moderate capital with exceptional rapidity. Even if he were sentimentally / affected by the fact that the women to whom his firm gives out its millions of garments earned only six to ten shillings a week, he could not appreciably raise their wages by foregoing his whole profit, seeing that this amounts, perhaps, only to a penny a garment. Or, to take another instance, the original shareholders in the CivU Service Supply Association, who receive profits at the rate of literally hundreds per cent per annum, cannot afford to put any check on their directors' real for screwing down the manufacturers, or on their foremen's assiduity in keep- ing down wages in their own producing departments ; for though the profit is colossal, compared with the capital invested, it is derived from tiny percentages on millions of transactions, and, if shared by all the wage-earners concerned in the production and distribution of the articles, would amount to an infinitesimal addition to their weekly wages.

670 Trade Union Theory

not bound to sell any particular article at any particular time. But he must, on pain of bankruptcy, attract a constant stream of customers for his wares. The customer, on the other hand, is as free as air. He can buy in one shop as well as in another. He is not even bound to buy at all, and may abstain, not only without loss, but with a positive saving to his pocket. He must, in short, be tempted to buy, and to this end is bent all the shopkeeper's knowledge and capacity. Now, with regard to the general run of com- modities, the only way of tempting the great mass of con- sumers to buy is to offer the article at what they consider a low price. Hence a shopkeeper is always on the look-out for something which he can sell at a lower price than has hitherto been customary, or cheaper than his competitors are (.selling it at. Competition between shopkeepers becomes, therefore, in all such cases entirely a matter of cutting prices, and the old-fashioned, steady -going business, which once contentedly paid whatever price the wholesale trader asked, is driven to look as sharply after "cheap lines" as the keenest trader. It might be suggested that a shopkeeper could equally outbid his rivals if he offered better quality at the same price. But this would be to misunderstand the psychology of the individual consumer.^ Owing to his lack of technical knowledge, to say nothing of his imperfect means of testing his purchase, the only fact that he can grasp is, with regard to all nondescript commodities, the retail money price, and all temptation must reach his mind through this, the only medium. Under these circumstances, it is easy to understand how the revolution in retail trade, to which we have already referred, plays into the hands of the customer. The mammoth establishments, having a much lower per- centage of working expenses to turn over, are able to sell

«^ 1 Even the shops which rely on a reputation for quality as their main attrac- tion, do not commit the mistake of merely offering a better article at the same price as is elsewhere charged for common goods. If they did, they would quickly find their customers deserting them. To retain the limited class of well-to-do purchasers who insist on the best quality, a positively higher price must be charged t

The Higgling of the Market d'ji

at lower prices than the small shops, and they naturally do their utmost to attract customers by widely advertising their cheapness. The customers become used to these low prices, and insist on them as the only condition upon which they will continue to patronise the surviving smaller shops. These, unable to reduce their working expenses, complain piteously to the wholesale houses, who are, as we have seen, driven to supply them on the lowest possible terms, lest they lose their custom altogether.

We thus arrive at the consumer as the ultimate sources of that persistent pressure on sellers, which, transmitted through the long chain of bargainings, finally crushes the isolated workman at the base of the pyramid. Yet, para - doxic al as it may seem, t he consumer is, of all the parties to the jtransactiot^, fhe least personally responsible for the result . For he takes no active part in the process. In the great market of the world, he but accepts what is spontaneously offered to him. He does not, as a rule, even suggest to the shopkeeper that he would like prices lowered. All he does — and it is enough to keep the whole machine in motion — is to demur to paying half a crown for an article, when some one else is offering him the same thing for two shillings. It may be urged that he ought to be ready to pay a higher price for a better quality. As a matter of fact, consumers, whether rich or poor, do strive, in an almost pathetic way, after some assurance of specific quality that would reconcile them to paying the higher price. They recognise that their own personal experience of any article is too casual and limited to afford any trustworthy guidance, and they accord- ingly exhibit a touching faith in " authority " of one kind or another. Tradition! current hearsay as to what experts have saici and even the vague impression left on the mind by the \ repeated assertions of mendacious advertisements, are aU^ reasons for remaining faithful to a particular commodity, a particular brand or mark, or even a particular shop, irrespec- tive of mere cheapness. But to enable the consumers to exercise this choice, there must be some easy means of

672 Trade Union Theory

distinguishing between rival wares. It so happens that the bulk of the consumption of the community consists of goods which cannot be labelled or otherwise artificially distinguished. With regard to the vast majority of the purchases of daily life, no one but an expert can, with any assurance, discrimi- nate between shades of quality, and the ordinary customer is reduced to decide by price alone. Nor could he, even on grounds of the highest philanthropy, reasonably take any other course. As a practical man, he knows it to be quite impossible for him to trace the article through its various stages of production and distribution, and to discover whether the extra sixpence charged by the dearer shop represents better wages to any workman, or goes as mere extra profit to one or other of the capitalists concerned. If he is an economist he will have a shrewd suspicion that the extra sixpence is most likely to be absorbed in one form or another of that rent of exceptional opportunity which plays so large a part in industrial incomes. Nor need he, in any particular case, have a presumption against low-priced articles as such, \nor even against a fall in prices. The finest and most ex- f)ensive broadcloth, made in the West of England factories, is the product of worse-paid labor than the cheap "tweeds" of Dewsbury or Batley. Costly handmade lace is, in actual fact, usually the outcome of cruelly long hours of labor, starvation wages, and incredibly bad sanitary conditions, whilst the cheap article, which Nottingham turns out by the ton, is the output of a closely combined trade, enjoying ex- ceptionally high wages, short hours, and comfortable homes. In the same way the great fall in prices, which is so marked a feature of our time, is undoubtedly due, in the main (if not, as some say, to currency changes), to the natural and legiti- mate reduction of the real cost of production ; to the im- provement of technical processes, the cheapening of transport, the exclusion of unnecessary middlemen, and the general increase in intelligence and in the efficiency of social organ- isation. It follows that the consumers, as consumers, are helpless in the matter. The systematic pressure upon the

The Higgling of the Market 673

isolated workman which we have described has reference to them alone, and serves their immediate interests, but it cannot be said to be caused by anything within their volition, or to be alterable by anything which they, in their capacity of consumers, could possibly accomplish.^

Such, then, is the general form of the industrial organisa^ tion which, in so far as it is not tampered with by monopoly or collective regulation, grows up under " the system of natural liberty." The idea of mutual exchange of services by free and independent producers in a state of economic equality results, not in a simple, but in a highly complex industrial structure which, whether or not consistent with any real Liberty, is strikingly lacking in either Equality or I Fraternity. What is most obvious about it is, not any freedom in alternatives enjoyed by the parties concerned,

  • This analysis of the actual working of the modem business organisation, with

its constant pressure on the seller, will remind the economic student of Professor Bohm-Bawerk's brilliant and suggestive exposition of the advantage of " present " over " future " goods. At every stage, from the wage-earner to the shopkeeper, it is the compulsion on the seller to barter his "future goods" for "present goods" which creates the stream of pressure. " It is undeniable," says Professor Bohm-Bawerk, " that, in this exchange of present commodities against future, the circumstances are of such a nature as to threaten the poor with exploitation of monopolists. Present goods are absolutely needed by everybody if people are to live. He who has not got them must try to obtain them at any price. To pro- duce them on his own account is proscribed the poor man by circumstances. . . . He must, then, buy his present goods from those who have them ... by selling his labor. But in this bargain he is doubly handicapped ; first, by the position of compulsion in which he finds himself, and second, by the numerical relation existing between buyers. and sellers of present goods. The capitalists who have present goods for sale are relatively few ; the proletarians who must buy them are innumerable. In the market for present goods, then, a majority of buyers who find themselves compelled to buy stands opposite a minority of sellers, and this is a relation which obviously is profoundly favorable to the sellers [that is, the buyers of labor or wares] and unfavorable to the buyers [that is, the sellers of labor or wares]. . . . [This] may be corrected by active competition among sellers [of present goods]. . . . Fortunately, in actual life this is the rule, not the exception. But, every now and then, something will suspend the capitalists' competition, and then those unfortunates, whom fate has thrown on a local market ruled by monopoly, are delivered over to the discretion of the adversary. . . . Hence the low wages forcibly exploited firom the workers — sometimes the workers of individual factories, sometimes of individual branches of production, sometimes — though happily not often, and only under peculiarly unfavorable circumstances— of whole nations." — E. von Bohm-Bawerk, The Positive Theory '/ Coital (London, 1891), p. 360.


674 Trade Union Theory

ibut the general consciousness of working under prtssure ifelt by every class of producers. At each link in the chain of bargainings, the superiority in " freedom " is so over- whelmingly on the side of the buyer, that the seller feels |only constraint.^ This freedom of the purchaser increases with 6very stage away from the actual production, until it culminates in the anarchic irresponsibility of the private customer, " free " alike from all moral considerations as to the conditions of employment, and from any intelligent appreciation of the quality of the product. On the other hand, the impulse for cheapness, of which the consumer is the unconscious source, grows in strength as it is transmitted from one stage of bargaining to another, until at last, with all its accumulated weight, it settles like an incubus on the isolated workman's means of subsistence.

We pause here for a moment, in our analysis of the industrial machine, to examine the case of the domestic servant. The reader will see, from this description of the higgling of the market, how pointless is the statement — used as a conclusive argument against the need for Trade Unionism, or its power to raise wages— of the good wages enjoyed by domestic servants. There is no analogy between the engagement of domestic servants to minister to the personal comfort of the relatively rich, and the wage-contract of the operative employed by the profit-maker. *In the first place, the conditions of domestic service put employer and

» ^ The existence of this feeling of constraint may be inferred from the efforts which each grade of producers makes to propitiate the buyers. Every form of bribery is used, from the sweated outworker's "tip" to the " giving-out fore- man," the manufacturer's Christmas present to the "buyer" of the wholesale house, the wholesale trader's dinner to the shopkeepers, and, finally, the cook's perquisites from the butcher and the dairyman. // is highly significant that it is always the seller who bribes, never the buyer. Sometimes the seller's effort to eficape the pressure takes the form of attempting — usually by giving credit — to entangle the buyer, so as to destroy his freedom to withhold his custom and compel him to continue his purchases. Thus, the leather-merchant gives credit to the boot-manufacturer, the boot-manufacturer to the shopkeeper, and the shopkeeper to the artisan — ^the well-understood condition always being that the buyer in each case continues to deal with the obliging seller, without too closely scrutinising his prices. We have already mentioned the " tallyman," who finds his profit in a similar entanglement of the necessitous customer.

The Higgling of the Market 675

employed much more on a par with regard to the bargain than those of industrial wage-labor. The alternative to the well-to-do woman of doing without a servant for a single day is perhaps as disagreeable to her as the alternative to the servant of being out of place ; and the worry and incon- venience to the mistress of finding another servant is at least as great as the discomfort to the servant of getting another situation. In capacity of bargaining the servant is normally as good as the mistress, whilst in technical knowledge she is usually vastly superior. In the all-important matter of carrying out the bargain, it is the mistress, with her lack of knowledge/ her indifference to detailsi and her preoccupation with other aflfairsi whose own ease of body and mind is at the mercy of the servant's hundred and one ways of making herself disagreeable. The personal comfort enjoyed by the servants in a typical middle-class household depends mainly on themselves ; that of the mistress and her family depends to an enormous extent on the goodwill of her servants. But more important than all these considerations is the fact that the conditions of employment of domestic servants in middle or upper-class households are in no way affected by the stream of competitive pressure that weighs down the price of wares and the wages of their producers. As each h ousehold works for its own use, and not for sale, th e temptation to " undercut" is entirely absent. It does not make an iota of difference to one mistress that another in the same town pays lower wages to her cook or her housemaid. Social pressure acts, in fact, in exactly the opposite direction. Such competition as exists between the households of the well-to-do classes, whether in London or county society, or in the more modest but not less comfort- able professional or manufacturers' "set" of a provincial town, takes the form of providing more luxurious quarters and more perfect entertainment for desirable guests, and therefore tends positively to raise the wages spontaneously offered to clever and trustworthy servants. Under these circumstances it might have been predicted that the rise in

676 Trade Union Theory

incomes, the greater desire for domestic comfort, and the growing preoccupation of upper and middle-class women in other things than housekeeping, would have resulted in a marked increase in the wages of servants in private house- holds.^ So helpless, in fact,- are the " employers " in this case that, if cooks and housemaids formed an effective Trade Union, so as to use their strategic advantage to the utmost, middle-class women would be forced to defend themselves by taking refuge behind a salaried official or profit-making contractor — for instance, by resorting to residential clubs, boarding-houses, or co-operatively managed blocks of flats. It is noteworthy that wherever .the p rofit-maker interve nes, the exceptional conditions enjoyed, by jdomestic^servants dis- ap^ar. Notwithstanding the constant demand for servants in private households, the women who cook, scrub, clean, or wait in the common run of hotels, boarding-houses, lodgings, coffee-shops, or restaurants, are as ill-paid, as ill-treated, and as overworked as their sisters in other unorganised occupations.

So far we have mainly concerned ourselves with tracing the stream of pressure to its origin in the private cus- |tomer. Now we have to consider the equally important ifact that, as each class of producers becomes conscious of ■this pressure, it tries to escape from it, to resist or to evade

it. All along the stream we discover the inhabitants of the

" debatable land " raising bulwarks or dykes, sometimes with a view of maintaining quiet backwaters of profit for themselves, sometimes with the object of embanking their , Standard of Life against further encroachments. It is in

•" 1 It is, we think, somewhat discreditable to English economists that they Should have gone on copying and recopying from each other's lectures and text- books the idea that this rise in wages among the domestic servants of the well- to-do classes constituted any airgument against the validity of the case for Trade Unionism in the world of competitive industry. We can only attribute it to the fact that male economic lecturers and text-book writers have seldom themselves experienced the troubles of housekeeping, either on a large or on a small scale, whilst the few women economists have hitherto suffered from a lack of personal knowledge of the actual relations between capitalist and workman in the profit- making world.

The Higgling of the Market 677

this deliberate resistance to a merely indiscriminate pressure that we shall find, not only the scope of the Methods and Regulations of Trade Unionism by which certain sections of the wage-earners protect and improve the conditions of their employment, but also the fundamental reason for th^ analogous devices of the other producing classes — the tradd secrets, patents and trade marks, the enormous advertisingX of specialities, the exclusive franchises or concessions, the! capitalist manufacturer's struggle ' to supersede the trader, and the trader's backstair effort to do without the capitalist manufacturer, together with all the desperate attempts to form rings and trusts, syndicates and "alliances" — by one or other of which is to be explained the perpetual inequality in the profits of contemporary industry, and the heaping up of fortunes in particular trades. I f it were not for th is de liberate erection of dykes a nd bulwarks we shoulcL, find, in all the Ql d-estahli ffhed indnsl-rtpq, every manufactiarer and tradgr making only the bare minimum of , profit, without which he would not be induced to engage in business al'a'llj and, we may add, every wage^^^earner reduced to bare suB- sistence wages, below which he could not continue to exist. BuTms^eaHTniureqpaTHjrirrr^^

of equality in minimum remuneration, industrial life presents, and has for over two centuries always presented, a spectacle of extreme inequality, alike between classes, trades, and individuals. We do not here refer to the differences of remuneration that are commensurate with differences of personal capacity, whether physical or mental : these, like the differences in advantageousness of different sites and soils, with their equivalent differences of land rent, will, by the economist, easily be put on one side. But it is a matter of common observation that there are, at any moment, huge incomes being gained, now in one trade, now in another, which bear no relation whatever to the relative capacity of the manufacturers or traders concerned, or to the amount of work that they perform. To take only this century, whilst the brewers have always been piling up riches, we see the

678 Trade Union Theory

great fortunes made in cotton and other textiles a hundred years ago succeeded by the fabulous profits of the coal- owners and iron-masters, together with those of the machine- making industry ; the great wealth amassed by the ship- owners and foreign merchants followed by the expansion of the wholesale grocers, the alkali producers, and the sewing- machine manufacturers ; whilst to - day huge gains are admittedly 'being reaped by the wholesale clothiers and provision dealers, the great soap and pill advertisers, and the bicycle makers. These times of great fortunes may, as regards any particular trade or any particular firm, last only a few years. But the experience of the last two centuries furnishes no period in which they did not exist in one quarter or another, and gives us no warrant for assuming that they will, under anything like the existing order of things, ever disappear. Though each particular case may be temporary only, the phenomenon itself is of constant occurrence. From the point of view of the community it is, accordingly, not evanescent but permanent. It may, in fact, be said to be even the most characteristic feature of the present industrial system as compared with any other, and it is one which vitally affects the life of every class. Without the constant presence of these exceptional profits the indus- trial world would differ as fundamentally from that in which we now exist as a Co-operative Commonwealth or a Socialist State. In our view, they cannot be philosophically accounted for b y anyj^erence,,iQ~™econQmic irjcti^ or ".las^Icir mobilitjT" : they are, as we shalj. now attempt to show, the "cRrectand necessary consequence, under., the, " system__gf natural liberty," of the fact that the stream of pressure that we have described impinges, not upon the normal weakness ot the "isolated individual seller, but upon a series of-ver^ 11fiequaT|dykes and,, bulwarks, cast, up, '^ytjie different sections of the industrial world. By passirig these briefly in"feview, we'^shal] be prepared to see, in their due proportion, the devices peculiar to the wage-earning class.

Let us note first one incidental and purely advantageous

The Higgling of the Market 679

effect of the constant pressure on all existing products and in all existing markets. It stimulates the capitalist and brainworker to desire to escape from these closely swept fields, by discovering new products or new markets. The ever-present instinct of every manufacturer or trader is to invent an article which no rival yet produces, or to find customers whom no one yet serves. Here at last he finds a land of real freedom of contract, where he has the same economic liberty to refuse to cheapen his commodity as the buyer has to abstain from gratifying that pai-ticular desire. He cannot, of course, actually dictate terms, for the customer 1 may always prefer to go on spending his income as he has hitherto done. But price is settled without reference to fear of competition, and is limited only by the extent and keen- ness of the demand. Merely to be first in the field in such a case often means a large fortune, which is but the reward for opening up a fresh source of income to producers and of satisfaction to consumers. But the capitalist is keenly conscious of the completeness with which the stream of pressure will presently deprive him of this economic liberty, and he therefore hastens to throw up a dyke before the stream reaches him. Two hundred years ago he turned, like the artisan, to the Government, and applied as a matter of course for a charter, giving him royal authority to exclude " interlopers." When the House of Commons took the view that there should be " no interference of the legislature with the freedom of trade, or with the right of every man to employ the capital he inherits, or has acquired, according to his own discretion," ^ it might have been supposed that all legal dykes and bulwarks against perfect freedom of com- petition would be brought to an end. But though Parliament has swept away, on this plea, every kind of vested interest of the artisan, it has, throughout the whole century, per- mitted one section of capitalists after another to entrench

1 Report an Petitions of the Cotton Weavers, iSli ; Report of the Committee on the State of the Woollen Manufacture in Englattd, 1806 ; History of Trade Vnionism, pp. 54, 56.

68o Trade Union Theory

themselves by laws which excluded other capitalists from competing with them. There has even been lately a re- crudescence of Chartered Companies, legally secured in the enjoyment of exceptional privileges.^ But apart from this accidental result of our growing Imperialism, the century 'has witnessed the building up of an unparalleled system of railway, gas, water, and tramway monopolies, founded on private Acts of Parliament. Here, it is true, Parliament reserves to itself the right at any time to license another competitor. But the policy throughout has been never to license a new undertaking in competition with one already in the field, however profitably the business may have resulted, unless the new promoters prove that there is a sufficiently large group or section of customers who are still unprovided with the service in question. Thus, it is never admitted even as an argument in favor of a proposed new water company or railway, that the one already in the field is paying lo per cent dividend. The new promoters do not get their Act unless they convince a committee of each House of Parliament that no existing company is actually supplying the service which they desire to undertake. We do not think that people realise to what an extent the industrial wealth of the country is invested in channels thus legally safeguarded. We roughly estimate that, excluding land and houses, something like one -fourth of the total capital of the United Kingdom is invested under private Acts of Parliament, and in this way protected from the stream of competitive pressure. It is not merely that the privileged capitalists are able to retain the amount of custom with which they first started. They share with the landlords

1 The modern form of charter carefully pays lip-homage to "freedom of trade. " But as it usually gives the privileged adventurers the exclusive ownership of land and minerals, the right to levy import and export duties on all traders (which, when the company itself trades, it pays only from one pocket to another), and the power of constructing railways and ports and of making towns and markets, the independent trader (in the Niger Territories, for instance) or the independent miner (in Rhodesia, for instance) does not find his position financially so different from that of the eighteenth - century "interloper" as might be supposed. ,

The Higgling of the Market 68 1

the unearned increment arising from the mere growth of population. They are even protected against the whole community itself, which is not permitted co-operatively to provide its own railways or water or gas, without first satisfying the monopolist who is in the field. We need not consider whether there was any other way of inducing capitalists to embark in these large, and, at one time, venturesome undertakings, otherwise than by thus according them what is virtually a legal guarantee of protection for their "established expectat ion." But this deliberate Parlia-i mentary policy of fcreatij^ and (maintaining > vested interests as the best means of securing the performance of particular services — this virtual defence against the full stream of! competitive pressure enjoyed by a quarter of the whole industrial capital of the community — is in itself an interest- ing criticism of " the system of natural liberty."

If we pass now to another incidental advantage of the pressure — the incessant attempts of manufacturers to improve their technical processes — we shall find another successful revolt against " the system of natural liberty." If by some new invention, or new machine, the cost of production can be reduced, or a superior article turned out, the manufacturer will be able to yield to the pressure of the wholesale trader, and yet make, at his ease, an increased profit for himself. The effect of the pressure would thus, it would seem, be to give the greatest possible stimulus to improvements in technical processes. But unless the manufacturer can erect some kind of dyke for his improvement, so as to prevent the other manufacturers from adopting the same device, he will very likely find that the invention has been a positive loss to him and them alike. For by the time the princ ipal manuf acturers have adopted tlie improvement, no one among them i s any bett er able to~witihstan3^he pressure of the whol esale trade r Tfian He was before. TKe^ stream of competition will have swept away the whole economic advantage of the new invention by way of reduction of price, to the advantage, first of the traders, and eventually VOL. U Z 2

682 Trade Union Theory

of the customers. But this does not complete the existing manufacturers' discomfiture. To adopt the new invention will have involved an additional outlay of capital, and can scarcely fail to have rendered obsolete, and so destroyed, some portion of their previous possessions. Even at this cost, the adaptation of the old mills to the new requirements leaves much to be desired from the point of view of perfect economy of production. Here is the chance for a new capitalist to build an entirely new mill, equipped with the very latest improvements, and making the utmost of the new invention. The old manufacturers, to whose ingenuity and enterprise the improvement was due, thus find themselves, under a system of free and unregulated competition, placed by it at a positive disadvantage. In this result lies the justification of the Patent Laws, which give the owner of a new invention a legal monopoly of its use for a term of l(in the United Kingdom) fourteen years. The present century, and especially the present generation, has seen an enormous extension of patents in every industry, it being now actually rare to find any important manufacturer who does not enjoy one or more of these defences against com- petition. And though each of them lasts only for fourteen years, capitalist ingenuity has found a way of indefinitely extending their protection. Before one patent runs out, another is secured for some subsidiary improvement in the original invention, which the patentee has, of course, had the best opportunity of discovering, or which he has bought from a needy inventor. The right to manufacture the original invention becomes in due course common to all, but is then of little use to anybody, for the legally protected monopolist of the latest improvement still holds the field. No estimate can be formed of the amount of the capital that is thus by patents legally protected from the pressure of free com- petition, but its amount is enormous and daily increasing.

We have hitherto dealt with the various forms of legal protection by which the capitalists have succeeded in embanking their profits against the stream of competitive

The Higgling of the Market 683

pressure. We come now to other devices with the same object. What the manufacturer seeks is in some way to! escape from the penetrating pressure exercised by the I wholesale trader. Stimulated by the desire to secure-* increased profits for himself, the trader is always setting his wits to work to see how he can transform the blind, impartial pressure of the private customer into a force so regulated and concentrated as to press always where there is least resistance. His specialist skill in bargaining) his trained appreciation of the minutest grades of quality! and his quick apprehension of improvements in technical pro- cesses! d^ble him so to play off the competing manufacturers one against the other, as to make them yield up, more quickly and more completely than would otherwise have been necessary, the exceptional profits that he discovers them to be enjoying. Thus, in the typically complete form of modern business organisation, the wholesale and retail traders act, virtually, as the expert agents of the ignorant consumer. The manufacturers are always seeking to relieve themselves of this expert criticism and deliberately adjustea[ pressure on the price or quality of their wares, by entering\ into direct relations with the private customer. This is the' economic explanation of the growth, during the present generation, of the world-wide advertisement of distinctive specialities, and the consequent development of the use of trade marks or makers' names. If such an impressj on, can be created on the minds of cons u mers that thousands of the m wifl jnsiat on-purchasj ng some particular arti {;]p <-hf> manu- facturer of that article gains enormously in his strategi c posi tion towards the wholesale trade r. It matters not for this purpose whether the consumer's prejudice is or is not founded on proved excellence : many a quack medicine gives as secure a position of vantage as has been won by Cadbury's Cocoa or Dr. Jaeger's woollens. This enormous development of "proprietary articles," beginning with patent medicines, but now including almost every kind of household requisite, has led to an interesting form of bulwark against the

684 Trade Union Theory

lowering of prices. The manufacturer of a proprietary article that has once secured the favor of the public, sees little advantage in the cut-throat competition which results in the customer getting it at a lower price. He does not find that appreciably more of his speciality is sold when customers can buy it for elevenpence instead of thirteen- pence-halfpenny. What happens, however, in such a case is that the pressure on the wholesale trader to give special discounts, or otherwise lower the wholesale price, becomes so irresistible, that, presently, the wholesale house finds it practically unremunerative to deal in the article at all, to the consequent loss of the manufacturer. The enterprising proprietor of a distinctive speciality therefore attempts nowadays to fix the price all along the line. For the pro- tection of all parties concerned, he devises what is called an " ironclad contract." He refuses to supply, or withholds the best discount from, any wholesale trader who will not formally bind himself, under penalty, not to sell below a certain prescribed " wholesale price." He may even pre- scribe a definite retail price, below which no shopkeeper may sell his wares, under penalty of finding the supply cut off. Our own impression is that, where the wholesale trader and the retail shopkeeper continue to be employed at all in the distribution of newly invented commodities, this strictly protected and highly regulated business organisation is J already the typical form.^

  • These " ironclad contracts " are not easily seen by persons unconnected

with the particular trade, and we do not believe that any one has an adequate idea of their rapid increase, or of the enormous proportion of the total trade to which they now extend. We have had the privilege of studying their operation in one of the largest of English wholesale houses, supplying household requisites of every kind, and itself entering into scores of contracts of this sort. We have now before us the confidential circulars of a manufacturer of well-known specialities, dated 8th June 1 896, from which we append some extracts. The circular to retailers, after specifying the wholesale prices and discounts, continues : " To avoid confusion of prices, and also to prevent ' cutting,' and secure a legitimate profit for our customers, we respectftiUy require all whom we supply not to sell under the prices named below. In the interests of our customers, therefore, only those will he supplied who have signed an agreement to this effect." ■ The circular to the wholesale houses states that there will be paid " a bonus of 5 per cent conditional on goods not being ' cut ' below our own quotations to the

The Higgling of the Market 685

But although the shopkeeper prefers regulation of the price of proprietary articles to the ruinous results of free competition in their sale, he greatly dislikes proprietary articles altogether. He is always trying to give a preference to nondescript commodities, of which he can " push " one make rather than another, and thus take advantage of the customer's ignorance to secure larger profits.^ The manu- facturers of proprietary articles retort by appointing their own retail agents on a definite commission, thus bringing into the field the vast number of bakers who sell packet tea, or newsvendors who push a special brand of tobacco. Aj new product, such as typewriting machines or bicycles, will break away altogether from the typical business organisation, and we see the manufacturers keeping in their own hands both the wholesale and the retail trade, even absorbing also the shipping business and the repairing. When neither patent nor trademark, long-standing reputation nor world- wide advertisement can be used as a bulwark, manufacturers try to protect themselves by rings and other arrangements to fix prices. So obvious is the pecuniary advantage of this course, that it is only the long habits of fighting each other, and the mutual suspicion thus engendered, which prevent a much wider adoption of this expedient by English manu- facturers.^ Finally, we have such bold attempts to abolish

retail trade. . . . This will enable wholesale houses ... to secure nearly 14 per cent profit, and will, we trust, ensure your continual interest in pushing (the article)." See also an article on "Combination in Shopkeeping" in Progressive Review, April 1897.

' It is interesting to notice, in this connection, how willingly the Legislature has lent itself, by the comprehensive provisions of the Merchandise Marks Acts, to the legal protection of the security enjoyed by "proprietary articles" against competition either in price or quality. A chemist may make "Condy's Fluid" (the well-known disinfecting solution of permanganate of potash) exactly in the same way as Condy, cheaper than Condy, and better than Condy, but he must not sell, under the only name by which customers will ask for it, any but the article supplied — it may be under an "ironclad contract" — by Condy himself.

^ We may cite one of the many informal and unknown "rings," which dominate particular branches of manufacture. The English hollow-ware trade, for instance (the manufacture of metal utensils of all kinds) is practically confined to about a dozen firms in and near Birmingham. These have, for many years, united in fixing the prices of all the articles they manu-

686 Trade Union Theory

competition altogether, by the union of all rivals into a single amalgamation, as have partially or wholly succeeded in the screw, cotton-thread, salt, alkali, and indiarubber tyre in- dustries in this country, and in innumerable other cases in the United States.

\ In all the foregoing attempts to resist or evade the stream of pressure, the device of the capitalist may be regarded as some form of dyke, tending to maintain prices at a paying level. x^In other cases we see a different expedient. We have already noticed the fact that, when a new industry springs up, there is nowadays a tendency to prevent any differentiation of productive structure, and to retain all the grades in a single hand. Thus the typewriter and bicycle manufacturers, following in the wake of the great sewing- machine producers, eliminate all the traders. >^ But the telescoping may start also from the other end. Out of the village pedlar in the countrj^J or the little town retailer of cheap boots and clothes, has grown the colossal wholesale clothier of our day, who gives out work to thousands of isolated families all over the country ; sorts and labels in his warehouse their diverse products ; supplies his own retail shops in the different towns ; executes asylum and workhouse contracts ; and ships, on his own account, to Cape Town or Melbourne, the hundreds of thousands of " cheap suits " annually absorbed by the Colonies. Here the characteristic feature is not the keeping up of the price against the con- sumer, but an exceptionally terrible engine of oppression of tthe manual-working producer. In__all Jhe sweated in- PiiSfeH?^^.'. XnJ agt, the capitalist's exped ient is nnl- to pvade the pressure for cheapness, bu t _to Jind a mean s of maki ng jhat p ressure fall with all its weight on the worker . We have already described the disadvantageous position of

facture. A uniform wholesale price-list is agreed upon, with three diflTerent rates of discount. The firms are classified by common consent, according to the perfeption of finish of their wares and the prestige which they enjoy, into three grades, each adhering to its corresponding rate of discount This "ring" is quite informal, but has for years been well maintained to the apparent gatisfac tion of its members.

The Higgling of the Market 687

the isolated workman when he bargains with the owner of a miToFa Jactorj!:. But he has, at any rate, the advantage of knowing what the other workmen are paid, and the in- valuabl e moral su pport which comes from the conipanioh- ship^ of^ numbers. Moreover, as we have seen, in mills and factories, the Trade Union Methods of Mutual Insurance] Collective Bargaining! ^"'^ Legal Enactmentl erect dykes in the form of Common Rules, the economic effects of which we shall presently discuss. But the home-worker is without any of 1 these protections, and finds himself reduced, as a rule, to the ' barest subsistence wage. And when, as in the slop-clothing trade, these home-workers are mainly drawn from classes without any notion of a definite " Standard of Life " — for Polish Jews and unskilled Englishwomen will do any work, at any price, under any conditions — their wages will be driven even below what would keep the class permanently in working efficiency. Thus, in the so-called " sweating system " the capitalist employer has found a way, not only of evading the downward pressure which the wholesale and retail trader normally exercises upon the manufacturer, but also of escaping the resistance either of combination or legal regulation by which the factory owner seeking to reduce the Standard of Life now usually finds himself confronted. The colossal fortunes which have^been, and-are, still. being, made by the wholesale clothiergT'represent the absorption, by one small section of capitalists, of absolutely the whole of that debatable land lying between the price that a careless con- sumer, ignorant alike of quality and of the transformation of the industry, will continue to pay, and the wage that half- subsidised womenland a stream of outcast Jews from other lands will continue to accept, rather than forego employment altogether.

We have in the foregoing pages briefly indicated some of the principal devices by which almost every section of capitalists, whether manufacturers or traders, nowadays succeed in evading, resisting, or controlling in their own interests the blind coercion which the great mass of unin-

688 Trade Union Theory

formed and irresponsible consumers are always unconscien- tiously exercising. To analyse adequately these various expedients, to discuss how far they increase or diminish the wealth of nations, to discover, how they affect national character or are consistent with this or that view of social expediency, would require as detailed an investigation of the actual facts of business organisation as we have undertaken with regard to Trade Unionism. Such an investigation would, we believe, yield results of the utmost value to the comnyiaitjiv..^^ One thing is clear. Those capitalist ('dykes) and. bulwarks^ short cuts and artificial floodings, have beoMiie so constant and general a feature of the whole " debatable land " of economic bargaining, that any discussion of the re- lation between consumer and producer^ or between capitalist, brain-worker, and manual laborer, which is based on the assumption of a mutual exchange of services among freely competing individual bargainers, is, from a practical point of view, entirely obsolete. We have, in fact, to work out a new scientific analysis, not of any ideal state of " natural liberty," but of the actual facts of a world of more or less complete econo mic mono gQlies — legal monopolies,°J_ natural mono- poTiesTmonopolies arising out of exploiting the prejudices of consumers, and, last but not least, monopolies deliberately constructed by the tacit or formal combination or amalgama- tion of all the competing interests.^ But before passing away from this, by the economist, as yet unexplored world,

' In the Groundwork of Economics, sec. 20, p. 33 (London, 1883), Mr. C. S. Devas reminds us that, " in a wise moment," J. S. Mill objected to the abstract methods of his father, and the other economic politicians of that school. " It is not to be imagined possible," Mill said, " nor is it true in point of fact, that ttese philosophers regarded the few premises of their theory as including all that is required for explaining social phenomena. . . . They would have applied, and did apply, their principles with innumerable allowances. But it is not allowances that are wanted. ... It is unphilosophical to construct" a science out of a few agencies by which the phenomena are determined. . . . We ought to study all the determining agencies equally, and endeavor, as far as it can be done, to in- clude all of them- within the pale of the science, else we shall infallibly bestow a disproportionate attention upon those which our theory takes into account, while we misestimate the rest, and probably underrate their importance." The quotation is from Mill's System of Logic, Book VI., end of chap. viii.

The Higgling of the Market 689

we are compelled to note how it impinges on our own


In our analysis of the chain of bargainings which take

place between the manual worker and the private customer,

and so determine the wages of labor, we demonstrated, not

only that the isolated individual workman was at a serious

disadvantage in bargaining with the capitalist manufacturer,

but also that the capitalist manufacturer himself was to a

large extent powerless to offer terms above those prevailing

in other establishments. But this latter consideration, as we

now see, does not necessarily apply to any but those cases

in which there has been no obstruction of the full stream of

competitive pressure. If an individual employer is able to

ward off this pressure from the price of his product by an

exclusive concession or a patent, a trade mark, or even an

assured personal connection, or if the whole body of

employers can unite in a tacit or formal combination to

' These monopolies, it will be observed, are, to a large extent, actually the outcome of legal freedom of contract. If every man is to be free to enter into such contracts as seem to him best in his own interest, it is impossible to deny him the right of joining with his fellow-capitalists to fix prices/regulate produc- tionVor actually to amalgamate all competing interests,7if this is deemed most advantageous. " Monopoly," says Professor Fox well, " is4nevitable. . . It is a natural outgrowth of industrial freedom" ("The Growth of Monopoly, and its Bearing on the Functions of the State," in Revue cC Economie Politique, vol. iii. September J889). That this state of things involves the economic compulsion of minorities,/the ruin of newcomers by deliberate underselling/ and the driving out of the trade of any recalcitrant firmy is, as Mr. Justice Chitty lucidly explained in the case of the Mogul Steamship Co. v. Macgregor, Gow, and Co., an inevitable result of legal freedom of contract. The classic econo mists never made upjhdr^ minds w hether , by a " s ystem_ofnaturaLlibfir.ty»!i-thfy-meant.-in.dlvidual--ficeedom ' of co ntract, or free comp etition betwee n individuals. As we have already - explamedliTour chapter on " The Method of Collective Bargaining," these two social ideals are not only not identical, but hopelessly inconsistent with each other. Alike in the world of capital and in the world of labor, individual freedom of contract leads inevitably to combination, and this destroys free competition between individuals. If we desire to maintain free competition between indi- viduals, the only conceivable way would be such a state interference with con- tracts as would prevent, not only every kind of association, but also every aliena- tion of land and every transfer of small businesses to larger ones, which would* in any way cause or increase inequality of wealth or power. Indeed, it would be an interesting point for academic discussion whether free competition among equal units, supposing this to be desired and to be compatible with human nature, | can be permanently secured in any other way than by the " nationalisation of the I means of production, distribution, and exchange. " « 

690 Trade Union Theory

regulate the trade, the workpeople in these establishments might, it may be argued, stand some chance' of receiving better wages. And in so far as these partial monopolies are directed by public-spirited philanthropists, — so lonf;, too, as the exceptional prolits remain in the hands of the original capital -

ists, — this presumption is borne out by facts. Such well- known firms as Cadbury, Horrocks, Tangye, and a host of other manufacturers of specialities, are noted for being •' good employers," that is, for voluntarily conceding to each grade of labor better terms than similar workers obtain in other establishments. But in this connection it is important to remember that the standard by which the "good employer" detertnines the conditions of labor is not any deliberate view of what is required for full family efficiency and worthy citizenship, but a practical estimate of what each grade of [workers would obtain from the ordinary employer, working •/under competitive pressure. Hence a comparatively small addition to weekly wages, a more equitable piecework list, a larger degree of consideration in fixing the hours for beginning or quitting work, the intervals for meals and the arrangements for holidays, greater care in providing the little comforts of the factory, or in rendering impossible the petty tyrannies of foremen, — any of these ameliorations of the con- itions of labor will suffice, without serious inroads on profits,

o attract to a firm the best workers in the town, to gain for

it a reputation for justice and benevolence, and to give the employer's family an abiding sense of satisfaction whenever they enter the works, or cross the thresholds of their opera- tives' homes. To this extent it is true that "the strength of the capitalist is the shield of the laborer." ^ But this relatively hlimane relationship is nowadays seldom of long standing. If the business grows to any size it will very soon be formed into a joint-stock company, in which the old partners may at first retain a large interest, but of which a yearly increasing proportion is transferred to outside share- holders. These new shareholders, who will have bought in ' Tratie Unionism, by James Stirling (Glasgow, i86q), p. 42.

The Higgling of the Market 691

it a price yielding them no more than the current rate of interest for that class of security, feel that they have no margin of exceptional profit to dispose of. Even if the old partners' families retain large holdings in their ancestral concern, they have, by capitalising their profits, lost their privilege of being benevolent with them ; and the share- holders' meeting, the board of directors, and the salaried general manager inevitably bring in "business principles," and pay no more for labor than they are compelled. And ' when we pass to the gigantic capitalist corporations, admin- istering legal monopolies, or to the colossal amalgamations more and more dominating the industrial world, we find, in sharpest contrast with the patriarchal employer of economic romance, the daily changing crowd of share and debenture owners, devoid of any responsi^ity for the conditions of labor, and as(^rnnformed)andTieedless)as the consumer him- self. It is not too much to say that, so far as concerns the personal life of the 50,000 employees of the London and North - Western Railway Company, the 55,000 ordinary shareholders, who own_that vast enterprise, are even more ignorai^ moreQnaccessible^and more irresponsibfev than the millions of passengers""" whom they serve. The situation is intensified by the fact that, in the absence of law or Collective Bargaining, these gr eat capitalis t._roQnopolies xan pr acticallyjdictate their own terms totheir workpeople. If, as is now admitted, the isolated workrhan stands at a serious disadvantage in bargaining with the capitalist manufacturer, what shall we say of the position of the candidate who applies for the situation of porter or shunter to the officer of a great railway company ? ' Here the very notion of bargaining disappears. This does not mean that such capitalists will necessarily dictate the absolute minimum wage. The corporation decides, in its own interest, what policy it will pursue as regards wages, hours, and other con- ditions. Porters and shunters, plate-layers and general laborers, can be had practically in any number at any price. Whether it pays best to give the lowest wage on which the

692 Trade Union Theory

human animal can temporarily subsist, and be content with a low level of muscular endurance, or whether it is better to pay for superior men, and work them for ninety hours a week, is a question which, in the absence of any interference with " freedom of contract," is settled on much the same principles as actuate a tramway company, deciding whether it is more profitable to wear its horses out in four years or in seven. And once the worker enters the employment of any of these gigantic monopolists, the alternative to submis- sion to his employer's commands is, not merely changing his situation, but finding some new means of livelihood. For a railway servant who leaves without a character, or with a black mark against his name, knows perfectly well that he will seek a situation in vain from any other railway company in the kingdom. ( ^Thus it is only in exceptional instances, and then qnly_ten5£orarily, that the wage-earners as_a_class get any sha.re_Qf„th.e_extra profits, secured, to the capitalists, by their dy kes and bulwarks. [ These exceptional profits are quickly capitalised by their owners, and transferred to new shareholders who come in at a premium. The mor e com - plete and lega ll y secured is the monopoly, the more certain it is to be disposed of at a price which yields only a low rate of interest — in extreme cases, such as urban waterworks, approximating actually to the return on government secur- 1 ities themselves. On the other hand, the position of the wage-earner is positively worsened, in the colossal capitalist corporations, by the absence of effective competition for his iservices by rival employers. The difference in strategic position becomes so overwhelming that the wage-contract ceases to be, in any genuine sense, a bargain at all.^

Amid all the capitalist devices that we have described, the workmen's efforts to protect themselves against the full

7\ • "To assume that the competition between the employer on the one hand, and the wage-earners on the other, when the latter are unorganised and unprotected by law, is a competition between equal units, is so fancifiil and contrary to fact, that any conclusions drawn from such an assumption can have little value undei present circumstances." — B. R. Wise, Industrial Freedom (London, 1892), pp.' 13. >S-

The Higgling of the Market 693

stream of competitive pressure will seem comparatively modest. Unlike the promoters of great capitalist under- takings, no section of the wage -earners can nowadays secure from Parliament any exclusive right to perform a certain service. Unlike the owner of a newly -invented machine, a workman cannot even retain a legal monopoly of the most ingenious improvement that he may make in his own share of the productive process, for no country grants a patent to the inventor of a new trick of manual dexterity — ^perhaps only a novel way of using the fingers — which enormously increases the productivity of industry. jNor can even the most skilled manual laborer in our time assure to himself, like( Jhe advertiser of a speciality, or of a legally secured trade markj[_t he" faithful custom of a large body of distant private consumers. And, the fact that the wage-i earners form the base of the industrial pyramid, and have/ no weaker class below to whom they can transfer the pressure, shuts them out from such evasions of the streani as we have seen to profit the wholesale clothier. All these dykes and bulwarks are, and must necessarily remain, the exclusive possession of the owners of capital.^

The first expedient of the Anglo-Saxon workman is rather an instinct than a method. Over a large part of the

X^' Individual workmen may, of course, become owners of capita), perhaps in ^ the form of sub-contractors, and thus rise out of their class. But this does not affect (unless, indeed, adversely) the economic position of the class itself. It is also claimed by one school of co-operators .that associations of wage-earners might entirely supersede the relation of capitalist employer and manual-working wage-"-' earner. Just as a combination of employers or the manufacturers of a proprietary ■ article practically turn the traders into their agents, so an association of workmen might turn the capitalist entrepreneur into a salaried manager working under their orders. This, however, would involve a section of workpeople becoming the < owners of the capital with which they work. If this ownership of the instruments ' of production by associations of producers ever became universal, it would natur- ally be unnecessary to continue to discuss the economic position of a class of wage- earners. The reasons which, in ou r opinion , make any such gen eral merging of the positions oTcapitalist a nd wage-earner inEerently~and permanently i mpossiEIe — tne causes whi ch have hitEerto prevented such ." asso ciatio ns of producers" from becom ing even an important part of th e British Co-operative Movement — ■ will be t CTiiiS3"TuIIy" stated in The Co-oierative Movement in Great Britai n (London , 'Eret edition 1891, second edition 18^4), by Beatrice Potter (M rs. ' Sidney WeBB]! ~"

694 Trade Union Theory

industrial field, the wage-earners cling with stubborn obstinacy to certain customary standards of expenditure. However overpowering may be the strategic strength of the employer, however unorganised and resourceless may be the wage- earners, it is found to be impossible to reduce the wages and other conditions of particular grades of workmen below a certain vaguely defined standard. In the years of worst trade, when thousands of engineers or boilermaker s, masons or plumbers , are walking the streets in search of work, the most grasping employer knows that it is useless for him to offer them work in their respective trades at ten or fifteen shillings a week. [Sooner than suffer such violen ce to their_ feelings of what isJit_and._,becoming to their social po sition, they will work as unskijled laborers, or pick up^d d jobs, for the same, or even lower earnings than they refuse jis craTtsmen. This stubborn refusal to render thei r^ particular class of service for a wage that strikes them as outr ageousl y below their customary standard, does not depend on their beronging to a Trad e Union, fo r it i^ characteristic of unionists and non-unionists alike, and is found in trades in which no combination _e3^tsP Even tEe~dock-labdfS7who frantically struggles at the dock -gates for any kind of employ- ment, turns sulky, and discharges himself after a few hours, if he is asked to work for a shilling a day. Nor does it apply only to money wages. The British workman in the building trades, though he is paid by the hour, and often belongs to no union, will accept any alternative rather than let his employer keep him habitually at work for fifteen hours a day. Nor has this conventional minimum any assignaJWe_reIation to the cost of actual subsistejice. The young engineer or plumber, unencumbered by wife or child, indignantly refuses to work for a wage upon which millions of his fellow-citizens not only exist, but marry and bring up families. On the other hand, though the London dock- laborer will not go on working at a shilling a day, he willingly accepts irregular work at a rate per hour which, taking into account the periods of unemployment incidental

The Higgling of the Market 695

to his occupation, is demonstrably insufficient for sustained physical health or industrial efficiency. This practical check on the employer's power of reducing wages has always been observed by the economists. " Where," observed J. S. Mill, " there is not in the people, or in some very large proportion of them, a resolute resistance to this deterioration — a deter- mination to preserve an established standard of comfort — the condition of the poorest class sinks, even in a progressive state, to the lowest point which they will consent to endure." ^ The classic economists were especially struck by the way in which this determination to preserve an established standard of comfort affected the level of wages in different countries, and among different districts or races in the same country.^ " Custom," said Adam Smith, ..." has rendered leather shoes a necessary of life in England, The poorest creditable person of either sex would be ashamed to appear in public without them. In Scotland, custom has rendered them a necessary of life to the lowest order of men, but not to the same order of women, who may, without any discredit, walk about barefooted. In France they are necessaries neither to men nor to women." ' " The circumstances and habits of

'^ ' J. S. Mill, Principles of Political Economy, Book IV. chap. vi. § i, p. 453. "The habitual earnings of the working classes at large can be affected by nothing but the habitual requirements of the laboring people ; these, indeed, may be altered, but while they remain the same w^es never fall permanently below the standard of these requirements and do not long remain above that standard." — Ibid. Book V. chap. x. § J, p. 564.

' " In England, for example, the lower classes principally live on wheaten bread and butcher's meat, in Ireland on potatoes, and in China and Hindostan on rice. In many provinces of France and Spain an allowance of wine is con- sidered indispensable. In England the laboring class entertain nearly the same opinion with respect to porter, beer, and cider ; whereas the Chinese and Hindoos drink only water. The peasantry of Ireland live in miserable mud-cabins without either a window or a chimney, or anything that can be called furniture ; while in England the cottages of the peasantry have glass windows and chimneys, are well furnished, and are as much distinguished for their neatness, cleanliness, and com- fort, as those of the Irish for their filth and misery. T hese di^erenus in thei r mann er j>f l}7nns occasion equal differenr/ts fn j&'iir WK':-; J sn that, whilp thp .average price of a day's labor may be taken at from 2od. to 2s., it cannot be taken at more than yd. in Ireland, and 3d. in Hindostan." — J. R. M'CuUoch, A Treatise on the Circumstances which determine the Rate of Wages (London,

1851). p. 32-

' Wealth of Nations, Book V. chap. ii. art. iv. p. 393.

696 Trade Union Theory

living prevalent in England," wrote Colonel Torrens, " have long determined that women in the laboring classes shall wear their feet and legs covered, and eat wheaten bread, with a portion of animal food. Now, long before the rate of wages could be so reduced as to compel women in this part of the United Kingdom to go with their legs and feet un- covered, and to subsist upon potatoes, with perhaps a little milk from which the butter had been taken, all the labor- ing classes would be upon parochial relief, and the land in ,a great measure depopulated." ' " These differences in their [manner of living," summed up M'Culloch, " occasion equal differences in their wages." But whilst the fact was clearly recognised, no satisfactory explanation of it was given. The only reason for these differences in wages that the classic economists could allege was that the customary " standard of comfort " determined the rate at which the population would increase — that any attempt by the employer to reduce wages below this level would promptly cause fewer children to be born, and thus alter the ratio of workers to wage-fund twenty years hence ! ^ But this, it is obvious, does n ot tell us w hy it is t hat the \york man is ab le toj[gjuse_to_accept lejs_to=day, even if population statistics still allowed us to make any such assumption about the birth-rate. If the economists had not been obsessed by the fallacy of a pre- determined wage-fund, they would have perceived, in this clinging of each generation to its accustomed livelihood, a primitive bulwark against the innovation of fixing all the conditions of labor by " free competition " among candidates for employment. ( To the modern observer it is obvious that

1 Essay on the External Com Trade, by Robert Torrens (London, 181 5), p. 58. See other references in Gun ton's Wealth ami Progress (London, 1888),

P- 193-

^■y a " Even though wages were high enough to admit of food's becoming more costly without depriving the laborers and their families of necessaries ; though they could bear, physically speaking, to be worse off, perhaps they would not consent to be so. They might have habits of comfort which were to them as necessaries, and sooner than forego which they would put an additional restraint on their power of multiplication, so that wages would rise, not by increase of deaths but by diminution of births." — J. S. Mill, Principles of Political Economy, Book II. chap. xi. § 2, p. 209 (London, 1865).

The Higgling of the Market 697

the_ existence, among all the workmen of a particular grade, of an identical notion as to what am ount and kind of weekly- expenditure constitutes subsistence, is in itself equivalent to a tacit combmation . It is, in fact, however it may have come about, an incipient Common Rule, supported by a

"univ ersal \ and (grolongeJjrefusal to work, which is none the less a strike in that it(^ unco?cert£4^and( {]ndenberatg ) If every artisan, without the slightest concert with his fellows, is possessed by an unreasoning prejudice that he and his family must consume wheaten bread, butcher's meat, beer, and tea, instead of living on oatmeal, maize, potatoes, and water, the employer will find it useless to suggest that " any meal is better than none." He quickly discovers that if he | offers wages which will provide only the cheaper food, no individual of the class that he requires will accept his situa- tion. He is, in fact, face to face with what is virtually a u niversal strik e. Like all other strikes it may, for one reason or another, presently fail. But as long as it lasts the alter- native to the employer of coming to terms with the work- man is, not one man's absence from his usual staff, but getting no men at all — not foregoing a fraction of his profits, but shutting up his establishment, [it is accordingly plain th at, in a class of workmen among whom any such identical

f notion as to the Standard of Co mfort exists, the isolated individual wage-earner bargains at greater advantage than he would if he and his fell ows were willing to_accept any kind of wages rather than noneJ~The~mere existence, among all theworkmen competing for a certain class of employment, of an identical notion as to what constitutes their minimum subsistence, amounts, therefore, even without concert or reserve- fund, to a real bulwark against the pressure of competition.^

' We are unable here to do more than refer to the existence of these popular ideas as to the Standard of Life. How they originate — why, for instance, the English workman should always have insisted on eating costly and unnutritious wheaten bread, or why some classes or races display so much more stubbornness of standard than others, would be a fruitful subject for economic inquiry. We suggest, as a hypothetical classification by way of starting-point, that the races and classes of wage-earners seem to divide themselves into three groups. There are those who, like the Anglo-Saxon skilled artisan, will not work below a

698 Trade Union Theory

But this primitive bulwark — the instinctive Standard of Life of uncombined resourceless wage- earners — has grave -dgfects. It is, in the first place, a weak b ulwark, seldom able to withstand the exceptional pressure of times of adversity, especially as it often fails to cover equally the whole length of the line. ( Moreover, it is usually weakest in its upper parts, so that the employers, in periods of great pressure, always succeed in planing it down a little. | On the other hand, owing to the absence of any deliberate concert, it cannot practically be raised by the workmen's own efiforts, even when the pressure is withdrawn, and thus, in the absence of any better protection or of the intervention of some outside force, it is apt to become gradually lower and lower. These defects arise, as we shall see, from (i) the necessary indefiniteness of a merely instinctive Standard of Life, (2]^ the absence of any material support for the wage-earner's stubbornness, and (3) the impossibility with- out concerted action of adjusting the workmen's instinctive demands so as to meet the changing circumstances of the industry.

customary minimum Standard of Life, but who have no maximum ; that is to say, the y w ill be stimulated to intenser effort and new wants by every increase of income. I There are races who, like the African negro, have no assignable mini- mum, but a very low maximum ; they will work, that is, for indefinitely low wages, but cannot be induced to work at all once their primitive wants are satisfied. T Finally, there is the Jew, who, as we think, is unique in possessing neither a minimum nor a maximum ; he will accept the lowest terms rather than remain out of employment ; as he rises in the world new wants stimulate him to increased intensity of effort, and no amount of income causes him to slacken his

(indefatigable activity. To this remarkable elasticity in the Standard of Li fe is, we suggest, jto be_a,ttrU)BjSr_b.oth. the wealth „aHd.lljg„ poverty oljtEe3£9si3Si_ stfJEi^Tact iSat their wage-earning class is permanently the poorest in all Purope , whilst individuaTJews are the wealthiesf men"of their respective countnes. "t~ The position of the English working-woman in this connection would especi- / ally repay inquiry. The poverty-stricken widow, with children depending on ' her for bread, will accept any rate of wages or any length of hours rather than refuse employment. On the other hand, the well-brought-up daughter of the artisan will obstinately insist on certain conditions of decency,! comfort^ land " respe^tabilitj;^" in her work. But owing to the fact tlFat she so often is not wKblly dependent on her wages, she is apt to accept any rate of pay rather than leave a comfortable and well-conducted factory , and emjjloyers often complain that no stimuluiof piecework or bonus will induce such women-workers to increase their effort beyond a somewhat low maximum.

The Higgling of the Market 699

The lack of definiteness is an essential feature of any merely instinctive standard. What the isolated individual workman feels is that he is entitled to a certain mode of living, a certain vague quantum of weekly expenditure, in return for an equally vague quantum of daily work. Each man translates this for himself into terms of wages, hours, etc., and the translations of thousands of men in different parts of the country inevitably differ among themselves. All engineers, for instance, would agree that fifteen shillings a week was far below their minimum standard. But, in the absence of any concerted action, they would differ among themselves as to whether its money equivalent at a particular time and place was twenty-seven or twenty-nine shillings a week, or whether any given piecework rate was or was not a fair one. Still more indefinite is the workman's instinctive Standard of Life with regard to the length of the working day, meal times, and holidays ; fines and deductions of every kind ; the conditions of over - crowding and ventilation, decency and safety, under which his work is done ; and the wear and tear of nerves, muscles, and clothes to which he is exposed. Thesejdifferences of translation are the employer's • opport unity. By constantly insisting upon taking, as the standard on any point, the lowest translation made by any candidate for employment, he is able gradually to beat all the others down to that level.

It is a no less serious cause of weakness that, in the absencejgfanycollective reserve fund, the isolated individual worker cannot hope to be~a5IFl;o stand out long against an obstinate employer. However strong may be the repugnance to accept what is felt to be less than the standard wage, the workman who has no other resources than the sale of his labor will find himself every day more strongly tempted by necessity to accept something less than he claims. When he is once in employment, his outspoken revolt against any " nibbling " at wages, " cribbing time," or other worsening of the conditions, will be checked, especially in periods of slack- ness, by his reluctance to " quarrel with his bread and butter."

700 Trade Union Theory

What the most necessitous man submits to, all the others soon find themselves pressed to put up with. Thus, in the absence of any financial strengthening of the weakest members, the bulwark of a merely instinctive Standard of Life insidiously gives way before employers' importunities.

/ Finally, whilst the bulwark of a Standard of Life is always yielding under the pressure of severe competition, it does not get systematically built up again in the seasons

^when the pressure is lightened. To the capitalist the scanty profits of lean years are made up by largely swollen gains in the alternating periods of commercial prosperity. But a_ wage determined only by an instinctive Standard of Life does not rise merely because the employers~are~ temporarily making larger profits" The "TiaHts aliH" customs^.jof_a people^^thelir ideas of what is necessary for comfort and social decency — may, in the slow course of generations of prosperity, silently and imperceptibly change for t he bett er, bufthey are unaffected by the swift and spasmodic fluctua- tions which characterise modern industry. Thus, in years of good t rade, when no competent man need remain long unemployed, though the pushing" workman may~witEout a Trade Union, temporarily exact better terms, the class asji whole is ap t to get only regular employment^t its accustonieoT

[live lihood.") In the absence of mutual consultation and

I concerted action, individuals may aspire to a higher sta ndard, but there can be no simultaneous and identical rise, and

Ithus no new consensus of feeling is brought to the aid of the I^^dividual Bargaining of the weaker men.

^ Tra de Unio nism, to put it briefly, remedie s all these

I defectsof a merely j^nstinctiye_^tand ard ofL ife. By inter- preting the standard into precise and uniform conditions of employment it gives every member of the combination a definite and identical jnin imum to stand out for, and an exact measure by which to tSF any new proposition of the employer. The reader of our descriptions of the elaborate standard ratesjand piecework lists, the scales fixing working hours and limiting overtime, and the special rules for sanita-

The Higgling of the Market 701

tion and safety, which together make up the body of Trade Union Regulations, will appreciate with what fervor and persistency the Trade Unions have pursued this object of giving the indispensable definiteness to the Standard of Life of each section of wage-earners. And when we pass from the Regulations of Trade Unionism to its characteristic Methods, we may now see how exactly these are calculated to remedy the gther shortcomings of the wage -earners' instinctive defence. By the Method of Mutual Insurance, the most necessitous workman, Who would otherwise be the weakest part of the position, is freed from the pressure of his special necessities, and placed in as good a position as his fellows to resist the employer's encroachments. The provision of a common fund enables, in fact, all the members alike to get what the economists have called a "reserve price " on their labor. Thus, the bulwark is made equally strong all along the line. But the Method oi_ Mutiia.1 Insurance also carries a stage further this strengthening of the weak parts of the defence. The money saved in good years, when the Out of Work benefit is little drawn upon, will be used to support the menibers in times of slack trade, when the pressure will be greatest. Thus, the bulwark is specially strengthened against the advancing tide. The Meth od of Collective Barsa lningf brings a new kind of support. When the terms of the contract are settled, not separately by the individual workmen concerned, but jointly by appointed agents on their behalf, an additional barrier is interposed between the pressure acting through the employer, and the apprehensions and ignorances of his wage-earners. The conclusion of collective agreements not only excludes, as we have explained, the influence of the exigencies of. particular workmen, particular firms, or particular districts, but^it also gives the combined manual workgrs the invaluable assistance of a professional expert who, in knowledge of .th.e trade and trained capacity for bargaining, may even be superior to the employer himself. XThe Method of Collective Bargaining has the further advantage over reliance on a

702 Trade Union Theory

merely (instinctive Standard of Life ) that the terms can be quickly ralseidrso as to take advantage of any time of rising profits, and indefinitely adjusted so as to meet the require- ments of an ever-changing industry. \ Finally, the Method of Legal Enactment — the use of which by the workmen demands a high degree of voluntary organisation, and above all, , an expert professional staff of salaried officers — absolutely secures one element of the Starylard of Life after another by embodying them in our factory code, and thus ifortifies the workmen's original bulwark by the unyielding Ibuttress of the law of the land.

  • But this general description of Trade Unionism as the

Dyke of a definite Standard of Life,jstrengthened by the existence of a common purse, | the services of expert negotiators, ) and the protection of the magistrate-j— though it serves to indicate its place in the higgling of the market — affords too indefinite a mark for useful economic criticism. <\n the Second Part of this work we laid before the reader an exhaustive analysis of the Regulations imposed by British Trade Unionists, of the Methods by which they seek their ends, and, finally, of the far-reaching views of social ex- pediency upon which the policy of the various sections of the Trade Union world is determined. In this analysis we distinguished between what is universal and what is only partial, and, above all, between the elements that are deepening and extending, and those that are dwindling in scope and intensity. What we have now to do is to follow out the economic effects of each type, and thus enable the reader to form some general estimate of the results upon our industrial development, of the actual content of contemporary Trade- Unionism in this country.


The economist and the statesman will judge Trade Unionism, not by its results in improving the position of a particular section of workmen at a particular time, but by its effects on the permanent efficiency of the nation. If any of the Methods and Regulations of Trade Unionism result in the choice of less efficient factors of production than would other- wise have been used ; if they compel the adoption of a lower type of organisation than would have prevailed without them ; and especially if they tend to lessen the capacity or degrade the character of either manual laborers or brain-workers, that part of Trade Unionism, however advantageous it may seem to particular sections of workmen, will stand condemned. If, on the other hand, any Trade Union Methods and Regulations are found to promote the selection of the most efficient factors of production, whether capital, brains, or labor ; if they tend to a better organisation of these factors, and above all, if their effect is progressively to increase the activities and improve the character of both brain and manual workers, then, in spite of any apparent contraction of the personal power of the capitalist class, they will be approved by the, economist as tending to heighten the faculties and enlarge the enjoyments of the community as a whole.^ ^

' Here and throughout this chapter we proceed on the assumption that it is desirable for the community to " progress " ; that is to say, that its members should attain, generation after generation, a wider and fuller life by developing

704 Trade Union Theory

Let us take first the Trade Union Regulations, for, if these have an injurious effect, it is unnecessary to consider by what methods they are enforced. Notwithstanding their almost infinite variety of technical detail these Regulations can, as we have seen, be \reduced to two economic devices : Restriction of Numbers and the Common Rule. To the former type belong the ancient Trade Union prescriptions as to Apprenticeship, the exclusion of new competitors from a trade, and the assertion of a vested interest in a particular occupation. The latter type includes the more modem rules directly fixing a Standard Rate, a Normal Day, and definite conditions of Sanitation and Safety,

(a) The Device of Restriction of Numbers[edit]

There is a certain sense in which every regulation, whether imposed by law or public custom, laid down by the employer or insisted on by the Trade Union, may be said to restrict the entrance to an occupation. It is inherent in any rule that its enforcement incidentally excludes those who, for one reason or another, cannot or will not conform to it. Thus, a firm which, as a matter of business routine, requires its employees to be regular in their attendance, or to abstain from smoking or drinking at their work, or which

increased faculties and satisfying more complicated desiies. When, therefore, for the sake of shortness, we use the phrase " Selection of the Fittest," we mean the fittest to achieve this object of social evolution ; and by the phrase " Func- tional Adaptation," we mean the adaptation of the individual to an increase in the strength and complexity of his faculties and desires, as distinguished from " Degeneration," the corresponding decrease in faculties and desires. We are aware that this assumption would not command universal assent,< The whole Eastern world, for instance, proclaims the opposite philosophy of life ; an Eng- lishman, it is said, " seeks happiness in the multiplication of his possessions, a Hindoo in the diminution of his wants." And there are, if we mistake not, many persons in the Western world whose dislike of modern progress springs, half unconsciously, from an objection to a life which, whilst satisfying more complicated desires, makes increasing demands upon the faculties. To such persons the whole argument contained in this chapter will be an additional reason for disliking the more modern manifestations of Trade Unionism.

> Econo7nic Characteristics 705

systematically dismisses those who fail to attain a certain speed, or repeatedly make mistakes, thereby restricts its employment to operatives of a certain standard of conduct or capacity. Similarly, the universal Trade Union insistence on a Standard Rate of payment for a given quota of work excludes, from the particular occupation those whom no employer will engage at that rate. And when any regulation, either of the employers or of the workmen, is embodied in the law of the land, this new Factory Act automatically closes the occupation to which it applies to all persons who cannot or will not conform to its prescriptions. The kingdom itself may be closed to certain races by a Sanitary Code, with which their religion forbids them to comply. But there is a great distinction in character and results between the incidentally restrictive effects of a Common Rule, to which every one is free to conform, and the direct exclusion of specified classes of persons, whether they conform or not, by regulations totally prohibiting theirl entrance. In the present section we deal solely with directf attempts to secure or maintain a more or less complete; " monopoly " of particular occupations, either by limiting the| number of learners, or by excluding, on grounds of sex, previous occupation, or lack of apprenticeship, persons whom an employer is willing to engage, and who are themselves willing to work, in strict conformity with the standard con- ditions of the trade.

From the standpoint of industrial efficiency, the most obvious characteristic of the Device of Restriction of Numbers is the manner in which it influences the selection of the factors of production. When situations are filled by com- petitive examination, as for instance in the English Civil Service, it is. recognised that any restriction on the number of candidates — still more, any limitation of the candidates to persons of particular families, particular classes, or particular antecedents — lowers the average of quality among the successful competitors. The same consequence results from any restriction which prevents an employer from filling all VOL. II 2 A

7o6 Trade Union Theory

his vacancies as they occur by selecting the most efficient operatives, wherever he can find them. The mere fixing of a ratio of apprentices to journeymen will exclude from the trade some boys who would otherwise have learnt it, and who might have proved the most capable operatives at the craft. This is certain to be the case if the regulation takes the form of exacting a high entrance fee, or of confining admission to craftsmen's sons. Even without any restrictions on apprenticeship, the requirement that the trade must be entered before a -prescribed age, by excluding the quick- witted outsider who desires to change his occupation in after years, necessarily tends to limit the range of the employer's choice, and hence to make the average level of capacity lower in the protected trade than it would otherwise be. And whilst this limitation on the process of selection is injurious even in old-established trades, it becomes plainly more harm- ful when the question is the choice of men to work a new machine or perform some novel service. The more restricted the field from which the capitalist can pick these new opera- tives, the lower will be their average level of capacity. Nor is it merely the absence of unemployed workmen that im- pedes the employer's freedom to select the most efficient man to fill his vacancy. The constant existence of a remnant of I unemployed may enable an employer to get a " cheap hand,"

or help him to lower wages -all round ; but the competition

I of this " reserve army " does little or nothing to promote i efficiency. The fact that a man is out of work affords a ' presumption that he has, for the moment, greater needs, but not that he has greater faculties. To compel employers to fill all vacancies from the unemployed remnant of the trade, in preference to promoting the ablest members of the next lower grade, is often to force them to engage, not the work- men who promise to be the most efficient, but thqse who have proved themselves below the average in regularity or capacity. On the other hand, if the Restriction of Numbers is carried so far that only one candidate presents him- self to fill each vacancy, all selection disappears. Had the

Economic Characteristics 707'

regul ations of the F lint (^1ass Makers and the Silk Hatter s been enforced with absolute universality every employer in those trades would have found himself compelled, whenever a vacancy occurred in his establishment, either to accept the Trade Union nominee, whatever his character or capacity, or else leave the situation unfilled.

And whilst any limitation of the persons from whom vacancies can be filled insidiously lowers the quality of the recruits, the same influence deteriorates the men already in the trade. When it is known that the master has no chance of getting better workmen, or that his choice will be limited to the unemployed remnant of the trade, the " avera ge s ensual man " is ap t to Inge miirh jjf his incentive to 1 e fficienc y, and even to regularity of conduct. In those trades in which the Device of Restriction of Numbers is effectually practised, an employer habitually puts up with a higher degree of irregularity, carelessness, and inefficiency in his existing staff, than he \%ould if he could freely promote a learner or an. assistant to the better-paid situation.

What is not so generally recognised is that, in trades in which the workmen are able to make effective use of the Device of Restriction of Numbers, the brain-workers of the tr ade are themselves less se lect, and suffer a similar Moss of in cgntive to efficien cy .^/In such completely organised and old- fashioned trades as gfass-blowin? and hand papermaking, the policy of limiting the numbers has been so effectively carried out that capitalists who, when trade is brisk and profits large, might desire to set up new works in competition with the old establishments, are actually stopped by the difficulty of obtaining an adequate supply of skilled workmen. Hence, ol d-fashioned family ccincern^,-w:ith->sle&py management and obsolete_£lant,.find the Trade. -Llni-PD,-. regulations a positive pr otection aga jnst cornpetition. This is frequently admitted in tEeliegotiations between masters and men. In 1874, for instance, the spokesman of the hand papermakers put forward this profitable effect of his union's restrictive regula- tions as a reason why the employers should concede better

yo8 Trade Union Theory

terms. " If," said he, " the men have good wages, the masters as a rule make large profits, and large profits are inducements which cause fresh capital to be embarked in a trade. If, however, the men have a limit to the supply of labor, no matter what the profits are, fresh capital cannot be introduced, because if a man starts fresh vats he will have no workmen to go on with. The rule as to limiting the supply of labor therefore works both ways. As far as our position in the vat trade is concerned we are like a close corporation. ... It would be a great inducement for capital to enter the trade if labor could be got,, but . . . according to our Rules and Regulations, competition is checked." ^

From the point of view of the consumer, this use of the Device of Restriction of Numbers by the workmen, and their formation of a close corporation seems, at first sight, analogous to the establishment of a capitalist ring or trust. Both expedients aim at creating a profitable monopoly, for the benefit of those already in the trade, by the exclusion of new [competitors. But there is an important difference between the workmen's monopoly and that of the capitalists, in the

' Arbitration on the Question of an Advance in Wages. . . . Rupert Kettle, Q.C., Arbitrator (Maidstone, p. 64, 1874).

Similar conditions seem to have prevailed in the .early factory industries of France, after the impulse given by Henry II. (ca. 1S50). Towards the end of the seventeenth century the workers in the paper-mills, carpet factories, and manufactories of looking-glasses are described as forming strong though un- authorised corporations, which were encouraged by the employers, and which were recruited exclusively from sons and sons-in-law of the workmen, so as to form virtually a hereditary monopoly. The papermakers were so powerful as to lead to special repressive laws for this industry in 1793 and again in 1796. — Du Cellier, Histoire des Classes Laborieuses en France (Paris, 1S60), pp. 259, 260, 334 ; and, as regards the papermakers, the articles by C. M. Briquet in the Revue Internationale de Sociologie, March 1897.

  • It is in this exclusion of new capital, and the consequent check to the process

[of Selection of the Fittest among the employers, that we discover the fundamental [objection to the policy of Restriction of Output, which we described in our chapter on " Continuity of Employment." It is, as we explained, impossible for the Trade Union, by any methods or regulations of its own, to limit the aggregate output. But the employers may, and occasionally do effect such a limitation, with or without the co-operation of the Trade Union concerned. In so far as this is effected by preventing or discouraging new capitalist enterprise, it tends to diminish the efficiency of the industry, by checking the " elimination of the unfit ' among the employers.

Economic Characteristics 709

type of industrial organisation that they set up, and in their I results upon productive efficiency. A successful Trust loses, [ it is true, the goad to improvement that comes from the free fight with other competitors. On the other hand, it retains undiminished, and gives full scope to the profit -maker's normal incentive to go on increasing his business and his income. So long as an additional increment of capital promises to yield more than the rate paid to the banker or debenture holder for its use; the capitalist Trust will strive to enlarge its output, and make the utmost possible improvement in its processes. The owners of even the most absolute monopoly do not find it pay to raise the price of their product in such a way as to cause any serious falling-off in the sales ; more commonly, indeed, as in the case of the Standard Oil Company,^ they get an advantage by actually lowering the price in order to stimulate the demand. They\ are, in any case, perpetually tempted to engage the ablest brains in the Trust's service, as well as to use the best machines and the latest inventions ; for every cheapening of production that can be effected enures wholly to their own advantage. Hence, however large and disproportionate may be the income drawn by the owners of the Trust, however arbitrary and oppressive may be the social power that it exercises, this capitalist monopoly has at any rate the economic advantage of selecting and organising the factors of pro- duction in such a way as to turn out its product at an ever diminishing cost. A close corporation of wo ytoeq.tias. o n the contrar y, n o interest i n enlarging its business. The individual operatives who enjoy the monopoly have only their own energy to sell, and they are accordingly interested in getting in return for their definitely limited output as high a price as possible. If they can, by raising price, exact the same income for a smaller number of hours' work, it will positively pay them to leave some of the world's demand unsatisfied. They have nothing to gain by cheapening the

1 See Wealth Against Commonwealth, by Henry D. Lloyd (London, 1894) ; E. von Halle, Trusts.

yio Trade Union Theory

process of production, and they stand actually to lose by every invention or improvement in organisation that enables their product to be turned out with less labor. Any altera- tion, in short, will be repugnant to them, as involving a change of habit, new exertion, and no pecuniary gain. Rather than forego the utmost possible individual wage, it would even pay them to stop all recruiting, and progressively raise their price as their members drop off one by one, until the whole industry dwindled away.

\ So far the Device of Restriction of Numbers appears (wholly injurious to industrial efficiency. There is, however, tone important effect in another direction. If, in the absence of all regulation, the employers are free without let or hind- rance to make the best bargain they can with the individual wage-earners, whole sections of the population, men, women, and children, will be compelled to live and toil under con- ditions seriously injurious to their health and industrial efficiency. Nor is this merely an empirical inference from the history of an unregulated factory system, and from the contemporary facts of the sweated industries. It is now theoretically demonstrated, as we saw in our chapter on " The Verdict of the Economists," that under " perfect competition," and complete mobility between one occupation I and another, the common level of wages tends to be no more than " the net produce due to the additional labor of the marginal laborer," who is on the verge ot not being [employed at all I The_JDevice of Restriction of N umbers imanifestly enables the privileged insiders to make a better pargain with ^heir emp loyers — that is to say, to insist on better sanitary conditions, shorter and more , regular hours, and, above all, a wage which provides for their families as well as themselves, a more adequate supply of food and clothing. However equivocal may be the device by which this higher Standard of Life is secured, there can be no doubt that, in itself, it renders ^po^bkajfar hig her deg ree of skill, conduct, and general efficiency than the long JiQursTlinheattKy conditions, and bare subsistence wages which are"~found

Economic Characteristics 7 1 1

prevailing- in the iinrf^giilateri traHps. In such a case the Device of Restriction of Numbers must be credited with indirectly preventing evil, and with producing a certain increase of efficiency, as a set-off against the direct weaken- ing of the incentive to improvement that we have been describing. Thus, it is easy to accuse the Glass Bottle Makers of injuring their industry by their drastic Restriction of Numbers. But it is open to them to reply that the very existence of their high level of technical skill depends on their maintaining a high Standard of Life ; that the Restric- tion of Numbers has been an effective means of maintaining this high standard ; and that without it, their combination would have crumbled away, their lists of Piecework Rates would have been destroyed by Individual Bargaining, and they themselves would have sunk to the low level of the present outcasts of the trade, those incompetent and un- organised workmen who pick up starvation wages by making, in cellars and " crib-shops," the commonest kind of medicine bottles. It was this consideration that induced J. S. Mill to declare that such a partial rise of wages, if not gained at the expense of the remainder of the working class, ought not to be regarded as an evil. The consumer indeed, must pay for it, but cheapness of goods is desirable only when the cause of it is that their production costs little labor, and not when occasioned by that labor being ill- remunerated. If, therefore, no improvement were to be hoped for in the general circumstances of the working classes the success of a portion of them, however small, in keeping their wages by combination above the market rate would be wholly a matter of satisfaction."^ Hence, from the point of view of those who regarded Restriction of Numbers as the only means by which wages could be maintained at anything above subsistence level, there was no argument against a Trade Union which adopted this expedient to save its members from slipping into the universal morass. During the fifty years that followed

' J. S. Mill, Principles of Political Economy, Book V. ch. a. § 5, p. 564.

713 Trade Union Theory

the repeal of the Combination Laws the Trade Unionists were incessantly told that " combinations of workmen . . . always fail to uphold wages at an artificial rate, unless they also limit the number of competitors."^ When the Flint Glass Makers and the Compositors, the Papermakers and Engineers adopted stringent apprenticeship regulations as one of the principal devices of their Trade Unionism, in so far as they were taking the only recognised means of protecting from a useless degradation their relatively high Standard of Life, and of maintaining unimpaired their relatively high level of industrial efficiency, they were but applying the current teachings of Political Economy.

To_>um„ .up,jdie Device of Restriction of Numbers, by Icolistantly baulking the free selection of the most capable manual workers and entrepreneurs ; by removing from both classes the incentive due to the fear of supersession ; by stereotyping processes and restricting output ; and by per- sistently hindering the re-organisation of industry on the most improved basis, lowers the level of productive efficiency all round. On the other hand, as compared with "perfect competition," it has the economic advantage of fencing-off particular families, grades, or classes from the general degrada- tion, and thus preserving to the community, in these privi- leged groups, a store of industrial traditions, a high level of specialised skill, and a degree of physical health and general intelligence unattainable at a bare subsistence wage. If, therefore, we had to choose between perfect "freedom of competition," and an effective but moderate use of the Device of Restriction of Numbers — between, for in- stance, the unregulated factory labor of the Lancashire of the beginning of this century, on the one hand, and the mediaeval craft gild on the other — the modern economist would hesitate long before counselling a complete abandon- ment of the old device.

^ J. S. Mill, Principles of Political Economy, Book II. chap. xiv. § 6, p. 243 of 1865 edition ; see also p. 229, " Even' successful combination to keep up wages owes its success to contrivances for restricting the number of the competitors."

Economic Characteristics 713

We are fortunately saved from so embarrassing a choice. In the first place, a n\effective use of the Device of Restrictio n o f Numbers is no longer practicable ., In our chapters on " The Entrance to a Trade " and " The Right to a Trade " we have seen how small and dwindling is the minority of Trade Unions which still rely on this means of protecting their Standard of Life. The ever-growing mobility op capital, and the incessant revolutionising of industrial pro- cesses render impracticable, in the vast majority of occupa-^ tions, any restriction, by the Methods of Mutual Insurance or Collective Bargaining, of the candidates for employment. The steadily-increasing dislike to the Doctrine of Vested Interests makes it every day more hopeless to set up or maintain, by the Method of Legal Enactment, any limitation on the freedom of the competent individual to do any work for which he is positively better fitted, than those by whom it has hitherto been performed. Thus, only an infinitesimal number of Trade Unions actually succeed in limiting the number of persons who become candidates for employment at their occupation. It is true that large sections of the Trade Union world still, as we have seen, cling to the old device. Th e Compositors, the Eng ineers, the Ir onfounders. the factory Boot, and Shoe Operatives, andj'"^_ jnany,.„,dist£ictSj___ one or other section of the bui lding trades limit, with more or less stringency, the nu mber of boy -learners in an y one establishment. This regulation can, however, only be enforced in establishments or districts over which the Trade Union has exceptional con- trol, and it is entirely nugatory in establishments dispensing with Trade Union labor, and in districts where the skilled workmen are only partially organised. Hence, as we have pointed out in our chapter on " The Entrance to a Trade," these Trade Unions are not, by their apprenticeship regula- tions, limiting the number of candidates for employment ; they are merely providing, at considerable cost to themselves, that the boys should be trained in the least skilled department of the trade • initiated into their industrial career by the VOL. II 2 A 2

714 Trade Union Theory

worst employers and the most indifferent workmen ; and, we may add, brought up with the feelings and traditions ol jf blacklegs," instead of those of good Trade Unionists. ' tVhatever advantages may be thought to accrue from a systematic and successful Restriction of Numbers, the partial ind lopsided application of this device by modern Trade Jnions is, we believe, economically as prejudicial to the itrategic position of their own members as it is to the interests of the rest of the community.

More effectual in inducing the great majority of Trade Unions to change their tactics has been the discovery — in flat contradiction to J. S. Mill's authoritative dictum — that they can successfully maintain a high Standard of Life, by re- lying exclusively on the Device of the Common Rule. Thus, the Amalgamated Association of Operative Cotton-spinners or the Northumberland Miners' Mutual Confident Association — combinations which have, fo'r-a whole generation, success- fully maintained relatively good wages and short hours, together with a high level of sanitation and safety — ^have never iriterfered in the employer's free choice of men, what- ever their antecedents, to fill vacancies in their respective trades. In the case of the Cotton-spinners the Trade Union even insists, as we have seen, on there being always ten times as many learners as would suffice to keep up the trade. In so far as the Common Rules governing these industries are enforced by law this may easily be understood. The Device of Restriction of Numbers in no way increases the power of a Trade Union to obtain an Act of Parliament or to press for the rigid application of existing statutes ; it tends, on the contrary, to diminish this power. Any success- ful limitation of numbers necessarily restricts the growth of the industry in question, and thus lessens the electoral area over which it is dominant, whilst the maintenance of a close monopoly alienates the sympathy of the excluded. More paradoxical is the fact that it is not, in practice, found to militate against the maintenance of Common Rules by Collec- tive Bargaining, that a large number of people would like to

Economic Characteristics 715

come into the trade, or even that a crowd of candidates apply for every situation that is vacant. The explanation of this paradox must be sought in the economic characteristics ot the Device of the Common Rule.

(b) The Device of the Common Rule[edit]

We have sufficiently explained, in our chapters on « The Standard Rate," " The Normal Day," and " Sanitation and Safety, that the Device of the Common Rule is, from the workman's point of view, always the Enforcem ent of a mini- mum, below which no employer may descend , never a maxi- mum, Deyond wnich he may not, if he chooses, offer better termsy^ This is specially noticeable where the Common Rule is enforced by law. An employer who, for one reason or another, desires to fill his works with the most respectable young women, does not restrict himself to the already high standard of comfort and decency enforced by the Factory Act ; he sees to it that the workrooms are cheerful, warm, and light ; provides dining-rooms and cloak-rooms, hot water, soap, and towels, free from the usual irritating charges ; takes care to prevent any opportunity for the foreman's petty tyrannies ; and strives to make a spirit of kindly considera- tion pervade the whole establishment. When the Trade Union has to enforce the Common Rule by Mutual Insurance or Collective Bargaining, it never objects to an employer attracting superior workmen to his establishment by adopt- ing a scale of wages in excess of the Standard ; by intro- ducing an Eight Hours' Day ; or by promising to pay full wages during holidays or breakdowns. The mere adoption of a Common Rule, even if it does no more than give definiteness and uniformity to what has hitherto been the average, current, or " fair " conditions of the industry, has therefore the psychological effect of transforming a " mean " into a " minimum " ; and hence of silently setting up, in the

7i6 Trade Union Theory

eyes of both employers and workmen, a new " mean " between the best and worst conditions prevailing in the trade.^

The Device- of the Common Rule stands in sharpest contrast, in all that concerns the selection of the factors of production, with the Device of Restriction of Numbers. The enforcement in any industry of a Standard Rate, a Normal Day, and prescribed conditions of Sanitation and Safety does not prevent the employer's choice of one man rather than another, or forbid him to pick out of the crowd of applicants the strongest, most skilful, or best-conducted workman. I Hence, the Common Rule in no way abolishes competition ' for employment. It does not even limit the intensity of such competition, or the freedom of the employer to take advantage of it. All that it does is to transfer the pr essure j roi" one element inthelbargain to JheQS5er=froiTi thewage to the work, fronr^ce~to~quality. In fact, this exclusion, from influence on the contract, of all degradation of price, whether it takes the forrti of a lower rate of wages, longer hours of labor, or worse conditions of sanitation and safety, necessarily heightens the relative influence on the contract of all the elements that are left. ' If the conditions of employment are unregulated, it will frequently pay an employer not to select the best workman, but to give the preference to an incompetent or infirm man, a " boozer " or a person of bad character, provided that he can hire him at a sufficiently low wage, make him work excessive and irregular hours, or subject him to insanitary or dangerous conditions. If the employer cannot go below a common minimum rate, and is unable to grade the other conditions of employment down to the leyd_af_ the. -lowest and most necessitous wage-earner in his estabHsJjment, he is 'economically impelled to do his utmost to raise the level of

' The Trade Unionist conception and application of a Standard Rate of re- muneration stands, it need hardly be said, at the opposite pole from the mediaeval fixing by law of a wage which it was equally an offence to diverge from in either direction. There is no resemblance between the economic effects of fixing s minimum wage, and those of establishing a maximum.

Economic Characteristics 717

I efficiency of all his workers so as to get the best possible return for the fixed conditions.^

This is the basis of the oft-repeated accusation brought by the sentimental lady or district visitor against the Trade Union Standard Rate, that it prevents an employer from pre- ferentially selecting an old man, or a physical or moral invalid, when there is a vacancy to be filled. But it is clear that the efficiency of industry is promoted by every situation being filled by the best available candidate. If the old man is engaged instead of the man in the prime of life, the man of irregular habits rather than the steady worker, there is a clear loss all round.* From the point of view of the economist, concerned to secure the highest efficiency of the national industry, it must be counted to the credit of the

' "The consequence is," says Mr. Lecky, of the Trade Union Standard Rate, " that the employer is necessarily driven to employ exclusively the most efficient labor" (Democracy and Liberty, vol. ii. p. 347). It is often supposed that this e6Fect of a Standard Rate is confined to Time Wages. But it operates also when (as is the case among the majority of Trade Unionists) the Standard Rate is a Piecework List. Even if the employer pays only in proportion to the work done, it is economically disadvantageous to him and to the community that his premises, machinery, and brain-power should be used short of their maximum capacity. This effect is intensified with every increased use of capital or brain-power in industry. The economic compulsion on the cotton manufacturer to select the most eflScient workman to fill a vacancy is as much due to the high cost of machinery as to the high Piecework List.

  • If all the fully competent workmen are already employed, and the weakling

or degenerate is the only candidate for the vacancy, he will be taken on, as con- stantly happens when business is very brisk, notwithstanding the Standard Rate. But if an old man or an irregular worker is, through philanthropic influence on some employer, or through benevolent favoritism, given a preference, the result is, in practical life, that some more competent workman is left unemployed. Thus, the burden on the philanthropist is not lessened. It may even be increased, for it probably costs more to keep an unemployed workman in the prime of life, with full health and activities, and family obligations, than it does to maintain the aged. Nor does this argument assume, as some may think, any fixed "work fund." Whatever the demand may be for any particular kind of service, efficiency requires that no weakling should be ernployed until every more competent man is fully occupied. The hypothetical case in which whilst every competent workman in the community is fully employed, there is still some demand unsupplied, but not enough to m.ike it worth while to pay the Standard Rate to one marginal old man or inferior worker, may be abandoned to the casuist. The necessary provision, both for the temporarily unemployed and the permanently unemployable — a problem not created by the enforcement of the Standard Rate — IS dealt with in a. later part of this chapter.

yi8 Trade Union Theory

\Device of the Common Rule, that it compels the employer.^ Jin his choice of men to fill vacancies, to be always striving, since he cannot get a " cheap hand," to exact, for the price that he has to pay, greater strength and skill, a higher standard of sobriety and regular attendance, and a superior capacity for responsibility and initiative/

But the rigid enforcement of the Device of the Common Rule does more than act as a perpetual stimulus to the selection of the fittest men for employment. The fact that the employer's mind is constantly jntent on getting^ the_best_^ possible workmen silently and imperceptibly reacts on the wage-earners. The young workman, knowing that he cannot secure a preference for employment by offering to put up with worse conditions than the standard, seeks to commend himself by a good character, technical skill, and general intelligence. Xfhere is, accordingly,)under a Common 1 Rule, no t only a c onataot-selectiQn of ±he most_efficient 'candidates, but also a po£ijtiy£ stimulus to the who!e„cJia5S to become ever more efficient.^/

We'strike here upon the explanation of the paradox, to which we have referred, that it is not in practice found to militate against the maintenance of Common Rules by Collective Bargaining that a large number of people would like to come into the trade. If a Lancashire millowner or a Northumberland coalowner, tempted by the large number of candidates for employment, were to engage a new cotton-

' Du Cellier (Histoire des Classes Laborieuses en France, • Paris, 1 860), in referring to the great strikes which prevailed all over France in the spring of 1 79 1 (pp. 320, 321), notes the effect of a Standard Rate in giving a positive advan- tage to the efficient workman over the inefficient. Most writers in i860 seem to have assumed that its object was to put the lazy and inefficient workman on a level with his more industrious rival.

2 The converse has often been pointed out by those who have studied the influence of out-door relief, promiscuous charity, and casual labor. The fact that a man without character, or of irregular habits, can get as easily taken on as a casual dock-laborer, as the unemployed workman with the best possible testimonials, is rightly regarded as exercising a demoralising influence on all London labor. If the dock-companies were compelled to give, say twenty-four shillings a week to every laborer who entered their employment, they would at once begin to pick out only those men on whose regular attendance and faithful service they could rely.

Economic Characteristics 719

spinner or coal-hewer on any other terms than those custom- ary in the trade, all the other spinners or hewers in his establishment would instantly " hand in their notices," and eventually leave his service in a body. No " nibbling at wages," or other standard conditions, would compensate such an employer for the loss in efficiency that would be involved in replacing his whole staff of spinners or hewers by inexperienced hands. The more " open " is the trade, and the more attractive are these standard conditions, the more certain it is that the employers will find it economically impossible to dispense with the services of the main body of men already in employment.^ Where the minimum con- ditions of employment are fixed and uniform, competition takes the form of raising the standard of quality, and ^where

t-TipgpjT^inimnm cnnriil-ir»n»; arp rplativply high, the_JUCCeSsful

candid ates, p icked as they are, out of a crowd of applicants, become a ygQ ^sgJfiSL^aas, which , can, be^ individually recruit ed "^ut not collectivelv replaced. The progressive raismg of the Common Rule, bv constantly prom oting the " Selection of the Fittest ." cau ses thus an incr easing special- isation of funct ion, ^creating a distinct groupT/Tiaving a Standard of Life and corporate traditions of its ' own which each recruit is glad enough to fall in with. If we imagine a community in which each industry was definitely marked off by its own Common Rule, the strategic strength of the workmen would be independent of any restriction on the choice of a trade. The employers in each industry would be free to pick their workmen where they chose, but, being unable to go below the minimum wage, or otherwise degrade the conditions of employment, they would be economically compelled to select the very best men for the amount of work required to satisfy the demand of the consumers. A newly-arrived workman would equally be free to accept any

  • Hence the rare but prolonged general stoppages of work among the

Lancashire Cotton-spinners require no "picketing." The employers know that they must have the same body of men back again, and they accordingly do not open their mills until they have come to terms. The same may be said of the

Coalminers in all well-organised districts. (

720 Trade Union Theory

situation he could get, in whatever trade he chose, but as he would find no opportunity of ousting a better man by offering to do his work in an inferior way at a reduced wage, he would be economically compelled to drop into the particular occupation in which, under the given distribution of demand and the given supply of special talent, his additional labor would produce the greatest addition of utility.

That the maintenance of a common minimum wage should, of itself, automatically improve the quality of the service will, to many readers, seem a paradox. Yet in all [Other cases this result of the diversion of competition is an [accepted truism of practical economics. When a middle- class governing body — a Town Council or a railway company, for instance — needs a middle-class official, be he doctor or architect, engineer or general manager, it invariably con- centrates the competition on quality by stopping it off price. The practical experience of business men has taught them that to engage the doctor or general manager who offers to come for the lowest salary would be a ruinous bargain. They accordingly always first fix the salary that they will offer, determining the amount according to the Standard of Life of the particular social grade they seek to attract, and they then pick the best candidate who offers himself at that salary.^ The same effect of a fixed price is noticed even in the sale of wares, though here the fixing of price is seldom free from some element of monopoly. If rival^ producers, of goods are precluded, by custom or com biriation, from " under- cutting ^l_^chother^ in the price of their_wares^they devote all their energies to putbidding each other^m^ the quality. ; Hence the fact that the accepted price for the morning newspaper in the United Kingdom has long been uniformly

1 It is interesting to note that the suggestion, often made by inexperienced " Labor members " of a public body, that it is absurd to offer the customary high salary for a brain-working post, when there are " plenty of men willing to do the work for less money," is always held up to derision by their middle-class

colleagues — and, according to the Trade Unionists' own argument, rightly so

»s being a " penny wise and pound foolish" policy.

Economic Characteristics 721

one penny in no way limits the competition, between rival editors. What it does is to concentrate the pressure on a struggle to surpass in excellence of type and paper, prompt and exclusive collection of news, brightness of literary style, and every other form of attractiveness. So overpowering is this impulse among railway companies that, in spite of the strict limitation of the number of competing lines, and their agreements among themselves, the general managers are always trying to outbid each other for public favor in the other ways that are left open to them, and the fact that the three separate railways between London and the North of England agree to charge identical fares is constantly raising the quality of ,the service in speed, punctuality, and comfort

But whilst, in the absence of any kind of monopoly, the adoption by all producers of an identical price automatically tends to bring about an improvement in quality, there is, in this as in other respects, a vital distinction between wares and the workmen who produce them. In the case of the wares, the tendency to improvement springs from the effect of the Common Rule in shifting the pressure of competition from price to quality. In the case of the workmen — influenced, as we have seen, in the same way by the mere existence of the Common Rule — we have also to consider the effect on the living human being of improved sanitary conditions, shorter hours of labor, and more adequate wages. If unre- stricted individual competition among the wage -earners resulted in the universal prevalence of a high standard of physical and mental activity, it would be difficult to argue that a mere improvement of sanitation, a mere shortening of the hours of labor, or a mere increase in the amount of food and clothing obtained by the workers or their families would of itself increase their industrial efficiency. But, as a matter of fact, whole sections of the wage-earners, unprotected by Factory Act or Collective Bargaining, are habitually crushed down below the level of physiological efficiency. Even in the United Kingdom, at least eight millions of the population —

72 2 Trade Union Theory

over one million of them, as Mr. Charles Booth tells us, in London alone — are at the present time existing under con- ditions represented by adult male earnings of less than a pound a week.^ The unskilled laborer who is only half fed, whose clothing is scanty and inappropriate to the season, who lives with his wife and children in a single room in a slum tenement, and whose spirit is broken by the ever-recurring irregularity of employment, cannot by any incentive be stimulated to much greater intensity of effort, for the simple reason that his method of life makes him physiologically incapable of either the physical or mental energy that would be involved.^ Even the average mechanic or factory operative, who earns from 20S. to 35s. per week, seldom obtains enough nourishing food, an adequate amount of sleep, or sufficiently comfortable surroundings to allow him to put forth the full physical and mental energy of which his frame is capable. No middle- class brain-worker who has lived for any length of time in households of typical factory operatives or artisans can have failed to become painfully aware of their far lower standard of nutrition, clothing, and rest, and also of vitality and physical and mental exertion.^ It has accordingly been pointed out

^ See Sir R. Giffen's evidence before the Royal Commission on Labor, sitting as a wliole, Questions 6942, 6943 ; Mr. Charles Booth, Life and Laboui of the People, especially vol. ix. p. 427.

2 " In England now, want of food is scarcely ever the direct cause of death ; but it is a frequent cause of that general weakening of the system which renders it unable to resist disease ; and it is a chief cause of industrial inefficiency. . . . After food, the next necessaries of life and labor are clothing, house-room, and firing ; when they are deficient the mind becomes torpid, and ultimately the physical constitution is undermined. When clothing is very scanty it is generally worn night and day ; and the skin is allowed to be enclosed in a crust of dirt. A deficiency of house-room or of fuel causes people to live in a vitiated atmo- sphere which is injurious to health and vigor. . . . Rest is as essential for the growth of a vigorous population as the more material necessities of food, clothing, etc." (Professor A. Marshall, Principles of Economics, 3rd edit. 1895, pp. 277, 278 ; see also the interesting series of illustrative facts in The Ground- work of Economics, by C. S. Devas, London, 1S83). For M'CuUoch's remarks, see, among other references, section vii. of his Principles of Political Economy, especially as to the " Advantages of a High Rate of Wages."

' The rich and the middle-class seldom realise how scandalously low is the standard of daily health among the wage-earners. Apart from actual disease or disablement, the workman and his wife and family are constantly suffering from minor ailments, brought about by unwholesome or deficient food, bad sanitatior., ihe

Economic Characteristics 723

by many economists, from J. R. M'CuIloch to Professor Marshall, that, at any rate so far as the weakest and most necessitous workers are concerned, improved conditions of employment would bring with them a positive increase in production. " A rise in the Standard of Life for the whole population," we are now expressly told, " will much increase the National Dividend, and the share of it which accrues to each grade and to each trade." ^ We see, therefore, thatlthe'^ Devi ce of the Common Rulej^so_Jar as the wage-earner is con cerned, promotes the action of both forces of evolutionary pr ogress ; it tends const antl y to the S ekctionjf^he"^ and ^at the s ame time provides both the mental stimuiurTnd th e material condit ions necessary for Functional Adaptation to a higher leve l of skill__and^en^y. •"-™.— ..^-,

Let us now consider the effects of the Device of the Common Rule upon the brain-workers, including under this term all who are concerned in the direction of industry, i When all the employers in a trade find themselves precluded, Dy the existence of a Common Rule, from worsening the conditions of employment — when, for instance, they are legally prohibited from crowding more operatives into their mills or keeping them at work for longer hours, or when they find it impossible, owing to a strictly enforced Piece- work List, to nibble at wages — they are driven, in their competitive struggle with each other, to seek advantage in other ways.^ We arrive, therefore, at the unexpected result

lack of sufiScient rest or holiday, and absence of medical care. The brain- worker, living temporarily in a wage-earning family, becomes positively oppressed by the constant suffering, of one member or another, from toothache or sores, headache or dyspepsia, and among the women, also from the dragging pains or chronic ansmia brought about by hard work or exposure at improper times. In the " Sweated " industries it is scarcely too much to say that the state of health, vhich is normal among the professional classes of the present day, is almost unknown.

' Professor A. Marshall, Principles of Economics, 3rd edit. p. 779.

2 Thus Mr. Mundella writes of the Standard List of Prices enforced by the Nottingham Hosiery Board : " Formerly, in times of depression, the greatest irregularity prevailed, according to the individual character of the employers. The hard and unscrupulous, trading on the necessities of the workmen, could bring down wages below a reasonable level ; the more considerate must either follow suit or .be undersold. Our Board has changed all that. All now pay the

724 Trade Union Theory

iihat the insistence by the Trade Union on uniform condi- tions of employment positivel}X ^timulates the . i a3;antiaa-.^0d adoption^of pgw. p ro cesses of manufacture/ This has been repeatedly remarked by the opponents of Trade Unionism. Thus BabbageJ,a 1832, described in detail how the inven- tion and adoption of new methods of f orging and welding gun-barrels was directly caused by the combined insistence on "better conditions of employment by all the workmen engaged in the old process. "In this difficulty," he says, " the contractors resorted to a mode of welding the gun- barrel according to a plan for which a patent had been taken out by them some years before the event. It had not then succeeded so well as to come into general use, in consequence of the cheapness of the usual mode of welding by hand labor, combined with some other difficulties with which the patentee had had to contend. But the stimulus produced by the com- bination of the workmen for this advance of wages induced him to make a few trials, and he was enabled to introduce such a facility in welding gun-barrels by roller, and such perfection in the work itself, that in all probability verj' few will in future be welded by hand - labor." ^ "Similar examples," continued Babbage, " must have presented them- selves to those who are familiar with the details of our manufactories, but these are sufficient to illustrate one of the results of combinations. ... It is quite evident that they have all this tendency ; it is also certain that considerable stimulus must be applied to induce a man to contrive a new and expensive process ; and that in both these cases unless the fear of pecuniary loss had acted powerfully the improve- ment would not have been made." ^ The Lancashire cotton trade supplied the same generation with a classic instance of

same price, and the competition is not who shall screw damn wages the most, but who shall buy material best, and prodttce the best article." — Arbitration as a Means of Preventing Strikes, by the Right Hon. A. J. Mundella (Bradford, 1868), p. IS

> C. Babbage, Economy of Manufactures (London, 1832), p. 246. The welding of tubes of all kinds is now invariably done by machinery — a fact which may be said to have made possible the modern bicycle.

2 Ibid. p. 248.

Economic Characteristics 725

" Trade Union folly " of this kind. Almost every contem- porary observer declares that the adoption of the "self- acting " mule was a direct result of the repeated strikes of the Cotton -spinners between 1829 and 1836 to enforce their Piecework Lists, and that many other improvements in this industry sprang from the same stimulus. The Edinburgh Review went so far as to say in 1835 that " if from the discovery of the Spinning Frame up to the present, wages had remained at a level, and workers' coalitions and strikes had remained unknown, we can without exaggeration assert that the industry would not have made half the progress." ^ And, coming down to our own day, we have "ourselves had the experience of being conducted over a huge steel-works in the North by the able captain of industry who is practically engaged in its administration, and being shown one improvement after another which had been devised and adopted expressly because the workmen engaged at the old processes had, through their powerful Trade Unions, exacted high piecework rates. To the old econo- mist, accustomed to the handicraftsman's blind hostility to machinery, this undesigned result of insistence on high wages seemed a proof of the shortsightedness of Trade Union action. The modern student perceives that the Trade Unions, in insisting on better conditions of employment than would have been yielded by Individual Bargaining, were " building better than they knew." To the wage-earners as a class, it is of the utmost importance that the other fac&rs in production — capital and brain power — should always be

• Edinburgh Rivie-w, July 1835. Similarly, Marx notes that it was not until the employment of women and young chiljjren in mines was forbidden that coalowners introduced mechanical traction ; and that, as the Inspectors of Factories report in 1858, the introduction of "the half-time system stimulated the invention of the piecing machine " in woollen yarn manufacture, by which a great deal of child labor was dispensed with ( Capital, Part LV. chap. xv. sec. 2, voL iL p. 390 of English translation of 1887). In the Proceedings of the Institute of Mechanical Engineers, 1895 (p. 346), "the great amount of ingenuity which had recently been expended in the charging and drawing of gas- retorts" by hydraulic machinery was described as "the direct result of the labor troubles experienced " since the formation of the Gas Workers' Union, and " it showed what was the general tendency of such troubles. "

726 Trade Union Theory

at their highest possible efficiency, in order that the common product, on which wages no less than profits depend, may be as large as possible. The enforcement of the Common Rule on all establishments concentrates the pressure of competi- /tion on the brains of the employers, and keeps them always on the stretch. " Mankind," says Emerson, " is as lazy as it dares to be," and so long as an employer can meet the pressure of the wholesale trader, or of foreign competition, by nibbling at wages or " cribbing time," he is not likely to undertake the " intolerable toil of thought," that would be required to discover a genuine improvement in the pro- ductive process, or even, as Babbage candidly admits, to introduce improvements that have already been invented. Hence the mere existence of the Common Rule, by debar- ring the hard-pressed employer from the most obvious source of relief, positively drives him to other means of lowering the cost of production. And the fact that the Common Rule habitually brings to the operatives a greater reward for their own labor, itself further increases the employer's incentive to adopt labor-saving machinery. For " t he lower

  • e^dlJ?'..-'^.age," we are told, '^the smallerjhejiis. of impro

ment Jn_Jabqr-saving methods and machinery . . . . Where labor is cheapest, the progress is the slowest." ' Far from being an advantage to industry, "the cheapness of human labor where it prevails is the greatest incentive for the per- petuation of obsolete methods. . . . The incentive is want- ing for replacing, with large capital outlay, old and obsolete by new and improved machinery. The survival of the fittest is, therefore, so to speak, the result of a high wage rate," ^ provided, that is to say, that the high rate is enforced on all establishments alike. This is now seen even by the capitalists themselves. " We employers," lately declared one of the leading captains of English industry, " owe more than, as a body, we are inclined to admit, to the improvements in our methods of manufacture due to the firmness and independ-

' The Economy of High Wages, by J. Schoenhof (New York, 1892), p. 276. •2 Ibid. pp. 38. 39.

Economic Characteristics 727

mce of trade combinations. Our industrial steadiness and enterprise are the envy of the world. The energy and pertinacity of Trade Unions have caused Acts of Parlia- ment to be passed which would not otherwise have been promoted by employers or politicians, all of which have tended to improve British Commerce.^ . . . Every intelligent employer will admit that his factory or workshop, when equipped with all the comforts and conveniences and pro- tective appliances prescribed by Parliament for the benefit and protection of his workpeople — though great effort, and, it may be, even sacrifice, on his part has been made to procure them — has become a more valuable property in every sense of the word, and a profit has accrued 'to him owing to the improved conditions under which his work- people have been placed." ^

Besides this direct effect in stimulating all the employers, the mere existence of the Common Rule has another, and even more important, result on the 'efficiency of industry, in that it is alway^: tending _to_ drive business into^ those establishments _which« are most, favorably _jjtuated, best equipped, and mana^d^with^the greatest ability, and to

' A recent instance is afforded by the humble industry of washing clothes. The chairman of the Eastbourne Sanitary Steam Laundry Company, Limited, told his shareholders on 2Sth January 1897 that "the new Factory Act pre- vented the hands working so long as they used to do, and the directors had been obliged to provide machinery to enable them to do the work in less time " (Laundry Record, 1st March 1897). The extraordinary backwardness of the art of washing clothes, and the difficulty of obtaining skilled, regular, and honfst laundry workers, are, we suggest, largely due to the lack of stimulus to employers and of decent conditions for the workpeople, resulting from the absence of Common Rules.

2 W. Mather, Contemporary Review, November 1892. Here Mr. Mather has the economists of to-day on his side. Professor Nicholson cites Thorold Rogers as observing, " that every act of the legislature that seems to interfere with the doctrine of Laisser Faire, and has stood the test of experience, has been endorsed because it has added to the general efficiency of labor " (Rogers, Six Centuries of Work and Wages, London, 1891, p. 528 ; Nicholson, Prin- tiples of Political Economy, Edinburgh, 1893, p. 331). Mr. Mather, who is at the head of a great engineering establishment^ is the author of the following interesting pamphlets : The Forty-eight ffoiirs' Week : a Year's Experiment and its Results at the Salford Iron Works (Manchester, 1894) ; A Reply to some Criticisms on Mr. Mather' s Report of a Years Trial of the Forty-eight Hours' Week (London, 1894).

728 Trade Union Theory

elimi nate the i ncompetent orold-fashioned_5rQplQ3^^ This factTpatent to the" practical man7was not observe^' by the older economists. Misled by their figment of the equality of profits, they seem habitually to have assumed that an increase in the cost of production would be equally injurious /to all the employers in the trade. The modern student at once recognises that the Device of the Common Rule, from its very nature, must always fail to get at the equivalent of all differential advantages of productive agents above the level of the worst actually required at any given time. When, for instance, the Amalgamated Association of Operative Cotton -spinners secures uniform piecework lists, identical hours of labor, and similar precautions against accident and disease in all English cotton mills, it in no way encroaches upon the extra profits earned by firms of long-standing reputation for quality, exceptional commercial skill, or technical capacity. Similarly, it does nothing to deprive mills enjoying a special convenience of site, the newest and best machinery, valuable patent rights or trade connections, of the exceptional profits due to these advan- tages. This is still more apparent in the case of the coal- miners, whose Mines Regulation Acts and "county averages" of wages, applying equally all round, necessarily leave untouched the vast incomes derived from the mining royalties of all but the worst mine in use. The very nature of this fundamental device of Trade Unionism — the neces- sary uniformity of any rule that is to be common to the whole trade — compels it to be fixed with reference to the circumstances, not of the best, but of the worst establish- ment at which the Tr(ide Unionists wish to obtain employ- ment. This does not mean that, in any well-organised trade, the Standard Rate, or other Common Rule, will be fixed so as to enable the economically weakest employers to con- tinue in business. On the contrary, it is a matter of common experience that every time a Trade Union really secures a Common Rule, whether by Collective Bargaining or Legal Enactment, it knocks another nail into the coffin

Economic Characteristics , 729

of the least intelligent and worst-equipped employers in the trade.^ We have already described how the small masters, in the boot and shoe industry denounce, as a conspiracy of the great capitalists in the trade, any acceptance of a "uniform statement," or of the high standard of workshop accommodation insisted on by the National Union of Boot and Shoe Operatives. In the building trades, it is the small "jerry masters" who especially protest against the " tyranny " of the " Working Rules," to which the contractor in a large way of business willingly agrees. And in Lanca- shire, it is in the backward villages, where many of the mills are already shut up, that Factory Acts and Piecework Lists are denounced for the relentless pressure with which they force up the standard of efficiency to the level of Oldham or Bolton.

How far this policy of the " selection of the fittest " among employers can be carried at any particular time is a matter for delicate calculation. It is obviously to the

  • "We have been working at a loss for years," said a large cotton manu-

facturer to the Union secretary. " Yes," was the shrewd reply, " you have been losing your little mills and building bigger ones." — First Prize Essay on Trades Unions, by "Ithuriel" (Glasgow, 1875), p. 31.

' This is a matter of deliberate policy with the modern Trade Union. Thus, the official organ of the C.otton Operatives lately declared, in an article written by a prominent Trade Union official, that "if a firm realises that it cannot manufacture with profit to itself, and it is paying no more than others for labor, it is better that that firm, harsh though the doctrine may seem, should cease to exist, rather than the operatives should accept a reduction in wages and drag the whole trade down with them." — Cotton Factory Times, 17th July 1896.

This result is then often pointed to as showing the folly of Trade Union action in " driving capital out of the trade." But, so long as any better-managed, better-equipped, or more favorably situated mill is capable of doing increased business, the amount of effective capital in the trade will not be lessened through the closing of the worst mill. The price remaining the same, and therefore presumably the demand, the same quantity of the product will be produced and sold. All that will have happened will be that the capital in the trade will, on an average, be employed to greater advantage. How much scope there is, in modern industry, for this concentration of business in the most advantageous centres, may be judged from the admirable Statistics of Manufactures of Massa- chusetts from 1 886 to 1896, which show that, in the two or three thousand separate establishments investigated, the average business done was only between 50 to 70 per cent of their fiill productive capacity — in some trades less than half the possible output of the existing plant being made. — See the Eleventh Report, Boston, 1897, pp. 99-104, 169.

730 Trade Union Theory

interest of the Trade Union so to fix the Common ,Rule as to be constantly "weeding out" the old-fashioned or stupid firms, and to concentrate the whole production in the hands of the more efficient " captains of industry," who know how to lower the cost of the product without lowering the wage. Thus, so long as the more advan- tageously situated establishments in the trade are not working up to their utmost capacity, or can, without losing their advantage, be further enlarged, the Trade Union could theoretically raise its Common Rule, to the successive exclusion, one after another, of the worst employers, without affecting price or the consumers' demand, and therefore without diminishing the area of employment. By thus "raising the margin of cultivation," and simultaneously increasing the output of the more advantageously situated establishments, this Device of the Common Rule may accordingly shift the boundary of that part of the produce which is economically of the nature of rent, and put some of it into the pockets of the workmen.^ If, for instance, one employer owns a patent which greatly reduces the cost of production, he will be able, so long as his output amounts only to a portion of the quantity demanded by the public at the old price, to put into his own pocket the entire equivalent of the improvement. ButS^f the Trade Union, by gradually raising its Standard Rate, drives all the other employers one \ by one out of the trade, and concentrates the whole business I into its most advantageous centre, the aggregate cost of production will be thereby greatly reduced. If the increased profit is retained by the monopolist, there is no theoretic reason why the workmen, if they are strong enough, should not encroach on this surplus, until they had reduced it to the current rate of profit of capital^ There are, however, practical limits to such a process. However advantageously

1 Ricardo and, more explicitly, J. S. Mill pointed out that anything whiclj increased the output of the more fertile farms would tend to reduce the aggregate rent of agricultural land. — Principles of Political Economy, Book IV. ch. iii. § 4, pp. 434-436 of 1865 editioa.

Economic Characteristics 731

situated a particular establishment may be, we do not find that it, in practice, absorbs the whole trade. Con- siderations of locality and connection, of variety of demand, of the lack of capital, and, above all, the absence of desire or capacity to manage a larger business, set limits to the indefinite extension of even the most advantageously placed firm.^ And whilst these limits interfere with the concentration of industry, other considera- tions conspire to hinder the desire of the Trade Union to push to the uttermost its policy of " levelling up." Though it would immediately profit the trade as a whole, and ultimately even its weakest members, the conSfentration involves, to begin with, a painful wrench for those members who would have to change their methods of working, often alter their habits of life, and sometimes even migrate to a new town. In such trades as the Engineers, the Boot and Shoe Operatives, the Cotton-weavers, and the Compositors, the Trade Union has, for whole generations, been struggling to induce its most apathetic and conservative - minded members to put on the adaptability and mobility of the " economic man." f he growth of " uniform lists " and " national agreements " in one trade after another is a i^ign that this difficulty is, in some cases, being overcome ; whilst part of the increasing preference for the Method of Legal Enactment is, in our view, to be attributed to the fact that it presses uniformly on all districts, and thus positively favors the concentration of each industry in the centres in which it can most advantageously be carried on. It is among the Lancashire Cotton-spinners that this far-sighted policy has been pursued with the greatest persistency, with the result, if we may believe the employers, of transferring to the operatives, in higher wages and better conditions, no small share of each successive improvement in production.

' For an expansion of this idea see "The Rate of Interest and the Laws of Distribution," by Sidney Webb, in Quarterly Journal of Economics, April 1888. Thus, it cannot be assumed that the cost of the marginal production is equal in good and bad establishments alike. Many other causes than marginal cost ol production determine the distribution of business.

732 Trade Union Theory

This result of the Common Rule — the constant selection of the fittest among the directors of industry, and the con- centration of business in the most advantageous centres — is, strangely enough, often made a matter of reproach to Trade Unionism. Thus, even so benevolent an employer as Sir Benjamin Browne, looking back after twenty- six years' experience of the Engineers' fixing of a Nine Hours' Normal Day in 1 871, blames the Trade Union^sjor, thereby driving business^into the hands of the best-equipped firms. " From this time," he declares, " more was ^one"by large companies and less by small employers, . . . more and more costly and complicated machinery was introduced. . . . The practical effect of the Nine Hours' Movement was to ruin the small employer."* But seeing that the aggregate volume of engineering work has admittedly not fallen off — that it has, on the contrary, enormously increased — it cannot biit be regarded as an economic gain thit this work should be executed where it can be done to the greatest advantage. If, in the absence of a Common Rule, the "small employer," with his imperfect machinery and in- sufficient capital, with inferior scientific training and inade- quate knowledge of the markets, is enabled to divert business from superior establishments by nibbling at wages, requiring systematic overtime, overcrowding his factory, or neglecting precautions against accident, his existence is not only de- trimental to the operatives, but also a clear diminution of the nation's productive efficiency. Hence the enforcement of a Common Rule, by progressively eliminating the worst equipped employers and concentrating the whole pressure of competition on securing the utmost possible efficiency of production, tends constantly to the development of the I highest type of industrial organisation.^

• Letter to the Times of nth August 1897.

' The student will find an interesting confirmation of much of the preceding analysis, with illustrations drawn from the industry of to-day, in an able address just delivered by a leading employer in the engineering trade. The Inaugural Address by the President of the Manchester Association of Eni;ineers (Mr. Joseph Nasniith). published at Manchester (1897), is largely occupied with the means

Economic Characteristics 733

Thus, the eff ect o f the Comm.QrL-Rule on the organisation^' of industry, like its effect on the manual laborer, and the brain-working entrepreneur, is all in the direction o^ in^eas: ing^ffipl^il£X:_ It in no way abolishes competition, or lessens its intensity. What it does is perpetually to stimulate the selection of the most efficient workmen, the best-equipped employers, and the most advantageous forms of industry. It in no way deteriorates any of the factors of production ; on the contrary, its influence acts as a constant incentive to the further improvement of the manual laborers, the machinery,

by which English employers can best meet foreign competition. He distinguishes three factors of supreme importance, among them being neither low wages nor long hours. " First, the economic eflFect of improved appliances ; second, the adoption of the best commercial methods ; and third, the fullest development of the skill of all those engaged in an industry, and especially of the leaders. . . . One of the direct consequences of the adoption of the newer methods and appliances has been such a subdivision of some operations as to involve a fresh organisation of labor. Instances will be well known in which the making of a single article, as, for instance, the matrix used in the linotype machine, or the spindles which are made for ring-spinning machines, involves the handling of the article by Bfteen or twenty workpeople, each of whom is charged with the performance of one operation, forming possibly a small portion of those which are needed to complete the whole article. This necessitates the design and employment of a large number of machines or appliances, each of which is intended to aid in effecting one of these minor operations, and calling for the attention of a workman specially trained in its use. In this way there has been silently worked a revolution which is not always fully appreciated even yet, and ■which has had no less an effect than the elevation of the machine tender from a subordinate to an important position in the economy of a workshop. It is in consequence of the facility of subdivision which the ingenuity displayed in the production of special appliances has brought about, that in all organised industries the labpr cost of any article continually tends to decrease. Probably because the economic change which has taken place has only been partially appreciated, we find people still making a great fuss about wages. As a matter of fact the rate of wages is not necessarily a guide to the labor cost of an article, and a wider recognition of this fact would prevent a good deal of trouble. . . . Labor cost and not wages is the determining factor, and there is not necessarily a direct connection between them. Indeed, it may be asserted that they are often in inverse proportion, and that the more highly organised an industry is, the greater is the tendeiuy for that to be so. . . . Nothing has so much influence upon this problem as the possibility of making articles in large numbers, and it is in this direction that much remains to be done by engineers. Nothing presents so hopeful a field for the future efforts of constructive engineers as the design and manufacture of machines which will enable the manufacturers to produce all kinds of articles in the greatest possible numbers in any given time. Wages become a secondary consideration under these circumstances, and although a change in the rate paid may for a time affect the economic conditions, it is not long before the skill of the constructor has placed him abreast of the new conditions."

734 Trade Union Theory

and the organising ability used in industry. In short, whether with regard to Labor or Capital, invention or organ- ising ability, the mere existence of a uniform Common Rule in any industry promotes alike the selection of the most efficient factors of production, their progressive functional adaptation to a higher level, and their combination in the most advanced type of industrial organisation^/ And these results are permanent and cumulative. However slight may be the effect upon the character or physical efficiency of the wage-earner or the employer ; however gradual may be the improvement in processes or in the organisation of the industry, these results endure and go on intensifying them- selves so that the smallest step forward becomes, in time, an advance of the utmost importance.

'* So far the substitution in any trade of the Common

1 Rule for the anarchy of Individual Bargaining would seem

' to be in every way beneficial. We have now to consider

some characteristics which lead to a qualification of this


We have to note, in the first place, that the result, though certain, may probably be slow. The passing of a Factory Act enforcing a definite standard of sanitation or a normal day, may be indispensable to prevent the progressive de- gradation of whole classes of operatives ; by its diversion of the pressure of competition it may re-establish the physique, improve the character, and increase the efficiency of all sub- sequent generations ; but the very day it comes into opera- tion it will almost certainly raise the cost of labor to the employer, if only for a time. The extension of a uniform Piecework List to all the establishments in an industry may eventually concentrate all the business in the best-equipped

1 The influence of a Common Rule in changing the nature and effects of com- petition in industry, is, of course, not confined to the relation between employei and workmen. The respective results on the character and efficiency of pro- duction, of " complete freedom of enterprise," on the one hand, and of such uniform restrictions as the Adulteration Acts, the by-laws relating to the con- struction of buildings, or the regulations for the conduct of common lodging- houses on the other, are well worth further study from this point of view.

Economic Characteristics 735

mills, managed by the most capable employers, and thus positively reduce the cost of production ; but its first effect will probably be to raise that cost in the old-fashioned or outlying establishments not yet dispensed with. Like all permanent changes in personal character or social organisa- tion, the economic effects of the Device of the Common Rule are gradual in their operation, and will not instantly reveal themselves in an improvement of quality or a diminished cost of production.

The response, moreover, in the way of added efficiency will vary from trade to trade. The rapidity with which the response will be given, the extent to which the improvement can be carried, and the particular " curve of diminishing return " that it will describe, will differ in each industry according as its condition at the moment affords more or less scope for the operation of the two potent forces of Functional Adaptation and the Selection of the Fittest, on workmen and capitalists respectively. Thus, the effect of the constant selection among the operatives will vary according to the range of choice which the technical circumstances of the industry permit the employer to exercise. This 'depends, in practice, for the skilled trades, upon the extent to which the process itself requires the co-operation of boys or other learners, from whom the skilled workers are recruited. Hence, the mule: spinners, attended each by two piecers — ten times the proportion of learners required to keep up the trade — are a far more " selected " class than the skilled hand-working tailors of the West End trade, who need have no boys at all working by their side, and who are largely assisted by women incapable of replacing them. We do not wish to discuss the social expediency of an arrange- ment, which attracts into an occupation every year thousands of boys, nine-tenths of whom, after they have reached maturity, find themselves skilled in an occupation which they have no chance of following, and which they must perforce abandon, at one period of their life or another, fdr some new means of livelihood. But whatever may be the consequences

736 Trade Union Theory

of this arrangement to the unsuccessful piecers, its effect on the cotton -spinners, as a class, is to make them a highly selected aristocracy of ability, able to adapt themselves to the progressive complication and "speeding-up" of the machinery. Analogous differences exist between trade and trade in regard to the extent to which Selection of the Fittest can act on the employers, especially as to machinery and location. Thus, the total absence of any form of monopoly in cotton -spinning and cotton -weaving, and the remarkable facility and cheapness with which Lancashire capital can always be obtained for new cotton mills, gives the cotton Trade Unions a special opportunity for increasing the efficiency of the industry, by constantly driving out the weakest firms. A complete contrast to this state of things is presented by such legal or natural monopolies as railways, waterworks, tramways, and gas works, where the Trade Unions have to put up with whatever incompetent Board' of Directors or General Manager may happen to hold the field. Nor is the difference between trade and trade any less in regard to the action on the employers of Functional Adapta- tion. Thus, the factory boot and shoe industry, supplied almost day by day with fresh inventions, and constantly" recruited by the upstarting of new businesses, offers obviously more scope for the improvements caused by pressure on the brains of employers, than an industry like English agriculture, where generation often succeeds to generation in the same farm, and economic freedom of enterprise and mobility of capital is comparatively rare. The only direction in which progress could be at all equal as between trade and trade seems to be the improvement of the operatives, brought about by increased food, clothing, and rest. Even in this respect there would be more scope for improvement in an industry carried on by women or unskilled laborers, who are likely to be chronically underfed or overworked, than in a trade employing skilled artisans already earning a high Standard Rate. But once the process of " levelling up " had reached a certain point, this inequality of response would

Economic Characteristics 737

cease to be apparent. At this stage, the increase in efficiency due to improvement in physical health and vigor, like the increase in mental activity made possible by suffi- ciency of food and rest, might be expected, in all trades, to bear a fairly close relation to the improvement in the workers' conditions, and would probably be subject to much the same limits in all the industries of a particular country. In every other respect trade differs widely from trade in the rapidity and degree with which it responds in the way of added efficiency, to the stimulus of the Common Rule. And this difference between one trade and another, in the potentiality of increased efficiency, bears, it will be obvious, no definite relation to the strategic strength or political power of the operatives. Whether the workers in any particular trade will actually be able to extract from the employers, either by Mutual Insurance, Collective Bargaining, or Legal Enactment, higher wages, shorter hours, or improved sanitation, depends, in practice, on many other circumstances than those affecting the possibilities of increased efficiency. Indeed, if we could admit any generalisation at all on the point, we might infer, from the general "law of diminishing returns," that a trade in which the wage -earners have hitherto been too weak to obtain any Common Rule, would be likely to yield a greater harvest of added efficiency than an old-established, well-organised, and powerful industry, in which the Trade Union had, for generations past, pushed its advantages to the utmost, and so probably exhausted most of the stimulus to increased Functional Adaptation and Selection of the Fittest produced by the use of the Common Rule.

There will, accordingly, be at any particular moment a practical limit to the advantageous raising of the Common Rule. The Selection of the Fittest, whether of employers, workmen, establishments, or districts, can achieve no more than to take the best for the purpose that the community at the time supplies. Functional Adaptation, whether of work- men or employers, or their mutual organisation, can go no VOL. II 2 B

738 Trade Union Theory

further than the structure for the time being allows. And though each successive rise in the Common Rule may pro- duce its own increment of additional efficiency, there is a rapidly decreasing return to each successive application of pressure. Hence a Trade Union which has, in the first few years of its complete organisation, succeeded in obtaining considerable advances in its Standard Rate, sensible reduc- tions of its Normal Day, and revolutionary improvements with regard to the Sanitation and Safety of its workplaces — all without injury to the extent and regularity of its members' employment — may presently find that, in spite of its perfected organisation and accumulated funds, its upward course slackens, its movements for further advances become less frequent or less successful, and, in comparison with the contemporary gains of other industries, the conditions of employment will remain almost stationary.

The Trade Unionist has a rough and ready barometer to guide him in this difficult navigation. It is impossible, even for the most learned economist or the most accomplished business man, to predict what will be the result of any par- ticular advance in the Common Rule. So long, however, as a Trade Union, without in any way restricting the numbers entering its occupation, finds that its members are fully employed, it can scarcely be wrong in maintaining its Common Rules at their existing level, and even, after a reasonable interval, in attempting gradually to raise them.^

When the percentage of workmen out of employment begins to rise, it is a sign that the demand for their particular commodity has begun to slacken. This diminution of de- mand may, as we shall presently see, be due to any one of an almost infinite number of causes, quite unconnected with the conditions enjoyed by the operatives. But one of these

1 This assumes, as is nearly always the case, that the wages and other condi- tions of employment are within the limits of the fullest physiological efficiency. So long as the family income of the typical skilled mechanic, even in England, is less than £\oo a year, and his hours of labor are more than forty or fifty per week, the potentiality of improvement in physical and mental efficiency, in family life and citizenship, no less than in industry, is great.

Economic Characteristics 739

possible causes is a rise in price, and one of the possible! factors in a rise in price is an advance of the Common ( Rule which does not bring with it, in one form or another, a corresponding increase in the efficiency of th| industry. Hence, although it can in no way be inferred that the slackening of demand has been caused by the rise in the level of the Common Rule, rather than to any other of the many possible causes, yet this slackening, however it is caused, must necessarily check any further advance. For assuming the workmen to rely exclusively on the Device of the Common Rule, it will not pay them to obtain a rise of wages, a shortening of hours, or improved conditions of sani- tation or safety at the cost of diminishing their own con- tinuity of employment. To put it concretely, whenever the percentage of the unemployed in a particular industry begins to rise from the 3 or 5 per cent characteristic of " good trade," to the 10, 15, or even 25 per cent experienced in "bad trade," there must be a pause in the operatives' advance movement.^

' The critical reader may retort that, when demand is expanding, a rise in the Common Rule unaccompanied by an increase in efficiency, may check the expan- sion without actually throwing any men out of work. This might conceivably be the case, if the particular rise in the Common Rule, which outstripped the increase in efficiency, took place before the increased orders for the commodity were given, and if the consequent rise in price merely choked off some or all of a coming increase in demand. This, however, is not the actual sequence of events. What happens first is that the increase in the demand shows itself in the receipt of unusually large orders by the manufacturers. The existing workmen are required to work full time, and then overtime ; most of the unemployed in the trade get taken on ; boys and other learners are promoted and additional men are inquired for ; old establishments are enlarged, and new ones are opened. On this, the Trade Union asks for a rise in wages or a shortening of hours. If this is conceded, and is not followed by increased efficiency, the rise in cost of production and therefore in price can scarcely fail actually to cause some of the men in employment to be discharged. The more completely organised is the trade, the more precise is the index afforded by the percentage of members "on donation."

740 Trade Union Theory

(c) The effect of the sectional application of the Common Rule on the distribution of industry[edit]

We have now to consider the effect of the Device of the Common Rule, not on the particular trade that practises it, but on the development of the nation's industry — that is to say, upon the distribution of the capital, labor, and brain power of any community among the different occupations that are open to it. In the complicated ebb and flow of the modern world of competitive industry the expansion or contraction of a particular trade cannot be considered by itself. The ordinary manufacturer or operative sees clearly enough that the growth or decay of his own establishment is intimately connected with the dwindling or expansion of other establishments in the same trade. The economist detects a similar rivalry between one occupation and another, even within the same community ; and sees the area of this competition between distinct classes of workers indefinitely enlarged by international trade. Without a full appreciation of this silent but perpetual struggle between separate occupations, it is impossible to form any correct estimate of the influence of any particular factor in the distribution of industry.

We have, to begin with, the competition between alterna- tive ways of manufacturing the same product. We need not dwell on the historic struggles of the handloom weaver and stocking-frame knitter against the operatives working with power ; nor recur to the contemporary competition between handmade clothing and boots, nails and ropes, and the machine-made articles. What is more typical of our own time is the rivalry of one machine-process with another, such as the innumerable ways of producing steel, or, to take a simpler instance, the competition in cotton-spinning between the self-acting mule, worked by men and boys, and the perfected ring-frame, worked by women. A new stage in the competition is seen in the substitution of one material

Economic Characteristics 741

for another, as, for instance, iron for wood in the making of bedsteads, and steel for iron in railway construction. A step farther brings us to the invention of alternative ways of fulfilling the same desire, exemplified in the rivalry between the railway and the road, the horse and the electric motor. Finally, there is a certain limited sense in which the operatives making entirely unconnected commodities compete for cus- tom, so that, as it is commonly alleged, the seasonal demand for books and pianos fluctuates inversely with that for cricket-bats and bicycles.

So far we have considered the nation as a self-contained community, and we have regarded the customers as choosing only between different products of their own country. Foreign trade brings in a new complication. The English producers of commodities for foreign markets, and those who manufacture, for home consumption, commodities that can be imported from abroad, find their industries expanding or contracting according as the prices of their products rise and fall in other countries as well as at home. This may be clearly seen in the case of English coal. The cargoes from Cardiff and the Tyne go all over the world and find, in many foreign ports, practically no competitors. But how far inland our coals will push into each continent varies with every change of price. In Germany the Silesian and Westphalian mines, in Australasia those of New South Wales, and in South Africa those of the Cape and Natal already supply a large part of the local demand, and the geographical limit at which the use of English coal ceases to be cheaper than the inland supply is seen in practice to be as sensitively mobile as the thermometer. And if we turn to the influence of the import trade, we may watch the area of wheat growing in Great Britain expanding or contracting in close corre- spondence with the oscillations of the world price of wheat. So far the success of any class of English producers in com- ' peting for the world's custom would seem to depend ex- clusively on their ability to undersell the foreign producers of the same article. But this is only half the truth. The

742 Trade Union Theory

distinctive effect of international trade is to bring into com- petitive rivalry, without their being conscious of the fact, many other trades within the particular country having no apparent connection with each other. This will be obvious to any one who considers for a moment the relation between exports and imports. Without sounding the depths of the orthodox " Theory of International Trade " or the mysteries of the Foreign Exchanges, it will not be doubted that any increase in our aggregate exports does, in practice, tend to cause at any rate some increase in our aggregate imports. If then, England for any reason increases its export trade — if, for instance, a fall in the cost of production of English machinery, coal, and textiles enables Lancashire and Cardiff increasingly to get the better of their foreign rivals in neutral markets — some increase will certainly reveal itself in our import trade, not in machinery, coal, and textiles, but in entirely different articles ; it may be, in American food stuffs and Australian wool, or it may be in German glass wares and Belgian iron. Exactly which articles will be sent to England in increased quantities to pay for the increased foreign purchases of machinery, textiles, and coal, will depend on the relative cheapness of production, both at home and abroad, of all the commodities consumed by England that can also be produced abroad. It may be that food stuffs and wool, glass and iron, can all be produced abroad actually cheaper than they are selling in England. But the increase will tend to occur, not in those commodities in which the difference is least, but principally in those in which the difference is greatest. Hence the expansion or contraction of English production in a particular industry working for the home demand, is affected, not only by the foreign producers of the same commodity for the English market, but also by the expansion and contraction of every English industry working for export, and, yet again, by the conditions existing in all the other English industries that are subject to the competition of imports from abroad. The enormous increase in our imports of food stuffs, and the consequent contraction of

Economic Characteristics 743

English agriculture, cannot therefore be dissociated from the contemporary increase in our exports : it is the Lancashire cotton-spinner and the Northumberland coal hewer who are most seriously competing with the English farmer. Or, to take another instance, if the jobbing home workers in the Sheffield cheap cutlery trade keep down the price of their product by working long hours, without expensive sanitary precautions, at the starvation wages of cut-throat competition, they may gain by their wretchedness a miserable exemption from the competition of French and German blades in the English market. But the effect of this exemption is to divert the nation's imports into other commodities. The brothers and cousins of the Sheffield cutlers, earning high wages in the Yorkshire glass works and iron furnaces, may therefore find their employment diminished by the persistent influx of German glass and Belgian iron, and they will be entirely unaware that the ebb and flow of their own trades have any connection, either with the expansions and contractions of the export trade of Lancashire on the one hand, or with the cheapness of production of Sheffield cutlery on the other. The same argument applies, it is clear, the other way round. The shrewd officials of the Lancashire Cotton Operatives, working largely for export, are as keenly aware as the employers that in promoting a new Factory Bill, or in resisting a reduction in their Piecework Lists, they must take into account the competition of Massachusetts and Bombay. But neither workmen nor employers in Lancashire realise that in this matter of foreign markets they have to face no less dangerous competitors at their own doors. Though the aggregate volume of our export trade is automatically kept up to a point that will discharge our foreign indebtedness, it does not at all follow that the export of each commodity will remain the same. England in this respect is like one great shop, from which the foreigner will certainly buy some goods. But how he will distribute his purchases among our different products will depend on which of them, relatively to all the others, offers the greatest advantage compared with foreign-

744 Trade Union Theory

made articles. If, without any alteration of the balance of indebtedness, there springs up a new business able by the relative cheapness or attractiveness of its product to command a foreign market, the exports of all our other commodities will tend to be injuriously affected by these new .^sales. Thus, the development during the last twenty years of a large export trade in ready-made clothing and hardware must have, to some extent, tended to elbow out the elder industries, perhaps those of cotton and wool, some of which would, in the absence of these new competitors, necessarily have expanded to balance the increase in our imports of food stuffs.^ The Lancashire mule-spinners must therefore-

1 This assumes that there has been no addition to the capital, brain power, and labor of the community. It has sometimes been urged that the upgrowth of the wholesale clothing trade in East London has been made possible only by the settlement of Jewish immigrants, and that the newcomers, creating a new export trade, cause an actual addition to our imports, and thus neither diminish em- ployment in other home trades nor restrict any existing export trade. It is, accordingly, suggested that the Jewish immigration is not injurious to the English wage-earners, and that it actually adds to English commercial prosperity.

As a matter of fact, neither the capital nor the brain power, which have created the new export trade in slop clothing, have been provided by the Jewish immigrants, nor is it by any means entirely carried on by immigrant labor. It may be that the opportunity for the trade in its present form arises from the presence of these and other workers of a low Standard of Life ; but the capital and organising capacity have been supplied by our own countrymen ; and must therefore be taken to have been diverted by this opportunity, away from other industries, which find themselves thereby subtly restricted.

If, indeed, the immigrants brought with them their own capital and brain power, and created a new industry exclusively for export, the result would be, as suggested, an addition to our imports, and there would be no tendency to a restriction of the other export trades. But the pinch would then be felt else- where. The additional imports would, of course, not be the articles actually consumed by the immigrants, and there would be a shifting of trade, some home industries expanding under the additional demand, others dwindling under the competition of the newly-stimulated imports. The total trade, apart from the immigrants' own production and. consumption, would neither be increased nor decreased ; and the total wealth of the nation, apart from the immigrants' own possessions and savings, not affected. The chief importance of the immigration would then lie in its indirect effects on national character and capacity. If the immigrants, like the PoUsh Jews, brought in a lower Standard of Life, the result might be (besides increasing the overcrowding of the slums) a constant influence for degradation. If, on the other hand, the immigrants, like the Huguenots, introduced a higher Standard of Life, their example might produr.e a permanent improvement in national character. There is also the obscure ifuestion of the effect of the intermixture of races to be considered.

Economic Characteristics 745

realise that they are competing, not only with the women ring-spinners in Lancashire itself and the mule-spinners in the foreign cotton mills, but also with the English workers in all the trades that produce any article whatsoever for sale to the foreigner.

We come, therefore, to the conclusion that the employers and operatives in any particular industry ought to regard '_ themselves as in the truest sense competing for business, no ' less than for the supply of capital, brains, and manual labor, with practically every other industry in the country, however ' unconnected with their own it may seem to be ; and in this competitive struggle the battle, it is obvious, will not always < be to the strong, nor the race to the swift. The ebb and s flow of business, and hence the distribution of the nation's industry, and the production of one article rather than another, depends on many conditions quite unconnected with the conduct or efificiency of the employers or the workmen concerned, or with their remuneration. A change of taste or fashion, a scientific discovery, the upgrowth of a new class of customers, a mere alteration in the nation's wealth, or in its distribution between classes, a war or a famine, or even a sumptuary law, will make some trades expand and others dwindle, quite independently of any increase or decrease in the cost at which their products are being turned out. And even if we restrict ourselves to the effect of price in stimulat- ing or contracting the demand for a particular commodity, it will be obvious that its cost of production will vary for many reasons totally unconnected with the requirements of the employers or the conditions of employment of the work- people concerned. The varying abundance or scarcity of the raw material, the ease and cost with which it can be transported, the discovery of a new ingredient, the invention of a new machine or a new process, a change in the incidence of taxation — all these, and numberless other factors uncon- nected with the conditions of employment affect cost of production, and therefore price. It is, of course, this extreme complication of factors — this almost infinite degree of VOL. II 2 B 2

746 Trade Union Theory

JFlurality of Causes and Intermixture of Effects — that makes it impossible to prove or disprove the efficacy of Trade Unionism by any enumeration of instances. What we have to do is, assuming each trade to be incessantly subjected to the keenest competition of every other trade at home and abroad, to leave on one side all the other influences at work and examine what effect the device of the Common Rule itself exercises upon the distribution of industry.

We have seen, in our analysis of the economic effects of the Common Rule on the industries in which it is applied, that this regulation, with its gradual advance of level, posi- tively tends to diminish the cost of production in those industries. It follows that, other things being equal, they will expand at a greater rate than the unregulated trades. But it is characteristic of the expansion thus caused that it brings incidental advantages to the whole industrial com- munity. The fact that the labor and capital employed in one or more of the nation's industries has become more productive than before does not diminish the aggregate demand or the aggregate purchasing power : on the contrary,

jit increases it. Any shrinkage in particular trades, due to the partial suppression of their products by the improving industries, will be balanced by at least as much expansion elsewhere, due to the increased purchases of these industries themselves. Moreover, the increased incentive to the invention and perfecting of labor-saving machinery, the added stimulus to the discovery of new markets, new materials, and new ways of satisfying existing desires, which, as we have seen, is an inevitable reaction from the bulwark of the Common Rule, provides the unregulated trades with a stream of ready- made appliances, tested inventions, and new opportunities, which would never have revealed themselves to their own unstimulated brains. Similarly, the general raising of the Standard of Life of any section of wage-earners improves

the national stock, from which all occupations draw their


' Thus, the great English factory industry of boot and shoe manufacture, only

Economic Characteristics 747

But though the regulated industries, by progressively raising the standard of mechanical ingenuity, organising capacity, and physical strength, will have added to the national capital in all its forms, their very superiority makes continu- ously harder the struggle of the unregulated trades to main- tain their position in the world's market. The rapid adoption-f of new inventions almost inevitably involves the decay and destruction of other trades. Thus, the enormous extension! of the use of iron bedsteads — the product of a highly- organised trade — cannot fail to have contracted the manu- facture of cheap wooden bedsteads in the sweating dens of the East End " garret masters." This is obvious enough when we consider the substitution of a new commodity for the inferior article which formerly satisfied the same want, or even the satisfaction of one need rather than another, as in the competition between books and bicycles. International trade, as we have seen, causes the same rivalry to exist between industries apparently unconnected with each other. Thus, the lowering of the cost of production of iron bedsteads does not interfere merely with the English production of wooden bedsteads : by its stimulus to the export of iron bedsteads it positively increases the imports into England of entirely different articles, and may, therefore, itself be one of the factors in the contraction of English agriculture, and of the manufacture of the cheaper sorts of glass, cutlery, and wood work.

recently emerging from the quagmire of Home Work, and itself as yet producing hardly any inventions, has been made possible by the amazing mental fertility of Connecticut and Massachusetts, where the well -organised workmen exact wages twice as high as their English rivals. Similarly, the Indian cotton-mills have, without effort of their. own, automatically received the inventions which, if we may believe Babbage and the Edinburgh Revilw, owe their very existence to the aggressive Trade Unionism of the Lancashire operatives. And the able Englishmen who began life as artisans, and are now to be found in responsible positions in so many continental factories, are plainly the result of the comparatively high wages and short hours — not to speak of the training in administration — which the English workmen in the regulated trades have derived from their Trade Unionism. In these and many other ways those countries and those industries in which a relatively high standard of life is enforced, are perpetually dispensing to the world, out of their abundance, what their unregulated rivals are unable to produce for themselves.

748 Trade Union Theory

More important in its detrimental effect on the unregu- lated trades will be the diversion away from them of the best industrial recruits. In industries unregulated by- Common Rules it may suit the immediate profit and loss account of an employer to select, as his foreman, not the man who can most improve the product or the process, but the man who has the greatest capacity for nibbling at wages or cribbing time. The fact that the Common Rules prevent the beating down of wages, the lengthening of hours, or the neglect of precautions against accidents or disease, automatic- ally causes the selection, for the post of foreman or manager, of men who have at their command, in the improvement of machinery and organisation, far more permanent and cumu- lative wa,ys of reducing the cost of production than taking advantage of the operatives' weakness. The concentration of business in large establishments, which, as we have seen, is one of the results of the Common Rule, directly encourages the enlistment in the industry of men of specialised know- ledge and scientific attainments. There is an enormous difference, not as yet adequately realised, between the sort of man who becomes the typical " small master " of the unregulated trades, and the hierarchy of highly -trained organisers, managers, buyers, travellers, agents, chemists, engineers, metallurgists, electricians, designers, and inventors who direct the business of great establishments. This differ- ence in the quality of the recruiting is no less marked among the manual laborers. No operative who is strong enough, or intelligent enough, or regular enough to get into a trade enjoying high wages, short hours, and decent con- ditions of work will stay in an occupation affording him inferior advantages. The high standard enjoyed by the Lancashire cotton-spinners and engineers, or by the North- umberland miners, causes these trades to draw to themselves the pick of the young men in their respective districts. Hence the final curse of the unregulated trades — they are perpetually condemned to put up with the inferior labor J that cannot get employment elsewhere. Every rise in the

Econotnic Characteristics )f49

conditions of life of the factory operative and the coal miner makes it harder for the country district to retain the best boys of the village. Every time the Board of Trade shortens the hours or protects the lives of the railway servant ; each new statute that increases the certainty and amount of his compensation for accident ; every rise in the Standard Rate' that public opinion secures to him, indirectly makes the struggle for existence harder for the farmer and the " little master " in the country town.

(d) Parasitic Trades[edit]

We have hitherto proceeded on the assumption that the competition between trades is unaffected by anything in the nature of a subsidy or bounty. If the community chooses to give to all the employers in a particular industry an annual bounty out of the taxes, or if it grants to all the operatives in that industry a weekly subsidy from the Poor Rate in aid of their wages, it is obvious that this special privilege will, other things being equal, cause the favored industry to out- strip its rivals. The subsidy or bounty will enable the en- dowed manufacturers to bribe the public to consume their article, by ceding to them what they have not paid for. An analogous advantage can be gained by the employers in a particular trade if they are able to obtain the use of labor not included in their wage-bill. Under the competitive pressure described in our chapter on " The Higgling of the Market" some of the unregulated trades become, in fact, parasitic. This occurs, in practice, in two distinct ways.

We have first the case of labor partially subsisted from , the incomes of persons unconnected with the industry in question. When an employer, without imparting any \ adequate instruction in a skilled craft, gets his work done by boys or girls who live with their parents and work practically for pocket-money, he is clearly receiving a subsidy or bounty which gives his process an economic advantage over those

7 JO Trade Union Theory

worked by fully-paid labor. But this is not all. Even if he pays the boys or girls a wage sufficient to cover the cost of their food, clothing, and lodging so long as they are in their teens, and dismisses them as soon as they become adults, he is in the same case. For the cost of boys and girls to the community includes not only their daily bread between thirteen and twenty-one, but also their nurture from birth to the age of beginning work, and their maintenance as adult citizens and parents.^ If a trade is carried on entirely by the labor of boys and girls and is supplied with successive relays who are dismissed as soon as they become adults, the mere fact that the employers pay what seems a good subsist- ence wage to the young people does not prevent the trade from being economically parasitic. The employer of adult women is in the same case where, as is usual, he pays them a wage insufficient to keep them in full efficiency, irrespective of what they receive from their parents, husbands, or lovers.* In all these instances the efficiency of the services rendered by the young persons or women is being kept up out of the earnings of some other class. These trades are therefore as clearly receiving a subsidy as if the workers in them were being given a " rate in aid of wages." The English farmer pays, it is true, no higher wages, but then he receives in return, since the abolition of the Old Poor Law, only what he pays for : his low Standard of Life involves a low Stand- ard of Work. The employer of partially subsidised woman or child labor gains, on the other hand, actually a double advantage over the self-supporting trades : he gets without cost to himself the extra energy due to the extra food, and he abstracts — possibly from the workers at a rival process,

' To this, in strictness, should be added their maintenance in old age and their burial. But only a small proportion of the aged wage-earners in the United Kingdom are maintained, and eventually buried, out of their own savings or the assistance of relations. Old age and burial, like education, have already become to a great extent, in the form of charity or the Poor Law, charges upon the community sis a whole. See Pauperism and the Endowment of Old Age (London, 1892), and TAe Aged Poor (London, 1894), by Charles Booth.

2 " Women as a rule are supplementary wage-earners." — Charles Booth, Life and Labour of ike People, vol. ix. p. 205 .

Economic Characteristics 751

or in a competing industry — ^some of the income which might have increased the energy put into the other trade.

But there is a far more vicious form of parasitism than this partial maintenance by another class. The continued efficiency of a nation's industry obviously depends on the continuance of its citizens in health and strength. For an, industry to be economically self-supporting, it must, therefore, maintain its full establishment of workers, unimpaired in numbers and vigor, with a sufficient number of children to fill all vacancies caused by death or superannuation. If the employers in a particular trade are able to take such advantage of the necessities of their workpeople as to hire i them for wages actually insufficient to provide enough food,? clothing, and shelter to maintain them in average health jf if they are able to work them for hours so long as to deprivef them of adequate rest and recreation ; or if they can subject! them to conditions so dangerous or insanitary as positively; to shorten their lives, that trade is clearly obtaining a supplyl of labor-force which it does not pay for. If the workers! thus used up were horses — as, for instance, on an urban tramway — the employers would have to provide, in addition to the daily modicum of food, shelter, and rest, the "whole cost of breeding and training, the successive relays necessary to keep up their establishments. In the case of free human beings, who are not purchased by the employer, this capital value of the new generation of workers is placed gratuitously at his disposal, on payment merely of subsistence from day to day. Such parasitic trades are not drawing any money subsidy from the incomes of other classes. But in thus deteriorating the physique, intelligence, and character of their operatives, they are drawing on the capital stock of the nation.^ And even if the using up is not actually so rapid ^

^ The economic position of the slave-owner where, as latterly in the United States and Brazil, the slaves had to be bred for the labor market, closely resembles that of the tramway company using horse-power. So long as the African slave- trade lasted, the importation of slaves being presumably cheaper than breeding them, the industries run by slave labor were economically in much the same position as our own sweated trades — that is to say, supplied with successive relays

752 Trade Union Theory

as to prevent the " sweated " workers from producing a new generation to replace them, the trade is none the less parasitic. In persistently deteriorating the stock it employs, it is subtly draining away the vital energy of the community. It is taking from these workers, week by week, more than its wages can restore to them. A whole community might conceivably thus become parasitic on itself, or, rather, upon its future. If we imagine all the employers in all the industries of the kingdom to be, in this sense, " sweating " their labor, the entire nation would, generation by generation, steadily degrade in character and industrial efficiency.^ And in human society, as in the animal world, the lower type de- veloped by parasitism, characterised as it is by the possession of smaller faculties and fewer desires, does not necessarily tend to be eliminated by free competition." The degenerate forms may, on the contrary, flourish in their degradation, and depart farther and farther from the higher type. Evolution, in a word, if unchecked by man's selective power.

of cheap but rapidly deteriorating labor — and the cheapness of their product, observed Mill, "is partly an artificial cheapness, which may be compared to that produced by a bounty on production or on exportation ; or considering the means by which it is obtained, an apter comparison would be with the cheapness of stolen goods." — Principles of Political Economy, Book III. ch. xxv. § 3, p. 413 of 1865 edition.

1 The practical agriculturist may see an analogy in the case of land. To the theoretic economist land often appears as an indestructible instrument of production, but the agricultural expert knows better. If under complete industrial freedom the hirers of land sought only to obtain the maximum profit for themselves, it would pay them to extract for a few years the utmost yield at the minimum out- lay. The land so treated would be virtually destroyed as an instrument of pro- duction, and could only be brought into cultivation again by a heavy outlay of capital. But this would not matter to the hirer, if he was free to discard the worn-out farm when he chose, and to take a fresh one. The remedy in this case is found in the covenants by which the owner of the land regulates the use of it by the hirer, so as to ensure that it shall be maintained in complete efficiency.

2 The apostles of laisser faire were sometimes startling in the extent to which they carried their optimism. Thus, when Harriet Martineau was driven by the evidence collected by the Factory Commissioners in 1833 to admit that " the case of these wretched factory children seems desperate," she goes on to add "the only hope seems to be that the race will die out in two or three generations " (Harriet Mariineau's Autobiography, by Maria Weston Chapman, vol. iii. p. 88). But there was no race of factory children dependent for continuance on its own reproduction.

Economic Characteristics 753

may result in Degeneration as well as in what we choose to call Progress.

We might have to accept as inevitable the incidental evils of the parasitic trades if it could be urged that their existence resulted in any positive addition to the national wealth — that is to say, if they utilised capital and found employment for labor that would otherwise have been idle ; or if they fulfilled desires that must othferwise have remained unsatisfied. But this is not the case. We have, to begin with, the fact that the mere existence of any parasitic industry tends incidentally to check the expansion of the self-supporting trades, whether these are regulated or un- regulated. Nor is it only such unprogressive industries as agriculture that suffer. In cotton-spinning, the fact that well-nurtured and respectable young women can be hired at ten or twelve shillings a week is tempting the millowners to substitute the ring-frame for the mule more extensively than would be profitable if the employers had to pay a full sub- sistence wage for their ring-spinners, or if they could get for their ten or twelve shillings a week only such irregular and inefficient workers as could or would permanently live on that income. The fact that the female ring-spinners have been brought up and are partly supported by the mule- spinners themselves, or by other well-paid trades like the engineers, is thus positively throwing more mule-spinners out of work than would otherwise be the case. And there is, as we have seen, a more subtle competition. The fact that the wholesale clothing contractor is allowed to deteriorate and use up in his service the unfortunate relays of sweated out- workers who make his slop clothing, gives him actually a constant supply of vital energy which he need not and does not replace by adequate wages and rest, and thus makes it possible for him to sell his product cheaper, and hence to augment his export trade more than he could have done if his industry were free from social parasitism. And every expansion of this rival export trade tends, as we have seen, to elbow out other sales to the foreigner — it may well be,

754 Trade Union Theory

therefore, to restrict the export, and therefore the manufacture, of hardware, machinery, or textiles.

Nor can it be imagined that there is anything so peculiar in the nature of the products of the " sweated trades," that they could not be just as efficiently supplied to us without their evil parasitism. We venture to assert, on the contrary, that there is no article produced in the whole range of the parasitic trades which could not be manufactured with greater technical efficiency, and with positively less labor, by a highly regulated factory industry. But just as in a single trade the unregulated employer who can get " cheap labor " is not eager to put in machinery, so in the nation, the enter- prising capitalists who exploit some new material or cater for some new desire inevitably take the line of least resistance. If they can get the work done by parasitic labor they will have so much the less inducement to devise means of per- forming the same service with the aid of machinery and steam power, and so much the less interest in adopting mechanical inventions that are already open to them.^ Thus the parasitic trades not only abstract part of the earnings of other wage- earners, and use up the capital stock of national vigor : they actually stand in the way of the most advantageous distribution of the nation's industry, and thus prevent its

1 Professor SchmoUer observes that ' ' Self-interest in industrial society is like steam in the steam-engine : only when we know under what pressure it is working can we tell what it will accomplish" (Setidschreiben an Herm von Treitscke, Berlin, 1875, p. 37). This is strikingly illustrated by the evil persistence in England, owing to the absence of the pressure of a Standard Rate in the sweated trades, of obsolete and uneconomical processes. " Public attention was directed with some force a short time ago to the wretched condition of the ' nailers ' in the Dudley district. In America labor conditions of this kind are impossible owing to the economic circumstances existing, yet nails are made at a labor cost far lower than that common in the Dudley district. The output of a worker in an American nail mill amounts to over 2\ tons per week, while the Staffordshire nailer, working on his old method, only produces 2 cwt. Of what avail is it that the workman in the latter case earn I Ss. only, and in the former £(> per week ? The labor cost per lb. is in the one case o.Sd. and in the other o.257d. Thus the earnings are eight-fold greater in the case of the American workman, while the labor cost is only one-third that of the nail produced by the English workman. This is . . . only illustrative of a principle which runs through all industries." — Manchester Association of Engineers, Inaugural Address by the President, Mr, foseph Nasmith (Manchester, 1897), p. 6.

Economic Characteristics 755

capital, brsdns, and manual labor from being, in the aggre- gate, as productive as they would otherwise be. So long as we assume each industry to be economically self-supporting, the competition between trades may be regarded as tending constantly to the most productive distribution of the capital, brains, and manual labor of the community. Each trade would tend to expand in proportion as it became more efficient in satisfying the public desires, and would be limited only at the point at which some other trade surpassed it in this respect. Every unit of the nation's capital, like every one of its capable entrepreneurs and laborers, would tend constantly to be attracted to the industry in which they would produce the greatest additional product. If, however,5 some trades receive a subsidy or bounty, these parasites will ' expand out of proportion to their real efficiency, and will thus obtain the use of a larger share of the nation's capital, brains, and manual labor than would otherwise be the case, with the result that the aggregate product will be dimirMshed, and the expansion of the self-supporting trades will be prematurely checked. This tendency of industry to be forced by the pressure for cheapness, not into the best, but into the lowest channel, was noticed by the shrewd observers who exposed the evils of the old Poor Law. " Whole branches of manu- facture," they said, " may thus follow the course, not of coal mines or streams, but of pauperism ; may flourish like the fungi that spring from corruption, in consequence of the abuses which are ruining all the other interests of the place in which they are established, and cease to exist in the better administered districts, in consequence of that better administration." ^

■ First Report of Poor I-aw Commissioners, 1834, p. 65, or reprint of 1S84 (H. C. 347 of 1884). The disastrous effects on agricultural labor of the "rate in aid of wages " of the old Poor Law have become an economic commonplace. It seems to be overlooked that what is virtually the same bounty system prevails wherever work is given out to be done at home. The scanty earnings of women outworkers, with their intermittent periods o{ unemployment, inevitably lead to their being assisted by private charity, if not also from public funds. Thus, a recent investi- gator in Glasgow reports that " the returns of the Inspectors of the Poor show that many outworkers, who are in receipt of wages too small to support them.

756 Trade Union Theory

This condition of parasitism is neither produced by the self-helping efforts of the more fortunate trades to improve their own conditions, nor can it be remedied by any such sectional action. The inadequate wages, excessive hours, and insanitary conditions which degrade and destroy the victims of the sweated trades are caused primarily by their own strategic weakness in face of the employer, himself driven to take advantage of their necessities by the uncon- scious pressure described in our chapter on " The Higgling of the Market." That weakness, and the industrial inefficiency to which it inevitably leads, are neither caused nor increased by the fact that other sections of wage -earners earn high wages, work short hours, or enjoy healthy conditions of employment. If, as we have argued, these conditions, enforced by the Device of the Common Rule, themselves produce the high degree of specialised efficiency which enables them to be provided, their existence is no dis- advantage to the community, nor to any section of it On the contrary, the resulting expansion of the regulated trades will have reclaimed an additional area from the morass. If, on the other hand, they are not accompanied by a full equivalent of efficiency, their existence in the regulated industries, by increasing cost of production, must be a draw- back to these in the competition between trades, and thus positively lessen the pressure on the unregulated occupations and the workers in them.* On neither view can the relatively

though working full time, are aided from the rates. Moreover, although to an extent which it is impossible to ascertain, many of the outworkers on low wages are assisted by the churches and by charities. Here evidently part of the wages is paid by outsiders. . . . The cheapness of goods made in such circumstances is balanced by the increase in Poor Rates and in the demands on the benevolent." — Home Work amongst Women, by Margaret H. Irwin (Glasgow, 1S97).

^ Thus, in the international competition between trades, the maintenance of wages at high rates by means of Restriction of Numbers is calculated to be disastrous to the trade practising this device. The high price of the labor, coupled with its declining efficiency, can scarcely fail to cause an increase in the price of the product. If this comes into competition with foreign articles, or if a cheap substitute can easily be found, the trade will quickly be checked and the falling off in demand, leading to some workmen losing their employment, vdll call for increased stringency in excluding fresh learners. The effect of the Restriction of Numbers in any trade, if this is pushed so far as seriously to raise

Economic Characteristics 757

good conditions exacted by the coalminer or the engineer be said to be in any way prejudicial to the chain and nail maker of the Black Country or the outworking Sheffield cutler, to the sweated shirtmaker of Manchester or the casual dock laborer of an East London slum. Their influence, such as it is, is all in the other direction. The fact that a brother, cousin, or friend is receiving a higher wage, working shorter hours, or enjoying better sanitary conditions is an incentive to struggle for similar advantages.^

Unfortunately there is no chance of the parasitic trades | raising themselves from their quagmire by any sectional action of their own. It is, for instance, hopeless for the casual dock laborers of London to attempt, by Mutual Insurance or Collective Bargaining, to maintain any effective Common Rules against the will of their employers. Even if every man employed at dock labor in any given week were a staunch and loyal member of the Trade Union, even if the union had funds enough to enable all these men to stand out for better terms, they would still be unable to carry their point. The employers could, without appreciable loss, fill their warehouses the very next day by an entirely new

the price of the product, is, therefore, actually to drive more and more of the nation's capital and labor from the restricted industry, and its progressive dwind- ling, even to the point of complete extinction, or transfer to another country.

1 It may be said that one class of parasitic workers — women or child workers — are partly supported from the wages of other operatives, usually better paid ; and that their parasitism is thus made possible by . the existence of these better paid operatives, and therefore, in some sense, by Trade Unionism. There is, however, no connection between the two. This kind of parasitism does, indeed, imply a donor of the bounty as well as a recipient, but the existence of differences in income between individuals, or even between classes, is in no way dependent on Trade Unionism. Moreover, there are some cases — such as the relation between home work and casual dock labor in East London — in which two equally low-paid occupations may be said, by their alternate mutual help, to be parasitic on each other. The facility of obtaining "large supplies of low-paid , labor," says Mr. Charles Booth, " may be regarded as the proximate cause of the expansion of some of the most distinctive manufacturing industries of East and South London — furniture, boots and shoes, caps, clothing, paper bags, and card- board boxes, matches, jam, etc. . . . They are found in the neighbourhood of districts largely occupied by unskilled or semi-skilled workmen, or by those whose employment is most discontinuous, since it is chiefly the daughters, wives, and widows of these men who turn to labor of this kind." — C. Booth, Life and Lnbout of the People (London, 1897), vol. ix. p. 193.

758 Trade Union Theory

set of men, who would do the work practically as well. There is, in fact, for unspecialised manual labor a practically unlimited "reserve army" made up of the temporarily unemployed members ot every other class. As these form a perpetually shifting body, and the occupation of " general laboring " needs no apprenticeship, no combination, however co-extensive it might be with the laborers actually employed at any one time, could deprive the employer of the alternative of engaging an entirely new gang. The same reason makes it for ever hopeless to attempt, by Mutual Insurance or Collective Bargaining, to raise appreciably the wages of the common run of women workers. Where, as is usually the case, female labor is employed for practically unskilled work, needing only the briefest experi- ence ; or where the work, though skilled, is of a kind into which every woman is initiated as part of her general educa- tion, no combination will ever be able to enforce, by its own power, any Standard Rate, any Normal Day, or any definite conditions of Sanitation and Safety. This is even more obvious when the parasitic labor is that of boys or girls, taken on without any industrial experience at all. Mutual Insurance and Collective Bargaining, as methods of enforcing the Common Rule, become impotent when the work is of so unskilled or so unspecialised a character that an employer can, without economic disadvantage, replace his existing hands in a body by an entirely new set of untrained persons of any antecedents whatsoever.

The outcome of this analysis is that the strongest competitors for the world's custom, and for the use of the nation's brains and capital, will be the regulated industries on the one hand, and the parasitic trades on the other — the unregulated but self-supporting industries having to put up with the leavings of both home and foreign trade, and a diminishing quantity and quality of organising capacity and manual labor.^ In what proportion a nation's industry will

1 It may be desirable to observe, in order to prevent possible misunderstand- "ing, that we propose this division of industries into three classes, as a Classification

Economic Characteristics 759

be divided among the two conquerors will, it is obvious, depend primarily on the extent to which regulation is resorted to. The more widespread and effective is the use of the Device, of the Common Rule, the larger, other things being equal, will be the proportion of the population pro- tected from the~ ravages of " sweating." On the other hand, the more generally the conditions of employment are left to be freely settled by Individual Bargaining, the wider will grow the area of the parasitic trades. And omitting from consideration those industries which are at once unregulated and self-supporting — which succumb, as we have seen, before either victor — it would require delicate economic investiga- tion to estimate the relative advantage, in this day-to-day struggle between industries, of the slow but cumulative stimulus given by the Common Rule, on the one hand, and, on the other, the immediate cheapening of production made possible by parasitism, whether this takes the form of grants in aid of subsistence from persons outside the industry, or of an unremunerated consumption of labor's capital stock. We might infer, from the respective economic characteristics

by Type, not by Definition. "It is determined, not by a boundary line without, but by a central point within ; not by what it strictly excludes, but by what it eminently includes ; by an example, not by a precept " (Whewell, History oj Scientific Ideas, vol. ii. p. 120; Mill, System of Logic, vol. ii. p. 276). Here, as elsewhere in Nature, there are no sharp lines of division. The different trades shade off firom each other by imperceptible degrees. So &r as we are aware, there is no industry that is completely regulated, none that is completely un- regulated and self-supporting, and none that is completely parasitic. Mule-spinning, for example, is a highly -regulated industry, but in so far as it is fed with relays of piecers whom it does not support, it is parasitic on other trades. Agriculture, though mainly driven to be self-supporting, is, in some districts, parasitic on occupations with which it is combined, such as fishing or letting lodgings ; and though mainly unregulated, sometimes employs workmen at wages governed by a Standard Rate, or residing in farm cottages, as to which there is some attempt to enforce the Public Health Acts. The parasitic trades themselves usually employ a modicum of organised labor, and their operations are frequently divided between the highly- regulated factory and the unregulated home. It is accordingly impossible to discover whether or not an industry is parasitic by any such operation as dividing the total wages that it pays among the total number of its employees. Any trade is so far parasitic if it employs any labor which is not entirely maintained and replaced out of the wages and other conditions afforded to that particular labor. Our remarks as to parasitic trades apply, therefore, to all bdustries whatsoever, in so far as they are parasitic

760 Trade Union Theory

of these two sources of industrial advantage, that the regu- lated trades would expand steadily, generation after genera- tion, improving the quality of their products even more rapidly than reducing their price, and thus tending to oust their rivals principally in the more complicated productive processes and the finer grades of workmanship. The parasitic trades, on the contrary, would form a constantly shifting body, cropping up suddenly in new forms and unexpected places, each in succession gaining a quick start in the world's market by the cheapness of its product, often realising great fortunes, but each gradually losing ground before other competitors, and thus individually failing to secure for itself a permanent place in the nation's industry.

Amid all the complications of human society, it is im- possible to give inductive proof of any generalisation whatso- ever. But the outcome of our analysis is certainly consistent with the main developments of British trade during the nineteenth century, and with its present aspect. If, for instance, we compare the distribution of industry in Great Britain fifty years ago with that of the present day, we are struck at once by the enormous increase in the proportion occupied by textile manufactures (especially cotton), ship- building, machine -making, and coal-mining,^ as compared with agriculture, and with those vskilled handicrafts like watchmaking, silk -weaving, and glove -making, for which Englartd was once celebrated. To whatever causes we may ascribe the success of the former industries, it is at least a striking coincidence that they are exactly those in which the Device of the Common Rule, whether enforced by Collective Bargaining or Legal Enactment, has been most extensively and continuously applied. Equally significant is the fact that the expansion of our manufactures is now taking place, in the main, less in the lower grades of quality Ithan in the higher. Thus, it is in the finer " counts " oi

' These four great staple industries now contribute three-quarters of the whole exports of British production, and an ever-increasing proportion of our manufac- tures for home consumption.

Economic Characteristics 761

yarn, the best longcloth, and the most elaborately figured muslins — not in the commoner sorts of cotton goods — that Lancashire exports find their widest market. In ship- building, the highly complicated and perfectly finished war- ship and passenger liner are the most distinctively British products. And English steam-engines, tools, and machinery are bought by the foreigner in yearly increasing quantities, not because they are lower -priced than many continental manufactures, but because they more than retain their pre- eminence in quality. Coincidently with this expansion in the most skilled parts of our regulated trades has been the gradual ousting, even in the home market, of our manu- factures of the commoner sorts- of joinery, glass, paper, and cutlery — all branches in which the English workmen have never been sufficiently organised to enforce a Standard Rate or a Normal Day.^ We might follow out this coincidence between expansion and regulation still further, pursuing it across the cleavage of handwork versus machinery, and not- ing the success of the highly organised Kentish hand paper- makers and Nottingham machine laceworkers, in comparison with the relative weakness before foreign competition of the machine papermakers and hand laceworkers, both of which have always been practically unorganised trades, earning low wages. It is interesting to note that, with the exception of the hand laceworkers, all these weak or decaying industries are carried on by adult men, and therefore debarred from the ordinary form of parasitic subsidy. But the most remarkable decline of an unregulated and self-supporting industry is afforded by British agriculture. The fact that the English farmer has always been able to hire his labor at practically its bare subsistence, and that, unlike the mill- owner, he is free to exact unlimited hours of work, and is

' In these very industries the more skilled branches of work, producing the finer kinds of glass, cutlery, paper, and furniture, in which the men insist on high standard conditions, have usually suffered comparatively little from foreign inva- sion, in spite of the fact that their old-fashioned unions have retained the Device of Restriction of Numbers, and have thus, as we believe, prevented an expansion of their crafts.

762 Trade Union Theory

untrammelled by any sanitary requirements, has, we believe, had the worst possible effect on agricultural prosperity. It has, to begin with, deprived the typically rural industry of anything but the residuum of the rural population. For a whole century the cleverest and most energetic boys, the strongest and most enterprising young men, have been drained from the countryside by the superior conditions pffered by the industries governed by the Common Rule. It follows that the employer has for generations had very little choice of labor, and practically no chance of securing fresh relays of workers from other occupations. Moreover, though he may reduce wages to a bare subsistence, he can, in the long run, get no more out of the laborers than his wages provide, for it is upon them and their families that he must rely for a continuance of the service. Hence the scanty food and clothing, long hours, and insanitary housing accom- modation of the rural population produce slow, lethargic, and unintelligent labor : the low Standard of Life is, as we have mentioned, accompanied by a low Standard of Work. What is no less important, the employers have, of all classes, troubled least about making inventions or improving their processes. If a farmer cannot make both ends meet, his remedy is to get a reduction of rent. The very fact that an agricultural tenant, unlike a mine owner or a cotton manu- facturer, is not held rigidly to his bargain with his landlord, and is frequently excused a part of his rent in unprofitable years, prevents that vigorous weeding out of the less efficient, and that constant supwsession of the unfit, which is one of the main factors of the efficiency of Lancashire. It is there- fore not surprising that, in a century of unparalleled technical improvement in almost every productive process, the methods ■ of agriculture have, we believe, changed less than those of any other occupation. In the rivalry between trades it has steadily lost grpund, securing for itself an ever-dwindling proportion of the nation's capital, and losing constantly more and more of the pick of the population that it nourishes. In the stress of international competition it has gone increas-

Economic Characteristics "jt^,

ingly to the wall, and far from being selected, like such highly regulated trades as coal mining or engineering, for the supply of the world market, it finds itself losing more and more even of the home trade ; not to any specially favored one among its rivals, but to all of them ; not alone in wheat- growing, but in every other branch of its operations. There are, of course, other causes for the decline of English farming, and we are far from pretending to offer a complete explana- tion of its relatively backward condition, as compared, say, with shipbuilding or machine- making. But the country gentlemen of 1833-184 7, who so willingly imposed the Factory Acts on the millowners, and so vehemently objected to any analogous regulations being applied to agriculture, would possibly not have been so eager to support Lord Shaftesbury if they had understood clearly the economic efTects of these Common Rules.'

' Even within a trade the districts in which the Common Rule is rigidly enforced will often outstrip those lacking this stimulus to improvement. Thus, in cotton-spinning Glasgow once rivalled Lancashire, and for the first third of the present century the two districts did not appreciably differ in the extent of their regulation. During the last sixty years the growth of Trade Unionism in Lanca- shire has led to a constant elaboration, raising, and ever more stringent enforce- ment of the Common Rules by which the industry is governed. In Glasgow, on the other hand, the operatives' violence and the employers' autocratic behaviour led to serious outbresdks of crime between 1830 and 1837, followed by drastic repression and the entire collapse of Trade Unionism in the textile industry. From 1838 down to the present day the Glasgow cotton manufacturers have, so far as Trade Unionism is concerned, been practically free to hire their labor as cheaply as they pleased, whilst, owing to the lack of organisation, even the Com- mon Rules of the Factory Acts have, until the last few years, been far less rigidly , enforced than in Lancashire. It is at least an interesting coincidence that during this period, whilst other manufacturing industries have enormously progressed, Glasgow cotton-spinning has steadily declined in efficiency. A lower grade of labor is now employed, much of it paid only the barest subsistence wage ; the speed of working and output per operative have failed to increase ; improvements in machinery have been tardily and inadequately adopted ; and no new mills have recently been erected. Only a few establishments now remain out of what was once a flourishing industry, and it is doubtful whether all of these will long survive.

Cloth manufacture supplies a similar example. The cloth mills of the West of England have enjoyed the advantage of inherited tradition, and a world-wide reputation for excellence of quality. Since the very beginning of the century the industry has been entirely free from Trade Unionism. Wages have been exceed- ingly low, and the Factoiy Inspector has certainly never been instigated to any particular activity. Water-power is abundant and coal cheap, whilst canals and

764 Trade Union Theory

Unfortunately, the triumphant progress of the regulated trades, as compared with the unregulated but self-supporting i industries, does not complete the picture of our industrial life. In the crowded slums of the great cities, in the far out-stretch- ing suburbs and industrial villages which are transforming so much of Great Britain into cross-cutting chains of houses, there are constantly springing up all sorts and conditions of mushroom manufactures — the innumerable articles of wear- ing apparel, cheap boots and slippers, walking-sticks and umbrellas, mineral waters and sweetstuffs, the lower grades of furniture and household requisites, bags and boxes, toys and knick-knacks of every kind — in short, a thousand mis- cellaneous trades, none of which can be compared in per- manence or extent with any one of our staple industries, but which in the aggregate absorb a considerable proportion of the custom, capital, and organising capacity of the nation. I This is the special field of the " small master, driven per- 'jpetually to buy his material on credit and to sell his product to meet the necessities of the hour ; of the speculative trader commanding capital but untrained in the technological details of any mechanical industry ; of armies of working sub- contractors, forced by the pressure of competition and the absence of regulation to grind the faces of the poor ; and, on the other hand, of the millions of unorganised workers, men, women, and children, who, from lack of opportunity, lack of strength, or lack of technical training, find themselves unable to escape from districts or trades in which the absence of regulation drives them to accept wages and conditions incon- sistent with industrial efficiency. We are here in a region seemingly apart from the world of the Great Industry to which our country owes its industrial predominance. These

railways make both Bristol and London accessible. Yet the cloth manufacturers of Gloucestershire, Somersetshire, and Wiltshire have throughout been steadily losing ground before those of Yorkshire and Lancashire. This decline was expressly attributed by one of the most enterprising of them to the lack of stimulus to improvement, manifest alike among the foremen and the employers. Whether our informant would have consciously welcomed the quickening o( Functional Adaptation and Selection of the Fittest, brought about by the Common Rules of a strong Trade Union is, however, doubtful I

Economic Characteristics 765

' sweated trades " seldom enter into direct competition with the highly -organised and self-supporting staple industries. What happens is that one form of parasitism dogs the steps of the other — the wholesale trader or sub-contractor using up relays of deteriorating outworkers, underbids the factory- owner resorting to the subsidised labor of respectable young women. It is refreshing to notice that when one of these sweated trades does get partially caught up into the factory system, and thus comes under Common Rules with regard to Hours of Labor and Sanitation, the factories, even when they pay little more than pocket-money wages to their women operatives, draw slowly ahead of their more disastrously parasitic rivals.' But this very competition of subsidised factory labor with deteriorating outworkers makes things worse for these latter. To what depth of misery and degradation the higgling of the market may reduce the denizens of the slums of our great cities is unsounded by the older econo- mists' pedantic phrase of " subsistence level." Unfortunately the harm that the sweater does lives after him. Men and women who have, for any length of time, been reduced, to quote the House of Lords' Committee, to " earnings barely sufficient to sustain existence ; hours of labor such as to make the lives of the workers periods of almost ceaseless toil, hard and unlovely to the last degree ; sanitary conditions injurious to the health of the persons employed and dangerous to the public," ^ become incapable of profitable labor. What they can do is to compete fitfully for the places which they cannot permanently fill, and thus not only drag down the wages of all other unregulated labor, but also contribute, by their irregularity of conduct and incapacity for persistent effort, to the dislocation of the machinery of production. But this is not all. No one who has not himself lived among the poor in London or Glasgow, Liverpool or Manchester,

  • In the slop clothing trade, the factories at Leeds and elsewhere, employ-

ing girls and women at extremely low wages, but under good sanitary conditions and fixed hours, are steadily increasing.

' Final Report of the Select Committee of the House of Lords on the Sweating System, 1890.

766 Trade Union Theory

can form any adequate idea of the unseen and unmeasured injury to national character wrought by the social contam- ination to which this misery inevitably leads. One degraded or ill-conducted worker will demoralise a family ; one dis- orderly family inexplicably lowers the conduct of a whole street ; the low -caste life of a single street spreads its evil influence over the entire quarter ; and the slum quarter, connected with the others by a thousand unnoticed threads of human intercourse, subtly deteriorates the standard of health, morality, and public spirit of the whole city. Thus though the morass does not actually gain on the portion of the nation's life already embanked by the Common Rule, we see it perpetuating itself, and, with the growth of popula- tion, even positively increasing in area,*

(e) The National Minimum[edit]

Though Trade Unionism affords no means of putting

down industrial parasitism by sectional action, the analysis

of the economic effects of the Device of the Common Rule

points the way to the solution of the problem. \ Within a

I trade, in the absence of any Common Rule, competition

I between firms leads, as we have seen, to the adoption of

\practices by which the whole industry is deteriorated. The

' Whilst the proportion of those who fall below the level of healthy sub- sistence has no doubt greatly decreased in the sixty years 1837-1897, there is good reason to believe that their actual number is at least as large as at any previous date. It may even be larger. See Labor in the Longest Reign, by Sidney Webb (London, 1897). How extensive is the area occupied by low-paid occupations may be inferred from Mr. Charles Booth's careful summary of his researches into the economic condition of London's 4^ millions. "The result of all our inquiries make it reasonably sure that one-third of the population are on or about the line of poverty or are below it, having at most an income which, one time with another, averages twenty-one shillings or twenty-two shillings for a small family (or up to twenty-five or twenty-six shillings for one of larger size), and in many cases falling much below this level. There may be another third who have perhaps ten shiUings more, or taking the year round, from twenty-five to thirty- five shillings a week, among whom would be counted, in addition to wage- earners, many retail tradesmen and small masters ; and the last third would in- clude those who arc better off." — Life and Labour of the People, vol. ix. p. 427.

Economic Characteristics ' 767

enforcement of a common minimum standard throughout the trade not only stops the degradation, but in every way conduces to industrial efficiency^ Within a community, too, in the absence of regulation, the competition between trades tends to the creation and persistence in certain occupations of conditions of employment injurious to the nation as a whole. \\The remedy is to extend the conception of the Common Rule from the trade to the whole community, and , by prescribing a National Minimum, absolutely to prevent any industry being carried on under conditions detrimental to the public welfare.^

This is, at bottom, the policy of factory legislation, now adopted by every industrial country. But this policy of prescribing minimum conditions, below which no employer is allowed to drive even his most necessitous operatives, has yet been only imperfectly carried out. Factory legislation applies, usually, only to sanitary conditions and, as regards particular classes, to the hours of labor. Even within this limited sphere it is everywhere unsystematic and lop-sided. When any European statesman makes up his mind to grapple seriously with the problem of the " sweated trades " he will have to expand the Factory Acts of his country into a systematic and comprehensive Labor Code, prescribing the minimum conditions under which the community can afford to allow industry to be carried on ; and including not merely definite precautions of sanitation and safety, and maximum hours of toil, but also a minimum of weekly earnings. We do not wish to enter here upon the compli- cated issues of industrial politics in each country, nor to

  • The majority of English statesmen are convinced that France and Germany

in giving bounties out of the taxes to the manufacturers of sugar, are impoverish- ing their respective communities, to the advantage of the consumers — often the foreign consumers — of the sugar. Yet the cost to France and Germany of this policy is merely a definite annual sum, equivalent to the destruction of an iron- clad or two. If we allow an industry to grow up, which habitually takes more out of its workers than the wages and other conditions of employment enable them to repair, — still more, if the effect of the employment is to deteriorate both character and physique of successive relays of operatives, who are flung eventually on the human rubbish-heap of charity or the Poor Law — is not the nation paying to that industry a bounty far more serious in its cost than any money grant ?

768 Trade Union Theory

discuss the practical difficulties and political obstacles which everywhere impede the reform and extension of the factory laws. But to complete our economic analysis we must con- sider what developments of the Trade Union Method of Legal Enactment would be implied by a systematic applica- tion of the conception of a National Minimum, and how this might be expected to affect the evils that we have described. One of the most obvious forms of industrial parasitism is the employment of child-labor. The early textile manu- facturer found that it paid best to run his mill almost exclusively by young children, whom he employed without regard to what was to become of them when they grew too big to creep under his machines, and when they required more wages than his labor bill allowed. The resulting degeneracy of the manufacturing population became so apparent that Parliament, in spite of all its prepossessions, was driven to interfere. The Yorkshire Woollen Workers were seeking, like the Flint Glass Makers of to-day, to meet the case by reviving the old period of educational servitude. The Calico-printers were aiming, like the National Union of Boot and Shoe Operatives before Lord James, at a simple limitation of the number of boys to be employed.^ Neither of these expedients was considered practicable. An alterna- tive remedy was found in prohibiting the manufacturer from

1 Minutes of Evidence and Report of the Committee on the Petition of the foumeymen Calico-printers, 4th July 1804, 17th July 1806; Hansard's Par/ja- mentary Debates, vol. ix. pp. 534-538 ; History of Trade Unionism, p. 50, Our analysis of the economic competition between trades enables us to see that no merely sectional measure would be of use against an illegitimate use of boy-labor. For it is not only the adult workers of the particular trade who are injured. In the competition of trade with trade, whether for home or foreign markets, the illegitimate expansion of a bounty-fed industry necessarily implies a relative con- traction of other and possibly quite unrelated trades. It is therefore not only, and perhaps not even principally, the adult boot and shoe operatives who are injured by the undue multiplication of boys in the great boot factories ; such trades as the Flint Glass Makers, who succeed in rigidly limiting their own apprentices, and agriculture, wljjch receives the residuum of boys, probably suffer equally, though in a more indirect way, from the fact that the boot and shoe trade receives this subsidy in aid of its own export trade, and thus encourages an increase of foreign imports which happen to come in the form of German glass and American food stuffs.

Economic Characteristics 769

employing children below a certain age, and requiring him to see that, up to a farther period, they spent half their days at school. The Factory Acts have, as regards children, long ' since won their way to universal approval, not merely on humanitarian grounds, but as positively conducive to the'i industrial efficiency of the community. There is, however,! still much to be done before the " Children's Charter " can be said effectually to prevent all parasitic use of child -labor. Though children may not be employed in factories until eleven years of age, nor full time until they are thirteen or fourteen, they are allowed to work at other occupations at earlier ages. " In certain districts of England and Wales, if a child of ten has obtained a certificate of previous due attendance [at school] for five years, he may be employed elsewhere than in a factory, workshop, or mine without any farther educational test or condition, and without any restric- tion as to the number of hours!' ^ Even if the law with ■ regard to the employment of children in factories were made uniformly applicable to all occupations in all parts of the 1 United Kingdom, the present limits of age are obviously inadequate to prevent parasitism. England has, in this respect, lost its honorable lead in protective legislation, and we ought at once to raise the age at which any boy or girl may enter industrial life to the fourteen years already adopted by the Swiss federal code,^ if not to the fifteen years now in force in Geneva, and eventually to the sixteen years demanded by the International Socialist and Trade Union Congress of 1896. It is, however, in an extension of the half-time system that we are likely to find the most effective check on child - labor. We have already seen reason to believe that the only way in which proper technical training can now be secured for the great mass of the people

  • Report of Departmental Committee appointed to Inquire into the Conditions

of School Attendance and Child-Laior, H. C. No. 311 of 1893, p. 25. In Ireland school attendance is compulsory only in the towns, and hence children of any age may lawfully be employed in the country districts for any number 0/ hours, night or day, otherwise than in factories, workshops, or mines.

^ Swiss Federal Factory Law of 23rd March 1877.


770 Trade Union Theory

is by their deliberate instruction in educational institutions. Such instruction can never be thoroughly utilised so long as the youth has to perform a full and exhausting day's work at the factory or the mine. There is much to be said, both from an educational and from a purely commercial point of view, for such a gradual ejctension of the half-time system as would put off until eighteen the working of full factory hours, in order to allow of a compulsory attendance at the technical school and the continuation classes. Any such proposal would, at present, meet with great opposition from parents objecting to be deprived of their children's earnings. Some of the more thoughtful Trade Unionists are, however, beginning to see that such a development of the half-time system, whilst affording the only practical substitute for the apprenticeship training, would have the incidental advantage of placing, in the most legitimate way, an effective check on any excessive use of boy-labor by the employers.^ With the contraction of the supply the rate of boy's wages would rise, so that little less might even be earned for the half day than formerly for full time. Boy -labor, therefore, would become less profitable to the employers, and would tend to be used by them only for its legitimate purpose of training up a new generation of adult workmen." To prevent para- sitism, in short, we must regard the boy or girl, not as an

' See, for instance, the Refort of the Trade Unionist Minority of the Royal Commission on Labor, in C. 74^ I > 1894. A somewhat analogous arrangement is already in force in Neuchitel, under its Apprenticeship Law of 1891, and in some other Swiss cantons.

2 It might even become necessary for the community to pay a premium for the proper technical education of boys in trades in which employers preferred altogether to dispense with them. Under private enterprise it requires a certain foresight and permanence of interest for individual employers to have any regard for the rearing up of new generations of skilled operatives. Thus, whilst some of the best shipbuilding establishments in the North of England bestow consider- able attention on their apprentices, the rule in the Midland boot and shoe factories is, as we have seen, to teach the boys practically nothing, and the London builders have lefjt off employing boys at all. It was found that, in 1895, 41 typical London firms in various branches of the building trades, employing 12,000 journeymen, had only 80 apprentices and 143 other "learners" in their establishments. (See the report of an inquiry into apprenticeship in the London building trades conducted by the Technical Education Board, published in the iMndon Technical Education Gazette, October 1895.)

Economic Characteristics 771

independent wealth-producer to be satisfied by a daily sub- sistence, but as the future citizen and parent, for whom, up to twenty-one, proper conditions of growth and education are of paramount importance. Hence the Policy of a National Minimum — the prohibition of all such conditions of employment as are inconsistent with the maintenance of the workers in a state of efficiency as producers and citizens — means, in the case of a child or a youth, the requirement not merely of daily subsistence and pocket-money, but also of such conditions of nurture as will ensure the continuous provision, generation after generation, of healthy and efficient adults.

In the case of adults, parasitism takes the form, if we may cite once more the unimpeachable testimony of the House of Lords, of " earnings barely sufficient to sustain existence ; hours of labor such as to make the lives of the workers periods of almost ceaseless toil, hard and unlovely to the last degree ; sanitary conditions injurious to the health of the persons employed and dangerous to the public."^ Each of these points requires separate consideration.

With regard to sanitation, the law of the United Kingdom already professes to secure to every manufacturing operative, whether employed in a factory or a workshop, and whether man or woman, reasonably healthy conditions of employ- ment. In addition to the general requirements of the Public Health Acts, the employer has put upon him, by the Factory Acts, as a condition of being allowed to carry on his industry, the obligation of providing and maintaining whatever is necessary for the sanitation and safety of all the persons whom he employs whilst they are at work on his premises. If the industry is one by its very nature unhealthy, the em- ployer is required to take the technical precautions deemed necessary by the scientific experts, and prescribed by special rules for each occupation. So far the Policy of a National Minimum of Sanitation would seem to be already embodied

1 Final Report of the Select Committee qf the Mouse of I^rds on the Sweating System, 1890.

772 Trade Union Theory

in English law. But appearances are deceptive. Whole classes of industrial wage-earners find themselves entirely outside the Factory Acts, whilst even of those who are nominally included, large sections are, in one way or another, deprived of any real protection. Hence, far from securing a National Minimum of Sanitation and Safety to every one, the law is at present only brought effectively into force to protect the conditions of employment of the strongest sections of the wage-earners, notably the Coalminers and the Cotton Operatives, whilst the weakest sections of all, notably the outworkers of the " sweated trades," remain as much oppressed in the way of sanitation as they are in hours of labor and wages. If it is desired to carry out the Policy of a National Minimum on this point. Parliament will have to make all employers, whether factory-owners, small workshop masters, or traders giving out material to be made up else- where, equally responsible for the sanitary conditions under which their work is done.^

When we turn from sanitation to the equally indispens- able conditions of leisure and rest, English factory legislation is still more imperfect. It has for fifty years been accepted that it is against public policy for women to be kept to manual labor for more than sixty hours a week, and this principle is supposed to be embodied in the law. But here again, the most oppressed classes — the women working day and night for the wholesale clothiers, or kept standing all day long behind the counter of a shop or the bar of a public- house — who are absolutely excluded from the scope of the law. Even where the law applies, it applies least thoroughly in the most helpless trades. We have already described

1 A beginning has been made by the sections of the Factory Acts of 1891 and 1895 imposing upon persons giving out worlt to be done elsewhere than on their own premises certain obligations with regard to the sanitary conditions of their outworkers. In their present form, however, these sections are admittedly unworkable, and no serious effort has yet been made to cope with the evils revealed by the House of Lords' Committee on the Sweating System in 1890. See Sweating, its Cause and Remedy (Fabian Tract, No. 50), How to do away with the Sweating System, by Beatrice Potter (Mrs. Sidney Webb) (Co-operative Union pamphlet), and the Trade Unionist Minority Report of the Royal Commission on Labor, in'C. 7421, 1894.

Economic Characteristics 773

how, in all non-textile industries, the overtime provisions destroy the efficacy of the Factory Act,^ and, in such cases as laundry-workers and dressmakers in small shops, render it practically of no avail. It is one more instance of the irony of English labor legislation that the women in the textile mills have alone secured a really effective limitation of their hours of labor, and this as low as 56^ hours a week, in spite of the fact that they are, of all women workers, the least helpless and, as a class, the best off. And when we pass from women to men, the statute book with regard to the hours of labor is at present a blank, relieved only by the tentative provisions of the Railway Regulation Act of 1893. Before we can be said to have established a National Mini- mum of leisure and rest, the provisions of the Factory Acts with regard to textile factories will have to be made appli- cable, with the special modifications appropriate to each particular occupation, to all manual workers whatsoever.

But sanitation and leisure do not, of themselves, maintain the nation's workers in health and efficiency, or prevent industrial parasitism. Just as it is against public policy to allow an employer to engage a woman to work excessive hours or under insanitary conditions, so it is equally against public policy to permit him to engage her for wages in- sufficient to provide the food and shelter, without which she cannot continue in health. Once we begin to prescribe the minimum conditions under which an employer should be permitted to open a factory, there is no logical distinction to be drawn between the several clauses of the wage contract. From the point of view of the employer, one way of increasing the cost of production is the same as another, whilst to the economist and the statesman, con- cerned with the permanent efficiency of industry and the maintenance of national health, adequate food is at least as important as reasonable hours or good drainage. To be completely effectual, the Policy of the National Minimum! will, therefore, have to be applied to wages.

1 See a preceding chapter on "The Normal Day."

774 Trade Union Theory

The proposition of a National Minimum of wages — the enactment of a definite sum of earnings per week below which no employer should be allowed to hire any worker- — has not yet been put forward by any considerable section of Trade Unionists, nor taken into consideration by any Home Secretary. This reluctance to pass to the obvious com- pletion of the policy of factory legislation, at once logical and practical, arises, we think, from a shrinking, both on the part of workmen and employers, from having all wages fixed by law. But this is quite a different proposition. The fixing of a National Minimum of Sanitation has not pre- vented the erection in our great industrial centres of work- places which, compared with the minimum prescribed by the law, are palatial in their provision of light, air, cubic space, warmth, and sanitary accommodation. And a National Minimum of leisure and rest, fixed, for instance, at the textile standard of 56^ hours' work a week, would in no way interfere with the Northumberland Coalminers maintaining their 37 hours' week, or the London Engineers bargaining for a 48 hours' week. There is even less reason why, with regard to wages, the enactment of a National Minimum should interfere with the higher rates actually existing, or in future obtained, in the tens of thousands of distinct occupa- tions throughout the country. ^ The fact that the Committees of the London County Council are precluded, by its Standing Orders, from employing any workman at less than 24s. a week, does not prevent their engaging workmen at all sorts of higher rates, according to agreement. And if the House of Commons were to replace its present platonic declaration against the evils of sweating by an effective minimum, the superintendents of the various Government departments would still go on paying their higher rates to all but the , lowest grade of workmen.

The object of the National Minimum being to secure the community against the evils of industrial parasitism, the minimum wage for a man or a woman respectively would be determined by practical inquiry as to the cost of the food,

Economic Characteristics 775

clothing, and shelter physiologically necessary, according to | national habit and custom, to prevent bodily deterioration, '•■ Such a minimum would therefore be low, and though its establishment would be welcomed as a boon by the unskilled workers in the unregulated trades, it would not at all corre- spond with the c onception of a " Living Wage " f ormed by the Cotton Operatives or the Coalminers. It would be a matter for careful consideration what relation the National Minimum for adult men should bear to that for adult women;- what differences, if any, should be made between town and country ; and whether the standard should be fixed by- national authority (like the hours of labor for young persons- and women), or by local authority (like the educational - qualification for child - labor). To those not practically - acquainted with the organisation of English industry and Government administration, the idea will seem impracticable. But, as a matter of fact, the authoritative settlement of a- minimum wage is already daily undertaken. Every local governing body throughout the country has to decide under the criticism of public opinion what wage it will pay to its lowest grade of laborers. It can hire them at any price, even at a shilling a day ; but what happens in practice is that the officer in charge fixes such a wage as he believes he can permanently get good enough work for. In the same way the national Government, which is by far the largest employer of labor in the country, does not take the cheapest laborers it can get, at the lowest price for which they will offer themselves, but deliberately settles its own minimum wage for each department During the last few years this systematic determination of the rate to be paid for Govern- ment labor, which must have existed since the days of Pepys, has been more and more consciously based upon what we have called the Doctrine of a Living Wage. Thus the Admiralty is now constantly taking evidence, either through the Labor Department or through its own officials, as to the cost of living in different localities, so as to adjust its laborers' wages to the expense of their subsistence. And in our

776 Trade Union Theory

local governing bodies we see the committees, under the pressure of public opinion, every day substituting a deliber- ately settled minimum for the haphazard decisions of the officials of the several departments.^ What is not so generally recognised is that exactly the same change is taking place in private enterprise. The great captains of industry, interested in the permanent efficiency of their estab- lishments, have long adopted the practice of deliberately fixing the minimum wage to be paid to the lowest class of unskilled laborers, according to their own view of what the laborers can live on, instead of letting out their work to sub- contractors, whose only object is to exact the utmost exertion for the lowest price. A railway company never dreams of putting its situations out to tender, and engaging the man who offers to come at the lowest wage : what happens is that the rate of pay of porters and shunters is deliberately fixed in advance. And it is a marked feature of the last ten years that the settlement of this minimum has been, in some of the greatest industries, taken out of the hands of the individual employer, and arrived at by an arbitrator. The assumption that the wages of the lowest grade of labor must at any rate be enough to maintain the laborer in industrial efficiency is, in fact, accepted by both parties, so that the task of the arbitrator is comparatively easy. Lord James, for instance, has lately fixed, with universal acceptance, a minimum wage for all the lowlier grades of labor employed

' An interesting survey of the steps taken to secure the payment of the Standard Rate to persons working for public authorities in France, the United Kingdom, Belgium, Holland, Italy, and Switzerland, is given by Auguste Keufer in his Rapport iendant & rechercker les moyens de parer aux funestes consigtiences du systime actuel des adjudications (Paris, 1896, 48 pp.). See also Louis Katzen- stein, Die Lohnfrage unter dem Englischen Submissionswesen (Berlin, 1896) ; the important Enquite of the Communal Council of Brussels into the effect of fixing and of not fixing the rates of wages payable in public contract works, 2 vols. (Brussels, 1896) ; and the Report of the House of Commons' Committee on the Conditions of Government Contracts (H. C. 334), July 1897.

In order to put a stop to the practice of engaging learners or improvers with- ■ out any salary whatsoever, the Victorian Factories and Shops Act of 1896 (No. 1445) enacts (sec. i5) that "no person whatsoever, unless in receipt of a weekly wage of at least two shillings and sixpence, shall be employed in any factory or workroom."

Economic Characteristics jjy

by the North Eastern Railway Company.^ Indeed, the fixing of a minimum wage on physiological grounds is a less complicated matter, and one demanding less techno- logical knowledge than the fixing of a minimum of sanitation ; and it interferes far less with the day-by-day management of industry, or its productivity, than any fixing of the hours of labor, whether of women or men. To put it concretely, if Colonel Dyer (of Armstrong's) and Mr. Livesey (of the South Metropolitan Gas Works) could for a moment rid themselves of their metaphysical horror of any legal regulation of wages, they would admit that the elaborate Factory Act require- ments in the way of Sanitation and Safety, and any limita- tion of the Hours of Labor, constitute a far greater impediment to their management of their own business in the way they think best than would any National Minimum of wages for the lowest grade of labor. As a matter of fact, what would happen would be the adoption, as the National Minimum, of the wages actually paid by the better establishments, who would accordingly be affected only to the extent of finding their competitors put on the same level as themselves.^

More formidable than any d priori objection to the \ National Minimum on the part of employers who would really be unaffected by it, would be the vehement obstruction ! that any such proposal would meet with from the profit-

' See his award in the Labour Gazette for August 1 897.

2 We desire to emphasise the point that, whatever political objections there may be to the fixing by law of a National Minimum Wage, and whatever practical diflSculties there may be in carrying it out, the proposal, from the point of view of abstract economics, is open to no more objection than the fixing by law of a National Minimum of Sanitation, or a National Minimum of Leisure, both of which are, in principle, embodied in our factory legislation. Indeed, a minimum wage, since it could in no way interfere with the fullest use of machinery and plant, or otherwise check productivity, would seem to be even less open to economic criticism than a limitation of the hours of labor.

It must not be supposed that the National Minimum of wages would necessarily involve payment by time. There would be no objection to its taking the form of Standard Piecework Lists, provided that these were combined, as they always are in efficient Trade Unions, with a guarantee that, so long as an operative is in the employer's service, he must be provided each week with sufficient work at the Standard Piece Rate to make up the minimum weekly earnings, or be paid for his time.

VOL. II ^^, 2 C 2

778 Trade Union Theory

makers in the parasitic trades. This obstruction would inevitably concentrate itself into two main arguments. They would assert that if they had to give decent conditions to every person they employed, their trade would at once become unprofitable, and would either cease to exist, or be driven out of the country. And, quite apart from this shrinking of the area of employment, what, they would ask, would become of the feeble and inefficient, the infirm and the aged, the " workers without a character," or the " poor widows," who now pick up some kind (that is, some part) of a livelihood, and who would inevitably be not worth employ- ing at all if they had to be paid the National Minimum wage?

The enactment of a National Minimum would by no means necessarily involve the destruction of the trades at present carried on by parasitic labor. When any particular way of carrying on an industry is favored by a bounty or subsidy, this way will almost certainly be chosen, to the exclusion of other methods of conducting the business. If the subsidy is withdrawn, it often happens that the industry falls back on another process which, less immediately pro- fitable to the capitalists than the bounty-fed method, proves positively more advantageous to the industry in the long run. This result, familiar to the Free Trader, is even more probable when the bounty or subsidy takes the form, not of a protective tariff, an exemption from taxation, or a direct money grant, but the privilege of exacting from the manual workers more labor-force than is replaced by the wages and other conditions of employment. The existence of negro slavery in the Southern States of America made, while it lasted, any other method of carrying on industry economically impossible ; but it was not really an economic advantage to cotton -growing. The " white slavery " of the early factory system stood, so long as it was permitted, in the way of any manufacturer adopting more humane conditions of employ- ment ; but when the Lancashire millowners had these more humane conditions forced upon them, they were discovered

Economic Characteristics 779

to be more profitable than those which unlimited freedom of competition had dictated. There is much reason to believe that the low wages to which, in the unregulated trades, the stream of competitive pressure forces employers and operatives alike, are not in themselves any more econo- mically advantageous to the industry than the long hours and absence of sanitary precautions were to the early cotton mills of Lancashire. To put it plumply, if the employers paid more, the labor would quickly be worth more. In so far as this proved to be the case, the National Minimum would have raised the Standard of Life without loss of work, without cost to the employer, and without disadvantage to the community. Moreover, the mere fact that employers are at present paying lower wages than the proposed minimum is no proof that the labor is not " worth " more to them and to the customers ; for the wages of the lowest grade of labor are fixed, not by the worth of the individual laborer, but largely by the necessities of the marginal man. It may well be that, rather than go without the particular commodity produced, the community would willingly pay more for it. Nevertheless, so long as the wage-earner can be squeezed down to a subsistence or, more correctly, a parasitic wage, the pressure of competi- tion will compel the employer so to squeeze him, whether the consumer desires it or not.

It may, however, be admitted that a prohibition of parasitism would have the effect of restricting certain in- dustries. The ablest, best-equipped, and best situated employers would find themselves able to go on under the 1 new conditions, and would even profit by the change. The \ firms just struggling on the margin would probably go under. It might even happen that. particular branches of the sweated trades would fall into the hands of other countries. If the French Government withdrew its pre- sent bounties on the production of sugar, some French establishments would certainly be shut up, and the total exports of French sugar, other things remaining equal.

780 Trade Union Theory

would be diminished. But all economists will agree that the mere keeping alive a trade by a bounty, whatever othei advantages it may be supposed to have, does not, of itself, increase the aggregate trade of the country, or the area of employment. What the bounty does is to divert to sugar production capital and labor which would otherwise have been devoted to the production of other articles, presumably to greater profit, for otherwise the bounty would not have been required. When the bounty is withdrawn this diver- sion ceases, and the available capital and labor is re-distrib- uted over the nation's industry in the more profitable way. And if it be replied that there will be no demand for these other articles, the answer is clear. If the bounty-fed sugar ceases to be exported, the commodities given in exchange for it cease to be imported, and have to be produced at home. The capital and labor which formerly produced sugar is now free to produce the commodities which were formerly obtained by the export of the sugar. In short, the ^ggi'egate product remaining the same, the aggregate demand cannot be lessened, for they are but different aspects of one and the same thing. ^

Exactly the same reasoning holds good with regard to what we have called the parasitic trades. Assuming that the employers in these trades have hitherto been getting more labor-force than their wages have been replacing, any effective enforcement of a National Minimum of conditions of employment would be equivalent to a simple withdrawal of a bounty. We should, therefore, expect to see a shrinkage in these trades. But there would be at least a corresponding expansion in others. Let us, for instance, imagine that the wholesale clothiers are compelled to give decent conditions to all their outworkers. It may be that this will cause a rise in the cost of production of certain lines of clothing. This will certainly diminish their export sales, and might even close particular markets altogether. This check to our export trade will have one of two results, If our imports go on undiminished, the aggregate of our

Economic Characteristics 781

exports must, to meet our foreign indebtedness, be made up somehow, and international demand will cause other branches of our export trade to expand. Hence the result of destroying parasitism in the wholesale clothing trade would, on this hypothesis, be to cause a positive increase in the exports, and thus in the number of producers, of such things as textiles, machinery, or coal. But it may be urged that the slackening of the wholesale clothing trade would cause our imports to fall off. In that case there would at last be a gleam of hope for the poor English farmer, whose sales would expand to meet the demand formerly satisfied by foreign food stuffs. Hence it follows that, whatever new ' distribution of the nation's industry might be produced by the prohibition of, parasitism, there is no ground for fearing that the aggregate production, and therefore either the aggregate demand or the total area of employment, would be in any way diminished.^

' It may be interesting to follow out this argument to its logical conclusion. Let us assume a country in which all trades whatsoever are parasitic — that is to say, where every manual worker is working under conditions which do not suffice to keep him permanently in industrial efficiency. In this case an enforce- ment of a National Minimum would necessarily raise the expenses of production to the capitalist employer (though not the actual labor cost) of all the commodi- ties produced. The economist would nevertheless advise the adoption of the policy. It would be of vital importance, in the economic interests of the com- munity as a whole, to stop the social degradation and industrial deterioration implied by the universal parasitism. The increased cost of production, due to the stoppage of this drawing on the future, would cause a general rise in prices. It is often assumed that such a rise would counteract the advantages of the higher wages.. Mr. Herbert Spencer, in the concluding volume of his Synthetic Philo- sophy, naively makes this his one economic objection to Trade Unionism. "If," he says, "wages are forced up, the price of the article produced must presently be forced up. What then happens if, as now. Trade Unions are established among the workers in nearly all occupations, and if these unions severally succeed in making wages higher ? All the various articles they are occupied in making must be raised in price ; and each trade unionist, while so much the more in pocket by advanced wages, is so much the more out of pocket by having to buy things at advanced rates " {Industrial Institutions, Loiidon,' 1896, p. 536). But tlus is to assume that the wage-earners purchase as consumers the whole of the commodities and services which they produce. We need not remind the reader that this is untrue. In the United Kingdom, for instance, though the wage- earners number four-fifths of the population, they consume — to take the highest estimate — only between one-third and two-fifths of the annual aggregate of products and services, the remainder being enjoyed by the propertied classes and the brain-workers. Even if a general rise in wages, amounting to say fifty

782 Trade Union Theory

The question then arises what effect the prohibition of parasitism would have on the individuals at present working in the sweated trades. We need not dwell on the inevi- table personal hardships incidental to any shifting of in- industry or change of process. Any deliberate improvement

millions sterling, produced a general rise in prices to the extent of fifty millions sterling, spread equally over all products, it could not be said that the wage- earners as a class would have to bear on their own purchases more than one-third to two-fiftlis of this additional price. If the rise in price was not spread equally over all commodities and services, but occurred only in those consumed by the other classes, the rise in wages would have been a net gain to the wage-earners. Only in the impossible case of the rise occurring exclusively in the commodities consumed by the wage-earning classes — these commodities being, as we have seen, only one-third to two-fifths of the whole — would that class find its action in raising wages nullified in the simple manner that Mr. Spencer imagines. Hence it is, that even if a rise in the Standard of Life of the whole wage-earning class produces an equivalent general rise in the price of commodities, the result must nevertheless be a net gain to the wage-earners. This process might, theoretically, be carried very far, the ultimate sufferers being the non-working recipients of rent and interest, whose incomes, nominally unimpaired, would purchase progressively less of the annual product Practically, however, any indefinite rise of wages would be limited by the impossibility of inducing the community of citizen-consumers to sanction, in the interests of the lowliest sections, anjrthing in the way of a legal minimum wage — involving, as this would, a mulcting of the vast majority of the better-off purchasers — which did not commend itself to this majority as being necessary to the public welfare.

Nor can it be inferred that any such general rise in the price of labor, even if it caused a general rise in the price of commodities, would adversely aflFect the nation's foreign trade. A rise in the price of any one commodity has, almost invariably, an immediate effect upon the volume of the import or export trade in that commodity. But if the rise in prices is general and uniform in all the com- modities of the community, the aggregate volume of the exports of that community will not be diminished merely by reason of the rise. It is a truism, not only of the academic economists, but also of the practical financiers of all nations, that the imports of our country (together with any other foreign indebtedness) must, on an average of years, be paid for by our exports, taking into account any other obligations of foreigners to us. Any general increase in the cost of labor, such as a rise in the Standard of Life, a general advance of factory legislation, or a universal Eight Hours' Day if we may assume for the sake of argument that this results in a uniform rise of prices, would leave our annual indebtedness to foreign countries undiminished, even if it did not increase it by temporarily stimulating imports. Hence it is inferred with certainty that a merely general and uniform rise in prices in one country will not prevent goods to the same aggregate value as before from being exported to discharge that indebtedness. To put it shortly, the mere fact that the manual laborers receive a larger proportion, and the directors of industry or capitalists a smaller propor- tion of the aggregate product, has no influence on the total volume, or the profitableness to the nation, of its international trade. See Appendix' II. in which this question is fully dealt with.

Economic Characteristics 783

in the distribution of the nation's industry ought, therefore, to be brought about gradually, and with equitable consideration of the persons injuriously affected, But there is no need to assume that anything like all those now receiving less than the National Minimum would be displaced by its enactment.

We see, in the first place, that the very levelling up of the standard conditions of sanitation, hours, and wages would, in some directions, positively stimulate the demand for labor. The contraction of the employment of boys and girls, brought about by the needful raising of the age for full and half time respectively, would, in itself, increase the number of situations to be filled by adults. The enforce- ment of the Normal Day, by stopping the excessive hours of labor now worked by the most necessitous operatives, would tend to increase the number employed. Moreover, the expansion of the self-supporting trades which would, as we have seen, accompany any shrinking of the sweated industries, would automatically absorb the best of the un- employed workers in their own and allied occupations, and would create a new demand for learners. Finally, the abandonment of that irregularity of employment which so disastrously affects the outworkers and the London dock- laborers, would result in the enrolment of a new permanent staff. All these changes would bring into regular work at or above the National Minimum whole classes of operatives, selected from among those now only partially or fitfully employed. Thus, all the most capable and best conducted would certainly obtain regular situations. But this con- centration of employment would undoubtedly imply the total exclusion of others who might, in the absence of regulation, have " picked up " some sort of a partial livelihood. In so far as these permanently unemployed consisted merely of children, removed from industrial work to the schoolroom, few would doubt that the change would be wholly advantageous. And there are many who would welcome a re-organisation of industry which, by concentrating employment exclusively among

784 Trade Union Theory

those in regular attendance, would tend to exclude from wage -labor, and to set free for domestic duties, an ever- increasing proportion of the women having young children to attend to. There would still remain to be considered the remnant who, notwithstanding the increased demand for adult male labor and independent female labor, proved to be incapable of earning the National Minimum in any capacity whatsoever. We should, in fact, be brought face to face with the problem, not of the unemployed, but of the unemployable.

(f) The Unemployable[edit]

Here we must, once for all, make a distinction of vital importance : we must mark off the Unemployable from I the temporarily unemployed. The case of the workman, normally able to earn his own living, who is unemployed merely because there is, for the moment, no work for him to do, stands on an altogether different plane from that of the man who is unemployed because he is at all times incapable of holding a regular situation, and producing a complete maintenance. Periods of unemployment, if only while shifting from job to job, are, in nearly all trades, an inevi- table incident in the life of even the most competent and the best conducted workman. To diminish the frequency and duration of these times of enforced idleness, to mitigate the hardships that they cause, and to prevent them from producing permanent degradation of personal character is, as we have seen, one of the foremost objects of Trade Unionism.^ But this evil, arising mainly from the seasonal or cyclical fluctua- tions in the volume of employment for the competent, has no relation to the problem of how to deal with the incom- petent. So long as these two problems are hopelessly entangled with each other, and habitually regarded as one and the same thing, any scientific treatment of either of them is impossible.

The problem of the Unemployable is not created by the

• We recur to this in our next chapter, " Trade Unionism and Democracy.

Economic Characteristics 785

fixing of a National Minimum by law. The Unemployable we have always with us. With regard to certain sections of the population, this unemployment is not a mark of social disease, but actually of social health. From the standpoint of national efficiency, no less than from that of humanity, it is desirable that the children, the aged, and the child-bearing women should not be compelled by their necessities to earn their own maintenance in the labor market. But in all other cases, incapacity or refusal to produce a livelihood is a symptom of ill-health or disease, physical or mental. With regard to the principal classes of these Unemployable — the sick and the crippled, the idiots and lunatics, the epileptic, the blind and the deaf and dumb, the criminals and the incorrigibly idle, and all who are actually " morally deficient " — ^the incapacity is the result of individual disease from which no society can expect to be completely free. But we have a third section of the Unemployable, men and women who, without suffering from apparent disease of body or mind, are incapable of steady or continuous application, or who are so deficient in strength, speed, or skill that they are incapable, in the industrial order in which they find themselves, of producing their maintenance at any occupation whatsoever. The two latter sections — the physically or mentally diseased and the constitutionally inefficient — may, in all their several subdivisions, either be increased or dimin- ished in numbers according to the wisdom of our social arrangements. If we desire to reduce these Unemployable to a minimum, it is necessary, as regards each of the sub- sections, to pursue a twofold policy. We must, on the one hand, arrange our social organisation in such a way that the smallest possible amount of such degeneracy, whether physical or mental, is produced. We must, on the other hand, treat the cases that are produced in such a way as to arrest the progress of the malady, and as far as possible restore the patient to health,^

1 As regards bodily disease, this twofold policy is now prescribed by the Public Health Acts. To maintain a high standard of health, "common rules"

786 Trade Union Theory

Now, we cannot here enter into the appropriate social regimen and curative treatment best calculated to minimise the production of the Unemployable in each subdivision, and to expedite the recovery of such as are produced. These physical and moral weaklings and degenerates must somehow be maintained at the expense of other persons. They may be provided for from their own property or (savings, by charity or from public funds, with or without being set to work in whatever ways are within their capacity. But of all ways of dealing with these unfortunate parasites the most ruinous to the community is to allow them unrestrainedly to compete as wage-earners for situations in the industrial organisation. For this at once prevents competition from resulting in the Selection of the Most Fit, and thus defeats its very object.^ In the absence of any Common Rule, it will, as we have seen, often pay an employer to select a physical or moral invalid, who offers his services for a parasitic wage, rather than the most efficient workman, who stands out for the conditions necessary for the maintenance of his efficiency. In the same way, a whole industry may batten on parasitic labor, diverting the nation's capital and brains from more productive processes, and undermining the position of its more capable artisans. And where the industrial parasitism takes the form of irregular employment — as, for instance, among the outworkers in all great cities and the London dock-laborers — its effect is actually to extend the area of the disease. The sum of employment given would suffice to keep in regular work, at something like adequate weekly earnings, a certain proportion of these casual workers. But because it is distributed, as partial employment and partial maintenance, among the entire class, its insufficiency and irregularity demoralise all alike, and render whole sections

as to drainage and water-supply, nuisances, and overcrowding are enforced on every one. To deal with such disease as nevertheless occurs, hospitals are provided. And when it is supposed that the sick contaminate those who are well, isolation and proper treatment are compulsory.

> "The main function of competition is that of selection." — Professor Fox- well (in the essay cited on p. 689).

Economic Characteristics 787

of the population of our large cities permanently incapable of regular conduct and continuous work. Thus, the disease perpetuates itself, and becomes, by its very vastness, incapable of being isolated and properly treated. A dim appreciation of the evil effects of any mixing of degenerates in daily life, joined, of course, with motives of humanity, has caused the sick and the infirm, the imbeciles and the lunatics, even the cripples and the epileptics, to be, in all civilised communities, increasingly removed off the competitive labor market, and scientifically dealt with according to their capacities and their needs. The " Labor Colonies " of Holland and Ger- many are, from this point of view, an extension of the same policy. To maintain our industrial invalids, even in idleness, from public funds, involves a definite and known burden on the community. To allow them to remain at large, in parasitic competition with those who are whole, is to con- taminate the labor market, and means a disastrous lowering of the Standard of Life and Standard of Conduct, not for them alone, but for the entire wage-earning class.^

Thus, in our opinion, the adoption of the Policy of a National Minimum of education, sanitation, leisure, and) wages would in no way increase the amount of maintenance] which has to be provided by the community in one form or another, for persons incapable of producing their own keep. It would, on the contrary, tend steadily to reduce it, both by diminishing the number of weaklings or degenerates annually produced, and by definitely marking out such as exist, so that they could be isolated and properly treated.^

' If the wages of every class of labor, under perfect competition, tend to be no more than the net produce due to the additional labor of the marginal laborer of that class, who is on the verge of not being employed at all, the abstraction of the paupers, not necessarily from productive labor for themselves but from the competitive labor market, by raising the capacity of the marginal wage-laborer, would seem to increase the wages of the entire laboring class.

^ The persons withdrawn from the competitive labor market, whether as invalids or aged, paupers or criminals, need not necessarily be idle. It would, on the contrary, usually be for their own good, as well as for the pecuniary interest of the community, that they should do such work as they are capable of. But it is of vital importance that their products should not be sold in the open market. I( their products are sold, they must inevitably undercut the wares

788 Trade Union Theory

The exact point at which the National Minimum should be fixed will, however, always be a matter of keen discussion. It will clearly be to the direct advantage of the wage-earning class, and especially to the large majority of self-supporting but comparatively unskilled adult laborers, that the National Minimum should be fixed as high as possible, as this will ensure to them a good wage. Moreover, every trade momentarily hard pressed by foreign competition, whether by way of import or of export trade, will see an advantage to itself in raising the Standard of Life of those who are in- directly its rivals. Even those employers who are already paying more than the minimum will be drawn by their economic interests in this direction. On the other hand, the employers in trades using low-paid labor would resent the dislocation to which a compulsory raising of conditions would subject them, and they would find powerful allies in the whole body of taxpayers, alarmed at the prospect of having

made by self-supporting operatives, who will therefore find their employment rendered less continuous than it would otherwise be, and who will accordingly be unable to resist the reductions forced upon them by their employers. This is not, as is often argued, because the institution laborers displace other operatives, but because they lower the price of the product. The psychological effect on the market is even more serious than the direct displacement of custom. Every private manufacturer fears that he may be the one destined to lose his customers to the institution which need not consider cost of production at all ; and this fear supplies the buyers with an irresistible lever for forcing down price. The harm lies in this lowering of the Standard of Life of other classes, not in any mere diversion from them of possible additional custom. Hence there is no economic harm, and nothing but gain, in the inmates of institutions producing for consumption or use inside the institution. This has no tendency to lower prices or wages out- side, any more than the fact that sailors at sea wash their own clothes lowers the wages of laundresses on land. And there would be no economic harm in the supported workers performing the whole of some new service for the community, if this was within their capacity, and if it paid better to keep all the more efficient workers employed in other ways. The same would be the case if the service were not new, and if it were, with due consideration for existing workers, wholly taken out of the domain of competitive industry. Thus the time might arrive when all efficient Englishmen would be able to employ their brains and labor to greater advantage than in growing cereals and breeding stock ; and the main processes of agriculture might become, perhaps in conjunction with muni- cipal sewage-farms, abattoirs, and dairies, exclusively Poor Law occupations, pro- ducing not for profit but for the sake of providing healthful occupation for the paupers, the infirm, and the aged, and selling their produce in competition only with foreign inijiorts at the prices determined by these.

Economic Characteristics 789

to maintain in public institutions an enlarged residuum of the Unemployable. The economist would be disinclined to give much weight to any of these arguments, and would rather press upon the statesman the paramount necessity of so fixing and gradually raising the National Minimum as progressively to increase the efficiency of the community as a whole, without casting an undue burden on the present generation of taxpayers.

(g) Summary of the Economic Characteristics of the Device of the Common Rule[edit]

The preceding analysis of the economic effects of the Device of the Common Rule, first as practised by isolated and separate trades, then as limited by the substitution of alternative processes or alternative products, at home or abroad ; and finally extended, by way of check on the illegi- timate use of this substitution, from particular trades to the community as a whole, will have revealed to the student the conditions under which each trade, and the whole body of wage-earners, will obtain the best conditions of employment then and there practicable, and at the same time the manner in which the utmost possible efficiency of the nation's industry will be secured.

We see, to begin with, that the need for the Common Rule is greatest at the very base of the social pyramid.^ , The first necessity for obtaining the greatest possible effi- ciency of the community as a whole, is so to control the \ struggle for existence that no section is pushed by it into | parasitism or degeneration. In the interests of the eco- nomically independent sections of wage-earners, whose labor

  • On the social importance of not abandoning to themselves those weakest

classes of wage-earners who are unable to form strong combinations^ see Dr. Heinrich Herkner's Die Sociale Reform ah Gebot des Wirtschaftlichen Fortschrittet (Leipzig, 1 89 1), ch. x. ; and the reports entitled Arbeilseinstellungm und Fort- bildung des Arbeitervertrages (Leipzig, 1890), pp. 12, 35, etc.

790 Trade Union Theory

might be displaced by a parasitic class of workers, no less than in the interests of the whole community of citizens, threatened with the growth of degenerate or dependent classes, it is vitally important to construct a solid basis for the industrial pyramid, below which no section of wage- earners, however great the pressure, can ever be forced. Such an extension of the Device of the Common Rule from the trade to the whole nation — the enforcement of National Minimum conditions as to sanitation and safety, leisure and wages, below which no industry should be allowed to be carried on — would, we may infer, have the same economic effect on the industry of the community as the introduction of the Common Rule has on each particular trade. Thus it would in no way prevent competition between trades, or lessen its intensity. The consumer would be free to select whatever product he preferred, whether it was made by men or by women, by hand or by machinery, by his own country- men or by foreigners. The capitalist would be free to introduce any machinery, to use any process, or to employ any class of labor that he thought most profitable to himself. The operative, whether man or woman, would be free to enter any trade, or to change from one trade to another, as he or she might be disposed. All that the community would require would be that there should be no parasitic labor ; /that is to say, that no employer should be allowed to offer, ' and no operative should be permitted to accept, employment under conditions below the minimum which the community had decided to be necessary to keep the lowest class in full and continued efficiency as producers and citizens. Under these circumstances the pressure of competition would be ^shifted from wages to quality. Alike between classes, pro- cesses, and products, a genuine Selection of the Fittest, un- handicapped by any bounty, would have free play. If one class of operatives superseded another class, it would be because the successful workers could perform the service positively better than their rivals, whilst themselves accepting no subsidy and suffering no deterioration. The result would

Economic Characteristics 791

be that, the necessary conditions of health being secured, the struggle for existence would take the form of progressive Functional Adaptation to a higher level, each class seeking to maintain its position by improving its technical capacity.^

NJhis National Minimum of conditions for the most help- less and dependent grades of labor can, it is obvious, be obtained only by the Method of Legal Enactment/ and it will represent, not the ideal condition which each section strives to attain for itself, but what the bulk of better-off citizens are willing to concede to a minority of less fortunate persons in order to avoid the financial burden and social contamination involved in the growth of parasitic or degenerate classes. But if the maximum income for the workers in each trade, and also the maximum efficiency of the whole industrial machine is to be secured, no section will remain satisfied with these minimum conditions. The greatest possible progress will be obtained by each grade of labor organising itself, and perpetually pushing upwards — seeking by the Device of the Common Rule to divert, within each occupation, the whole force of competition from wages to quality, from remuneration to service, so as to secure always the selection for employment of those individuals who have the most developed faculties, rather than those who have the

' To give only two out of many instances, we can imagine nothing more calculated to improve the social position of women, and to render them economically independent of their sexual relationship, than the gradual introduc- tion of a legal minimum wage, below which their employment should not be per- mitted. Nothing does so much at present to prevent women becoming technically proficient in industry, and to deprive girls of incentive to acquire technical educa- tion, than their feeling that they can obtain employment as they are, if only they will accept low enough wages ! The result of the low wages is a deplorably low standard of efiSciency, due to lack alike of proper physiological conditions and of stimulus to greater exertions. The knprovement in the capacity and technical efficiency of women teachers in the last twenty years, concurrently with the introduction of fixed standards of qualification by the Education Department and, to some extent, the adoption by School Boards of full subsistence wages, is especially significant in this connection. The other instance is that of the casual unskilled laborer of the great cities. At present he knows that he can earn his miserable pittance by transient employment, without a character, without regu- larity of attendance day by day, and without technical skill. A legal minimum weekly wage would induce the employers to pick their men, and at once set up » Selection of the Fittest for regularity, trustworthiness, and skill.

792 Trade Union Theory

fewest needs. The object of each section will be to raise its own service to the highest possible degree of specialised excellency, and to differentiate itself to the utmost from the unspecialised and " unskilled " labor, commanding only the National Minimum. In this way, each body of specialists becomes able to insist on its own " rent of ability " or " rent of opportunity." The more open the occupation is to newcomers, and the more attractive are the conditions that are obtained by those who are already employed, the more effective will become the constant Selection of the Fittest. The more progressive is the industry and the more opportunities it provides for technical instruction, the greater will be the Functional Adapt- ation to a higher level. And so long as this progressive raising of the Common Rule brings with it, either through it<"unctional Adaptation or the Selection of the Fittest, an ■equivalent increase in the operatives' own productive efficiency, the added wages, or other improvement of conditions, will in themselves constitute a clear addition to the income of the community. And in so far as the maintenance of the Com- mon Rule brings pressure to bear on the brains of the employers, so as to compel them to improve the technical processes of the trade ; and in so far as the progressive raising of the standard concentrates industry in the hands oi the most capable employers, in the best-equipped establish- ments, in the most advantageous sites, the organised wage-

arners, in seeking to improve their own conditions, will

ncidentally have positively added to the resources of the )ther classes of the community as well as to their own. So ar the improvement' in the wage-earners' condition need not lead to any rise in the price of commodities. When, however, the operatives in any given industry have ex- hausted the increased efficiency due to Functional Adapt- ation and the Selection of the Fittest, whether acting on the employers or on workmen, any further advance of wages will, unless under very exceptional conditions, result in a slackening of the demand for their product. The same result happens in the more frequent case of the advance in

Economic Characteristics 793

wages outstripping for a time the increase in efficiency, or again, even without a rise of wages or of prices, a change of fashion or a new invention may cause the substitution of another grade of labor. In all these cases, the progress of the advance movement of a particular trade will be effectively stopped by an increase in the proportion of its unemployed members. This, indeed, marks the limit of the possible advance in the conditions of any particular trade, beyond which the progressive raising of the Common Rule, whether by the Method of Collective Bargaining or by that of Legal Enactment, fails to achieve its object. Against a positive slackening of the consumers' demand, the producers have no remedy. If, indeed, the wages and other conditions pre- viously enjoyed have been unnecessarily good — if, that is to say, they have been more than enough to maintain the particular degree of specialised intensity of the trade in question — it might theoretically pay the Trade Union to submit to a reduction. In our opinion, this is seldom the case in practice. Even in the relatively well-paid trades, in times of comparative prosperity, the ordinary income of a skilled mechanic — in England, from ;£'8o to ;^i 50 per annum — is below the amount necessary for the development in himself, his wife, and his children of the highest efficiency that they are capable of. If the consumers' demand is falling off, and is being diverted to some other process or some other product, the decline can seldom be arrested by any slight fall in price, and the Trade Union may well think that the comparatively small saving in the total cost of pro- duction which would be caused by even a 10 or 20 per cent decline of wages, would probably be quite illusory.^ On the

• When the slackening of demand for a particular trade is not caused by any substitution, but is the result merely of a universal contraction of the world's industry — due, for instance, to a general failure of crops — there would be no advantage in a reduction of wages, either in a particular trade, or generally of the wage-earners of the world. As any such reduction could not possibly increase the aggregate demand (which is the aggregate product), it would serve no other purpose than to make up, to the capitalists of the world, part of the diminution of income that they would otherwise suffer. Rather than submit to a lowering of the standard conditions of employment it would be better, in such a case,

794 Trade Union Theory

other hand, there is, as we have shown in our chapter on " New Processes and Machinery," no policy so disastrous for the skilled operatives to pursue as to submit to any reduction of wages, any lengthening of hours, or any worsening of sanitary conditions, that in any way impairs their peculiar specialist efficiency. In the interests of the community as a whole, no less than of their own trade, such of their members as remain in employment must at all hazards maintain un- diminished the high standard of life which alone has per- mitted them to evolve their exceptional talent. What a Trade Union can do, if it finds the demand for its members' services steadily falling off, is to set its expert officials to discover the exact cause of this change of demand. If the decline is not due to a merely temporary depression of trade in general ; if, that is to say, there is going on an actual substitution of process or product which is likely to continue, the first duty of the Trade Union is to make the fact widely known to its own members and the public, so that members may seize every opportunity of escaping from the trade, and so ,_that parents may learn to avoid putting their sons to so unpromising an occupation. The second duty of the threatened trade is to look sharply into the conditions under which the substituted article is being produced, or (in the case of foreign competition) into the conditions of all the export trades of the country. It may be that these are escaping regulation altogether, or that there is a case for demanding a rise in the legal minimum of conditions of employment. The best policy of the threatened trade is, therefore, to throw itself vigorously into the agitation for a general levelling up of the National Minimum. And in this policy they will find themselves increasingly supported by

for the workers of each community to maintain their rate unimpaired, and subsidise their unemployed members. The frequent result of unregulated competition in times of general depression of trade — that the hours of labor of the workers in employment are positively lengthened because of their strategic weakness, and the numbers unemployed thereby unnecessarily increased — is an arrangement so insane that it would not be tolerated but for the superstition that the anarchy of " Nature " was somehow superior to the deliberate adjust- ments of science.

Economic Characteristics 795

public opinion. For if all the occupations enjoying any organisation at all have been pursuing the policy of pushing up their Common Rules apd developing their own specialisa- tion, there will have been set up, in the community as a whole, a new conception of what is necessaty for the decent existence of any class of workers. In each trade, as we have seen, the enforcement of a Common Rule automatically sets up a new " mean " for the trade, which tends to become a new minimum. Similarly, when a National Minimum has been effectively enforced ; and when one occupation after another has raised itself above that minimum to the extent of its particular skill, there will have been created, in the public opinion both of the wage-earners and other classes, not excluding even the employers, a new standard of expenditure for the average working-class family. The psychological establishment of this new standard makes the old minimum, once considered a boon, appear " starvation wages." Hence a growing discontent among the poorest classes of workers, and rising sympathy for their privations, will lead eventually to a rise in the minimum. This rise will be justified to the economists by the increase in efificiency which the enforcement of the legal minimum will have brought about. Thus,\the whole community of wage-earners, I including the lowest sections of it, may by a persistent and j systematic use of the Device of the Common Rule, secure an indefinite, though of course not an -unlimited, rise in its Standard of Life. And in this universal and elaborate application of the Common Rule, the economist finds a sound and consistent_theory:j3fjrrad£j[Jmoni^ adapted to the conditions of modern industry ; applicable to the circum- stances of each particular trade ; acceptable by the whole body of wage-earners ; and positively conducive to national efficiency and national wealth.

7g6 Trade Union Theory

(h) Trade Union Methods[edit]

Our survey of the economic characteristics of Trade Unionism would not be complete without some comparison, from an economic standpoint, of the three Methods by which, as we have seen, Trade Unions seek to attain their ends. At first sight this may seem unnecessary. When once a Trade Union Regulation has been successfully enforced upon the employers and workmen in a trade, it can be economically of no consequence whether the Regulation has been obtained by Legal Enactment, or Collective Bargaining, or by the more silent but not less coercive influence that may be exerted by Mutual Insurance. The owners of mining royalties, the lessees of the coal, and the individual hewers will find their faculties and desires affected in exactly the same way, whether the tonnage-rates for the Northumberland coal mines are fixed by law or by the irresistible fiat of the Joint Committee. It is immaterial to the owner of an old- fashioned cotton-mill whether the shortening of hours, or the raising of the minimum cubic space required by each operative, which finally destroys his margin of profit, is enforced by the visits of the Factory Inspector or by those of the secretaries of the Employers' and Operatives' Associations. It might be urged, in short, that it is the Trade Union Regulation itself which influences the organisation of industry, or alters cost of production, profits, or price, not the particular Method by which the Regulation is secured.

But this is to assume that, whether a Trade Union Regulation is supported by one Method or the other, it will be obtained and enforced with equal friction, equal effective- ness, equal universality, and equal rapidity of application to the changing circumstances. Thus, the general reduction of the hours of labor, which characterised the decade 1870 to 1880, had distinctive economic results of its own, whether it was effected by Legal Enactment (as in the textile mills), or by Collective Bargaining (as in the engineering workshops). But the economist cannot overlook the fact that the reduction was,

Economic Characteristics 797

in the one case, secured without any cessation of industry, enforced universally on all establishments in the trade from one end of the kingdom to the other, and rigidly maintained without struggle in subsequent years. In the other case, the reduction of hours cost the community a five months' stop- page of engineering industry in one of its most important centres, and many other struggles.^ It never became universal, even in the same industry, and it has not been uniformly maintained. On the other hand, the Engineers got the reduction three years sooner than the Cotton Operatives, and have been able, in times of good trade, in well-organised districts, to obtain even further reductions. To complete the economic analysis of Trade Unionism, we have therefore to inquire how far these important differences in the application of the Regulations are characteristic of the several Methods by which they are enforced. In this inquiry, we may leave out the Method of Mutual Insurance, which, in its economic aspect, is hardly distinguishable from imperfect Collective Bargaining, and which, except in a few small trades, may be regarded as an adjunct of the other Methods." The question therefore resolves itself into the manner in which the economic results of the various Trade Union Regulations

1 History of Trade Unionism, pp. 299-302.

2 This omits from consideration the purely Friendly Society side of Trade Unionism. The provision made by wage-earning families against sickness and accident, and the expenses of burial, has an important effect on their well-being, and cannot be ignored by the economist. But in this respect, as we have seen in our chapter on " The Method of Mutual Insurance," the Trade Unions amount to no more than small offshoots from the great Friendly Society movement, and (as regards death benefit) of the equally extensive system of "industrial insurance." In the United Kingdom, these provide, in the aggregate, many times more sick and funeral benefit than the whole of the Trade Unions put together. The economic results of this form of saving, like that of mere individual hoarding or deposit in a savings bank, are, therefore, in no way characteristic of Trade Unionism. The Trade Union, as we have seen, is a bad form of Friendly Society, and if it had to be considered exclusively as a Friendly Society, its total lack of actuarial basis and absence of security would bring upon it the severest condemnation. The main benefit provided by the Trade Union is, how- ever, not sick pay or funeral money, but the Out of Work Donation, and this, as we have pointed out, must be regarded, not as an end in itself, but as a means o\ maintaining or improving the members' conditions of employment — as a method, that is, of supporting the Trade Union Regulations.

798 Trade Union Theory

are modified, according as they are enforced by Collective Bargaining or Legal Enactment.

Confining ourselves to the circumstances of this country at the present time, we see that to obtain and enforce a Trade Union Regulation by the Method of Collective^ Bargaining necessarily involves, as we described in a previous chapter, the drawback of occasional disputes and stoppages of work. The seven hundred or more strikes and lock-outs annually reported to the Board of Trade ^ represent a con- siderable amount of economic friction. The laying idle of costly and perishable machinery and plant, the dislocation of business enterprise, the diversion of orders to other countries, the absorption in angry quarrels of the intellects which would otherwise be devoted to the further development of our industry — above all, the reduction to poverty and semi- starvation of thousands of workmen — involve a serious inroad upon the nation's wealth. This perpetual liability to a disagreement between the parties to a bargain is a necessary accompaniment of freedom of contract. We have already pointed out that if it is thought desirable that the parties to a bargain should be free to agree or not to agree, it is inevitable that, human nature being as it is, there should now and again come a deadlock, leading to that trial of strength which lies behind all negotiations between free and independent contracting parties. The Trade Union Method of Collective Bargaining, though by its machinery for industrial diplomacy it may reduce to a minimum the occasions of industrial war, can never, as we have seen, altogether prevent its occurrence. We need not dwell any further upon this capital drawback of this particular Method of industrial regulation, as it is one on which both public opinion and economic authority are convinced, and of which, in our judgment, they take even an exaggerated view.

1 The reports on the Strikes and Lock-outs of the year, which have been annually published by the Labor Department of the Board of Trade since 1888, and by various American State Governments, afford a valuable picture of the number and variety of these disputes.

Economic Characieristics 799

The use by the Trade Unions of the Method of Legal! Enactment has the great economic merit of avoiding all the waste and friction that we have been describing. Whatever may be the result of a new Factory Act, it is not bought at the cost of a strike or a lock-out. Even when a new enact-

  • ment is supremely distasteful to both employers and operatives,

as in the case of the Truck Act of 1896, there is no cessation or interruption of the nation's industry. All that happens is that employers and workmen importune their members of Parliament, and go on deputations to the Home Secretary, to beg for an amendment or a repeal of the obnoxious law. The regulations themselves, like the clauses of the Truck Act which are complained of, may be irksome, useless, or eco- nomically injurious, but the method by which they have jjeen obtained and enforced has the inestimable merit of peacefulness.

The case of the Truck Act of 1896 supplies an instance of a corresponding drawback of the Method of Legal Enact- ment. An Act of Parliament is hard to obtain, and hard to alter. It is therefore probable that an industry has to go on for some years without the regulation which would be economically advantageous to it, or to endure for some time an obsolete regulation which could advantageously be amended. This want of elasticity to meet changing circumstances is specially noticeable in our legislative machinery of the present day, when the one central legislature is patently incapable of coping with the incessant new applications of law required by a complicated society. It would be interesting to ask whether this defect is inherent in the Method of Legal Enact- ment. If the principle of regulating the conditions of employment were definitely adopted by Parliament, there does not seem any impossibility in the rules themselves being made and amended by the fiat — carrying with it the force of law — of an executive department, a local authority, or a com- pulsory arbitration court for the particular industry.-' But

' The ordinances of the craft-gilds, the by-laws of the mediaeval town councils, and the fixing of rates pf wages by the justices are familiar examples of law-

8oo Trade Union Theory

though a community which believed in regulating the condi- tions of employment by law would be able greatly to simplify and develop its legislative machinery, the making and amend- ing of legally enforcible rules must, we believe, necessarily be a more stiff and cumbrous process than the concluding or modifying a voluntary trade agreement by a joint com- mittee. If, therefore, it be desirable that the Regulation itself, or the stringency with which it is interpreted or applied, should be constantly shifted upwards or downwards, accord- ing to the changing circumstances of the day, or the relative positions of employers and workmen, the Method of Collective Bargaining has undoubtedly a great advantage over the Method of Legal Enactment.

'^ So far, thereforeXthe Method of Legal Enactment is

1 superior in the characteristics of peacefulness and absence

lof preliminary friction, whilst in the qualities of elasticity,

Ipromptness of attainment, and facility of alteration, the

3^ethod of Collective Bargaining holds the fieldy When we

come to the effectiveness of the Regulation — tnat is to say,

the rigidity, impartiality, and universality with which it is

applied — the issue is more open to doubt. In our analysis

of the economic effects of the Common Rule, we have seen

how important it is that it should really be co-extensive with

the industry in any community. It will clearly make all the

difference to the economic effect of a reduction of hours or

an advance in costly sanitary comforts, whether all competing

making, which, though they were open to many other objections, were lacking neither in promptitude nor elasticity. "The substance no less than the form of the law would, it is probable, be a good deal improved if the executive govern- ment of England could, like that of France, by means of decrees, ordinances, or proclamations having the force of law, work out the detailed application of the general principles embodied in the Acts of the legislature " (A. V. Dicey, The Law of the ConstittUion, ch. i. ; H. Sidgwick, Principles of Politics, ch. xxii. p. (|33). Already, a large amount of our legislation is made in the form of " rules " or " orders " by executive departments, sometimes under a general authority given by statute, and only nominally laid before Parliament, sometimes by mere executive authority ; see, for instance, the eight volumes of Statutory Rules and Orders (London, 1897) in force having the authority of law. It is probable that the increasing incapacity of the House of Commons to cope with its work will lead to a silent extension of this practice. We shall, in faot^ be saved by th«  Royal Prerogative !

Economic Characteristics 801

employers are equally subjected to the regulation, or whethei this is enforced only on particular establishments or particular districts. At first sight it would seem that this is an over- whelming argument in favor of the law. In our own country at the present day factory legislation applies uniformly from one end of the kingdom to another. If it is properly drafted and really intended to work, it will be conscientiously and impartially enforced by the Home Office. But unfortunately, though the machinery for enforcing the regulations is, in the United Kingdom, exceptionally efficient, the regulations themselves are still very imperfect. Outside the textile and mining industries, it is not too much to say that they have generally been drafted or emasculated by ministers or legislators yielding to popular pressure, but themselves opposed, in principle, to any interference with the employer's " freedom of enterprise." Our Labor Code contains many " bogus " clauses, which were, by their authors, never intended to be applied, and which the most zealous Factory Inspectors are unable to enforce. On the other hand, the regulations which are secured in Collective Bargaining by the shrewd and experienced officials of a powerful Trade Union, are, from the outset, intended to work, and, when the trade is completely organised, they are enforced with an unrelenting and detailed exactitude unknown to the Factory Inspector or the magis- trate's court. But whereas the law, however imperfect, > applies equally to all firms and to all districts, it is rare, as we have seen, for a Trade Union to secure a " National Agreement," and still more unusual for the whole trade to be so well organised as to be able to enforce any uniform terms upon all the employers. The usual result is that, though the workmen enforce their Regulations on " society shops " in " good " Trade Union towns with more than the severity of the law of the land, there are numerous establishments, and sometimes whole districts, over which the Trade Union has absolutely no control.

Finally we have the question — to the statesman, as we have seen, of vital importance — whether one or other Method VOL. H 2D

8o2 Trade Union Theory

is best calculated to prevent industrial parasitism. From the point of view of the community, it is essential that every industry should afford, to every person employed, at least the National Minimum of sanitation and safety, leisure and wages, in order to prevent any particular trade from get- ting a virtual " bounty " from the community, in the form either of partially supported labor, or of successive relays of workers deteriorated in their use. Only under these condi- tions, as we have seen, has the nation any assurance that its industry will flow into those channels in which its capital, brains, and manual labor will be applied to the greatest economic advantage, and produce the greatest " National iDividend." Now, it is an inherent defect of any sectional action by particular Trade Unions that its success will depend, not on the real necessities of the workers, but on their strategic position. Under the Method of Collective Bargaining the provisions for Sanitation and Safety would differ from trade to trade, not according to the unhealthiness or danger of the process, but according to the capacity of the workers for organisation, the ability of their leaders, the magnitude of their " war-chests," the relative scarcity of their labor, and the " squeezability " of their employers. Where the hours of labor are not affected by law, we find, in fact, at the present time, that they vary from trade to trade with- out the least reference to the average strength of the workers concerned, or the exhausting character of their labors. The London Silverworkers, the Birmingham Flint Glass Makers, and the various classes of building operatives in the Metropolis, enjoy, for instance, practically an Eight Hours' Day, whilst the outworking Sheffield Cutlers, the London Carmen, and the great race of Tailors everywhere work at least half as long again for a smaller remuneration. And, turning to the four millions of women wage-earners, we come to the paradoxical result that, wherever unregulated by law, the physically weakest class in the world of labor is forced to work the longest hours for the least adequate sub- sistence. It is clear that the National Minimum, whether

Econotnic Characteristics 803

with regard to sanitation or safety, leisure or wages, cannot] be secured, in the cases in which it is most required, other- 1 wise than by law.^

We see, therefore, that if, for the moment, we leave out of account the Regulations themselves, the Method of Legal Enactment has, where it can be employed, a considerable balance of economic advantages over the Method of Collec- tive Bargaining. It has, to begin with, the great merit of avoiding^alLs^pfiages -of industry and of causing the mini- mum of economic friction. In our own country, at any rate, a Regulation enforced by Legal Enactment will be more uniformly and impartially applied throughout^ an industry, as a whole than is ever likely to be the case with a Regulation eniorced by Collective Bargaining. Its greatest drawback is the cumbrousness of the machinery that mustT^eTset in motion7"^|Hnd^"the'cons'equent difficulty in quickly adapting the^Regulations^ to new circumstances. Hence the Method of LegaT Enactment is best adapted for those Regulations which are based on permaiient considerations, such as the health^d efficiency of the workers. The minimum require- ments of Sanitation and Safety need no sudden modifications. Much the same argument applies to the fixing of the Normal Day and even of a minimum of wages, calculated so as to

• Even when a Trade Union uses the Method of Legal Enactment for its own benefit, it usually secures advantages for weaker classes. Thus, the adult male cotton-spinners, in getting shorter hours and improved sanitation for them- selves, have secured identical conditions for the comparatively weak women ring- spinners of Lancashire, and for the practically unorganised women employed to assist at mule-spinning in the mills of Glasgow. And this uniformity of regula- tion, initiated by the 19,000 male spinners, has not only been extended to all the 300,000 workers in cotton - mills, whether spinners, weavers, beamers, twisters, or card-room hands, but also to the 200,000 factory operatives in the competing products of the woollen, linen, and silk trades. Finally, whilst the 500,000 operatives in the textile trades thus already work under identical legal conditions, there is a constant tendency, in every amendment of the Factory Acts, to approximate to this " textile " standard the regulations applying to the hours and sanitation of all the other industries of the country. In short, when Parliament has to determine the conditions of employ ment, it tends necessarily, whatever the trade, to base its action on one and the ^ame common assumption — on the necessity of securing to everjf glass qf workeivs at least the minimum requirements of health and efficiency.

8o4 Trade Union Theory

prevent any class of workers from being driven down below the standard of healthy subsistence. These are all matters of physiological science. The Method of Legal Enactment ,is, in fact, economically the most advantageous way of en- I forcing all Regulations based on the Doctrine of a Living Wage.'

But the Method of Collective Bargaining has also its legitimate sphere. In our analysis of the economic charac- teristics of the Common Rule, we have pointed out how essential it is, in the interests of each particular trade, and also in those of the community as a whole, that no section of workers should remain content with the National Minimum secured by law, and that each trade should be perpetually trying to force up its }jwn Standard of Life so as to stimulate to the utmost the forcbs of Functional Adaptation and the Selection of the Fittest within the occupation. The several sections of workers show no backwardness in demanding all that they can gety and they often desire, as we have ' seen, to get the law on their side. But if the Doctrine of Vested Interests is abandoned, there are many reasons which will prevent the use of the Method of Legal Enact- ment for obtaining what we may call this sectional " Rent of Ability," or " Rent of Opportunity. If, indeed, the workers in any particular trade could prove to the representatives of

1 In support of this view we are glad to be able to quote an editorial of the Times in the palmy days of that great organ of English public opinion. Re- ferring to the movement in favor of shortening the hours of labor of shop assistants, its leading article of the nth November 1846 observed: "Now we would humbly suggest that, after all, an Act of Parliament would be the most short and certain mode of effecting the proposed object. It would be universal in its operation. It would admit of no partial exceptions or favoritisms. It would be binding on all. It would be, we think, desired by all who hope to be benefited by the change. A master who, out of spite, obstinacy, or the spirit of martyrdom, would kick at a speech, or iremain obdurate to a sermon, would bow before the majesty of the law. There is more eloquence in a tiny penal clause imposing a fine of ;^5 than in the graceful benevolence of Lord John Manners or the historical resumes of Dr. Vaughan. No man would resist it often, or resist it long. . . . Let the young men and women . . . appeal to Parliament to ratify by its fiat that principle which should be the boast and the mission of every Legislature — to protect the poor from contumely and the weak frpw oppression. '

Economic Characteristics 805

the whole community that their task required for its proper fulfilment more than ordinary leisure and income, there is no reason why they should not ask to have these exceptional conditions embodied in a new Common Rule and secured by law. But the attempts of the diiferent trades to force up their wages and other conditions above the National Mini- mum, must, as we have learnt, be purely experimental. In so far as any rise in the level of the Common Rule results in an increase in the efficiency of the industry, each Trade Union can safely push its own interests. But any such attempt will be dependent for success on forces which cannot be foreseen, and many of which are unconnected with the efficiency of the manual workers themselves. The rapidity of industrial invention in the particular trade, the extent to which it is recruited by additional brain-workers, the ease with which new capital can be obtained, will determine how far and how quickly the Trade Union can, by raising its Common Rule, stimulate increased efficiency and concentrate the business in its most advantageous centres. And there is also another direction in which, under a system of private enterprise, a Trade Union may successfully push its members' claims. In our chapter on " The Higgling of the Market " we have seen how nearly every section of capitalists throws up its own bulwark against the stream of pressure, in order to enjoy its own particular pool of profit. A legal monopoly or exclusive concession, a ring or syndicate, will secure for the capitalists of the trade exemption from competition and exceptional gains. The same result occurs whenever there is a sudden rush of demand for a new product, or a sudden cheapening of production. If the wage -earners in these trades are strongly organised, they can extract some part of these exceptional profits, which the employers will concede if they are threatened with a complete stoppage of the industry." From the point of view of the community there is no reason against this "sharing of the plunder," as the expenditure of the workmen's share, distributed over thousands of families, is quite as likely to be socially advantageous as

8o6 Trade Union Theory

that of the swollen incomes of a comparatively small number of newly-enriched employers.^

For these and all other kinds of " Rent of Opportunity," the law is obviously quite inapplicable. In short^.for every- thing beyond the National Minimum, and the technical interpretation of this to secure to each trade the conditions necessary for efficient citizenship, the wage-earners must rely on the Method of Collective Bargaining^

' But here again we must remind the reader that the Trade Union cannot, by any Common Rule, trench upon the exceptional profits of particular firms. Patents and Trade Marks, advertising specialities and proprietary articles are therefore beyond its reach. It is only when, as in the case of the Birmingham Alliances, the swollen profits extend over the whole industry that the Trade Union can effectively insist on sharing the plunder. And it so happens that in these cases the wage-earners are seldom sufficiently well organised even to defend their own position. When the enlarged profits of the trade arise from a sudden rush of demand or a sudden cheapening of production, it is usually a question (as in the case of the sewing-machine and the bicycle) of a new product or a new process, produced by workers who, newly gathered together, are unprotected by effective combination. Accordingly, though the wage-earners in exceptionally profitable industries often obtain continuous employment, and a slight rise of wages, they practically never secure any appreciable share of the " pools of profit " that we have described. Thus whilst the brewers, wholesale provision merchants, patent medicine proprietors, soap and pill advertisers, wholesale clothiers, sewing-machine makers, bicycle and pneumatic tyre manufacturers, and the mineral water merchants have all during the past eight years been making colossal profits, the wage-earners employed in these trades, who are almost entirely unorganised, stand, on the whole, rather below than above the average of the kingdom. In many of these cases the conditions of the wage-earners have remained actually below the level of " a Living Wage."


It might easily be contended that Trade Unionism has no logical or necessary connection with any particular kind of state or form of administration. If we consider only its fundamental object — the deliberate regulation of the condi- tions of employment in such a way as to ward off from the manual-working producers the evil effects of industrial competition — there is clearly no incompatibility between this and any kind of government. Regulations of this type have existed, as a matter of fact, under emperors and presi- dents, aristocracies and democracies. The spread of the Industrial Revolution and the enormous development of international trade have everywhere brought the evils of unregulated competition into sensational prominence. The wise autocrat of to-day, conversant with the latest results of economic science, and interested in the progressive improve- ment of his state, might, therefore, be as eager to prevent the growth of industrial parasitism as the most democratic politician. Hence, we can easily imagine such an autocrat enforcing a National Minimum, which should rule out of ^the industrial system all forms of competition degrading to the health, intelligence, or character of his people. The rapid extension of factory legislation in semi -autocratic countries during recent years indicates that some inkling of this truth is reaching the minds of European bureaucracies. What is distrusted in modern Trade Unionism is not its

8o8 Trade Union Theory

object, nor even its devices, but its structure and its methods. When workmen meet together to discuss their grievances — still more, when they form associations of national extent, raise an independent revenue, elect permanent representative committees, and proceed to bargain and agitate as corporate 'bodies — they are forming, within the state, a spontaneous democracy of their own. The autocrat might see in this industrial democracy nothing more hostile to his supremacy in the state than the self-government of the village or the co-operative store. It is, we imagine, on this view that the Czar of All the Russias regards with complacency the spon- taneous activity of the Mir and the Artel. More usually, however, the autocrat distrusts the educational influence of even the most subordinate forms of self-government. And when the association is national in extent, composed ex- clusively of one class, and untrammelled by any compulsory constitution, his faith in its objects or his tolerance for its devices becomes completely submerged beneath his fear of its apparently revolutionary organisation.-' Hence, though European autocracies may greatly extend their factory legislation, and might even, on the advice of the economists or in response to the public opinion of the wage-earning class, deliberately enforce a National Minimum of education, sanitation, leisure, and wages, they are not likely to encourage that pushing forward of the Common Rules of each section by the method of Collective Bargaining, which is so char- acteristic of British Trade Unionism, and upon which, as we have seen, the maximum productivity of the community as a whole depends.^

The problem of how far Trade Unionism is consistent with autocratic government — important to the continental student — is not of practical concern to the Anglo-Saxon.

' In this respect, the old-fashioned Liberal stood at the opposite pole from the autocrat. What he liked in Trade Unionism was the voluntary spontaneity of its structure and the self-helpfulness of its methods ; even when he disbelieved in the possibility of its. objects, and disliked its devices.

2 It would seem to follow that, if we could suppose other things to be equal, ar sutocracy would not attain so great a national wealth-production as a democracy

Trade Unionism and Democracy 809

In the English-speaking world institutions which desire to maintain and improve their position must at all hazards bring themselves into line with democracy. The wise official who has to function under the control of a committee of management, carefully considers its modes of action and the interests and opinions of its members, so that he may shape and state his policy in such a way as to avoid the rejection of the measure he desires. In the same way each section of Trade Unionists will have to put forward a policy of which no part runs counter to the interests and ideals of the bulk of the people. Believing, as we do, in the social expediency both of popular government, and of a wisely directed Trade Unionism for each class of producers, we shall end our work by suggesting with what modifications and extensions, and subject to what limitations, British Trade Unionism can best 'fulfil its legitimate function in the modern democratic state. At this point, therefore, we leave behind the exposition and analysis of facts, and their~ generalisation into economic theory, in order to pass over into precept and prophecy. , -^

We see at once that the complete acceptance of demo- cracy, with its acute consciousness of the interests of the community as a whole, and its insistence on equality of opportunity for all citizens, will necessitate a reconsidera-V tion by the Trade Unionists of their three Doctrines — the J abandonment of one, the modification of another, and the! far-reaching extension and development of the third.^ Tc/^ begin with the Doctrine of Vested Interests, we may infer that, whatever respect may be paid to the "established expectations " of any class, this will not be allowed to take the form of a resistance to inventions, or of any obstruction of improvements in industrial processes. Equitable con- sideration of the interests of existing workers will no doubt be more and more expected, and popular governments may even adopt Mill's suggestion of making some provision for operatives displaced by a new machine. But this con-

1 See Part II chap. xiii. "The Assumptions of Trade Unionism." ' VOL. 11 2 D 2

8io Trade Union Theory

sideration and this provision will certainly not take the form of restricting the entrance to a trade, or of recognising any exclusive right to a particular occupation or service. Hence the old Trade Union conception of a vested interest in an occupation must be entirely given up — a change of front will be the more easy in that, as we have seen,^ no union is now able to embody this conception in a practical policy.

Coming now to the Doctrine of Supply and Demand, we see that any attempt to better the strategic position of a particular section by the Device of Restriction of Numbers will be unreservedly condemned. Not only is this Device inconsistent with the democratic instinct in favor of opening up the widest possible opportunity for every citizen, but it is hostile to the welfare of the community as a whole, and especially to the manual workers, in that it tends to dis- tribute the capital, brains, and labor of the nation less productively than would otherwise be the case.^ Trade Unionism has, therefore, absolutely to "abandon one of its two Devices. This throwing off of the old Adam of monopoly will be facilitated by the fact that the mobility of modern industry has, in all but a few occupations, already made any effective use of Restriction of Numbers quite impracticable.^ Even if, in particular cases, the old Device should again become feasible, those Trade Unions which practised it would be placing themselves directly in antag- onism to the conscious interests of the remainder of their own class, and of the community as a whole. And in so far as industry passes from the hands of private capitalists into the control of representatives of the consumers, whether in the form of voluntary co-operative societies,* or in that of

1 Part II. chaps, x. and xi. " The Entrance to a Trade " and " The Right to a Trade." '

2 See Part III. chap. iii. "The Economic Characteristics of Trade Unionism," under the heading " The Device of Restriction of Numbers."

^ See Part II. chap. x. " The Entrance to a Trade."

' Here and elsewhere in this chapter we mean by co-operative societies the characteristic British type of associations of consumers, who unite for the purpose of carrying on, by salaried service, the manufacture and distribution of the commodities they desire. This form of co-operative society — the "store" and

Trade Unionism and Democracy 8 1 1

the municipality or the central government, any interference with freedom to choose the best man or woman for every vacancy, more and more consciously condemned by public opinion, will certainly not be tolerated.

But the manipulation of the labor market to the advantage of particular sections does not always take the form of a limitation of apprenticeship, or any Restriction of Numbers. Among the Cotton -spinners the piecers, and among the Cotton-weavers the tenters, are engaged and paid by the operatives themselves, whose earnings are accordingly partly made up of the profit on this juvenile labor. It therefore suits the interest of the adult workers, no less than that of the capitalist manufacturers, that there should be as little restriction as possible on the age or numbers of these subordinate learners: the Cotton -spinners, in fact, as we have more than once mentioned, go so far as to insist on there being always ten times as many of them as would suffice to recruit the trade. In this parasitic use of child- labor, the Cotton Operatives are sharing with the manu- facturers what is virtually a subsidy from the community as a whole. The enforcement of a National Minimum would.

the " wholesale, together with their adjunct, the Co-operative Com Mill — accounts for nineteen-twentieths of the capital, practically all the distributive trade, and three-fourths of the aggregate production of the British Co-operative Movement ( Third Annual Report of the Labour Department of the Board of Trade, C. 8230, 1896, pp. 25-48). Though the commodities and services supplied by voluntary associations of consumers will varj' from time to time, we regard this type of co-operative society as a permanent element in the democratic state. However widely we may extend the scope of central or local govemrhent, there will always be a place for voluntary associations of consumers to provide for (themselves what the public authority either cannot or will not supply. The other type of organisation known as a co-operative society, the association of producers, or so-called " productive society," stands in a very different position. We see no fiiture for this in the fully-developed democratic state. In its original ideal form of a self-governing association of manual workers, it seems to us (besides being open to grave objections) to have been made impossible by the Great Industry, whilst the subsequent forms known as "co-partnership" appear to us to be incompatible with Trade Unionism, and the indispensable mainten- ance of the Common Rule. See The Co-operative Movement in Great Britain (2nd edition, London, 1894), and The Relationship between Co-operation and Trade Unionism (Co-operative Union pamphlet, Manchester, 1892), both by Mrs. Sidney Webb.

8i2 Trade Union Theory

as we have seen,^ involve such a raising of the minimum age, both for half and whole time employment, as would put a stop to this particular expression of corporate self-help. Thus, the Doctrine of Supply and Demand will have to manifest itself exclusively in the persistent attempts of each trade to specialise its particular grade of skill, by progres- sively raising the level of its own Common Rules. In so far as this results in a corresponding increase in efficiency it will, as we have shown,** not only benefit the trade itself, but also cause the capital, brains, and labor of the community to be distributed in the most productive way. And the demands of each grade will, in the absence of any Restric- tion of Numbers or resistance to innovations, be automat- ically checked by the liberty of the customer to resort to an alternative product and the absolute freedom of the directors of industry to adopt an alternative process, or to select another grade of labor. Thus, the permanent bias of the manual worker towards higher wages and shorter hours of labor is perpetually being counteracted by another — his equally strong desire for continuity of employment. If the Common Rule in any industry at any time is pressed upward further or more quickly than is compensated for by an equivalent advance in the efficiency of the industry, the cost of production, and, therefore, the price, will be raised, and" the consumers' demand for that particular commodity will, in the vast majority of cases, be thereby restricted. The rise of wages will, in such a case, have been purchased at the cost of throwing some men out of work. And though the working-class official cannot, any more than the capitalist or the economist, predict the effect on demand of any particular rise of wages, even the most aggressive members of a Trade Union discover, in an increase of the percentage of unemployed colleagues whom they have to maintain,

an unmistakable and imperative check upon any repeti-


1 Part III. chap. iii. " The Economic Characteristics of Trade Unionism."

  • Ibid, under the heading " The Effect of the Sectional Application of the

Common Rule on the Distribution of Industry. "

Trade Unionism and Democracy 813

tion of an excessive claim. How constantly and effec- tively this check operates on the mind of the Trade Union officials can be realised only by those who have heard their private discussions, or who have watched the silent postponement of cherished aims by particular unions. It is not fear of the employers' strength, or lack of desire for shorter hours that is (1897) preventing the Cotton Operatives from using their power to obtain an eight hours' day or a rise in their piecework rates, but the ever- present dread, quickened by the sight of unemployed spinners and weavers on short-time, of driving away some of the trade of Lancashire. Paradoxical as it may seem, the sins of the Trade Unions in this respect would tend to be those of omission rather than those of commission. Whether with regard to sanitation, hours, or wages, each Trade Union would, in its fear of encouraging new inventions, be apt to stop short in its claims at an earlier point than the fullest efficiency demanded, rather than push ever onward the specialisation of its craft, at the cost of seeing some part of it, to the common advantage, superseded by another process.^

So far democracy may be expected to look on com- placently at the fixing, by mutual agreement between the directors of industry and the manual workers, of special rates of wages for special classes. But this use of the Method of Collective Bargaining for the advantage of parti- cular sections- — this " freedom of contract " between capitalists and wage-earners — will become increasingly subject to the fundamental condition that the business of the community must not be interfered with. When in the course of bar- gaining there ensues a deadlock ^ — when the workmen strike, or the employers lock out — many other interests are affected than those of the parties concerned. We may accordingly expect that, whenever an industrial dispute reaches a certain

' See Part II. chap. viii. " New Processes and Machinery." ^ See Part II. chap. ii. ' ' The Method of Collective Bargaining, " chap. iii. 'Arbitration," and chap. iv. "The Method of Legal Enactment."

8 14 Trade Union Theory

magnitude, a democratic state will, in the interests of the community as a whole, not scruple to intervene, and settle the points at issue by an authoritative fiat. The growing impatience with industrial dislocation will, in fact, where Collective Bargaining breaks down, lead to its supersession by some form of compulsory arbitration ; that is to say, by Legal Enactment.^ And when the fixing of the conditions on which any industry is to be carried on, is thus taken out of the hands of employers and workmen, the settlement will no longer depend exclusively on the strategic position of the parties, or of the industry, but will be largely influenced by

1 In this connection, the provisions of the New Zealand Industrial Concilia- tion and Arbitration Act, drafted and carried through by the Hon. W. P. Reeves, are highly significant. By this Act (No. 14 of 1894, slightly amended by No. 30 of 1865 and No. 57 of 1896) there is created a complete system of industrial tribunals for dealing, from the standpoint of the public interest, not only vpith the interpretation and enforcement of collective agreements expressly made subject to them ; but also with industrial disputes of every kind. There is, first, in each district a Board of Conciliation, consisting in equal numbers of members ' elected by the employers' and workmen's associations respectively, with an impartial chairman chosen by the Board from outside itself. Any party to an industrial dispute — that is to say, an association of employers or of work- men, or one or more employers though not associated — may bring the quarrel before the Board, which is thereon required, whether the other party consents or not, to inquire into the dispute, and do its best to promote a settlement. If conciliation fails the Board is then required, within two months of the first application to it, to "decide the question according to the meirits and substantial justice of the case. " So far, the system is merely one of Compulsory Arbitration, with a formal award which the parties are not bound to accept. But the Board may, if it thinks fit, refer any unsettled dispute, with or without its own decision on its merits, to the central Court of Arbitration, consisting of three members appointed by the Governor, two on the nomination respectively of the associa- tions of employers and employed, and one, who presides, from among the Judges of the Supreme Court. If the local Board does not so remit the case, any party to it may require the Board's report to be referred to the Court. The Court is thereupon required to investigate the dispute in the most complete manner, with or without the assent of any of the parties, and with all the powers of a court of justice. Its award is, in all cases, nominally binding on the associations or persons specified therein, for the period (not exceeding two years) named ; and any award which refers to an association is binding not only upon all those who are members at the date of the award, but also upon all those who sub- sequently join during its continuance. But though the award is nominally binding, it is within the discretion of the Court whether it shall be legally enforcible. The Court may, if it thinks fit, either at once, or, on the applica- tion of any of the parties, subsequently, file its award in the Supreme Court office, when it becomes, by leave of the" Court, enforcible as if it were a judg- ment of the Supreme Court. The award may include an order to pay costs anri

Trade Unionism, and Democracy 815

the doctrine of a living wage. The Trade Union official would then have to prove that the claims of his clients were warranted by the greater intensity of their effort, or by the rareness of their skill in comparison with those of the lowest grade of labor receiving only the National Minimum ; whilst the case of the associated employers would have to rest on a demonstration, both that the conditions demanded were unnecessary, if not prejudicial, to the workmen's efficiency, and that equally competent recruits could be obtained in sufficient numbers without the particular "rent of ability," demanded by the Trade Union over and above the National Minimum.

expenses, and penalties for its breach, not exceeding £\o against an individual workman or j^Soo against an association or an individual employer. The decision of the Court of Arbitration, acting by a majority of its members, may, therefore, at its discretion, be made part of the law of the land. When a dispute has once been brought before a Board or the Court, " any act or thing in the nature of a strike or lock-out " is expressly prohibited, and would presumably be punishable as contempt.

During the three years that this Act has been in force, there have been alto- gether sixteen labor disputes, and it has been successfully applied to every one of them, half being settled by the Boards of Conciliation and half by the Court of Arbitration. The awards have been uniformly well received by the parties, and appear to have been generally obeyed. Several of them were filed in the Supreme Court, and have thus obtained the force of law. So far the Act has been entirely successful in preventing the dislocation of industry. This success is no doubt largely due to the general support given by public opinion in the Colony to the principle of arbitration. There is at present no provision enab- ling the Boards or the Court to deal with a dispute, however disastrous to the public welfare, in which none of the parties request its intervention. And as there has been as yet no refusal to obey any of the awards, the actual process of enforcement has not been tested in the lawr courts. It has been suggested that an obstinate employer, refusing to join any association, and employing only non- unionists, might escape jurisdiction by declining to recognise (and therefore having no quarrel with) any Trade Union. Such a case occurred in South Australia, where a less ably drafted Act on somewhat the same lines as that of New Zealand is in force. The point was, however, not judicially decided ("Quelques Experiences de Conciliation par I'Etat en Australie," by Anton Bertram in Revue ifAconomie Politique, 1897). In the present state of public opinion in New Zealand, this or any other evasion of the law would be veiy narrowly viewed by the judges, and any flaw discovered would be promptly cured by an amending Act. The Board or Court might easily be empowered to deal, on its own initiative, with any dispute that it considered injurious to the community, and also to take cognisance, as a dispute, of any wholesale dis- missal of workmen, or of any explicit refusal to employ members of a duly registered association.

8i6 Trade Union Theory

It is accordingly on the side of the Doctrine of a Living Wage that the present policy of Trade Unionism will require most extension. Democratic public opinion will expect each trade to use its strategic position to secure the conditions necessary for the fulfilment of its particular social function in the best possible way — to obtain, that is to say, not what will be immediately most enjoyed by the " average sensual man," but what, in the long run, will most conduce to his efificiency as a professional, a parent, and a citizen. This will involve some modification of Trade Union policy. Powerful Trade Unions show no backwardness in exacting the highest money wages that they know how to obtain ; but even the best organised trades will at present consent, as a part of their bargain with the employer, to work for excessive and irregular hours, and to put up with unsafe, insanitary, indecent, and hideous surroundings.^ In all the better-paid crafts in the England of to-day, shorter and more regular hours, greater healthfulness, comfort, and refinement in the conditions of work, and the definite provision of periodical holidays for recreation and travel, are, in the interests of industrial and civic efficiency, more urgently required than a rise in the Standard Rate, ^uch an application of the Doctrine of a Living Wage will involve, not only a growth of deliberate foresight and self-control among the rank and file, but also a development of capacity in the Civil Service of the Trade Union movement. To haggle over an advance in wages is within the capacity of any labor leader ; to suggest to the employer and the legislature the "special rules" calculated to ensure the maximum comfort to the operatives, and cause the minimum cost and inconvenience to the industry, demands a higher degree of technical expertness.^'

Nor is it enough for each trade to maintain and raise its own Standard of Life. Unless the better-paid occupations are to be insidiously handicapped in the competition for the

1 See Part II. chap. vi. " The Normal Day," and chap. vii. " Sanitation and Safety."

  • See Part II. chap. vii. " Sanitation and Safety.

Trade Unionism and Democracy 817

home and foreign market, it is, as we have demonstrated,^ essential that no one of the national industries should be permitted to become parasitic by the use of subsidised or deteriorating labor. Hence the organised trades are vitally concerned in the abolition of " sweating " in all occupations whatsoever, whether these compete with them for custom by manufacturing for the same demand, or for the means of production by diverting the organising capacity and capital of the nation. And this self-interest of the better -paid trades coincides, as we have seen, with the welfare of the community, dependent as this is on securing the utmost development of health, intelligence, and character in the weaker as well as in the stronger sections. Thus we arrive at the characteristic device of the Doctrine of a Living Wage, which we have termed the National Minimum — the deliberate enforcement, by an elaborate Labor Code, of a definite quota of education, sanitation, leisure, and wages for every grade of workers in every industry.^ This National Minimum the public opinion of the democratic state will not only support, but positively insist on for the common weal. But public opinion alone will not suffice. To get the principle of a National Minimum unreservedly adopted ; to embody it in successive Acts of Parliament of the requisite technical detail ; to see that this legislation is properly enforced ; to cause the regulations to be promptly and intelligently adapted to changes in the national industry, requires persistent effort and specialised skill. For this task no section of the com- munity is so directly interested and so well-equipped as the organised trades, with their prolonged experience of industrial regulation and their trained official staff. It is accordingly upon the Trade Unions that the democratic state must mainly rely for the stimulus, expert counsel, and persistent watchfulness, without which a National Minimum can neither be obtained nor enforced.

' Part III. chap. iii. "The Economic Characteristics of Trade Unionism" under the heading " Parasitic Trades."

'^ Ibid, under the heading "The National Minimum."

8i8 Trade Union Theory

This survey of the changes required in Trade Union policy leads us straight to a conclusion as to the part which Trade Unionism will be expected to play in the manage- ment of the industry of a democratic state. The intermin- able series of decisions, which together make up industrial administration, fall into three main classes. There is, first, the decision as to what shall be produced — that is to say,' the exact commodity or service to be supplied to the con- sumers. There is, secondly, the judgment as to the manner in which the production shall take place, the adoption of material, the choice of processes, and the selection of human agents. Finally, there is the altogether different question of the conditions under which these human agents shall be employed — the temperature, atmosphere, and sanitary arrangements amid which they shall work, the intensity and duration of their toil, and the wages given as its •■eward.

To obtain for the community the maximum satisfaction it is essential that the needs and desires of the consumers should be the main factor in determining the commodities and services to be produced. Whether these needs and desires can best be ascertained and satisfied by the private enterprise of capitalist profit-makers, keenly interested in securing custom, or by the public service of salaried officials, intent on pleasing associations of consumers (as in the British Co-operative Movement) or associations of citizens (the Municipality or the State), is at present the crucial problem of democracy. But whichever way this issue may be decided, one thing is certain, namely, that the several sections of manual workers, enrolled in their Trade Unions, will have, under private enterprise or Collectivism, no more to do with the determination of what is to be produced than any other citizens or consumers. As manual workers and wage-earners, they bring to the problem no specialised knowledge, and as persons fitted for the per- formance of particular services, they are even biassed against the inevitable changes in demand which characterise a

Trade Unionism and Democracy 819

progressive community.^ This is even more the case with regard to the second department of industrial administration — the adoption of material, the choice of processes, and the selection of human agents. Here, the Trade Unions con- cerned are specially disqualified, not only by their ignorance of the possible alternatives, but also by their overwhelming bias in favor of a particular material, a particular process, or a particular grade of workers, irrespective of whether these are or are not the best adapted for the gratification of the consumers' desires. On the other hand, the directors of industry, whether thrown up by the competitive struggle or deliberately appointed by the consumers or citizens, have been specially picked out and trained to discover the best means of satisfying the consumers' desires. More- over, the bias of their self-interest coincides with the object of their customers or employers — that is to say, the best and cheapest production. Thus, if we leave out of account the disturbing influence of monopoly in private enterprise, and corruption in public administration, it would at first sight seem as if we might safely leave the organisation of pro- duction and distribution under the one system as under the other to the expert knowledge of the directors of industry. But this is subject to one all-important qualification. The permanent bias of the profit-maker, and even of the salaried official of the Co-operative Society, the Municipality, or the Government Department, is to lower the expense of pro- duction. So far as immediate results are concerned, it seems equally advantageous whether this reduction of cost is secured by a better choice of materials, processes, or men, or by some lowering of wages or other worsening of the conditions upon which the human agents are employed. But the democratic state is, as we have seen,^ vitally interested in upholding the highest possible Standard of Life of all its citizens, and especially of the manual workers who form four-fifths of the whole. Hence the bias of the directors of industry in favor

1 See Part II. chap ix. " Ojntinuity of Employment."

  • See Part III. chap. iii. " The Economic Characteristics of Trade Unionisii; "

820 Trade Union Theory

of cheapness has, in the interests of the community, to be perpetually controlled and guided by a determination to maintain, and progressively to raise, the conditions of employment.

This leads us to the third branch of industrial administra- tion — the settlement of the conditions under which the human beings are to be employed. The adoption of one material rather than another, the choice between alternative processes or alternative ways of organising the factory, the selection of particular grades of workers, or even of a particular foreman, may affect, for the worse, the Standard of Life of the opera- tives concerned. This indirect influence on the conditions of employment passes imperceptibly into the direct determi- nation of the wages, hours, and other terms of the wage contract. On all these matters the consumers, on the one hand, and the directors of industry on the other, are per- manently disqualified from acting as arbiters. In our chapter on " The Higgling of the Market " ^ we described how in the elaborate division of labor which characterises the modern industrial system, thousands of workers co-operate in the bringing to market of a single commodity ; and no consumer, even if he desired it, could possibly ascertain or judge of the conditions of employment in all these varied trades. Thus, the consumers of all classes are not only biassed in favor of low prices : they are compelled to accept this apparent or genuine cheapness as the only practicable test of efficiency of production. And though the immediate employer of each section of workpeople knows the hours that they work and the wages that they receive, he is precluded by the stream of competitive pressure, transmitted through the retail shop- keeper and the wholesale trader, from effectively resisting the promptings of his own self-interest towards a constant cheapening of labor. Moreover, though he may be statistic- ally aware of the conditions of employment, his lack of personal experience of those conditions deprives him of any real knowledge of their effects. To the brain-working captain 1 Part III. chap. ii.

Trade Unionism and Democracy 821

of industry, maintaining himself and his family on thousands a year, the manual-working wage-earner seems to belong to another species, having mental faculties and bodily needs altogether different from his own. Men and women of the upper or middle classes are totally unable to realise what state of body and mind, what level of character and conduct result from a life spent, from childhood to old age, amid the dirt, the smell, the noise, the ugliness, and the vitiated atmosphere of the workshop ; under constant subjection to the peremptory, or, it may be, brutal orders of the foreman ; kept continuously at laborious manual toil for sixty or seventy hours in every week of the year ; and maintained by the food,, recreation, and family lifewhich are implied by a precarious income of between ten shillings and two pounds a week. If the democratic state is to attain its fullest and finest development, it is essential that the actual needs and desires of the human agents concerned should be the main considerations in determining the conditions of employment.^ Here, then, we find the special function of the Trade Union in the administration of industry. The simplest member of the working-class organisation knows at any rate where the shoe pinches. The Trade Union official is specially selected by his fellow- work men for his capacity to express the grievances from which they suffer, arid is trained by his calling in devising remedies for them. But in expressing the desires of their members, and in insisting on the necessary reforms, the Trade Unions act within the constant friction -brake supplied by the need of securing employment. It is always the consumers, and the consumers alone, whether they act through profit -making entrepreneurs or through their own salaried officials, who determine how many of each particular grade of workers they care to employ on the conditions demanded.^

Thus, it is for the consumers, acting either through

• See Part II. chap. v. "The Standard Rate," and chap. iii. "Arbitration."

' This was the conclusion also of Fleeming Jenkin's mathematical analysis of

abstract economics. " It is the seller of labor who determines the price, but it is

82 2 Trade Union Theory

capitalist entrepreneurs or their own salaried agents, to decide what shall be produced. It is for the directors of industry, whether profit-makers or officials, to decide how it shall be produced, though in this decision they must take into account the objections of the workers' representatives as to the effect on the conditions of employment. And, in the settlement of these conditions, it is for the expert negotiators of the Trade Unions, controlled by the desires of their members, to state the terms under which each grade will sell its labor. But above all these, stands the community itself. To its elected representatives and trained Civil Service is entrusted the duty of perpetually considering the permanent interests of the State as a whole. When any group of consumers desires something which is regarded as inimical to the public wellbeing — for instance, poisons, explosives, indecent literature, or facilities for sexual immorality or gambling — the community prohibits or regulates the satisfaction of these desires. When the directors of industry attempt to use a material, or a process, which is regarded as injurious — for instance, food products so adulterated as to be detrimental to health, ingredients poisonous to the users, or processes polluting the rivers or the atmosphere — their action is restrained by Public Health Acts. And when the workers concerned, whether through ignorance, indifference, or strategic weakness, consent to work under conditions which impair their physique, injure their intellect, or degrade their character, the community has, for its own sake, to enforce a National Minimum of education, sanitation, leisure, and wages. We see, therefore, that industrial admini- stration is, in the democratic state, a more complicated matter than is naively imagined by the old-fashioned capitalist, demanding the " right to manage his own business in his own way." In each of its three divisions, the interests and will of one or othpr section is the dominant factor. But no section

the buyer who determines the number of transactions. Capital settles how many men are wanted at given wages, but labor settles what wages the man shall have." — " Graphic Representation of the Laws of Supply and Demand," by Fleeming Jenkin, in Recess Studies (Edinburgh, 1870), p. 184.

Trade Unionism and Democracy 823

wields uncontrolled sway even in its own sphere. The State is a partner in every enterprise. In the interests of the community as a whole, no one of the interminable series of decisions can be allowed to run counter to the consensus of expert opinion representing the consumers on the one hand, the producers on the other, and the nation that is paramount over both.^

It follows from this analysis that Trade Unionism is not merely an incident of the present phase of capitalist industry, but has a permanent function to fulfil in the democratic state.

• Some of the ablest Trade Union ofiScials have already arrived at practically this analysis. Thus, the last annual report of the Amalgamated Society of Engineers, written by Mr. George Barnes, the new General Secretary, contains an interesting exposition of the modem Trade Union view as to the respective fiinctions of the employers and the workmen in industrial administration. The interest of the wage-earners and that of the community are, it is argued, identical, " inasmuch as it is of public importance that a high standard of wages, and there- fore a high purchasing power, should be maintained. The employer, on the other hand, claims absolute freedom to exercise authority in the selection and placing and paying of workmen, because he says he provides the machinery and plant. But he forgets that this freedom in the conduct generally of business has long since been taken away from him, and that he now only has liberty to conduct industrial enterprise in accordance with public opinion, as embodied in Parlia- mentary enactment and the pressure of Trade Unionism. As a result of these humanising influences, hours of labor have been reduced, boy-labor curtailed, machinery fenced, and workshops cleansed. In short, competition has been forced up to a higher plane with immense advantage to the commonweal, so that the employer's plea ' to do what he likes with his own ' is somewhat out of date, and cannot be sustained. We are willing, however, to admit that in certain directions both employer and employed should have freedom of action. Our society, for instance, has never questioned the right of the employer to terminate cont-racts, to select and discriminate between workmen, and to pay according to merit or skill. But it has stipulated, and has a right to stipulate, for the observance of a standard or minimum wage as a basis. And if, as has been stated by the Employers' Council, the introduction of machinery has simplified production, and widened'the difference as between the skill of the machine and the hand operative, then the w^e of the handicraftsmen should be proportionately increased. The introduction of machinery increases as well as simplifies production, and here, surely, is sufficient gain for the employer and the purchaser, without trenching upon the wage of the worker, whose needs remain the same whether tending a machine or using his tools by hand. Upon this ground we base our claim, but, convinced as we are that this, like most other questions, must ultimately be settled in accord with the common interest, and believing as we do in the wisdom contained in the utterance of the late Lord Derby that ' the greatest of all interests is peace,' we are willing to leave the matter to the arbitrament of a public and impartial authority, aided by technical knowledge from each side." — Amalgamated Society of Engineers, Forty-Sixth A nnital Report CLxm&aa, 1897), pp. vi.-vii.

824 Trade Union Theory

Should capitalism develop in the direction of gigantic Trusts, the organisation of the manual workers in each industry will be the only effective bulwark against social oppression. If, on the other hand, there should be a revival of the small master system, the enforcement of Common Rules will be more than ever needed to protect the community against industrial parasitism.^ And if, as we personally expect, democracy moves in the direction of superseding both the little profit-maker and the Trust, by the salaried officer of the Co-operative Society, the Municipality, and the Govern- ment Department, Trade Unionism would remain equally necessary. For even under the most complete Collectivism, the directors of each particular industry would, as agents of the community of consumers, remain biassed in favor of cheapening production, and could, as brainworkers, never be personally conscious of the conditions of the maAual laborers,^ And though it may be assumed that the community as a whole would not deliberately oppress any section of its members, experience of all administration on a large scale, whether public or private, indicates how difficult it must always be, in any complicated organisation, for an isolated individual sufferer to obtain redress against the malice, caprice, or simple heedlessness of his official superior. Even a whole class or grade of workers would find it practically impossible, without forming some sort of association of its own, to bring its special needs to the notice of public opinion, and press them effectively upon the Parliament of the nation. /More- over, without an organisation of each grade or section of the producers, it would be difficult to ensure the special adaptation to their particular conditions of the National Minimum, or other embodiment of the Doctriile of a Living Wage, which the community would need to enforce ; and it would be impossible to have that progressive and experi- mental pressing upward of the particular Common Rules of each class, upon which, as we have seen, the maximum productivity of the nation depends. '\ In short, it is essential ' See Part II. chap. xii. "The Implications of Trade 'Unionism. "

Trade Unionism and Democracy 825

that each grade or section of producers should be at least so well organised that it can compel public opinion to listen to its claims, and so strongly combined that it could if need be, as a last resort against bureaucratic stupidity or official oppression, enforce its demands by a concerted abstention from work, against every authority short of a decision of the public tribunals, or a deliberate judgment of the Representative Assembly itself.

But though, as industry passes more and more into public control. Trade Unionism must still remain a necessary element in the democratic state, it would, we conceive, in such a development, undergo certain changes. The mere extension of national agreemdnts and factory legislation has already, in the most highly regulated trades, superseded the old guerilla warfare between employers and employed, and transformed the Trade Union official from a local strike leader to an expert industrial negotiator, mainly occupied, with the cordial co-operation of the secretary of the Employers' Association and the Factory Inspector, in securing an exact observance of the Common Rules prescribed for the trade. And as each part of the minimum conditiops of employment becomes definitely enacted in the regulations governing the public industries, or embodied in the law of the land, it will tend more and more to be accepted by the directors of industry as a matter of course, and will need less and less enforcement by the watchful officials concerned.^ The Trade Union function of constantly maintaining an armed resistance to attempts to lower the Standard of Life of its members may be accordingly expected to engage a diminishing share of its attention. On the other hand, its duty of perpetually striving to raise the level of its Common Rules, and thereby increasing the specialised technical efficiency of its craft, will remain unabated. We may therefore expect that, with the progressive nationalisation or municipalisation of public services, on the one hand, and the spread of the Co-operative movement on the other, the Trade Unions of the workers

' See Part II. chap. iv. "The Method of Legal Enactment."

826 Trade Union Theory

thus taken directly into the employment of the citizen- consumers will more and more assume the character of professional associations. Like the National Union of Teachers at the present day, they may even come to be little concerned with any direct bargaining as to sanitation, hours, or wages, except by way of redressing individual grievances, or supplying expert knowledge as to the effect of proposed changes. The conditions of employment depend- ing on the degree of expert specialisation to which the craft has been carried, and upon public opinion as to its needs, each Trade Union will find itself, like the National Union of Teachers, more and more concerned with raising the standard of competency in its occupation, improving the professional equipment of its members, " educating their masters " as to the best way of carrying on the craft, and endeavoring by every means to increase its status in public estimation.^

So far our review of the functions of Trade Unionism in the democratic state has taken account only of its part in industrial organisation. But the Trade Unions are turned also to other uses. At present, for instance, they compete with the ordinary friendly societies and industrial insurance companies in providing money benefits in cases of accident, sickness, and death, together with pensions for the aged.^ This is the side of Trade Unionism which commonly meets with the greatest approval, but it is a side that, in our opinion, is destined to dwindle. As one class of invalids after another is taken directly undfer public care, the friendly benefits provided by the Trade Unions will no longer be necessary to save their members from absolute destitution.

' The industry with which the National Union of Teachers is mainly con- cerned — elementary school-keeping — has, within a couple of generations, entirely passed out of the domain of profit-making into that of a public service. The Union (established 1870, membership at end of 1896, 36,793) has thus grown up under a CoUectivist organisation, and a comparison between its functions and those of the manual workers' Trade Unions is . full of interest and significance. Its admirably compiled and elaborate Annual Reports afford constant illustrations of the above inferences.

  • See Part II. chap. i. "The Method of Mutual Insurance."

Trade Unionism and Democracy 827

With any general system of compensation for industrial accidents, provided or secured by the state itself, the costly "accident benefit" hitherto given by Trade Unions will become a thing of the past. The increasing use in sickness of hospitals and convalescent homes, the growing importance of isolation and skilled nursing, and the gratuitous provision in public institutions of the highest medical skill— adopted for reasons of public health — will incidentally go far to relieve working-class families of the intolerable strain of periods of bodily incapacity.^ Any Government scheme of Old Age Pensions, such, for instance, as that proposed by Mr. Charles Booth, would absolve the Trade Unions from their present attempts, in the form of superannuation benefit, to buy off the undercutting of the Standard Rate of wages by their aged members. It is not that State provision against the absolute destitution caused by accident, sickness, or old age, will supersede, or even diminish, individual saving. On the contrary, it is one of the grounds on which Mr. Charles Booth and others advocate these measures,^ that the state pension, by ensuring something to build on, will positively stimulate thrift. But this supplementary saving, to provide the little comforts and amenities beyond the state allowance, will, in our opinion, not be made through the Trade Union. As the manual workers advance in intelligence and foresight,

' There is no reason why the burial of the dead should not — to the great economic advantage of all concerned — become a public service and a common charge. Probably a majority of all the funerals in the United Kingdom already take place at the public expense, and the provision of burial grounds, once a common form of profit-making enterprise, is becoming almost exclusively a public function. In Fans, as is well knovm, the service of burial is performed by a strictly regulated and licensed monopolist corporation, virtually public in character.

^ On Old Age Pensions, see "The Reform of the Poor Law," by Sidney Webb in Contemporary Review, July 1890, republished as Fabian Tract No. 17, March 1891 ; the paper on "Enumeration and Classification of Paupers, and State Pensions for the Aged," by Charles Booth, read before the Statistical Society, December 1 891, and republished as Pauperism, a Picture and Endowment of Old Age, an Argument (London, 1892) ; and Pensions and Pauperism, by the Rev. J. Frome Wilkinson (London, 1892). These proposals must be distinguished from schemes of insurance, or making the poor provide their own pension, as to which see Part II. chap. xii. "The Implications of Trade Unionism."

828 Trade Union Theory

they will more and more realise that a Trade Union, how- ever honestly and efficiently administered, is, of necessity, financially unsound as a friendly society. Hitherto the actuarial defects of the friendly society side of Trade Unionism have been far outweighed by the adventitious advantages which it brought to the organisation in attract- ing recruits, rolling up a great reserve fund, and ensuring discipline. But in the democratic state these adventitious aids will no longer be necessary. The Trade Union will be a definitely recognised institution of public utility to which every person working at the craft will be imperatively ex- pected, even if not (as is already the case with regard to the appointment of a checkweigher),^ legally compelled to con- tribute. With Trade Union membership thus virtually or actually compulsory, Trade Union leaders will find it con- venient to concentrate their whole attention on the funda- mental purposes of their organisation, and to cede the mere insurance business to the Friendly Societies. Thus, with the complete recognition of Trade Unionism as an essential organ of the democratic state, the Friendly Societies and Mutual Insurance Companies, confining themselves to the co-operative provision of larger opportunities and additional amenities to the aged, sick, or injured workman, will be relieved from the competition of actuarially defective trade societies, and may therefore be expected to expand and con- solidate their own position as an indispensable part of social organisation.

To this, decay of the friendly society side of Trade Unionism there will probably be one exception. In the democratic state the evil effects of the alternate expansions and contractions of demand will doubtless be mitigated by the increasing regulation and concentration of industry, if not also, as some would say, by the substitution, for the speculative middleman, of the salaried official of the con- sumers. But the inevitable fluctuations in the consumers'

1 See Part II. chap. ii. "The Method ot Collective Bargaining, and chap. v. "The Standard Rate."

Trade Unionistn and Democracy 829

own tastes, together with the vicissitudes oi harvests, will at all times leave some workmen in some trades or in some districts temporarily unemployed. Hence the Out of Work Benefit, or Donation, will form a permanent feature of the democratic state. This provision for temporarily un- \ employed craftsmen, — to be carefully distinguished from persons falling below the standard of the National Minimum, or the unemployable — can, as we have suggested, be best administered by the Trade Union. Even when, as in times of severe depression, or in cases of supersession by a new invention, some assistance of the temporarily unemployed is given from public funds, it will probably be most economical for it to take the form of a capitation grant to the Trade Union, so calculated that the allowance to each unemployed member is shared between the government and the dis- tributing association.

But whilst Trade Unionism may be expected to lose some of its present incidental functions, we suggest that \the democratic state will probably find it new duties to fulfil. For most of the purposes of government, including registration, taxation, the general education of the young, and the election of representatives, the classification of the citizens into geographical districts according to their place of abode is, no doubt, the most convenient form. But there are other purposes for which the geographical organisation may usefully be supplemented by an organisation according to professional occupations. The technical instruction of our craftsmen would, for instance, gain enormously in vigor and reality if the Trade Unions were in some way directly associated with the administration of the technological classes relating to their particular trades. Even now Trade Union committees sometimes render admirable service by watchful supervision of trade classes, by suggestion and criticism, and by practically requiring their apprentices to attend. And once it becomes clearly understood all round that the. object of Technical Education is not, by increasing the number of craftsmen, to lower wages, but, by increasing

830 Trade Union Theory

the competence of those who have already entered the various trades, positively to raise their Standard of Life, the Trade Unions and the community as a whole will be seen to have an identical interest in the matter. There is, in fact, no reason why a Trade Union should not be treated as a local administrative committee of the Technical Education Authority, and allowed, under proper supervision, to conduct its own technological classes with public funds.^ In other directions, too, such as the compilation of statistics relating to particular occupations, and the dissemination of informa- tion useful to members of particular crafts, the democratic state will probably make increasirxg use of Trade Union machinery.

Finally, there is the service of counsel./' On all issues of industrial regulation, whether in their own or other trades, the Trade Union officials will naturally assume the position of technical experts, to whom public opinion will look for guidance. But industrial regulation is not the only matter on which a democratic state needs the counsels of a work- ing-class organisation. Whenever a proposal or a scheme touches the daily life of the manual -working wage-earner, the representative committees and experienced officials of the Trade Union world are in a position to contribute informa- tion and criticism, which are beyond the reach of any other class. They are, of course, ignorant, if not incapable, of the complications and subtilties of the law. Their suggestions are one-sided and often impracticable, and their opinion can never be accepted as decisive. But whenever a minister has to deal with such questions as the Housing of the People or the Regulation of the Liquor Traffic, the administration of the law by magistrates or county-court judges, the un-

1 There seems much to be said for combining trade classes with the provision for the temporarily unemployed. A large proportion of the unemployed printers, for instance, who hang about the office of the London Society of Compositors waiting for a " call " from an employer, are very indifferent workmen, often young men who have " picked up " the trade without any really educational apprenticeship. There would be much advantage if their Out of Work Donation were made conditional on their spending the idle time in perfecting themselves at their craft.

Trade Unionism and Democracy 83 1

employed or the unemployable, the working of the Education Acts and the Poor Law, or, to pass into quite another department of the public service, the organisation ol popular recreation and amusement, he will find himself obliged, if he wishes to make his legislation or administra- tion genuinely successful, to discover the desires and needs of the manual workers, as represented by the committees and officials whom they elect.

This examination of the function of Trade Unionism brings us face to face with its inherent limitations. Trade Unionism, to begin with, does not furnish any complete scheme of distribution of the community's income. The Device of the Common Rule, can, by its very nature, never reach any other part of the product than the minimum applicable to the worst as well as to the best establishment for the time being in use. It leaves untouched, as we have shown,^ all that large proportion of the aggregate income which is the equivalent of the differential advantages of the various factors of production above the marginal level, whether their superiority lies in soil or site, machinery or organisation, intellect or physical strength. In short, as between different localities, different establishments, or different individuals, Trade Unionism leaves unaffected everything in the nature of economic rent. And even if we imagine each branch of productive industry throughout the community to be amalgamated into a single capitalist trust or government department, each grade or section of manual workers would find itself receiving, not an aliquot part of the total produce, but a wage depending either on the minimum necessary for the efficient fulfilment of its particular function, or, for all the grades above the National Minimum, upon the degree of technical specialisation, and therefore of relative scarcity, to which it had brought its particular service. The disposal of the balance of the product — the administration, that is to say, of the rent of land and capital — must, under

' Part III. chap. iii. "The Economic Characteristics of Trade Unionism,' nnder the heading " The Device of the Common Rule."

832 Trade Union Theory

any system of society, fall to the owners of the material instruments of production.

Now, Trade Unionism has no logical connection with any particular form of ownership of land and capital, and the members of British Trade Unions are not drawn, as Trade Unionists, unreservedly either towards Individualism or towards Collectivism. Certain sections of the Trade Union world, as we have pointed out in our chapter on " The Implications of Trade Unionism," ^ find that they can exact better terms from the capitalist employer than would be likely to be conceded to them by a democratic government department Other sections, on the contrary, see in the extension of public employment the only remedy for a disastrous irregularity of work and all the evils of sweating. This divergence of immediate interests between different sections of producers will inevitably continue. But ^' the nationalisation or municipalisation of any industry — the taking over of the telephones, ocean cables, railways, or mines by the central government, or the administration of slaughter- houses, tramways, river steamboats, or public-houses by the Town Council — has to be determined on wider issues than the sectional interests of the wage-earners employed. It is ■ in their capacity of citizens, not as Trade Unionists, that the manual workers will have to decide between the rival forms of social organisation, and to make up their minds as to how they wish the economic rent of the nation's land and capital to be distributed. And though, in this, the most momentous issue of modern democracy, the manual workers will be influenced by their poverty in favor of a more equal sharing of the benefits of combined labor,^ they will, by their Trade Unionism, not be biassed in favor of any particular scheme of attaining this result outside their own Device of the Common Rule. And when we pass from the ownership of the means

I Part II. chap. xii.

^ " The social problem of the future we considered to be, how to unite the greatest individual liberty of action with a common ownership in the raw maierial of the globe, and an equal participation of all in the betufits of cowkimd labor."—: John Stuart Mill, Autobiography (London, 1879), P- 2.^2.

Trade Unionism and Democracy 833

of production and the administration of industry to such practical problems as the best form of currency or the proper relation between local and central government, or to such vital questions as the collective organisation of moral and religious teaching, the provision for scholarship and science and the promotion of the arts — not to mention the sharper issues of "Home Rule" or foreign aiifairs — the members of the Trade Union world have no distinctive opinion, and their representatives and officials no special knowledge. We may therefore infer that the wage-earners will, in the democratic state, not content themselves with belonging to their Trade Union, or even to any wider organisation based on a distinction of economic class. Besides their distinctive interests and opinions as wage- earners and manual workers, they have others which they share with persons of every grade or occupation. The citizen in the democratic state, enrolled first in his geographical constituency, will take his place also in the professional association of his craft ; but he will go on to combine in voluntary associations for special purposes with those who agree with him in religion or politics, or in the pursuit of particular recreations or hobbies.

These considerations have a direct bearing on the probable development of Trade Union structure. In the first part of this work we described ^ how, in spite of historical tradition, in spite of crude ideas of de- mocracy suited only to little autonomous communities, and in spite of a strong prejudice in favor of local exclusiveness, the Trade Union world has, throughout its whole history, manifested an overpowering impulse to the amalgamation of local trade clubs into national unions, with centralised funds and centralised administration. The economic characteristics of Trade Unionism revealed to us the source of this impulse in the fundamental iriiportance to each separate class of operatives that its occupation should

  • Part I. chap. i. " Primitive Democracy," chap, U. " Representative

Institutions," chap. iii. "The Unit of Government."


834 Trade Union Theory

be governed by its own Common Rules, applicable from one ^nd of the kingdom to the other. This centralisation of lidministration, involving the adoption of a national trade policy, and, above all, the constant levelling-up of the lower- paid districts to the higher standard set in more advantageous

, lentres, requires, it is clear, the development of a salaried staff, selected for special capacity, devoting their whole attention to the commercial position and technical details of the particular section of the industry that they represent, and able to act for the whole of that section throughout the nation. It is, as we saw in our chapter on " The Method of Collective Bargaining," ^ because of the absence of such a staff that so few of the Trade Unions of the present day secure national agreements, or enforce with uniformity such Common

'ilules as they obtain. The Trade Union of the future will, therefore, be co-extensive with its craft, national in its scope, centralised in its administration, and served by an expert official staff of its own.

This consolidation of authority in the central office of the

I national union for each craft will be accompanied by an in- creased activity of the branches. In our description of Trade

I Union Structure,^ we saw that the crude and mechanical expedi- ents of the Initiative and the Referendum were being steadily replaced, for all the more complicated issues of government, by an organic differentiation of representative institutions. So long as a union was contented with Government by Referendum all that was necessary was an ambulatory ballot-box by which an unemployed member collected " the voices " of each factory or each pit. When a representative is appointed, the branch meeting affords the opportunity for ascertaining the desires of his constituents, impressing upon them his own advice, and consulting with them in any emergency. The branch thus becomes the local centre of the union's intellectual life. At the same time it retains and even extends its

' Part II. chap. ii.

2 Part I. chap. i. "Primitive Democracy, and chap. ii. "Representative Institutions. "

Trade Uniomsni and Democracy 835

functions as a jury or local administrative committee. For even if the Trade Union gradually discards its purely " friendly " benefits, the branch will have to administer the all-important Out of Work Donation, supplemented, as this may be, by a grant from public funds. And with the increasing use which the democratic state may make of Trade Union machinery, it will be the branchj and not the central office, that will be charged w ith' conducting technical classes, collecting "sfatlitics, or disseminating information. Finally, when the Trade Union world desires to make use of the Method of Legal Enactment,^ or to supervise the con- ditions of employment granted by local governing bodies, the network of branches pervading every district affords, as we have seen, the only practicable way of superposing an organisation by constituencies on an organisation by trades. There is one direction in which the branch (or, in the larger centres, the district committee representing several branches) will find this increase of work accompanied by a decrease of autonomy. The central executive and the< salaried officials at the head office of each craft will be principally occupied in securing national minimum conditions of employment throughout the country. It will be for the branches and their district committees to be constantly con- sidering the particular needs and special opportunities of their own localities. But the fact that the cost of any "advance movement" falls upon the funds of the union as a whole makes it imperative that no dispute should be begun, and even that no claim should be made, until the position has been carefully considered by the central ex- ecutive representing the whole society. This precept of democratic finance is made more imperative by every con- solidation of the forces of capital. It is obvious that if the demand of the branches in one town for an advance of wages or reduction of hours is liable to be met by a lock- out 01 the whole trade throughout the country, a union which permits its local branches to involve it in war at > See Part II. chap. iv. " The Method of Legal Enactment"

836 Trade Union Theory

their own uncontrolled discretion simply courts disaster.

'in matters of trade policy the branches or district com- mittees, whilst undertaking even more of the work of supervision, local interpretation, and suggestion, must de- finitely give up all claim to autonomy.^

J^ The need for centralisation of authority, as an in- evitable consequence of centralisation of funds, is not the only lesson in structure that the Trade Unions have derived

-from their experience, or will learn as they realise their full function in the democratic state. In our chapter on " Inter- Union Relations " ^ we pointed out that the amalgamation of different sections into a single society may easily be carried too far. The formation of a central fund, filled by equal contributions from all the members, inevitably leads to equality of franchise and government by the numerical majority. So long as the interests of all the members are fairly identical, this majority rule, where efficient representa- tive machinery has been developed, is the most feasible contrivance for uniting administrative efficiency with popular control. But whenever the association contains several distinct classes of workers, having different degrees of skill, divergent standards of expenditure, and varying needs and opportunities, experience shows that any scheme of equalised finance and centralised administration produces, even with the best democratic machinery, neither efficiency nor the consciousness of popular control, and hence is always in a condition of unstable equilibrium. The several minorities, keenly alive to their separate requirements and opportunities, are always feeling themselves thwarted in pushing their own interests, and deprived of any effective control over the con- ditions of their own lives. In voluntary associations the result is a perpetual tendency to secession, each distinct section aiming at Home Rule by setting up for itself as a separate national union. This limitation on the process of amalgamation, arising out of the conditions of democratic

» See Part I. chap. iii. "The Unit of Government." ' Part I. chap. iv.

Trade Unionism and Democracy 837

structure, is fortified, as we can now see, by economic con- siderations. The largest income for the wage-earners, and the highest efficiency of industry, will, as we have pointed out, be secured not by any uniform wage for manual labor as such, or for all the operatives in any industry, but by each distinct section of workers using the Device of the Common Rule to raise to the utmost its own conditions of employment. This persistent pushing forward of each class of operatives, constantly imperilled, as it must be, by a rise in the price of the product and a diminution of demand for some particular section of labor, can be undertaken, it will be obvious, only at the risk and cost of that section, and therefore, in practice, on its own initiative, untrammelled by the votes of other sections. We may therefore expect, in the democratic state, not a single association of the whol4 wage-earning class, nor yet a single amalgamated union for\ each great industry, but separate organisations for such of the various sections of producers as are so far specialised from others as to possess and require separate Common Rules of their own.

These separate national organisations will, however, clearly have many interests in common. In such matters as cubic space, ventilation, temperature, sanitary conveniences, precautions against fire, fencing of machinery, and, last but by no means least, the fixing and distribution of the Normal Day, the conditions of employment must, in the majority of manufacturing industries, be identical for all the grades of labor in each establishment. Even for Collective Bargain- ing they must necessarily develop some federal machinery; for concerting identical demands upon their common em-i ployers, and for supporting them by joint action. Moreover, as we have pointed out, in all questions of this sort, the democratic state will be influenced in the main by the Doctrine of a Living Wage, and they will accordingly tend more and more to be settled on physiological grounds and en- forced by the Method of Legal Enactment. It is unnecessary

, 1 Part III. chap. iii. " The Economic Characteristics of Trade Unionism."

838 Trade Union Theory , ^


to repeat that for any effective use of this Method in a Parlia- mentary community, organisation by crafts is practically use- less, unless it is supplemented by a'geographical organisation by constituencies. Hence we see rising iii theTrade Union world not only federal action among groups employed in one establishment, such as the joint committees of the building trades, but also such political federations as the United Textile Factory Workers' Association, the local Trades Councils, and the Trade Union Congress. But the economic analysis of the Common Rule has shown us that there is a third, and even more important, reason for this federal action between different trades. It will, as we have seen, be a primary duty of the Trade Unions in the democratic state to maintain and progressively to raise, not their own Com- mon Rules alone, but also the National Minimum for the whole wage -earning class. To the national amalgamation of each section, and the federal union of the different sections in each great industry, there must be added a federation of the whole Trade Union world.

Our vision of the sphere of Trade Unionism in the democratic state does more than explain the development of the Trade Union world into a hierarchy of federations. It gives us also its political programme. The weakness and inefficiency of the existing Trades Councils and Trade Union Congress spring, as we have pointed out, not only from their extremely imperfect structure, but also from an entire misapprehension of their proper function.^ In spite of the fact that Trade Unionists include men of all shades of political opinion, — Conservatives from Lancashire, Liberals from Scotland, Socialists from London and York- shire, ,-!^ the federal organisations of the British Trade / Unions of to-day are perpetually meddling with wide issues of general politics, upon which the bulk of their constituents have either no opinions at all, or are marshalled in the ranks of one or another of the political parties. Resolutions abolishing the House of Lords, secularising education, 1 See Part II. chap. iv. "The Method of Legal Enactment."

Trade Unionism and Democracy 839

rehabilitating silver, establishing a system of peasant proprietorship, enfranchising leaseholds, or "nationalising the means of production, distribution, and exchange," — questions in which the Trade Unionists, as such, are not more interested, not better informed, nor yet more united than other citizens, — find a place on Trade Union agendas, and either get formally passed through sheer indifference, or become the source of discord, recrimination, and disruption. This waste of time and dissipation of energy over extraneous matters arises, we think, mainly from the absence of any clearly conceived and distinctive Trade Union programme. In the democratic state of the future the Trade Unionist: may be expected to be conscious of their own special function in the political world, and to busy themselves primarily with its fulfilment. First in importance to everyf section we put the establishment of a National Minimum of!. education, sanitation, leisure, and wages, its application to all * the conditions of employment, its technical interpretation to fit the circumstances of each particular trade, and, above all, its vigorous enforcement, for the sake of the whole wage- earning world, in the weak trades no less than in those more able to protect themselves. But the systematic rehandling of the Factories and Workshops, Mines, Railways, Shops, and Merchant Shipping Acts, which is involved in this conception of a National Minimum, will, as we have explained, only secure the base of the pyramid. Upon this fundamental ground level each separate craft will need to develop such technical regulations of its own as are required to remove any conditions of employment which can be proved to be actually prejudicial to the efficiency of the operatives concerned. On all these points, as we have seen, the claim of any particular section for the help of the law may not only advantageously be supported by all the other trades, but may also profitably be conceded by the representatives of the community. And since th^ utmost possible use of the Method of Legal Enact- ment will> as we have seen, still permanently leave a large sphere for the Method of Collective Bargaining/ there must

840 Trade Union Theory

be added to the political programme of the federated unions all that we have described as the Implications of Trade Unionism.^ The federal executive of the Trade Union world would find itself defending complete freedom of association, and carefully watching every development of legislation or judicial interpretation to see that nothing was made criminal or actionable, when done by a Trade Union or its officials, which would not be criminal or actionable if done by a partnership of traders in pursuit of their own gain. And the federal executive would be on its guard, not only against a direct attack on the workmen's organisations, but also against any insidious weakening of their influence. It would insist on the legal prohibition of all forms of truck, or deductions from wages, including fines, loom-rent, and payments to national insurance funds or employers' benefit societies. Above all, it would resist any attempt on the part of the employer to transform the workman's home into a workshop, and thus escape the responsibility for the carrying out of the conditions of employment embodied in the law of

the- land -^ With a programme of this kind, the federal

executive would find itself backed by the whole force of the Trade Union world, which would thus contribute to the councils of the nation that technical knowledge and specialist experience of manual labor without which the regulation of industry can become neither popular nor efficient.

The student of political science will be interested in considering what light the experience of the workmen's organisations throws upon democracy itself The persistence of Trade Unionism, and its growing power in the state, indicates, to begin with, that the very conception of democracy will have to be widened, so as to include economic as well as political relations. The framers of the United States constitution, like the various parties in the French Revolution of 1789, saw no resemblance or analogy between the personal power which they drove from the castle, the altar, and the throne, and that which they left ' Part II. chap. xii. and Appendix I. as to the legal position.

Trade Unionism and Democracy 841

unchecked in the farm, the factory, and the mine! Even at the present day, after a century of revolution, the great mass of middle and upper-class " Liberals " all over the world see no more inconsistency between democracy and unre- strained capitalist enterprise, than Washington or JeiTerson did between democracy and slave -owning. The " dim, in- articulate " multitude of manual-working wage-earners have, from the outset, felt their way to a different view. To them, the uncontrolled power wielded by the owners of the means of production, able to withhold from the manual worker all chance of subsistence unless he accepted their terms, meant a far more genuine loss of liberty, and a far keener sense of personal subjection, than the official jurisdiction of the magistrate, or the far-off, impalpable rule of the king. The captains of industry, like the kings of yore, are honestly unable to understand why their personal power should be interfered with, and kings and captains alike have never found any difficulty in demonstrating that its maintenance was indispensable to society. Against this autocracy in industry, the manual workers have, during the century, increasingly made good their protest. The agitation for freedom of combination and factory legislation has been, in reality, a demand for a " constitution " in the industrial realm. The tardy recognition of Collective Bargaining and the gradual elaboration of a Labor Code signifies that this Magna Carta will, as democracy triumphs, inevitably be conceded to the entire wage-earning class. " One thing is clear," wrote, in 1869, a hostile critic ; "the relation between workmen and their employers has permanently changed its character. The democratic idea which rules in politics has no less penetrated into industry. The notion of a governing class, exacting implicit obedience from inferiors, and im- posing upon them their own terms of service, is gone, never to return. Henceforward, employers and their workmen must meet as equals." ^ What has not been so obvious to middle -class observers is the necessary condition of this

' Treuie Unionism, by James Stilling (Glasgow, 1869), p. 5S. VOL. II 2 E 2

842 Trade Union Theory

equality. ' Individual Bargaining between the owner of the inean^" of subsistence and the seller of so perishable a commodity as a day's labor must be, once for all, abandoned. In its place, if there is to be any genuine "freedom of contract," we shall see the conditions of employment adjusted between equally expert negotiators, acting for corporations reasonably comparable in strategic strength, and always subject to and supplemented i)y the decisions of the High Court of Parliament, representing the interests of the community as a whole. Equality in industry implies, in short, a universal application of the Device of the ■Common Rule.^

Besides the imperative lesson that political democracy will inevitably result in industrial democracy. Trade Unionism affords some indications as to the probable work- ing of democratic institutions. We notice, in the first place, that the spontaneous and untrammelled democracies of the workmen show neither desire for, nor tendency to, " one dead level " of equality of remuneration or identity of service. On the contrary, the most superficial study of the Trade Union world makes the old-fashioned merging of all the manual workers into the " laboring class " seem almost ludicrous in its ineptitude. Instead of the classic economist's categories

' We attribute to an imperfect appreciation of the change of status many industrial disputes, and a large proportion of the resentment of working-class pretensions manifested by the brain - working and propertied classes. The employer cannot rid himself of the idea that he has bought the whole energy and capacity of the operative within the hours of the working day, just as the slave- owner had bought the whole capacity of his slaves for life. The workman, on the other hand, regards himself as hired to co-operate in industry by performing a definite task, and feels himself defrauded if the employer seeks to impose upon him any extra strain or discomfort, or any different duty, not specified in the bargain. A similar misunderstanding lingers as to social relations. The capitalist is very fond of declaring that labor is a commodity, and the wage TOntract a bargain of purchase and sale like any other. But he instinctively expects his wage-earners to render him, not only obedience, but also personal deference. If the wage contract is a bargain of purchase and sale like any other, why is the workman expected to touch his hat to his employer, and to say " sir " to him without reciprocity, when the employer meets on terms of equality the persons (often actually of higher social rank than himself) from whom he buys his raw material or iriakes the other bargains incidental to his trade ?

Trade Unionism and Democracy 843

of" the capitalist " and " the laborer," we see Trade Unionism ad opting and strength e ning the almost infinite grading of the industrial world into separate clas ses, each with its own corporate tradition and Standard of EneTits own specialised faculty and distinctive needs, and each therefore exacting its own " Rent of Opportunity " or " Rent of Ability." And when we examine the indirect effect of the Trade Union Device of the Common Rule in extinguishing the Small Master system and favoring the growth of the Great Industry,^ we realise how effectively Trade Unionism extends a similar grading to the brain-working directors of industry. In place of the single figure of the " capitalist entrepreneur " we' watch emerging in each trade a whole hierarchy of specialised professionals, — inventors, designers, chemists, engineers, buyers, managers, foremen, and what not, — organised in their own professional associations,^ and standing midway between the shareholder, taxpayer, or consumer, whom they serve, and the graded army of manual workers whom they direct Nor does this progressive specialisation of function | stop at economic relations. The internal development of; the Trade Union world unmistakably indicates that division] of labor must be carried into the very structure of democracy.} Though the workmen started with a deeply-rooted conviction that " one man was as good as another," and that democracy meant an "equal and identical " sharing of the duties of govern- ment, as well as of its advantages, they have been forced to devolve more and more of " their own business " on a specially selected and specially trained class of professional experts. And in spite of the almost tnsupetable difficulties which

  • Part III. chap. iii. "The Economic Characteristics of Trade Unionism.
  • It is not commonly realised how numerous and how varied are these pro-

fessional associations. Besides the obvious instances oi the three "learned professions," organisations of this kind now exist among all grades of brain- workers in almost every department of social life. Not to speak of the archi- tects, surveyors, engineers, actuaries, and accountants, we have such associations as those of the Gasworks Managers, Colliery Managers, School Board Clerks, Sanitary Engineers, Sanitary Inspectors, Medical Officers of Health, Inspectors of Weights and Measures, different varieties of Foremen and Managers, and even Ships' Clerks. No study of these professional associations, or of their extensive Common Rules, has yet been made.

844 Trade Union Theory

representative institutions present to a community of un- leisured manual workers, we find union after union abandon- ing the mechanical devices of the Referendum and the Initiative, and gradually differentiating, for the sake of the efficient administration of its own affairs, the Representative from the Civil Servant on the one hand and the Elector on the other, j In short, whilst Trade Unionism emphasises the classic dictum of Adam Smith that division of labor increases material production, it carries this principle into the organ- isg|.tion of society itself. If democracy is to mean the com- bination of administrative efficiency with genuine popular control, Trade Union experience points clearly to an ever- incteasing differentiation between the functions of the three indispensable classes of Citizen-Electors, chosen Representa- tives, and expert Civil Servants.^

Thus we fjnd no neat formula for defining the rights and duties of the individual in society. In the democratic state every individual is both master and servant. In the work that he does for the community in return for his subsistence he is, and must remain, a servant, subject to the instructions and directions of those whose desires he is helping to satisfy. As a Citizen-Elector jointly with his fellows, and as a Con- sumer to the extent of his demand, he is a master, determining, free from any superior, what shall be done. Hence, it is the supreme paradox of democracy that every man is a servant in respect of the matters of which he possesses the most intimate knowledge, and for which he shows the most expert proficiency, namely, the professional craft to which he devotes his working hours ; and he is a master over that on which he knows no more than anybody else, namely, the' general interests of the community as a whole. In this paradox, we suggest, lies at once the justification and the strength of democracy. It is not, as is commonly asserted by the superficial, that Ignorance rules over Knowledge, and Medio- crity over Capacity. In the administration of society Know- ledge and Capacity can make no real and durable progress

  • See Part I. chaps, i. to iv. "Trade Union Structure."

Trade Unionism and Democracy 845

except by acting on and through the minds of the common human material which it is desired to improve. It is only by carrying along with him the " average sensual man," that even the wisest and most philanthropic reformer, however autocratic his power, can genuinely change the face of things. Moreover, not even the wisest of men can be trusted with that supreme authority which comes from the union of knowledge, capacity, and opportunity with the power of untrammelled and ultimate decision. Democracy is an ex- pedient — perhaps the only practicable expedient — for pre- venting the concentration in any single individual or in any single class of what inevitably becomes, when so concentrated, a terrible engine of oppression. The autocratic emperor, served by a trained bureaucracy, seems to the Anglo-Saxon a perilously near approach to such a concentration. If democracy meant, as early observers imagined, a similar concentration of Knowledge and Power in the hands of the numerical majority for the time being, it might easily become as injurious a tyranny as any autocracy. An actual study of the spontaneous democracies of Anglo-Saxon workmen, or, as we suggest, of any other democratic institutions, reveals the splitting up of this dangerous authority into two parts. Whether in political or in industrial democracy, though it is the Citizen who, as Elector or Consumer, ultimately gives the order, it is the Professional Expert who advises what the order shall be.^

  • It is here that we discover the answer to Carlyle's question, " How, in

conjunction with inevitable Democracy, indispensable Sovereignty is to exist : certainly it is the hugest question ever heretofore propounded to Mankind " (Past and Present, Book IV. chap. L p. 311 of 1843 edition). The student of Austin will probably find, in the industrial democracy of the future, that Sovereignty, in the old sense, is as hard to discover as it already is in the political democracies of to-day (see Professor D. G. Ritchie, Darwin and Hegel, London, 1893). Whatever sphere may be allotted to private ownership of land and capital, this will no more carry with it uncontrolled power to fix the conditions of industry, than kingship does of fixing the conditions of citizenship. In modern conceptions of society the old simple division into Sovereign and Subject is entirely superseded by a complex difierentiation of social structure and function.

More interesting, perhaps, in the present connection, is Auguste Comte's famous proposal to separate Social Knowledge from Social Power — to differentiate

846 Trade Union Theory

It is another aspect of this paradox that, in the democratic state, no man minds his own business. In the economic sphere this is a necessary consequence of division of labor ; Robinson Crusoe producing solely for his own consumption, being the last man who minded nothing but his own business. The extreme complication brought about by universal production for exchange in itself implieSj'fhat every c : works with a view to fulfilling the desires of other peoplf The crowding together . of dense populations, and especially the co-operative enterprises which then arise, extend in every direction this spontaneous delegation to professional experts of what the isolated individual once deemed "his own business." Thus, the citizen in a modern municipality no longer produces his own food or makes his own clothes ; no longer protects his own life or property ; no longer fetches his own water ; no longer makes his own thoroughfares, or cleans or lights them when made ; no longer removes his own refuse or even disinfects his own dwelling. He no longer educates his own children, or doctors and nurses his own invalids. Trade Unionism adds to the long list of functions thus delegated to professional experts the settlement of the conditions on which the citizen will agree to co-operate in the national service. In the fully-developed democratic state, the Citizen will be always minding other people's business. In his professional occupation he will, whether as brain-worker or manual laborer, be continually striving to fulfil the desires of those whom he serves, whilst, as an Elector, in his parish

a class of highly-educated Priests, possessing no authority, from the Admini- strators, wielding uncontrolled authority under the constant moral influence of this Spiritual Power. This proposal, though embodied in a fantastic form, seems at first sight to approximate to that separation between Expert Knowledge and Ultimate Control which we regard as a necessary condition of Liberty. In reality, however, it would secure no such separation. The Administrators, highly educated, specialised, and constantly acting on affairs, would possess both Knowledge and Power, and would be irresistible. Comte's proposed differentia- tion is much more that between two separate classes of Experts — the men of pure science, investigating and discovering, and the practical men of action, appl)ring to the affairs of daily life the generalisations of science. In democracy, these two classes of Experts, both absolutely essential to progress, are neither 0/ them entrusted with ultimate decision.

Trade Unionism and Democracy 847

or his co-operative society, his Trade Union or his political association, he will be perpetually passing judgment on issues in which his personal interest is no greater than that of his fellows.

If, then, we are asked whether democracy, as shown by an analysis of Trade Unionism, is consistent with Individual Liberty, we are compelled to answer by asking. What is Liberty? If Liberty means every man being his own master, and following his own impulses, then it is clearly inconsistent, not so much with democracy or any other particular form of government, as with the crowding together of population in dense masses, division of labor, and, as we think, civilisation itself. What particular individuals, sec- tions, or classes usually mean by "freedom of contract," " freedom of association," or " freedom of enterprise " is free- dom of opportunity to use the power that they happen to possess ; that is to say, to compel other less powerful people to accept their terms. This sort of personal freedom in a community composed of unequal units is not distinguishable from compulsion. It is, therefore, necessary to define Liberty before talking about it, a definition which every man will frame according to his own view of what is socially desirable. We ourselves understand by the words " Liberty " or " Free- , dom," not any quantum of natural or Inalienable rights, but such conditions of existence in the community as do, in I practice, result in the utmost possible development of facultyl in the individual human being.^ Now, in this sense demo-^ cracy is not only consistent with Liberty, but is, as it seems. to us, the only way of securing the largest amount of it. ; It is open to argument whether other forms of government may not achieve a fuller development of the faculties of particular individuals or classes. To an autocrat, untrammelled rule over a whole kingdom may mean an exercise of his individual faculties, and a development of his individual personality, such as no other situation in life would afford. An aristocracy, or

I "Liberty, in fact, means just so far as it is realised, the right man in the tight place." — Sir John Seeley, Lectures and Essays, p. 109.

848 Trade Union Theory

government by one class in the interests of one class, may conceivably enable that class to develop a perfection in physical grace or intellectual charm attainable by no other system of society. Similarly, it might be argued that, where the ownership of the means of production and the admini- stration of industry are unreservedly left to the capitalist class, this " freedom of enterprise " would result in a develop- ment of faculty among the captains of industry which could not otherwise be reached. We dissent from all these pro- positions, if only on the ground that the fullest development of personal character requires the pressure of discipline as well as the stimulus of opportunity. But, however un- trammelled power may affect the character of those who pos- sess it, autocracy, aristocracy, and plutocracy have all, from the point of view of the lover of liberty, one fatal defect. They necessarily involve a restriction in the opportunity for development of faculty among the great mass of the population. It is only when the resources of the nation are deliberately

organised and dealt with for the benefit, not of particular indi-

viduals or classes, but of the entire community ; when the administration of industry, as of every other branch of human affairs, becomes the function of specialised experts, working through deliberately adjusted Common Rules ; and jlvhen the ultimate decision on policy rests in no other hands than those of the citizens themselves, that the maximum aggregate development of individual intellect and individual character in the community as a whole can be attained^

For our analysis helps us to disentangle, from the

complex influences on individual development, those

caused by democracy itself. The universal specialisation

,nd delegation which, as we suggest, democratic insti-

utions involve, necessarily imply a great increase in

apacity and efficiency, if only because specialisation in

^rvice means expertness, and delegation compels selection.

This deepening and narrowing of professional skill may be

expected, in the fully - developed democratic state, to be

accompanied by a growth in culture of which our present

Trade Unionism and Democracy 849

imperfect organisation gives us no adequate idea. So long as life is one long scramble for personal gain — still more, when it is one long struggle against destitution — there is no free time or strength for much development of the sympa- thetic, intellectual, artistic, or religious faculties. When the conditions of employment are deliberately regulated so as to secure adequate food, education, and leisure to every capable citizen, the great mass of the population will, for the first 1 time, have any real chance of expanding in friendship and | family affection, and of satisfying the instinct for knowledge or beauty. It is an even more unique attribute of demo- cracy that it is always taking the mind of the individual off his own narrow interests and immediate concerns, and forcing him to give his thought and leisure, not to satisfying his own desires, but to considering the needs and desires of his fellows. As an Elector — still more as a chosen Repre- sentative' — in his parish, in his professional association, in his co-operative society, or in the wider political institutions of his state, the " average sensual man " is perpetually impelled to appreciate and to decide issues of public policy. The working of democratic institutions, means, therefore, one long training in enlightened altruism, one continual weigh- ing, not of the advantage" of the particular act to the particular individual at the particular moment, but of those " larger expediencies " on which all successful conduct of social life depends.

If now, at the end of this long analysis, we try to formu- late our dominant impression, it is a sense of the vastness and complexity of democracy itself. Modern civilised states are driven to this complication by the dense massing of their popu- lations, knd the course of industrial development. The very desire to secure mobility in the crowd compels the adoption of one regulation after another, which limit the right of every man to use the air, the water, the land, and even the artificially produced instruments of production, in the way that he may think best. The very discovery of improved industrial methods, by leading to specialisation, makes manual laborer

850 Trade Union Theory

and brain-worker alike dependent on the rest of the com- munity for the means of subsistence, and subordinates them, evervirr'their own crafts, to the action of others. In the w(^d of civilisation and progress, no man can be his own

faster. But the very fact that, in modern society, the individual thus necessarily loses control over his own life, makes him desire to regain collectively what has become

^'individually impossible.. Hence the irresistible tendency to popular government, in spite of all its difficulties and dangers. But democracy is still the Great Unknown. Of its full scope and import we can yet catch only glimpses. As one depart- ment of social life after another becomes the subject of careful examination, we shall gradually attain to a more complete vision. Our own tentative conclusions, derived from the study of one manifestation of the democratic spirit, may, we hope, not only suggest hypotheses for future verification, but also stimulate other students to carry out original investigations into the larger and perhaps more significant types of demo- cratic organisation.