Popular Science Monthly/Volume 31/September 1887/The Economic Disturbances Since 1873 III
OVER-PRODUCTION.—Consider first the most popular alleged cause of recent economic disturbances, that to which the Royal Commission of Great Britain in its final report  (December, 1886), and the United States Bureau of Labor (1886) have assigned a prominent place; and which the "Trades-Union Congress of England has by resolution accepted as being, in the opinion of the workmen of England," the most prominent cause, namely, "over-production." In a certain sense there can be no over-production of desirable products so long as human wants for such products remain unsatisfied. But it is in accordance with the most common of the world's experiences, that there is at times and places a production of most useful and desirable things in excess of any demand at remunerative prices to the producer. This happens, in some instances, through lack of progress or enterprise, and in others through what may be termed an excess of progress or enterprise. An example of the first is to be found in the circumstance that in the days of Turgot, the French Minister of Finance under Louis XVI, there were at times in certain departments of France such abundant harvests that wheat was almost unmarketable, while in other and not far-distant sections of the country there was such a lack of food that the inhabitants perished of hunger; and yet through the absence of facilities for transportation and communication of intelligence, the influence of bad laws, and the moral inertia of the people, there was no equalization of conditions. An example of the second, intensified to a degree never before experienced, is to be found in the results of the improvements in production and distribution which have been made especially effective within the last quarter of a century. A given amount of labor, operating through machinery, produces or distributes at least a third more product on the average, in given time, than ever before. Note the natural tendency
of human nature under the new conditions. The machinery which thus cheapens and increases product is, as a rule, most costly, and entails a like burden of interest, insurance, and care, whether it is at work or idle; and the possessor of it, recognizing this fact, naturally desires to convert outlay into income by utilizing it to the greatest extent possible. Again, a man who has learned by experience that he can dispose of a certain amount of product or service at a profit, naturally reasons that a larger amount will give him, if not a proportionally greater, at least a larger aggregate profit; and as the conditions determining demand are not only imperfectly known, but to a certain extent incapable of exact determination, he discards the idea of any risk, even if he for a moment entertains it, and pushes industrial effort to its maximum. And as this process is general, and, as a rule, involves a steady increase in the improved and constantly improving instrumentalities of production and distribution, the period at length arrives when the industrial and commercial world awakens to the fact that there is a product disproportionate to any current remunerative demand. In this way only is it possible to account for the circumstance that the supply of the great articles and instrumentalities of the world's use and commerce has increased, during the last ten or fifteen years, in a far greater ratio than the contemporaneous increase in the world's population, or of its immediate consuming capacity. But although such is substantially a correct general exposition of the recent course of industrial events, and although all the agencies concerned in reducing the time and labor necessary to effect a given result in the world's work have undoubtedly acted to a certain extent and in all cases in unison, the diversity of method, under which the supply in excess of remunerative demand, or the so-called over-production has been specially effected, is not a little curious. Thus, in the case of crude iron and steel, cotton fabrics and textiles generally, coal, most articles of metal fabrication, ships, and the like, the increase and cheapened supply have been brought about mainly through improvements in the machinery and economy of production; while in the case of wheat, rice, and other cereals, wool, cotton-fibers, meats, and petroleum, like results have been mainly occasioned by improvements in the machinery and economy of distribution. On the other hand, in the case of copper, tin, nickel, silver, quicksilver, quinine, and some important chemicals, over-production, in the sense as above defined, has been almost entirely due to the discovery of new and abundant natural sources of supply. It is also not to be over-looked that other factors, which can not properly be included within the sphere of the influence of recent discoveries and inventions, have also powerfully contributed to bring about the so-called phenomenon of over-production. The increase in the consumption of some commodities is entirely dependent upon the increase in the tastes and intelligence of the masses; and it is undeniable that the culture of the manual laborers of the world has not advanced concurrently, in recent years, with the increased and cheapened production of such articles. Many things, consequently, have been, as it were, showered upon these classes, which they do not know how to use, and do not feel that they need, and for which, therefore, they can create no market. A man who has long been contented with one shirt a week, is not likely to wish to use seven immediately, even if he can buy seven for the price that he formerly paid for one, and his wife takes pleasure in doing his washing. But the most remarkable example of this nature is to be found in the case of sugar, which takes precedence over most of the articles which enter largely into the world's commerce and consumption in respect to extraordinary increase of product, and equally extraordinary decline in price within recent years, and mainly (as will be hereafter shown) by reason of wholly artificial agencies—bounties—rather than from improvements in machinery and processes, or increased facilities for distribution.
One of the inevitable results of a supply of product or service in excess of remunerative demand (i. e., over-production) is a decline of price; and as the power of production and distribution has been increased in an unexampled degree since 1873 (as has been already shown), the prices of nearly all the great staple commodities of commerce and consumption have declined within the same period (as will be hereafter shown), in manner altogether without precedent in all former commercial history. That this experience has been altogether natural, and what might have been expected under the circumstances, will appear from the following considerations:
If production exceeds, by even a very small percentage, what is required to meet every current demand for consumption, the price which the surplus will command in the open market will govern and control the price of the whole; and if it can not be sold at all, or with difficulty, an intense competition on the part of the owners of accumulated stocks to sell will be engendered, with a great reduction or annihilation of all profit. Mr. John Bright, of England, in one of his recent speeches, relates the following incident of personal experience: "I know," he said, "a company manufacturing chemicals of some kind extensively, and one of the principal persons in it told me that in one of those high years, 1872, 1873, and 1874, the profits of that concern were £80,000, and he added that when the stock-taking and its results were communicated to the leading owner in the business, he made this very wise observation: 'I am very sorry to hear it, for you may depend upon it in the years that are to come we shall have to pay the whole of it back'; and in speaking to me of it he said, 'It is quite true, because for several years we have been able to make no dividend at all.' Well, why was that? The men who were making so large incomes at that time reinvested their money in increasing their business. Many of the concerns in this trade doubled their establishments, new companies were formed, and so the produce of their manufacture was extended to such a degree that the prices went down and the profits vanished."
As prices fall and profits shrink, producers working on insufficient capital, or by imperfect methods, are soon obliged, in order to meet impending obligations, to force sales through a further reduction of prices; and then stronger competitors, in order to retain their markets and customers, are compelled to follow their example; and this in turn is followed by new concessions alternately by both parties, until gradually the industrial system becomes depressed and demoralized, and the weaker succumb (fail), with a greater or less destruction of capital and waste of product. Affairs now having reached their minimum of depression, recovery slowly commences. Consumption is never arrested, even if production is, for the world must continue to consume in order that life and civilization may exist. The continued increase of population also increases the aggregate of consumption; and, finally, the industrial and commercial world again suddenly realizes that the condition of affairs has been reversed, and that now the supply has become unequal to the demand. Then such producers as have "stocks on hand," or the machinery of production ready for immediate and effective service, realize large profits; and the realization of this fact immediately tempts others to rush into production, in many cases with insufficient capital (raised often through stock companies), and without that practical knowledge of the detail of their undertaking which is necessary to insure success, and the old experience of inflation and reaction is again and again repeated. Hence, the explanation of the now much-talked-of "periods" or "cycles" of panic and speculation, of trade activity and stagnation. Their periodical occurrence has long been recognized, and the economic principles involved in them have long been understood. But a century ago or more, when such a state of affairs occurred in any country, it was mainly confined to such country, as was notably the case in John Law's "Mississippi Scheme," or the English "South-Sea Bubble," in the last century, or the severe industrial and financial crises which occurred in Great Britain in the earlier years of the present century—and people of other countries, hearing of it after considerable intervals, and then vaguely through mercantile correspondence, were little troubled or interested. During recent years, however, they have become less local and more universal, because the railroad, the steamship, and the telegraph have broken down the barriers between nations, and, by spreading in a brief time the same hopes and fears over the whole civilized world, have made it impossible any longer to confine the speculative spirit to any one country. So that now the announcement of any signal success in any department of production or mercantile venture, at once fires the imagination of the enterprising and reckless in every country, and quickly incites to operations which, without such a leaven of stimulus, would probably never be undertaken. The so-called cycles of inflation and depression have also undoubtedly in recent years become more frequent and intense, because the instrumentalities of production and distribution work more rapidly in effecting results than at any former period.
One universally recognized and, to some persons, perplexing peculiarity of the recent long-continued depression in trade is, the circumstance that while profits have been so largely reduced that, as the common expression goes, "it has not paid to do business," the volume of trade throughout the world has not contracted, but, measured by quantities rather than by values, has in many departments notably increased. The following are some of the more notable examples of the evidence that can be offered in confirmation of this statement:
The years 1879, 1880, and 1881, for the United States were years of abundant crops and great foreign demand, and are generally acknowledged to have been prosperous; while the years 1882, 1883, and 1884 are regarded as having been years of extreme depression and reaction. And yet the movement of railroad freights throughout the country greatly increased during this latter as compared with the former period; the tonnage carried by six railroads centering at Chicago in 1884 having been nearly thirty-three per cent greater than in 1881; and the tonnage carried one mile by all the railroads of the United States in 1884—a year of extreme depression—having been 5,000,000,000 in excess of that carried in 1882; and this, notwithstanding there was a great falling off, in 1884, in the carriage of material for new railroad construction. Again, the foreign commerce of the United States, measured in dollars, largely declined during the same later period; but, measured in quantities, there was but little decrease, and in the case of not a few leading articles a notable increase. Thus, for the year 1885, the total value of the foreign commerce of the country in merchandise was $93,251,921 less than in the preceding year (1881), but of this decrease $90,170,304, according to the estimates of the United States Bureau of Statistics, represented a decline in price. An export of 70,000,000 bushels of wheat from the United States in 1884 returned $75,000,000; while an export of 84,500,000 in 1885 gave less than $73,000,000. An export of 389,000,000 pounds of bacon and hams in 1884 brought in nearly $40,000,000; but shipments of 400,000,000 pounds in 1885 returned but $37,000,000, or an increase of foreign sales of about 11,000,000 pounds was accompanied by a decline of about $3,000,000 in price. In 1884 the United States paid about $50,000,000 for 535,000,000 pounds of imported coffee; in 1885 it imported 573,000,000 pounds for $47,000,000. In 1877, 216,287,891 gallons of exported petroleum were valued at $44,209,360; but in 1886, 303,911,698 gallons (or 87,623,000 gallons more) were valued at only $24,685,767, a decline in value of $19,683,000. But the most remarkable example of changes of this character is to be found in the case of sugar. Thus, in 1883 the United States imported 2,023,000,000 pounds of sugar, for which it paid $91,959,000. In 1885, 2,548,000,000 pounds were imported, at a cost of $68,531,000; or a larger quantity by 525,000,000 pounds was imported in 1885, as compared with 1883, for $23,428,000 less money.
The statistics of the recent foreign trade of Great Britain, as reported to the British Board of Trade, by Mr. Giffen, also exhibit corresponding results. For example, the declared aggregate value of British exports and imports for 1883 were £667,000,000 as compared with £682,000,000 in 1873, an apparent decline of no little magnitude. But if the aggregate of the foreign trade of Great Britain for 1883 had been valued at the prices of 1873, the total in place of £667,000,000, would have been £861,000,000, or an increase for the decade of about thirty per cent.
An explanation of this economic phenomenon of recent years, namely, a continuing increase in the volume of trade, with a continuing low rate or decline in profits, may be found in the following circumstances: One constant result of a decline in prices is an increase (but not necessarily proportional or even universal) in consumption. Evidence on this point, derived from recent experiences, will be referred to hereafter; but the following example illustrates how this economic principle manifests itself even under unexpected conditions:
The price of sulphate of quinine of American manufacture in July, 1879, was $3.35 per ounce in bulk. In June, 1886, the quotation for the same article in bulk was 68 cents per ounce. Quinine is used mainly as a medicine, and is so indispensable in certain ailments that it may be presumed that its cost in 1879 was no great restriction on its consumption, and that no great increase in its use from a reduction in price was to be expected, any more than an increase in the use of coffins for a similar reason—both commodities being used to the extent that they are needed, even if a denial of the use of other things is necessary, in order to permit of their procurement. And yet, that increase in the cheapness of quinine has been followed by a notable increase in its consumption, is shown by the fact that the importation of cinchona-bark from which quinine is manufactured into Europe and the United States during recent years has notably increased; about 4,000,000 pounds having been imported into the United States in 1886, as compared with an import of 2,580,000 in 1883. The following statement also illustrates even more forcibly the ordinary effect of a reduction of price on the consumption of the more staple commodities: Thus, a reduction (saving) of 6d. (twelve cents) per week, in the cost of the bread of every family in Great Britain (a saving which, on the basis of the decline in the wholesale prices of wheat within the last decade, would seem to have been practicable), has been estimated as equivalent to giving a quarter of a million pounds sterling, or $1,250,000 per week, to the whole people of the Kingdom, to be spent for other things.
The evidence is also conclusive that the ability of the population of the world to consume is greater than ever before, and is rapidly increasing. Indeed, such a conclusion is a corollary from the acknowledged fact of increased production the end and object of all production being consumption. Take, for example, the United States, with its present population of sixty million—a population that undoubtedly produces and consumes more per head than any other equal number of people on the face of the globe, and is producing and consuming very much more than it did ten or even five years ago. The business of exchanging the products or services, and of satisfying thereby the wants of such a people is, therefore, necessarily immense, and with the annual increase of population, and with consuming power increasing in an even larger ratio, the volume of such business must continue to increase. And what is true of the United States is true, in a greater or less degree, of all the other nations of the globe. There is, therefore, nothing inconsistent or mysterious in the maintenance or increase in the volume of the world's business contemporaneously with a depression of trade—in the sense of a reduction of profits—occasioned by an intense competition to dispose of commodities, which have been produced under comparatively new conditions in excess of a satisfactory remunerative demand in the world's markets.
The popular sentiment which has instinctively attributed the remarkable disturbance of trade within recent years to the more remarkable changes which have taken place concurrently in the methods of production and distribution has, therefore, not been mistaken. The almost instinctive efforts of producers everywhere to arrest what they consider "bad trade" by partially or wholly interrupting production has not been inexpedient; and the use of the word "over-production," stripped of its looseness of expression, and in the sense as defined by the British Commission (and as heretofore shown), is not inappropriate in discussing the economic phenomena under consideration. It would also seem as if much of the bewilderment that is still attendant upon this subject, and the secret of the fruitlessness of most of the elaborate inquiries that have been instituted concerning it, have been due mainly to an inability to distinguish clearly between a causation that is primary, all-sufficient, and which has acted in the nature of unity, and causes which are in the nature of sequences or derivatives. One striking illustration of this is to be found in the tendency of many of the English writers and investigators to consider the immense losses which British farming capital has experienced since 1873, as alone sufficient to account for all the disturbances to which trade and industry in the United Kingdom have been subjected during the same period. That such losses have been extensive and disastrous without precedent, is not to be questioned. Sir James Caird estimates this loss in the purchasing power of the classes engaged in or connected with British agriculture, for the single year 1885, as having amounted to 42,800,000 ($214,000,000); and as the losses for several preceding years are believed to have been equal or even greater than this, an estimate of a thousand million dollars decline in the value of British farming capital since 1880, from depreciation of land-values, rentals, and prices for stock and cereals, is probably an under rather than an over-estimate. Wheat-growing, which was formerly profitable in Great Britain, is reported as not having been remunerative to the British farmer since 1874; a fact that finds eloquent expression in the acknowledged reduction in British wheat acreage from about 4,000,000 acres in 1869 to 2,528,905 in 1886. That the agricultural populations of the interior states of Europe, which have hitherto been protected in a degree by the barrier of distance against the tremendous cheapening of transportation, are also at last beginning to feel the full effects of its influence, is shown by the statement (United States consular reports, 1886) that farming land in Germany, remote from large cities, where the demand for milk and other perishable products is small, can now be purchased for fifty per cent of the prices which prevailed at the close of the Franco-German War in 1870-'71. And yet such startling results, in the place of being prime factors in occasioning a depression of British trade and industry, are really four removes from the original causes, which may be enumerated in order as follows: First, the occupation and utilization of new and immense areas of cheap and fertile wheat-growing land in the United States, Canada (Manitoba), Australia, and the Argentine Republic. Second, the invention and application of machinery for facilitating and cheapening the production and harvesting of crops, and which on the wheat-fields of Dakota (as before pointed out) have made the labor of every agriculturist equivalent to the annual production of five thousand five hundred bushels of wheat. Third, the extension of the system of transportation on land through the railroad, and on sea through the steamship, in default of which the appropriation of new land and the invention and application of new agricultural machinery would have availed but little. Fourth, the discovery of Bessemer, and the invention of the compound (steamship) engine, without which transportation could not have cheapened to the degree necessary to effect the present extent of distribution. Now, from the conjoined result of all these different agencies has come a reduction in the world's price of wheat to an extent sufficient to make its growing unprofitable on lands taken at high rents, and under unfavorable climatic conditions; and legislation is powerless to make it otherwise. In short, the whole secret of the recent immense losses of the British and to a lesser extent also of the Continental agriculturist, and the depression of British trade and industry, so far as it has been contingent on such losses, stands revealed in the simple statement that American wheat sold for export at the principal shipping ports of the United States in 1885 for 56 cents less per bushel than in 1874, 32 cents less than in 1882, and 20 cents less than in 1884.
"I have calculated that the produce of five acres of wheat can be brought from Chicago to Liverpool at less than the cost of manuring one acre for wheat in England."—Testimony of W. J. Harris, a leading farmer in Devonshire, England, before the British Commission, 1886. And what has happened in the case of wheat has happened also in a greater or less degree as respects meats and almost all other food products; increased supplies having occasioned reduction of prices, and reduction of prices, in turn, ruinous losses to invested capital, and revolutionary disturbances in old methods of doing business. The Bessemer rail, the modern steamship, and the Suez Canal have brought the wheat-fields of Dakota and India, and the grazing-lands of Texas, Colorado, Australia, and the Argentine Republic, nearer to the factory operatives in Manchester, England, than the farms of Illinois were before the war to the spindles and looms of New England.
Changes in the Relations of Labor and Capital.—Consider next how potent for economic disturbance have been the changes in recent years in the relations of labor and capital, and how clearly and unmistakably these changes are consequents or derivatives from a more potent and antecedent agency.
Machinery is now recognized as essential to cheap production. Nobody can produce effectively and economically without it, and what was formerly known as domestic manufacture is now almost obsolete. But machinery is one of the most expensive of all products, and its extensive purchase and use require an amount of capital far beyond the capacity of the ordinary individual to furnish. There are very few men in the world possessed of an amount of wealth sufficient to individually construct and own an extensive line of railway or telegraph, a first-class steamship, or a great factory. It is also to be remembered that for carrying on production by the most modern and effective methods large capital is needed, not only for machinery, but also for the purchasing and carrying of extensive stocks of crude material and finished products. Sugar can now be, and generally is, refined at a profit of an eighth of a cent a pound, and sometimes as low as a sixteenth; or in other words, from eight to sixteen pounds of raw sugar must now be treated in refining in order to make a cent; from eight hundred to sixteen hundred pounds to make a dollar, from eighty thousand to one hundred and sixty thousand pounds to make a hundred dollars, and so on. The mere capital requisite for providing and carrying the raw material necessary for the successful prosecution of this business, apart from all other conditions, places it, therefore, of necessity beyond the reach of any ordinary capitalist or producer. It has been before stated that, in the manufacture of jewelry by machinery, one boy can make up nine thousand sleeve-buttons per day; four girls also, working by modern methods, can put together in the same time eight thousand collar-buttons. But to run an establishment with such facilities the manufacturer must keep constantly in stock thirty thousand dollars' worth of cut ornamental stones, and a stock of cuff-buttons that represents nine thousand different designs and patterns. Hence from such conditions have grown up great corporations or stock companies, which are only forms of associated capital organized for effective use and protection. They are regarded to some extent as evils; but they are necessary, as there is apparently no other way in which the work of production and distribution, in accordance with the requirements of the age, can be prosecuted. The rapidity, however, with which such combinations of capital are organizing for the purpose of promoting industrial and commercial undertakings on a scale heretofore wholly unprecedented, and the tendency they have to crystallize into something far more complex than what has been familiar to the public as corporations, with the impressive names of syndicates, trusts, etc., also constitute one of the remarkable features of modern business methods.
And when once a great association of capital has been effected, it becomes necessary to have a master-mind to manage it—a man who is competent to use and direct other men, who is fertile in expedient and quick to note and profit by any improvements in methods of production and variations in prices. Such a man is a general of industry, and corresponds in position and functions to the general of an army.
"What, as a consequence, has happened to the employés? Coincident with and as a result of this change in the methods of production, the modern manufacturing system has been brought into a condition analogous to that of a military organization, in which the individual no longer works as independently as formerly, but as a private in the ranks, obeying orders, keeping step, as it were, to the tap of the drum, and having nothing to say as to the plan of his work, of its final completion, or of its ultimate use and distribution. In short, the people who work in the modern factory are, as a rule, taught to do one thing—to perform one and generally a simple operation, and, when there is no more of that kind of work to do, they are in a measure helpless. The result has been that the individualism or independence of the producer in manufacturing has been in a great degree destroyed, and with it has also in a great degree been destroyed the pride which the workman formerly took in his work—that fertility of resource, which formerly was a special characteristic of American workmen, and that element of skill that comes from long and varied practice and reflection and responsibility. Not many years ago every shoemaker was or could be his own employer. The boots and shoes passed directly from an individual producer to the consumer. Now this condition of things has passed away. Boots and shoes are made in large factories; and machinery has been so utilized, and the division of labor in connection with it has been carried to such an extent, that the process of making a shoe is said to be divided into sixty-four parts, or the shoemaker of to-day is only the sixty-fourth part of what a shoemaker once was. It is also asserted that "the constant employment at one sixty-fourth part of a shoe not only offers no encouragement to mental activity, but dulls by its monotony the brain of the employé to such an extent that the power to think and reason is almost lost."
As the division of labor in manufacturing—more especially in the case of textiles—is increased, the tendency is to supplement the employment of men with the labor of women and children. The whole number of employés in the cotton-mills of tbe United States, according to the census of 1880, was 172,544; of this number, 59,685 were men, and 112,859 women and children. In Massachusetts, out of 61,246 employés in the cotton-mills, 22,180 are males, 31,496 women, and 7,570 children. In the latter State certain manufacturing towns, owing to the disparity in the numbers of men and women employed, and in favor of the latter, are coming to be known by the appellation of "she-towns."
Another exceedingly interesting and developing feature of the new situation is, that as machinery has destroyed the handicrafts, and associated capital has placed individual capital at a disadvantage, so machinery and associated capital in turn guided by the same common influences, now war upon machinery and other associated capital. Thus, the now well-ascertained and accepted fact, based on long experience, that power is most economically applied when applied on the largest possible scale, is rapidly and inevitably leading to the concentration of manufacturing in the largest establishments, and the gradual extinction of those which are small. A cotton-mill which, with a profit (formerly not unusual) of a cent a yard, could easily pay ten per cent per annum on a given capital, with a reduction of profit to a quarter of a cent per yard, would have to make and sell four times the number of yards to earn the same gross profit, which even then would fall very far short of paying the former rate of percentage on the increased capital, machinery, buildings, etc., necessary to effect the increased production. Such also has already been, and such will continue to be, the outcome of railroad, telegraph, and steamship development and experience; and another quarter of a century, unless legislation interferes, will not unlikely see all of the numerous companies that at present make up the vast railroad system of the United States consolidated, for sound economic reasons, under a comparatively few organizations or companies. In this respect the existing situation in Great Britain (which corresponds to that in all other countries) has thus been represented: "Trade after trade is monopolized, not necessarily by large capitalists, but by great capitals. In every trade the standard of necessary size, the minimum establishment that can hold its own in competition, is constantly and rapidly raised. The little men are ground out, and the littleness that dooms men to destruction waxes year by year. Of the (British) cotton-mills of the last century, a few here and there are standing, saved by local or other accidents, while their rivals have either grown to gigantic size or fallen into ruin. The survivors with steam substituted for water-power, with machinery twice or thrice renewed, are worked while they pay one half or one fourth per cent on their cost. The case of other textile manufactures is the same or stronger still. Steel and iron are yet more completely the monopoly of gigantic plants. The chemical trade was for a long time open to men of very moderate means. Recent inventions threaten to turn the plant that has cost millions to waste brick and old lead. Already nothing but a trade agreement, temporary in its nature, has prevented the closing of half the (chemical) factories of St. Helen's and Widnes, and the utter ruin of all the smaller owners. Every year the same thing happens in one or another of our minor industries."
Such changes in the direction of the concentration of production by machinery in large establishments are, moreover, in a certain and large sense, not voluntary on the part of the possessors and controllers of capital, but necessary or even compulsory. If an eighth or a sixteenth of a cent a pound is all the profit that competition and modern improvements will permit in the business of refining sugar, such business has got to be conducted on a large scale to admit of the realization of any profit. An establishment fitted up with all modern improvements and refining the absolutely large but comparatively small quantity, of a million pounds per annum, could realize, at a sixteenth of a cent a pound profit on its work, but $623. Accordingly, the successful refiner of sugars of to-day, in place of being as formerly a manufacturer exclusively, must now, as a condition of full success, be his own importer, do his own lighterage, own his own wharfs and warehouses, make his own barrels and boxes, prepare his own bone-black, and ever be ready to discard and replace his expensive machinery with every new improvement. But to do all this successfully requires not only the command of large capital, but of business qualifications of the very highest order—two conditions that but comparatively few can command. It is not, therefore, to be wondered at that, under the advent of these new conditions, one half of the sugar-refineries that were in operation in the seaboard cities of the United States in 1875 have since failed or discontinued operations.
The census returns of the United States are also very instructive on this point. Between 1850 and 1860, the number of manufacturing firms and corporations in the United States increased from 123,025 to 140,433, and the value of manufactured products increased from $1,019,106,616 to $1,885,861,676, so that in that decade there was an increase of 17,408 establishments, to an increase of only $866,755,060 in the value of products. In 1870 there were 252,148 firms and corporations so employed, producing $4,232,325,442 in manufactured products; or an increase of 111,715 establishments in the decade from 1860 to 1870, gave an increase of $2,346,461, in the value of products. In 1880, the number of manufacturing establishments was returned at 253,852, producing articles valued at $5,365,579,191, or an addition of only 1,704 firms and corporations was accompanied with an increase of product of $1,133,537,749. Here, then, is a demonstration that the average product of a manufacturing establishment in the United States in 1880 was just sixty per cent greater than it was in 1860.
The following are other illustrations pertinent to this subject: "It is a characteristic and noteworthy feature of banking in Germany," says the London "Statist," "that the bulk of the business is gradually shifting from the small bankers, who used to do a thriving business, to the great banking companies, leaving quite a number of small customers almost without any chance to prosper in legitimate operations concentration of capital and business in the hands of a limited number of powerful customers being the rule of the day."
The tendency to discontinue the building and use of small vessels for ocean transportation, and the inability of such vessels to compete with vessels of larger tonnage, is shown by the statement that while a steamer of from 200 or 300 tons requires one sailor for every 19·8 tons, a steamer of from 800 to 1,000 tons requires but one sailor for every 41·5 tons. In like manner, while a sailing-vessel of from 200 to 300 tons requires one sailor for every 28·9 tons, a sailing-vessel of five times the size, or from 1,000 to 1,600 tons, requires but one sailor for every 60·3 tons. And as it is also claimed that other economies in the construction of the hull or the rigging, and in repairing, are concurrent with the reduction of crews, it is not difficult to understand why it is, that large vessels are enabled to earn a percentage of profit with rates of freight which, in the case of small vessels, would inevitably entail losses.
It was a matter of congratulation after the conclusion of the American war in 1865, that the large plantation system of cotton-raising would be broken up, and a system of smaller crops, by small and independent farmers or yeomanry, would take its place. Experience has not, however, verified this expectation; but, on the contrary, has shown that it is doubtful whether any profit can accrue to a cultivator of cotton whose annual crop is less than fifty bales. "Cotton (at the South) is made an exclusive crop, because it can be sold for cash—for an actual and certain price in gold. It is a mere trifle to get eight or nine cents for a pound of cotton, but for a bale of 450 pounds it is $40. The bale of cotton is therefore a reward which the anxious farmer works for during an entire year, and for which he will spend half as much in money before the cotton is grown, besides all his labor and time. And the man who can not make eight or ten bales at least has almost no object in life, and nothing to live on."
The (Milwaukee) "Directory of American Millers," for 1886, shows a decrease in the number of flour-mills in the United States for that year, as compared with 1884, of 6,812, out of a total in the latter year of 25,079, but an increase at the same time in capacity for flour production. The legitimate inference from these statistics, therefore, is, that the small flour-mills of the United States are being crushed, or forced into consolidation with the larger companies. That consolidation, in this instance, has not interfered with the cheapening of product, is indicated by the circumstance that whereas the mills of Minneapolis sent out in 1881 1,200,000 barrels of flour, at an average price of $6.14 per barrel, the quantity sent out in 1885 was 1,834,000 barrels, at an average of $4.89 per barrel; and for the year 1886 the average was reported at even less.
The experience of the co-operative societies of Great Britain—the inception and practical working of which have been hopefully looked upon as likely to furnish a solution of the labor problem—as recently detailed by Mr. Thomas Hughes ("Tom Brown"), does not, moreover, seem likely to constitute any exception to the general tendency of great aggregated capital, employed in production or distribution, to remorselessly disregard any sentiment on the part of the individual workman, in respect to his vocation, and to crush out or supersede all industrial enterprises of like character that may be compelled to work at relative disadvantage by reason of operating upon a smaller scale, or inability to employ a larger aggregate of capital. This experience, as related by Mr. Hughes at a recent Congress of the Co-operative Societies of Great Britain, has been as follows: Co-operation in Great Britain, so long as it has confined itself to distribution—that is, to the purchase of commodities at the lowest rates at wholesale and without the intervention of middle-men, and their subsequent sale to members of the societies at the minimum of cost and profit—has been a very great success; but co-operation in production, so far as it has been attempted by these same societies, appears to have succeeded only by abandoning co-operation in the original and best sense of the term. For example, some of the great and most successful co-operative distribution societies of England, in order to increase their dividends, have recently undertaken to manufacture a portion of the goods which they require, and thus secure for themselves the profits they have heretofore paid to the manufacturers; and with this view, the manufacture of boots and shoes has been commenced on a large scale by two of the largest of such societies in Glasgow and Manchester respectively—the English society employing a thousand operatives, and disposing of goods to a present aggregate value of more than a million dollars per annum. "These manufacturing enterprises have not, however, been conducted on co-operative lines. ... The work-people in their factories are not co-operators. They do not share in the profits of the business. They receive simply the market rate of wages." They are on just as bad terms with their co-operative employers as they would be with individual capitalists, and they have endeavored to better their condition by entering upon strikes; or, in other words, the great Co-operative Distribution Society managers, in Great Britain, finding that it was essential to their success as manufacturing producers, have adopted, without scruple, all the methods and rules that prevail in similar establishments which have been incorporated and are managed solely with a view to the profit of their individual capitalists or stock- holders."
But this is not the whole story. Besides these great wholesale co-operative distribution societies which have engaged in manufacturing, there are a large number of smaller and weaker similar societies in Great Britain which are also attempting to manufacture the same description of goods for the profit of their more limited circle of members; and these last now complain that they are absolutely unable to withstand the competition of the larger wholesale societies, which, purchasing labor at the lowest rate in the open market, denying any participation of profit to their workmen, and working upon the largest scale, are enabled to produce and sell cheaper. "So that all the disastrous effects of unlimited and unscrupulous competition, for which co-operation was expected to be a cure, are showing themselves among the co-operators, and another example is to be added to the record of modern economic experience, of the strong industrial and commercial organizations devouring the weak."
An element of international character and importance, growing out of the improvements in production through machinery, should also not be overlooked. Whatever of advantage one country may have formerly enjoyed over another by reason of absolute or comparative low wages, is now, so far as the cost of machine-made goods is concerned, through the destruction of handicrafts, and the extended use and improvements in machinery, being rapidly reduced to a minimum. For, apart from any enhancement of cost by taxes upon imports, there is at present but very little difference in all countries of advanced civilization in the cost of machinery, of the power that moves it, or of the crude materials which it converts into manufactures. The machine, therefore, which enables the labor of one man to dispense with the cheap labor of ten men, practically reduces any advantage which the manufacturer in France, Germany, or other countries, paying nominally low wages, has heretofore had over the manufacturer of England, or of the United States, to the simple difference in the cost of the labor of the operative who manages the machine in different places; and all experience shows that the invariable concomitant of high wages, conjoined with the skillful management of machinery, is a low cost of production.
Attention is next asked to the economic— industrial, commercial, and financial—disturbances that have also resulted in recent years from changes, in the sense of improvements, in the details of the distribution of products. And as the best method of showing this, the recent course of trade in respect to the practical distribution and supply of one of the great articles of commerce, namely, tin-plate, is selected.
Before the days of the swift steamship and the telegraph, the business of distributing tin-plate for consumption in the United States was largely in the hands of one of the great mercantile firms of New York, who brought to it large enterprise and experience. At every place in the world where tin was produced and tin-plate manufactured, they had their confidential correspondent or agent, and every foreign mail brought to them exclusive and prompt returns of the state of the market. Those who dealt with such a firm dealt with them under conditions which, while not discriminating unfavorably to any buyer, were certainly extraordinarily favorable to the seller; and great fortunes were amassed. But to-day how stands that business? There is no man, however obscure he may be, who wants to know any morning the state of the tin-plate market in any part of the world, but can find it in the mercantile journals. If he wants to know more in detail, he joins a little syndicate for news, and then he can be put in possession of every transaction of importance that took place the day previous in Cornwall, Liverpool, in the Strait of Sunda, in Australia, or South America. What has been the result? There are no longer great warehouses where tin in large quantities and of all sizes, waiting for customers, is stored. The business has passed into the hands of men who do not own or manage stores. They have simply desks in offices. They go round and find who is going to use tin in the next six months. They hear of a railroad-bridge which is to be constructed; of a certain number of cars which are to be covered; that the salmon-canneries on the Columbia River or Puget's Sound are likely to require seventy thousand boxes of tin to pack the catch of this year, as compared with a requirement of sixty thousand last year (or in 1886)—a business, by-the-way, which a few years ago was not in existence—and they will go to the builders, contractors, or business managers, and say to them: "You will want at such a time so much tin. I will buy it for you at the lowest market price, not of New York, but of the world; and I will put it in your possession, in any part of the continent on a given day, and you shall cash the bill, and pay me a percentage commission"—possibly a fraction of one per cent; thus bringing a former great and complicated business of importing, warehousing, selling at wholesale and retail, and employing many middle-men, clerks, book-keepers, and large capital, to a mere commission business, which dispenses to a great extent with the employment of intermediates, and does not necessarily require the possession or control of any capital.
Let us next go one step farther, and see what has happened at the same time to the man whose business it has been not to sell, but to manufacture tin-plate into articles for domestic use, or for other consumption. Thirty or forty years ago, the tinman, whose occupation was mainly one of handicraft, was recognized as one of the leading and most skillful mechanics in every village, town, and city. His occupation has, however, now well-nigh passed away. For example, a townsman and a farmer desires a supply of milk-cans. He never thinks of going to his corner tinman, because he knows that in New York, and Chicago, and Philadelphia, and other large towns and cities, there is a special establishment fitted up with special machinery, which will make his can better and fifty per cent cheaper than he can have it made by hand in his own town. And so in regard to almost all the other articles which the tinman formerly made. He simply keeps a stock of machine-made goods, as a small merchant, and his business has come down from that of a general, comprehensive mechanic to little other than a tinker and mender of pots and pans. Where great quantities of tin-plate are required for a particular use, as, for example, the canning of salmon or lobsters, of biscuit, or of fruit and vegetables, the plates come direct from the manufactory to the manufacturer of cans or boxes, in such previously agreed upon sizes and shapes as will obviate any waste of material, and reduce to a minimum the time and labor necessary to adapt them to their respective uses. And by this arrangement alone, in one cracker (biscuit) bakery in the United States, consuming forty thousand tin boxes per month, forty men are now enabled to produce as large a product of boxes in a given time as formerly required fifty men; and, taken in connection with machinery, the labor of twenty-five men in the entire business has become equivalent to that of the fifty who until recently worked by other methods. And what has been thus affirmed of tin-plate might be equally affirmed of a great variety of other leading commodities; the blacksmith, for example, no longer making, but buying his horseshoes, nails, nuts, and bolts; the carpenter his doors, sash, blinds, and moldings; the wheelwright his spokes, hubs, and fellies; the harness-maker his straps, girths, and collars; the painter his paints ground and mixed, and so on; the change in methods of distribution and preparation for final consumption having been equally radical in almost every case, though varying somewhat in respect to particulars.
The same influences have also to a great degree revolutionized the nature of retail trade, which has been aptly described as, "until lately, the recourse of men whose character, skill, thrift, and ambition, won credit, and enabled them to dispense with large capital." Experience has shown that, under a good organization of clerks, shopmen, porters, and distributors, it costs much less proportionally to sell a large amount of goods than a small amount, and that the buyer of large quantities can, without sacrifice of satisfactory profit, afford to offer to his retail customers such advantages in respect to prices and range of selection, as almost to preclude competition on the part of dealers operating on a smaller scale, no matter how otherwise capable, honest, and diligent they may be. The various retail trades, in the cities and larger towns of all civilized countries, are accordingly being rapidly superseded by vast and skillfully organized establishments—and in Great Britain and Europe by co-operative associations which can sell at little over wholesale prices a great variety of merchandise—dry-goods, manufactures of leather, books, stationery, furs, ready-made clothing, hats and caps, and sometimes groceries and hardware—and at the same time give their customers far greater conveniences than can be offered by the ordinary shopkeeper or tradesman. In London, the extension of the "tramway" or street-railroad system is even advocated, on the single ground that the big stores need quicker access to their branch establishments, in order to still further promote the economy of goods distribution.
The spirit of progress conjoined with capital, and having in view economy in distribution and the equalization of values, is therefore controlling and concentrating the business of retailing, in the same manner as the business of wholesale distribution and transportation, and of production by machinery, is being controlled and concentrated, and all to an extent never before known in the world's experience.
Keeping economy in distribution constantly in view as an essential for material progress, the tendency is also everywhere to dispense to the greatest extent with the "middle-man," and put the locomotive and the telegraph in his place. Retail grocers, as before shown, now buy their teas directly of the Chinaman, and dispense with the services of the East Indian merchant and his warehouses. Manufacturers deal more directly with retailers, with the result, it is claimed, of steadying supply and demand, and preventing the recurrence of business crises. The English cotton-spinner at Manchester now buys his raw cotton by cable in the interior towns of the cotton-growing States of North America, and dispenses with the services of the American broker or commission-merchant. European manufacturers now send their agents with samples of merchandise to almost every locality in America, Asia, and the Pacific islands, where commerce is protected and transportation practicable, and offer supplies, even in comparatively small quantities, on better terms than dealers and consumers can obtain from the established wholesale or retail merchants of their vicinity. And all of these changes have inevitably occasioned, and for a long time yet will continue to occasion, great disturbances in old methods, and entail losses of capital and displacement from occupation on the part of individuals. And yet the world wonders, and commissions of great states inquire without coming to definite conclusions, why trade and industry in recent years have been universally and abnormally disturbed and depressed.
- "One of the commonest explanations of this depression or absence of profit is that known under the name of over-production; by which we understand the production of commodities, or even the existence of a capacity for production, at a time when the demand is not sufficiently brisk to maintain a remunerative price to the producer, and to afford him an adequate return on his capital. We think such an over-production has been one of the most prominent features of the course of trade during recent years; and that the depression under which we are now suffering may be partially explained by this fact."—British Commission, majority report. "By over-production we understand the production of commodities (or existence of the agencies of production) in excess, not of the capacity of consumption if their distribution was gratuitous, but of the demand for export at remunerative prices, and of the amount of income or earnings available for their purchase in the home market. The depression under which we have so long been suffering is undoubtedly of this nature."—British Commission, minority report.
- "Machinery — and the word is used in its largest and most comprehensive sense — has been most potent in bringing the mechanically-producing nations of the world to their present industrial position, which position constitutes an epoch in their industrial development. The rapid development and adaptation of machinery in all the activities belonging to production and transportation have brought what is commonly called over-production; so that machinery and over-production are two causes so closely allied that it is difficult to discuss the one without taking the other into consideration.... The direct results, so far as the present period is concerned, of this wonderful and rapid extension of power-machinery are, for the countries involved, over-production, or, to be more correct, bad or injudicious production; that is, that condition of production of things the value of which depends upon immediate consumption, or consumption by that portion of the population of the world already requiring the goods produced." — Report of the United States Commissioner of Labor, 1886, pp. 88, 89.
- This experience of France in the last quarter of the eighteenth century is repeating itself at the present day in China. General Wilson, in his recent "Study of China" (1887), states that "over ten million people died from starvation about ten years ago in the provinces of Shansi and Shensi alone, while abundance and plenty were prevailing in other parts of the country. Every effort was made to send food into the stricken regions; but owing to the entire absence of river and canal navigation, as well as of railroads, but few of the suffering multitudes could be reached."
- The average value of the wheat exported from the United States in 1885, according to the tables of the United States Bureau of Statistics, was 86 cents per bushel at the shipping ports. This was a decline of 20 cents from 1884, 262 cents from 1883, 32 cents from 1882, 66 cents from 1874, and 61 cents from 1871.
The export value of corn was 54 cents in 1885, showing a decline of 7 cents from 1884, 14 cents from 1883, 12 cents from 1882, 30 cents from 1875, and 15 cents from 1872.
The export value of oats was 37 cents in 1885, showing a decline of 2 cents from 1884, 13 cents from 1883, 7 cents from 1882, 20 cents from 1875, and 14 cents from 1871.
The export price of bacon was 9 cents in 1885, showing a decline of 1 cent from 1884, 2 cents from 1883, 2 cents from 1875, a rise of 1 cent from 1872, and a decline of 6 cents from 1870.
The export price of lard was 7 cents in 1885, showing a decline of 2 cents from 1884, 4 cents from 1883, 6 cents from 1875, 3 cents from 1872, and 9 cents from 1870.
How closely the decline in recent years in the export prices of American cereals has been followed by corresponding reductions in the prices of cereals in the markets of Great Britain is exhibited by the following table (published in the British "Farmer's Almanac" for 1886), showing the average prices per quarter of wheat, barley, and oats, in Great Britain for two periods of ten years, commencing with 1865, with a separate estimate for 1885:
Cereals. Price per quarter.
Average for the 10
Price per Quarter.
Average for the 10
Average price per
quarter for 1885
s. d. s. d. s. d. Wheat. 54 7 4 43 9 4 32 10 Barley. 39 2 36 5 30 1 Oats. 25 10 2 22 8 4 20 7
Similar tables given by the same authority show the gross value per annum of the product of wheat, barley, oats, beef, mutton, and wool, in Great Britain, to have been £35,000,000 ($175,000,000) less in 1885 than were the mean returns for the ten years 1866-1875. According also to data given in the returns of the British Registrar-General, the average prices of beef by the carcass in the London market were £58 5s. 7d. per ton during the ten years from 1866-1875, £57 5s. 8d. for 1876-1885, and £49 17s. 6d. for the year 1885.
- The following is a reported enumeration of the specialties or distinct branches of shoemaking at which men, women, and children are kept constantly at work in the most perfect of the modern shoe-factories, no apprentices being needed or taken in such establishments: "Binders, blockers, boot-liners, beaters-out, boot-turners, bottomers, buffers, burnishers, channelers, counter-makers, crimpers, cutters, dressers, edge-setters, eyeleters, finishers, fitters, heelers, lasters, levelers, machine-peggers, McKay stitchers, nailers, packers, parters, peggers, pressers, rosette-makers, siders, sandpaperers, skinners, stitchers, stringers, treers, trimmers, welters, buttonhole-makers, clampers, deckers, closers, corders, embossers, gluers, inner sole-makers, lacers, leather-assorters, riveters, rollers, seam-rubbers, shank-pressers, shavers, slipper-liners, sole-leather-cutters, sole-quilters, stampers stiffeners, stock-fitters, strippers, taggers, tipmakers, turners, vampers, etc."
- "The tendency of late years is toward the employment of child-labor. We see men frequently thrown out of employment, owing to the spinning-mule being displaced by the ring-frame; or children spinning yarn, which men used to spin. In the weaveshops, girls and women are preferable to men, so that we may reasonably expect that, in the not very distant future, all the cotton-manufacturing districts will be classed in the category of 'she-towns.' But people will naturally say, What will become of the men? This is a question which it behooves manufacturers to take seriously into consideration, for men will not stay in any town or city where only their wives and children can be given employment. Therefore, a pause at the present time might be of untold value in the future, for, just as sure as the world goes round, women and children will seek fresh pastures, where work can be found for the husband and father, in preference to remaining in places where he has to play the part of the 'old woman,' while they go to work to earn the means of subsistence."—Wade's Fiber and Fabric.
- "Bradstreet's Journal."