Manual of Political Economy/Book 1/Chapter 6
CHAPTER VI.
PRODUCTION ON A LARGE AND A SMALL SCALE.
IF we had not feared that the last chapter was becoming too long, we should not have placed the subject we here propose to discuss in a separate chapter, because the carrying out of production on a large and a small scale exerts a very powerful effect upon the productive powers both of land, labour, and capital.
Comparative advantages of production on a large and small scale.The comparative advantages of production on a large, and production on a small scale, depend upon conditions which may vary greatly at different times, and in different employments. Every extension of machinery no doubt tends to give an advantage to production on a large scale. In the days of hand-loom weavers, little would have been gained by gathering them together into large buildings, such as the mills of Manchester. Each hand-loom weaver worked for himself; he needed not the assistance of others, and therefore there was no reason why he should not work in his own cottage. But the introduction of machinery has divided the work which was previously done by the hand-loom weaver, into a great number of distinct operations; and in this way machinery renders production on a large scale absolutely necessary. But to what extent it is advantageous to increase the scale of production, whether it is more profitable to erect a mill containing 10,000 spindles, or two mills containing 5,000 each, will be most correctly determined by those engaged in the trade. The comparative economy of working large and small mills is sure to be quickly ascertained by the manufacturers themselves; there can, however, be no doubt that a small manufactory will have little chance of competing with a Advantages of large manufactories.large one, if the small manufactory is not large enough for the efficient working of the most complete machinery used in the trade. Again, a small manufactory cannot compete with a large one, if in the one there is a less complete division or labour than in the other. A pin factory which employed ten men would produce pins at a much smaller cost than a factory in which only five men were employed. The labour of superintendence generally forms a comparatively larger item in small concerns than in large ones; for instance, each room in a cotton mill may require an overlooker, whether a hundred men are working in the room, or two hundred. A steam-engine must be constantly watched by an engineer, whether the engine is fifty-horse power, or a hundred-horse power; but all such questions concerning the greater or less economy of business arrangements will ultimately be decided by practical experience. There is at the present time a very decided tendency to increase the scale of production, and this tendency is particularly shown in those vast manufactories and warehouses which exemplify the wealth and energy of Lancashire and Yorkshire; hence we must conclude, that production on a large scale, especially in the manufacturing districts, is rapidly becoming more advantageous. In fact, we have ascertained that a cotton mill containing 10,000 throstle spindles can be worked with a capital of 20,000l., whereas a mill with 5,000 spindles requires a capital of not less than ll,000l.
The scale of manufacturing operations is limited by the demand.It was remarked in the last chapter that the extent of the demand places a limit upon the division of labour. But the extent of the demand influences in a much more decided manner the scale on which the production of any commodity can be carried on. A very serious loss would be incurred if the demand for any commodity was not sufficient to take off all that might be produced by the machinery and plant erected for its manufacture. Machinery when unemployed is capital lying idle, and the workmen when thrown out of employment could only be kept together by paying them some portion of their wages. This would represent an unproductive employment of capital, but if the labourers were not thus kept together, when work was resumed new and untrained hands would have to be employed. Machinery also, if kept idle, frequently suffers great injury. The fluctuation in the demand, when it is small, is comparatively much greater than when the demand is large.
Production on a small scale may maintain itself, though at a disadvantage.Even if production on a large scale is very advantageous, production on a small scale may still be very much practised. Let us again use our previous example, and suppose that a cotton mill containing 20,000 spindles can be worked at a much cheaper rate than one containing 5,000; but a capital of nearly 40,000l. may perhaps be required to work a mill with 20,000 spindles, whereas a capital not much exceeding ll,000l. would probably suffice for a mill with 5,000 spindles. The number of individuals who possess a capital of 40,000l., and who are willing to invest it in a cotton mill, is very limited, and therefore there can only be a limited number of mills with 20,000 spindles. These mills may not suffice to spin all the cotton for which there is a demand, and therefore other and smaller mills must be worked. It is true that the small mills could not remain open if they had to compete with an unlimited number of large mills; but as the number of these is virtually restricted, the small mills may be still worked at an advantage, although the profits obtained by these mills may fall for short of the profits obtained by the larger ones. Large capitals thus obtain an advantage, and possess as it were a monopoly; we shall treat this subject at considerable length in our chapters on profits.
The advantages of production on a large scale only partly attainable by joint-stock companies.It may naturally be supposed that, in a wealthy country like England, production on a large scale when advantageous will never be restricted by the causes to which we have just alluded, for it may be said that if the individuals who have sufficient capital to work large mills are limited in number, there will be no difficulty in gathering together the requisite capital by means of joint-stock companies, and that such companies will avail themselves or the advantages of a large production, and thus drive the small producers out of the market. But joint-stock companies labour under many difficulties: and although they secure the advantages of producing on a large scale, yet in many industrial occupations, joint-stock companies cannot compete with the energy
of the individual trader or manufacturer. With one or two exceptions there are no individuals who have capital enough for the construction and maintenance of such works as railways, docks and canals; and therefore such undertakings must be carried out by joint-stock companies. But if a joint-stock company conducts some ordinary business, it is often placed in a comparatively disadvantageous position, because the energy and watchfulness are wanting which an individual exercises when a business is his own. If competition is active, a business cannot be successful unless all its operations are conducted with energy, and unless economy is secured by constant vigilance. In a joint-stock company all depends upon the manager or agent. owing to the want of interest on the part of the managers.The individual shareholders are not sufficiently interested to take any part in the management of the concern. Men can very rarely be found who are as careful with other people's property as they would be with their own. The manager of a company may do nothing which is in the slightest degree dishonest; it may be impossible to single out any particular instance in which he has neglected to do his duty, yet the position in which he is placed will not probably call forth those qualities which not only distinguish the good man of business, but which also cause the success of commercial undertakings. If however the manager is partly remunerated by a share of the profits realised, he will no doubt be stimulated to much greater exertion; in fact he will be made to feel the same kind of interest in the success of the business as if it were his own, and many of the disadvantages to which we have just referred as impeding the success of joint-stock companies will be removed. Joint-stock trading companies have frequently failed, because those concerned m their management have not a sufficiently strong pecuniary interest in their success. There can be no doubt that individual employers suffer most serious losses from the listlessness and apathy of their workmen, although such employers have the strongest motives to prevent neglect of work by their labourers; the losses however which are thus incurred will be still more serious in the case of a trading company, when the labourers are only watched by a manager, who is comparatively uninterested. A joint-stock trading company would even be more benefited than the individual trader, by adopting some course, if it were practicable, which would give the labourers a pecuniary interest in their work, for in this manner the energy and skill of the workmen might with greater certainty be secured. Joint-stock companies have always experienced the greatest obstacles in retail trades, where the transactions are numerous and small. The petty details of such businesses seem particularly to require the energy of individual management.
Special advantage of cooperative stores.The cooperative stores, however, which have assumed so much prominence all over the country, especially in London and in the north of England, are joint-stock companies; the capital is supplied by a large number of shareholders. Yet these societies have engaged with the most remarkable success in the ordinary retail trades, conducted by grocers, drapers, chemists, wine-merchants, coal-merchants, bakers, butchers, &c The success of these societies not only proves that the disadvantages of the joint-stock system have been much exaggerated, but also indicates how the most prominent of these disadvantages may be overcome. The prosperity of the cooperative stores is probably mainly due to the ready-money system which they invariably adopt; the smallest sum is consequently never lost in bad debts.
The extension of the joint-stock system desirable.It is in every respect advantageous to a country, that the joint-stock system should be encouraged; it greatly promotes the production of wealth. Small capital which, if separately applied, would do little towards the production of wealth, are brought together by joint-stock companies, and accomplish industrial works of the utmost importance. A thousand individuals who have saved lOOl. each, may not have the time, capacity, or inclination themselves to employ the money in any business. If each of these individuals subscribed his lOOl to one common fund, a capital would be created sufficient to work a large Manchester manufactory; they would become proprietors and promoters of a great commercial concern, annually producing a large amount of wealth, and annually employing many hundreds of labourers.
Large and small farming.The relative advantages of large and small farming have long been one of the most controverted points connected with the subject of this chapter. In England, agriculture has no doubt, within the last few years, been conducted on a much larger scale than formerly. In the best cultivated districts of England, each farmer generally rents not less than three or four hundred acres. In many parishes the land which is now cultivated by one or two farmers was, within the memory of those who are still living, parcelled into twenty or thirty distinct holdings. Advantages of large farming.We will first point out some of the obvious advantages which arise from large farming. The extended use of agricultural machinery has been a prominent feature of that great improvement in the cultivation of the soil which has taken place during the present century. Forty or fifty years since the greater portion of the corn grown in this country was thrashed by the flail; now steam-thrashing machines are used in every district, and the flail has been almost banished; even agricultural labourers rejoice in the change, and confess that they would most reluctantly resume the use of the flail; the young men of the present day would probably not submit to such monotonous work. Steam cultivation is each year rapidly extending. Agricultural machinery more available.A much greater proportion of the farmer's capital is consequently now invested in machinery than formerly. A good steam-thrashing machine costs nearly 400l.; small farmers cannot afford to avail themselves of all this improved and expensive machinery. Not only can they not afford it, but a steam-thrashing machine requires for its working something more than the resources which a small farm can supply; its working must be attended to by eight or ten men; the corn is taken from the stack by two men, another man has to feed the machine with corn; the engine must have an engineer; the straw must be carried away by one man, and stacked by another; another man must take the grain from the machine, and another again will have to carry water to the engine. It is true that a great many even of the large farmers do not now own, but hire, the steam-thrashing machines which they use; such a plan, however, is extremely uneconomical. A farmer who hires such a machine cannot always obtain it at the exact time he may require it; those who let the machine must make a profit from those who hire it, and for several reasons a high charge must be paid for the use of the machine. There is the expense of taking it from one farm to another; it is earning nothing when being so moved, and the wear and tear caused by dragging it along the roads is very considerable. But a small farmer who hires such a machine is under still greater disadvantages, for he not only has to hire the machine, but must also hire the men to work it, since he has not enough men in his own employment. Men who are hired in this irregular way must be paid more than the ordinary labourer, whose employment is constant, for they have to sacrifice much time in moving from place to place in quest of this irregular employment. Such a farmer will not be able to thrash his corn at the time most convenient to him; he must thrash it when he can get the engine and hire the men.
Fields are larger,Small farming generally involves small fields; these fields will be surrounded by hedges, and must be approached by roads, and thus a great deal of land is wasted; the disadvantage of small fields will be greatly increased when steam cultivation is introduced The steam plough requires considerable breadth of land upon which to work; at every turn that the plough makes, time is lost; after the centre of the field has been ploughed, the headlands will remain to be ploughed separately; the labour of moving the engine from field to field is considerable; much time may be thus wasted, and in fact it has been calculated that a steam cultivator would plough a square field of ten acres in half the time occupied in ploughing two fields of five acres each, and at two-thirds of the expense.
and labour frequently more productive.Many kinds of labour on a small farm are less productive than on a large one. Thus a flock of 400 sheep requires nearly as many shepherds as a flock of 800. Each farm has a carter, whether the farm is 300 acres, or 600 acres. Again, much of the time and energy of a small farmer is frequently wasted, for he would often be able to superintend his farm quite as well if it were larger.
These and many other considerations show that large farming now possesses advantages over small farming, and that these advantages are destined to become more decided as the use of agricultural machinery is extended. Under large farming, labour can be made to work with greater efficiency; capital can be applied with greater effect, the most complete machinery can be used, less land will be wasted in useless hedges, and thus large farming tends to make labour and capital more efficient.
Advantages of small farming.The advantages which have been here attributed to large farming mainly refer to the cultivation of corn and the breeding of sheep. In the growth of various other products, and especially in dairy farming, many most important advantages are associated with small farming. A traveller on the continent must have remarked that the vine, and other such products which require great care, it may be almost said tenderness, in their cultivation, are most frequently grown by small farmers; the reason of this is, that the cultivation of products requiring such watchfulness and skill could not be trusted to the careless apathy which so frequently characterizes the hired labourer. It is seldom that anyone but a mother will bestow the tender care an infant needs, and the vine will be seldom properly cultivated except by one who has that interest in it which can alone be derived from the feeling of ownership. Even in England there is a similar advantage associated with small farming; for all the operations of a small farm may be attended by the interested watchfulness of the farmer himself, and this advantage is more prominently shown in those farming operations which require great care. A dairy, for instance, needs a constant attention which the large farmers of the present day have not time or inclination to bestow; hence, if there is a dairy attached to a corn or sheep farm, the large farmer will generally underlet his dairy; the farmer supplies all the food for his cows, and the person to whom the dairy is let has every motive to give his whole and undivided attention to those minute details upon which the success of a dairy depends. Again, English farmers seldom are willing to give the time and attention which the profitable rearing of poultry for the market requires. In France, Russia, Denmark and other European countries, however, the farmer depends upon his poultry for no inconsiderable portion of his profits; and the extent to which this branch of industry is cultivated is proved by the fact that England annually purchases from abroad eggs to the value, in 1904, of nearly 7,000,000l.
The question of large and small farming is often incorrectly confused with the consideration of small landed properties. This subject will be discussed in some of the succeeding chapters of this work.