Popular Science Monthly/Volume 63/October 1903/Cooperation, Coercion, Competition

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UNDER the title, 'Cooperation, Coercion, Competition,' I propose to consider the three characteristic systems of industrial organization. Having set forth in a few words what appear to me to be the determining factors of industrial organization, in the first part of my paper I shall endeavor to show that the three systems of association have succeeded each other historically in the order named, that in primitive times, before the appropriation of natural resources, the cooperative system prevailed, that during the proprietary period which followed, when natural resources were appropriated but before the institution of exchange, the cooperative system became subservient to the coercive system, and that with the rise of the commercial era resulting from the development of exchange, the coercive system was superseded by the competitive system. In the second part of my paper I intend to draw attention to certain tendencies which appear to me to point toward a reversal of the original order of evolution. Having shown why the competitive system was necessarily a transitional form, I shall indicate how it is now being superseded by the coercive system, and in conclusion I shall endeavor to demonstrate that the ultimate outcome must be the reestablishment of the original cooperative system.

My main proposition is that industrial organization is determined by two factors: first, by the character of the social surplus, and second, by the monopolization of the sources thereof. Instead of stopping to prove this proposition I shall proceed at once with the historical survey, hoping that in the course of such survey the requisite proof will be forthcoming.

During the earliest days of human development, when people lived in what political philosophers have called the natural state, the surplus was derived from fishing, hunting, nut-gathering, berry-picking and root-culture. In this savage, or so-called natural state, the character of the surplus was such as sometimes to call simply for sexual association of labor and sometimes to require personal association of labor. To cite a few examples: for shore-fishing, river-fishing and forest hunting, nut-gathering, berry-picking and primitive root-culture, sexual association of labor was sufficient, and we find the peoples pursuing these occupations organized accordingly along domestic lines. On the other hand, sea-fishing and plain-hunting to be successful had to be carried on by clans or cooperating companies of virile males—manly-men, as they were called—and as root-culture advanced from the original essartage methods to the more complicated plantation system, the association of the women and womanly-men was found essential. As far as these latter cases were concerned, therefore, the character of the surplus required personal association of labor and in this way the cooperative system was originally established.

Whether the character of the surplus was such as to require sexual or personal association of labor, in the natural state, the sources of the surplus were far too widespread to admit of monopolization. True, the spawning grounds of fish might be closed in to some extent, but for the most part, fishing, hunting and primitive agricultural opportunities were too far dispersed to be monopolized by any one party within the community to the exclusion of others. As a result, access to the surplus source was not restricted to any particular class. Where the character of the surplus was such as to require only sexual association of labor, there each family had immediate access to the surplus source and the individual members were dependent upon the domestic group for their livelihood. Where the character of the surplus was such as to require personal association of labor, there the cooperating company had immediate access to the surplus source and the individual members were dependent upon the clan for their livelihood. But though in both cases individuals were dependent upon the group to which they belonged, still no one set of individuals was dependent upon another set of individuals for their livelihood. In short, the fact that the surplus source could not be controlled precluded the possibility of coercion and left the cooperative system supreme in the natural state.

During the proprietary period which succeeded the natural state the surplus was derived primarily from cattle-raising and agriculture. For the development of the pastoral surplus personal association was necessary for the defense of the flock and for the occupation and defense of pasture lands, with the result that we find the manly-men of pastoral peoples organized like the hunters of the plain into military companies under a competent chief. For the development of the agricultural surplus personal association of labor was not everywhere necessary. In the temperate zone, where the extensive system of agriculture was most profitable, the land could best be cleared and cultivated by individual families. In the subtropical zone, however, agricultural opportunities were confined to certain favored localities, such as oases, river valleys or lakesides, where irrigation and hoe and spade culture were necessary. These conditions called for intensive agriculture and this in turn necessitated the associated labor of men, women and even children. In summarizing, therefore, we may say that during the proprietary period the character of the surplus was such as to call for cooperation among pastoral peoples and intensive agriculturists, while among extensive agriculturists the familial or domestic system was found sufficient.

The sources of the pastoral surplus might be monopolized to a considerable extent, since herds of domesticated animals were not goods freely reproducible by labor alone. A single individual or a company of cooperating individuals might by labor alone bring down the wild beasts of the forest and plain, but they could not secure a herd of domesticated animals in this way. Herds and flocks were products of generation and their possession was accordingly confined to the comparatively few who had inherited such stocks from their ancestors. These proprietors were, therefore, in their way monopolists who controlled the pastoral surplus source. As for the rest, they could only gain access to this surplus source by serving the proprietors and receiving in return from them either the products of the existing herd or the nucleus of a new. To the extent, then, that the non-proprietors were dependent upon the herd for their livelihood, they could be coerced by the proprietors. It should be borne in mind, however, that the proprietors were also dependent to some extent upon the non-proprietors for the defense of their herds and pasture lands. For this reason they were forced to mitigate the rigor of coercion in order to secure the advantages of cooperation.

The sources of the agricultural surplus were either widespread or confined. In the subtropical zone where the sources of the agricultural surplus were confined it was a comparatively simple matter for a group of conquerors or usurpers to secure control. In the temperate zone, however, where the sources of the agricultural surplus were spread out over a wide area, monopolization was more difficult. By conquest and through inheritance such control was, however, eventually obtained, except where the surplus was not rich enough to make such monopolization worth while. In both cases when proprietorship was established the disinherited peasants were henceforth dependent upon their landlords for their livelihood, for they no longer had free access to the surplus source. As a result, in agricultural regions the coercive system was established in all its rigor during what we speak of as the feudal ages.

The commercial era may be said to have begun with the differentiation of occupations, the institution of markets and the introduction of coined money. With the resultant development of exchange a new surplus source was opened up whose utility producing capacity was practically boundless, provided appropriate means and methods for its exploitation could be devised. In this enquiry we are concerned with the methods rather than with the means of production, with the system of organization rather than with the kinds of capital required for the development of the industrial surplus source.'

For trade and commerce the familial system was found inadequate from the outset. For handicraft and manufacture also the domestic system was only applicable in certain circumstances and to a limited extent at that. On the whole, therefore, the development of industry and commerce is characterized by the extensive and intensive application of the personal system of association. During the early days of the craft and merchant guilds the cooperative system included all classes of producers, the apprentices, the journeymen and the guild masters. Later on when the wage system was established there was a differentiation of cooperative groups, the apprentices and Journeymen cooperating henceforth as industrial laborers, and the masters combining as capitalists in partnerships, companies and corporations. This differentiation of cooperative groups was due to the gradual monopolization of the sources of the industrial surplus. We should accordingly shift our standpoint slightly and study the subject from this side.

At first the sources of the industrial surplus were too widespread to admit of monopolization. As a result, the early guilds were organized along purely cooperative lines. As each guild chose its particular line of production, the then existing surplus sources came in time by custom to be regarded as monopolies of the several guilds. But as every member of the community was allowed to Join a guild and rise from apprentice to Journeyman, to master, such collective monopolies worked no injury to any one. It had the effect, however, of restricting the normal development of industry. Beyond the limited lines of production controlled by the guilds there were practically limitless industrial opportunities open to those who would work for themselves. This being the case, the guilds—even though they sought and for the most part obtained the support of the state—were not able to hold their artificial monopolies of the surplus sources. Not to go into the history of the subject, suffice it to say that in some countries by revolution and in others through peaceful progress, the older guild privileges were everywhere broken down and industrial opportunities opened to all. In this manner the way was cleared for the development of the competitive system, which was a compromise of the older cooperative and coercive systems, and a transitional stage, as it were, between the two.

Under the new regime the surplus sources were opened to competition, and by the laws of private property each producer was allowed to hold and pass by testament so much of the surplus source as he succeeded in developing. In considering the conditions of this contest it should be noted at the outset that for the development of the industrial surplus organized labor was not enough; a certain amount—and with the progress of industry an increasing amount—of capital was required. So from the first those that possessed capital had a superior claim to the control of the surplus source, and as industry developed the validity of this claim increased. Those that had labor alone to offer were consequently compelled to work for wages for those who had capital to contribute; but if from their wages the laborers could save enough, they too might become capitalists and enter upon the competitive struggle on their own account. Nor among the capitalists were the conditions of the contest entirely equal. For the development of some surplus sources more capital was required than for the development of others; and again, though as far as the surplus source itself was concerned, small capital could compete with large capital, still by reason of the economy of great organizations the small capitalist might nevertheless be at a disadvantage. So from the first the large capitalist had a superior claim to the control of the surplus source, and with the development of industry the validity of this claim also increased.

From this it is evident that the competitive system must result in the gradual elimination of the weaker competitors until in the end only the strong survive. Indeed, this movement has already gone so far as to be unmistakable, particularly in this land of ours where the competitive system was given the fairest chance to prove its economic efficiency. As the competitive field was gradually restricted, the laborers naturally were first excluded. Though they continued to save, as time went on they found that more and more capital was required to enter into business for themselves, either because the industries in their neighborhood were already absorbed by large capitalists, or because the industries they might still embark upon with their small capital were far removed from their neighborhood. The next to be excluded from the competitive struggle were the small capitalists. As some capitalists secured control of the natural monopolies and others succeeded in establishing artificial monopolies, the small producers were unable to hold their own on the market and one by one they have either been extinguished by or absorbed in the larger concerns, until now, as a matter of fact, only the few strong competitors remain.

Properly interpreted this modern movement so familiar to us all means simply this: the gradual monopolization of the sources of the industrial surplus. Formerly these surplus sources were too widespread to be monopolized, hence the passing existence of the competitive system; but nowadays the ramifications of capital are nearly as widespread as the surplus sources themselves, hence, as I see it, the inevitable recrudescence of the coercive system. By the opening up of new lands through colonization and by the development of fresh surplus sources through invention, this movement has been stayed time and time again in the past; but as colonies and inventions are immediately monopolized nowadays we need not expect much further obstruction from these factors. It is high time, therefore, that we faced the problem. Instead of trying to stimulate the competitive system, which is really moribund, we should accept the situation as it is and ask what the new coercive system signifies, how long it will last and what system will probably succeed it.

It is a fact beyond dispute, I believe—though I confess with the short space at my disposal I have not been able to present more than passing proof of the fact—that to the extent that the sources of the surplus are monopolized, to just such extent can the monopolizers coerce those shut out of such monopoly. During the middle ages the coercive system was established, as we have seen, through the monopolization of the sources of the agricultural surplus by powerful feudal lords. Being dependent upon the feudal lords for their land, the peasants were deprived of free access to the agricultural surplus source, and could consequently be coerced. In our day the coercive system is being reestablished through the monopolization of the sources of the industrial surplus by the great capitalists. Becoming dependent upon these capitalists for their jobs, wage-earners and salaried men generally are being deprived of free access to the industrial surplus sources and to this extent they too are being coerced. As throughout the middle ages a few free peasant communities remained, so in modern times independent producers persist in some industries. Still as most of the land was feudalized in medieval times, the free peasants existed more by sufferance than by right; and as the main lines of industry are nowadays controlled by great capitalists, the existing independence of the small producer is nominal rather than real.

But freemen have never submitted to coercion with good grace if there was any way to throw off the yoke. For this reason coercion has never proved itself in the end a productive system of association; it runs faster, so to speak, toward the law of diminishing returns than any other system thus far devised. These facts are fundamental and serve to suggest the probable outcome of the existing situation. Let us therefore regard present conditions from this point of view.

As soon as the wage-earners recognized that despite their saving they could not become capitalists, they began at once to present an organized front to coercion. Up to this time the forces of labor had been associated for the purpose of increasing the profits of capital. Henceforth the laborers themselves began to organize their own forces with a view to raising the wages of labor. Trade unionism was the result. It was then that the shield was reversed and the other side exposed to view. It had become evident enough in the past that labor could not develop the industrial surplus source without capital; recently it has become equally evident that capital can not develop the industrial surplus source without labor. Indeed, one has not to examine the situation very closely to become convinced that the once disfranchised wage-earners are rapidly regaining as organized unions what they lost as individuals, viz., a claim—and a valid claim at that—to some share in the control of the industrial surplus source. To the extent that such claim can be established through association, to just such extent, therefore, can coercion be mitigated. On this account it does not appear to me at all unlikely that capitalists will tire in time of trying to enforce coercive measures, if for no other reason, because they will find coercion in the end too costly. That is to say, with diminishing returns staring them in the face because of the antagonism of trade unionism, I can readily see how capitalists may find it to their advantage to forego exclusive control of their surplus sources and admit their laborers into their monopolies by giving them shares in their companies. And if this movement—which is already well advanced—toward profit-sharing proceeds, ultimately the existing coercive relation between employer and employee will be replaced by the cooperative system, and the old guild organization will be reestablished on a very much larger scale. But supposing the coercive system between capitalists and laborers to be succeeded in this way by the cooperative system among producers, there is still another class to be considered, namely, the consumers. The new guilds, if established, would differ from the old guilds in this, that they would actually control the headwaters of the industrial surplus, while their predecessors only controlled a few incipient streams. If they chose—and as their profits would be increased thereby they might very well so choose—they could coerce consumers by demanding monopoly prices for their products. Under the existing regime we have had a taste of this sort of coercion as applied by the capitalists alone, we can well imagine, therefore, what it would mean when applied by capitalists and laborers combined. But here again, in spite of present appearances, coercion must in the long run prove unprofitable. The consumers do not represent a particular class, as do the laborers and the capitalists, nor are their interests divided, as are those of the producers. On the contrary, the consumers represent the entire community, and public opinion is always united for fair prices and efficient service. Monopoly prices and poor service touch the public's pocket, as we say, and arouse resistance at once. When things go well enough the consumers are satisfied, but let pressure be exerted on any side by producers, it is remarkable how vigorously they resist. Agitation quickly leads to association, and when combined consumers can readily bring recalcitrant producers to terms, either by boycotting their products, or, if this is not enough, by assuming control of the surplus source themselves. This latter plan has been adopted to a considerable extent in Europe, where many industries are already municipalized or nationalized, and in our middle western cities it looks as though the trolley companies would pay the same penalty for charging what the people consider high fares.

However we look at it, therefore, the existing system of coercion as applied by the present monopolizers of the social surplus sources appears to be confronted by opposing forces. When pushed too far coercion is met by cooperation and diminishing returns set in. Already cooperation is acting as a powerful check upon such coercion as exists, and as we advance a little further I expect to see the coercive system broken down bit by bit, first by the cooperation of capitalists and laborers in profit-sharing undertakings, and next, where necessary, by the socialization of such industries as prove recalcitrant under the new order of things. Or to put the thought theoretically, I think we may expect the present monopolization of the surplus sources to be extended gradually to admit laborers as well as capitalists, and finally, perhaps, some monopolies to be still further extended so as to admit consumers as well as producers.