What Social Classes Owe to Each Other/VI

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The discussion of "the relations of labor and capital" has not hitherto been very fruitful. It has been confused by ambiguous definitions, and it has been based upon assumptions about the rights and duties of social classes which are, to say the least, open to serious question as regards their truth and justice. If, then, we correct and limit the definitions, and if we test the assumptions, we shall find out whether there is anything to discuss about the relations of "labor and capital," and, if anything, what it is.

Let us first examine the terms.

1. Labor means properly toil, irksome exertion, expenditure of productive energy.

2. The term is used, secondly, by a figure of speech, and in a collective sense, to designate the body of persons who, having neither capital nor land, come into the industrial organization offering productive services in exchange for means of subsistence. These persons are united by community of interest into a group, or class, or interest, and, when interests come to be adjusted, the interests of this group will undoubtedly be limited by those of other groups.

3. The term labor is used, thirdly, in a more restricted, very popular and current, but very ill-defined way, to designate a limited sub-group among those who live by contributing productive efforts to the work of society. Every one is a laborer who is not a person of leisure. Public men, or other workers, if any, who labor but receive no pay, might be excluded from the category, and we should immediately pass, by such a restriction, from a broad and philosophical to a technical definition of the labor class. But merchants, bankers, professional men, and all whose labor is, to an important degree, mental as well as manual, are excluded from this third use of the term labor. The result is, that the word is used, in a sense at once loosely popular and strictly technical, to designate a group of laborers who separate their interests from those of other laborers. Whether farmers are included under "labor" in this third sense or not I have not been able to determine. It seems that they are or are not, as the interest of the disputants may require.

1. Capital is any product of labor which is used to assist production.

2. This term also is used, by a figure of speech, and in a collective sense, for the persons who possess capital, and who come into the industrial organization to get their living by using capital for profit. To do this they need to exchange capital for productive services. These persons constitute an interest, group, or class, although they are not united by any such community of interest as laborers, and, in the adjustment of interests, the interest of the owners of capital must be limited by the interests of other groups.

3. Capital, however, is also used in a vague and popular sense which it is hard to define. In general it is used, in this sense, to mean employers of laborers, but it seems to be restricted to those who are employers on a large scale. It does not seem to include those who employ only domestic servants. Those also are excluded who own capital and lend it, but do not directly employ people to use it.

It is evident that if we take for discussion "capital and labor," if each of the terms has three definitions, and if one definition of each is loose and doubtful, we have everything prepared for a discussion which shall be interminable and fruitless, which shall offer every attraction to undisciplined thinkers, and repel everybody else.

The real collision of interest, which is the centre of the dispute, is that of employers and employed; and the first condition of successful study of the question, or of successful investigation to see if there is any question, is to throw aside the technical economic terms, and to look at the subject in its true meaning, expressed in untechnical language. We will use the terms "capital" and "labor" only in their strict economic significance, viz., the first definition given above under each term, and we will use the terms "laborers" and "capitalists" when we mean the persons described in the second definition under each term.

It is a common assertion that the interests of employers and employed are identical, that they are partners in an enterprise, etc. These sayings spring from a disposition, which may often be noticed, to find consoling and encouraging observations in the facts of sociology, and to refute, if possible, any unpleasant observations. If we try to learn what is true, we shall both do what is alone right, and we shall do the best for ourselves in the end. The interests of employers and employed as parties to a contract are antagonistic in certain respects and united in others, as in the case wherever supply and demand operate. If John gives cloth to James in exchange for wheat, John's interest is that cloth be good and attractive but not plentiful, but that wheat be good and plentiful; James's interest is that wheat be good and attractive but not plentiful, but that cloth be good and plentiful. All men have a common interest that all things be good, and that all things but the one which each produces be plentiful. The employer is interested that capital be good but rare, and productive energy good and plentiful; the employé is interested that capital be good and plentiful, but that productive energy be good and rare. When one man alone can do a service, and he can do it very well, he represents the laborer's ideal. To say that employers and employed are partners in an enterprise is only a delusive figure of speech. It is plainly based on no facts in the industrial system.

Employers and employed make contracts on the best terms which they can agree upon, like buyers and sellers, renters and hirers, borrowers and lenders. Their relations are, therefore, controlled by the universal law of supply and demand. The employer assumes the direction of the business, and takes all the risk, for the capital must be consumed in the industrial process, and whether it will be found again in the product or not depends upon the good judgment and foresight with which the capital and labor have been applied. Under the wages system the employer and the employé contract for time. The employé fulfils the contract if he obeys orders during the time, and treats the capital as he is told to treat it. Hence he is free from all responsibility, risk, and speculation. That this is the most advantageous arrangement for him, on the whole and in the great majority of cases, is very certain. Salaried men and wage-receivers are in precisely the same circumstances, except that the former, by custom and usage, are those who have special skill or training, which is almost always an investment of capital, and which narrows the range of competition in their case. Physicians, lawyers, and others paid by fees are workers by the piece. To the capital in existence all must come for their subsistence and their tools.

Association is the lowest and simplest mode of attaining accord and concord between men. It is now the mode best suited to the condition and chances of employés. Employers formerly made use of guilds to secure common action for a common interest. They have given up this mode of union because it has been superseded by better ones. Correspondence, travel, newspapers, circulars, and telegrams bring to employers and capitalists the information which they need for the defence of their interests. The combination between them is automatic and instinctive. It is not formal and regulated by rule. It is all the stronger on that account, because intelligent men, holding the same general maxims of policy, and obtaining the same information, pursue similar lines of action, while retaining all the ease, freedom, and elasticity of personal independence.

At present employés have not the leisure necessary for the higher modes of communication. Capital is also necessary to establish the ties of common action under the higher forms. Moreover, there is, no doubt, an incidental disadvantage connected with the release which the employé gets under the wages system from all responsibility for the conduct of the business. That is, that employés do not learn to watch or study the course of industry, and do not plan for their own advantage, as other classes do. There is an especial field for combined action in the case of employés. Employers are generally separated by jealousy and pride in regard to all but the most universal class interests. Employés have a much closer interest in each other's wisdom. Competition of capitalists for profits redounds to the benefit of laborers. Competition of laborers for subsistence redounds to the benefit of capitalists. It is utterly futile to plan and scheme so that either party can make a "corner" on the other. If employers withdraw capital from employment in an attempt to lower wages, they lose profits. If employés withdraw from competition in order to raise wages, they starve to death. Capital and labor are the two things which least admit of monopoly. Employers can, however, if they have foresight of the movements of industry and commerce, and if they make skillful use of credit, win exceptional profits for a limited period. One great means of exceptional profit lies in the very fact that the employés have not exercised the same foresight, but have plodded along and waited for the slow and successive action of the industrial system through successive periods of production, while the employer has anticipated and synchronized several successive steps. No bargain is fairly made if one of the parties to it fails to maintain his interest. If one party to a contract is well informed and the other ill informed, the former is sure to win an advantage. No doctrine that a true adjustment of interest follows from the free play of interests can be construed to mean that an interest which is neglected will get its rights.

The employés have no means of information which is as good and legitimate as association, and it is fair and necessary that their action should be united on behalf of their interests. They are not in a position for the unrestricted development of individualism in regard to many of their interests. Unquestionably the better ones lose by this, and the development of individualism is to be looked forward to and hoped for as a great gain. In the mean time the labor market, in which wages are fixed, cannot reach fair adjustments unless the interest of the laborers is fairly defended, and that cannot, perhaps, yet be done without associations of laborers. No newspapers yet report the labor market. If they give any notices of it—of its rise and fall, of its variations in different districts and in different trades—such notices are always made for the interest of the employers. Re-distribution of employés, both locally and trade-wise (so far as the latter is possible), is a legitimate and useful mode of raising wages. The illegitimate attempt to raise wages by limiting the number of apprentices is the great abuse of trades-unions. I shall discuss that in the ninth chapter.

It appears that the English trades were forced to contend, during the first half of this century, for the wages which the market really would give them, but which, under the old traditions and restrictions which remained, they could not get without a positive struggle. They formed the opinion that a strike could raise wages. They were educated so to think by the success which they had won in certain attempts. It appears to have become a traditional opinion, in which no account is taken of the state of the labor market. It would be hard to find a case of any strike within thirty or forty years, either in England or the United States[1], which has paid. If a strike occurs, it certainly wastes capital and hinders production. It must, therefore, lower wages subsequently below what they would have been if there had been no strike. If a strike succeeds, the question arises whether an advance of wages as great or greater would not have occurred within a limited period without a strike.

Nevertheless, a strike is a legitimate resort at last. It is like war, for it is war. All that can be said is that those who have recourse to it at last ought to understand that they assume a great responsibility, and that they can only be justified by the circumstances of the case. I cannot believe that a strike for wages ever is expedient. There are other purposes, to be mentioned in a moment, for which a strike may be expedient; but a strike for wages is a clear case of a strife in which ultimate success is a complete test of the justifiability of the course of those who made the strife. If the men win an advance, it proves that they ought to have had it. If they do not win, it proves that they were wrong to strike. If they strike with the market in their favor, they win. If they strike with the market against them, they fail. It is in human nature that a man whose income is increased is happy and satisfied, although, if he demanded it, he might perhaps at that very moment get more. A man whose income is lessened is displeased and irritated, and he is more likely to strike then, when it may be in vain. Strikes in industry are not nearly so peculiar a phenomenon as they are often thought to be. Buyers strike when they refuse to buy commodities of which the price has risen. Either the price remains high, and they permanently learn to do without the commodity, or the price is lowered, and they buy again. Tenants strike when house-rents rise too high for them. They seek smaller houses or parts of houses until there is a complete re-adjustment. Borrowers strike when the rates for capital are so high that they cannot employ it to advantage and pay those rates. Laborers may strike and emigrate, or, in this country, take to the land. This kind of strike is a regular application of legitimate means, and is sure to succeed. Of course, strikes with violence against employers or other employés are not to be discussed at all.

Trades-unions, then, are right and useful, and it may be that they are necessary. They may do much by way of true economic means to raise wages. They are useful to spread information, to maintain esprit de corps, to elevate the public opinion of the class. They have been greatly abused in the past. In this country they are in constant danger of being used by political schemers—a fact which does more than anything else to disparage them in the eyes of the best workmen. The economic notions most in favor in the trades-unions are erroneous, although not more so than those which find favor in the counting-room. A man who believes that he can raise wages by doing bad work, wasting time, allowing material to be wasted, and giving generally the least possible service in the allotted time, is not to be distinguished from the man who says that wages can be raised by putting protective taxes on all clothing, furniture, crockery, bedding, books, fuel, utensils, and tools. One lowers the services given for the capital, and the other lowers the capital given for the services. Trades-unionism in the higher classes consists in jobbery. There is a great deal of it in the professions. I once heard a group of lawyers of high standing sneer at an executor who hoped to get a large estate through probate without allowing any lawyers to get big fees out of it. They all approved of steps which had been taken to force a contest, which steps had forced the executor to retain two or three lawyers. No one of the speakers had been retained.

Trades-unions need development, correction, and perfection. They ought, however, to get this from the men themselves. If the men do not feel any need of such institutions, the patronage of other persons who come to them and give them these institutions will do harm and not good. Especially trades-unions ought to be perfected so as to undertake a great range of important duties for which we now rely on Government inspection, which never gives what we need. The safety of workmen from machinery, the ventilation and sanitary arrangements required by factories, the special precautions of certain processes, the hours of labor of women and children, the schooling of children, the limits of age for employed children, Sunday work, hours of labor—these and other like matters ought to be controlled by the men themselves through their organizations. The laborers about whom we are talking are free men in a free state. If they want to be protected they must protect themselves. They ought to protect their own women and children. Their own class opinion ought to secure the education of the children of their class. If an individual workman is not bold enough to protest against a wrong to laborers, the agent of a trades-union might with propriety do it on behalf of the body of workmen. Here is a great and important need, and, instead of applying suitable and adequate means to supply it, we have demagogues declaiming, trades-union officers resolving, and Government inspectors drawing salaries, while little or nothing is done.

I have said that trades-unions are right and useful, and perhaps, necessary; but trades-unions are, in fact, in this country, an exotic and imported institution, and a great many of their rules and modes of procedure, having been developed in England to meet English circumstances, are out of place here. The institution itself does not flourish here as it would if it were in a thoroughly congenial environment. It needs to be supported by special exertion and care. Two things here work against it. First, the great mobility of our population. A trades-union, to be strong, needs to be composed of men who have grown up together, who have close personal acquaintance and mutual confidence, who have been trained to the same code, and who expect to live on together in the same circumstances and interests. In this country, where workmen move about frequently and with facility, the unions suffer in their harmony and stability. It was a significant fact that the unions declined during the hard times. It was only when the men were prosperous that they could afford to keep up the unions, as a kind of social luxury. When the time came to use the union it ceased to be. Secondly, the American workman really has such personal independence, and such an independent and strong position in the labor market, that he does not need the union. He is farther on the road toward the point where personal liberty supplants the associative principle than any other workman. Hence the association is likely to be a clog to him, especially if he is a good laborer, rather than an assistance. If it were not for the notion brought from England, that trades-unions are, in some mysterious way, beneficial to the workmen—which notion has now become an article of faith—it is very doubtful whether American workmen would find that the unions were of any use, unless they were converted into organizations for accomplishing the purposes enumerated in the last paragraph.

The fashion of the time is to run to Government boards, commissions, and inspectors to set right everything which is wrong. No experience seems to damp the faith of our public in these instrumentalities. The English Liberals in the middle of this century seemed to have full grasp of the principle of liberty, and to be fixed and established in favor of non-interference. Since they have come to power, however, they have adopted the old instrumentalities, and have greatly multiplied them since they have had a great number of reforms to carry out. They seem to think that interference is good if only they interfere. In this country the party which is "in" always interferes, and the party which is "out" favors non-interference. The system of interference is a complete failure of the ends it aims at, and sooner or later it will fall of its own expense and be swept away. The two notions—one to regulate things by a committee of control, and the other to let things regulate themselves by the conflict of interests between free men—are diametrically opposed; and the former is corrupting to free institutions, because men who are taught to expect Government inspectors to come and take care of them lose all true education in liberty. If we have been all wrong for the last three hundred years in aiming at a fuller realization of individual liberty, as a condition of general and widely-diffused happiness, then we must turn back to paternalism, discipline, and authority; but to have a combination of liberty and dependence is impossible.

I have read a great many diatribes within the last ten years against employers, and a great many declamations about the wrongs of employés. I have never seen a defence of the employer. Who dares say that he is not the friend of the poor man? Who dares say that he is the friend of the employer? I will try to say what I think is true. There are bad, harsh, cross employers; there are slovenly, negligent workmen; there are just about as many proportionately of one of these classes as of the other. The employers of the United States—as a class, proper exceptions being understood—have no advantage over their workmen. They could not oppress them if they wanted to do so. The advantage, taking good and bad times together, is with the workmen. The employers wish the welfare of the workmen in all respects, and would give redress for any grievance which was brought to their attention. They are considerate of the circumstances and interests of the laborers. They remember the interests of the workmen when driven to consider the necessity of closing or reducing hours. They go on, and take risk and trouble on themselves in working through bad times, rather than close their works. The whole class of those-who-have are quick in their sympathy for any form of distress or suffering. They are too quick. Their sympathies need regulating, not stimulating. They are more likely to give away capital recklessly than to withhold it stingily when any alleged case of misfortune is before them. They rejoice to see any man succeed in improving his position. They will aid him with counsel and information if he desires it, and any man who needs and deserves help because he is trying to help himself will be sure to meet with sympathy, encouragement, and assistance from those who are better off. If those who are in that position are related to him as employers to employé, that tie will be recognized as giving him an especial claim.


  1. See Labor history of the United States. (Wikisource contributor note)