The Socialist Movement/Chapter 2

by James Ramsay MacDonald

CHAPTER II

ECONOMIC AND INDUSTRIAL

Socialism is sometimes presented as though it were nothing but a proposal to make such economic changes in social structure as would eliminate poverty. This is only a partial statement of socialist aims, and yet it is true that the prevalence of excessive wealth and excessive poverty side by side is one of the chief causes of the success of the socialist propaganda.

 

1. To-day.

Every town in the country affords some example of this contrast; every commercialist country in the world adds details to the picture. Apologists of the existing order sometimes excuse it, sometimes say that the individual is to blame, sometimes try and show that things are getting better. Mr. Mallock has been making guesses about family incomes recently for the purpose of showing that they are now fairly substantial and are rising.^[1] When the family income is not that of the "breadwinner" alone, it is a very flimsy foundation to give to progress. But even on such a foundation, strengthened as much as possible by generous estimates and by inadmissible statistical methods, Mr. Mallock has to admit that 350,000 families, containing 1,750,000 persons, have a total family income of £30 per annum—a sum which works out at a fraction over 2s. 3d. per head er week from which everything must be paid. There are in addition 1,200,000 with an average family income of £94 per annum, In this figure Mr. Mallock includes the incomes of the members of these families who are living out as domestic servants! Without them, the income is £71 or about 6s. per head per week, an altogether unsatisfactory figure and a somewhat miserable one even if it were earned by a single breadwinner. It is quite inadequate for bringing up a family. It gives no margin for sickness and unemployment, and from it can hardly be taken a rent sufficient to keep a comfortable house over the heads of the group. It certainly is insufficient to bear the cost of that innocent recreation and luxury which go to improve the quality of life. Mr. Mallock is an apologist, and his estimates must be accepted with appropriate care, but he has signally failed to disprove the assertions that a substantial percentage of our people have incomes inadequate to enable them to attend to their animal wants satisfactorily, and that a great part of our poverty arises not from uneconomical expenditure but from insufficient income.

Fortunately figures of greater scientific value than Mr. Mallock's are at our disposal. Mr. Booth's and Mr. Rowntree's investigations have become so familiar that they hardly bear quoting. Mr. Booth found 35•2 per cent. of the people of the north and east of London living on a family income of under a guinea per week; Mr. Rowntree found that of the people of York nearly 30 per cent. were "living in poverty." Investigations in West Ham showed that only in a small percentage of cases did married women engage in home work when their husbands were earning enough to keep their families.<refWest Ham: A Study. By E. G. Howarth and Mona Wilson.></ref> Inquiries conducted in Dundee,^[2] Norwich,^[3] and elsewhere substantiate the same conclusions. Many other sets of figures compiled by different methods are available and their meaning cannot be doubted. For instance, an investigation by Commissioner Cadman, of the Salvation Army, found that amongst the most unfortunate of their clientèle, 55•8 per cent. had lost their grip on decency owing to depressions in trade and 11•6 because they could not tide themselves over periods of sickness.

These facts are true of every industrial country. Great numbers of people are forced to live on incomes which are insufficient to enable them to make good their daily physiological waste and meet the ordinary accidents of life like sickness and unemployment.

But we can turn to another group of facts, and get another body of evidence in our support. The wages of the woollen operatives in Yorkshire have advanced but slightly since 1871, in some of the leading centres like Bradford, Leeds, Batley and Dewsbury, they have actually receded since 1874.^[4] Mr. Wood has shown that for about half a century, up to 1900, wages in the following trades have not advanced: ironfounders in Warrington, Nottingham, London, Birmingham; engineers in Wolverhampton; Compositors in Huddersfield, Manchester, Reading; masons, painters, plasterers, slaters, coopers, in the South of Scotland; ship-painters in Hull, and so on.^[5] Then if we turn to the figures published by the Board of Trade year by year,^[6] they show that at the end of 1909, amongst the larger groups of labour, excluding agricultural labourers, seamen and railway servants, nearly £100,000 per week less were paid in wages than in 1900, whilst increases in 1910 only improved the 1909 figures by £14,000, so that the workers to-day are still well over £80,000 per week less well off in respect to wages than they were in 1900.

Every reliable investigation that has been conducted into our social conditions reveals an appalling amount of poverty and a still more appalling bitterness in the struggle for life under sordid and heartless conditions. Practically the whole of the vital energy of more than half of our people is consumed in providing bread and butter for their stomachs and a shelter for their heads, and then they do not always succeed.^[7]

Nor is the reply that poverty is a self-inflicted wound very decisive. It is true that drunkenness brings misery upon individuals. The wasteful man must come to grief whether he be rich or poor. But intemperance—to select only the most frequently discussed source of personal poverty—is not the cause of social poverty. Its chief effect is to select the victims of poverty. For there come to all slackness of work and misfortunes of many kinds, and the most that thriftless expenditure does is to determine who are to be completely, and who partially, wrecked in the hard times. It is said that if every penny which finds its way into the pockets of rich and poor were well spent, every man would face the rainy day with an umbrella over his head, and the slack time with something in the savings bank. Only to a small extent is this true. The best form of saving which the majority of our working classes can practise is the art of useful expenditure upon themselves and their families. Their incomes are too small to bear any other form of thrift. The reason why so many of those who practise thrift—meaning by that, saving—are unattractive and even repulsive, is that they have not spent enough on themselves to allow their personalities to grow. They have been banking not real savings but capital which they ought to have spent on their personal development. They are hampering their own growth by choosing to remain under-nourished—especially in mind. The true practice of thrift for a man with a family and thirty shillings per week as an income, is not niggardly saving but wise expenditure. Such expenditure would increase the volume of demand for productive labour, but it would not put an end to unemployment or to slack times and sickness. During these times the thriftless man will suffer most, because he has probably destroyed his nerve and skill and is unreliable to boot, and because he is exposed straight away to the full blast of the cutting wind of adversity. But the temperate man is also discharged, and if he may be rarely seen in unemployed marches, he is found by those who know how to seek him in his seclusion, before a cold grate and an empty home. The cause of poverty is social; but personal conduct often determines whether this man or that is to be the victim and how deep the poverty is to be.

Statistics on such an intricate subject as the play: and counter-play of social and personal causes of poverty are of course difficult to compile. But various authorities have attempted to supply them. Commissioner Cadman says that 26•6 per cent. of those who come to Salvation Army Homes have been wrecked financially by drink and gambling. Mr. Rowntree commits himself to no figures regarding York, but puts drink and gambling, together with bad housekeeping, as the first of the causes which produce secondary poverty from which 13,000 persons out of a total poverty-stricken population of 20,000 are suffering. Mr. Charles Booth worked out, from a certain number of investigated families, that 14 per cent. of the A and B classes of poverty was caused by personal habits, and 13 per cent. of classes C and D, whilst "conditions of employment" accounted for 55 and 68 per cent. of the poverty in these classes respectively. I would be the last to seek to belittle the evils of drunkenness, but it must be reduced to its proportions. The Socialist movement in practically every country in the world has declared war upon drink, and at the International Congress at Stuttgart the question was considered. Nor must it be forgotten that the effect of social pressure is to increase the activities of those cravings and appetites which reduce individual efficiency and so create individual poverty. Did not the worldly-wise writer of the Proverbs^[8] say: ‘"Let him drink and forget his poverty and remember his misery no more."

As we have traced the rise of the democratic state, so we must now trace the rise of the modern industrial state, of which this poverty is a result, and from which the way to Socialism opens out.

 

2. Revolts against Poverty.

Just as we have seen that the demand for individual freedom disturbed the feudal community, so do we find that the prevalence of poverty led to protests against economic changes which sometimes ended in riot, but which sometimes produced Utopias. So long as the man was a serf or was a charge on the soil, his poverty was accepted as his lot, because it rarely became so oppressive as to be intolerable. It was his status. He had his bed and his food and his clothes, and he expected nothing more. But the economic state of villeinage had to pass. Commerce grew between market and market, and country and country. Profits were made by bankers, manufacturers and merchants. The aristocracy planted on the land tended to decay on account of new economic and political conditions and the consequent rise of a plutocracy of wealth; and the personal relations between squire and cottar tended to disappear as new ways of using land, which were more profitable to the owners than the old ways, offered themselves. As some writer once said: Agriculture from being the winning of subsistence became a making of profits. In addition to this, as peace began to settle in the land, the old aristocracy had to resort to extravagant expenditure in order to keep up appearances. Their work was done and they had to fall back upon badges as a sign of authority and status. This meant money, whilst their old economic relations meant comparatively small personal incomes. So they had to employ their lands in such a way as would yield them a higher revenue. Thus, whilst standing by all the outward appearances and the political and social structure of feudalism, the landed classes abandoned their social relationships and followed more and more closely the profit-making ways of the capitalism which was coming to rule the land.

The first uprising of the poverty-stricken in England came from famine and preaching. Whilst the third Edward was glorying in his shameful extravagances and follies, the shadow of plague was creeping westward over Europe. At the end of 1348 it fell upon England. Half the population died and social life was paralysed. The fields returned to their original wildness. The very beasts sickened and died too. After the horror came reaction. For a long time the workman had been drifting towards the status of a hired labourer, and was being pushed into the position of a landless and propertyless man without a guardian. After the plague, he found himself in an advantageous position, for he was a man whose services were sought, and not one who was trying to find an employer. He forced up his wage; in his moods of sportive independence or careless laziness he became a "sturdy beggar." But he was not allowed to enjoy the advantages of his economic position for long. Legislation in the form of the Statute of Labourers thrust him back into his subordinate and servile status. His political impotence rendered his economic strength useless. Civil discord ensued. A thousand grievances added fuel to the fire. The memory of generations of hardship such as is described by the authors of Piers Plowman put rebellion in the hearts of the people, and the disturbances called the Peasants' Revolt occurred.

A similar state of things occurred a century and a half later, in the time of Henry VIII. Ecclesiastical property had been secularised and it bore no longer its heavy burden of charity. As in the days of the Peasants' Rising religion inflamed want and quickened a sense of injustice. The land labourer had become free, and had found that freedom meant that he was allowed to wander on the roads and starve. He now had no certain income. Lands were let for sheep rearing, common fields and wastes were enclosed, tillage was being greatly reduced. An address to the king and parliament, written at the middle of the sixteenth century, tells how there were "fewer plows by forty in Oxfordshire. Each plow kept six persons. Now there is nothing but sheep. These 240 persons must live—where shall they go? Some of these are driven to beg, some to steal."^[9] A revolution, greater than the later change which is known as the Industrial Revolution, then happened. "The production of wealth, instead of being merely a means of subsistence, became an end in itself or a means to political influence." The spirit of commercialism had taken a firm hold of England. The landlords laid their hands on every acre they could appropriate, and imposed as large rents upon them as they could get. Employers placed impediments in the way of their journeymen starting in business, substituted juveniles for journeymen, and concentrated their attention on their bank balances. Rents were raised, wages reduced, privileges curtailed. In the introduction to his Utopia, Sir Thomas More describes the state of the people. The rich kept a train of idle serving men, and turned the poor who became sick or old out of doors because they could not maintain both. Thus the number of robberies increased. The poor man grew ragged and pale-faced, and then no one would employ him. The argument that large numbers of fighting men had to be maintained is ridiculed by More, and met. Both in the statement and the reply these paragraphs are wonderfully modern. But the greatest grievance of all was: "Your sheep that were wont to be so meek and tame, and so small eaters, now, as I hear say, be become so great devourers, and so wild, that they eat up and swallow down the very men themselves. They consume, destroy and devour whole fields, houses and cities: for look, in what parts of the realm doth grow the finest, and therefore dearest wool—there noblemen and gentlemen, yea, and certain abbots, holy men no doubt, not contenting themselves with the yearly revenues and profits that were wont to grow to their forefathers and predecessors of their lands, not being content that they live in rest and pleasure, nothing profiting—yea, much noying the weal-public, leave no ground for tillage: they inclose all into pastures; they throw down houses; they pluck down towns and leave nothing standing, but only the church to be made a sheep-house." The increasing numbers of sheep did not, however, lead to a reduction in the price of wool or of mutton, because ‘"they be almost all come into a few rich men's hands." It was also more profitable to buy store cattle abroad and fatten them in England, and this, too, meant less work and village depopulation. "Thus, the unreasonable covetousness of a few hath turned that thing to the utter undoing of your island, in the which thing the chief felicity of your realm did consist." More refers to hospitality, which the poor could no longer afford and the rich were making too lavish and vicious.

This is the opening of a new epoch in the history of English poverty. The landless man appears for good. The ownership of the soil no longer carries with it the heavy social obligations to maintain men on it. The labourer becomes a mere convenience in profit making, to be employed when it suits the landlord and farmer, and to be turned upon the road when his labour is not profitable.

Moreover, both preceding the Black Death and in the time of Sir Thomas More, the grievances of urban unemployment had been felt. Parliament had to consider it, and in More's days there was an agitation, which smacks of very modern error, on the ground that Englishmen were being supplanted by foreigners, and there were, also very appropriately to complete a parallel with modern conditions, May Day riots in London.

But one other epochal change had to pass over England before Socialism arose. England had to undergo the Industrial Revolution. The world had to become the market for our goods and the source of our supply of food and raw material. The forces of nature had to be harnessed to production, and mechanical contrivance had to supplement manual labour. The people had to be ingathered into great centres, their labour had to be subdivided and co-ordinated in great factories. Capital had to be concentrated and the day of the large industry come, before Socialism, as a scientific hope and a practical guide, was possible.

 

3. The Rise of Capitalism.

The Industrial Revolution is the term applied to the change which came over industry when mechanical appliances led to the factory system and the specialising of factory labour. There were rich men before that happened, but they belonged to the class of merchants and financiers rather than to that of manufacturers. And when the Industrial Revolution came, the manufacturer was not specially wealthy. He lived, as a rule, like a workman enjoying a substantial income. But wealth rapidly accumulated in his hands. He drew away, both in his social status and his ideals, from the people from whom he came. He formed a plutocratic class all by himself. The influence of the change was enormous. The aristocracy opened its doors to the new rich, for the aristocracy needed money. The exploiters of the virgin soil of America, its speculators, its financiers, supplied the incomes which our aristocracy required; our own rich families acquired titles. Nominally birth was retained as the hall mark of aristocracy, but wealth was in reality its foundation. Thus it has come about that the social effect of the Industrial Revolution has been the establishment of customs and distinctions which depend solely upon the possession of wealth, and which have led to the use of that wealth in selfish and anti-social directions. Wealth divorced from social responsibility, but held and used purely as a personal possession, has divided society into the two great separate kingdoms of rich and poor, each living its own life and very rarely coming into contact with the other. Slumming, charitable activities, patronising interferences, have taken the place of those personal relationships which used to exist between hut and hall before the feeling of social solidarity was destroyed by a huge factory and town population, the clearance of the people from the soil, and the class distinctions which became the chief desire of the plebeian rich. Thus public spirit and responsibility have become weakened, and we have less guarantee than ever that the control of wealth is to be other than purely selfish. Moreover, whilst the moral relationships between rich and poor have been weakening, the power of wealth has been increasing by leaps and bounds. This increase must be traced out, as it is an important link in the chain of socialist evolution.

Although the conflict between capital and labour began very early in our industrial history, and the employer never seems to have been unwilling to beat down wages to competitive levels,^[10] it was not till the eighteenth century had well advanced to its close that the two classes of capitalists and workmen became separated; that the journeyman began to become obsolete, and that the chance of a substantial proportion of the wage-earners becoming employers in due time tended to disappear. Mechanical invention increased the amount of capital required in business, the extension of the market intensified competition, and led to the organisation of a huge and a complicated system of exchange, factory-methods of work narrowed the skill and the outlook of the wage earners; thus the separation between the two economic classes became permanent and well defined. In the days of the hand-loom and the spinning-wheel there were poverty, child labour, and social distress, but the conditions under which they occurred were not so crushing, and they did not throw such a long and a black shadow across extended periods of life as they were destined to do later.

The history of this movement of the separation of economic classes is, first of all, a history of the guilds. Originally a commercial union with religious sentiments and some political powers, the growing division of function between capital and labour destroyed the industrial catholicity of the first type of guild, the merchant guild, and raised opposition to it amongst the craftsmen. To begin with, the craftsmen won, but the gulf between the capitalist who had wealth, and the labourer who had only skill widened apace, and the guilds again drifted into positions of economic privilege and antagonised the poorer workmen. The merchant guild had given place to the craft guild, qualification for membership in which consisted mainly in having served an apprenticeship to a craft or mystery. The function of the guild was to regulate the trade in the interest of the craftsmen. But all such organisations have an evolution. They arise to satisfy a need; they succeed; they decay through a period of abuse. Thus it happened that the craft guild, too, became a close corporation, and its powers to regulate trade were used for the purpose of securing monopolies—a movement exactly parallel to that of modern capitalism, though the methods differ. For two centuries, ending about the middle of the sixteenth, the craft guild rose and sank. Outside it had grown up a new class of men who depended upon hire, who were not a craft aristocracy, who could neither amass money nor gather together stock, who had no land and who often worked with supplied capital. The guilds interfered with this class, not for the purpose of helping it, but of suppressing it. Entrance fees were raised against it. By the end of the fourteenth century, the journeymen, accepting their status as the final one which they were likely to experience, and, assuming that the crafts were barred against them, had formed some fraternities of their own.^[11] By the middle of the sixteenth century the guild had broken down, and legislation began to take the place of its statutes. But the landless and propertyless hired servant became common, and he in turn formed his guild in the shape of a trade union, when the factory system and the town system gave him a chance to do so, and the final separation of the labour and the capitalist classes compelled him to abandon the assumption that his industrial advancement was more likely than not. The employer had moved into another social stratum, and "born a workman, die a workman" became the guiding thought of the labourer’s life.

Up to the time of the Industrial Revolution the capitalist producing class was not a rich class. The industrial system was then domestic, and the craftsmen, as a rule, owned their own tools, just as a carpenter owns his kit to-day. The competition of the power-loom with the hand-loom in cotton manufacture was not severe up to 1812, and as late as 1884 there were only 733 power-loom workers to 7,000 or 8,000 seer workers. In the woollen and linen industry power-looms were in little use before 1840. In spinning, mechanical power and factory conditions came somewhat earlier. In 1883 there were three spinning mills in Manchester, employing 1,400 hands each, eight employing from 500 to 900, eight from 300 to 500, and 17 from 100 to 300.^[12] Mr. Andrew, in his Annals of Oldham, tells of his uncle, who owned a carding engine in a factory (power was then let out to individual owners of engines something in the way that power is still let out to the owners of stands in Sheffield cutlery workshops) in 1809, and who created "a great hue and cry in the town" when he became the owner of a second.

Professor Marshall illustrates this point by comparing the relative value of tools and wages now and formerly. The textile operative used to employ tools equivalent in price to but a few months of his labour, whilst in modern times there is a capital in plant of about £200 for each man, woman and child in a textile factory. The cost of a steam ship is equivalent to the price of the labour for ten years of those who work her, whilst the railway servants operate capital valued at perhaps twenty years of their wages.^[13] In 1845 McCulloch estimated that the fixed capital in good cotton mills was no more than equal to two years' wages of an operative; Marshall’s figures work out at five years' wages.

This brings us to a new stage.

 

4. The Fulfilment of Capitalism.

The increase in the amount of capital used led to a revolution in the ownership of it. Industrial capital used to be owned by those who used it. The employer was the capitalist. But obviously one man cannot own the Midland Railway, or one of the huge modern engineering concerns like Armstrong, Whitworth & Co. So it has inevitably happened that the capital required for these huge undertakings is procured from a wide area of capitalists. Thus the limited liability, or joint stock, company arose to mark a further stage in capitalist evolution.

The constitution of these companies ls quite familiar. Their capital is raised in the form of shares, it is controlled by a board of directors, generally by a managing director, and those who have provided it have practically no voice in the management of the business. Shareholders' meetings are held occasionally, but apart from the fact that many shareholders never attend these meetings, the power which the shareholder has does not amount to much more than to express gratitude or to grumble. Except at a crisis the directors, working within the bounds of the articles of association, hold an absolute authority.

Thus, one of the first results of the concentration of capital in industrial undertakings has been the supplanting of the individual and responsible capitalist by the official agent who represents many capitalists. The "captain of industry" is thus no more a man working with his own capital, but an agent working with other people’s capital, and the capitalist himself is ceasing to be a business man and is becoming a mere financier. This change from personal to impersonal capitalism, from ownership control to agency control, is another important link in the chain of socialist evolution and argument.

One erroneous deduction from this change ought to be disposed of at once. It is often assumed that under a system of joint stock companies the dividends and profits previously made by a small class of industrial capitalists are spread over a wider field, and a better national distribution is thus secured. Elderly ladies with small savings get an income from building societies, clergymen eke out modest incomes derived from their calling by sharing in the profits of brewery companies and tied houses, clerks dabble in the gains of rubber companies, and so on. This, however, does not mean nearly so much as appears on the face of it. The list of shareholders in public companies is long, but the duplicates are enormous. No thorough attempt has ever been made to eliminate these duplicates so that we may know what number of separate individuals have invested their money in these companies, but, judging from one's personal knowledge, the net number of investors must be very substantially smaller than the gross number. The shareholding financier in his turn becomes a class with a solid nucleus of great controlling magnates and a more or less unimportant fringe of comparatively poor people.

Moreover, it is clearly proved by every official and reliable publication that wealth continues to accumulate at one end of society, and that whilst the middle slowly improves, the other extreme is either stationary or is losing ground. Thus, on an average for the five years up to 1903–4^[14] the net value of dutiable estates left at death was £276,000,000, and of these only 17,000 were of less value than £100. For the year 1909–10, the net value of these estates was £283,660,000, and the total of the 71 estates of a quarter of a million and over was not less than £59,160,000. Though it is true that over long periods the condition of the better class of artisan and the lower middle class improves, it is subject to considerable fluctuation owing to times of unemployment and bad trade, and to increases in the cost of living. To-day, at the end of 1910, these middle social strata are not so well off as they were at the beginning of the century. There have been losses in wages and rises in prices in the interval, and rents continue to take more and more out of working-class pockets. Relatively to the modern combinations of capital, combinations of labour tend to weaken, and the upward pressure which the workman can exert on his status is less effective than it was.

Nor must we forget that the joint stock company means that every industrial improvement is capitalised, and that, in consequence, the amount of capital borne by industry tends to keep pace with profits so that labour finds it increasingly difficult to secure an improving share in national wealth. Any successful limited liability company supplies an illustration of this argument. Let us suppose that a company is floated with a capital of £20,000, and that it pays a dividend of 10 per cent. Under the old system of the employing capitalist, a portion of this 10 per cent. was available for increased wages. But under the public company system a shareholder sells his shares at perhaps double the price he paid for them. Thus, although the business has never absorbed more than a capital of £20,000, it is in reality carrying a burden of £40,000; nominally it is paying 10 per cent., it is actually paying its new shareholders only 5 per cent. The margins are immediately capitalised; profits are not available for improving the business itself, nor for increasing the wages of the employees; rapid capitalisation acts as a sponge and sucks up the life sap of the enterprise. This can be seen by the study of any handbook on public companies which gives the actual dividends paid on the current price of stock. These figures work out at something about 4 per cent.

Over-capitalisation is the direct result of the joint stock phase of capitalist control. It has been estimated that the over-capitalisation of American railroads is from 50 to 200 per cent. of their actual value. The Sugar Refining Company is capitalised at three or four times its actual value, the Felt Company at ten times, the Steel and Wire Company at three times, the Standard Oil Company at six times. Our own large companies are not quite so free to over-capitalise themselves as those of America, owing to our Free Trade system, but our railways, our shipping combines, our large stores, some of our manufacturing trusts, are carrying far too heavy financial responsibilities, and the public suffer grievously in consequence.

Thus the weight of capital on industry becomes excessive, the exploiting investor becomes all-powerful, and though the statistics of incomes may improve in appearance, as a matter of fact a system of distribution is being established which must ultimately produce impoverishment for every creative factor in national prosperity.^[15]

 

5. The Small Capitalist.

In this way the trust grows and another stage begins. Capital is carnivorous and preys upon itself. Competition is self-destructive.^[16] A point is reached in the concentration of capital when war between rival firms entails such loss and such risk that peace is signed between them. They either define the limits of their activities, as a certain well-known thread combine has divided the great markets of the world between its various sections, or they pool their profits or come to some other mutual arrangement regarding their disposal, or they amalgamate under one management like the American Steel Trust. They also proceed to control subsidiary industries—as the Steel Trust controls not only rolling mills and furnaces, but iron ore quarries and steamship and railway lines required for the transport of its material. So the grip of capital upon industry tightens, and the empire of finance widens.

We are sometimes told that along with this concentration there is also a growth of small businesses. But regarding this point, two observations have to be made. A great bulk of these businesses are casual. They are kept going by consumers who have special needs—little shops keeping open late, shops that give credit, shops that deal in special lines, small manufacturers who for some reason or other produce economically, or who are engaged in work that does not require much capital or that does not depend upon machinery, or that is artistic and, therefore, individual and not mechanical in its nature. The second observation is that the small capitalist, even though he may increase in numbers, diminishes in industrial importance. More and more absolute in trade and commerce becomes the rule of the large capitalist, the syndicate, the trust, the universal provider. He will never gather all trade unto himself. Indeed, one can foresee that with an improvement in taste and a strengthening of individuality, machine production of articles of personal use will diminish rather than increase; but even then, the facilities for transport and the convenience of great central stores, like the modern Whiteley's, will secure the survival of capitalist concentration in the distribution of these articles of taste, and a concentrated system of distribution will secure a concentrated system of production. For instance, the "artistic" productions in cabinet-making sold in some of our department stores are made in workshops which themselves are small, but which depend for their existence solely upon the patronage of these stores. The warehouse system in the boot and shoe trade is of the same nature. Hundreds of small manufacturers bring their products once, or oftener, a week to these buying warehouses connected with thousands of centrally controlled shops open all over the country. The manufacturer remains a "small" man, he depends upon the warehouses for his existence, he is generally financed by them, his profits are often not more than wages, he is practically in the position of an employee, his profits are cut down by an operation of economic law which, in respect to him, is far less curbed and controlled than it is in respect to the ordinary factory workman who is a member of a trade union. The statistics of independent capitalists and employers must therefore be read with much reservation, or they will convey very false meanings.

 

6. Summary.

We are now in a position to summarise the processes of the evolution of capitalism during the Industrial Revolution, and to state the law of that evolution.

Capitalist industry begins with competition, and the law of the survival of the fittest comes at once into operation. From this emerges the law of concentration and co-ordination. Competition ends in the domination of the surviving few, and in the widening of the sphere of control of the capitalist unit. Trades which depend upon each other tend to be organised together and to be controlled as one unit.

But whilst this concentration of control is proceeding, the employer working with his own capital tends to disappear; the investor comes upon the stage, industrial capital is drawn, not from one bank balance but from many bank balances, and the control of industrial capital, and hence of industry, passes into the hands of agents. The industrial mechanism ceases to be personal and becomes impersonal. It is a hierarchy of managers and directors.

That is the law of capitalist evolution, and at that point we now find ourselves. The problem with which we are faced is not how to maintain competition, but how to control monopoly.

 

1. The Nation as a Business Firm.
2. Report on Housing, &c., in Dundee.
3. Norwich: A Social Study. By C. B. Hawkins.
4. See an interesting article on the subject in the Socialist Review, Nov. 1910, by Henry Willmott.
5. Economic Journal, xi., pp. 151–6.
6. Report on the Changes in Rates of Wages and Hours of Labour.
7. American conditions, despite the newness of the country and the vast extent of its territory, show the same features. One-eighth of the families of the United States enjoy seven-eighths of the wealth of the country; and investigations conducted by the New York State Conference of Charities and Correction in 1906–7, by the Massachusetts Bureau of Statistics and by private inquirers in other states show that great masses of the town workers of America have incomes which come considerably below the efficient subsistence minimum.
8. Chap. xxxi. 7.
9. Early English Text Society, Extra Series, XIII.
10. For instance, Macaulay refers in his History of England (vol. i., p. 204) to a ballad sung on the streets of Leeds and Norwich and now preserved in the British Museum, as "the vehement and bitter cry of labour against capital. It describes the good old times when every artisan employed in the woollen manufacture lived as well as a farmer. But these times were past. Sixpence a day was now all that could be earned by hard labour at the loom. If the poor complained that they could not live on such a pittance, they were told that they were free to take it or leave it."
11. In 1887 the "serving men of the London cord-wainers" were accused of trying to form an independent fraternity, and similar complaint was made against the saddlers in 1396, and in 1415 against the tailors. (Webb, History of Trade Unionism, pp. 2–3.)
12. Butterworth, History of Oldham, p. 118.
13. Principles of Economics, pp. 302–8, 4th edition.
14. Riches and Poverty, p. 48, Chiozza-Money.
15. This was never put with more honest and callous candour than by the President of the American Sugar Trust, Mr. H. O. Havemeyer, when examined before the American Industrial Commission. "The policy of the American Sugar Refining Company," he said, "is to protect its trade, and if it resulted in crushing a competitor it is no concern of the American Company; if he gets in the press, that is his affair, not ours." Then he was asked: "And if any one interferes with the business, profits, or competition of the American Sugar Refining Company, it is its policy to prevent it if possible?" He answered: "By lowering profits to defy it." "And if it results in crushing him out?" "That is his affair."
16. Perhaps the most conclusive proof of this argument has been supplied by Mr. Mallock in a book written with the intention of disproving it. In The Nation as a Business Firm, Mr. Mallock analyses national income for the purpose of showing that it is better distributed than it was, and that those who have told us that it is very inequitably distributed are wrong. He deals with family incomes only. This in itself is open to grave objection from the scientific point of view, and he further stretches figures and arguments in order to make his families as affluent as he possibly can. But what are his conclusions? They are that 855,000 rich people take £400,000,000 per annum, that 12,150,000 comfortable people take £571,000,000, and that 29,895,000 wage-earners take £773,000,000 per annum. This apology for the existing order sounds little better than a confession of the truth of all the condemnations that have been uttered against it.