Part 2

IX. WOMEN AND CHILDREN AT WORK-- 80 Evils of Early Factory System--Expansion of Woman Labor--Why Women are Paid Lower Wages than Men-- Desirability of Employment of Women--Child Labor-- Labor Legislation.

X. UNEMPLOYMENT AND INSURANCE-- 90 Number of Unemployed in Modern Industry--Classification of the Unemployed--Causes of Unemployment--Insurance against Accident, Sickness and Old Age in the United States; in Germany.

XI. MACHINERY AND INDUSTRIAL EFFICIENCY-- 101 Evils of Machinery--Labor’s Complaint against Machinery--Industrial Education in Germany; in England; in the United States--Aids to Industrial Development in the United States.

XII. PROFIT-SHARING AND CO-OPERATION-- 110 Methods of Profit-Sharing--Economic Theory of Profit-Sharing--Objections against Profit-Sharing --Experiments in Profit-Sharing--Co-Operation--The Rochdale Society--Producers’ Co-Operation--Advantages and Defects of Co-Operation.

XIII. PROBLEMS OF DISTRIBUTION-- 119 Functional Distribution--Personal Distribution--Forms of Distribution Proposed--Questions Connected with Functional Distribution; with Personal Distribution.

XIV. SAVING AND SPENDING-- 127 Expenditures for Different Purposes--Relation Between Saving and Spending--Desirability of Work for its Own Sake--Problem of Luxury--Economy in Consumption-- Economic Evils of Intemperance.

XV. MONEY AND BANKING-- 137 What Determines the Value of Money--Bimetallism-- Monometallism--Government Paper Money--Kinds of Money in the United States--Problems of the Banking System of the United States.

XVI. TRANSPORTATION AND COMMUNICATION-- 145 Consolidation in the Railroad World--Question of Railroad Rates--The Public Nature of Railroads-- Ownership of Railroads--Electric Interurban Railways--Express Companies--The Telephone--The Telegraph--Inland and Ocean Water Transportation--Our Canal System--Our Merchant Marine.

XVII. TAXATION AND TARIFF-- 154 Consequences of Taxation--Adam Smith’s Rules of Taxation--Problems of Taxation--Sources of Revenue in the United States--The General Property Tax--Inheritance Taxes--The Question of the Tariff.

XVIII. THE FUNCTIONS OF GOVERNMENT-- 163 Functions of a Modern State--Anarchism--Individualism-- Modified Individualism--Culture State Theory--State Socialism--Socialism--Municipalization of Local Public Utilities.

XIX. ECONOMIC PROGRESS-- 172 Improvement in Rate of Wages and Hours or Labor-- Advances in the Field of Production--Reasons Why Labor has not Profited More by the Great Increase in Wealth--Reduction in the Cost of Semi-Luxuries--Lines Along Which Reform is Needed.

Manufacturing. By O. P. AUSTIN 179

INTRODUCTION-- 179 The Hand Method of Manufacturing--The Factory Method-- Chief Producers by each Method--Exchanges of the World--Relation of Development of Manufactures to Commerce.

I. MODERN MANUFACTURING SYSTEMS OF THE WORLD-- 185 Their Development During the Last Two Centuries--The Waterfall as a Source of Power--Development of Steam Power--Enlargement of the Use of Machinery Following the Application of Power--The Factory Town--Results of the Application of Steam Power to Transportation--Electricity as an Aid in Manufacturing.

II. THE USE OF MACHINERY IN MANUFACTURING-- 193 The Spinning Wheel--The Loom--Kay’s Flying Shuttle-- Hargreave’s Spinning Jenny--Arkwright’s Water Frame--Crompton’s Spinning Mule--Machinery in the Iron and Steel Industry--Growth in Manufacturing Following the Application of Machinery to the Leading Industries--Effect of Machinery upon the Employment of Men--Effect upon Employment of Capital--Effect upon Prices of Labor, of Raw Materials, of Finished Products--Effect upon Commerce--Effect upon the Quality of Manufactures Produced.

III. DEVELOPMENT OF THE FACTORY SYSTEM-- 203 Growth of the Factory System in England--Causes of the Recent Growth of the Manufacturing Industries in the United States--Estimates of the Value of Manufactures in the Principal Countries of the World--Net and Gross Valuations of Manufactures in the United States.

IV. CAPITAL IN MANUFACTURING-- 214 Capital a Growing Factor in Manufacturing Industries-- Manufacturing in Great Establishments and under Expert Management a Favorite Investment for Capital--Effect of Increase in Gold Production-- Investments of Capital and Use of Machinery Increase more Rapidly than Employment of Labor--United States Statistics of Investment and Production Superior to those of Other Countries.

V. TRUSTS AND COMBINATIONS-- 222 Reasons for Co-Operation--The Pooling System--The Company--The Corporation--Trusts and Other Combinations--Causes of the Transformation from the Company and the Corporation to the Trust--Effect of Trusts upon Production, Prices, Wages and Employment.

VI. THE IRON AND STEEL INDUSTRY-- 230 Pig Iron the Basis of all Iron and Steel Manufacturing-- Pig Iron Production of the World in 1800 Compared with 1907--Fall in Prices of Iron and Steel a Result of the Application of Modern Methods of Manufacture-- History of Iron Manufacture; Development in England and Germany--History of Iron-Making in the United States--Transformation from the Charcoal Method to that of Coal and Coke--The Earlier Methods of Manufacturing Steel Contrasted with those of Today-- Rival Claims of the English and the American Inventors, Bessemer and Kelly, to the Modern System of Steel Manufacturing--Description of the Process of Manufacturing Steel under American Methods--The Use of Powerful Machinery and Lessening Proportion of Work Performed by Man Power--The Railway and Steamship in Relation to the Steel Industry--Great Combinations of Iron and Steel Manufacturers--Description of the Process of Transforming Iron into Steel by the Bessemer Process.

VII. THE TEXTILE INDUSTRY-- 247 Growth of the Textile Industry from the Hand Industries to Use of Machinery and the Factory System--Great Britain, the Greatest Cotton Manufacturing Country of the World in Proportion to Population--The United States the World’s Greatest Producer of Raw Cotton--Contrast of Manufacturing Methods in the United States and Europe--Great Britain the World’s Principal Cotton Manufacturer for Exportation--The United States a Large Manufacturer but Chiefly for her Own People--Light Grades of Cotton Manufactured in Europe--History of the Textile Industry--Description of the Manufacture of Textiles--Cotton Manufacturing has Outgrown that of Other Textiles--History of its Manufacture in India, in Asia Minor, in America, and, in Recent Years, in Japan--Other Oriental Countries Manufacture by the Hand Processes--Growth of the Use of Machinery in Cotton Manufacturing, from the Spinning Wheel and Spinning Jenny to Modern Machine Methods--The Textile Industry of the United States.

VIII. THE MANUFACTURING INDUSTRIES OF THE UNITED STATES-- 263 The United States the World’s Greatest Manufacturer-- Its System Developed More Recently than that of Europe--Has Utilized Modern Methods in Combination with Large Sums of Capital--The United States the Only Nation Taking a Census of Manufactures--The Gross and Net Value of Manufactures as Reported by the Census--Relation of the Gross and Net Figures to Those of Other Countries--Acceptance of the Lowest Estimate of Manufactures in the United States Places her Products Far in Excess of Those of any Other Nation--Growth of Manufacturing has Outgrown Consuming Power of the People and Resulted in Rapid Growth in Exportation--Manufactures Form a Growing Share of Exports--Principal Manufactured Articles Exported and Principal Countries to which Sent.

IX. STATISTICS OF MANUFACTURING-- 289 Production of Manufacturers’ Materials--Development of Transportation Facilities--Distribution of Manufactures--World’s Production of Gold, 1492 to 1908--Enlargement of Capital Invested in Manufacturing--The Various Classes of Manufactures Produced in the United States--The Value of Each Group at Recurring Censuses from 1880 to 1905--Distribution of the Manufacturing Industries in the Various Sections of the United States--Share which Manufactures Form in the Imports and Exports of the United States--Share which Manufactures Form in the Imports and Exports of the Principal Countries of Europe--Estimated Value of Manufactures Produced in the Principal Countries of the World, 1780 to 1905--Commerce of the World, 1780 to 1905--Number of Persons Engaged in the Principal Manufacturing Industries of the United States--Cotton Spindles of the World--Cotton Production of the World--Growth of Population, Commerce, Transportation Facilities, and in Production of Certain Articles Required in Manufacturing, 1800 to 1908.

Concrete and Steel. By J. F. SPRINGER 322

Chemistry and the Industries. By BENJAMIN BALL FREUD 341

The Close Relation of the Producer-Gas Power Plant to the Conservation of our Fuel Resources. By ROBERT HEYWOOD FERNALD 352

Efficiency in Shop Operations. By H. F. STIMPSON 370

The Bridge Between Labor and Capital. By JOHN MITCHELL 380

The Unemployed. By JOHN BASCOM 384

Quiz Questions 403

PRACTICAL ECONOMICS. 1

BY ERNEST LUDLOW BOGART, Ph. D.

[Born Yonkers, N. Y., 1870; A. B., A. M., Princeton University, 1890, 1896; Ph. D., University of Halle, 1897; Graduate Student, University of Halle, 1894, 1896-7, University of Berlin, 1894-5, Princeton University (Fellow), 1895-6, Columbia University, 1897-8. Assistant Professor Economics and Social Science, Indiana University, 1898-1900; Professor Economics and Sociology, Oberlin College, 1900-1905; Assistant Professor Economics, History and Politics, Princeton University, 1905-9; Associate Professor Economics, University of Illinois, 1909. Author of Economic History of the United States (Longmans Green & Co., 3rd edition, 1909), and several monographs and periodical articles.]

INTRODUCTION.

In the preparation of this text the author has endeavored to apply the principles of economic science to some of the more important problems of the modern industrial world, and especially those now confronting the people of the United States. He has attempted in doing this above all to make the text practical. The student or teacher of economics will recognize at once that the sections are arranged into groups corresponding with the traditional divisions of economic text-books into production and distribution (land, capital and organization, and labor), consumption, exchange, and the relation of the government to the individual. It is hoped that the text may not be without profit and interest to the general reader as well as the students of the La Salle Extension University.

I. THE MODERN INDUSTRIAL SYSTEM.

We shall probably get the clearest idea of the complexity of our modern industrial society if we contrast it briefly with the simpler state of social organization which preceded it. For this purpose we may take the English manor of the eleventh century. At that time England was a purely agricultural country, and the whole country 2 was divided into manors, of which the lord was regarded as the owner, under feudal conditions, while those who cultivated the land were his tenants. These tenants--villeins and cotters--worked on the lord’s land two or three days in the week, and the rest of the time cultivated their own holdings. The whole of the land of the manor, both that of the lord and that of the tenants, was cultivated on an elaborate system of joint labor. The land was divided into strips of about half an acre each, and a man’s holding might consist of a dozen or more of these strips scattered about in different parts of the manor. This was done in order to secure equality in the fertility and location of each man’s land. At that time the prevailing method of agriculture was known as the three-field system, in which one field, comprising about one-third of the manor and containing a portion of the scattered strips of the lord and every tenant, was planted with wheat, a second field comprising another third of the cultivated land was planted with barley or oats, while the third field was left fallow. The second year saw the second stage of this three-year rotation, one-third of the manor lying fallow each year to recuperate from this exhausting method of cropping; artificial manures were unknown.

Now the significant characteristics of such a manorial society were three. First, it was economically self-sufficient, that is, practically everything that was needed or was consumed on the manor was produced there. There was no need of intercourse with the outside world and there was little contact with it. Salt, iron, and millstones were almost the only things that the inhabitants of such a manor had to buy from outsiders. Consequently there was no production of goods for a market, little money, and almost no trade. The few things that were purchased were paid for at prices fixed by custom. Secondly, agriculture was carried on under a system of joint labor, and under customary methods which did not change from generation to 3 generation. It is clear that as long as all the land of the manor was thrown together, for purposes of cultivation, into fields on which were planted wheat or barley or which lay fallow, no one individual could cultivate his land differently from his neighbors. Indeed, the holdings of the different tenants were not even separated by fences, but only by ridges of grass. On the land which lay fallow the cattle were turned out to graze; if any man had attempted to plant a new crop the third year, his neighbors’ cattle would have devoured it under such a system. Production was regulated absolutely by custom, and no opportunity was given for the development of the inventiveness or initiative of the progressive individual. Thirdly, the tenants were personally unfree, that is, they did not have the liberty of moving freely from place to place, but were bound to the soil which they cultivated. A man could not freely choose either his occupation or his residence. There was no mobility or freedom of movement. Labor was wholly or partly compulsory, and on terms rigidly fixed by custom or by superior authority.

Such a society differs from that of today in almost every point, and offers a startling proof of how far we have progressed in the past eight or nine hundred years. For many of these characteristics, however, we do not need to go back to the English mediaeval manor; the plantation of the South two generations ago, with its system of slave labor, furnishes an illustration more familiar to most of us. With such a condition of industrial development we may now profitably contrast our own of the twentieth century. The chief characteristics of the modern industrial system are the institutions of private property, of competition, and of personal liberty.

The institution of private property is so familiar to us and so fundamental in modern economic life, that we commonly regard it as a natural right. Nevertheless, private property, like most other 4 economic institutions, is the result of a long evolution. Primitive man can hardly have had the conception of private property, and when it did begin to emerge, it was at first confined to movables. Indeed we may say that on the mediaeval English manor the private ownership of land did not yet exist in the modern sense. It was found however that, when each cultivator was permitted to fence in his holding and to call it his own, he cultivated it much more carefully and produced much more. Inclosure led to private property in land and to individual freedom in its use. Today in the United States the possession and transfer of landed property is almost as easy as that of movables. Private property must be justified on the ground of social utility, because under this method of control so much more is produced than under any system of commercial ownership yet tried. But there are not wanting objectors who contend that limits should be placed upon this institution, and that the right of use, of bequest, and possibly of unlimited acquisition should be brought under social control. The beneficence of private property turns largely upon the existence of competition and individual liberty and to these we must now turn.

Competition is defined as “the act of seeking or endeavoring to gain what another is endeavoring to gain at the same time.” But competition in modern industrial life is not merely a struggle to appropriate an existing good. The very contest, as over the control of a market, may and probably will lead to cheaper and larger production, and thus to the benefit of society. Competition is a selective process in our modern economic society, and through it we have the survival of the fittest. “Competition,” so runs the proverb, “is the soul of trade.” There is, to be sure, a dark side to the picture, for economic competition involves the defeat of the weaker party, but this does not necessarily mean his destruction, for his very failure may sharpen 5 his faculties and secure his ultimate success, or at worst he may find employment under his successful rival. But here again it is being urged that competition is brutal and that we should go back to the mediaeval method of regulation by custom, or resort to combination and monopoly. We are now witnessing experiments in both directions, but competition still remains the controlling force of modern economic society, and bids fair to continue so. It should however be the function of society to raise the ethical level of competition.

Industrial liberty has been developed even more slowly and painfully than the institution of private property, and has in some instances not yet been wholly won. Slavery and serfdom have given way before the higher and more beneficent conception of freedom or liberty. We believe today that a man generally knows what is best for him and will utilize his opportunities to the best advantage; that by giving him a maximum of freedom the welfare of society will at the same time be best promoted. Consequently, in our modern industrial society, a man is given not only social and religious liberty, but is free to move, to choose his occupation, to produce and to trade, to associate with his fellows, and to expend his income as he will. But here again, while the prevailing rule is liberty, society has found it necessary to lay restrictions upon the abuse of this liberty. It is not enough even to regard the industrial world as a great game in which each may act as he pleases provided only he observes the rules of the game. A higher conception of responsibility and duty must accompany freedom of action if we are to secure the best results.

The term “industrial society” has already been frequently used and needs a somewhat fuller explanation. About the year 1760 there took place in England what is usually called the Industrial Revolution. A number of inventions were made which rendered it possible to use 6 steam-driven machinery in the manufacture, first of textile and then of other goods. Manufactures were removed from the home, where they had hitherto been carried on, to the factory. Capital began to be used in large masses, machinery displaced hand tools, and the laborer ceased to own the implements with which he worked. Men, machines, and capital were massed in the factory and organized under the management of a new set of industrial organizers for the purpose of producing goods for a world market. The development of such an industrial society has been attended by the minute division of labor, by a growing separation of classes, by concentration of the population in urban centers, by the increasing cost and complexity of machinery, by the development of improved methods of transportation and of credit, by the combination of labor and of capital, by the enormous increase of production, and by the growing concentration of wealth.

The introduction of power manufacture completely revolutionized industry. The independent workman with his own tools was superseded by the factory, the small producer has given way in turn to the trust. With the introduction of expensive machinery it became necessary to organize capital on a large scale. Corporations with limited liability were organized for the manufacture of goods, the exploitation of mines, the building of railroads, and the carrying on of trade. As methods of production improved industry became more and more concentrated, and finally huge trusts took over the operation of combined plants. The business unit has grown increasingly larger, and the need and power of capital have become increasingly important. Capital has played a role of growing significance and has become more and more powerful in modern economic life. Indeed the name “capitalistic production” has been applied to modern industry because of the predominant importance of capital in all lines of wealth 7 production. Impersonal, growing by sheer force of its own momentum, capital is often thought of as intensely selfish and even cruel. Abuses which have arisen in the development of modern capitalistic industry must be remedied, but attacks upon capital itself are misguided and rest upon a mistaken analysis of methods of production.