In countries which are further advanced in industry and population, and
have therefore a lower rate of profit, than others, there is always, long
before the actual minimum is reached, a practical minimum, viz., when
profits have fallen so much below what they are elsewhere that, were they
to fall lower, all further accumulations would go abroad. As long as there
are old countries where capital increases very rapidly, and new countries
where profit is still high, profits in the old countries will not sink to
the rate which would put a stop to accumulation: the fall is stopped at
the point which sends capital abroad.
Chapter IV. Consequences Of The Tendency Of Profits To A Minimum, And The
Stationary State.
§ 1. Abstraction of Capital not necessarily a national loss.
The theory of the effect of accumulation on profits must greatly abate, or
rather, altogether destroy, in countries where profits are low, the
immense importance which used to be attached by political economists to
the effects which an event or a measure of government might have in adding
to or subtracting from the capital of the country. We have now seen that
the lowness of profits is a proof that the spirit of accumulation is so
active, and that the increase of capital has proceeded at so rapid a rate,
as to outstrip the two counter-agencies, improvements in production and
increased supply of cheap necessaries from abroad. A sudden abstraction of
capital, unless of inordinate amount, [would not] have any real effect in
impoverishing the country. After a few months or years, there would exist
in the country just as much capital as if none had been taken away. The
abstraction, by raising profits and interest, would give a fresh stimulus
to the accumulative principle, which would speedily fill up the vacuum.
Probably, indeed, the only effect that would ensue would be that for some
time afterward less capital would be exported, and less thrown away in
hazardous speculation.
In the first place, then, this view of things greatly weakens, in a
wealthy and industrious country, the force of the economical argument
against the expenditure of public money for really valuable, even though
industriously unproductive, purposes. In poor countries, the capital of
the country requires the legislator’s sedulous care; he is bound to be
most cautious of encroaching upon it, and should favor to the utmost its
accumulation at home, and its introduction from abroad. But in rich,
populous, and highly cultivated countries, it is not capital which is the
deficient element, but fertile land; and what the legislator should desire
and promote, is not a greater aggregate saving, but a greater return to
savings, either by improved cultivation, or by access to the produce of
more fertile lands in other parts of the globe.
The same considerations enable us to throw aside as unworthy of regard one
of the common arguments against emigration as a means of relief for the
laboring-class. Emigration, it is said, can do no good to the laborers,
if, in order to defray the cost, as much must be taken away from the
capital of the country as from its population. If one tenth of the
laboring people of England were transferred to the colonies, and along
with them one tenth of the circulating capital of the country, either
wages, or profits, or both, would be greatly benefited, by the diminished
pressure of capital and population upon the fertility of the land. The
landlords alone would sustain some loss of income; and even they, only if
colonization went to the length of actually diminishing capital and
population, but not if it merely carried off the annual increase.
§ 2. In opulent countries, the extension of machinery not detrimental but
beneficial to Laborers.
From the same principles we are now able to arrive at a final conclusion
respecting the effects which machinery, and generally the sinking of
capital for a productive purpose, produce upon the immediate and ultimate
interests of the laboring-class. The characteristic property of this class
of industrial improvements is the conversion of circulating capital into
fixed: and it was shown in the first book(303) that, in a country where
capital accumulates slowly, the introduction of machinery, permanent
improvements of land, and the like, might be, for the time, extremely
injurious; since the capital so employed might be directly taken from the
wages fund, the subsistence of the people and the employment for labor
curtailed, and the gross annual produce of the country actually
diminished. But in a country of great annual savings and low profits no
such effects need be apprehended. It merely draws off at one orifice what
was already flowing out at another; or, if not, the greater vacant space
left in the reservoir does but cause a greater quantity to flow in.
Accordingly, in spite of the mischievous derangements of the money market
which have been occasioned by the great sums in process of being sunk in
railways, I can not agree with those who apprehend any mischief, from this
source, to the productive resources of the country. Not on the absurd
ground (which to any one acquainted with the elements of the subject needs
no confutation) that railway expenditure is a mere transfer of capital
from hand to hand, by which nothing is lost or destroyed. This is true of
what is spent in the purchase of the land; a portion too of what is paid
to agents, counsels, engineers, and surveyors, is saved by those who
receive it, and becomes capital again: but what is laid out in the _bona
fide_ construction of the railway itself is lost and gone; when once
expended, it is incapable of ever being paid in wages or applied to the
maintenance of laborers again; as a matter of account, the result is, that
so much food and clothing and tools have been consumed, and the country
has got a railway instead.
It already appears, from these considerations, that the conversion of
circulating capital into fixed, whether by railways, or manufactories, or
ships, or machinery, or canals, or mines, or works of drainage and
irrigation, is not likely, in any rich country, to diminish the gross
produce or the amount of employment for labor. There is hardly any
increase of fixed capital which does not enable the country to contain
eventually a larger circulating capital than it otherwise could possess
and employ within its own limits; for there is hardly any creation of
fixed capital which, when it proves successful, does not cheapen the
articles on which wages are habitually expended.
As regards the effects upon the material condition of the
wages-receiving class, since it seems clear that capital increases
faster than improvements, and probably faster even than
population, it follows that in countries where the
laboring-classes are evidently growing in intelligence, they gain
in wages with the progress of society. Such certainly seems to be
the teaching of Mr. Giffen’s late studies (see Book IV, Chap. III,
§ 5).
§ 3. Stationary state of wealth and population dreaded by some writers,
but not in itself undesirable.
Toward what ultimate point is society tending by its industrial progress?
When the progress ceases, in what condition are we to expect that it will
leave mankind?
It must always have been seen, more or less distinctly, by political
economists, that the increase of wealth is not boundless; that at the end
of what they term the progressive state lies the stationary state, that
all progress in wealth is but a postponement of this, and that each step
in advance is an approach to it. We have now been led to recognize that
this ultimate goal is at all times near enough to be fully in view; that
we are always on the verge of it, and that, if we have not reached it long
ago, it is because the goal itself flies before us. The richest and most
prosperous countries would very soon attain the stationary state, if no
further improvements were made in the productive arts, and if there were a
suspension of the overflow of capital from those countries into the
uncultivated or ill-cultivated regions of the earth. Adam Smith always
assumes that the condition of the mass of the people, though it may not be
positively distressed, must be pinched and stinted in a stationary
condition of wealth, and can only be satisfactory in a progressive state.
The doctrine that, to however distant a time incessant struggling may put
off our doom, the progress of society must “end in shallows and in
miseries,” far from being, as many people still believe, a wicked
invention of Mr. Malthus, was either expressly or tacitly affirmed by his
most distinguished predecessors, and can only be successfully combated on
his principles.
Even in a progressive state of capital, in old countries, a conscientious
or prudential restraint on population is indispensable, to prevent the
increase of numbers from outstripping the increase of capital, and the
condition of the classes who are at the bottom of society from being
deteriorated. Where there is not, in the people, or in some very large
proportion of them, a resolute resistance to this deterioration—a
determination to preserve an established standard of comfort—the condition
of the poorest class sinks, even in a progressive state, to the lowest
point which they will consent to endure. The same determination would be
equally effectual to keep up their condition in the stationary state, and
would be quite as likely to exist.
I can not, therefore, regard the stationary state of capital and wealth
with the unaffected aversion so generally manifested toward it by
political economists of the old school. I am inclined to believe that it
would be, on the whole, a very considerable improvement on our present
condition.
It is only in the backward countries of the world that increased
production is still an important object; in those most advanced, what is
economically needed is a better distribution, of which one indispensable
means is a stricter restraint on population. On the other hand, we may
suppose this better distribution of property attained, by the joint effect
of the prudence and frugality of individuals, and of a system of
legislation favoring equality of fortunes, so far as is consistent with
the just claim of the individual to the fruits, whether great or small, of
his or her own industry. We may suppose, for instance (according to the
suggestion thrown out in a former chapter(304)), a limitation of the sum
which any one person may acquire by gift or inheritance, to the amount
sufficient to constitute a moderate independence. Under this twofold
influence, society would exhibit these leading features: a well-paid and
affluent body of laborers; no enormous fortunes, except what were earned
and accumulated during a single lifetime; but a much larger body of
persons than at present, not only exempt from the coarser toils, but with
sufficient leisure, both physical and mental, from mechanical details, to
cultivate freely the graces of life, and afford examples of them to the
classes less favorably circumstanced for their growth. This condition of
society, so greatly preferable to the present, is not only perfectly
compatible with the stationary state, but, it would seem, more naturally
allied with that state than with any other.
There is room in the world, no doubt, and even in old countries, for a
great increase of population, supposing the arts of life to go on
improving, and capital to increase. But even if innocuous, I confess I see
very little reason for desiring it. The density of population necessary to
enable mankind to obtain, in the greatest degree, all the advantages both
of co-operation and of social intercourse, has, in all the most populous
countries, been attained. If the earth must lose that great portion of its
pleasantness which it owes to things that the unlimited increase of wealth
and population would extirpate from it, for the mere purpose of enabling
it to support a larger but not a better or a happier population, I
sincerely hope, for the sake of posterity, that they will be content to be
stationary, long before necessity compels them to it.
It is scarcely necessary to remark that a stationary condition of capital
and population implies no stationary state of human improvement. Even the
industrial arts might be as earnestly and as successfully cultivated, with
this sole difference, that instead of serving no purpose but the increase
of wealth, industrial improvements would produce their legitimate effect,
that of abridging labor. Hitherto it is questionable if all the mechanical
inventions yet made have lightened the day’s toil of any human being. They
have enabled a greater population to live the same life of drudgery and
imprisonment, and an increased number of manufacturers and others to make
fortunes. They have increased the comforts of the middle classes.
The statement that inventions have not “lightened the day’s toil
of any human being” has been persistently misquoted by many
persons and has been taken out of its connection. Mr. Mill
distinctly holds that the laborer’s lot could have been improved
had there been any limitation of population; that it is the
constant growth of population as society progresses which destroys
the gains afforded to the laboring-classes by improvements. But it
is quite certain that the material facts of Mr. Mill’s statement
are no longer true. In the United States wages have risen, with an
additional gain in lower prices; and Mr. Giffen shows the same
progress in England. Moreover, travelers on the Continent speak of
a similar movement already noticeable there. Mr. Giffen’s
statement in his comparison(305) with fifty years ago, is as
follows:
“While the money wages have increased as we have seen, the hours
of labor have diminished. It is difficult to estimate what the
extent of this diminution has been, but collecting one or two
scattered notices I should be inclined to say very nearly 20 per
cent. There has been at least this reduction in the textile,
engineering, and house-building trades. The workman gets from 50
to 100 per cent more money for 20 per cent less work; in round
figures he has gained from 70 to 120 per cent in fifty years in
money return. It is just possible, of course, that the workman may
do as much, or nearly as much, in the shorter period as he did in
his longer hours. Still, there is the positive gain in his being
less time at his task, which many of the classes still tugging
lengthily day by day at the oar would appreciate.”
Chapter V. On The Possible Futurity Of The Laboring-Classes.
§ 1. The possibility of improvement while Laborers remain merely receivers
of Wages.
There has probably never been a time when more attention has been
called to the material and social conditions of the
working-classes than in the last few years. The great increase of
literature and the extension of the newspaper has brought to every
reader, even where public and private charities have not sent
eye-witnesses into direct contact with distress, a more explicit
knowledge of the working-classes than ever before. The revelation
of existing poverty and misery is, often wrongly, taken to be a
proof of the increasing degradation of the working-men, and the
cause has been ascribed to the grasping cruelty of capitalists.
Instances of injustice arising from the relations of employers and
employed will occur so long as human nature remains imperfect. But
the world hopes that some other relation than that of master and
workman may be evolved in which not only many admitted wrongs may
be avoided, but also new forces may be applied to raise the
laborer out of his dependence on other classes in the community.
We are, at present, living under a _regime_ of private property
and competition. But certainly the progress of the laborer is not
that which can excite enthusiastic hopes for the future, so long
as he remains a mere receiver of wages. The progress of industrial
improvements has resulted, says Mr. Cairnes, in “a temporary
improvement of the laborer’s condition, followed by an increase of
population and an enlarged demand for the cheapened commodity....
Laborers’ commodities, however, are for the most part commodities
of raw produce, or in which the raw material constitutes the chief
element of the value (clothing is, in truth, the only important
exception); and of all such commodities it is the well-known law
that an augmentation of quantity can only be obtained, other
things being the same, at an increasing proportional cost. Thus,
it has happened that the gain in productiveness obtained by
improved processes has, after a generation, to a great extent been
lost—lost, that is to say, for any benefit that can be derived
from it in favor of wages and profits.... The large addition to
the wealth of the country has gone neither to profits nor to
wages, nor yet to the public at large [as consumers], but to swell
a fund ever growing even while its proprietors sleep—the rent-roll
of the owners of the soil.... The aggregate return from the land
has immensely increased; but the cost of the costliest portion of
the produce, which is that which determines the price of the
whole, remains pretty nearly as it was. Profits, therefore, have
not risen at all, and the real remuneration of the laborer, taking
the whole field of labor, in but a slight degree—at all events in
a degree very far from commensurate with the general progress of
industry.”(306)
Under these conditions, it seems that the only hope of an
improvement for the laboring-classes lies in the limitation of
population—or at least in an increase of numbers less than the
increase of capital and improvements. It is possible, however,
that Mr. Cairnes, with many others, has failed to recognize the
full extent of the improvement which is taking place in the wages
of the laborer under the existing social order. Although we hear
much of the wrongs of the working-men—and they no doubt exist—yet
it is unquestionable that their condition has vastly improved
within the last fifty years; largely, in my opinion, because
improvements have outstripped population, and because wide areas
of fertile land in new and peaceful countries have drawn off the
surplus population in the older countries, and because the
available spots in the newer countries like the United States have
not yet been covered over with a population sufficiently dense to
keep real wages anything below a relatively high standard. The
facts to substantiate this opinion, so far as regards Great
Britain, are to be found in a recent investigation(307) by Mr.
Giffen, the statistician of the English Board of Trade. For a very
considerable reduction in hours of daily labor, the workman now
receives wages on an average about 70 per cent higher than fifty
years ago, as may be seen by the following table:
Occupation. Place. Wages Wages, Increase
fifty present or
years ago, time, per decrease,
per week. week. amount,
per cent.
Carpenters Manchester 24 0 34 0 10 0 (+)
42
Glasgow 14 0 26 0 12 0 (+)
85
Bricklayers Manchester(308) 24 0 36 0 12 0 (+)
50
Glasgow 15 0 27 0 12 0 (+)
80
Masons Manchester(309) 24 0 29 10 5 10 (+)
24
Glasgow 14 0 23 8 9 8 (+) 69
Miners Staffordshire 2 8(310) 4 0(311) 1 4 (+) 50
Pattern-weavers Huddersfield 16 0 25 0 9 0 (+) 55
Wool-scourers " 17 0 22 0 5 0 (+) 30
Mule-spinners " 25 6 30 0 4 6 (+) 20
Weavers " 12 0 26 0 14 0 (+)
115
Warpers and " 17 0 27 0 10 0 (+)
beamers 58
Winders and " 6 0 11 0 5 0 (+) 83
reelers
Weavers (men) Bradford 8 3 20 6 12 3 (+)
150
Reeling and " 7 9 15 6 7 9 (+)
warping 100
Spinning " 4 5 11 6 7 1 (+)
(children) 160
With increased wages, prices are not much higher than fifty years
ago. But the clearest evidence as to their bettered material
condition is to be found in the following table, which shows the
amount of food consumed per head by the total population of Great
Britain:
Articles. 1840. 1881.
Bacon and hams, 0.01 13.93
Pounds.
Butter, Pounds. 1.05 6.36
Cheese, Pounds. 0.92 5.77
Currants and 1.45 4.34
raisins, Pounds.
Eggs, No. 3.63 21.65
Potatoes, Pounds. 0.01 12.5
Rice, Pounds. 0.90 16.32
Cocoa, Pounds. 0.08 0.31
Coffee, Pounds. 1.08 0.89
Corn, wheat, and 42.47 216.92
wheat-flour, Pounds.
Raw sugar, Pounds. 15.20 58.92
Refined sugar, Nil. 8.44
Pounds.
Tea, Pounds. 1.22 4.58
Tobacco, Pounds. 0.86 1.41
Wine, Gallons. 0.25 0.45
Spirits, Gallons. 0.97 1.08
Malt, Bushels. 1.59 1.91(312)
The question then at once arises, whether capital has been shown
by the statistics to have gained accordingly, or whether there has
been a proportionally less increase than in wages. Says Mr.
Giffen: “If the return to capital had doubled, as the wages of the
working-classes appear to have doubled, the aggregate income of
the capitalist classes returned to the income-tax would now be
￡800,000,000 instead of ￡400,000,000.... The capitalist, as such,
gets a low interest for his money, and the aggregate returns to
capital is not a third part of the aggregate income of the
country, which may be put at not less than ￡1,200,000,000.” It is
found, moreover—as a suggestion that property is more generally
diffused—that while there were 25,368 estates entered to probate
in 1838, of an average value of ￡2,160 each, there were 55,359
estates in 1882 of an average value of ￡2,500 each.
But yet the vast increase of wealth made possible by improvements
and the growth of capital would have bettered the condition of all
still more had population been somewhat more limited. As it is,
the material gain has been large in spite of an increase in the
population from 16,500,000 in 1831 to nearly 30,000,000 in 1881.
In other words, the landlords have been great gainers, while the
laborers have intercepted much more than Mr. Cairnes supposed.
There are at hand some very striking data relating to the United
States which point in the same direction as those of Mr. Giffen.
Charts No. XIX and XX show vividly how far the increased
productiveness of an industry, arising from greater skill and
greater efficiency of labor in the connection of improved
machinery, has enabled manufacturers to steadily lower the price
of their goods, and yet increase the wages paid to their
operatives. What was true of these two cotton-mills was true of
others within New England; for the rate of wages paid by these
mills was the rate current in the country in 1830 and in 1884.
While each spindle and loom has become vastly more effective, we
see by Chart No. XIX that the average production of each operative
constantly increased from 4,321 yards per year in 1830, to 28,032
yards in 1884; and this it was which made possible the
corresponding increase in the rate of wages from $164 in 1830, to
$290 in 1884. The sum of $290 a year as an average for each
operative, is a stipend too small to cause any general
satisfaction; but he must be gloomy indeed who does not see that
$290 is a cheerful possession as compared with $164. There is,
then, abundant ground for believing that in the past fifty years
the condition of the working-classes in the United States has been
materially improved. The diminishing proportion of the price which
goes to the capital is a significant fact, and illustrates the
tendency of profits to fall with the increase of capital.(313) The
same truth seems to be seen in the table given in a previous
chapter,(314) where the wages have been increased, but the hours
have fallen per day from thirteen to eleven since 1840.
§ 2.—through small holdings, by which the landlord’s gain is shared.
So far we have considered the chances for improvement in an
industrial order in which the present separation of capitalists
from laborers is maintained. But this does not take into account
that future time when cultivation in the United States shall be
forced down upon inferior land, and no more remains to be
occupied, and when capital may no longer increase as fast as
population. What must be the ultimate outlook for wages-receivers?
Or, more practically, what is the outlook now for those who are
wages-receivers, and for whom a more equitable distribution of the
product seems desirable? How can they escape the thralldom of
dependence on the accumulations of others?
In this connection, and of primary importance, is the avenue
opened to all holders of small properties to share in the increase
which goes to owners of land. It has been seen that owners of the
soil constantly gain from the inevitable tendencies of industrial
progress. If one large owner gains, why should not the increment
be the same if ten owners held the property instead of one? The
more the land is subdivided, the more the vast increase arising
from rent will be shared by a larger number. This, in my opinion,
is the strongest reason for the encouragement of small holdings in
every country. The greater the extension of small properties among
the working-class, the more will they gain a share of that part of
the product which goes to the owner of land by the persistent
increase of population. If, then, the gain arising from
improvements is largely passed to the credit of land-owners, as
Mr. Cairnes believes, it should be absolutely necessary to spread
among the working-classes the doctrine that if they own their own
homes, and buy the land they live on, to that extent will they
“grow rich while they sleep,” independently of their other
exertions. Land worth $500 to-day when bought by the savings of a
laborer, besides the self-respect(315) it gives him, will increase
in value with the density of population, and become worth $600 or
more without other sacrifice of his.
§ 3. —through co-operation, by which the manager’s wages are shared.
It will be found, however, that, of the various industrial
rewards, profits tend to diminish, meaning by “profits” only the
interest and insurance given for abstinence and risk in the use of
capital; but that the manager’s wages (wages of superintendence)
are larger than is commonly supposed in relation to other
industrial rewards, owing to the position of monopoly practically
held by such executive ability as is competent to successfully
manage large business interests. To the laborer this large payment
to the manager seems to be paid for the possession of capital.
This we now know to be wrong. The manager’s wages are payments of
exactly the same nature as any laborer’s wages. It makes no
difference whether wages are paid for manual or mental labor. The
payment to capital, purely as such, known as interest (with
insurance for risk), is unmistakably decreasing, even in the
United States. And yet we see men gain by industrial operations
enormous rewards; but these returns are in their essence solely
manager’s wages. For in many instances, as hitherto discussed, we
have seen that the manager is not the owner of the capital he
employs. To what does this lead us? Inevitably to the conclusion
that the laborer, if he would become something more than a
receiver of wages, in the ordinary sense, must himself move up in
the scale of laborers until he reaches the skill and power also to
command manager’s wages. The importance of this principle to the
working-man can not be exaggerated, and there flows from it
important consequences to the whole social condition of the lower
classes. It leads us directly to the means by which the lower
classes may raise themselves to a higher position—the actual
details of which, of course, are difficult, but, as they are not
included in political economy, they must be left to sociology—and
forms the essential basis of hope for any proper extension of
productive co-operation. In short, co-operation owes its existence
to the possibility of dividing the manager’s wages, to a greater
or less degree, among the so-called wages-receivers, or the
“laboring-class.” And it is from this point of view that
co-operation is seen more truly and fitly than in any other way.
For it is to be said that in some of its forms co-operation gives
the most promising economic results as regards the condition of
the laborer which have yet been reached in the long discussion
upon the relations of labor and capital.
§ 4. Distributive Co-operation.
It will be my object, then, to describe the chief forms in which
the co-operative principle has manifested itself. These may be
said, in general, to be four: (1) distributive co-operation, by
which goods already produced are bought and sold to members
without the aid of retail dealers; (2) productive co-operation, by
which associations are formed for producing and manufacturing
goods for the market; (3) partial productive co-operation in the
form of industrial partnerships between laborers and employers,
without dispensing with the latter; and (4) co-operative, or
People’s, banks. There are, of course, many other forms in which
the principle of co-operation has been applied; but these four are
probably the most characteristic.
Distributive co-operation is at once the simplest and the most
successful form, not merely because it requires less for capital
than any other for its inception, but also because it calls for
less business and executive capacity. The number of persons
capable of managing a small retail store is vastly greater than
the class fit to assume control of the very complex duties
involved in the care of wholesale houses—or, at all events, of
mills and factories. Distributive co-operation has its origin in
the fact that the expenses of a middle-man between the producer
and consumer may be entirely dispensed with, and in the fact that
more capital had collected in the business of distribution than
could economically be so employed. Its educating power on the men
concerned in teaching them to save, in showing the need of
business methods, and in instilling the elements of industrial
management, is of no little importance. It is, therefore, the best
gateway to any further or more difficult co-operative
experiments—such experiments as can be attempted only after the
proper capital is saved, and the necessary executive capacity is
discovered, or developed by training. In England co-operation
began its history in distributive stores, and has finally led to
such a stimulus of self-help in the laborer, that now co-operative
gymnasiums, libraries, gardens, and other results have proved the
wisdom of calling upon the laborers for their own exertions. Under
the system which separates employers and the employed, high wages
are not found to be the only boon which the receivers could wish;
for it is sometimes found that the best-paid workmen are the most
unwise and intemperate.(316) For the most ignorant and unskilled
of the workmen in the lowest strata the object would seem to be to
give not merely more wages, but give more in such a way as might
excite new and better motives, a desire as well as a possibility
of improvement. Self-help must be stimulated, not deadened by
stifling dependence on a class of superiors, or on the state. The
extraordinary growth of co-operation is one of the most cheering
signs of modern times. Distributive co-operation originated in
Rochdale, in England, about 1844, with a few laborers desirous of
saving themselves from the high prices paid for poor provisions.
By uniting, they purchased tea by the chest, sugar by the
hogshead, which they sold to each member at market prices. They
were surprised to find a large profit by the operation, which they
divided proportionally to the capital subscribed. Others soon
joined them; they took a store-room, and in 1882 there were 10,894
members, with a share capital of $1,576,215, and with realized
profits in that year of $162,885. They have erected expensive
steam flour-mills, and the society occupies eighteen branch
establishments in Rochdale. Libraries containing more than 15,000
volumes, and classes in science, language, and the technical arts,
attended by 500 students, have been maintained. The extension of
the Rochdale store led to the necessity of a wholesale
establishment of their own. It is now a large institution with
branches in London and Newcastle. “It owns manufactories in
London, Manchester, Newcastle, Leicester, Durham, and Crumpsall;
and it has depots in Cork, Limerick, Kilmallock, Waterford,
Tipperary, Tralee, and Armagh, for the purchase of butter,
potatoes, and eggs. It has buyers in New York and Copenhagen, and
it owns two steamships. It has a banking department with a
turn-over of more than ￡12,000,000 annually.”(317)
The following figures for England and Wales tell their own story
as to the progress of co-operation:(318)
1862. 1881.
Number of members 90,000 525,000
Capital: Share 428,000 5,881,000
Capital: Loan 55,000 1,267,000
Sales 2,333,000 20,901,000
Net profit 165,000 1,617,000
Several persons each subscribe a sum to make up the share capital
of a store, and a person is selected to take charge of the
purchase and care of the goods. The advantages of the plan are:
(1) A division among the co-operators of all the net profits of
the retail trade; (2) a saving in advertisements, since members
are always purchasers without solicitation; (3) no loss by bad
debts, since only cash sales are permitted; and (4) security
against fraud as to the character of the goods, because there is
no inducement to make gains by adulterations. It is often found
that the capital is turned over ten times in the course of a year;
while the cost of management in the wholesale Rochdale stores does
not amount to one per cent on the returns.
The arrangement of obligations in due order of their priority,
which has been recommended by Mr. Holyoake,(319) is as follows: of
funds in the store, payment should be made, (1) of the expenses of
management; (2) of interest due on all loans; (3) of an amount
equivalent to ten per cent of the value of the fixed stock to
cover the annual depreciation from wear and tear; (4) of dividends
on the subscribed capital of the members;(320) (5) of such a sum
as may be necessary for an extension of the business; (6) of two
and a half per cent of the remaining profit, after all the above
items are provided for, for educational purposes; (7) of the
residue, and that only, among all the persons employed, and
members of the store, in proportion to the amount of their wages,
or of their respective purchases during the quarter.(321) The
payment of dividends to customers on their purchases seems now to
be considered an essential element of success.
§ 5. Productive Co-Operation.
Productive co-operation presents many serious difficulties, the
chief of which is the need of managing ability. Some one in the
association must know the wholesale markets well, the expectation
of crops connected with his materials used, the proper time to
buy; he must know the processes of the special production
thoroughly, the best machinery, the best adaptation of labor to
the given end; he must know the whims of purchasers, and be ready
to change his products accordingly—in short, a man eminently
fitted for success in his own factory is essential to the
profitable management of one belonging to a body of co-operators.
It has been already seen how large a variation in profit is due to
manager’s wages; and it is very often only his skill, prudence,
and experience that make the difference between a failure and a
success in business. Unless co-operators are willing to pay as
large a sum for the services of a good manager as he could get in
his own establishment, they can not secure the talent which will
make their venture succeed.(322)
In France the national workshops of Louis Blanc, established in
1848, were a failure. Nowhere has it been more clearly seen that
state help has been disastrous than in France, where the
Constituent Assembly voted 3,000,000 francs for co-operative
experiments, all of which failed. Curiously enough, distributive
co-operation has not succeeded in France, because, owing to a
wide-spread dislike of the wages system, workmen will try nothing
less than productive schemes. And their success in this has been
no greater than might be expected, when inexperience is put to a
task beyond its powers.(323)
In Great Britain and the United States there have been some
successful experiments in production; and Mr. Holyoake(324) holds
that, although workmen certainly do begrudge the manager’s salary,
productive associations are possible when managed by a board of
elected directors. He urges, moreover, that, as in distributive
co-operation, if profits are shared with customers, there will be
insured both popularity and continuity of custom without the cost
of advertising, and such expenses as those of travelers and
commissions. The plan of actual operations upon which successes
have been reached in England seems to be briefly this: (1) To save
capital, chiefly through co-operative associations; (2) to
purchase or lease premises; (3) to engage managers, accountants,
and officers at the ordinary salaries which such men can command
in the market according to their ability; (4) to borrow capital on
the credit of the association; (5) to pay upon capital subscribed
by members the same rate of interest as that upon borrowed
capital; (6) to regard as profit only that which remains after
making payment for rent, materials, wages, all business outlays,
and interest on capital; and (7) to divide the profits according
to the salaries of all officers, wages of workmen, and purchases
of customers. Those mills and factories which have sprung out of
the extension of distributive associations, as at Rochdale, seem,
and naturally so, to have been most successful. They have
gradually trained themselves somewhat for the work, and their
customers were beforehand secured. That is, where the difficulties
of the manager’s function have been lessened, they have a better
chance of success. And yet it must be said that productive
associations will gain largely from the efficiency of the labor
when working for its own interest; and this is an important
consideration to be urged in favor of such associations.
The Sun Mill,(325) at Oldham, England, was established for
spinning cotton in 1861 by the exertions of some co-operative
bodies. Beginning with a share capital of $250,000, and a loan
capital of a like amount, it set 80,000 spindles in operation. In
1874 they had a share capital of $375,000 (all subscribed except
$1,000), and an equal amount of loan capital, while the whole
plant was estimated as worth $615,000. Two and a half per cent per
annum has been set apart for the depreciation in the value of the
mill, and seven and a half per cent for the machinery; so that in
the first ten years a total sum of $160,000 was set aside for
depreciation of the property. The profits have varied from two to
forty per cent; and, while only five per cent interest was paid on
the loan capital, large dividends were made on the share capital.
During the last few years the Sun Mill has on an average realized
a profit of 12-½ per cent, although it is known that the cotton
trade has suffered during this time from a serious depression.
Many experiments, however, have proved failures; and sometimes,
when they are successful (as in the case of the Hatters’
Association in Newark, New Jersey(326)), the workmen have no
desire to share their benefits with others, and practically form a
corporation by themselves. The mere fact that they do sometimes
succeed is an important thing. Then, too, they have an opportunity
of securing by salaries that executive ability in the community
which exists separate from the possession of capital. And in these
days, in large corporations, the manager is not necessarily
(although he often is) a large owner of capital. The last annual
report of the Co-operative Congress (1882) shows the existence in
England and Scotland of productive associations for the
manufacture of cloth, flannel, fustian, hosiery, quilts, worsted,
nails, watches, linen, and silk, as well as those for engineering,
printing, and quarrying; and these were but a few of them.(327)
In the United States there have been some successes as well as
failures. In January, 1872, a number of machinists and other
working-men organized in the town of Beaver Falls, Pennsylvania, a
Co-operative Foundry Association for the manufacture of stoves,
hollow-ware, and fine castings. On a small capital of only $4,000
they have steadily prospered, paid the market rate of wages, and
also paid annual dividends, over and above all expenses and
interest on the plant, of from twelve to fifteen per cent. In 1867
thirty workmen started a co-operative foundry in Somerset,
Massachusetts, with a capital of about $14,000. In the years
1874-1875 the company spent $5,400 for new flasks and patterns,
and yet showed a net gain of $11,914. In 1876 it had a capital of
$30,000, and a surplus fund of $28,924.(328)
§ 6. Industrial Partnership.
The difficulties of productive co-operation arising from the need
of skilled management, together with the existing unsatisfactory
relation between employers and laborers when wholly separate from
each other, have led to a most promising plan of industrial
partnership by which the manager retains the control of the
business operations, but shares his profits with the workmen. The
gain through increased efficiency, greater economy, and superior
workmanship, recoups the manager for the voluntary subtraction
from his share, and yet the laborers receive an additional share;
but more than this, it educates the laborer in industrial methods,
discloses the difficulties of management, and stimulates him to
saving habits and greater regularity of work. This system is
particularly adapted to reaching those laborers who would not
themselves rise to the demands of productive co-operation.
The principle was tried on one of the Belgian railways.
“Ninety-five kilogrammes of coke were consumed for every league of
distance run, but this was known to be more than necessary; but
how to remedy the evil was the problem. A bonus of 3-½_d._ on
every hectolitre of coke saved on this average of ninety-five to
the league was offered to the men concerned, and this trifling
bonus worked the miracle. The work was done equally well, or
better, with forty-eight kilogrammes of coke instead of
ninety-five; just one half, or nearly, saved by careful work, at
an expense of probably less than one tenth of the saving.”(329)
The experiment which has attracted most attention in the past has
been that of the Messrs. Briggs, at their collieries in Yorkshire,
England.(330) The relations between the owners and the laborers
were as bad as they could well be. “All coal-masters is devils,
and Briggs is the prince of devils,” ran the talk of the miners,
when they did not choose to send letters threatening to shoot the
owners. In 1865 Messrs. Briggs tried the plan of an industrial
partnership with their men, purely from business considerations.
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