Great combinations.—The tendency toward improvement by combination of laborers through the possibilities of division of labor leads to still larger combinations in so-called factory systems, and even to a combination of factories in large corporations. This tendency has been especially marked since the multiplication of labor-saving machines and more perfect systems of transportation. Indeed, the possibility of extensive machine using, as well as extended division of labor, rests upon a combination of many forces under one general management. Beyond these advantages, saving is found in the necessary care for waste products, which often may be turned into profit, greater freedom of action from closer community of interests, greatly enlarged facilities for marketing, and the best possible devices for handling and transporting products.

All these advantages in great establishments are readily perceived, yet some have doubted whether the gains are so distributed as actually to increase the general welfare. Farmers, perhaps, as readily as any persons, distrust the power of great corporations. Wage earners, generally, in the expression, “corporations have no souls,” express their distrust of results. Yet so far [pg 192] as they actually introduce improvement in production so that variety of products is increased and the cost of production reduced, the whole community gains in large measure the total saving. Any one can realize the advantage by study of a single article of every-day use. In the middle ages the cloth in a garment was worth eight times the wool from which it was made. Now the value is chiefly in the raw product. The price of iron affects every farmer through the cost of his tools and implements or the quality of either. Compare the modern steel hoe, first in quality and then in cost, with the hoe of fifty years since. Then measure that cost in its relation to a day's work, as compared with the same measure in 1850. All are in this way benefited by reducing the exertion needed to procure any one article of use, since more exertion may be left for meeting other wants. If machinery and improved methods have entered less into the farmer's home life, he can find his own advantage from the range of such improvements in other directions by thinking what a pound of butter will buy for him today as compared with what it would buy before the period of machinery. (Chart No. XIV, p. 106.)

The introduction of labor-saving machines is a direct addition to human power and economy of time, and a means of converting useless material to meet human wants. That a new machine throws out of employment workers in that particular field brings a hardship which ought to be shared by the multitude who are benefited; but the probabilities are great that the improved method of manufacture will so increase the uses for the product as to bring into employment a far larger number of [pg 193] laborers. The spinning jenny threw out of employment several thousand spinners in the old way, but in twenty-five years the cloth-makers in England had increased from less than eight thousand to three hundred and twenty thousand. The machines which in 1760 were thought to have ruined some eight thousand cloth-makers, in 1833 employed two million persons. This is only a striking illustration of what has happened in every direction. It is perfectly evident that communities using the most machinery pay larger wages and far larger welfare to every laborer. It is not too much to say that the actual comforts within the reach of every laborer have been more than doubled within the last hundred years.

A few illustrations of the actual saving in cost of production and distribution may be interesting. Complicated machinery can never be used in producing upon a small scale, just as a small farmer can never afford the use of a harvester. All the benefits of invention applied to machinery have come through its use on a large scale. A factory making a thousand pairs of shoes each year cannot use such machinery as the one making a million pairs will need. Each one of the million pairs, therefore, costs the world less than each one of the thousand pairs. Again the large establishment, like an immense saw mill, being obliged to care for its sawdust, may devise a way of making this waste product of use in pressed blocks for kindling, or possibly in buttons or wood ornaments. The waste of the shoe shop is only a nuisance, but the waste of a great shoe factory is ground and pressed into all sorts of useful forms. All such saving of [pg 194] waste is so much added to the world's store of wealth.

That the large establishment saves unnecessary friction is shown in the order of any great mercantile establishment. It is still more noticeable in immense iron works separated from every other form of industry for the sake of freedom of motion. In these ways, principally, there is a saving of labor in the huge department stores, although the facilities for advertising, advantages for transportation in large bulk and the employment of expert salesmen in every department contribute to the same result. The general expenses of an ordinary store are estimated at nearly 40 per cent of the difference between wholesale and retail prices. The same expenses in the great coÖperative store at Paris, the Bon MarchÉ, are only 14 per cent. While the controllers of capital in the large enterprises have the first advantage of such saving, the very necessities of their business compel a sharing with their employÉs and with the public.

Even the so-called trusts, supposed to be contrivances for controlling the market, have really served in many instances the welfare of the whole community. A biscuit trust, in handling the most of the crackers in the market, saves great expense of advertising, a still greater expense in sales by traveling salesmen, or drummers, and immense waste of stock on hand through condensation into fewer warehouses, reduces its insurance to actual cost, and has brought to the public by means of all these savings a greater variety of crackers of almost uniform quality suited to the fluctuations of demand at a reduced price. No one doubts that even the Standard Oil Company, [pg 195] by means of its savings through consolidation, has at the same time preserved the general supply of oil from waste and brought it to every man's door, with a great improvement in quality, comparative safety in use, and an almost constantly diminishing price.

The record of facts shows that with all the tendency to great aggregations, and so to concentration of power, masses of wage-earners have had their hours of labor shortened, have gained facilities for culture in libraries, lectures and voluntary associations, have gained habits more systematic, and regular methods of life with greater constancy of employment, have better protection of civil rights, better provision for education of children, a larger insurance against accident, and a better provision for hospital care when disabled. The same system has provided methods for economical use of savings in joint stock companies, and cultivated a general unity of purpose and appreciation of others' welfare. Withal it has given to the mothers of families an immense increase of leisure for home-making, and at the same time has opened ranges of employment for women without homes. Even the rate of wages has not been diminished, but rather increased, as is shown also by actual records. That the great establishments cannot pay less than average rates is evident from the multitudes seeking to enter their employment. Moreover, they must pay their workmen regularly or appear bankrupt. Employers on a small scale can easily postpone upon all sorts of pretences, and failures are frequent. Suppose the distribution of milk in New York city were under a single management. A systematic division of territory would at once reduce the [pg 196] number of milk wagons by at least one-half. The certainty of responsibility would insure uniform purity, and means of transportation could be brought to perfection, so that the amount now delivered would actually cost perhaps not more than two-thirds the present price. While at present prices the profit would be large, the necessity for investing those profits would at once call for extension of the trade by reducing the price, and at the same time increasing the proceeds to farmers somewhere who furnish the larger supply. The better quality and larger quantity for the same money would certainly increase the demand, and probably with direct benefit to the milk-raisers. The essential element of distrust of individual management in large enterprises as to fair distribution of the profits stands in the way of such a combination.

Limits to aggregation.—It is easy to see that the advantages of great establishments cannot always be gained. The limits of demand restrict the possibility of profit in supply. The element of space in connection with the market and in relation to the buyers makes an important limit. Special advantages of location on a small scale may outweigh the advantages of aggregation. Utilization of forces in nature, like pure water or water power, or special qualities of raw materials, may outweigh all other considerations. In general the requirement of interested oversight in a single superintendent has checked such growth. The more perfect, however, the system of management, the less effective is such a limitation. It is possible with extreme division of labor to make distinct rules take the place of personal [pg 197] direction, and oversight is reduced to a minimum. All these limitations serve to check the too rapid growth of this factory system and to hold in check the tendency to misuse of power in possible monopolies. Any raising of prices which diminishes the demand destroys the advantage of a great combination. It makes its profits by the quantity of its products sold. A reduction of the quantity much more certainly than a reduction in price destroys the advantage. Hence a monopoly gained in the ordinary progress of trade can seldom operate for any long time to advance prices, though it may destroy the competition of smaller establishments completely.

Disadvantages of aggregation.—It is impossible to overlook a considerable number of disadvantages to the welfare of a community in a too rapid aggregation of its industrial enterprises. It changes large numbers of laborers from independent workers to wage earners, and thus makes them a part of the great machine, with an immense momentum in production which does not so readily yield to the fluctuations of demand. An independent worker is not worried if he has a leisure day. The great establishment cannot adjust its machinery to a lessened demand without a uniformity of reduction in wages or time of employment, or else the discharge of numbers of employÉs. This is one of the causes of over-production so evident in certain directions upon the coming of financial crises. Another great disadvantage is seen in the breakdown of any such enterprise. Then its employÉs, trained for its particular uses, find themselves not only without employment, but [pg 198] unfitted to drop into other niches of usefulness. The absolute routine of the great establishment so fixes habits as to make very difficult a change of work except in line of promotion in a similar organization. The dissatisfaction and distress from such absence of employment is more apparent than in ordinary poverty.

The strongest objections, however, to the great aggregations are found in the possibility of oppression through a monopoly of business, and therefore almost absolute control by a few persons of the interests not only of a large body of employÉs, but of every competitor upon a smaller scale. A large combination practically compels all to yield to its methods. The certain economy of methods has led to the statement, “Where combination is possible, competition ceases.” The common saying, “Competition is the life of trade,” becomes untrue whenever that competition implies a costly service. Competition is supposed to reduce cost by stimulating energy and ingenuity. But when that ingenuity can be better applied in combination, the result is the destruction of competition. Competition may drive the milk wagon faster, but combination will deliver more quarts of milk in the same time. The natural opposition to combination rests upon the same ground as the opposition to improved machinery. It certainly throws out of their ordinary employment a considerable number of independent workers.

This power of the combination is a constant temptation to unscrupulous and grasping managers to increase their advantage by vicious discrimination and false competition, expecting the destruction of others' business to [pg 199] increase their own. The largeness of the operation makes more plain the injustice of the maxim, “All is fair in trade.” The final dangers of combination are thus likely to be overestimated. It is not true that any larger proportion of false methods of business enters into the large establishment than into the small, and the possibility of profit in a great combination is quite as truly dependent upon the universal welfare as anywhere. The same extremes of prices mark the range for these establishments as for any others. The price cannot continue higher than buyers will pay with an increasing disposition to buy more. It cannot remain lower, of course, than will enable sellers to continue living as well as in any other business. Checks upon increased price come as certainly from substitutes as from rival production, and the ability of the people will always gauge the amount of sales. The expression “What the trade will bear,” means a price such as not to diminish consumption. Indeed, the business principles of a great trust are essentially the same as those in any single manufactory. A trust which stops the work of certain factories in a combination for the sake of diminishing the output, because of danger to prices from too rapid production, follows the same principle as a farmer who stops raising wheat from the probability of too much wheat in the market. The farmer would better lose the use of his land for a time than lose the advantage of both land and labor by over-production of wheat. In the same way a trust may wisely hold its fixed capital unproductive till the consumption of the community reaches the full extent of its power to [pg 200] produce. The power of one combination to interfere with the workings of another by indirect methods, like investment in the other's stock, is an evil to be treated like any fraud. Laws and courts are in the power of the people, and should preserve the rights of all.

One great danger of large combinations is the tendency to govern by iron rule instead of by fair judgment of individual cases. This is a difficulty always connected with great enterprises, to be cured as growth advances through establishing well trained experts whose judgment makes the rules not only good in themselves, but well executed. The government itself is subject to the same difficulty, as seen in the handling of an army, and is obliged to meet it in the same way. Even the abuses often referred to from enormous difference of wages between the executive officers and the inferior operatives are quite possibly only a natural method for solving these difficulties. A first-class officer has no difficulty with his men. In general those institutions whose management is costly do better for their workmen than the weaker institutions with weaker men at the head.

The supposed dangers from too rapid improvement in the machinery of production are scarcely to be credited in the light of improvements during the last hundred years. Every improvement has certainly given a larger enjoyment and better employment to the masses of people. The enterprise which invents better ways of accomplishing anything is the best possible means for enlarging and stimulating the wants and abilities of the whole people. The very profits themselves are sure to [pg 201] awaken larger enterprise, and even if the accumulated surplus is distributed in so-called watered stock, it does not cease to promote production. The wider the distribution of stock, the more permanent and more generally satisfactory is the working of the great combination. If employÉs themselves become sharers in the business, the true interests of all are likely to be promoted. When the savings of the multitude can be perfectly united in a joint stock company, to furnish the capital with which the same people work, the general conditions of wealth production for all the community are fairly met.

Bonanza farms.—An illustration of some effects of aggregation may be seen in the enormous farms of the wheat regions of America. There machinery is introduced as far as possible, all work is methodically planned and executed, and wholesale rates in purchases and in transportation are secured. The result is that certain staple products, especially wheat, are raised at a cost far below the average cost to moderate farmers. The result is large profits upon the capital invested, in spite of the fact that such farms do not make best use of soil fertility and certainly do not maintain the best condition of soil for future use. This, however, is due rather to the nature of pioneer farming, which makes immediate use of the powers of the soil, than to the nature of the management. It is conceivable that the same ingenuity may continue the development of large farms under greatly improved agriculture. In that case the general effect will be much more widely felt than now. So far it seems that bonanza farming is [pg 202] confined to a very few lines of production, where everything is bent in the direction of lessening labor instead of benefiting the soil or making homes.

There is no question as to the general advantage of small farms in making farm homes. It is a question whether the general improvements in agriculture, except in machinery and its use, have not come from the diligent ingenuity of the small farmer in making most of his own acres. Ben Franklin said, “The best manure for the farm is the foot of its owner.” The interested constancy among small farmers certainly develops both character and ability in any country. This fact has probably been one reason for the small farms of large parts of Europe. One-third of France is cultivated by owners of farms averaging 7-½ acres. Four-fifths of Bavaria, Belgium and Switzerland are in farms of less than twelve acres. Even Prussia has 900,000 farms of less than four acres. These farms vary in quality from poorest to richest, and peasant farmers are not able to boast of their wealth. Yet some of the most fertile regions are made so and kept so by the labor employed upon the small farm. Some of them also involve large capital. The Isle of Jersey, where land is worth $1,000 an acre, is so divided that an average farm is eight acres. Of course, but little labor-saving machinery reaches these places. Tillage with the spade costs five times as much as tillage by plough; yet the small farmer finds such advantage from its use as to call it gold mining. It is probable that the strong competition of immense farms in grain raising, possibly also in sugar raising from either cane or beets, and in seed raising, will awaken among the smaller [pg 203] farmers attention to finer grades of farming and more care for the fertility of their fewer acres.

On the whole, the tendency with increasing population is toward smaller farms with more intensive farming. Whether our country, with its stronger commercial energy, will follow this tendency as exhibited in northern Europe seems doubtful. It is not likely that we shall ever admit the legal restrictions under which division and subdivision have made their way in that region. The question will doubtless be settled by economic conditions independent of legislation. At present we are far from either extreme, as can be seen by reference to Chart No. I, p. 9.

Department stores.—Increasing application of the principles of aggregation is seen in the so-called department stores, which not only deal in everything but with everybody, extending their trade by mail over large territory. The very evident economy of such aggregation of capital for purposes of exchange appeals so directly to the customers as to make the sufferers in competition cry out in vain for restrictions. Such stores seem sure to maintain their advantage in exchange, except with reference to mere local distribution of every-day necessities and expert handling of specialties. The community does well to give attention not so much to restrictions upon this trade as to reduction of opportunity for abuse of power over the mass of employÉs under control. The great establishment will certainly bring more satisfactory conditions in time than the multitude of small ones beyond the reach of public inspection.