CHAPTER XIV

THE ORGANIZATION OF LABOR AND CAPITAL

INTRODUCTION

The modern labor problem can hardly be said to have existed in America until after the middle of the nineteenth century. Before that time the American people had indeed their labor problem, as most new countries have, but it was something quite different from what now passes under that name. How to secure a sufficient number of wage workers, how to create a laboring class, was the real problem; not how to protect laborers from the injuries of excessive competition. With the single exception of commercial enterprises, capital cannot be invested in any considerable amount in an industry without the hiring of labor. No matter how profitable an industry may be, no capitalist as such can engage in it until he is able to secure the services of laborers. As capital accumulates in a country, therefore, or is brought in from outside for investment, the creation of a wage-earning class becomes a matter of paramount importance to economic progress. Down to about the time of the Civil War, the difficulty of securing an adequate supply of such labor and keeping it was felt in every industry that required production on a large scale. In the South and the West Indies, where men wished to invest capital in the production of. sugar, tobacco, and cotton, a solution of the difficulty was found in the estab-. lishment of negro slavery. In Spanish America, where the capitalist wished to exploit the mines, it was found in a system of compulsory labor for the natives. In the northern part of the United States for many generations the capitalist devoted himself to commerce and shipping, where not much wage labor was required. When, however, attention was turned to manufactures and to various enterprises for improving transportation, the same difficulty had to be met there that had long been felt in other parts of America.'

It was chiefly the labor of women and children, and later of an increasing body of immigrants, which made possible the investment of capital in the industries of this region. They furnished almost the only wage labor which was to be had. They could not, however, be called a laboring class in the ordinary sense of that term; and few or none of the modern problems of such a class appeared among them. It is true that trade-unions of the modern type were organized in considerable numbers in the country before 1850, but it is misleading to infer from them that the labor situation in this country resembled even remotely the conditions which caused the growth of labor organizations in Europe during the same time. Communistic societies, based on the

ideas of Owen and Fourier, also sprang up here in great numbers at this time; but no one would infer from this that social conditions in America were anything like those in Europe which Owen and Fourier were striving to remedy. Trade-unions, like communistic societies, were in America foreign ideas, taken up by our people at a time of great social and moral ferment and applied here to a society almost completely free from the ills those devices were designed to cure in Europe. They did not spring out of industrial conditions here and had no roots in the country itself at this time.

As the labor problem in our early history was how to secure combination, so a similar problem arose in relation to capital. So long as the chief enterprises requiring large capital were commercial and maritime, or were in the production of agricultural staples, there seems to have been no great difficulty in bringing together under one management a sufficient amount of capital to carry on the industries. Single individuals or two or three persons in partnership could supply all that was necessary. But when attention was turned to banking and insurance, to manufactures requiring expensive machinery, and to various transportation enterprises like the establishment of steamboat lines and the building of turnpikes, canals, and railroads, sufficient capital could not be secured in this way. A great deal of saving and accumulation of capital took place during the prosperous years of the European wars. There was capital enough in the country in the aggregate to carry on these new enterprises, but it existed for the most part in small amounts and the owners were loath to risk them in speculative ventures which did not promise very 'large returns. Some means had to be devised for bringing these together so as to provide the large capitals that were needed. This problem was met by the development of corporations. Practically none had existed in colonial times, but beginning a few years after the close of the Revolution we find the state governments creating them in great numbers to carry on the various new enterprises that were attracting attention. They began with banks and insurance companies during the last ten years of the eighteenth century. Turnpike and manufacturing companies were most numerous before the War of 1812, while banking, canal, and railroad companies were created in great numbers from this time to the Civil War. Gradually corporations secured the confidence of the people, and to an increasing extent the savings of the country went to the purchase of their stocks and bonds. There seems to have been some little fear of possible dangers from them at first, and this was increased toward banking corporations by the political struggle over the United States Bank. But the opposition to corporations as such never became strong or general. On the contrary they were regarded as an application of the democratic principle to business; the small stockholder in a corporation like the humble citizen of the republic had a voice in the management of affairs. The attitude of the public toward corporations soon became extremely indulgent. Few precautions were taken against any possible evils from them, and almost every concession asked for was eagerly granted by the state governments to them.

I. THE LABOR PROBLEM OF NEW COUNTRIES

1. . . I have now to request your special attention to an absolute condition of a high rate of profit anywhere, and, indeed, of any return whatever from capital, which is often wanting or deficient in colonies, though not in old countries.

In this country [England], for example, it never comes into anybody's head to doubt that capital can be employed in a productive business. There is capital, and there is the business: put the one into the other, and all will go well. The business, let us suppose, is the farming of 500 acres of fertile land in a high state of cultivation, well found in drainage, fences, and buildings, and rent free: the capital is £5000 worth of the things requisite for carrying on the business of the farm, such as crops in the ground, live stock, fodder, implements, and money at the bank wherewith to pay outgoings till incomings restore the invested capital. Nothing more seems requisite. . . . But, . . . let us suppose, the number of labourers on this farm being thirty, that two-thirds of them quitted their employer, and that he was totally unable to get others in their place . . . We can hardly bring ourselves to imagine the occurrence of such a case here. It is substantially an every-day case in the colonies. Farmers, or other men of business there, can get and keep horses as many as they please, but they cannot do so with labourers. Labour, which is here a drug, is scarce there. . .

It has long been an axiom with political economists, that the most important improvement in the application of human industry is what they call "the division of labour:" the produce, they show, is great in proportion as the labour is divided. Adam Smith's famous chapter on the subject satisfies the mind on this point. But he fell into an error of words, which has kept out of view until lately, that what he calls the division of labour, is wholly dependent upon something else. It is dependent upon combination amongst the labourers. In his illustrative case of the pin-factory, for example, the separate parts of the whole work of making a pin could not be assigned to different persons one drawing the wire, another polishing it, a third cutting it in bits, a fourth pointing one end of the 1 Wakefield, A View of the Art of Colonization [1851], pp. 165-166, 167, 168-170.

bits, a fifth making the heads, a sixth putting them on, and so forth

unless all these persons were brought together under one roof, and induced to co-operate. The bringing together of workmen, and inducing them to co-operate, is a combination of labour: it cannot be properly called by any other name.

The principle of the combination of labour, which seems more important the more one reflects on it, was not perceived until a colonial inquiry led to its discovery: it was unnoticed by economists, because they have resided in countries where combination of labour takes place, as a matter of course, whenever it is required it seems in old countries like a natural property of labour. But in colonies the case is totally different. There, the difficulty of inducing a number of people to combine their labour for any purpose, meets the capitalist in every step of his endeavours, and in every line of industry. I shall speak of the consequences presently. There is another principle of labour which nothing points out to the economical inquirer in old countries, but of which every colonial capitalist has been made conscious in his own person. By far the greater part of the operations of industry, and especially those of which the produce is great in proportion to the capital and labour employed, require a considerable time for their completion. As to most of them, it is not worth while to make a commencement without the certainty of being able to carry them on for several years. A large portion of the capital employed in them is fixed, incontrovertible, durable. If anything happens to stop the operation, all this capital is lost. If the harvest cannot be gathered, the whole outlay in making it grow has been thrown away. Like examples, without end, might be cited. They show that constancy is a no less important principle than combination of labour. The importance of the principle of constancy is not seen here, because rarely indeed does it happen, that the labour which carries on a business, is stopped against the will of the capitalist; and it perhaps never happens, that a capitalist is deterred from entering on an undertaking by the fear that in the middle of it he may be left without labourers. But in the colonies, on the contrary, I will not say that this occurs every day, because capitalists are so much afraid of it, that they avoid its occurrence as much as they can, by avoiding, as

much as possible, operations which require much time for their completion; but it occurs, more or less, to all who heedlessly engage in such operations, especially to new comers; and the general fear of it the known difficulty of providing with certainty that operations shall not be stopped or interrupted by the inconstancy of labour is as serious a colonial impediment to the productiveness of industry as the difficulty of combining labour in masses for only a short time.

Combination and constancy of labour are provided for in old countries, without an effort or a thought on the part of the capitalist, merely by the abundance of labourers for hire. In colonies, labourers for hire are scarce. The scarcity of labourers for hire is the universal complaint of colonies. It is the one cause, both of the high wages which put the colonial labourer at his ease, and of the exorbitant wages which sometimes harass the capitalist.

1. . . There is no one subject on which so many complaints are to be heard from every class of American society as the immigration of foreigners. The incapacity of men to recognise blessings in disguise has been the theme of moralists in all ages: but it might be expected that the Americans, in this case, would be an exception. It is wonderful, to a stranger, to see how they fret and toil, and scheme and invent, to supply the deficiency of help, and all the time quarrel with the one means by which labour is brought to their door. The immigration of foreigners was the one complaint by which I was met in every corner of the free States; and I really believe I did not converse with a dozen persons who saw the ultimate good through the present apparent evil.

It is not much to be wondered at that gentlemen and ladies, living in Boston and New York, and seeing, for the first time in their lives, half-naked and squalid persons in the street, should ask where they come from, and fear lest they should infect others with their squalor, and wish they would keep away. It is not much to be wondered at that the managers of charitable institutions in the maritime cities should be weary of the claims advanced by indigent foreigners but it is surprising that these gentlemen and ladies

1 Martineau, Society in America [1834-1836], I, 339-340, 341-342, 343-344.