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The Evolution of Modern Capitalism - A Study of Machine Production
by John Atkinson Hobson
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+ -+ Transcriber's Note: Inconsistent hyphenation in the original document has been preserved. Bolded text has been bracketted with ='s, =like so=. Greek text has been transliterated and bracketted with +'s, +like so+. Obvious typographical errors have been corrected. For a complete list, please see the end of this document. + -+

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THE CONTEMPORARY SCIENCE SERIES. EDITED BY HAVELOCK ELLIS.



EVOLUTION OF MODERN CAPITALISM.



THE EVOLUTION

OF

MODERN CAPITALISM

A STUDY OF MACHINE PRODUCTION.

BY JOHN A. HOBSON, M.A., AUTHOR OF "PROBLEMS OF POVERTY."

THE WALTER SCOTT PUBLISHING CO., LTD., PATERNOSTER SQUARE, LONDON, E.C. CHARLES SCRIBNER'S SONS, 153-157 FIFTH AVENUE, NEW YORK. 1902.



PREFACE.

In seeking to express and illustrate some of the laws of the structural changes in modern industry, I have chosen a focus of study between the wider philosophic survey of treatises on Social Evolution and the special studies of modern machine-industry contained in such works as Babbage's Economy of Manufactures and Ure's Philosophy of Manufactures, or more recently in Professor Schulze-Gaevernitz's careful study of the cotton industry. By using the term "evolution" I have designed to mark the study as one of a subject-matter in process of organic change, and I have sought to trace in it some of those large movements which are characteristic of all natural growth.

The sub-title, A Study of Machine-Production, indicates a further narrowing of the investigation. Selecting the operation of modern machinery and motors for special attention, I have sought to enforce a clearer recognition of organic unity, by dwelling upon the more material aspects of industrial change which mark off the last century and a half from all former industrial epochs. The position of central importance thus assigned to machinery as a factor in industrial evolution may be—to some extent must be—deceptive, but in bringing scientific analysis to bear upon phenomena so complex and so imperfectly explored, it is essential to select some single clearly appreciable standpoint, even at the risk of failing to present the full complexity of forces in their just but bewildering interaction.

In tracing through the Business, the Trade, and the Industrial Organism the chief structural and functional changes which accompany machine-development, I have not attempted to follow out the numerous branches of social investigation which diverge from the main line of inquiry. Two studies, however, of "the competitive system" in its modern working are presented; one examining the process of restriction, by which competition of capitals gives way to different forms of combination; the other tracing in periodic Trade Depressions the natural outcome of unrestricted competition in private capitalist production.

In some final chapters I have sought to indicate the chief bearings of the changes of industrial structure upon a few of the deeper issues of social life, in particular upon the problem of the Industrial Town, and the position of woman as an industrial competitor.

A portion of Chapters VIII., IX., and X. have already appeared in the Contemporary Review and in the Political Science Quarterly Review, and I am indebted to the courtesy of the editors for permission to use them.

I have also to acknowledge most gratefully the valuable assistance rendered by Dr. William Smart of Glasgow University, who was kind enough to read through the proofs of a large portion of this book, and to make many serviceable corrections and suggestions.

JOHN A. HOBSON.



CONTENTS.

CHAPTER I.

PAGE INTRODUCTION 1

Section. 1. Industrial Science, its Standpoint and Methods of Advance. 2. Capital as Factor in Modern Industrial Changes. 3. Place of Machinery in Evolution of Capitalism. 4. The Monetary Aspect of Industry. 5. The Literary Presentment of Organic Movement.

CHAPTER II.

THE STRUCTURE OF INDUSTRY BEFORE MACHINERY 10

1. Dimensions of International Commerce in early Eighteenth Century. 2. Natural Barriers to International Trade. 3. Political, Pseudo-economic, and Economic Barriers— Protective Theory and Practice. 4. Nature of International Trade. 5. Size, Structure, Relations of the several Industries. 6. Slight Extent of Local Specialisation. 7. Nature and Conditions of Specialised Industry. 8. Structure of the Market. 9. Combined Agriculture and Manufacture. 10. Relations between Processes in a Manufacture. 11. Structure of the Domestic Business: Early Stages of Transition. 12. Beginnings of Concentrated Industry and the Factory. 13. Limitations in Size and Application of Capital—Merchant Capitalism.

CHAPTER III.

THE ORDER OF DEVELOPMENT OF MACHINE INDUSTRY 44

1. A Machine differentiated from a Tool. 2. Machinery in Relation to the Character of Human Labour. 3. Contributions of Machinery to Productive Power. 4. Main Factors in Development of Machine Industry. 5. Importance of Cotton-trade in Machine Development. 6. History refutes the "Heroic" Theory of Invention. 7. Application of Machinery to other Textile Work. 8. Reverse order of Development in Iron Trades. 9. Leading Determinants in the General Application of Machinery and Steam-Motor. 10. Order of Development of modern Industrial Methods in the several Countries—Natural, Racial, Political, Economic.

CHAPTER IV.

THE STRUCTURE OF MODERN INDUSTRY 88

1. Growing Size of the Business-Unit. 2. Relative Increase of Capital and Labour in the Business. 3. Increased Complexity and Integration of Business Structure. 4. Structure and Size of the Market for different Commodities. 5. Machinery a direct Agent in expanding Market Areas. 6. Expanded Time-area of the Market. 7. Interdependency of Markets. 8. Sympathetic and Antagonistic Relations between Trades. 9. National and Local Specialisation in Industry. 10. Influences determining Localisation of Industry under World-Competition. 11. Impossibility of Final Settlement of Industry. 12. Specialisation in Districts and Towns. 13. Specialisation within the Town.

CHAPTER V.

THE FORMATION OF MONOPOLIES IN CAPITAL 117

1. Productive Economies of the Large Business. 2. Competitive Economies of the Large Business. 3. Intenser Competition of the few Large Businesses. 4. Restraint of Competition and Limited Monopoly. 5. Facilities for maintaining Price-Lists in different Industries. 6. Logical Outcome of Large-Scale Competition. 7. Different Species of "Combines." 8. Legal and Economic Nature of the "Trust." 9. Origin and Modus Operandi of the Standard Oil Trust. 10. The Economic Strength of other Trusts. 11. Industrial Conditions favourable to "Monopoly"

CHAPTER VI.

ECONOMIC POWERS OF THE TRUST 143

1. Power of a Monopoly over earlier or later Processes in Production of a Commodity. 2. Power over Actual or Potential Competitors. 3. Power over Employees of a Trust. 4. Power over Consumers. 5. Determinants of a Monopoly Price. 6. The Possibility of low Monopoly Prices. 7. Considerations of Elasticity of Demand limiting Prices. 8. Final Summary of Monopoly Prices.

CHAPTER VII.

MACHINERY AND INDUSTRIAL DEPRESSION 167

1. The external phenomena of Trade Depression. 2. Correctly described as Under-production and Over-production. 3. Testimony to a general excess of Productive Power over the requirement for Consumption. 4. The connection of modern Machine-production and Depression shown by statistics of price. 5. Changing forms in which Over-supply of Capital is embodied. 6. Summary of economic relation of Machinery to Depression. 7. Under-consumption as the root-evil. 8. Economic analysis of "Saving." 9. Saving requires increased Consumption in the future. 10. Quantitative relation of parts in the organism of Industry. 11. Quantitative relation of Capital and Consumption. 12. Economic limits of Saving for a Community. 13. No limits to the possibility of individual Saving—Clash of individual and social interests in Saving. 14. Objection that excess in forms of Capital would drive interests to zero not valid. 15. Excess is in embodiments of Capital, not in real Capital. 16. Uncontrolled Machinery a source of fluctuation.

CHAPTER VIII.

MACHINERY AND DEMAND FOR LABOUR 220

1. The Influence of Machinery upon the number of Employed, dependent on "elasticity of demand." 2. Measurement of direct effects on Employment in Staple Manufactures. 3. Effects of Machinery in other Employments—The Evidence of French Statistics. 4. Influence of Introduction of Machinery upon Regularity of Employment. 5. Effects of "Unorganised" Machine-industry upon Regularity. 6. Different Ways in which modern Industry causes Unemployment. 7. Summary of General Conclusions.

CHAPTER IX.

MACHINERY AND THE QUALITY OF LABOUR 244

1. Kinds of Labour which Machinery supersedes. 2. Influence of Machine-evolution upon intensity of physical work. 3. Machinery and the length of the working day. 4. The Education of Working with Machinery. 5. The levelling tendency of Machinery—The subordination of individual capacity in work.

CHAPTER X.

THE ECONOMY OF HIGH WAGES 261

1. The Economy of Low Wages. 2. Modifications of the Early Doctrine—Sir T. Brassey's Evidence from Heavy Manual Work. 3. Wages, Hours, and Product in Machine-industry. 4. A General Application of the Economy of High Wages and Short Hours inadmissible. 5. Mutual Determination of Conditions of Employment and Productivity. 6. Compressibility of Labour and Intensification of Effort. 7. Effective Consumption dependent upon Spare Energy of the Worker. 8. Growth of Machinery in relation to Standard of Comfort. 9. Economy of High Wages dependent upon Consumption.

CHAPTER XI.

SOME EFFECTS OF MODERN INDUSTRY UPON THE WORKERS AS CONSUMERS 285

1. How far the different Working Classes gain from the Fall of Prices. 2. Part of the Economy of Machine-production compensated by the growing Work of Distribution. 3. The Lowest Class of Workers gains least from Machine-production.

CHAPTER XII.

WOMEN IN MODERN INDUSTRY 290

1. Growing Employment of Women in Manufacture. 2. Machinery favours Employment of Women. 3. Wages of Women lower than of Men. 4. Causes of Lower Wages for Women. 5. Smaller Productivity or Efficiency of Women's Labour. 6. Factors enlarging the scope of Women's Wage-work. 7. "Minimum Wage" lower for Women—Her Labour often subsidised from other sources. 8. Woman's Contribution to the Family Wages—Effect of Woman's Work upon Man's Wages. 9. Tendency of Woman's Wage to low uniform level. 10. Custom and Competition as determinants of Low Wages. 11. Lack of Organisation among Women—Effect on Wages. 12. Over-supply of Labour in Women's Employments the root-evil. 13. Low Wages the chief cause of alleged Low "Value" of Woman's Work. 14. Industrial Position of Woman analogous to that of Low-skilled Men. 15. Damage to Home-life arising from Women's Wage-work.

CHAPTER XIII.

MACHINERY AND THE MODERN TOWN 324

1. The Modern Industrial Town as a Machine-product. 2. Growth of Town as compared with Rural Population in the Old and New Worlds. 3. Limits imposed upon the Townward Movement by the Economic Conditions of World-industry. 4. Effect of increasing Town-life upon Mortality. 5. The impaired quality of Physical Life in Towns. 6. The Intellectual Education of Town-life. 7. The Moral Education of Town-life. 8. Economic Forces making for Decentralisation. 9. Desirability of Public Control of Transport Services to effect Decentralisation. 10. Long Hours and Insecurity of Work as Obstacles to Reforms. 11. The Principle of Internal Reform of Town-life.

CHAPTER XIV.

CIVILISATION AND INDUSTRIAL DEVELOPMENT 350

1. Imperfect Adjustment of Industrial Structure to its Environment. 2. Reform upon the Basis of Private Enterprise and Free Trade. 3. Freedom and Transparency of Industry powerless to cure the deeper Industrial Maladies. 4. Beginnings of Public Control of Machine-production. 5. Passage of Industries into a public Non-competitive Condition. 6. The raison d'etre of Progressive Collectivism. 7. Collectivism follows the line of Monopoly. 8. Cases of "Arrested Development:" the Sweating Trades. 9. Retardation of rate of Progress in Collective Industries. 10. Will Official Machine-work absorb an Increasing Proportion of Energy? 11. Improved Quality of Consumption the Condition of Social Progress. 12. The Highest Division of Labour between Machinery and Art. 13. Qualitative Consumption defeats the Law of Decreasing Returns. 14. Freedom of Art from Limitations of Matter. 15. Machinery and Art in production of Intellectual Wealth. 16. Reformed Consumption abolishes Anti-Social Competition. 17. Life itself must become Qualitative. 18. Organic Relations between Production and Consumption. 19. Summary of Progress towards a Coherent Industrial Organism.

INDEX 385



THE EVOLUTION OF MODERN CAPITALISM.



THE EVOLUTION OF MODERN CAPITALISM.



CHAPTER I.

INTRODUCTION.

Sec. 1. Industrial Science, its Standpoint and Methods of Advance. Sec. 2. Capital as Factor in Modern Industrial Changes. Sec. 3. Place of Machinery in Evolution of Capitalism. Sec. 4. The Monetary Aspect of Industry. Sec. 5. The Literary Presentment of Organic Movement.

Sec. 1. Science is ever becoming more and more historical in the sense that it becomes more studiously anxious to show that the laws or principles with whose exposition it is concerned not merely are rightly derived from observation of phenomena but cover the whole range of these phenomena in the explanation they afford. So likewise History is ever becoming more scientific in the sense that facts or phenomena are so ordered in their setting as to give prominence to the ideas or principles which appear to relate them and of which they are the outward expression. Thus the old sharp line, of distinction has slipped away, and we see there is no ultimate barrier between a study of facts and a study of the laws or principles which dominate these facts. In this way the severance of History and Science becomes less logically justifiable. Yet it is still convenient that we should say of one branch of study that it is historical in the sense that it is directly and consciously engaged in the collection and clear expression of facts or phenomena as they stand objectively in place or time without any conscious reference to the laws which relate or explain them; of another branch of study that it is scientific because it is engaged in the discovery, formulation, and correct expression of the laws according to which facts are related, without affecting to give a full presentment of those facts. The treatment in this book belongs in this sense to economic science rather than to industrial history as being an endeavour to discover and interpret the laws of the movement of industrial forces during the period of the eighteenth and nineteenth centuries.

It cannot, however, be pretended that any high degree of exactitude can attach to such a scientific study.

Two chief difficulties beset any attempt to explain industrial phenomena by tracing the laws of the action of the forces manifested in them. The first is that only a limited proportion of the phenomena which at any given time constitute Industry are clearly and definitely ascertainable, and it may always be possible that the laws which satisfactorily explain the statical and dynamical relations of these may be subordinate or even counteracting forces of larger movements whose dominance would appear if all parts of the industrial whole were equally known.

The second difficulty, closely related to the first, is the inherent complexity of Industry, the continual and close interaction of a number of phenomena whose exact size and relative importance is continually shifting and baffles the keenest observer.

These difficulties, common to all sciences, are enhanced in sociological sciences by the impossibility of adequate experiment in specially prepared environments.

The degree of exactitude attainable in industrial sciences may thus appear to be limited by the development of statistical inquiry. Since the collection of accurate statistics, even on those matters which are most important, and which lend themselves most easily to statistical description, is a modern acquirement which has not yet widely spread over the whole world, while the capacity for classifying and making right use of statistics is still rarer, it is held by some that in a study where so much depends upon accurate statements of quantity little advance is at present possible.

And it is, of course, true that until the advance of organised curiosity has provided us with a complete measurement of industrial phenomena over a wide area of commerce and over a considerable period of time, the inductive science of Economics cannot approach exactitude.

But a study which cannot claim this exactness may yet be a science, and may have its value. A hypothesis which best explains the generally apparent relation between certain known phenomena is not the less science because it is liable to be succeeded by other hypotheses which with equal relative accuracy explain a wider range of similar phenomena. It is true that in studies where we know that there exists a number of unascertained factors we shall expect a more fundamental displacement of earlier and more speculative hypotheses than in studies where we know, or think we know, that most of the phenomena with which we are concerned are equally within our ken: but the earlier scientific treatment, so far as it goes, is equally necessary and equally scientific.

In modern industrial changes many different factors, material and moral, are discernibly related to one another in many complex ways. According as one or other of the leading factors is taken for a scientific objective the study assumes a widely different character.

For example, since the end of Industry is wealth for consumption it would be possible to group the industrial phenomena accordingly as they served more fully and directly to satisfy human wants, or as they affected quantitatively or qualitatively the standard of consumption, and to consider the reflex actions of changed consumption upon modes of industrial activity. Or again, considering Industry to consist essentially of organised productive human effort, those factors most closely related to changes in nature, conditions, and intensity of work might form the centre of scientific interest; and we might group our facts and forces according to their bearing upon this. These points of view would give us different objective scientific studies.

Or, once more, taking a purely subjective standpoint, we might search out the intellectual expression of these industrial changes in the changing thought and feeling of the age, tracing the educative influences of industrial development upon (1) the deliberate judgments of the business world and of economic thinkers as reflected in economic writings; (2) politics, literature, and art through the changes of social environment, and the direct stimulation of new ideas and sentiments. The deeper and more important human bearings of the changes in industrial environment might thus be brought into prominence as well as the reaction by which, through the various social avenues of law, public opinion, and private organised activity, these intellectual forces have operated in their turn upon the industrial structure.

The crowning difficulty of an adequate scientific treatment consists in the fact that each and all of these scientific objects ought to be pursued simultaneously; that is to say, the whole of the phenomena—industrial, intellectual, political, moral, aesthetic—should be presented in their just but ever-changing proportions.

This larger philosophic treatment is only named in order that it may be realised how narrow and incomplete would be even the amplest fulfilment of the purpose indicated in the title of this book.

Sec. 2. Industrial science has not yet sufficiently advanced to enable a full treatment of the objective phenomena to be attempted.

The method here adopted is to take for our intellectual objective one important factor in modern industrial movements, to study the laws of its development and activity, and by observing the relations which subsist between it and other leading factors or forces in industry to obtain some clearer appreciation and understanding of the structure of industry as a whole and its relation to the evolution of human society. This central factor is indicated by the descriptive title peculiarly applied to modern industry, Capitalism. A clear view of the phenomena grouped together under the head of the Industrial Revolution cannot fail to give prominence to the changes that have taken place in the structure and functional character of Capital. Whatever transformations have taken place in the character of land, the raw material of industrial wealth, and of labour, or those abilities and faculties of man which operate upon the raw material, have occurred chiefly and directly through the agency of the enlarged and more complex use of those forms of material wealth which, while embodying some element of human effort, are not directly serviceable in satisfying human want.

Writers upon Political Economy have brought much metaphysical acumen to bear upon definitions of Capital, and have reached very widely divergent conclusions as to what the term ought to mean, ignoring the clear and fairly consistent meaning the term actually possesses in the business world around them. The business world has indeed two views of Capital, but they are consistent with one another. Abstractly, money or the control of money, sometimes called credit, is Capital. Concretely, capital consists of all forms of marketable matter which embody labour. Land or nature is excluded except for improvements: human powers are excluded as not being matter; commodities in the hands of consumers are excluded because they are no longer marketable. Thus the actual concrete forms of capital are the raw materials of production, including the finished stage of shop goods; and the plant and implements used in the several processes of industry, including the monetary implements of exchange. Concrete business capital is composed of these and of nothing but these.[1] In taking modern industrial phenomena as the subject of scientific inquiry it is better to accept such terminology as is generally and consistently received by business men, than either to invent new terms or to give a private significance to some accepted term which shall be different from that given by other scientific students, and, if we may judge from past experience, probably inferior in logical exactitude to the current meaning in the business world.

Sec. 3. The chief material factor in the evolution of Capitalism is machinery. The growing quantity and complexity of machinery applied to purposes of manufacture and conveyance, and to the extractive industries, is the great special fact in the narrative of the expansion of modern industry.

It is therefore to the development and influence of machinery upon industry that we shall chiefly direct our attention, adopting the following method of study. It is first essential to obtain a clear understanding of the structure of industry or "the industrial organism" as a whole, and of its constituent parts, before the new industrial forces had begun to operate. We must then seek to ascertain the laws of the development and application of the new forces to the different departments of industry and the different parts of the industrial world, examining in certain typical machine industries the order and pace of the application of the new machinery and motor to the several processes. Turning our attention again to the industrial organism, we shall strive to ascertain the chief changes that have been brought about in the size and structural character of industry, in the relations of the several parts of the industrial world, of the several trades which constitute industry, of the processes within these trades, of the businesses or units which comprise a trade or a market, and of the units of capital and labour comprising a business. It will then remain to undertake closer studies of certain important special outcomes of machinery and factory production. These studies will fall into three classes. (1) The influences of machine-production upon the size of the units of capital, the intensification and limitation of competition; the natural formation of Trusts and other forms of economic monopoly of capital; trade depressions and grave industrial disorders due to discrepancies between individual and social interests in the working of modern methods of production. (2) Effects of machinery upon labour, the quantity and regularity of employment, the character and remuneration of work, the place of women in industry (3) Effects upon the industrial classes in the capacity of consumers, the growth of the large industrial town and its influences upon the physical, intellectual, moral life of the community. Lastly, an attempt will be made to summarise the net influences of modern capitalist production in their relation to other social progressive forces, and to indicate the relations between these which seem most conducive to the welfare of a community measured by generally accepted standards of character or happiness.

Sec. 4. Since every industrial act in a modern community has its monetary counterpart, and its importance is commonly estimated in terms of money, it will be evident that the growth of capitalism might be studied with great advantage in its monetary aspect. Corresponding to the changes in productive methods under mechanical machinery we should find the rapid growth of a complex monetary system reflecting in its international and national character, in its elaborate structure of credit, the leading characteristics which we find in modern productive and distributive industry. The whole industrial movement might be regarded from the financial or monetary point of view. But though such a study would be capable of throwing a flood of light upon the movements of concrete industrial factors at many points, the intellectual difficulties involved in simultaneously following the double study, in constantly passing from the more concrete to the more abstract contemplation of industrial phenomena, would tax the mental agility of students too severely, and would greatly diminish the chance of a substantially accurate understanding of either aspect of modern industry. We shall therefore in this study confine our attention to the concrete aspect of capitalism, merely indicating by passing references some of the direct effects upon industrial methods, especially in the expansion and complexity of markets, of the elaborate monetary system of modern exchange.

Sec. 5. The inherent difficulty which besets every literary presentation of the study of a living and changing organism is here present in no ordinary degree. A book of physiology is necessarily defective in that it can neither present the just simultaneity of phenomena which occur together, nor the just sequence of phenomena which are successive. Diagrams may serve effectively to set forth tolerably simple simultaneity, but a complex diagram inevitably fails of its object; for it confuses the sight of one who seeks to simultaneously grasp the whole, and thus compels a successive examination of different parts which is generally inferior to skilled narration, in that it affords no security of the fittest order of examination of the parts. For certain simple relations between the movements of a few definite objects a working model may be serviceable; but when complex changes of shape, pace, and local relations exist, when intricate interaction takes place, and when new phenomena arise affecting by their presence all former ones, little can be effected by such visual presentment. Still less can a succession of diagrams assist us to realise the continuity of the working of such shifting forces as are presented in industrial movements.

Thus while the impossibility of adequate experimentation, the difficulties of scientific observations of phenomena so vast in scope and so intricate in their relations, make the student of sociological subjects more dependent upon printed records for his material than is the case in most other sciences, these printed records induce a sequence of thought antagonistic to the grasp of a living and moving unity. This cause is primarily responsible for the failure of many of the ablest and subtlest economic treatises to impress upon the reader a clear conception of the industrial world as a single "going concern." Each piece of the mechanism is clearly described, and the reader is informed how it fits into the parts which are most closely related to it, but no simultaneous grasp of the mechanism as a working whole is attained. When we graft upon the idea of a mechanism that character of continuous self-development which transforms it into an "organism," the synthesis of the changing phenomena is still more difficult to comprehend. These difficulties can only be overcome by a recognition that the scientific imagination must play a larger part here than it does in those sciences whose subject-matter is more amenable to direct observation. In the latter the chief function of the imagination will be the increase of knowledge by means of hypotheses which tentatively transcend the region of known facts.

In economic science, as Cairnes has ably shown, the use of hypothesis is much wider, serving in large measure as a substitute for experiment.[2] But the scientific imagination has another constant service to perform. Its exercise is constantly required by the economist, and in general by the sociologist, to gather into true relations of time, space, and causality those intricately connected phenomena which, though individually amenable to sensuous presentation, are not able to be thus presented as an aggregate in their right organic order.

The attempts to construct a deductive economic science upon a piece-meal basis by framing special and separate theories of wages, rent, value, the functions of money, and so forth, are now recognised to be in large measure failures precisely because they involve the fundamental scientific fallacy of supposing that the several parts of an organic whole can be separately studied, and that from this study of the parts we can construct a correct idea of the whole. As in economic theory so in the comprehension of industrial history, no detailed investigation of a number of different heaps of facts laboriously collected by intellectual moles will suffice for our purpose. To understand the evolution of the system of modern industry we must apply to the heaps of bare unordered facts those principles of order which are now recognised as the widest generalisations or the most valid assumptions derivable from other sciences, and endeavour without slavish conformity to the formulae of these other sciences to trace in the growth of industrial organisms those general laws of development which seem common to all bodies of closely-related phenomena.

FOOTNOTES:

[1] Professor Marshall regards this restricted use of capital as "misleading," rightly urging that "there are many other things which truly perform the services commonly attributed to capital" (Principles Bk. II., chap. iv.). But if we enlarge our definition so as to include all these "other things" we shall be driven to a political economy which shall widely transcend Industry as we now understand the term, and shall comprehend the whole science and art of life so far as it is concerned with human effort and satisfaction. If it is convenient and justifiable to retain for certain purposes of study the restricted connotation of Industry now in vogue, the confinement of Capital as above to Trade Capital is logically justified. For a fuller treatment of the question of the use of the term Capital in forming a terminology descriptive of the parts of Industry the reader is referred to Chapter VII., and in particular to Appendix I.

[2] Logical Method of Political Economy, p. 81, etc.



CHAPTER II.

THE STRUCTURE OF INDUSTRY BEFORE MACHINERY.

Sec. 1. Dimensions of International Commerce in early Eighteenth Century. Sec. 2. Natural Barriers to International Trade. Sec. 3. Political, Pseudo-economic, and Economic Barriers— Protective Theory and Practice. Sec. 4. Nature of International Trade. Sec. 5. Size, Structure, Relations of the several Industries. Sec. 6. Slight Extent of Local Specialisation. Sec. 7. Nature and Conditions of Specialised Industry. Sec. 8. Structure of the Market. Sec. 9. Combined Agriculture and Manufacture. Sec. 10. Relations between Processes in a Manufacture. Sec. 11. Structure of the Domestic Business: Early Stages of Transition. Sec. 12. Beginnings of Concentrated Industry and the Factory. Sec. 13. Limitations in Size and Application of Capital— Merchant Capitalism.

Sec. 1. In order to get some clear understanding of the laws of the operation of the new industrial forces which prevail under machine-production it is first essential to know rightly the structure and functional character of the "industrial organism" upon which they were destined to act. In order to build up a clear conception of industry it is possible to take either of two modes of inquiry. Taking as the primary cell or unit that combination of labour and capital under a single control for a single industrial purpose which is termed a Business, we may examine the structure and life of the Business, then proceed to discover how it stands related to other businesses so as to form a Market, and, finally, how the several Markets are related locally, nationally, internationally so as to yield the complex structure of Industry as a whole. Or reversely, we may take Industry as a whole, the Industrial Organism as it exists at any given time, consider the nature and extent of the cohesion existing between its several parts, and, further, resolving these parts into their constituent elements, gain a close understanding of the extent to which differentiation of industrial functions has been carried in the several divisions.

Although in any sociological inquiry these two methods are equally valid, or, more strictly speaking, are equally balanced in virtues and defects, the latter method is here to be preferred, because by the order of its descent from the whole to the constituent parts it brings out more definitely the slight cohesiveness and integration of industry beyond the national limits, and serves to emphasise those qualities of nationalism and narrow localism which mark the character of earlier eighteenth century industry. We are thus enabled better to recognise the nature and scope of the work wrought by the modern industrial forces which are the central object of study.

While the Market or the Trade is less and less determined or confined by national or other political boundaries in modern times, and nationalism is therefore a factor of diminishing importance in the modern science of economics, the paramount domination of politics over large commerce in the last century, acting in co-operation with other racial and national forces, obliges any just analysis of eighteenth century industry to give clear and early emphasis to the slight character of the commercial interdependency among nations. The degree of importance which statesmen and economists attached to this foreign commerce as compared with home trade, and the large part it played in the discussion and determination of public conduct, have given it a prominence in written history far beyond its real value.[3]

It is true that through the Middle Ages a succession of European nations rose to eminence by the development of navigation and international trade, Italy, Portugal, Spain, France, Holland, and England; but neither in size nor in character was this trade of the first importance. Even in the case of those nations where it was most developed it formed a very small proportion of the total industry of the country, and it was chiefly confined to spicery, bullion, ornamental cloths, and other objects of art and luxury.

It is important to recognise that in the first half of the eighteenth century international trade still largely partook of this character. Not only did it bear a far smaller proportion to the total industry of the several countries than does foreign trade to-day, but it was still engaged to a comparatively small extent with the transport of necessaries or prime conveniences of life. Each nation, as regards the more important constituents of its consumption, its staple foods, articles of clothing, household furniture, and the chief implements of industry, was almost self-sufficing, producing little that it did not consume, consuming little it did not produce.

In 1712 the export trade of England is officially estimated at L6,644,103,[4] or considerably less than one-sixth of the home trade of that date as calculated by Smith in his Memoirs of Wool. Such an estimate, however, gives an exaggerated impression of the relation of foreign to home trade, because under the latter no account is taken of the large domestic production of goods and services which figure in no statistics. A more instructive estimate is that which values the total consumption of the English people in 1713 at forty-nine or fifty millions, out of which about four millions covers the consumption of foreign goods.[5] In 1740 imports amounted to L6,703,778, exports to L8,197,788. In 1750 they had risen respectively to L7,772,339 and L12,699,081,[6] and ten years later to L9,832,802 and L14,694,970. Macpherson, whose Annals of Commerce are a mine of wealth upon the history of foreign commerce in the eighteenth century, after commenting upon the impossibility of obtaining a just estimate of the value of home trade, alludes to a calculation which places it at thirty-two times the size of the export trade. Macpherson contents himself with concluding that it is "a vast deal greater in value than the whole of the foreign trade."[7] There is every reason to believe that in the case of Holland and France, the only two other European nations with a considerable foreign trade, the same general conclusion will apply.



The smallness of the part which foreign trade played in industry signifies that in the earlier part of the eighteenth century the industrial organism as a whole must be regarded as a number of tolerably self-sufficing and therefore homogeneous national forms attached to one another by bonds which are few and feeble. As yet there was little specialisation in national industry, and therefore little integration of national parts of the world-industry.

Sec. 2. Since the breaking-down of international barriers and the strengthening of the industrial bonds of attachment between nations will be seen to be one of the most important effects of the development of machine-industry, some statement of the nature of these barriers and their effect upon the size and character of international trade is required.

Though considerable advances had been made by England and Holland at the beginning of the eighteenth century in the improvement of harbours, the establishment of lighthouses, and the development of marine insurance,[8] navigation was still subject to considerable risks of the loss of life and of investments, while these "natural" dangers were increased by the prevalence of piracy. Voyages were slow and expensive, commerce between distant nations being necessarily confined to goods of a less perishable character which would stand the voyage. Trade in fresh foods, which forms so large a part of modern commerce, would have been impossible except along the coasts of adjoining nations. With these natural barriers to commerce may be reckoned the defective knowledge of the position, resources, and requirements of large parts of the earth which now fill an important place in commerce. The new world was but slightly opened up, nor could its known resources be largely utilised before the development of more adequate machinery of transport. We can scarcely realise the inconveniences, costs, and risks entailed by the more distant branches of foreign trade at a time when the captain of a merchant-ship still freighted his vessel at his own expense, and when each voyage was a separate speculation. Even in the early nineteenth century the manufacturer commonly shipped his surplus produce at his own risk, employing the merchant upon commission, and in the trade with the Indies, China, or South America he had frequently to lie out of his money or his return freight of indigo, coffee, tea, etc., for as long as eighteen months or two years, and to bear the expense of warehousing as well as the damage which time and tide inflicted on his goods.

Sec. 3. Next come a series of barriers, partly political, partly pseudo-economic, in which the antagonism of nations took shape, the formation of political and industrial theories which directed the commercial intercourse of nations into certain narrow and definite channels.

Two economic doctrines, separate in the world of false ideas, though their joint application in the world of practice has led many to confuse them, exercised a dominant influence in diminishing the quantity, and determining the quality of international trade in the eighteenth century. These doctrines had reference respectively to the construction and maintenance of home industries and the balance of trade. The former doctrine, which was not so much a consciously-evolved theory as a short-sighted, intellectual assumption driven by the urgent impulse of vested interests into practical effect, taught that, on the one hand, import trade should be restricted to commodities which were not and could not with advantage be produced at home, and to the provision of cheap materials for existing manufactures; while export trade, on the other hand, should be generally encouraged by a system of bounties and drawbacks. This doctrine was first rigidly applied by the French minister, Colbert, but the policy of France was faithfully copied by England and other commercial nations and ranked as an orthodox theory of international trade.

The Balance of Trade doctrine estimated the worth of a nation's intercourse with another by the excess of the export over the import trade, which brought a quantity of bullion into the exporting country. This theory was also widely spread, though obviously its general application would have been destructive of all international commerce. The more liberal interpretation of the doctrine was satisfied with a favourable balance of the aggregate export over the aggregate import trade of the country, but the stricter interpretation, generally dominant in practice, required that in the case of each particular nation the balance should be favourable. In regarding England's commerce with a foreign nation, any excess in import values over export was spoken of as "a loss to England." England deliberately cut off all trade with France during the period 1702 to 1763 by a system of prohibitive tariffs urged by a double dread lest the balance should be against us, and lest French textile goods might successfully compete with English goods in the home markets. On the other hand, we cultivated trade with Portugal because "we gain a greater balance from Portugal than from any other country whatever." The practical policy prevalent in 1713 is thus summarised by one of its enthusiastic upholders—"We suffer the goods and merchandises of Holland, Germany, Portugal, and Italy to be imported and consumed among us; and it is well we do, for we expect a much greater value of our own to those countries than we take from them. So that the consumption of those nations pays much greater sums to the rents of our lands and the labour of our people than ours does to theirs. But we keep out as much as possible the goods and merchandises of France, because our consumption of theirs would very much hinder the consumption of our own, and abate a great part of forty-two millions which it now pays to the rents of our lands and the labour of our people."[9] Thus our policy was to confine our import trade to foreign luxuries and raw materials of manufacture which could not be here produced, drawn exclusively from countries where such trade would not turn the balance against us, and, on the other hand, to force our export trade on any country that would receive it. Since every European nation was largely influenced by similar ideas and motives, and enforced upon their colonies and dependencies a like line of conduct, many mutually profitable exchanges were prevented, and commerce was confined to certain narrow and artificial grooves, while the national industrial energy was wasted in the production of many things at home which could have been more cheaply obtained from foreign countries through exchange.

The following example may suffice to illustrate the intricacy of the legislation passed in pursuance of this policy. It describes a change of detailed policy in support and regulation of textile trade:—

"A tax was laid on foreign linens in order to provide a fund for raising hemp and flax at home; while bounties were given on these necessary articles from our colonies, the bounty on the exportation of hemp was withdrawn. The imposts on foreign linen yarn were withdrawn. Bounties were given on British linen cloth exported; while the making of cambricks was promoted, partly by prohibiting the foreign and partly by giving fresh incentives, though without success, to the manufacture of cambricks within our island. Indigo, cochineal, and logwood, the necessaries of dyes, were allowed to be freely imported."[10]

The encouragement of English shipping (partly for commercial, partly for political reasons) took elaborate shape in the Navigation Acts, designed to secure for English vessels a monopoly of the carrying trade between England and all other countries which sent goods to English or to colonial shores. This policy was supported by a network of minor measures giving bounties to our colonies for the exportation of shipping materials, pitch, tar, hemp, turpentine, masts, and spars, and giving bounties at home for the construction of defensible ships. This Navigation policy gave a strong foundational support to the whole protective policy. Probably the actuating motives of this policy were more political than industrial. Holland, the first to apply this method systematically, had immensely strengthened her maritime power. France, though less successfully, had followed in her wake. Doubtless there were many clear-thinking Englishmen who, though aware of the damage done to commerce by our restrictive regulations about shipping, held that the maintenance of a powerful navy for the defence of the kingdom and its foreign possessions was an advantage which outweighed the damage.[11]

The selfish and short-sighted policy of this protective system found its culminating point in the treatment of Ireland and the American plantations. The former was forbidden all manufacture which might either directly or indirectly compete with English industry, and was compelled to deal exclusively with England; the American colonies were forbidden to weave cloth, to make hats, or to forge a bolt, and were compelled to take all the manufactured goods required for their consumption from England.

The freedom and expansion of international commerce was further hampered by the policy of assigning monopolies of colonial and foreign trade to close Chartered Companies. This policy, however, defensible as an encouragement of early mercantile adventure, was carried far beyond these legitimate limits in the eighteenth century. In England the East Indian was the most powerful and successful of these companies, but the assignment of the trade with Turkey, Russia, and other countries to chartered companies was a distinct hindrance to the development of foreign trade.

Our foreign trade at that period might indeed be classed or graded in accordance with the degree of encouragement or discouragement offered by the State.

Imports would fall into four classes.

1. Imports forbidden either (a) by legislative prohibition, or (b) by prohibitive taxation.

2. Imports admitted but taxed.

3. Free imports.

4. Imports encouraged by bounties.

Exports might be graded in similar fashion.

1. Prohibited exports (e.g., sheep and wool, raw hides, tanned leather, woollen yarn, textile implements,[12] certain forms of skilled labour).

2. Exports upon which duties are levied (e.g., coals[13]).

3. Free exports.

4. Exports encouraged by bounties, or by drawbacks.

The unnatural and injurious character of most of this legislation is best proved by the notable inability to effectively enforce its application. The chartered companies were continually complaining of the infringement of their monopolies by private adventurers, and more than one of them failed through inability to crush out this illegal competition. A striking condemnation of our policy towards France consisted in the growth of an enormous illicit trade which, in spite of the difficulties which beset it, made a considerable part of our aggregate foreign trade during the whole of the century. The lack of any clear perception of the mutuality of advantage in foreign and colonial trade was the root fallacy which underlay these restrictions. Professor Cunningham rightly says of the colonial policy of England, that it "implied that each distinct member should strengthen the head, and not at all that these members should mutually strengthen each other."[14]

So, as we tried to get the better of our colonies, still more rigorously did we apply the same methods to foreign countries, regarding each gain which accrued to us as an advantage which would have wholly gone to the foreigner if we had not by firmness and enterprise secured it for ourselves.

The slight extent of foreign intercourse was, however, partly due to causes which are to be regarded as genuinely economic. The life and experience of the great mass of the population of all countries was extremely restricted; they were a scattered and rural folk whose wants and tastes were simple, few, home-bred, and customary. The customary standard of consumption, slowly built up in conformity with local production, gave little encouragement to foreign trade. Moreover, to meet the new tastes and the more varied consumption which gradually found its way over this country, it was in conformity with the economic theory and practice of the day to prefer the establishment of new home industries, equipped if necessary with imported foreign labour, to the importation of the products of such labour from abroad. So far as England, in particular, is concerned, the attitude was favoured by the political and religious oppression of the French government which supplied England in the earlier eighteenth century with a constant flow of skilled artisan labour. Many English manufacturers profited by this flow. Our textile industries in silk, wool, and linen, calico-printing, glass, paper, and pottery are special beholden to the new arts thus introduced.

Among the economic barriers must be reckoned the slight development of international credit, and of the machinery of exchange.

Sec. 4. These barriers, natural, political, social, economic, against free international intercourse, throw important light upon the general structure of world-industry in the eighteenth century.

In this application they determined and strictly limited not only the quantity but the nature of the international trade. The export trade of England, for example, in 1730 was practically confined to woollen goods and other textile materials, a small quantity of leather, iron, lead, silver, and gold plate, and a certain number of re-exported foreign products, such as tobacco and Indian calicoes. The import trade consisted of wine and spirits, foreign foods, such as rice, sugar, coffee, oil, furs, and some quantity of foreign wool, hemp, silk, and linen-yarn, as material for our specially favoured manufactures. Having regard to the proportion of the several commodities, it would not be much exaggeration to summarise our foreign trade by saying that we sent out woollen goods and received foreign foods. These formed the great bulk of our foreign trade.[15] Excepting the woollen goods and a small trade in metals, leather is the only manufactured article which figured to any appreciable extent in our export of 1730. At that time it is clear that in the main English manufacture, as well as English agriculture, was for the supply of English wants. The same was true of other industrial countries. Holland and France, who divided with England the shipping supremacy, had a foreign trade which, though then deemed considerable, bore no greater proportion to the total industry of these countries than in the case of England. Germany, Italy, Russia, Spain, and even Portugal were almost wholly self-sustained.

Regarding, then, the known and related world of that time in the light of an industrial organism, we must consider it as one in which the processes of integration and of differentiation of parts has advanced but a little way, consisting as yet of a number of homogeneous and incoherent national cells.

This homogeneity is of course qualified by differences in production and consumption due to climate, natural products, national character and institutions, and the development of industrial arts in the several nations.

Sec. 5. This consideration of the approximate homogeneity of the national units of world-industry gives a higher scientific value to the analysis of a single typical industrial nation such as England, than would be the case in modern times, when the work of differentiation of industrial functions among the several nations has advanced much further.

Taking, therefore, the national industry of England as the special subject of analysis, we may seek to obtain a clear conception of the size, structure, and connections, of the several branches of industry, paying special regard to the manufactures upon which the new industrial forces were chiefly to operate.

It is not possible to form a very accurate estimate of the relative importance of the different industries as measured either by the money value of their products, or by the amount of labour engaged in producing them. Eighteenth century statistics, as we saw, furnished no close estimate of the total income of the nation or of the value of home industries. Since no direct census of the English population was taken before 1805, the numbers were never exactly known, and eighteenth century economists spent much time and ingenuity in trying to ascertain the growth of population by calculations based upon the number of occupied houses, or by generalising from slender and unreliable local statistics, without in the end arriving at any close agreement. Still less reliable will be the estimates of the relative size and importance of the different industries.

Two such attempts, however, one slightly prior to the special period we are investigating, and one a little later, may be taken as general indications of the comparative importance of the great divisions of industry, agriculture, manufacture, distribution or commerce.

The first is that of Gregory King in the year 1688. King's calculation, however, can only be regarded as roughly approximate. The quantity of combined agriculture and manufacture, and the amount of domestic industry for domestic consumption, renders the manufacturing figures, however carefully they might have been collected, very deceptive. The same criticism, though to a less degree, applies to the estimate of Arthur Young for 1769.



If to Young's estimate of the population dependent upon agriculture we add the class of landlords and their direct dependents and a proper proportion of the non-industrious poor, who, though not to be so classed in a direct measurement of occupations, are supported out of the produce of agriculture, we shall see that in 1769 we are justified in believing that agriculture was in its productiveness almost equivalent to the whole of manufactures and commerce.

In turning to the several branches of manufacture, the abnormal development of one of them, viz. the woollen, for purposes of foreign trade, marks the first and only considerable specialisation of English industry before the advent of steam machinery. With the single exception of woollen goods almost the whole of English manufactures were for home consumption. At the opening of the eighteenth century, and even as late as 1770, no other single manufacture played any comparable part in the composition of our export trade.

According to Chalmers,[16] in the period 1699-1701, the annual value of woollen exports was over two and a half million pounds, or about two-fifths of the total export trade, while in 1769-71 it still amounted to nearly one-third of the whole, giving entire or partial employment to no fewer than "a million and a half of people," or half of the total number assigned by Young to manufacture.

Next to the woollen, but far behind in size and importance, came the iron trade. In 1720 England seems to have developed her mining resources so imperfectly as to be in the condition of importing from foreign countries 20,000 out of the 30,000 tons required for her hardware manufactures.[17] Almost all this iron was destined to home consumption with the exception of hardware forced upon the American colonies, who were forbidden to manufacture for themselves. In 1720 it is calculated that mining and manufacture of iron and hardware employed 200,000 persons.[18]

Copper and brass manufactures employed some 30,000 persons in 1720.[19]

Silk was the only other highly developed and considerable manufacture. It had, however, to contend with Indian competition, introduced by the East India Company, and also with imported calicoes.[20] In 1750 there were about 13,000 looms in England, the product of which was almost entirely used for home consumption. Cotton and linen were very small manufactures during the first half of the eighteenth century. At the beginning of the century the linen trade was chiefly in the hands of Russia and Germany, although it had taken root in Ireland as early as the close of the seventeenth century, and was worked to some extent in Lancashire, Leicestershire, and round Darlington in Yorkshire, which districts supplied the linen-warp to the cotton weavers.[21] As for cotton, even in 1760 not more than 40,000 persons were engaged in the manufacture, and in 1764 the cotton exports were but one-twentieth of the value of the woollen exports.[22] The small value of the cotton trade and an anticipatory glance at its portentous after-growth is conveyed in the following figures:—

Home Market. Export Trade.

1766 L379,241 L220,759 (Postletwayte) 1819-21 13,044,000 15,740,000 } 1829-31 13,351,000 18,074,000 } (Ellison[23])

The many other little manufactures which had sprung up, such as glass, paper, tin-plate, produced entirely for home consumption, and employed but a small number of workers.

Sec. 6. If we turn from the consideration of the size of English industry and the several departments to the analysis of its structure and the relation to the several trades, we shall find the same signs of imperfect organic development which we found in the world-industry, though not so strongly marked. Just as we found each country in the main self-sufficing, so we find each district of England (with a few significant exceptions) engaged chiefly in producing for its own consumption. There was far less local specialisation in industry than we find to-day. The staple industries, tillage, stock-raising, and those connected with the supply of the common articles of clothing, furniture, fuel, and other necessaries were widespread over the whole country.

Though far more advanced than foreign intercourse, the internal trade between more distant parts of England was extremely slight. Defective facilities of communication and transport were of course in large measure responsible for this.

The physical obstructions to such freedom of commerce as now subsists were very considerable in the eighteenth century. The condition of the main roads in the country at the opening of the century was such as to make the carriage of goods long and expensive. Agricultural produce was almost entirely for local consumption, with the exception of cattle and poultry, which were driven on foot from the neighbouring counties into London and other large markets.[24] In the winter, even round London, bad roads were a great obstacle to trade. The impossibility of driving cattle to London later than October often led to a monopoly of winter supply and high prices.[25] The growth of turnpike roads, which proceeded apace in the first half of the century, led to the large substitution of carts for pack horses, but even these roads were found "execrable" by Arthur Young, and off the posting routes and the neighbourhood of London the communication was extremely difficult. "The great roads of England remained almost in this ancient condition even as late as 1752 and 1754, when the traveller seldom saw a turnpike for two hundred miles after leaving the vicinity of London."[26]

Rivers rather than roads were the highways of commerce, and many Acts were passed in the earlier eighteenth century for improving the navigability of rivers, as the Trent, Ouse, and Mersey, partly in order to facilitate internal trade and partly to enable towns like Leeds and Derby to engage directly in trade by sea,[27] and to connect adjoining towns such as Liverpool and Manchester. In 1755 the first canal was constructed, and in the latter part of the century the part played by canals in the development of the new factory system was considerable. But in spite of these efforts to improve methods of transport in the earlier eighteenth century, it is evident that the bulk of industry was engaged in providing articles for local consumption, and that the area of the market for most products was extremely narrow.

The facile transport of both capital and labour, which is essential to highly specialised local industry, was retarded not merely by lack of knowledge of the opportunities of remunerative investment, but also by legal restrictions which had the influence of checking the free application and migration of labour. The Statute of Apprentices by requiring a seven years' apprenticeship[28] in many trades, and the Law of Settlement by impairing mobility of labour, are to be regarded as essentially protective measures calculated to prevent that concentrated application of capital and labour required for specialisation of industry.

Within the nation we had for the most part a number of self-sufficing communities, or, in other words, there was little specialisation of function in the several parts, and little integration in the national industry. With the single exception of Holland, whose admirable natural and artificial water communication seemed to give unity to its commerce, the other countries of Europe, France, Germany, Italy, Spain, Russia, were still more disintegrated in their industry.

Sec. 7. In regarding those districts of England in which strong indications of growing industrial specialisation showed themselves, it is important to observe the degree and character of that specialisation.

We find various branches of the woollen, silk, cotton, iron, hardware, and other manufactures allocated to certain districts. But if we compare this specialisation with that which obtains to-day we shall observe wide differences.

In the first place, it was far less advanced. The woollen industry of England, though conveniently divided into three districts—one in the Eastern Counties, with Norwich, Colchester, Sandwich, Canterbury, Maidstone, for principal centres; one in the West, with Taunton, Devizes, Bradford (in Wilts), Frome, Trowbridge, Stroud, and Exeter; and the third, in the West Riding, is in reality distributed over almost the whole of England south of the Thames, and over a large part of Yorkshire, to say nothing of the widespread production, either for private consumption or for the market, in Westmoreland, Cumberland, and indeed all the North of England. Where the land was richer in pasture or with easier access to large supplies of wool, the clothing manufactures were more flourishing and gave more employment, but over all the southern and most of the northern counties some form of woollen manufacture was carried on.



The only part of England which Defoe regarded as definitely specialised in manufacture is part of the West Riding, for though agriculture is carried on here to some extent, the chief manufacturing district is dependent upon surrounding districts for its main supply of food.[29]

Iron, the industry of next, though of far inferior importance, was of necessity less widely distributed. But in 1737 the fifty-nine furnaces in use were distributed over no fewer than fifteen counties, Sussex, Gloucester, Shropshire, Yorkshire, and Northumberland taking the lead.[30] So too the industries engaged in manufacturing metal goods were far less concentrated than in the present day. Though Sheffield and Birmingham even in Defoe's time were the great centres of the trade, of the total consumption of the country the greater part was made in small workshops scattered over the land.

Nottingham and Leicester were beginning to specialise in cotton and woollen hosiery, but a good deal was made round London, and generally in the woollen counties of the south. Silk was more specialised owing to the importation of special skill and special machinery to Spitalsfield, Stockport, Derby, and a few other towns. In Coventry it was only the second trade in 1727.[31]

The scattered crafts of the wheelwright, the smith, carpenter, turner, carried on many of the subsidiary processes of building, manufacture of vehicles and furniture, which are now for the most part highly centralised industries.

When we come presently to consider the structure of the several industries we shall see that even those trades which are allocated to certain local areas are much less concentrated within these areas than is now the case.

But though stress is here laid upon the imperfect differentiation of localities in industry, it is not to be supposed that the eighteenth century shows England a simple industrial community with no considerable specialisation.

Three conditions of specialised industry are clearly discernible in the early eighteenth century—conditions which always are among the chief determinants.

1. Physical aptitudes of soile.g., since timber was still used almost entirely for smelting, iron works are found where timber is plentiful or where river communication makes it easily procurable. So the more fertile meadows of Gloucester and Somerset led these districts to specialise in the finer branches of the woollen trade. A still more striking example is that of South Lancashire. By nature it was ill-suited for agriculture, and therefore its inhabitants employed themselves largely in the cotton and woollen trades. The numerous little streams which flowed from the hills to the neighbouring sea gave plenty of water-power, and thus made this district the home of the earlier mills and the cradle of machine-industry.[32] The "grit" of the local grindstones secured the supremacy of Sheffield cutlery, while the heavy clay required for the "seggars," or boxes in which pottery is fired, helped to determine the specialisation of Staffordshire in this industry.[33]

2. Facility of Market.—The country round London, Bristol, and other larger towns became more specialised than the less accessible and more evenly populated parts, because the needs of a large town population compelled the specialisation in agriculture of much of the surrounding country; cottagers could more easily dispose of their manufactures; improved roads and other facilities for conveyance induced a specialisation impossible in the purely rural parts.

3. The Nature of the Commodity.—When all modes of conveyance were slow the degree of specialisation depended largely upon the keeping quality of the goods. From this point of view hardware and textiles are obviously more amenable to local specialisation than the more perishable forms of food. Where conveyance is difficult and expensive a commodity bulky for its value is less suitable for local specialisation in production than one containing a high value in small weight and bulk. So cloth is more suitable for trade than corn;[34] and coal, save where navigation is possible, could not be profitably taken any distance.[35]

The common commodities consumed, as food, fuel, and shelter, were thus excluded from any considerable amount of specialisation in their production.

Sec. 8. Turning from consideration of the attributes of goods and of the means of transport which served to limit the character of internal trade and determine the size of the market, let us now regard the structure of the market, the central object in the mechanism of internal commerce.

The market, not the industry, is the true term which expresses the group of organically related businesses. How far did England present a national market? How far was the typical market a district or purely local one?

The one great national market town was London. It alone may be said to have drawn supplies from the whole of England, and there alone was it possible to purchase at any season of the year every kind of produce, agricultural or manufactured, made anywhere in England or imported from abroad. This flow to and from the great centre of population was incessant, and extended to the furthermost parts of the land. Other large towns, such as Bristol, Leeds, Norwich, maintained close and constant relations with the neighbouring counties, but exchanged their produce for the most part only indirectly with that of more distant parts of the country.

The improving communication of the eighteenth century enabled the clothiers and other leading manufacturers to distribute more of their wares even in the remotest parts of the country, but the value paid for their wares reached the vendors by slow and indirect channels of trade, passing for the most part through the metropolis.

But while London was the one constant national market-place, national trade was largely assisted by fairs held for several weeks each year at Stourbridge, Winchester, and other convenient centres. At the most important of these the large merchants and manufacturers met their customers, and business was transacted between distant parts of the country, including all kinds of wares, English and foreign. Thus we had one constant and two or three intermittent avenues of free national trade. The great bulk of markets, however, were confined within far smaller areas.

In the more highly developed and specialised textile trades certain regular market-places were established of wide local importance. The largest of these specialised district markets were at Leeds, Halifax, Norwich, and Exeter. Here the chief local manufacturers of cloth, worsted, or crape met the merchants and factors and disposed of their wares to these distributing middlemen.

It was, however, in the general market-places of the county town or smaller centres of population that the mass of the business of exchange was transacted. There the mass of the small workers in agriculture and manufacture brought the product of their labour and sold it, buying what they needed for consumption and for the pursuance of their craft. Only in considerable towns were there to be found in the earlier eighteenth century any number of permanent shops where all sorts of wares could be bought at any time. The weekly market in the market-town was the chief medium of commerce for the great mass of the population.

Regarding the general structure of Industry we see that not only are international bonds slight and unessential, but that within the nation the elements of national cohesion are feeble as compared with those which subsist now. We have a number of small local communities whose relations, though tolerably strong with other communities in their immediate neighbourhood, become greatly weakened by distance. For the most part these small communities are self-sufficing for work and life, producing most of their own necessaries, and only dependent on distant and unknown producers for their comforts and luxuries.

Trade is for the most part conducted on a small steady local basis with known regular customers.

Outside of agriculture the elements of speculation and fluctuation are almost entirely confined to foreign trade. Capital and labour are fixed to a particular locality and a particular business.[36]

Sec. 9. Turning to the structure of the several industries we find that different employments are not sharply separated from one another. In the first place, agriculture and manufacture are not only carried on in the same locality but by the same people. This combined agriculture and manufacture took several forms.

The textile industries were largely combined with agriculture. Where spinning was carried on in agricultural parts there was, for the most part, a division of labour within the family. The women and children spun while the men attended to their work in the fields.[37] Every woman and child above the age of five found full employment in the spinning and weaving trades of Somerset and the West Riding.[38]

This method prevailed more largely in the spinning than in the weaving trades, for before the introduction of the spinning-jenny the weaving trade was far more centralised than the other. For example, a large quantity of weaving was done in the town of Norwich while the earlier process was executed in the scattered cottages over a wide district. But even these town workers were not specialised in manufacture to the extent which prevails to-day. Large numbers of them had allotments in the country to which they gave their spare time, and many had pasture rights and kept their cattle on the common lands. This applied not merely to the textile but to other industries. At West Bromwich, a chief centre of the metal trade, agriculture was still carried on as a subsidiary pursuit by the metal workers.[39] So too the cutlers of Sheffield living in the outskirts of the town had their plot of land and carried on agriculture to a small extent, a practice which has lasted almost up to the present day. The combined agriculture and manufacture often took the form of a division of labour according to season. Where the weaving was not concentrated in towns it furnished a winter occupation to many men who gave the bulk of their summer time to agriculture. Generally speaking, we may take as fairly representative of the manufacturing parts of England the picture which Defoe gave of the condition of affairs in the neighbourhood of Halifax. He found "the land divided into small enclosures from two acres to six or seven acres each, seldom more; every three or four pieces of land had a house belonging to it—one continued village, hardly a house standing out of speaking distance from another—at every house a tenter, and on almost every tenter a piece of cloth or kersie or shalloon—every clothier keeps a horse—so every one generally keeps a cow or two for his family."[40]

Not only were agriculture and many forms of manufacture conjoined, but the division of labour and differentiation of processes within the several industries was not very far advanced. The primitive tillage of the common-fields which still prevailed in the early eighteenth century, though the rapid enclosure of commons was effecting a considerable, and from the wealth-producing point of view, a very salutary change, did not favour the specialisation of land for pasture or for some particular grain crops. Each little hamlet was engaged in providing crops of hay, wheat, barley, oats, beans, and had to fulfil the other purposes required by a self-subsisting community. This partly arose from the necessity of the system of land tenure, partly from ignorance of how to take advantage of special qualities and positions of soil, and partly from the self-sufficiency improved by difficulties of conveyance. As the century advanced, the enclosure of commons, the increase of large farms, the application of new science and new capital led to a rapid differentiation in the use of land for agricultural purposes. But in the earlier part of the century there was little specialisation of land except in the West Riding and round the chief centres of the woollen trade, and to a less extent in the portions of the counties round London whose position forced them to specialise for some particular market of the metropolis.

Sec. 10. As the small agriculturist on a self-sufficing farm must perform many different processes, so the manufacturer was not narrowed down to a single process of manufacture. A large part of the ruder manufactures were home productions for home consumption, and the same hands tended the sheep which furnished the wool, and spun and wove the wool for family use. The smith was in a far fuller sense the maker of the horse-shoe or the nail or bolt than he is to-day; the wheelwright, the carpenter, and other handicraftsmen performed a far larger number of different processes than they do now. Moreover, each household, in addition to its principal employments of agriculture and manufacture, carried on many minor productive occupations, such as baking, brewing, butter-making, dressmaking, washing, which are now for the most part special and independent branches of employment.

In the more highly-developed branches of the textile and metal trades the division of processes appears at first sight more sharply marked than to-day. The carder, spinner, weaver, fuller in the cloth trade worked in the several processes of converting raw wool into finished cloth, related to one another only by a series of middlemen who supplied them with the material required for their work and received it back with the impress of their labour attached, to hand it out once more to undergo the next process.[41] But though modern machine-production will show us these various processes drawn together into close local proximity, sometimes performed under the same roof and often making use of the same steam power, we shall find that a chief object and effect of this closer local co-ordination of the several processes is to define and narrow more precisely the labour of each worker and to make the spinner and the weaver confine himself to the performance of a fractional part of the full process of spinning or weaving. Thus we find that English industry in the early eighteenth century is marked on the one hand by a lack of clear differentiation as regards industries, and on the other hand by a lack of minute differentiation of processes within the industry.

Sec. 11. We must now descend from the consideration of the Industry and the Market, or group of related businesses, to examine the character and structure of the unit of industry—the Business.

In a study of the composition or co-operation of labour and capital in a Business before the era of machine-production there are five points of dominant importance—(1) The ownership of the material; (2) the ownership of the tools; (3) the ownership of the productive power; (4) the relations subsisting between the individual units of labour; (5) the work-place.

English manufacturing industry in the first half of the eighteenth century furnishes a variety of different forms of business of widely different nature and complexity. The simplest form of manufacturing industry is that in which an industrial family owning the raw material and the requisite tools, and working with the power of their own bodies in their own homes, produce commodities for their own consumption. This private production for private consumption survived largely in the eighteenth century, not merely in the case of agriculturists who produced the more necessary articles of food for themselves as well as for the market, but also in the case of farmers and cottagers in the remotest parts of the country who produced their own wool and flax, and spun and wove it for their own use.[42]

From this primitive form which required no commerce and no industrial organisation we may trace the growth of various forms of higher industrial development, many of which co-existed in eighteenth century England.

The simplest structure of "domestic" manufacture is that in which the farmer-manufacturer is found purchasing his own material, the raw wool or flax if he is a spinner, the warp and weft if he is a weaver, and, working with his family, produces yarn or cloth which he sells himself, either in the local market or to regular master-clothiers or merchants. The mixed cotton weaving trade was in this condition in the earlier years of the eighteenth century. "The workshop of the weaver was a rural cottage, from which, when he was tired of sedentary labour, he could sally forth into his little garden, and with the spade or the hoe tend its culinary productions. The cotton-wool which was to form his weft was picked clean by the fingers of his younger children, and was carded and spun by the older girls assisted by his wife, and the yarn was woven by himself assisted by his sons."[43]

Following as the central point the ownership of the requisites of production, we find in the next stage that the ownership of the material has passed from the workman into the hands of the organising merchant or middleman, who usurps the title "manufacturer." The workman, however, still retains the ownership of the implements of his craft and works in his own house. The condition of the worsted trade later in the century, about 1770, well illustrates this industrial form.

"The work was entirely domestic, and its different branches widely scattered over the country. First, the manufacturer had to travel on horseback to purchase his raw material among the farmers, or at the great fairs held in those old towns that had formerly been the exclusive markets, or, as they were called, 'staples' of wool. The wool, safely received, was handed over to the sorters, who rigorously applied their gauge of required length of staple and mercilessly chopped off by shears or hatchet what did not reach the standard as wool fit for the clothing trade. The long wool thus passed into the hands of the combers, and, having been brought back to them into the combed state, was again carefully packed and strapped on the back of the sturdy horse, to be taken into the country to be spun.... Here, at each village, he had his agents, who received the wool, distributed it amongst the peasantry and received it back as yarn. The machine employed was still the old one-thread wheel, and in summer weather on many a village green might be seen the housewives plying their busy trade, and furnishing to the poet the vision of contentment spinning at the cottage door. Returning in safety with his yarn, the manufacturer had now to seek out his weavers, who ultimately delivered to him his camblets or russels, or tammies or calimancoes (such were the leading names of the fibres) ready for sale to the merchant or delivery to the dyer."[44]

The condition of the cotton-trade in Lancashire about 1750 illustrates most clearly the transition from the independent weaver to the dependent weaver. So far as the linen warp of his fabric was concerned he had long been in the habit of receiving it from the larger "manufacturer" in Bolton or in Manchester, but the cotton yarn he had hitherto supplied himself, using the yarn spun by his own family or purchased by himself in the neighbourhood. The difficulty of obtaining a steady, adequate supply, and the waste of time involved in trudging about in search of this necessary material, operated more strongly as the market for cotton goods expanded and the pressure of work made itself felt.[45] It was this pressure which we shall see acting as chief stimulus to the application of new inventions in the spinning[46] trade. In the interim, however, the habit grew of receiving not only linen warp but cotton weft from the merchant or middleman. Thus the ownership of the raw material entirely passed out of the weaver's hands, though he continued to ply his domestic craft as formerly.[47] This had grown into the normal condition of the trade by 1750. The stocking-trade illustrates one further encroachment of the capitalist system upon domestic industry. In this trade not only was the material given out by merchants, but the "frames" used for weaving were likewise owned by them, and were rented out to the workers, who continued, however, to work in their own homes.[48]

Sec. 12. Two further steps remained to be taken in the transition from the "domestic" to the "factory" system, the one relating to the ownership of "power," the other to the work-place, (a) The substitution of extra-human power owned by the employer for the physical power of the worker; (b) the withdrawal of the workers from their homes, and the concentration of them in factories and work-places owned by the capitalists.

Although these steps were not completely taken until the age of steam had well set in, before the middle of the eighteenth century there were found examples of the factory, complete in its essential character, side by side and in actual competition with the earlier shapes of domestic industry.

Capitalist ownership of extra-human industrial "power" was of course narrowly restricted before the age of steam. Water-power, horse-power, and to a much smaller extent, wind-power, were utilised. But the most important services water rendered to industry prior to the great inventions were in facilitating the transport of goods, and in certain subsidiary processes of manufacture such as dyeing. Though a considerable number of water-mills existed early in the century, they played no large part in manufacture. A natural force so strictly confined in quantity and in local application, and subject to such great waste from the backward condition of mechanical art, was not able to serve to any great extent as a substitute for or aid to the muscular activity of man.

But although the economy of mechanical power was not yet operative to any appreciable extent in concentrating labour, certain other notable economics of large-scale production were beginning to assert themselves in all the leading manufactures. Indeed so powerful are some of the economies of division of labour and co-operation even in a primitive condition of the industrial arts, that Professor Ashley considers it not improbable that the great manufactory might have become an important or even a dominant feature of the woollen trade as early as the sixteenth century, if legislative enactments had not stood in the way.[49] As it was, these earlier centralising forces, while they drove the workers to work and live in closer and compacter masses, did not at first dispose them in factories to any great extent. They continued for the most part to work in their own houses, though for material and sometimes for the implements of their craft they were dependent upon some merchant or large master-manufacturer. This was the condition of industry in the neighbourhood of Leeds in 1725. "The houses are not scattered and dispersed as in the vicarage of Halifax, one by one, but in villages, and those houses thronged with people and the whole country infinitely populous."[50] In the more highly-developed branches of the cloth trade, however, where the best looms were a relatively costly form of capital, the foundation of the factory system was clearly laid. In Norwich, Frome, Taunton, Devizes, Stourbridge, and other clothing centres, Defoe found the weaving industry highly concentrated, and rich employers owning considerable numbers of looms. Some of this work was put out by the master-manufacturers, but other work was done in large sheds or other premises owned by the master. This large organised "business," half factory, half domestic, continued to prevail in the important West of England clothing industry up to the close of the eighteenth century. "The master clothier of the West of England buys his wool from the importer, if it be foreign, or in the fleece if it be of domestic growth; after which, in all the different processes through which it passes, he is under the necessity of employing as many distinct classes of persons; sometimes working in their own houses, sometimes in that of the master clothier, but none of them going out of their proper line. Each class of workman, however, acquires great skill in performing its particular operation, and hence may have arisen the acknowledged excellence, and, till of late, the superiority of the cloths of the West of England."[51]

So again, in the cotton industry of Lancashire, the hold which the merchants had got over the weavers by supplying them with warp and weft led in some cases, before the middle of the century, to the establishment of small factories containing a score or two of looms, in which hired men were employed to weave. A little later, though long before steam power, Arthur Young finds a factory at Darlington with over fifty looms, a factory at Boynton with 150 workers, and a silk mill at Sheffield with 152 workers. Even where the final step of substituting the factory for the home had not been taken the subordination of the handicraftsman to the master who provided the materials and paid the wages was tolerably complete. By the middle of the century the free artisan was gradually passing into the condition of a hired "hand." Improved means of communication were beginning to expand the area of the market, enlarged businesses enabled labour to be profitably divided, and required a more effective control over the workers than could be obtained over a scattered population of agricultural manufacturers.

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