The Wages Question: A Treatise on Wages and the Wages Class

Part II, Chapter XV

COÖPERATION: GETTING RID OF THE EMPLOYING CLASS.

It is as we turn from discussing the industrial character of the employing class, that we can most advantageously consider the schemes proposed, under the title of coöperation, for the amelioration of the condition of the wages class; and, at the same time, it is as we try to find the real significance of these schemes that we realize most fully the confusion introduced into the theory of distribution by the failure to discriminate the entrepreneur-function, and by the undue extension of the word profits. In my opinion, it is simply not possible to give an intelligible account of coöperation through the use of the definitions by the text-book writers. If what we have called the profits of business are only “the wages of supervision and management,” what is it that coöperation aims to effect? Supervision and management must still be exercised, or coöperation will come to a very speedy end. If supervision
and management are to be exercised, it must be by some one, and if the present supervisors and managers (the employers, as I call them) are to be turned adrift or reduced to the ranks, then these duties will have to be performed by men now taking some other part in industry, and to them “the wages of supervision and management” will be paid. Wherein have the workmen gained anything? It is fairly to be presumed that these peculiar and difficult duties will not be performed any better by men chosen by caucus and ballot, than by men selected through the stern processes of unremitting business competition.

To repeat: if, under the coöperative system, the work of “supervision and management” is to be done by a new set of men for the same “wages,” the workmen will gain nothing; if, on the other hand, the workmen, controlling the operations of industry for themselves, can get the work done for less (and the great promises held out as to the benefits of coöperation would imply that it must be
for very much less), then it must be concluded that employers at present receive something more than and different from wages.

But if we find it difficult to conceive what account one could give of coöperation, using the definitions of the text-books, we find that, if we stand aside and allow the text-book writers to state it in their own way, the result is not a whit the more happy. Prof. Cairnes, so highly distinguished for his justness and clearness of reasoning, stumbles, at the very threshold of the subject, across an obstacle of his own devising. Thus in the very act of bringing forward the scheme of coöperation as a cure for the industrial ills of society, he makes a statement of coöperation which reduces it to a nullity: “It appears to me that the condition of any substantial improvement of a permanent kind in the laborer’s lot is that the separation of industrial classes into
laborers and
capitalists shall not be maintained; that the laborer shall cease to be a mere laborer—in a word, that
profits shall be brought to reënforce the
wages fund.”
*1 And again, more tersely: “The characteristic feature of coöperation, looked at from the economic point of view, is that it
combines in the same person the two capacities of laborer and capitalist.”
*2 This needs but to be looked at a moment to reveal its utter fallacy. Remember, this is not the declaration of an irresponsible philanthropist that every workman ought to have a palace and a coach, but the grave statement of an accountable economist as to the manner in which the welfare of the working class may, under economical conditions,
be advanced. What is this industrial panacea? Why, the laborers are to become capitalists. A most felicitous result truly; but how is it to be accomplished? By saving their own earnings? But this they can and do accomplish at present; and, through the medium of the bank of savings, they may and do lend their money in vast amounts to the employing class (oftentimes to their individual employers), and thus, under the present system profits (in Prof. Cairnes’ sense) may be and are “brought to reënforce” wages. Is it, then, by saving somebody else’s earnings, and bringing the profits thereof to “reënforce the wages fund”? But this is spoliation, confiscation, a resort which no one would be before Prof. Cairnes in denouncing, and whose disastrous consequences to the laborers themselves no one could more forcibly portray.

What then is the attitude of laborers in coöperation? To the employer they say: You have performed an important
part in production, and you have performed it well; but you are now relieved. You have charged too high for your services. Your annual profits, taking good years and bad together, are greater than we need to pay to get the work done, if we will take the responsibilities of business on ourselves, and exercise a forethought, patience, and pains we have had no call to exercise while you were in charge. Up to this time the state of the case has been this:

One word more before we part. We intend no disrespect. With workmen who are ignorant, dissolute, unwilling to subordinate the present to the future, incapable of organization, such services as you are qualified to render are absolutely indispensable; and we will not say that such remuneration as you exact is excessive. But we profess
better things. We are prepared to exercise patience, industry, economy, and to subject our individual desires to the general will, for the sake of dividing among ourselves the profits you have been accustomed to make out of us.
*3 We know it will be hard; but we believe it can be done. If men are not fit for an industrial republic, then they must submit to the despot of industry, and they have no right to complain of Civil List and Privy Purse. But we are republicans, cheerfully accepting all the responsibilities of freedom, and boldly laying claim to all its privileges.

This is, in effect, what the laborers, by coöperation, say to the entrepreneur. Do they give the capitalist his congé after the same fashion? Do they assert independence of him, and ability to go along without him? Not in the least. Not a word of it. Coöperation is not going to rid them of dependence on capital. They are to be just as dependent on the capitalist as were their employers whose place they aspire to fill. They know that they must have just as much and just as good machinery, just as abundant and good materials, as competing establishments under entrepreneur management. So far as they themselves have capital, the results of their savings out of past wages, they will employ these and receive the returns therefrom directly, instead of lending it to the entrepreneur through the savings bank and getting interest therefor. So far as they want capital for their operations over what they can scrape together, they must go to the banks or to private lenders, and pay as high a price for its use as their quondam employer was wont to do; indeed, for
awhile at least, probably a higher price, as their credit will not be likely to be so good at first as his. And if coöperation should start earliest, and make most progress, in those industries where the amount of capital required is comparatively small, this would be but a recognition [???] the fact that coöperation has no tendency to free the laboring class from any domination of capital, of which complaint may have been made, but that its sole object is to

First, to reap the profits of the entrepreneur, which are very large,
*4 large enough if divided among the wages
class to make a substantial addition to their means of subsistence.

Second: to secure employment independently of the will of the “middle man.” It has been shown in a previous chapter, that the interest which the employer has in production is found in the balance of profit left after the payment of wages. The payment of these, perhaps to the extent of ten, twenty, or fifty times his profit, is to him merely a necessary means to that end. It may be, as has been said, that his relations to a body of customers shall be such as to induce him to continue producing even though, for a time, he sinks his own profit. After the effect of this has been exhausted, however, and it is soon exhausted, he will pay wages only to get a profit. But the condition of the market will often be such as to render him exceedingly doubtful of his profit, or even apprehensive of a loss; and then his whole interest in production ceases. Because he can not see his way to make ten or five thousand dollars profit, he is ready to stop a production, the agencies and instrumentalities of which are wholly at his command, which involves the payment of one or two hundred thousand dollars in wages. Now, with reference to such an oft recurring condition of industry, a body of workmen may properly say that, while they cannot blame the employer for refusing to risk the payment of such large amounts in wages to them, without a reasonable assurance of getting it back, with a
profit, in the price of the goods, yet they are much disposed to take the responsibility of production upon themselves. Thus, especially in branches of manufacture where the value of the materials bears a small proportion to the value of the finished goods, they might propose to go on producing moderately in spite of the most unfavorable aspect of the market, on the ground that they might just as well be laboring as lying idle, and sell the product for what it would bring. All they should thus receive would be clear gain, as against a period of enforced idleness, and it might not infrequently happen that, on settling up their venture, they would find a turn in the market giving them a compensation as large or nearly as large as usual.

It is true that arrangements for a “sliding scale” of wages, adapted to the market price of the product, are sometimes entered into in coal and iron mining; but these cover only a portion of the ground embraced in the
coöperative plan, as the cost of materials and transportation, rent, interest, and the general expenses of business management, may vary so greatly as very much to reduce, and at times to destroy, the employer’s expectations of profit, in spite of the sliding scale of wages.

First: coöperation would, by the very terms of it, obviate strikes. The employer being abolished, the workmen being now self-employed, these destructive contests would cease. The industrial “non-ego” disappearing, the industrial egotism which precipitates strikes would disappear also. Second: the workman would be stimulated to greater industry and greater carefulness. He would work more and waste less, for, under the coöperative system, he would receive a direct, instant, and certain advantage from his own increased carefulness and laboriousness. It is true that the pressure thus brought to bear upon the individual laborer is not so great as in the case of the individual proprietor of land, since there the gain is all his own, while here the workman has to divide with his fellow-coöperators the advantages of his own extra exertions, looking, though not with absolute assurance, to receive an equivalent from each of them in turn. Third: the workman would be incited to frugality. He has at once furnished him the best possible opportunity for investing his savings, namely, in materials and implements
which he is himself to use in labor. Especially in the early days of coöperative industry, when the great need of coöperators is capital, will this pressure be felt, constraining the workman to invest in his trade all of his earnings that can be spared from necessary subsistence. Capital thus saved and thus invested is likely to be cared for and used to the best ability of the coöperators. They will make the most of it, for it will have cost them dear.

In spite of these marked advantages, however, we have to note that coöperation in mechanical industry has achieved a very slight and even doubtful success. Mr. Frederick Harrison has called attention in the Fortnightly Review
*5 to the fact that the vast majority of all the coöperative establishments maintained in England are simply stores,
i.e. shops, “for the sale of food and sometimes clothing.” “These, of course, cannot affect the condition of industry materially. Labor here does not in any sense share in the produce with capital. The relation of employer and employed remains just the same, and not a single workman would change the conditions of his employment
if the store were to extinguish all the shops of a town.”

A later writer gives a not more encouraging picture: “A large proportion of all coöperative societies are dealers in food, provisions, and articles of clothing, consumed chiefly by themselves and families. Others, but in a small ratio, are manufacturers of flax, spinners of cotton or wool, and manufacturers of shoes, etc. But very few of them
succeed; and the failures are to be found chiefly in these attempts at production.”
*6

The same tale comes from France, where these enterprises were inaugurated during the revolutionary period of 1848. M. Ducarre’s report of 1875, from the Commission on Wages and the Relations between Workmen and their Employers, claims even less success for coöperative production in that country than is reported in England and Germany.
*7

In Switzerland, the nursery of accomplished artisans, whose citizens are trained in self-government more perfectly than those of any other country in the world, we find, at the latest date for which the facts are given,
*8 only thirteen small coöperative societies of production. In these inconsiderable results, if not failure, of coöperative manufacturing, we find the most striking testimony that could be given to the importance of the entrepreneur-function in modern industry. Small groups of highly skilled artisans—artists, Mr. Harrison would call them—carefully selected, using inexpensive materials and small “plant,” and working for a market
*9 close at hand, perhaps for customers personally known, may achieve success by the exercise of no impossible patience and pains. But where laborers of very various qualifications, of all ages and both sexes, are to be brought together in industries
which involve a great many processes requiring differing degrees of strength and skill, and which produce goods for distant, and perhaps, at the time of production, unknown markets, we see as yet scarcely a sign of the services of the employer being dispensed with. What, then, is the reason for this comparative failure of industrial coöperation? I answer, the difficulty of effecting coöperation on a large scale is directly as its desirableness. It is solely because of the importance of the entrepreneur-function that the employing class are enabled to realize those large profits which so naturally and properly excite the desires of the wages class; and it is for precisely the same reason that it is found so difficult to get rid of the employing class.

The qualities of the successful entrepreneur are rare. We need only to look around us, within the most limited field, and for the shortest time, to see how vast a difference is made by the able, as contrasted with the merely common-place, not to say bad, conduct of business; and how great losses may be incurred by the failure to realize all the conditions of purchase, production, and sale. And the more extensively markets are opened by the removal of commercial restrictions, the more intense competition becomes under the opportunities of frequent communication and rapid transportation, the richer the prizes, the heavier the penalties, of the entrepreneur; the wider the breach between the able and the commonplace management of business. In these days, a person who should, upon the strength of respectable general abilities, undertake a branch of manufacture to which he had not been trained, and in which he had not long been exercised in subordinate positions, would run a serious risk of sinking a large part of his capital in a few years, it might be in a few months; and this, without any great catastrophe in trade, or any flagrant instance of misconduct in the operations
undertaken. Simply not to do well is generally, in production, to do very ill.

Is it asked, why may not the men who have the knowledge, skill, and experience requisite for the conduct of business, be employed as agents of coöperators, receiving wages for their services? In the first place, I answer, the same men cannot conduct the same business as well for others as for themselves. You might as well expect the bow to send the arrow as far when unbent as when bent. The knowledge that he will gain what is gained; that he will lose what is lost, is essential to
the temper of the man of business. No matter how faithfully disposed, he simply cannot meet the exigencies and make the choices of purchase, production, and sale, if the gain or the loss is to be another’s, with the same spirit as if the gain or the loss were to be all his own. That alertness and activity of mind, that perfect mingling of caution and audacity, those unaccountable suggestions of possibilities,
opportunities, and contingencies, which, at least, make the difference between great and merely moderate success, are not to be had at a salary.
*10

Yet I do not claim that the effect of this would extend so far as to neutralize all the great advantages
*11 of coöperation. If a body of workmen possessed the faith and patience necessary to carry them through the period of outlay and experiment, if they had the good judgment to select the best manager they could find, the good sense to pay him enough to keep him solidly attached to them, and the good humor to support him heartily, submit promptly to his decisions, and remain harmonious among themselves, coöperation might become a triumphant success with them. But let us see how much all this demands from poor human nature.

In the first place, there is the all-important choice of a manager. Not to dwell on the danger of a body of workmen mistaking presumption for a true self-confidence, a brave show of information for thorough knowledge, an affected brusqueness for decision of character; or being led away by the plausibility and popular acts of a candidate, we have the almost certainty that such a body would, in the result, lose the best man, if not by turns every competent man, through indisposition to pay a sufficient salary. In his address before the Coöperative Congress already quoted, Mr. Thomas Brassey asked: “Where shall we find coöperative shareholders ready to give £5,000 a year for a competent manager? And yet the sum I have
named is sometimes readily paid by private employers to an able lieutenant.”
*12 But it is not merely an able lieutenant, but a “captain of industry,” that coöperators must secure, if they are to conduct purchase, production, and sale in competition with establishments under individual control. Can we imagine such a body paying $50,000 a year to a manager, when they receive on an average not more than $500 themselves? Would not jealousy of such high wages sooner or later, in one way or another, overcome their sense of their own interest? Even if we suppose them intellectually convinced of the expediency, upon general principles, of paying largely for good service, will they not be found calculating that for this particular manager this particular sum is altogether too much, or, without any disparagement of his merits, experimenting to see how much they can “cut him down” without driving him off, an experiment always dangerous, always breeding ill-feeling, and preparing the way for a separation. For why should the man who has the skill and knowledge necessary to conduct business on his own account be content to remain on a salary greatly below the amount he might fairly expect to earn for himself? Is it said his salary is regular and his profits always more or less uncertain? But the men of the temper to conduct business are not generally timid men or self-distrustful; they like responsibility and the exercise of authority—it is a part of their pay. Nor are they averse to a risk well taken; it braces them up and makes the game exciting. Is it said that want of capital may constrain some of the best men to seek employment at the hand of such associations? This is true, in a degree, and here is one of the possibilities of coöperation. Yet if a man have the real stuff in him, want of capital is not likely long to keep him under. The history of modern industry teaches that.
Getting into business in the most humble way, the merchants from whom he buys his materials, those to whom he sells his products, and the bankers to whom he resorts with his modest note,
*13 all soon take his measure, and when they have taken his measure they give him room. Genius will have its appointed course: antagonism and adversity only incite, inspire, instruct.

We have thus far spoken only of those difficulties of coöperation which attend the selection and retention of able managers. On the difficulties to which this is but an introduction, arising out of the tendency to intrigue which exists in all numerous bodies, and the disposition to meddlesomeness on the part of committees or boards of directors,
*14 I need not dwell. A sufficient lively impression of them is likely to be created by the merest mention. I will only further refer to an embarrassment which attends the extension of the coöperative plan to all branches of manufacture which employ laborers of very different degrees of industrial efficiency. Thus, in a cotton or woolen mill are to be found persons of both sexes and of all ages, earning under the present system from a few pence up to as many shillings a day. Under the coöperative plan, how is the scale of prices to be fixed? To say that all should be paid alike would be monstrous, impossible. It would be grossly unjust, and would be quite sufficient to wreck the enterprise from the start.
*15But if the laborers are to be paid at different rates, who, I ask again, is to determine the proportions in which the product shall be divided? How is general consent to be obtained to a scheme which must condemn the great majority to receive but a contemptible fraction of their proportional share? Without general consent, what chance of harmonious action? But if we suppose the scale of distribution to be fixed, who is to assign the
personnel of the association to their several categories, to say that this man shall go into one class, and that man, who thinks quite as well of himself, shall go into a lower class? Is there not here the occasion, almost the provocation, of disputes and bad blood highly dangerous to such an enterprise?

It would appear that if coöperation could be introduced anywhere, it would be in agriculture: yet in no
department of production have the experiments tried proved less satisfactory.
*16 One reason which, in addition to those already enumerated, will probably always serve to delay the extension of the coöperative system in this direction, is the great difficulty of determining the actual profits of a year or a term of years, with reference, as is essential, to the value of unexhausted improvements. So long as the coöperators hold together and divide the yearly produce, all goes well; but if at any time one desires to withdraw, and men will not enter into associations of this character without the right of retiring, at pleasure, without forfeiture, the question of undivided profits becomes of the most serious importance. To settle it with absolute justice is simply impossible,
*17 and no method of arriving roughly at a result of substantial justice, is likely to avoid deep dissatisfaction and sense of wrong.

The difficulties of industrial coöperation have been so manifest that schemes have been suggested for avoiding them in great part, by methods which should sacrifice a proportionally smaller part of the advantages looked for from coöperation. Among these schemes, one, which seems to have been first definitely brought forward by Mr. Babbage,
*18 has been tried upon a considerable scale. By this plan, which may be called one of partial coöperation, the employer is induced to admit his workmen to a participation to a certain extent in the profits of manufacture, while himself retaining the full authority and responsibility of the entrepreneur. By this plan the employer might fairly hope to attach his workmen to himself by more than the slight tie of daily or monthly employment, and to interest them so directly in the production of the establishment, as to secure a greater activity in labor and more carefulness in avoiding waste. The resulting advantages to the workmen would clearly be both moral and economical. There is quite a body of literature relating to the experiments in this direction, of MM. Leclaire,
*19 Dupont, Gisquet, and Lemaire, in France; of the Messrs. Briggs, owners of extensive collieries and others in England;
*20 of a few manufacturers in a small way in Switzerland,
*21 of M. Cini, an extensive paper manufacturer of Tuscany,
*22 and the Messrs.
Brewster,
*23 carriage manufacturers, of Broome st., New York. That something of the sort is practicable, with the exercise of no more of patience, pains and mutual good faith than it is reasonable to expect of many employers and many bodies of workmen, I am greatly disposed to believe. Many experiments, and probably much disappointment and some failures, will be required to develop the possibilities of this scheme, and determine its best working shape, yet in the end I see no reason to doubt that such a relation will be introduced extensively with the most beneficial results.