Natural law in the business world

Front matter

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NATURAL LAW IN THE BUSINESS WOELD.

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Preface

entirely different direction from the majority of those who claim to especially champion his cause. There can be no active antagonism between different wheels of the same machine, without disastrous results to all. The true ideal of society is a complete and rounded unity, but this unity is made up of variety. Like the different parts of a vast mechanism, this variety must be harmonious.

The plain words of this book are in no sense directed against labor, but only against the abuses and evils that masquerade under its banner. Class prejudice, so persistently stimulated by some agitators, is disastrous to business confidence and prosperity. Demand for labor and products cannot be coerced, but harmony will stimulate and increase it. Our object in this work is to promote the interest of labor, which is the interest of society. We endeavor to point out the natural and solid highway to success, through industry, merit, and economy, and how to avoid the treacherous quagmires of antagonism, coercion, and tyranny, which end in business stagnation and idleness. The conclusions arrived at are not mere matters of choice, but the logical result of unchanging natural principles. We acknowledge our indebtedness for facts and statistics to

8 PREFACE.

the writings of Adam Smith, J. S. Mill, Ricardo, the Duke of Argyll, W. Stanley Jevons, John B. Jervis, Prof. A. T. Hadley, Prof. F. A. Walker, Edward Atkinson, W. B. Weeden, and C. S. Ashley.

The substance of a few of the following chapters has appeared in occasional articles in the public press.

Contents

PAGE

I. General Principles 11

II. Supply and Demand 21

II. Supply And Demand

nppIE law of supply and demand is perhaps the most general and fundamental of all the brotherhood of natural laws, and we have direct relations with it at all times and under all circumstances. It lies at the foundation of all modern commerce, civilization, invention, and science. It has been the main-spring and impelling force in every transaction, trade, or exchange, back to the time when man existed under the most primitive conditions. It was the basis of the first exchanges of flint arrowheads and skins of wild beasts among savage and barbarous tribes, as it is also of all the endless and multiform currents and countercurrents of modern economic lite and society. Its force cannot be measured. Its pressure impels mankind to work its behests, in gathering, transporting, and exchanging the products of the globe, in order that these two principles may meet and satisfy each other. Men will penetrate to the heart of tropical Africa, or to the* iceberg regions o( the Arctic v.onc, they will dive to the bottom of the sea, or delve in the bowels of the earth, to bring forth all the complex materials of supply, in order to make them equal to the grand aggregate of universal demand. No enterprise is too venturesome, no effort too daring. These two elements are like two halves of a sphere, neither complete without the other, and each waiting for and needing the other, as necessary to produce roundness and perfection. In the economy of the creation each of these factors is not only incomplete without the other, but each is evidence of the existence of the other. Even in the spiritual world, which is more beyond our comprehension, universal analogy teaches that as man was created with a natural desire or demand for future existence, that demand will be supplied. In general, demand was created for supply, and supply for demand, and they have a strong and unerring affinity for each other. A vacuum is a demand for air, and cold for heat. Man's natural constitution has many demands, and these are supplied when it is in a normal condition.

Applying these principles more specifically, let us take the problem of meeting the food demands of a great city like London or New York. Supplies of just the required amount and variety are forthcoming from every quarter of the globe, and all without any system, design, or forethought. The Chinaman is gathering the tea, the Brazilian the coffee, the Dakota farmer is raising the wheat ; and every other quarter and country of the globe is working and striving to make up the supply to fit this demand. It does fit it as perfectly as if it were regulated by a pair of colossal balances. The element of price comes in and smooths off all the inequalities, so that the two surfaces come together as perfectly as though polished for the purpose. If a temporary, or even expected surplus of any article occurs, the price drops just enough to increase the demand to the point of perfect equilibrium. If there is a temporary or foreseen future deficiency, the price rises, and the inevitable equilibrium is restored as before. It is the element of price that always determines the point at which that is reached, and price is modified by still another element, which is competition. In the event of a tendency toward excess, competition takes place among sellers; and, on the other hand, a predominance of demand causes competition among buyers. AH commercial transactions •and prices, not only of material products, but of everything that bears price, like rate- of interest, rents, salaries, brain work, as well as muscle work, are so regulated. The salary of the clergyman, the fees of the lawyer, and rates of transportation, as well as the rate of wages for manual labor, are all controlled by this law. A high order of talent brings a high price from its scarcity. Price is a relative and not an abstract quantity. Competition among buyers may cause strawberries to bring a dollar a quart in April, and among sellers may bring them down to ten cents in June. They were relatively as cheap at the one time as at the other, the price at which supply and demand became equal varying by so much in the different months.

These laws are elastic and beneficent, and they adapt themselves to all conditions in a natural and easy way, if allowed to run smoothly and without interference. Not that they will do away with all the ills of society, or give to every man employment at good wages, or always give success in business, for all these drawbacks are incidental to human fallibility and imperfection. The efiect, however, of any attempt to put any forced or artificial laws in their place is to increase the friction and difficulties tenfold. It always reacts, and is harmful to those who mistakenly hoped for benefit.

A few illustrations : Legislative interference in trying to fix rates of interest (or, rather, one might say, to take away the freedom of individual contract), in the different States, is now generally admitted to be worse than useless, although years ago it was regarded as necessary. The effort to substitute artificial rates for natural ones, under penalty, not only did not accomplish the purpose intended, but actually made interest dearer, by obstructing supplies, injuring confidence, and by natural reaction. When the peculiar conditions in any State made money really worth more than the maximum legal rate, the practical rate would be still further enhanced, to equal the risk of penalty incurred by the lender. Both parties would also feel that they did no moral wrong by evading a statute which interfered with the first principles of personal freedom. So generally has this view of the case come to prevail, that this form of legislative interference with Natural Law is practically a dead letter, though in some States the ill-advised statutes are still nominally in force. Legislative interference with rates of transportation, and with passenger, telegraph, and telephone service, is in the same line, and in the long run will be found to produce similar results. Aside from legislative interference (which will be more fully considered in the chapter on Economic Legislation), the most formidable attempts to force artificial prices occur in the cases of railway pools or combinations, speculative corners in food products and coal, and in labor unions.

The results of these efforts are in the main unsuccessful, and in any case but temporary, and they, of course, lack the moral dignity of legislative interference. In the case of railway combinations, statistics show that in all instances where pool rates were put at a point much above that which may be regarded as the normal, they have been very short-lived. Such a variety of disintegrating and competitive influences come in, that even the most binding agreements to maintain artificial rates soon have to yield. In the case of speculative combinations and corners, or efforts to control market prices, it may be admitted that in a few cases they have been apparently successful, but in a vastly greater number they have not succeeded, and often they have ruined their projectors. In the successful cases, where one clique of operators have succeeded in cornering the market, or in establishing artificial prices, it has been in consequence of another clique selling or agreeing to sell what they did not possess (in common parlance of the commercial world called short selling), which is in itself an abnormal condition. Any effort to artificially advance prices against natural consumption alone is rarely attempted, for to have any chance for success there must be the opposing clique of "short sellers,'' or those who are trying to artificially depress the market. Even with the large amount of "short selling," attempts to corner the market are becoming more and more infrequent, owing to the increased rapidity of transportation and communication, which has a strong equalizing tendency. Wherever such combinations have temporarily succeeded, the result has been brought about by peculiar conditions, and in a forcible manner, before Natural Law had time to assert itself. It was like lifting a heavy weight in spite of gravitation.

There is much popular misapprehension on this subject. We often see newspaper headlines like the following: "The West is holding back its grain," or "Chicago speculators are trying to force up the foreign markets," or "Wall Street has combined to get up a boom," and many other similar announcements, instances of which might be multiplied. The idea, that the millions of tanners in the West, or that the thousands of operators in Chicago or Wall Street, could come to any general understanding in regard to a uniform policy is absurd. Instead of any such condition of unity ever existing, there are always two parties, known in common parlance as " bulls " and w bears," each of which is a balance to the other, like the two elements under consideration. The bears represent the principle of supply, and the bulls that of demand; and, as elsewhere, the higher or lower prices determine the point of equilibrium between them. So far from combination, not only each party, but every individual in each party, is trying to excel all others in making the most correct estimate of the natural drift and tendency of existing conditions, and how to profit thereby.

Of attempted forced artificial prices fcr labor by labor unions, we shall speak more fully in another chapter, but in passing will suggest that the uniform dominion of these principles does not abruptly terminate here, as some of the sentimental theorists maintain. They are obliged to assume that it does make an exception in this spot, in order to save their system. No matter how much we might wish it otherwise, facts are opposed. Not only that, but upon closer study we shall find that the laboring man is as much concerned in the integrity of these laws, even if he had the power to modify them, as any other part of society. As we have before noticed, the prices of brain labor are regulated by these two elements, and it would be a violation of all analogy to claim any exception in the case of muscle. He who tries to sow the seeds of discontent in the minds of laboring men by teaching such a theory, is not their true friend. He may be actuated by an honest, though misguided sympathy, but it is none the less harmful to the laborer, and tends directly to degrade his manliness and independence. Those sentimentalists who expect the laboring man will be benefited by force of combination (as though he were going into a combat) are on the wrong track. Societies of laboring men might be organized for social, intellectual, and moral purposes, and be productive of great good; but when, as at present, they arc constituted for the sole purpose o{ forcing artificial prices, they injure not only the laborer himself, but they are harmful to business and confidence, and an injury to society at large. A seller of labor, or any other commodity, is dependent on demand, and demand cannot be coerced, Whenever thai i> attempted, it shrinks back, ft is like picking a quarrel with the' only friend that can help us. It would be a poor way to induce a horse to drink, to force his head under water.

Demand can be stimulated, courted, and increased by the adoption of such a policy as will promote peaceful conditions, and inspire confidence, present and future. Wages will then rise naturally from increased demand. Under such conditions, every employer would want to enlarge his capacity, and as a buyer of labor would have to offer higher prices to get it. The almost or quite one hundred per cent advance in average wages which has been made during the last thirty years, in spite of the immense immigration into the country, is a natural advance, and was caused by an excess of demand. If the forcing process had been continually applied during that period, the advance would have been much less marked, for the reason that the demand would have been injured. As we have already seen that supply and demand are always equal, it follows that an injury to the one is harmful to both. It may be objected that in the case of factory towns and cities, the immobility of labor would prevent in some degree the right adjustment of wages - by the law of supply and demand. This sounds rather plausible, but, in the first place, there is no other adjustment possible ; therefore, we have no choice. In the next place, the practical immobility is never so great, but that in the event of any forced or continued attempt to impose artificially low prices upon labor by employers, a gradual but sure process of recovery would at once begin, and would not rest until the normal rate was approximated. The emigration from such a factory or town might be slow, but it would be continuous, until the inevitable equilibrium was reached. It would be no compliment to the intelligence and manliness of laboring men to assert to the contrary. The real self-interest of the employer would also become a factor, for the emigration would be from his most intelligent and desirable class of help.

In general, demand has grown from the few and simple cravings of primitive man for mere food and shelter, and these of the simplest character, up to the infinite and wonderfully complex variety of desire that characterizes modern civilization, and supply has paralleled iis track for the entire distance. This equal progress and enlargement o( supply ami demand will continue in the future, and no one can tix its limits.

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LABOR, LABORERS, AND PRODUCTION.

" He that by the plough would thrive Himself must either hold or drive."

" Man goeth forth unto his work and to his labor until the evening."

Ps. civ. 23.

" On bravely through the sunshine and the showers, Time hath his work to do and we have ours."

Emerson.

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LABOR, LABORERS, AND PRODUCTION.

T ABO'R is normal ; idleness, abnormal. The -^ physical, mental, and moral faculties of man were created for use and exercise, and it is only by their active training that they attain skill, efficiency, and excellence. That the active employment of the gifts and capabilities of man's nature was designed by the Creator is abundantly proved, both by analogy and experience. As all human happiness and perfection are reached in the line of conformity to law, so a non-conformity brings misery and unhappiness. Labor is a blessing, and idleness a curse. Human powers must have occupation, or else they become weakened, withered, and out o( harmony. As mankind is at present constituted, it were better to give him the barren and sterile soil bringing forth weeds and thistles, to be transformed by the healthful activity of his energy into blooming gardens and fruitful fields, than to supply him with all these delightful and useful objects spontaneously, and without efforl and toil on his part.

The world is full of things to be done, and labor is, therefore, the most staple of all commodities. The mistake of thinking that the hands alone perform labor is a very common one, when the fact is, that every part and power of the body and mind can and does labor and toil, and only by this activity can it fulfil its function. Under primitive conditions, there was a general activity of body and mind, rather than a special development in any one direction. The barbarian was his own tailor, carpenter, jeweller, farmer, and common carrier, and his products were few and poor. Under modern conditions, activity is more subdivided, and education more thorough. Thus, we have farmers, carpenters, painters, engravers, masons, and numberless other trades and professions, each one of whom has special education, and as a result, superiority. Each therefore does not only his own particular kind of work for himself, but for all the others, because his production is far more perfect. So in the department of brain labor, the clergyman, physician, lawyer, banker, scientist, historian, and statesman have all cultivated their powers in their several fields to a high state of efficiency, and each has his place in the rounding out and completing of the grand unit called society. In this consists the great superiority of the modern state, with its high degree of civilization, over the barbarous governments and peoples of primitive times and conditions.

The scientist, historian, and bookkeeper are as truly laborers and producers as he who handles a pick, plough, or loom. The popular use of the term "labor" as applied only to those who exercise muscle, is therefore erroneous. The brakeman in the employment of a railway company may, by industry, energy, and ability, rise to be its president, but he is no le>- a laborer than before, and as a man, not necessarily any more worthy or noble.

While a normal amount of labor is in accord with law, and is necessary to healthful and harmonious development, an excess of exertion is harmful. It is also obvious to any close observer that, of the two, an exct^ss of mental labor is more wearing and disastrous in its results on the health and constitution than is too much physical exertion. The care, worry, ami responsibility incidental to menial occupations cause vast numbers to break down in health ; and here again the popular idea is at fault that connects all hardship and suffering with only manual occupations. While therefore our sympathy may go out towards the laborer who uses a shovel for eight or ten hours in a day, we should not entirely overlook the weary bookkeeper or clerk, who often works twelve or fourteen hours, amidst unwholesome conditions and impure air. The sleep of the man who labors with muscle is sweeter, his digestion more sure, and his vigor greater than that of the average brain laborer. The idea that manual labor is in itself degrading, and to be avoided as far as is possible, is the delusion of the present time.

The ideal man would be he whose physical, mental, and moral powers are all well rounded out, cultivated, and harmoniously balanced. Idleness is a violation of Natural Law, and its companions in transgression are improvidence, degradation, intemperance, and decay. By inexorable law and logic, each positive virtue has its corresponding opposite condition of vice and error.

As to the different varieties of labor, it may be said that all are indispensable, the mental as well as the physical, each in its proper sphere. The steam in the locomotive is a more subtle and refined factor than the boiler and wheels, but no less necessary and important. So the brain worker, though in a more delicate, refined, and nominally higher sphere, is only a

LABOR, LABORERS, ANT) PRODUCTION. 41

component part of a general system, but in personality is not necessarily above his fellowlaborer. The test of excellency of a wheel in a machine is that it fills well its peculiar place and office. There is no natural aristocracy of the mental laborer over the physical that is based upon his greater necessity to society, for Natural Law is not sentimental, but thoroughly democratic.

Having found that labor is natural, necessary, and in harmony with man's constitution, let us consider its object. In the economy of Natural Law, means are always in order to an end. Labor is the means; production, the result or object. The finished building is as much the product of the architect as of the carpenter or mason ; or, rather, it is the joint product of both. In the distinction made between mental and manual labor, it is evident that only the predominant element is referred to, lor neither can be strictly pure. The simplest manual task must be accompanied by a mental process ; and likewise, the scholar or scientist must do some physical labor with pen ov apparatus.

Production is only a general term for Food, clothing, home, education, surplus. These constitute wealth, which is only another name for accumulated labor. The wages paid tor labor

42 NATURAL LAW IN THE BUSINESS WOULD.

are rather the above-named objects, than any certain sum of money, for the value of money consists only in the products that it will command. The natural aim and object then of the laborer is to increase the result produced by his labor. How can this be done ? First, personally, or by a greater activity and industry, and by the cultivation of individual qualities which tend to success. Second, by surrounding himself with more favorable environment and conditions. It is not only in accord with Natural Law, but with common-sense, that individual energy and ambition and persistent training in a particular department are necessary for much progress in any line of, effort. The question with the wage-worker must not be, how few hours or how little exertion can I possibly get along with? but rather, how much can I accomplish? He who puts forth his best efforts will soon become indispensable to his employer, and his labor will naturally rise in value, and he. will soon by positive development step into the ranks of the employer himself.

Society is composed of two classes, the independent and the dependent. The question as to which of these two classes a man will belong is, under all ordinary conditions, a matter of individual choice. The road to independence is open, and finger-boards are up on every corner. Here is seen one of the bad effects on the laborer of labor unions. Instead of relying upon individual merit and energy for maintaining or advancing his wages, he relies upon the power of the union. The former is natural ; the latter, artificial. By this course he loses his motive for the attainment of personal superiority and natural advancement, and settles down to the dead level of the dependent elements that surround and control him.

The goal of the American laborer is the position of accumulated labor, or, in other words, that of capitalist. A continuous, even if a small margin between income and expenditure in one direction fixes the condition of independence, and, in the other, of its necessary opposite. It is not a matter of chance, but of law. In this country, even if a laborer begins in the dependent ranks, his condition is not a fixed one. The transition to the independent class is easy and plain, when the natural course of individual merit and effort is chosen. Examples on every hand prove that this is universal experience, and is not a matter of sentiment or theory. But a very small part of the wealth of this country was inherited, probably nine tenths being the result of personal labor. Any short-cut route to success is very uncertain, and any forced march, outside of the natural conditions of progress, or under a dictator, is generally disastrous. But the broad, direct, and solid highway of individual industry, economy, and temperance is always open. A surplus is what the daily wage-worker should be accumulating, and presently it supplements his personal force with power of another kind. For such a man to try to antagonize accumulated labor, or those who possess it, is to oppose the very principles and conditions which are his own hope and reward.

The young American wage-worker who puts forth his best efforts, and who practises what economists call abstinence, or the limiting of expenditure to less than income, has as good ground for expecting to become a capitalist as has the gardener to expect a crop from good seed deposited in a rich and fertile soil. It is no less true that he who does as little as will possibly keep him in his position, and who has little regard for the interests of his employer, has the elements in him that make it almost certain that he will always, be a member of the dependent class.

In regard to means favorable to increased production by labor which are external to the laborer, two general conditions may be mentioned : first, by increasing the efficiency of mechanical appliances and aids ; and second, by seeking a favorable location or propitious field for operations. As to the first, it is not long since that labor-saving machines were looked upon as the enemy of the laboring man, and some of the most useful inventions were forcibly destroyed, and their owners persecuted. Even as recently as thirty or forty years ago, the opinion was quite prevalent in the rural districts of New England that the general advent of railroads would quite destroy the value of both horses and oats. It was found later that the world needed them both, and the result was just the opposite of what the farmers had expected.

When the printing press was first brought into use, it was found that with it one man could do the work of two hundred copyists, and, as a consequence, it was feared thai one hundred and ninety-nine men would be thrown out of employment. But notice- the result. Soon the superiority of printed books over those that were written, together with the lower price, stimulated authorship aiul increased the sale and use of books a thousand-fold, and employment was given to more printers than there were copyists before. Besides this direct result, there were in addition the related occupations of paper makers, bookbinders, book sellers, and various others, so that the final result was the employment of many times the number of persons that seemingly lost their occupation at the time the invention came into practical use. And this, as a result, merely of an economic process, aside from the immense impetus given by it to human learning, art, and knowledge. It may be regarded as in accordance with Natural Law that every new invention and improvement that saves manual labor, and adds to the comfort and convenience of mankind, at the same time increases and opens up new avenues of employment, so that, as in the instance just given, it gives occupation to greater numbers of operatives than were before required. Every such new improvement increases the production, the varieties of occupation, and also raises the grade of employment. The engineer who runs a locomotive is in a higher grade of occupation than he who wields a pick, for the reason that there is more of the intellectual element in it. The higher grade is in the occupation, for the man that uses the pick is not necessarily lower as a man.

In general, therefore, with the progress of science and invention, mind has more and more asserted its supremacy over matter, and the physical exertion of the laborer has been mixed and tempered in an increasing degree with the intellectual. As man becomes better acquainted with Natural Law, he gains in his supremacy and command of the material elements around him, and makes them minister to his complex needs and desires. All this is to the special advantage and benefit of the manual laborer. In consequence of this, the humble cottager of to-day has more of comfort and even luxury than the king in his palace could have enjoyed three hundred years ago. It is said that Queen Elizabeth wore the first pair of knit stockings ever brought to England, and they were regarded as a great luxury, while now even a beggar could hardly be found without them. The introduction and use of the telegraph, telephone, and other electrical appliances afford examples of the conveniences now enjoyed by all classes. These, at the same time, open up immense fields and new avenues for human energy and employment. As before suggested, labor becomes more efficient in production by subdivision. The Jack-at-all-trades style of production belongs to a past age, but the present tendency is towards perfection of detail, by means of thorough organization and subdivision.

The law of progress is in the line of each member of society doing the particular thing that he can do best, and leaving everything else alone. This natural principle is being more widely utilized than ever before, and, as a result, no past age can be compared with the present in respect to ease, quantity, and quality of production.